$80,000 is the New Black or How to Use the Stimulus Plans Tax Credit on South Bend Housing

by Nick Molnar on February 27, 2009

  • Housing Tax Credit
  • First Time Homeowners Incentive 
  • Stimulus Plan’s Home Buyer Credit
  • $8,000 

Whatever you call it, the Federal Housing Tax Credit in the recent economic stimulus package is raising interest from first time home buyers. Housing is now so often in the news that much of it is reduced to background noise. But this is worth knowing about.

First time homebuyers, with some restrictions, can claim a tax credit of 10% of the price of any house they buy during calendar year 2009 and reside in for three years. The maximum amount of the credit is $8,000, which makes $80,000 the sweet spot for the tax credit. That’s the point at which you max out the credit, and don’t spend more without the same boost.

If you could qualify, this may catch your attention. But what does $80k buy in the South Bend, Mishawaka, Granger Region? There are 186 houses for sale in St. Joseph County that are priced from 70-90k, and have at least 1,000 square feet. I scanned them and here are the first few dozen that caught my eye, for whatever reason.

Admittedly, those are fairly random criteria. If you were looking for a house you’d probably want a list of homes with a certain number of bedrooms, a location near your work or school and maybe a garage or basement. Want your list?  All you have to do is ask by phone or e-mail. No strings, No spam.

574-217-4770 / nick@realst8.com


{ 10 comments… read them below or add one }

macro-micro February 27, 2009 at 2:48 pm

Not sure the tax credit scheme is great for the country or even especially well crafted, but if I were eligible, I’d take it.

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Jake February 28, 2009 at 8:34 am

Hopefully this will give the housing market the boost it needs. There are so many homes on the market now.

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Anon Alum February 28, 2009 at 12:53 pm

Just a desperate attempt by the federal government to re-inflate the housing bubble demand and prices. Won’t work. Will only make the federal debt larger as this is just a credit bubble shell game pawning off the debt to the tax payer. Let home prices go back to being more affordable. The housing bubble demand was an illusion and let it go. By the way, eventually we’ll go to mostly buyers agents in real estate with fewer and fewer sellers agents as this role gets done by a flat fee consultant.

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Nick Molnar February 28, 2009 at 6:36 pm

Good idea or not it looks like we’ll see more government involvement in housing and lending for the foreseeable future. Everyone should be aware of it because it does impact transactions in a very significant way.

Two years ago I might have agreed with you on the reduced role for seller’s agents, but I think it will be a long time until that changes. Many sellers don’t have the money to pay for any services up front, whether staging, photography, marketing, or consulting. Paying at closing is their only option if they wish to hire people to perform these tasks. Of the sellers that can pay up front, many don’t want to deal with the often tiresome and tedious tasks agents handle: repetitive online marketing, printing and delivering flyers, contracting repairs and meeting repairmen, pre-screening buyers and showing the house on short notice, coordinating with the buyer’s lender to be sure that isn’t an issue, watching the tax proration, and the like. Flat fee listings are available in South Bend, but seem a minor threat to traditional selling agents at this point. In fact, I think most agents would welcome a shift to a flat fee consultancy, at least most of the good ones. However I haven’t seen any familiarity with the concept or any demand for it in the South Bend Area.

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Anon Alum March 1, 2009 at 12:32 pm

Nick – Hardly a tedious task to save $6K on a $200K house sale for most people. There is no barrier to paying a flat fee consultant at closing too. When you sell your house you need to prep it for sale just like you’d detail your car when you go to sell it. More services for homes like AutoTrader for autos would be helpful but then again used car sales never had the barriers to competition that Realtors have put in place. Regardless, I would see some sort of cap on commissions. $30K commission on a $500K house seems excessive to me. Even more so on a $1M house for $60K. Or perhaps a sliding scale? The Internet took off during the housing when people were not as price sensitive to commissions since there was plenty of money floating around and most people made money on appreciation. Now with the Internet firmly established and the housing bubble (which was part of a larger credit bubble) is over, the Internet may find an enlarged role in residential real estate transactions and more competitive commission structures. No doubt Realtors earn their money on most under $100K sales, but the higher priced homes one wonders….time will tell.

