You can argue about the effectiveness of the $8,000 tax credit last year and whether it actually helped you sell homes. The point is that the IRS discloses now that the program cost all of us over one-half billion dollars in fraud. Why the IRS honored the fraudulent claims and paid out the money is unclear.
The IRS says that about one-third of a million dollars ($326 million) went to people who weren't first-time homebuyers.
The rest of the money went to people in prison (Florida lead the nation here), people under 18, and people who never bought a home.
When the government puts out a really nice carrot, there are people who just can't help taking a bite.
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For more information on my coaching and educational programs and services, visit my website stevehoffacker.com, or go to my other blog homesalesinsights.com for additional sales tips, insights, and commentary. Listen to my free podcast messages at Steve Hoffacker's Happenings.
Steve Hoffacker - Consultant, Coach, Author, Blogger, Photographer, Motivator, Teacher, & Strategist - for Realtors, Real Estate Sales Professionals, Home Builders, New Home Salespeople, Entrepreneurs, Small Business Owners, and Independent Sales Representatives.
© Steve Hoffacker, 2011. All Rights Reserved.
Thanks for the information Steve. You are right, it cost all of us. - David
Another good reason to keep goverment out of out lives. Waste, Waste and more waste of our hard earned money.
You gotta love it! People who really need the credits cannot get it, but the people in prison can. If they know it is fraud, why did they pay it out? What are they thinking?
Though interesting marketing, I'm not sure how many folks actually bought JUST BECAUSE of the credit. Most of my buyers would have probably bought anyway. Sure hope my great-grad kids enjoy working off this debt!
And, I'd be willing to bet that most of those legitimate first-time buyers who took advantage of the tax credit would have purchased a home anyway - with or without the credit.
Amazing that there was not more security. These people should be heavily fined.
Although we were led to believe that the purpose of the tax credit was to sell homes, it was not. The purpose was to put dollars in the hands of the part of the population that would be most likely to spend it on consumer goods. The purpose was to stimulate retail and the companies that supply retail (China and India?). To get financing, home buyers have to be current on bills, and they have to have a reasonable debt to income ratio. Since new homes are usually larger and have at least one more room than the apartments that are left behind, there is an immediate need for something to fill the void. The credit mostly went to Target, Walmart, etc. In that respect, it was successful in stimulating consumer spending.
The fraud would have existed, even if there were no buyer tax credit. How many fake $30,000 geo-thermal systems were claimed for a 30% credit? The IRS will deal with the fake claims.
Steve
Could it be possible that business people can run a business better then the goverment manage our tax dollars. I'm just asking.
Good luck and success.
Lou Ludwig
David,
Too often this is the case in government programs. :)
Steve
Edward and Cecelia,
If they know this happened, why did they allow it? :)
Steve
Kathy,
That was my first question. :)
Steve
Doug,
I am sensing that this was just icing on the cake to people ready to buy anyway although it did compress the market by bringing buyers from a few months out into the window,. :)
Steve
Rose,
That's a safe bet. :)
Steve
Ellie,
Don't know how they get the money back. :)
Steve
Mike,
If the objective is to get money into the hands of consumers, forget the rules and the games. Just mail every legitimate taxpayer a check. :)
Steve
Lou,
What a thought! :)
Steve
Steve, I'm not trying to defend the credit, but, if given to everyone, most of the cash given to most taxpayers would go to pay bills, not to purchase consumer goods. The object of the game was to put money in the hands of the people most likely to spend it. We and the loan originators got unknowingly conscripted into doing the government's screening and selecting. I believe that they knew that the only real estate effect would be to push a year's worth of business into a quarter. We were had.
I saw an article stating $19 billion in housing tax credits were redeemed. The $500 million in fraud would be approx 2.6% of the total awarded. If true, would it be one of the most efficient uses of goverment money? My perception is most governement programs waste much more than 3% of their funding. That does not mean the fraudsters should not be prosecuted - Book 'em Dano!
Mel
Mike,
Paying bills does keep the money flowing because those companies have payroll. As for the credit, I did not support it for the very reasons you cite. :)
Steve
Mel and Grethen,
What a perfect indictment of all federal programs. If 3% waste is considered the norm then do away with all of them. We just can't afford any program that loses or misuses money. :)
Steve
Hi Steve,
I wiish I was 97% efficient in my business, with my time and my dollars.
Mel
Mel and Gretchen,
But it is our money and our business. That's the difference. :)
Steve
Steve- You should rename your post "Housing Tax Credit Was A Sham".
Congratulations Steve- this post is now featured in the Tea Party group of AR.
Actually Steve it cost us alot more. That was just the amount that was spent on fraud. We paid for the rest of it too. Another program that benefited a few at the expense of the many.
Kevin,
Thanks for the feature - could have gone either way on the title. :)
Steve
Dale,
Anytime the government messes with the free market, it takes a while to recover - plus the upside is greatly overstated. :)
Steve
I read about the fraud thing too and was dismayed - but there's always that element that will find a way around any program. I believe this program was well intentioned even though it robbed some future sales. At least in our area, Southern California foreclosure capitol, it resulted in hundreds of homes disappearing from inventory and sales really spiked during the months it was in place. It got those homes off the market and increased demand at a critical time and arrested our pricing free-fall. Our prices are now stable to slightly appreciating and after 4 or 5 slow sales months, we are again tracking expansion in our market. If it did nothing but help stabilize our pricing free fall the program would have been worth it.
Now, get the government the hell out of our business.