5 Reasons To Buy In August

1. Real Estate is a Great Long Term Investment
Mike Mandel, former chief economist at BusinessWeek and current Senior Fellow at Wharton's Mack Center for Technological Innovation, said:"We've just had the biggest boom and bust in real history in recent history. Nevertheless, real estate has still greatly outperformed the stock market over the past ten years."Below is his chart actually showing the difference between real estate and the stock market.
2. A Home Is a Better Place to Raise a Family
When Fannie Mae asked current renters for the major reason to buy a house in their National Housing Survey 2010, these were the answers renters gave (they could pick multiple answers):
78% said it was a good place to raise children
75% said because they would feel safe
70% said because you have control of your own space
3. A Home Creates a Sense of Community
The Federal Reserve Bank of New York just published a paper The Homeownership Gap. The paper explained:"Because owners have a financial interest in their property, they have incentives to take measures that will maintain or increase the value of that property. Some of these measures-such as fixing a leaky roof-are closely related to the house itself. Others, such as investing resources in the betterment of the neighborhood and the community, have broader beneficial effects on the local area, creating what economists call 'positive externalities'."
4. It is Cheaper to Own Than Rent in Many Parts of the Country
Housing Wire just reported on a Credit Suisse study:"While a segment of the renting population continues to rent, many are looking to dip their toes in the homeownership waters. Credit Suisse said the percentage of median household income needed to pay the mortgage on a median priced home is at a 30-year low... Low mortgage rates and property values makes homeownership more attractive than renting for many. In many markets - including Washington DC, California's Inland Empire, Las Vegas and Phoenix - paying for a mortgage is less expensive than renting."
5. The People Who Do Buy a Home Don't Regret It.
Probably the best people to ask if buying a home makes sense are the people who currently own homes. A recent national poll commissioned by Bankrate.com found:"Ninety percent of homeowners say they don't regret buying their home despite a nationwide tsunami of foreclosures, short sales and loan modifications."

Summer days

It's the first day of August and I can't believe that summer is almost over. I guess not over in terms of the summer season but with school schedules this is over the halfway point. We try to fit everything in. Friends, family, lay around time and work. Work? I've been trying to do that every day of this summer break but it's not easy when you have friends calling to meet at museums and grandparents calling to come over and swim. Then the kids who are wanting to play Wii and have friends over. Balancing work and family is hard but doable. I'm always striving to have a happy medium where I can service my clients the way they should be taken care of but not have my family suffer. Right now I'd give myself an A- but there is always room for improvement.

School Time is almost here

Want information about schools? Check out Greatschools.com and you can look up test scores, demographics, teacher salaries and how your home school ranks in the district.

Old article but still relevant

I came across this article when going through some stuff on my desk and although the article is from 2008 it still applies to today and what sellers can do to get ready for the sale of their home. Not only will you be able to inform the potential buyers and move offers and escrow along faster but you can possibly fix items a head of time and maybe get a better price for your home. Just a thought.

Earthquake Insurance?

What you don't know CAN hurt you. A basic homeowners policy does not cover damage caused by earthquake, and if you have a policy in place already, the deductible is very likely higher than you might imagine. It is no coincidence, places all over the world really are ‘moving and shaking’ and the recent 7.2 earthquake in Mexico was felt by many, especially here in Southern California. Since we reside in one of the most active earthquake areas in the country, let’s take a moment to address this important subject and ways to mitigate potential loss.

Don’t wait until after an earthquake to think about the importance of planning and preparing for a natural disaster and it’s after-effects. Earthquake insurance does not have to be complicated, but there are several risk factors to consider before you decide to purchase this coverage.

