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Why the Extended Home Buyer Tax Credit is a Slap In the Face



Slap in the face - home buyer tax credit extended and expandedSure, you’ve all heard by now…the first-time home buyer federal tax credit has been extended through March 30, 2010 and has also been expanded to include many existing home owners. Many are shouting, “WOO HOO!”. But I’m not.

No, really..we’re serious! SIKE!

For some time now, NAR and the government have been screaming and yelling, “You’d better hurry up and buy a house before the tax credit expires Nov 30!” Yet, before the deadline even hit, the tax credit was extended and expanded.

You know what this says to all the folks who jumped through hoops to buy and settle on a home before Nov 30? “SUCKERS!!!”

I’ve had buyers take vacation and sick leave and sneak out of work early to preview properties just so they could get into a house before November 30. They saved every last penny for a down payment and money to fix up the property and call it their new home. They were stressed out and frustrated because they felt the clock ticking and November 30 approaching quickly.

But now, they realize that they could have waited…

…and saved vacation and sick leave for an actual vacation or when they’re really sick. They could have gone out for dinner or to a movie all those times they didn’t because they now have an extra 4 months to save money. They could have saved themselves from all the stress involved with rushing to find and buy a home by November 30.

From where I come from, it goes a little something like this, “Let the early birds/adopters reap the greatest benefits because they were the first to react and took the biggest risk in doing so. Those who waited to see what happened took on much less risk and therefore, should reap fewer benefits.”

But that’s not the case here. Those who waited and didn’t jump to make the November 30 deadline will get the exact same amount of tax credit as those who jumped through hoops to get in before November 30. That just doesn’t seem fair.

Adding insult to injury

And to add insult to injury, many of the folks who recently bought their first home, but could not get the tax credit because their incomes were above the limits as the guidelines originally stood would qualify under the new, higher income limit guidelines.

If the tax credit keeps getting better, why would anyone jump on the tax credit now? The government is rewarding those who do not buy and wait until the “extended” tax credit comes out (again) rather than those who already did. Doesn’t this defeat the purpose of the tax credit in the first place – to stimulate the housing market by enticing people to buy now rather than wait until…?

What should have happened?

If they kept the tax credit going (whether they should have or not is a totally different discussion), they should have waited until after November 30 to come out with the news and should have significantly decreased the amount of the tax credit and kept the income limits the same, if not lower them. This would reward the people who jumped through hoops through November 30 and shown the ones who didn’t, “See… When we say you had better take advantage of something before the deadline, we mean it!”

But I guess that makes too much sense and is way too fair…

Danilo Bogdanovic is a Real Estate Consultant/REALTOR(R) in Northern Virginia and author/owner of and Danilo serves on various committees with the Dulles Area Association of REALTORS(R) and the Virginia Association of REALTORS(R).

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  1. Matthew Rathbun

    November 6, 2009 at 6:03 pm


    I can honestly say that I hadn’t thought about it this way. This is a great point of view and reflects your empathy with your clients and the priority you make them.

    It does seem that there should have been some substantial benefit for those who worked toward the deadline. Makes you wonder if the new deadline is really a deadline. The Government that cried wolf….?

  2. anitacrum

    November 6, 2009 at 7:33 pm

    It’s not just a slap in the face, it’s more like a one-two punch. Don’t forget about those buyers who were the first to be lead into the buying frenzy that the powers to be tried to create by offering the $7500 tax break. They were rushing around like holiday shoppers on Black Friday trying to get their deals closed by 12/31/08 only to find out if they had just waited, not only would they get $500 more but they wouldn’t have to pay it back. It almost seems like the longer you wait, the more Uncle Sam will give you.

  3. Duke Long

    November 6, 2009 at 7:38 pm

    Let the Market decide.

  4. Bob Wilson

    November 6, 2009 at 8:32 pm

    Its a slap in the face because the real dollar cost of this giveaway is over $40,000 per.

  5. Ken Montville

    November 6, 2009 at 9:18 pm

    That’s assuming, of course, that all those home buyers were not going to buy homes anyway. My guess is that these folks had home buying on the mind and it was the tax credit with the the deadline that got them “off the fence”. Kinda like the auto cash for clunkers thing. (I’ve heard this program called “Cash for Cul-de-Sacs”).

    Without the deadline these buyers who took time off to look at homes would have taken their time, looked at just one more home (and one more after that) until they drove themselves crazy with confusion about which home they wanted, if any at all.

    The tax credit with or without a deadline and for first timers or all timers is a stimulus. A stimulus is supposed to get people excited and out there getting a mortgage and jump starting the housing market.

    BTW, aren’t these folks happy they have a home that they own? Or would they rather give it back so they can look some more or continue to live in their parent’s basement?

