I've worked with more than a dozen "first timers' this year and not one of them brought up the $8000 Tax Credit as a reason that they are in the market! Not a single one!
This is not really surprising if you think about it. Just because we, as real estate professionals, see this as an opportunity, doesn't mean it is making the TOP THREE or even TOP TEN reasons these folks are buying. (Just because MY RSS feeds stream real estate related info 24/7 doesn't mean anyone else's do...)
The top reasons my first time buyers are buying:
- They have a new job or a new life and want to live in a house!
- They recognize that home prices and interest rates are lower than they have ever seen before.
- They can look at homes in towns and neighborhoods that previously were not affordable for them.
The top reasons my non-first time buyers are buying:
- They have a new job or a new life and need to move!
- They recognize that home prices and interest rates are lower than they have ever seen before and they want to take advantage of that and move UP!
- They can look at homes in towns and neighborhoods that previously were not affordable for them so they want to sell and move UP!
The ONLY thing new in these lists are #2 and #3. Period.
But I'll tell you what the Tax Credit does do!
It makes me look really good when I suggest, while they are basking in the glow of an accepted contract, that they might like to consider ammending their 2008 tax return in order to get some money back from the government! You'd think I had just put a cherry on top of their milkshake!
It's Simple...When You Have A Great Agent!
SarahGray Lamm is a licensed, full time, residential real estate professional in the Raleigh Durham area of North Carolina with over 60,000 hours of experience. She specializes in serving the real estate needs of home sellers, home buyers and investors in Chapel Hill, Carrboro, Durham and Northern Chatham County and is proudly associated with Allen Tate Realtors, the Carolinas #1 independent realty company.
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I think you make some great points here.. I must say however, that for many buyers, the tax credit has made a big difference in our neck of the woods. I am sure it varies from region to region.
I love to read a great post like this one. keep them coming!
@Joan, I'm sure you are correct! I happen to be in a GREAT area and when I read what others are going through across the country I am very, very grateful!
@Jeremy, aw shucks...thanks.
Good points Sarah but that has not been my experience. Yes your 3 points are part of their motivation but the sense of urgency is prompted by the $8,000 tax credit deadline. I am currently working with a first time buyer who has bought into the hype that people are giving away their homes and is becoming frustrated because he now realizes that he just blew away $8,000 trying to find a bargain-basement-priced mansion that fits his budget.
@Gloria, as Joan said above, I'm sure the success of this program is local..as is real estate. It does sound like your buyer may have a bigger problem with "buying into the hype" of "bargain" mansions than seeing the tax credit as a motivator! Now that he has a better concept of what's available I hope you can work through his frustration and get him into something he will enjoy...AND get his credit! Good Luck!
SarahGray,
While I have seen people motivated by the $8000, mostly that has been a group of well-qualified buyers.
They see it as a cherry, indeed.
Sometimes I read a post and think that it is brilliant ... I love the title!
Featured in the Group "Whacked!!!"
@ Mike Yessir! And aren't we lucky to be in the Triangle!
@Richard You know how to make my day!
Excellent post, SaraGray. I totally agree. I am working with a couple of first-time buyers who are fully aware of the credit and it moves them nought. They are busy and they have their own time-line to buy. Also, everyone is fully aware that this might be extended, so why rush anyway. And, you can bet if and when they do extend the deadline, they will still take their sweet time. People will buy when they find the right house at the right price.
A tax credit of UP TO $8000 is not near enough of a reason to sign a 30 year mortgage! I agree that buyers are certainly buying for other reasons...... great title!
That's a great comment, and so true!! Most people buy for other reasons and are grateful when they are reminded that they get some money for it.
Sarah - This is a great post. The $8k credit shouldn't be a reason for anyone to buy something they are not ready to buy. When you are looking at a home purchase of even $150k, that $8k credit really doesn't account for much, a little over 5%. That's about enough to cover the down payment or closing costs.
Sarah - Agreed and agreed. I haven't seen the tax credit generating any additional excitement, nor have I seen anyone who cited this as their primary reason for purchasing.
