Tax credit hoops? What hoops?
I saw an article posted on Rismedia the other day (http://rismedia.com/2009-10-15/8000-tax-credits-hoops-frustrate-house-hunters/) that was picked up from the Orlando Sentinel. The reporter (Mary Shanklin) titled the article “$8,000 Tax Credit’s Hoops Frustrate House Hunters”. She wrote a nice article about the challenges some people are facing in today’s market, concise and well written. In reality, the challenges she outlined have nothing to do with the tax credit. Let me give you the examples used, summarized from the article:
- A buyer, after 4 months of searching and looking at 40 houses, is frustrated and quits searching.
- Some buyers are forced to contend with much stricter lending standards and a lengthier, more complicated loan process.
- Short sales taking months to finalize and buyers cannot wait that long.
- Foreclosed properties that need so many repairs they fail to qualify for FHA and other “government backed” mortgages.
- “Deal killing” appraisals (HVCC anyone?) coming in short of sales prices and making purchase contracts fall apart.
- Condo fees that cost more than mortgage payments, making homes unaffordable.
- Multiple offers (yes, more than one or in the example cited , 12 offers on one home). Competition on hot homes makes it hard to snag a deal.
- Finally, a buyer quoted who says he doesn’t qualify for as state program that allows him to use the tax credit money upfront, so he now has to withdraw other funds he didn’t want to use, which inconveniences him.
Now, if you look at those examples you’ll find lots of issues for first time buyers to contend with, but only one thing that actuall qualifies as a “hoop” relating to the tax credit. That hoop is Time. It’s a significant hoop, as unless Congress actually does extend the credit, if you don’t already have a home under agreement, it’s already too late. Contracts for First Time Buyers who wish to claim the tax credit must close before 12-1-09 and with contracts taking 45-60 days to close due to the current lending environment, there is simply not enough time.
Other than that though, how can those issues be blamed on tax credit “hoops”. They can’t. Those issues have absolutely nothing to do wiith the tax credit! Let’ s address them quickly one by one so you understand why I say that:
- That buyer is frustrated by either a lack of inventory that fits his criteria, he is not working with the right agent, he is simply too picky or he can’t find a home he can afford that meets his criteria as well. That’s it, it’s one of those 4 reasons.
- The only thing constant right now in the lending world is change. The days of even well qualified buyers having a quick, bump free process may be gone. If you don’t fit the lender’s loan criteria, they aren’t making exceptions any more. Buyers really need to be partnered with a good lender, a good agent and on the ball to make some loans work nowadays.
- Yeah, they are taking forever. Nothing else to say here, if you are pressed for time short sales are not for you.
- FHA and other government backed loans have standards. Odds are, if you are a first time buyer who does not have much money (buyers this credit was designed to attract), you need these loans and those standards are the only thing keeping you from a big mistake. Ever see the movie The Money Pit? With most forclosures that movie is a real life story and buyers short on cash should generally not be buying forecclosures.
- Ah, good ole HVCC! It’s not jsut that though, it is lending standards in general. With the government threatening civil litigation against underwriters who approve loans on houses with inflated appraisals, if I was an underwriter I might be pressuring appraisers to come in low too. On the other hand, wasn’t HVCC supposed to solve tht problem for appraisers? Hmmm.
- Yes, condo fees in some areas are pretty steep, but not all condos have high fees, but if you are a first time buyer scraping together enough money each month to make a mortgage payment, you are probably shopping in too high a price range anyway. Look at lower priced homes.
- Multiple offers are a good thing for market health in some areas, they help stabilize falling prices and are a great indicator of market recovery. It is tough when you are a buyer dealing with that, but it shoudl make you feel good about your investment.
- Alright, this is my favorite. If a buyer doesn’t qualify to meet those state programs, THEY MAKE TOO MUCH MONEY! Notice he didn’t say he didn’t have it, just that he didn’t want to use what he already had! The fact that he even qualifies for the credit at all with that income range speaks to just how good the credit really is!
So, at the end of another long one from me, all I can say in closing is what I said in the beginning. Hoops? What hoops?
Your Friend in Real Estate,
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