Home buyers get the short end of the stick?
UPDATE: bill revived in Congress, may survive after all.
The bill to extend the closing time from June 30th to September 30th for the buyers who properly contracted by April 30th to be eligible for their $6,500 or $8,000 tax credit appears today to have died. After what appeared to be a promising passage of the bill just last week after NAR’s urging of the government to aide buyers currently in the transaction, the “American Jobs and Closing Tax Loopholes Act” aka HR4213 failed to pass.
Given that the House and Senate observe a recess after July 2nd and buyers only have through June 30th to close on homes they contracted on in April, there is little to no hope that they will come up with an alternative for these buyers. These buyers have simply gotten the short end of the stick.
Pointing fingers
One of the greatest rights we have in this country is free speech, which most interpret as the right of free speech pointing fingers. In that vein, some blame Republicans, others blame Democrats, others blame Sarah Palin and others jeer at Pelosi- all four of whom are not likely the culprit, but the fingers are flying today as HR4213 appears to have died.
Because the tax extension got crammed into a bill alongside many other extensions, such as the contentious extension of unemployment benefits including COBRA and made amendments to Medicare coverage and obscure measures such as railroad maintenance and because the cumulative cost of all of the bill’s extensions would hit $141 billion Uncle Sam would have to cough up, homeowners that legitmately should receive their tax credit will not… not because they didn’t legitimately contract by the deadline of April 30th, but because the credit lenders can’t close a contract in 60 days in most cases in the current climate.
So whose fault is it?
Who is to blame? In my opinion, the culprit is good ol’ Charlie Rangel who sponsored the bill and lumped everything together and watched as it got spun out of control and turned into a “tax hike” bill thanks to talking points. To be fair, I have a pre-existing condition called “ihaterangel-itis” and it’s not really his fault, it’s the way the system works (lumping amendments together), but control over the message was lost early on and that is the fault of someone so high profile who has the ear of the media.
My inner Republican scoffs at such massive spending, but the economy was given a boost this spring based on this spending and now because of poor branding will fail, so my inner Democrat is frustrated that the talking heads have perverted the bill so intensely that it’s now a lose/lose situation regardless.
Phoenix agent Jay Thompson said, “My guess, and we’re talking pure speculation here, is the unemployment extension provisions of this bill will be “spun off” into a separate bill. What will happen with the homebuyer tax credit closing extension? I won’t even hazard a guess… Congress could, in theory, pass something with a retroactive date to extend the credit. Or, the credit deadline could go on as planned.”
Forbes reporter Robert Green agrees with the sentiment that talking points have influenced the death of this bill. Green said, “This Congress has taken re-branding to heart too. It’s the ugly side of politics, turning garbage into gold with the right name and campaign to fool the voting public. Did this happen with HR 4213? It went from being labeled a “tax extenders” bill to a “tax hike” bill. Tax extenders implies extending tax breaks and credits to spur the economy. Then the bill was titled “Closing Tax Loopholes.” Selling a business for a capital gain is not a loophole.”
Regardless of our opinions and whether Rangel, the evil Republicans, the San Francisco Democrats or the devil himself is at fault, the bottom lines is that Congress couldn’t pull it together and home buyers are getting the rug pulled out from underneath them. That is the unfortunate part.
Distrust of Realtors, comin’ right up…
Of secondary importance, this will surely impact the real estate industry– I think it will tragically set the trust factor back for our industry just as we had finally made progress toward an environment where agents aren’t seen as crooks. Consumers won’t understand that their not getting the credit (or the horror stories about their friends not getting the credit, causing their dog to die and for them to contract herpes AND the clap) is not the fault of the individual agents, the brokers, the National Association of Realtors or the industry for that matter.
Regardless of your political leanings and whether or not you support tax credits in the first place, the agents on the street will feel ripples of frustration as a result of a tax credit that thousands bought their home contingent upon but will never see. This will leave a pock mark in the face of real estate and no amount of foundation or rouge will cover it… and it’s not even the industry who is at fault.
CC Licensed image courtesy of Mike Renlund via Flickr.com.
Josh Aberson
June 28, 2010 at 4:25 pm
Well said. I don’t know what is more frustrating, all of those buyers getting kicked to the side, or classic Washington politics screwing up a very simple task. I’m just glad I didn’t have any clients not make the deadline! Rough conversation….
