Tuesday, April 8, 2008

$7,000 Senate Housing Bill Foreclosure Tax Credit.

The Senate housing bill contains a $7,000 tax credit for the purchase of foreclosed [primary resident] properties. The pitch appears to be that this credit, available for one year only, will help remove foreclosed properties from the market, reducing the supply of homes available for sale.

Also, my view is that because a tax credit aided foreclosure sale should NOT be considered a market comparable for appraisal purposes, a foreclosure sale may NOT depress the market value of comparable non foreclosure sales properties if those sales are categorically excluded as market comparables. Alternately, if appraiser DO use these sales as comparables, and if they discount the sales price by the value of the tax credit, this would depress market values, and run counter to the purpose of the tax credit.

The biggest criticism of this measure is cost which CBO estimates at $1.63 Billion and equity-- this provision is another benefit to lenders who are the owners of foreclosed properties.

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