  6. Bob Wilson

    November 6, 2009 at 10:11 pm

    Ken, can I assume from your characterization of these buyers that you didn’t represent any of them?

  7. Frank LL0SA- Arlington Realtor Blogger

    November 7, 2009 at 12:07 am

    Great point Danilo.

    And how in the world did they get non-1st time home buyers in the “1st time homebuyer” program? That is like extended senior citizen benefits for seniors, and non seniors.

    I told people to NOT jump through hoops to get the credit, but my reason was different. I said home prices would stall right after the credit.

    We actually had a seller try to PULL a ratified contract. Their reason was “well I was rushing to sell because the buyers need the credit and all the buyers would be gone in a week, but now we have time, so now we want more.” Can you say unintended consequences?


  8. Matt Stigliano

    November 7, 2009 at 9:10 am

    Danilo – I thought I’d share a tweet I sent out the other day after it became official. Emphasis is mine.

    “This is probably the last extension,” said Sen. Johnny Isakson, R-Ga. [Thanks for remaining vague. No need to be final about it. #ugh]

  9. Matt Thomson

    November 7, 2009 at 10:17 am

    You put to words much better what I’ve been trying to say. I’ve been the only “negative” guy in our office because I wasn’t clapping and cheering when this was passed.
    I’m not against stimulus, I just think the timing and the structure of this was very poorly planned.

  10. Matt Stigliano

    November 7, 2009 at 11:29 am

    Matt – There are many of us out there that don’t think it was a great idea, but it does seem that we’re spread out. I don’t meet many people locally that are against it, but I know plenty in towns all across the country it seems.

    In a post I wrote about why I didn’t like it, I even had someone tell me that if I didn’t think it was a good idea I shouldn’t take part in any transactions that it was involved in (in a kind of huffy tone I thought).

  11. Danilo Bogdanovic

    November 7, 2009 at 11:43 am

    Anita C – You bring up an even better point. Wonder how those folks are feeling right about now?

    Matt S – Nice tweet. Says it all…

    Ken – You must have a lot of repeat business.

    Bob W – And that’s on your, mine and everyone else’s IOU tab 🙂

    Matt T – Right there with ya. You’re usually not the only guy, just the first one to speak up about it.

    Frank – Thinking of a better name was beyond their scope of intelligence.

  12. Diana Timmons

    November 7, 2009 at 1:13 pm

    This is tongue-in-cheek, right? This line “They could have gone out for dinner or to a movie all those times they didn’t because they now have an extra 4 months to save money” was a tip-off that you couldn’t be serious about this rant. Programs, like jobless benefits, have to be extended.

  13. Bob Wilson

    November 7, 2009 at 1:39 pm

    “Programs, like jobless benefits, have to be extended”
    Why? .

  14. Ken Montville

    November 7, 2009 at 2:18 pm

    Danillo (and Bob) – I represented buyers and 1st time buyers and I emphasized the importance of action because of the impending deadline. I don’t feel bad that these people got a house because a) they wanted to buy a house, b) they got the tax credit and c) best of all, they didn’t run me around and around and around with the hopes that the “next house” was going to be nicer, cheaper and better.

    My point is that for people who were going to buy a house and were financially qualified to do so, the tax credit was a nice perk and an incentive to get moving. I doubt seriously that $8,000 enticed anyone to buy a house they regret buying or weren’t financially qualified to buy.

  15. Bob Wilson

    November 7, 2009 at 2:52 pm

    Ken, I was responding to your crack about people living in their parents basements. Would you be comfortable with any of those buyers of yours reading your remarks?

    FWIW, I agree with the point you were trying to make.

    Maybe we should give renters who would barely qualify for financing an incentive to not buy so that they wont cost money down the road if they default.

  16. Danilo Bogdanovic

    November 7, 2009 at 4:22 pm

    Diana – I’m dead serious about my “rant” and the line you quoted came from a first time home buyer. Some (extremely fiscally responsible) people will save every penny for something important like…oh I don’t know…SHELTER…rather than spending money eating out or paying $12 for a movie when it’ll be on Netflix in a month.

    And jobless benefits are crap. They only promote joblessness. How about create jobs and improve the economy so companies start hiring more? And most jobless people are jobless because they can’t find the job they WANT – not because they can’t find A job. If worse comes to worse, as long as there are restaurants or bars, there’s a job. I waited tables out of high school to pay for myself and school and I never had a problem finding a job – and that was during a not-so-good economic period as well.

  17. Bob Wilson

    November 7, 2009 at 4:35 pm

  18. Matt Wilkins

    November 7, 2009 at 6:00 pm

    As I write this comment I will say I’m very torn by the extension because although I odn’t agree with it in principle. I now have at least 3 clients who can now qualify under the exxtended provisions/income caps.

