Pay Your Mortgage On Credit Cards, Buyer’s Agent Rebates Are Not Taxable, Japan’s Real Estate Bubble

Buyer’s Agent Rebates Are Not Taxable
It struck me that the buyer’s agent rebates I am seeking may be taxable income. That would stink. But it seems that Redfin, another company that does rebates in selected areas, received a private letter ruling from the IRS that states that such rebates are not considered income. 1099s are not submitted, and nothing is reported to the IRS.

Japan’s Real Estate Bubble
Got Bubble? I stumbled upon this article comparing the Japanese real estate bubble with the situation in the US. Did you know that residential real estate in Tokyo dropped for 17 straight years? Definitely will be reading more about this.

Pay Your Mortgage On Credit Cards
It had to happen one day. Although there are some hoops to jump through (you can’t be sub-prime) and it’s only available through specific lenders, American Express is letting people pay their mortgages with a credit card. There’s a $395 initial fee paid at closing, but the potential rewards might let you break even after only a few years.

Comments

  1. For me personally (& for responsible credit card users), I would love to pay for my mortgage with my credit card, but I think the net result will be awful, b/c people who don’t pay in full every month are going to really quickly get themselves in a lot of trouble.

    Also people will overcommit themselves to a house, thinking “oh, I can just put it on my credit card.”

  2. Interesting. I will consider this when shopping for a mortgage in the coming months.

    I have a question about prime loans, however. Is excellent credit, proof of income, and an acceptable debt-to-incme ratio not enough to qualify for a prime loan? The article also mentions the size of the down payment and availability of liquid assets are considered when going for a prime loan.

    My wife and I have excellent credit, high documented incomes, and a sensible debt-to-income ratio, but we will not have more than a 5% down payment or much of a reserve of cash. Would we still likely qualify for a prime loan?

  3. If people don’t have the habit of paying their credit card balance in full every month, they will get into a lot of trouble even without the mortgage factor.

    The CNN article did say that not just anybody can pay their mortgage with their cards. It seems that AMEX will regularly examine a person’s credit to see if there’s any late payment. Hopefully, that can discourage some who are not very responsible with their credit bills to use this option.

  4. yes i did know about the japan bubble, it is often referred to on housingpanic. and with japan being the size of CA, they’re definitely not making anymore land there. (a phrase people use here to claim it can only go up)

  5. Ted Valentine says:

    Thanks for looking up the info about the commission rebate. I had wondered if that could be considered income.

  6. I can’t tell if these are the AmEx cards that make you pay in full each month (charge cards) or if they let you carry a balance.

  7. Cynthia says:

    In the article about Japanese real estate, could the decrease in the Japanese population have anything to do with it? Maybe not for commercial property, but residential. The US population seems to always be increasing, so perhaps it’s not an accurate comparison.

  8. interesting about the rebates on the commission. rebates on things from places like bestbuy/compusa/microsoft etc aren’t classified as income, so why should a “rebate” from the realtor be classified any different – unless it’s a tax dodge of course but realtor’s wouldn’t do *anything* sneaky would they ;-)

  9. A few words about Japan and the current US situation.

    1. I visited Japan in 1988 (near peak) and 2004. In 1988 a bowl of rice with an egg on top cost $6 and a cup of coffee cost $5-$6 in US money. In 2004 egg/rice cost closer to $3 and coffee $2. They NEEDED a good bit of deflation…

    2. Don’t forget that Japan had so much paper weath that they “bought” Pebble Beach, Rockefeller Center, etc. and lost a fortune on them within years.

    3. Yes, Japan has a declining population but they’ve got 125 million people in the same area as California. California complains about overcrowding with 35 million. On top of that Japan packs them into a few urban areas so 50% to 75% of the nation is natural or farm country.

    The valuations made no sense then, which leads to my second topic: Coastal CA real estate.