Scott Allen
June 28, 2010 at 4:27 pm
Doesn’t offering an incentive to stimulate a particular industry, and then failing to pay those incentives, smack of breach of contract? I think homeowners should sue — and I say that as a taxpayer who will bear some of the cost of that.
If our government can just make up incentives and then refuse to honor them, that’s not just poor governance — that’s just plain fraud.
Vicki
June 28, 2010 at 5:08 pm
The June 30th deadline was set over a year ago (maybe 18 months?).
I don’t see how failing to extend it further can be viewed as anything that any Realtor could take the blame for. If the credit was the only reason to buy, and you now know that it can’t close by June 30th, there is still time to cancel, (if you don’t mind losing the deposit.)
I’m tired of all this artificial stimulation. Eventually, we have to get back to reality and buy for the right reasons, (or decide not to.)
Lani Rosales
June 28, 2010 at 5:13 pm
Vicki, my point outlined above is that it doesn’t MATTER who set what or when. This is the breeding ground for bad PR and the real estate sector is right dab in the middle of it. Hypothetically, Jimmy Jack contracted on a home so that he and his baby mama could close by June 30th and use that ol’ tax credit to pay for Jimmy Jack’s baby that’s due June 29th. The loan wasn’t processed fast enough and now Jimmy Jack’s baby is homeless and his wife is leaving him and his dog is dying and his lips are chapped.
WE know as an industry that agents have nothing to do with any of that, but Jimmy Jack will cry about how his agent didn’t warn him that if it doesn’t close by June 30th, he won’t get his tax credit. Jimmy Jack will tell everyone he knows about how evil the real estate industry is and what a scam it is, all because lending rarely gets done in 60 days even 18 months ago when the bill passed. It was unrealistic in the first place (although I think lending should be able to be complete in 30 but no one asked me), so it set the industry up for failure in that Jimmy Jacks of the world tell fish tales and they get bigger every time they’re retold. None of that has to do with politics or the bill but you’re the one who will pay the price.
shari_tweets
June 28, 2010 at 5:28 pm
On June 30, long about noon, if you have a contract that looks like it’s not going to close, you have a tough decision to make.
Whether or not you blame your Realtor, your lender, your title company, or the moon, if you entered into a contract, needed the tax credit, yet didn’t understand the June 30 deadline, you likely have no business owning a home in the first place. Homeownership is a privilege, not a right, and it comes with a hefty dose of hard work and responsibility. Can’t stand the heat – get out of the kitchen.
Bad PR for Realtors? IMHO, I sincerely can’t agree. Bad PR for people who have no business entering into a contract they don’t understand? Yeah, that sounds right on target.
Fred Glick
June 28, 2010 at 6:04 pm
Think about it this way….if the HVCC wasn’t such a bad thing and the lender’s underwriting standards just plain stupid, there should be no way that a 60 day close could not have happened.
Congress can and should look at both of these disasters and help the industry going forward!
Maxwell McDaniel
June 28, 2010 at 6:37 pm
Lani-
This is absolutely pathetic. I can’t believe this is even an issue. I’ve been doing this a pretty long time and I have never, ever had a deal take 60 days to close. (short sales excluded)
If agents are working with lenders that can’t get a deal closed in 30 days, I have some advice for you: Take your business elsewhere. Seriously, it is just totally unacceptable that a competent lender would take that long to close. And I don’t want to hear any BS excuses, because I know it can be done. I see it happen for my clients every time. If your lender can’t get a deal closed in 30 days or less, move on down the road.
Over the last few months, I think my lender has averaged under 3 weeks in every situation. If you are not getting that kind of service from the people you are doing business with, let this be a wake up call to you. Find someone who can.
aMY L cavENDER
June 28, 2010 at 6:45 pm
I agree with Maxwell! The only time it takes me more than 30-45 days to get a deal to the closing table is in the case of a short sale. I have warned customers that the larger banking institutions are taking 60-90 days to close a transaction.
The “egg on the face” needs to be placed where it is deserved. Lani – I do understand what you’re saying though. The deadline of June 30th has been out there forever though. I hope the number of homeowner’s that lose out on the credit is a small number.
Keep up the good work.
Fred Romano
June 28, 2010 at 7:09 pm
Lani – The buyers didn’t get the short end, they KNEW they needed to close by 6/30. It is THEIR responsibility to work with their lender to make it happen. If there was a delay it would most likely be due to the buyers inability to produce required documentation. Come on now – 2 months to close!
