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Dear First Time Buyer - Don’t’ Buy that Dump! It's not worth the $8000 tax credit.

The $8000 tax credit is a nice perk for first-time homebuyers. In my opinion, new Buyers should look at it as a perk, not as an incentive:
1) Qualify for a home based on solid income, a certain level of confidence in job security, and ability to repay for years to come.
2) Find a nice property that you don’t have to sell for at least 5 years, better if you can keep it for 10 years or more, possibly as a rental later on.
3) Don’t let the pending deadline for free money lure you into a dump! First of all, market swings can wipe out that $8000 in a flash, even if you are buying a $150,000 property. Second of all, a dump doesn’t need the market to help wipe out that $8000 of free money. A dump can do it all by itself. See my blog “Top 10 Ways to Know Your Buying A Dump.”

In certain locations there is a shortage of inventory and a feeding frenzy among first-time Buyers trying to beat the clock. Meanwhile cash investors are snatching up the best properties causing first-timers to battle for scraps.

Yes, the $8000 tax credit is a nice perk. If you buy for all the right reasons, the credit is gravy. But buying a dog pile to get $8000 today and risk your future just makes no sense. Some times renting makes more sense. (OK now you can officially declare me the worst real estate salesperson ever.)

For all its encouragement and stimulus, the government doesn’t even want you to buy a dump. Last I heard, they have not announced Cash-for-Clunkers Homes, and you don’t want to be calling Marilyn Mock of the Foreclosure Angel Foundation in 2011.

Let the professional investors deal with risk. You too can be a pro some day if you make the right moves today.

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Comment by Ellie Drury on September 30, 2009 at 2:52pm
Wow! I couldn't have said that better myself. :-) Here in Palm Beach County our under $150,000 inventory is extremely picked over. There are still some opportunities when you get up around $250,000, but at that point $8,000 isn't much of a deal maker or breaker.
Comment by Linda Landry on September 27, 2009 at 2:56pm
Great advice Ken; it is not 'free' money if it is a bad investment. Even a personal residence becomes an investment.

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