The first-time homebuyer tax credit, due to expire on November 30, has been extended and expanded.  Under legislation signed today by President Obama, first-time homebuyers have until April 30, 2010 to enter into a firm contract for the purchase of a home, and must close on it by June 30, 2010.

In addition, people who already own a home and have lived in it as their primary residence for at least five of the last eight years may be qualified for up to $6500 in a tax credit.

Income limits apply, but they have been raised in the case of the first-time home buyers.  For more information click here.

The real estate market should experience a good winter and spring!

In yesterday's USA TODAY there was an interesting article about why General Motors went bankrupt.  There were seven reasons given, but one caught my eye.  GM "drove incentives into the ground."  Long after discounts and cash back, etc. were necessary, GM kept them up, keeping their prices well above the competition, but offering discounts to sell cars.  GM, according to USA TODAY, for years concentrated on the "deal," not the product, and sold non-competitive cars for competitive prices by discounting. Once the market changed drastically toward higher quality, more efficient cars, GM had lost the ability to produce them. As a consequence, no amount of discounting and incentivizing could move relatively low-quality product.

That situation immediately brought to my mind the notion that for many homesellers the fee an agent seeks is the sole determining factor in choosing any agent.  The "deal"(commission), not the "product" (marketing the property) became the driving force in the decision-making process.  Agents have brought it on themselves, failing to differentiate their services from those of their competition.  My father-in-law once had a sign in his lumberyard: "Fresh oats $10 per bushel; oats that have already been through the horse $1 per bushel."  You can't sell lower quality for higher prices for ever, even with discounts and incentives. Eventually people figure it out, and they stay away in droves.  There have been some examples of that in real estate as well as the auto industry.

"Marketing" has been a buzz-word for a decade or so.  The Internet has made it even buzzier.  More websites, more prospects, more offers.  Six websites, six offers (Sorry, I got carried away). 

A good agent not only markets a property.  Ask any seller who has had to negotiate their own contract and take it to closing.  Once the offer is presented the fun begins.  It doesn't end until closing; and sometimes the closing doesn't happen.

Agents are still racing each other to the bottom.  General Motors has blazed the trail for them.  Good luck in bankruptcy.

Why banks fail.  I was tempted to call this Why Banks SHOULD Fail.  But I was feeling charitable.  I want to share with you a personal experience of the failure of the American banking system.

Many years ago my wife and I opened checking and savings accounts at a local bank.  They had maybe three branches, one three blocks from our home.  Over the years they were gobbled up by a larger bank, then the gobbler became the "gobblee," and this scenario replayed itself a couple of times over the years.

About three years ago we grew weary of the poor service our national mega-bank was providing, so we switched over to large regional that promised and delivered more service.  We were very pleased.

However, every month we received a statement from Mega-Bank stating we had a zero balance.  We ignored it.  We knew we had closed all our accounts.  There seemed to be little reason to be concerned, but we started to be annoyed by the waste of postage and paper.

My wife finally called Mega-Bank the other day, and after the better part of an hour the customer service person discovered the reason we kept receiving zero-balance statements.  It seems that one of our earlier banks, gobbled up subsequently by Mega-Bank, in its infinite wisdom had granted us an open line of credit.  We never used it.  It was - are you surprised? - a zero-balance account.  Nevertheless, Mega-Bank dutifully sent a statement every month.

I am not a financial wizard - I don't even play one on TV like Jim Cramer.  However, it would seem to me that our line of credit must have been calculated into their balance sheet somehow.  After all, we could have written a rather large check without warning that Mega-Bank would have had to honor.  Wasn't this a potential liability?  Where were the reserves that would have covered it?  How many accounts like this does Mega-Bank have?  As far as I can determine, they swallowed about three banks that we had done business with, and probably some others as well. 

Here's the kicker.  Mega-Bank was one of those major banks that received a bunch of billions of dollars from the federal government under TARP.  Were there losses and liabilities like mine?  Were they really in such bad shape?

There is much about our banking system that needs more scrutiny than has ever been given to this point.  Stress-testing could be interesting, if my experience is any indicator.