In the last week, I’ve received emails from just about every person I know who works in real estate. They all want to remind me that if I buy a house this year, the government will give me $8,000. My dad even called, telling me that he didn’t want me to miss out on this chance for what amounts to free money. I would like to buy a house in 2009 — but I’m not so sure that the tax credit should be such a major incentive.

A Real Estate Agent’s Perspective

Real estate agents are taking steps to point out the tax credit to all of their potential clients. In part, they want to help their clients as much as possible. But there’s more to the tax credit’s popularity with real estate agents. Business is down in the real estate sector — and agents only make money when a client buys a house. Furthermore, the amount of money an agent earns is based on the cost of the house in question. It’s in every agent’s interest to promote more clients to buy, especially if those clients can afford more expensive homes. The tax credit adds a little more to the ability of the average first time home buyer to purchase.

I’m not saying that it’s a bad thing that real estate agents are promoting this tax credit. But it’s worth remembering that they aren’t disinterested parties.

The Home Buyer’s Perspective

In the grand scheme of things, the tax credit won’t really determine whether or not you’ll buy a house. It doesn’t affect the amount of money you have available for a down payment or to make payments toward your mortgage. Heck, you won’t even see that money until after you file your 2009 tax returns and get your refund. At best, you can use it towards making larger payments on your mortgage. That’s assuming you get the money at all. There are plenty of restrictions on who’s actually eligible for the tax credit — and Uncle Sam actually has first dibs towards the money. If you owe taxes for 2009, your tax credit will be applied to that bill before you even see a cent.

If you’re looking for a house in 2009, it’s worthwhile to ignore the tax credit. If you can’t make the down payment comfortably without getting a check for $8,000 some time in 2010, you shouldn’t be making the down payment at all. There’s a reason the housing industry is so desperate to make sales right now: the credit that was extended to people who couldn’t really afford it allowed people to rely on money they didn’t have, but only for a little while.

2009 does have some opportunities for home buyers. It’s good to take those opportunities into consideration during the buying process. But the tax credit, along with other opportunities, shouldn’t be your motivation or your method for buying a house. It’s crucial to make sure your finances are stable enough to manage such a purchase — without $8,000 somewhere down the line.

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