Buyers' bizarre expectations

It's always been a source of annoyance for me when people talk about the real estate market like it's the stock market. They say it's "good" or "bad" in a blanket fashion, when they typically mean that it's good or bad for sellers. In fact, a market that is good for sellers is inherently less favorable for buyers, and market dynamics that favor buyers are less kind to sellers.

So, it's never really a bad market for everyone and -- to be glass-half-full about it -- it's always a good market for someone, whether that someone knows it or not.

But lately, I'm seeing less of this problem. There's a new popular misconception in town. It suddenly seems "de rigueur" (French for "part of the protocol") for both sides to think that the market is great -- so great, in fact, that real estate consumers seem with increasing frequency to think that they can have it all, sometimes getting upset or even irate when they receive an explanation as to why that's not realistic.

This space -- the space of bizarrely unrealistic expectations -- is not owned exclusively by either buyer or seller. No, we're talking about a universal cluelessness here, folks. It's the stuff of phone calls and e-mails like:

Q: I plan to buy a house before the deadline for getting the current $8,000 tax credit. But I've heard it might go up next year to $15,000. If it does, can I get that one, too?

A: OK, this one might not be totally bizarre. Maybe this person just doesn't understand the nature of the tax credit. It's meant to be an incentive to buy, and to create some urgency by imposing a looming deadline, beyond which we don't know -- at this time -- whether there will be a credit at all.

This is why it stimulates homebuying. If they announced now that the credit would still be around in 2015, or will be increasing next year, the tax credit would not be effective at creating the sense of urgency on the part of homebuyers that is needed to turn this thing around (as it might already have started doing).

Does that leave buyers without a critical piece of information? Yes. But that's the whole point! You can't have everything -- you can't have the certainty of securing the credit now and a guarantee that if it goes up, you'll get the benefit of that, too. The people who took the 2008 credit had no idea it would go up and be converted from a loan to a refundable credit.

But if they wanted certainty of getting a tax credit, they had to buy then. And no, they didn't retroactively get the benefits of the 2009 credit just because they're nice people. You can have the certainty of getting the credit while the getting's good, or the potential for a larger credit understanding that if you wait you might get no credit at all. Is there risk in that? Yes. But you can't have it both ways.

Here's another one:

Q: "I'm a self-employed consultant. I bring in about $200,000 a year from my contracts but my taxes show about $30,000 a year because I'm, let's just say, aggressive with my deductions. (Side note: This consumer was not a real estate broker. Moving along ...) I know you needed my 1040 to get me preapproved for a mortgage, but I'm just going to send you over some of the recent checks I've received from my clients, instead, because I need to be approved for way more than I could buy on $30 grand, heh heh heh."

A: Uh, you might have a problem. Unless you have some payroll check stubs or W-2s to document your income, the after-the-bubble rule of income documentation for the self-employed is: Your income for mortgage qualifying purposes is the amount of income you pay taxes on. Period. You can't have it both ways. ...CONTINUED

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