    1. I relocated to a CA coastal city for work in late 2004. I’d left the state only a year earlier for a couple contract jobs. Well…in that period of time entry level houses went from $250K to $450K and people who couldn’t get a loan at $250K were suddenly “homeowners.” The trouble is, these houses (now asking $550K-$600K) are 1200 sq. ft., 40-50 years old, and in neighborhoods were I wouldn’t rent, let alone buy.

    2. A couple colleges at work “bought” houses for $600K-$725K at the market peak in 2005 and one tried to sell within 6 months, as the mortgage was “killing them.” Another guy backed out of a condo at $500K at the last minute.

    There is NO logic to US coastal real estate these days and all the time people are work fantasize about selling and moving to Arizona, Utah, Texas, or somewhere cheaper. “Cash out my equity and own free and clear there…” The CA bubble will pass. It may take 17 years, but it will pass. I expect the banks to write off loans much more quickly in the US, so 4-8 years before the bottom is more likely.

  10. I would love to pay my mortgage with my AMEX credit card too, just for the rewards.

  11. I’d be all over the amex mortgage thing except:

    “American Express currently has one partner – American Home Mortgage. But later this week, it plans to announce another partner-lender, with more partners in the works, said company spokesperson Christine Elliott.”

  12. Gates VP says:

    I like the AMEX idea for cash flow. As a guy who pays all of his bills on the card, it just makes life easier. That way I don’t need to coordinate my paydays with my payments, I can just book off a day once/month to check the receipts and pay off the CC.

    Right now, I have to check this stuff multiple times/month to make sure that all of the money is going through at all of the right times.

    As to the Japanese housing link, here’s a great quote: “a decline in wealth from a house-price crash would hurt consumption”. I find this really funny, b/c it uses a very specific definition of wealth, the “pretend one”. You see, even if the house prices crash, you still own the property, you still have the hard asset. So it’s kind of funny to think that a drop in the relative value of my place is really going to kill my consumption.

    I mean really, if housing has a bad year are we going to hear people saying: “Well, we were going to buy a big-screen TV (new car, riding mower, etc), except that the value of our house just dropped so we can’t afford it anymore.” Maybe I’m just talking about rational people, but a drop in house prices just means a drop in your investment value. It’s like you owned stock that went down. except that you also get a place to sleep at night. Either way, food for thought :)

  13. SavingEverything says:

    Remember, dont be too frugal or cheap when it comes to comfort for you and your wife’s back for the next decade. Go with whatever feels comfortable, whether it costs $300 or $800 or more, it’s comfort and having a good third of your day spent well.

  14. es21729 says:

    FYI although it doesn’t get me points, I use Bank of America’s (formerly MBNA’s) BillPay service to automate my mortgage payments through my credit card (bill payments don’t accrue points on their cards). I would love however to pay it on my Starwood AMEX and get points!

  15. An additional fact that was not mentioned in the Japanese property bubble article: At the peak, the value of the land in Tokyo was valued at more than all the land in the entire United States.

    Oh well, at least it was land in a decent location. During the dot.com bubble, we had companies with no sales, profits, or even sustainable business plans valued at billions…

  16. There is a new service that?s going to be available for consumers by November of this year Mega Bill Pay.
    You can pay your mortgage on line by using any of your credit cards

  17. Philip Mikal says:

    Our company, CardIt, launched this month and allows payment of over 100 lenders with Visa, Mastercard, or Discover. As one can tell from the feedback on this post, a service like ours or the AmEx offering can be a powerful tool for the responsible consumer.

    Dino – of course I’m curious to learn of your “Mega Bill Pay”. It was a difficult and long process to launch our business; years in the making. It’s not as simle as getting an online merchant account and sending someone a check when a payment comes in. There are many reasons for this, which I’m sure you’ve come across already. CardIt is fully electronic and integrated with our lenders via the same bill payment network that powers the largest online banking websites. If you represent a serious concern, I would to hear from you directly and see if the opportunity exists for us to work together. philip (at) cardit (dot) com

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