The Second Commandment Of Real Estate

Are you really an expert?

Last week, The Stigliano Chronicles, covered my thoughts on being an expert and what it means to be one. Its a word we use all the time in real estate and something we all want to be recognized as. Today, I went to the experts for some education, advice, and new information.

I admitted last week that mortgages weren’t my strong suit, so when my local title company offered a class with a panel of experts on different aspects of the lending side of real estate, I jumped at the chance. I knew a few of the people on the panel from other classes and around town, so I knew this would be a great class that would leave me full of knowledge.

This isn’t about what I learned.

I’ll save the ins and outs of what I learned for another day (by the time I write it, it will be completely outdated – this is the mortgage business we’re talking about). So what is this about then? Since this was a panel of experts, I would expect to get the best information available and for the most part I did. At the very end though, came some information during a question and answer session that sent me back to my office to whip open my laptop, hit the internet, and do my research.

The expert on mortgages, decided to talk about the First Time Home Buyer Tax Credit, something I feel I am pretty well versed on (both the previous 2008 credit and the 2009 credit). I have heard in the past (back with the 2008 credit) murmurs of how to use the tax credit as a down payment on a home. Not only did I hear murmurs about it, but I read an article about it in one of the many publications I receive. Now, of course, when I read this, I hit up a lender I know and asked the tough question; “Really? This just doesn’t sound right.” We had a long discussion about it and although he wasn’t sure whether it was possible or not according to the tax code, we both agreed it seemed like a very dangerous proposition.

The rumor resurfaces.

Apparently, the rumor is back. Surrounded by a sea of agents at the class this morning, the topic quickly came up. The expert’s answer? Yes, you can claim it today as long as you plan to buy a house before December 1, 2009. They then went on to explain that on the new IRS Form 5405 there is a section that you must put the purchase date (this occurs in Part 1, Line B), which they then suggested you put December 1, 2009 if you had not already purchased the home.

Back up and re-read that one.

Yes, you read it correctly. Fill in an arbitrary date on a tax form. Get tax money refunded to you and then purchase a home using that money. I’m not even going to get into the potential complications of a theory like this (what if you can’t close in time?). What shocks me is that here is an expert with a sea of nodding heads with light bulbs going off over their heads. How many clients got a call tonight telling them of this wonderful news?

And here’s the kicker. The lender gave us the “government’s website“, set up to explain everything you need to know about the tax credit. Of course, I wanted to research this myself, so I wrote down the URL for later reading. I want you to click on it and look at it for a moment, then come back and finish reading:

www.federalhousingtaxcredit.com

Good, you’re back. Did you see what I saw? The little logo in the bottom right hand corner? Didn’t look like a government logo to me. Nope, it was from the National Association Of Home Builders. Ok, fine, so the lender misspoke a bit. I can live with that. So where’s the info on how I can leverage the tax credit into a down payment? I mean that nugget of info is gold to a client, so I better find it…right? Well, dear friends, I searched high and low and the closest thing I can find is #19 of their Frequently Asked Questions. I’ll let you read it on your own when you have time. I’m not here to disprove the rumors. I’m here to make a point.

Don’t worship false experts.

Although we all rely on experts and consumers rely on our expertise, a mistake can be costly. When we take what we read or hear as the gospel truth; we can find ourselves in court, distrusted, discredited, or out of a job. We can’t know everything about everything, but we can do our homework. We can listen and take in information, but backing it up with the facts and finding out the nuances of any information can be crucial. So next time you hear someone preaching salvation from the street corner, take a moment…listen, soak it all up, and then go seek the truth.

photo courtesy of Gary Denness