Why would anyone blame the Realtor? This is simply a moot point. I am sure every Realtor working with buyers wanting the credit properly informed their client that the deadline is 6/30. Buyers have no one to blame except themselves.
Barry Cunningham
June 29, 2010 at 12:49 am
Fred my thoughts exactly…two months and no closing..somebody screwed up horribly. We’ve had a number of closings in that time period. 60 days is an eternity. Short sales being the exception…if someone had a closing deadline of June 30th and they didn’t make it…it has to be somebody’s fault! Somebody better be prepared to fall on the sword.
Lani Rosales
June 29, 2010 at 12:57 am
Barry, I was gentle in my article, but I’ll note in comments that I agree- 60 days is above and beyond enough time.
That said, the people who will fall on the sword are the foot soldiers / the face people / the ones who hold the hands of buyers… agents.
Barry Cunningham
June 29, 2010 at 10:30 am
Maybe a follow up article would be to find out why these deals did not close. (short sales excepted)
Anyone with any experience knows it only takes a few days to get a mortgage commitment so they would know WELL in advance if there were loan qualification problems…so it would be very interesting to know why these deals could not close in 60 days…I would be VERY interested in knowing that answer.
Wouldn’t you?
Lani Rosales
June 28, 2010 at 7:39 pm
Again, I understand that it is not the norm and that most buyers knew the limitations, but people know the risk of not using a condom yet they blame condoms after they’re ineffective and THEY are victim of the 2% failure rate. People run red lights and know the risk, but when they tell the story to their friend, the light was timed poorly and the yellow light was only two seconds long and the city can’t expect anyone to make it through the light. People binge drink and have major hangovers but when they tell the story, they only had two cosmos and they must have been spiked by that rude bartender and that’s why they are puking. Most of these stories are false, but it doesn’t stop them from being the excuses told and exaggerated to friends.
People know risks and in small numbers, it’s easy to roll your eyes, but add a feeling of injustice and frustration and multiply these stories thousands of times and you have the potential for image damage. Basic PR.
Can NAR or big brokers get in front of it? Probably. But Jimmy Jack (see previous comment) will still tell his fish tales and that fish will get bigger and bigger every time. Urban Legends exist for the same reason- people want to believe they’re not at fault and the people closest to them (in this case are their agents) just might take it on the chin as an industry.
aMY L cavENDER
June 28, 2010 at 7:46 pm
Lani – love the analogies. Back to PR 101 – if they’re happy with the transaction they’ll tell maybe one person. If they are unhappy with the transaction (or any service), they’ll tell 10. Hmmm, those were old numbers. Now with Social Media, you put it out there and your potential to reach millions is huge.
Bruce Lemieux
June 28, 2010 at 8:26 pm
Buyers who couldn’t close in 60 days will be frustrated, and I would expect them to vent their frustration towards the government – not NAR or their Realtor.
60 days is tons of time to close a sale unless it’s a short sale.
The entity that should be worried about bad PR is the banks. We’ve been in this short-sale/foreclosure mess for a couple of years now, and these clowns still can’t process a contract. Actually, I shouldn’t call them clowns — clowns are more professional, predictable and competent. And, they can be fun at parties.
I feel bad for the buyers who missed it, but they knew the rules: contract by 4/30, close by 6/30. Like others on this thread, I agree — let the credit die and let’s move on.
George
June 28, 2010 at 8:31 pm
It is not really fair for any home buyer. I am planning to buy an Apartment in Rochester as I got a new job there. 60 days are not too long, plenty of time but just 2 months. I think many buyers can miss this period.
Joe Loomer
June 29, 2010 at 8:43 am
As someone who consistently agrees with Lani – I have to call the bovine scatology flag on this one. By any metric I ever saw (NAR’s own Homebuyer surveys) – the tax credit wasn’t even in the top five reasons to buy. It’s certainly my experience locally – in canvassing our own agents and those from other firms – that the credit may have gotten some folks off the fence, but it certainly wasn’t the primary reason they bought a home. My wife has at least three under contract that will not get the credit due to the lender – but she prepared them for this eventuality because of the type of property they were purchasing.
The Realtors who will take it on the chin are the yahoos that thought the Senate passing the extension meant it was now law – and jumped all over every platform from Facebook, Twitter, and LinkedIn – to actual print ads and blog entries. Credibility fail = Trust in your Realtor fail.
Navy Chief, Navy Pride.
