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$8,000 Housing Tax Credit Screws 100,000 Home Buyers?

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Dear home buyer, sucks to be you:

housing tax credit
If you are an agent assisting a buyer with applying for the $8,000 tax credit, you might want to advise them to have all of their tax returns in order and squeaky clean going back a few years because according to The Real Estate Bloggers, the IRS is auditing 100,000 home buyers who applied for the tax credit.

Your client might have to have a panic attack if there is one tiny thing out of order, because as Tom Royce points out, the IRS tax code is over 67,000 pages long making the chances pretty high that a T wasn’t crossed or an I wasn’t dotted properly. But of course, the IRS is saying they’re auditing 100,000 claims of the million applicants due to their being “suspicious.”

What does it all mean?

  1. Is this a merited reactive measure because of the terrible loan situation and subprime loans the market endured?
  2. What will the expense be to taxpayers to investigate “suspicious” applicants?
  3. Why such a drastic measure when the credit was meant to stimulate housing (350,000 closings occurred that otherwise wouldn’t have, according to WSJ.com) yet now that the market is stimulated, the attitude shifts from pro-consumer to anti-consumer?
  4. Who on capitol hill spearheaded this effort or how was some proverbial whistle blown calling applicants suspicious?
  5. With the National Association of Realtors lobbying for the credit to be extended, how are agents being educated and prepared to deal with potential results (positive or negative)?
  6. Do agents that aren’t actively reading blogs or news sources even know this is going on?
  7. Will the 100,000 applicants raise eyebrows and cause audits for all applicants to the credit?

So what do you think- is this a safeguard to protect the market from the days of no doc loans (or “liar loans” as the media calls them), or is this a political play by the powers that be? On a sidenote, what do YOU think of the $8,000 tax credit?

Lani is the Chief Operating Officer at The American Genius - she has co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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15 Comments

15 Comments

  1. Joe Loomer

    October 21, 2009 at 1:41 pm

    First of all – what you’re doing on here writing away on your BIRTHDAY I’ll never know – go have a drink with an umbrella in it!

    This is scary, I suspect some will turn out to be shady, down-payment reimbursement deals that just didn’t stand the light of day test (closed AFTER getting the credit, for example). Either way, it’s not something I had heard of – thanks for putting the link in – looks like the WSJ had the original story, too…

    Navy Chief, Navy Pride

  2. Barb Dragotta

    October 21, 2009 at 3:50 pm

    Lani, really your birthday–Happy day to you. This IS a Black Hole if ever I saw one; couple this with some of the SS stories out there and it is enough to bring on nightmares or insomnia.
    As to 2dragottas’ opinion of the $8,000 credit:
    …iffy in the first place [ note the number of lapses in payments already ]
    …extending it ?…NO–wait and see How & / or If it actually works before continuing for more months.

  3. Paula Henry

    October 21, 2009 at 5:32 pm

    I’m really not surprised! I wonder how many first time home buyers know they MUST stay in the home 3 years or they owe the credit back.

    On a side note: Only a few of my closings have been first time home buyers, but I believe we may see some backlash from this. If someone bought a home (only) for the tax credit, how many may not be prepared for home ownership.

    The first new tax bill at a higher rate, the first baby, the $5000.00 HVAC system goes or any number of things could force a few unprepared home owners to foreclosure, and then they owe the $8000.00 in addition.

  4. Joe Spake

    October 21, 2009 at 8:11 pm

    Lani, these audits are for cheaters. From the inception of the $8000 credit, it seemed incredibly easy to cheat or game the system, almost as if cheating was encouraged. Closing attorneys were reporting buyers bringing the $8000 to the closing table. How did they pull that off? The IRS did not require tax returns, just a form be filled out. And recipients got their check quicker than any tax refund I have ever received. I think we are seeing the backlash of the government’s not thinking through this program before implementing it. It would be interesting to know how many Realtors, out there rushing buyers to go for the free money, know the rules.

  5. Toby Boyce

    October 21, 2009 at 9:55 pm

    I agree with Joe that the audits are to catch those that are “cheating” on the game. The number of people looking at this from the IRS’s survey shows that there is going to be a disparengent number of audits for first-time home buyers.

    As to the tax credit, my concern is that we leveraged 2010’s first-time home buyers in exchange for a decent 2009 by shoving a majority of those buyers into this year’s selling season.

  6. Betty Byrnes

    October 21, 2009 at 10:26 pm

    Good points made by all…

    One thing that stikes me though is the microscope being applied to those taking advantage of an $8,000 maximum tax credit vs the lack of oversight to the billions of dollars in bail-out money that’s gone to prop up various entities.

    Cheats should be caught everywhere – not just on Main Street!

  7. Paul

    October 23, 2009 at 2:11 pm

    @ Joe – I had no idea people were getting away with that.

  8. Rebecca

    November 18, 2009 at 7:55 pm

    Well, I have been waiting on my $8000 tax credit for 4 months now. I am not a cheat, and there is nothing at all suspicious with my amended ’08 return, or my 3 prior returns. I received a letter in the mail saying they needed additional documentation so I sent in my settlement paperwork. A month later I get another letter in the mail saying they received my paperwork and may need ADDITIONAL DOCUMENTATION! It will be a year until I see that credit, if I see it at all! And these people want to take over the healthcare system…

  9. Brenda

    March 24, 2010 at 1:29 pm

    I am one of the lucky people being audited also. I just want to say I have not owned a home and filled a 1040 ez for the past 13years. I mailed my paperwork 6 months ago and had to take out a loan to pay off debt for home repairs that the $8000 was going to be used for. I feel like the person above it will probably be a year before I see my cash if I ever see it. So don’t be so quick to judge somone. Without the $8000 tax credit it would not be possible to pick out a house in my prive range as a single person on one paycheck and pay for repairs. The system was supposed to help people make it easier to be a home buyer not destoy thier credit.

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

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Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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