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Nick Molnar March 1, 2009 at 2:21 pm

No barrier at all if the flat fee is high enough to entice the consultant to accept the risk of not being paid if the house doesn’t sell. That’s the real reason Realtors (most of whom make less than you think) commonly demand higher fees. I suspect that if you offered $3,000 paid up front to perform their services for 3 months, with no additional money at closing, most would smile and accept the listing. They would probably ask you to offer a percentage or flat figure to any cooperating Realtor representing a buyer, but that gets to the roundabout manner in which agents are paid – an entirely different issue worth its own conversation.

As to AutoTrader for homes, it’s been tried by Google, Trulia, Zillow and others. No reason someone couldn’t be successfull with it if they satisfy consumers needs. Redfin seems to be the most likely, but their hybrid model of online and by-agent services with refunds at closing only works in pricier markets than South Bend – Mishawaka – Granger.

My best practical advice to would be sellers, and what I’d tell my family members is this: Talk to as many agents as you can. I’d suggest at least three. Ask them what they will do for you – specific actions. Ask them what they will charge you – specific fees. Ask them if you can cancel the contract at any time for any reason. If you’re happy with the answers one of them gives you, work with them. If you’re nearly happy with one of them – ask them if they can make changes so you are happy. If none of them seem reasonable, find a different way to go forward.

To my knowledge the least expensive ways to indicate your house is for sale to the public are:

1. $20: Craig’s List ad and FSBO sign in the yard
2. $499: to Mentor Listing, for placement in the MLS
3. Discount broker: Polack Realty for example has a standard commission of 4.9%

If all you’re only criteria are costs.

For what it’s worth, you can see what services I offer here. I’ll try to add samples of our listings shortly. You can tell me what you think our efforts are worth, if anything. I’d be interested in hearing candid feedback. I’ll also answer any questions you, or the public has about how, when, and why agents get paid in the manner they do, in plain-speak.

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Anon Alum March 1, 2009 at 8:51 pm

If I recall correctly, it took major legal action recently for the discounted fee brokers to have access to the MLS. To me, and I’m sure to others, such actions to prohibit legitimate competition by the established realtors was shameful, pure and simple. Like a real estate mafia or something that everyone ends up being part of a shake down. That’s my opinion.

With regard to low price markets like South Bend, the 6% is not unreasonable. But once you get to the higher priced homes, a change in fee would be reasonable. Say 6% for the first $100K, 5% for the $100K-$200K portion, 4.5% $200K-$300K….etc. Have marginal rates. Makes sense to me since there are certain upfront fixed costs but selling a $1M home in South Bend is NOT 10x’s the work of a $100K house. Again, just my opinion….which obviously wouldn’t be popular among realtors….esp listing agents!

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Nick Molnar March 1, 2009 at 10:10 pm

True competition will have to come from outside of the MLS. A better database of properties, with more features and more viewers, that all sellers would want to be part of would be real competition. The less obvious strength of the MLS is that agents know that any property listed in it has a guaranteed compensation for a cooperating buyer’s agent. But Realtors work with builders and with “for sale by owners” all the time. I can’t imagine that guaranteeing payment is something that can’t be overcome outside the MLS.

I think you make sense on your point about high price homes. It’s not a market I work, so I have nothing to lose by saying it. I like to think I’d say it regardless. I’d honestly be a little surprised if this isn’t happening to some extent already – rates are not fixed, so some agents must be charging less to get listings. But even if they all get 7%, in South Bend, and especially in this market, I’d much rather have ten $100,000 listings than a single one at $1,000,000.

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Anon Alum March 1, 2009 at 11:31 pm

NM said “I’d much rather have ten $100,000 listings than a single one at $1,000,000”

No doubt…when was the last $1M sale! LOL Better yet, 50 $20K listings by the looks at what is selling! 🙂

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r. copeland July 8, 2009 at 6:20 pm

i bought a home in march of 2009 and learned of the tax credit. i was excited that i was able to get the credit and purchase several expensive items that needed to be replaced on the home i purchased.

however, i just learned that i am not qualified to get the credit because i owned a mobile home at the time i purchased my house. that does’nt seem fair since the rules state that a person who ownes a “vacation home” or “rental property” would be eligiable.

must be nice to own vacation homes and rental property and still get $8000 while small struggling families have to do with out.

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