Lani Rosales
June 29, 2010 at 11:11 am
Joe, Barry, I actually agree with you on all counts but one… yes, they probably knew (agents and buyers alike) and yes, the tax credit wasn’t the only reason many bought, but consumer sentiment is frequently based on word of mouth. It’s still the primary reason people select their agent and could be a primary reason that there’s a setback in trust since there are so many exaggerators out there.
Again, I go back to my comment above outlining specific risks people take, then when they fail, rather than owning up to the risks taken, it’s the American way to blame it on someone or something else and turn it into a big ol’ fish tale that makes everyone around them look poorly and them to look like a victim. Foot soldiers are the most likely to take it on the chin even if it’s on a low, grumbling level.
Dennis C Smith
June 29, 2010 at 3:27 pm
Blame someone for not getting $8000 free that others never got when they bought homes? Or those who purchased in 2008 may have received but have to pay back? We never should have had the tax credits in the first place. This is where our country has come, instead of being grateful they can buy a home they blame someone for not getting something for nothing.
As a mortgage broker for over 20 years I think you agents can rest easy, somehow the blame will be pointed at my side of the industry. It always is. Agents escaped a huge portion of blame for the bubble expansion, for steering borrowers to “friendly” lenders, for their own in-house lenders making every deal work. This too shall pass and if someone missed the tomorrow’s deadline because of whatever reason, somehow it will come down to lender, underwriter, originator.
Thank goodness this tax credit is over, let’s hope we don’t see Congress and Obama do anything along these lines again.
teresa boardman
June 29, 2010 at 4:56 pm
It is the banks fault. They messed up. They promised the buyers loans and did not deliver in time. Lets hold them accountable. I saw every kind of problem with my closings including one institution that had a computer glitch and could not find anyone to fix it. if I ran my business the way the lenders do I wouldn’t have a business to run any more. Sure we can blame regulations but they got plenty of notice. I had one closing delayed because they couldn’t generate a HUD 1. Give me a break.
Jason Improta - Calabasas Homes for Sale
June 29, 2010 at 6:33 pm
Realtors are not to blame. Not that buyers won’t look for a scapegoat.
Mike
June 29, 2010 at 10:05 pm
Well according to Reuters, the House passed it today, but it needs to get approved by the Senate. They must have rewrote it so that it would not be attached to the previous Unemployment extension bill.
Personally, I don’t think that it should be extended. EVERYONE knew the deadlines. Most deals should have closed in less than 60 days, and buyers shouldn’t have waited until the 11th hour anyway. If a buyer was purchasing a short sale or from a builder, then they should have been made aware that the credit was not an absolute.
I like what you bring to AG Lani, but for you to opine that buyers will blame the agent, is a little presumptuous no? If an agent explains everything in detail and the buyer wants to blame them, then the buyer is just clueless.
Let the market correct itself. Enough with the stimulation measures already. Historically low rates should attract buyers, if the rates don’t then they weren’t ready to buy anyway.
https://www.reuters.com/article/idUSN2916439020100629
Mike O’Hara
Ruthmarie Hicks
June 30, 2010 at 5:34 am
Escrows in NY are notoriously long. 60 days? Maybe – but only if everything goes well and you have a good lender – and even then if you get miserable underwriter – not much can be done. This is on the banks – or clients who just couldn’t get it together. I had one of those. The lender and I warned and warned him that he had to get moving, but he didn’t. We begged and pleaded for the paper work and it came in drips and drabs. Then he called and asked if we were scheduled to close on the 30th. Ah….NO since there are a host of contingencies on your commitment letter- not happening. He has the money to buy without the credit – but will he? Don’t know. Since the lender will probably approve the loan in any case – he may be stuck. However, he got a low rate and a great price.
In any case, I felt that unemployment SHOULD have been extended. This is the worst recession since the great depression. My former field is dead in the water – very skilled people are mired in post-docs for 10 years or more at under $40k a year and some of them are getting laid off. Some sectors have it very bad. People aren’t working because there is no work in many places. PERIOD. So yes- they need the insurance. having them out on the street is not an answer. So I blame the methuglicans for the Filibuster. It had the votes to pass …57 – since when is it necessary to have 60 votes out of 100 to pass a bill EVERY SINGLE TIME. This would have added 0.00043% to the deficit – talk about false economy.
Lani Rosales
June 30, 2010 at 12:15 pm
UPDATE: bill revived in Congress, may survive after all.