WASHINGTON (AP) – Oct. 27, 2009 – Top Democrats in the Senate are pressing a plan that would extend a popular tax credit for first-time homebuyers but gradually phase it out over the course of next year.

The proposal, by Majority Leader Harry Reid, D-Nev., and Senate Finance Committee Chairman Max Baucus, D-Mont., would extend the $8,000 tax credit – which expires Nov. 30 – through March 31. Its value would drop by $2,000 for each of the subsequent three quarters of 2010.

The plan, which could face a vote in the Senate this week, appears aimed at countering a far more generous $17 billion bipartisan plan that would extend the $8,000 credit through June 30, 2010, boost the income cap for eligibility and open the credit to all buyers, rather than first-timers.

Senators are maneuvering to add the homebuyer tax credit extension to legislation to extend unemployment benefits by up to 20 weeks. That bill faces a key test vote on Tuesday.

Supporters say the tax credit has helped revive the housing market and say that if it’s cut off as scheduled at the end of next month, home sales could drop off.

Reid sought to schedule a vote on the competing measures on Monday but was blocked by top Senate Republican Mitch McConnell of Kentucky, who is demanding votes on unrelated GOP proposals.

One such proposal would require people receiving unemployment insurance to be processed through the E-Verify program to prove legal immigration status and would require all federal contractors to use E-Verify. E-Verify is an Internet-based system that employers use to check on the immigration status of new hires.

The Democratic plan also would extend the ability of money-losing businesses to claim refunds on taxes paid during profitable times up to four years ago. All businesses could take advantage of the credit; when passed in February it was limited to smaller companies with annual revenues of $15 million or less.

The provision is especially popular with homebuilders who made huge profits in the housing boom but are struggling today. Critics say it’s a giveaway to some of the very companies that helped build up the housing bubble years ago.

Copyright © 2009 The Associated Press, Andrew Taylor, Associated Press writer

 
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‘Freaky’ side of real estate economics
Flat-fee brokers may put pressure on traditional commissions
Friday, June 23, 2006

By Glenn Roberts Jr.
Inman News

SAN FRANCISCO — Traditional pricing for real estate services is bound to crumble, and flat-fee brokers will likely deliver the deathblow — at least according to Steven D. Levitt, co-author of “Freakonomics,” a book that takes an unconventional approach to economics.

Levitt, who spoke to attendees Thursday at the PCBC builders’ conference and trade show at San Francisco’s Moscone Center, also said that the real estate brokerage industry is in some ways its own worst enemy, as low barriers to entry lead to proportional surges in agent population during housing market booms.

“It turns out that the median real estate agent is making the same amount of money today that they were 10 years ago, despite the fact that housing prices are up 50 to 60 to 70 percent during that time period nationwide. In the end … you’ve got to feel sorry for the real estate agents. Now, instead of selling six houses a year, the typical agent sells two or three houses. My own feeling is that if you were thinking about getting into the real estate business, I wouldn’t do it,” he said.

Such views have not won Levitt and co-author Stephen J. Dubner any popularity contests within the ranks of the National Association of Realtors trade group, Levitt readily acknowledges. Particularly because one of the chapters in the book draws parallels between real estate agents and the Ku Klux Klan. “We’re not big favorites with the National Association of Realtors right now,” he said.

But Levitt explained that the book is not intended “to imply that real estate agents are bad people in any way, shape or form,” he said. His research has raised questions, though, about whether real estate agents always seek to get the best deal for their clients.

In an analysis of 100,000 home sales in the Chicago area, Levitt found that real estate agents tend to sell their own homes for about 3 percent or so more than the selling price of their clients’ homes. When he speaks to real estate agents, he inevitably will hear a familiar range of responses, he said, such as: “Well, that’s just because we have better taste. We’re better at showing houses. We have good paint colors and that makes people want to jump in our houses and pay more.”

The research also found that real estate agents tend to leave their own homes on the market about 10 percent longer than their clients’ homes. “If they have such great taste in paint you’d think their homes would sell faster than their clients’ (homes),” he said, adding that he was not surprised by the findings.

He shared a personal story about a home he was interested in buying in the suburban Chicago area. The home had been on the market for about six or eight months, and he decided to call the listing agent directly.

“I had learned already that I didn’t want to have a buyer’s agent,” he said, since he knew that a buyer’s agent shares in the total commission paid by the seller to the listing agent. By going directly to the seller’s agent, that agent and the agent’s broker could keep all of the commission for themselves.

“I said to her, ‘I’m interested in this house and I don’t believe in buyer’s agents.’ I could hear her voice really pick up on the other side of the line.” Then, he asked a very direct question. “Can you just tell me the absolute lowest price at which the homeowner is willing to sell this house for?”

Her response, “You should be ashamed of yourself. That would be a complete violation of my client relationship to tell you any information like that and you should know better than that. It’s not right to ask me questions like that.”

Later, as the phone call came to an end, Levitt said the agent volunteered some information that led to his offer on the property: “Let me just tell you one last thing. The owner of this home is willing to sell this house for less than you can possibly imagine.”

He made an offer for $50,000 less than he had planned to offer, and the offer was accepted without any back-and-forth. “Basically, in order for that agent to put an extra $20,000 or $30,000 back in her pocket she basically stole $50,000 from her client.”

Levitt added, “When I tell this story in front of real estate agents, I always get the same reaction, completely predictably, ‘I would never, ever do something like that to my client. It’s just patently absurd.’ But you wouldn’t believe the people I interact with on a daily basis – every other real estate agent is doing this every time I turn around.”

Lately, Levitt has focused his attention on flat-fee real estate brokers that charge a flat rate for listing a home for sale in a multiple listing service. He has studied three markets, and so far has concluded that there isn’t much difference in the price that sellers get for using a flat-fee broker versus a traditional, full-service real estate broker.

“In some markets it may take 10 to 15 days longer to sell my house — in other markets I see no difference at all. In the end, if this is true, it’s really going to be bad, bad news for real estate agents, which I think is actually really good news for everybody else.

“I just don’t see how the real estate agents can maintain the level of pricing they have,” he said, referring to a commission rate that has traditionally hovered around 6 percent of the sale price of a home. “And I think that the way it will crumble is not through FSBOs (for-sale-by-owner transactions). What’s really going to be the undoing of real estate agents is going to be flat-fee brokers. It seems to me that’s a very viable option, unless (Realtors are) successful in the end in getting legislation passed which will preclude it from happening.”

Levitt said that lawyers for the National Association of Realtors asked about the source of the MLS data used in his and threatened litigation. But Laurie Janik, general counsel for the National Association of Realtors, said today, “NAR never at any time ever threatened Mr. Levitt with litigation nor did any member of my staff ever speak to him or contact him.”

And Steve Cook, a spokesman for the National Association of Realtors, said that the Realtor group has not taken any legal action against Levitt or the real estate professional who supplied the MLS data.

New doors opened to his research after the release of “Freakonomics,” Levitt said. “Suddenly, everybody wants to give me data.”