The Wall Street Journal also reports on those trying to fraudulently claim the tax deduction by backdating contracts.  This is my favorite recent real estate related quote:

Backdating a contract would be both wrong and risky. “That would be fraud on the federal government,” notes Mark Fiedler of Coldwell Banker Legacy, Rio Rancho, N.M. “As a broker, I would not participate in that activity, although there may be others who might. My license enables me to earn a living, and the FBI is not someone I want to cozy up to.” Besides, Mr. Fiedler says, the FBI is “busy putting people in jail for mortgage fraud right now, so let’s not overwork them.”

• $8000- amount that qualified first time home buyers are eligible for
• $6500- amount that qualified repeat home buyers are eligible for
• $7500- amount that first time buyers were eligible for in the first version (which must be repaid)
• 85- votes by Senate in November 2009 to extend the Credit
• 2- votes against (it was bundled with an unemployment plan)
• $12,600,000,000- amount claimed through February (source New York Times)
• 1,800,000- number of people who have claimed the Home buyer Tax Credit through February
• 36- hours, as of posting this, until Credit expires
• $43,000- amount cited on Calculated Risk as to cost  to government for each home sold that would have not sold without the Credit
• 61- number of days to close a tax credit eligible sale after April 30th (June 30th)
• 4,180,000- number of results on Google for “Homebuyer Tax Credit”

The “standard” inspection period for an Oregon residential real estate transaction is 10 business days.  The 10 days can be modified in the earnest money agreement.  That means an offer accepted this Friday would have an inspection period that expires at midnight on the 30th.  This is important because if the buyer and seller can’t agree on repairs, the transaction is going to be terminated and there will be no opportunity to take advantage of the tax credits.  You cannot parlay your accepted offer to another property.  If you are concerned that your first choice is not “going to pass inspections” you should try to leave some cushion in the time lines.

There is nothing in theory that would prevent a buyer from looking at a house on the 30th, writing an offer and getting it accepted on that day but there isn’t a good reason to push against the deadline if you have decided that now is your time to buy.  $8000 or $6500 isn’t the reason to enter into a home purchase.  It should be viewed as a bonus and a factor in the overall picture.  I wouldn’t choose the “wrong” home just to get the credit.

Who knows, maybe Congress will surprise us all and extend the credit but I wouldn’t bet $8000 on it.  I’m not finding anything regarding them even discussing it.

A search of RMLS for Portland real estate reveals these statistics:

There are 5188 active/bumpable listings in the city of Portland.
694 of them are short sales (13.3%).

2990 of the active/bumpable listings are under $300,000.
562 of them are short sales (18.8%).

There are 216 active/bumpable listings over $1,000,000.
4 of them (1.9%) are short sales.

I still maintain that the Home Buyer Tax Credit is not THE reason to buy a home now but it, and the factors required to qualify for it, should be a part of the current decision making process.

In October, conventional wisdom was, “you have to assume the Credit is going to expire but it will probably be extended.” This time around it seems much more likely that it will be allowed to expire on April 30th. The National Association of Realtor’s 2009 Profile of Buyers and Sellers reported that in 2009, only six percent of first time buyers cited the Buyer Credit as the “Primary Reason for Purchasing a Home.” That’s in contrast to 62% the said it was the “desire to own a home” that caused them to buy. The Credit was the 4th most cited reason for buying (graphic below).

What does that mean? When the Credit expires the sky shouldn’t fall. The Credit is a great benefit for those that qualify and find a home that they want to own but it isn’t a reason to settle. Sure $8000 goes a long way for most people but that’s 2.6% of a $300,000 transaction. Not, in my mind, enough to sacrifice.

Kiplinger’s writes this about the tax credit for military personnel:

Homeowner breaks. And now service members serving outside the U.S. for at least 90 days between December 31, 2008, and May 1, 2010, have an extra year to qualify for the $8,000 first-time home-buyer credit or the $6,500 credit for current homeowners. They have until April 30, 2011, to sign a contract and until June 30, 2011, to close on the new house. Normally, if homeowners don’t live in the new house for at least three years, they have to repay the tax credit. But there’s an exception for members of the military who have to relocate because of government orders.

Military families also get a special break when they sell their homes. Most homeowners need to live in a house for at least two of the five years leading up to the sale in order to claim tax-free profits of up to $250,000 ($500,000 if married filing jointly). But because they move frequently, military families need to live in the house for only two of the preceding ten years in order to qualify if they are on qualified official extended duty, which means living at least 50 miles from home or in government quarters. 

Thank you to those that are serving or have served.

How does the Credit affect Portland real estate? In my opinion, not much. Yes, it has been a contributing factor but I don’t think it has been the savior that some cite and I don’t think the market is going to crash and burn when the Credit ends. The Credit is significant for those that qualify or decide to purchase because of it but it is not significant to the long term. NAR cited roughly 350,000 houses sold last year because of the Credit (that’s not the number of people that qualified but the number that would not have purchased had the Credit not existed). There are roughly 1 million licensed Realtors. Do the math.

If I was a buyer or seller? The Credit is a bonus. If I was planning on doing something in the first half of the year, I would do it now to take advantage of what is essentially free money. “I’m selling, it doesn’t do me any good.” Sure it does. Your house is $8000 more attractive on April 30th than it is on May 1 to certain segment of the market. If you qualify for the $6500 there is potentially $14,500 worth of Credit in the two transactions.

If I thought the market was going to drop 3% I’d be better off waiting if I was looking at roughly the average home (3% of a $300,000 house is $9,000). Some may consider the Credit as an “insurance policy” against a possible slide? The Credit is cash in your hand (once you file) versus theoretical paper money. Ultimately you have look at your situation, talk to advisers and go from there.

The revised credit will take effect on December 1st and is not retroactive.  Changes include raising the maximum income for qualified couples to $225,000.  The $6500 credit is only valid for primary residences.

UPI.com has a good article here, Examiner.com here, and subprime blogger here regarding the passage of the revised credit and additional information.

On October 22, the Treasury Inspector General for Tax Administration released a report that includes:

As a result of the IRS’s inaction, TIGTA’s report found that 19,351 taxpayers claimed $139.4 million in credits for homes they had not yet purchased but would allegedly purchase in the future. In addition, 70,005 taxpayers claimed more than $479 million in credits, despite indications that they were not first-time homebuyers. TIGTA also identified 582 taxpayers under 18 years of age who claimed almost $4 million in First-Time Homebuyer Credits. The youngest taxpayers receiving the Credit were 4 years old. (emphasis added)

The new law makes provisions to go after those fraudulently claiming the credit.

After two weeks of delay, the Senate last night cleared the way to pass a seven month extension and expansion of the tax credit for homebuyers.  By an 85 to 2 roll call vote, the Senate voted to cut off debate on a package of measures that includes the homebuyer credit, making it virtually certain that the legislation will reach President Obama for his signature this week.

As a Realtor, it’s good news for our industry but I don’t think that it would have been the end of the world, or will be in April, when the tax credit expires.  It will be interesting to see how many people are able to take advantage  of the $6500 credit for existing homeowners.  I haven’t found the exact text of what the senate is going to vote on but heard today that the requirement is that it has been your home for five of the last eight years.