Hi Sarah-- I agree. I get lots of calls every day from first time homebuyers, but nobody ever mentions the credit.
Hi Sarah~ I agree with you. It is just the icing on the cake! Any home buyer that would be buying just because of the tax credit, would be buying for all the wrong reasons!
"A cherry, not a carrot" - thanks for the great metaphor!
Ultimately I believe you are correct. The $8000 was an incentive for many to get motivated and a tool to get others to look at buying a house. Ultimately, I don't know anyone who purchased when the credit was their primary driver. Oddly, a recent poll from Trulia indicates that 18% of people thought of it as their primary driver.
Ultimately, the credit has performed it's function. The market has moved along and much of the fear has been removed. While many (including NAR) will clamor for its extension, it is now nothing more than a gift or as you so aptly described, a cherry.
and the clients I've had that have called specifically for the tax credit all want something for nothing and have yet to get an accepted offer because they're dlilusional about what they should be offering even after I've tried to talk some sense into them
Funny. I haven't had a single client make it more than 10 minutes before asking about the tax credit.
Sarah - Excellent post but you already know that.... Yes the credit does make us look good if the first time home buyer is not aware of it. Rarely have I seen that happen. Buyers in my neck of the woods seem quite savvy to it. #2 & 3 are the important ones for sure.
It has made a big difference in our market up here I know. Wish they would extend it... Dont you?
I thought the credit was a cherry initially, that is 6+ months ago. As time goes on I have several clients that closed and several writing offers on homes right now that are using the tax credit as their main objective. Ultimately, as someone who deals primarily with first time home buyers, closing in time for the credit is now a major concern/reason. No, not the only reason, but more and more as we get to the 11th hour, people are jumping in and buying. As a nation I don't know if extending it is best, but I can verify firsthand that I have closed loans specifically because of this credit.
Thanks All (and whomever featured this... ;-)
I really am enjoying your responses as it seems so very clear that real estate is LOCAL and this credit makes a bigger difference in certain parts of the country than others! Ultimately I think we are doing our best work as agents when we make sure first timers understand the whole process and ensure they buy because they really can and should. I guess that makes it sort of a carrot AND a cherry!
Hi SarahGray !
Very well written and thoroughly enjoyable post !
My experience has been the opposite however !! :o)
The majority of my buyers are first timers, and I would say at least 50% of them (maybe more) said they wanted to buy now so they didnt leave $8000 on the table if they waited. I have had 5 already amend their 2008 and receive the check already, and the others are content knowing it's in the bank for their '09 returns.
Like you said, so funny how local real estate can differ so much !
Great post !
Cheers !
Sheldon ;o)
Great post - & interesting comments as to the regional differences people are seeing. Here I would say that your list of reasons are also the reasons I am seeing most 1st time buyers decide to buy - but in the last few weeks, the tax incentive's deadline has also spurred some on to a bit greater urgency about finding the house NOW not in a couple months. Back to some multiple offer scenarios on homes priced well for 1st timers!
Great thought.. Thank you!
Many of our first time homebuyers have been thrilled with their recent purchase regardless of the tax credit as well...but I also know they are looking forward to receiving their funds to make other purchased that will stimulate the economy such as landscaping, furniture, appliances, etc.
personally i hope it goes away and kudos to those that were smart enough to take advantage but the longer it stays it just create a mentality of always expecting some thing
In California here, The credit is on the lips of many of my homebuyers in the Napa Valley regoin. I do promote and educate my clients to many traditional reasons and benefits of homeownership, the credit has really helped alot of these buyers get off the fence. I do not think we should extend the credit to $15,000 and to all buyers but I do think that we need to extend the credit until the fall of next year. Investors are buying up 1 in 5 homes, all the while the traditional buyer, whom we are relying on to maintain some extended recovery, is having a hard time competing. I am hopeful that the credit get extended for some time longer. But I agree, this cannot be a long term solution. With the overall economy, 9.6 unemployment, and who know how much more is to come, a little longer would be advisable.
