The $8000 tax credit has made first time purchasers in New York absolutely insane

Being a real estate attorney in New York City I can discuss some legalese surrounding Real Estate purchases, but I think there are better way of putting you to sleep.  So, for a minute, allow me to give you my opinion on how absolutely ridiculously dumb this $8000 tax credit is and why I believe it will do nothing to start any type of housing turnaround.

1.  Many people realistically don’t  know if they qualify for the credit:  Many of my clients, but not all, make a nice amount of income and therefore, based on the income limits set forth by the IRS, may not even qualify for this credit to begin with.  However the majority of first time purchasers I have spoken to (and not just my clients) have had absolutely no contact with his/her accountant before proceeding with the purchase to make sure there are no caveats involved in qualifying for this credit.  They just are hoping they qualify.  Nice.

2. An $8000 credit on a $600,000.00 residence is like me enticing you to buy a Mercedes by offering you a free snickers bar and one shoe.  Lets face it, $8000 is $8000 and were in a recession.  But I would base my decision on whether or not to buy now on factors such as the neighborhood, the price of the place, the interest rate you’re receiving, whether or not you see yourself living there for more than 7 years, and/or whether or not the floors are caving in.  Over the life of a loan for a property worth $600,000.00 or even less, $8000 would mean absolutely nothing at all.  Doesn’t matter, people are still offering their first borns for this credit.

3. If you are purchasing a new construction condominium and you haven’t had the place inspected AND you’re rushing forward because you wanted to fit into this 8k credit, then you’re signing a letter absolving me of any responsibility as your attorney.  Look, I’m not a real estate broker, you can go to Trulia.com for that, but lets face it, there are serious legal consequences involved in buying a home, especially if its a new construction.  Half of Park Slope is suing their developers because their windows are falling off.  Williamsburg looks like California after the Gold Rush left town.  The most important thing I tell clients these days is to get their place inspected and to make sure to list the things that need repaired inside the actual contract itself.  If you’re foregoing this crucially important step which can ultimately cost you tens of thousands of dollars down the line because of an 8k credit, then we you have some ‘splainin to do.

At the end of the day what I see, and what I completely empathize with, is that people are very emotional about the places they want to live and purchase.  The ones that are completely unemotional (Ive found something cheap in a decent neighborhood with a low interest rate, low common charges, good condition, and I get this 8k credit) are the ones that may very well come out ahead.

Ive spoken to several New York City Real Estate attorneys last week, who, like me, were burning the midnight oil attempting to get deals done in time for the deadline.  And they all say the same thing:  We’re happy this is finally over.

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