Article written by: Shelley Dawson

Tax Credit for Military Extension

Military personel, members of the Foreign Service, and employees of the intelligence community have an extra year, through June 2011, to buy a principal residence in the U.S. and claim the federal tax credit. The deadline for entering a binding contract is April 30th 2011 with the deadline to close a purchase being June 30 2011. The extension applies to any individual (and if married the individuals spouse) who serves on qualified official extended duty service outside of the U.S. for at least 90 days during the period beginning after December 31,2008 and ending befor May 1st 2010. See www.military.com/finance/content/0,15356,205662,00.html for more information.
Pretty cool!

April Market Reflection

C.A.R. reports April median price increased 21 percent; home sales decreased 8.1 percent

Quick Facts:
• Existing, single-family home sales decreased 8.1 percent in April to a seasonally adjusted rate of 483,830 units on an annualized basis compared with April 2009.

• The statewide median price of an existing single-family home increased 21 percent in April to $306,230, compared with April 2009.

• C.A.R.’s Unsold Inventory Index rose to 5.1 months in April, compared with five months in April 2009.

LOS ANGELES (May 24) – Home sales decreased 8.1 percent in April in California compared with the same period a year ago, while the median price of an existing home rose 21 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.

SHORT SALE TAX IMPLICATONS

What are the tax implications of a short sale?

A

Cancellation of Debt (COD) Income

A short sale, where the lender agrees to reduce some or all of the outstanding debt, may give rise to forgiveness of debt income (also called "cancellation of debt" or COD income). The amount of the debt that the lender agrees to write off is treated as "ordinary income" (as opposed to capital gains income which is taxed at a lower rate). Even though the lender may be taking this action to facilitate the sale by the owner who is under a notice of default and facing a foreclosure, the agreement between the owner and the lender is considered voluntary and the amount of the loan written off by the lender is treated as forgiveness of debt (cancellation of debt--COD). The taxpayer will generally receive a 1099 tax form from the lender in the amount of the cancellation of debt.

This forgiveness or cancellation of debt which is treated as "ordinary income" under certain circumstances may or may not be subject to taxation.

Federal Mortgage Forgiveness Debt Relief

Under the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) signed by the President on December 20, 2007, Internal Revenue Code §108(a)(1)(E) was added and provides that a taxpayer will not be taxed upon cancellation of debt income if the following conditions are met:


. The property sold in the short sale is the taxpayer's principal residence, as that term is used in IRC §121.
. The cancellation of debt is Qualified Principal Residence Indebtedness** under IRC Section 163(h)(3)(B).
. The indebtedness is discharged after January 1, 2007 and before January 1, 2013. (The end date was increased by three years from 2010 to 2013 pursuant to H.R. 1424, the Emergency Economic Stabilization Act of 2008).

**Qualified Principal Residence Indebtedness is a loan secured by the residence used to acquire, construct or substantially improve the residence. The income relief provided is capped at $1,000,000 in the case of a married person filing a separate return and $2,000,000 for all others.

Any reduction of indebtedness excluded by IRC §108(a)(1)(E) will be applied to reduce the basis of the taxpayer's principal residence, but not below zero. This could result in a higher amount of capital gains tax owed by the taxpayer.

California Mortgage Debt Forgiveness Relief

California law, SB 401, conforms California Revenue and Tax Code Section 17144.5 to federal law, but with the following changes:

(1) The maximum amount of qualified principal residence indebtedness is $800,000 for married couples filing jointly, registered domestic partners filing jointly, single persons, head of household, widow/widower; and $400,000 for married couples or registered domestic partners filing separately; and

(2) The maximum amount of debt relief income that can be forgiven is $500,000 for married couples filing jointly, registered domestic partners filing jointly, single persons, head of household, widow/widower; and $250,000 for married couples or registered domestic partners filing separately; and

(3) California’s debt relief statute applies to property sold on or after Jan. 1, 2009 and before Jan. 1, 2013.

Qualifying taxpayers who have already filed their 2009 California tax returns should file Form 540X, Amended Individual Income Tax Return, to subtract the amount of debt relief from income. To expedite processing, write "Mortgage Debt Relief" in red across the top of the amended tax return. Taxpayers must attach a copy of their federal return, including Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), with their state tax return.