There is definetely some conflicts regarding the tax credit. Some surveys say it's the reason most buyers are buying and some say it's not. I believe that the best way to get to the bottom is what you just did. Put it out there and inquire among those that are in the front line, not behind a desk. Great points!
Our experience has been different also. Our first time home buyers knew about the tax credit but not the details. They did know it was said to be a good thing for them and that's what made them start looking!
And a very beautiful Cherry that it is for new homeowners.
But way too many see a Carrot. I know.... I see it everyday.
Hi Sarah -- This is encouraging news as it can show that perhaps there may be a bit more optimism than may exist. I would say my first-time buyers are split on the incentive creating the desire, but they were also at the right time.
I agree about prices and interest rates, and I think that the tax credit drew attention to the rea estate market that otherwise would have had buyers sitting on the sidelines. It is not a coincidence that NAR reported that 1 out of 2 buyers are first timers.
I am craving a milk shake now! THANKS!!
;-)
Hi Sarah ~ Like so many other commenters I think this is a great post and love the title. I don't necessarily agree with you though. The $8000 credit was close to the top of the list for most of my buyers. I'm not saying they didn't also have the same motivating factors as you mention, but it was the tax credit that took them over the line.
Denise
I agree that many buyers are not motivated by the credit alone. They must have more fundamental reasons for buying.
Hi Sarah Gray. I had two buyers who took advantage of this incentive. It helped them and they were qualified to buy. ~ Lana
Great post Sarah! Some buyers are also waiting for prices to go down further and by-passing the tax credit.
Linda Metallo, Re/max Impact, Lockport, Il.
I couldn't agree more with your comment about it being a "cherry not a carrot!" Well said for sure. I haven't had any buyers who have asked about it or interested, for the most part , at all.! Ha....
Patricia
SarahGray--Wonderful points. I re-blogged this.
We too are NOT seeing buyers buying just because they want the $8000 credit. It is a nice cherry on top, though, for those who qualify.
I have a few buyers that would have bought at some point... but the FTHBTC is getting them to do it now...
Sarahgray,
Interesting post because every first time buyer I've represented this year bought because of the credit. In fact, one didn't have the 3.5% down payment so his parents gave it to him until he receives his tax return.
Sarah,
Well said. I have been saying this all along but not using the cherry and carrot adjectives. Thanks. :)
Steve
SarahGray - I've seen it split about 50/50 for me. I have buyers who are looking at homes that weren't even aware of the credit and will get the "cherry" after they have closed. The others are buying solely because of the "carrot" of an $8,000 tax credit.
Great article. As a professionall mortgage banker I have seen both types of buyers. Characteristically, the well qualified buyer sees the money as a way to fix up or pay off debt, while the buyer who asks about the money during the loan pre-qual sees the house as a way to get a fast buck and generally couldn't qualify if they had to.
Gotta agree with you SarahGay, I have two buyers right now that could qualify for the tax credit and they are holding fast.
Great information Sarah.. I'm seeing the gold rush starting to hit in our area. People are beginning to realise this won't be around much longer.
I've had the same experience. I've surveyed my clients and the majority are in the market to purchase a house because homes are much more affordable now than they were a few years ago. Most of them have been saving for a few years now and waiting for the opportunity. However, the federal tax incentive is a great add on to lower home prices and low interest rates.
SarahGay: Great fruit and vegetable metaphor...but:
The tax credit is clearly responsible for a partial price stabilization at the lower price range in many markets, including mine.
It appears to be the only thing the government did that has helped to turn around the recession.
If it is not extended we are going to lose that positive momentum.
Without an extension of the credit, we will be hard pressed to endure the next couple of waves of foreclosures.
Would we like the credit to be unneeded? Certainly. Alas, an extension of it is absolutely required.
I don't doubt your word about your twelve buyers who were oblivious to the credit. But statistically it's a little like believing girls "run in" a family because a couple only has girls....or even if their parents and several sisters have only had girls. It seems like a trend, but it's just not. It's simply the law of random numbers - playing its usual game with us.
I am impressed with your Blog site. I am also with Allen Tate (Ballantyne office). I would love to send referrals back and forth. I have friends in the Triangle.
Lynne