Friday, June 25, 2010

Another Sob Story About Missing Out on Homeowner Tax Credit

Are we supposed to feel sorry for the fact that thousands of people aren't going to take advantage of the homeowner tax credit before it expires June 30 because they couldn't get the deals done in time?

Nope. I certainly don't.

Some of these people tried to get the deals done but for paperwork demands and tougher credit requirements by banks. I can't fault the banks for that - they don't want to get burned again by lending to those who are incapable of repaying.

Moreover, many of these potential purchasers would have bought regardless of whether the credit was in place or not. It isn't creating additional sales. In fact, it did nothing to improve real estate sales.

The MSNBC report goes on to explain that many of those properties involved were foreclosures and short sales, which are typically far more complicated real estate transactions, take much longer to process and go to closing than standard deals, and everyone involved knew or had reason to know that there would be issues with closing on or before June 30.

Moreover, it points out once again that many of these transactions were attempts to expedite the sale to take advantage of the credit - but that would have gone through regardless.

Now, there are some people who are calling for yet another extension to the credit, which should have expired last year, but which was extended through June 30 based on those sales that were agreed to on or before April 30 of this year.

The real estate market is a mess and no number of sob stories courtesy of MSNBC over why we need to relax lending requirements or make it easier for borrowers will actually improve matters. In fact, that would presage the return to the very reasons that the market had a bubble and then crashed precipitously. Strong lending requirements eliminate potential buyers from the market because they do not have the ability to repay their obligations. It reduces speculation, and allows the market adjust to a more rational approach to housing.

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