How to factor the end of the Tax Credit when pricing a home for sale? (incentive, appraisal)
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Someone in my family is getting a rental home ready for sale which is may be worth around 210k given comps. But comps were supported by the $8,500 tax credit and the new sales are not. So how much of an adjustment would you make given that this buyer incentive had been removed?
Pesonally I don't think I would account for it at all. I would take the most recent comps and use those as a basis regardless of weather those sales took place before or after the credit expired.
One thing to keep in mind is that not every buyer would have been eligible for the credit.
One thing to keep in mind is that not every buyer would have been eligible for the credit.
For this price range and neighborhood, a large majority of buyers qualified. If they happened to not be a first time buyer, then they would have gotten $6,500. With regards to the house in question, it would make more sense to consider what happened with a large majority of sales.
For this price range and neighborhood, a large majority of buyers qualified. If they happened to not be a first time buyer, then they would have gotten $6,500. With regards to the house in question, it would make more sense to consider what happened with a large majority of sales.
You are making an assumption that the sellers factored the credit into their pricing, and that any negotiations did not negate that pricing strategy.
The tax credit in general may have had a side effect of propping up prices due to demand. Prices in our area seem to be dipping subsequent to the expiration. You should review recent sales before and after to get a sense of the trend. I would not automatically discount by the amount of credit.
The sellers didn't get that tax credit in their pocket, so why would it have any effect on the end sales price of the comps? If the comps showed the seller paid some closing costs for the buyer, you can do a price adjustment, but the tax credit is outside the purchase, and only 2 buyers I had qualified, so it's not "the large majority" that qualified.
The sellers didn't get that tax credit in their pocket, so why would it have any effect on the end sales price of the comps? If the comps showed the seller paid some closing costs for the buyer, you can do a price adjustment, but the tax credit is outside the purchase, and only 2 buyers I had qualified, so it's not "the large majority" that qualified.
The qualifications are that the buyer uses it as a primary residence. Income requirements are $125k for singles and $225k for married. In the low 200k home price range, besides rental properties, what is left over, as far as buyers who did not qualify? I'm just trying to be practical here, for this particular neighborhood.
I understand that they didn't get the credit right away, but it is extra money that would come in the near future.
I understand where Felix is coming from on this one, but the reality is this - there are some people wanting to sell, others wanting to buy, many comps appear to be tax credit driven - exactly how much $ for each comp cause 8,000 is different than 6,500? how many used it/qualified? did the sellers use it as a tool to raise price? would the buyers have moved ahead regardless? would the sellers have adjusted price lower if not?
The only way to know, would be to know every detail of every transaction/comp not to mention the exact interest rate someone got, cause rates affect markets as well, which your peeps, will never know enough to make it a pure science. comps and appraisals are for approximations not an exact science like two exact pillows for different prices at different stores on the same day. So they need to keep it simple, and assume that there is some risk, and how much are they willing to risk vs. the potential benefits.
Also when people buy they suddenly become extremely picky and forget to realize on the comps they didn't have an inspection, appraisal, or most likely even go in the "comps". What type of tile? what type of granite? how worn/damaged is the floor, h20 in basement, radon in the water or air, termites, furnace, and thats just the tip of the iceberg, but ad just a couple of these factors and they add up to more than 6,500 really fast, and the buyers agent, appraiser, buyer, most likely won't know any of this stuff.
Eric#1, That makes sense. The credit was used to stimulate demand. Higher demand equals higher prices, if all other things are equal. It would be hard to tell who got the credit on each particular sale and to know all the details of those sales. So with so many variables it's hard to compare on a case by case basis. Given all of this, I would still prefer to be a seller when the tax credits still existed, although I don't agree with the use of credits.
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