    Our country cannot survive forever on giving out THAT much money to homebuyers. The tax credit has done its job in many local markets and I honestly think a smaller and/or different kind of credit may have had a larger impact and/or helped a wider array of potential home buyers (and even sellers depending on the programs initiated).

    The tax credit has really only helped a small sliver of the overall housing market and I will be VERY interested to see what happens if the “next wave” of foreclosures come right after the credit expires (which looks very possible).

  19. Jason Farris

    November 7, 2009 at 6:03 pm

    I suppose I’m sitting on the fence on this one 😉

    I have had clients that, like Danilo described, jumped through many hoops to get their home purchase in before the deadline expired. I can’t imagine they were overly excited to hear the news.

    All the while, I also have a client that busted their back fixing minor credit problems just in time to not qualify for it… I’m completely certain they were excited for hear the news.

    Thanks for sharing Danilio!


  20. Dolly Nicely

    November 7, 2009 at 7:16 pm

    It’s interesting to see both the positive and negative points of view of my fellow real estate professionals. Isn’t it better to celebrate what you have than to anger over what you don’t have? Life is too short to be stuck on the “what if’s”. The key focus should be that this was and still is a huge “opportunity”!

  21. MIssy Caulk

    November 7, 2009 at 11:30 pm

    It will be interesting to see what the consumers think about this. I was not in favor of it at all. The income levels increased are amazing.
    Do people making 250K need a credit? Just sayin’.

    • George

      November 11, 2009 at 5:23 pm

      Missy—My wife and I are in our best year of our respective careers and will make about $180K combined this year. We would not have qualified for the credit without the income changes and the reason we were able to purchase a house is because we worked our butts off and found great jobs in this terrible economy. Is it fair for those who worked hard to not get the credit because they have increased their income each year?

  22. Kent Simpson

    November 7, 2009 at 11:45 pm

    Expecting Congress to do something wise for all parties involved is like wishing that farts smelled more like roses…its pointless!

    Do I think this legislation is the savior of the real estate industry? NO
    Is it smart policy? Probably not as much as people want it to be

    Will I tell a client that I won’t help them get a home because of my political views on the tax credit that they might be eligible to gain? NO

    Does my marketing plan revolve entirely around finding buyers who want to use the tax credit? NO

    It is a tool, and an opportunity – nothing more, nothing less. Agents who structure their whole business plan around something like this are the ones who we’ll see doing something else next fall…because they are “following the market” instead of building and structuring a business model that isn’t based upon gimmickry or the whims of others.

    I expect that this extension & modification of the tax credit will bring an extra transaction or two my way this coming year…but I’ll say here the exact same thing I tell my clients:

    “If its available and you qualify for it, talk to your tax advisor and go for it, if it makes sense. Don’t ever COUNT on something that is not on paper & signed – rumors, hopes and verbal extensions of the inspection period don’t count – the same goes for Congress!”

  23. Matthew Rathbun

    November 8, 2009 at 7:10 am

    “Is it smart policy?” ~ Let’s ask my daughters while their generation is left to try and pay it back in 20 years from now…

    I think there are a number of people who hustled to get the tax credit, but I am not convinced that it’s really the prevailing influence to buy.

    With the way that property values are continuing to decline, they’ve lost more than $8,000 in depreciation in the first year of ownership, in much of my market area… #justsayin

  24. Paula Henry

    November 8, 2009 at 11:25 pm

    I was also against the extension and the only good I can see coming out of this, is the price point of lower price homes in Indianapolis is heading up. Other than that, let the market correct itself.

  25. Gary Waters

    November 9, 2009 at 2:16 pm

    Buyers who took “advantage” of version one still got a tax credit. Those who take advantage of the second will as well. It is like the guy who bought a car a month before the clunker program.

  26. Courtney

    November 14, 2009 at 2:26 pm

    It’s free money! So stop complaining. People should be thankful for receiving any help at all

    • Danilo Bogdanovic

      November 14, 2009 at 6:15 pm

      Courtney – “free money”? Not quite. Every cent of money not taken in by the IRS and the government is made up for somewhere else. And you know who ends up paying for it? You and I and every other taxpayer in America (with interest).

  27. Marissa

    November 16, 2009 at 2:10 pm

    I totally agree! I have about 3 friends that have been stressing themselves out about this deadline, 2 out the 3 have already closed, for it to just be extended?? It was a complete slap in the face!

  28. janet

    March 13, 2010 at 10:17 pm

    what about all of the people left out of the $6,500 tax credit for buyers who move-up and purchase a more expensive home. the new rules are for those who bought a home after November 6, 2009. i closed escrow on october 28th. i previous lived in a 35 year old mobile home, so i was not considered a first time home buyer and bought my new home a few weeks to early and lost out on $6,500, so much for the government helping all of its citzens. Some of us got screwed.

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