Capital Gains Income

Finally, if the owner has owned the property for some time and has refinanced to take out some of the equity, the owner could be subject to capital gains taxation when selling the property as well. For example, the borrower has a remaining loan on the property when the borrower refinances in order to buy an investment property (or to buy a car, to take a vacation, consolidate credit card debt, etc.) and now owes $300,000 to the lender. Thus, the taxpayer's adjusted basis may be lower than the outstanding balance on the loan (see the example below).

The tax calculation for any capital gains income looks just like step one when calculating capital gains income for a foreclosure sale of recourse debt.

Example:

1. The unpaid balance of the loan is $300,000;

2. The sales price (FMV) is $250,000;

3. The taxpayer's adjusted basis in the property is $50,000.

Sales price (FMV $250,000) less taxpayer's adjusted basis ($50,000) results in capital gains for the taxpayer.

Sales Price (FMV) $250,000
Less Adjusted Basis $50,000
Capital Gains $200,000


Additionally, the taxpayer will have ordinary income from the lender's write off of any debt, which in this example would be $50,000 (** See the discussion above in this question to determine whether or not this would be taxable)

Loan Balance $300,000
Less Sales Price $250,000
Ordinary Income $50,000

Earth Day!!!

Today is Earth Day and to be gentle on the earth my kids and I are riding our bikes today instead of driving our car (even running errands today for me). We are also using as little electricity as possible today. So far no T.V. or radio and only lights this morning to get ready. My little guy and I have been playing games and talking rather than electronic diversion. What can you do on this day of earth celebration?

Tax Relief Bill Vetoed

Governor Schwarzenegger vetoed a bill that would have prevented California homeowners who sold their homes via short sales or received loan modifications in 2009 from being taxed on the forgiven mortgage debt. Schwarzenegger vetoed the bill, which would have aligned much of the state’s tax code with that of the federal government’s, because it contained an unrelated provision regarding tax refunds for the state’s largest businesses. Although the governor vetoed this particular bill, he expressed his support for banning taxation of forgiven mortgage debt, and immediately called for the legislature to send him a bill to provide tax forgiveness prior to the April 15 tax-filing deadline.

Choices?

QUESTION: How do you choose your real estate agent? a) Signs around town b) Referral from a friend c) Google, Yellow Pages, etc. d) From a listing you were interested in e) other (please explain) Would LOVE to hear your responses...thanks!

Time is Running Out

Only 12 more days to get into escrow to take advantage of the Federal First Time Homeowner Tax Credit of up to $8000.

New California Tax Credit

Governor Schwarzenegger signed AB 183, providing $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes.
The tax credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under AB 183 purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state).

The eligible taxpayer who closes escrow on a qualified principal residence between May 1, 2010 and December, 31, 2010, or who closes escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.
This credit will not last until December though. It is estimated that the money will run out within 3 to 4 months so if you are eligible for this credit after May 1st you need to fill out and turn in your paperwork asap.

What's on my mind today.

Do more with Less

Keeping Your Home in Ship Shape

Things to check on a regular basis...
Electrical Wiring- Fix broken plugs or switches. When updating your electrical be sure to check with your city to see what permits are necessary.
Roof- Do a visual inspection of your own twice a year. Repair damaged tiles/shingles as they arise and cut back tree limbs that grow near the roof or pose a threat.
Plumbing- Fix dripping faucets, tighten toilet bolts and check for moisture under sinks to avoid mold/mildew and structural damage from water.
Overall upkeep- Check the caulking around the doors and window that can compromise the efficiency of your heating and cooling systems. Walk around your home with a scrutinizing eye looking for cracking or peeling paint, broken fixtures (inside or out) or broken appliances.
Keeping up with items around your home will not only keep your homes value but make it more pleasing f0r you while you live there.