Gene Perez Your Real Estate Consultant, Santa Maria Homes: October 2009

With foreclosure rates increasing across the nation and here in the Las Vegas valley, more and more homeowners are receiving notices for the sheriff's sale.  The conventional advice from legal experts has been to immediately pack up and move, but that is changing.  Recently, we've been seeing a new phenomenon coined "bank walkaways," when the bank begins the foreclosure process, then walks away with no word or explanation, leaving the homeowners wondering what happens next.  And legal experts aren't sure, either.

Today, if a homeowner leaves after getting a foreclosure notice and the bank fails to finish the foreclosure, the homeowner opens themselves up to being sued by the city for failing to maintain the abandoned property.  After all, the home is still in their name.  In some cases, water pipes have burst in abandoned homes, creating a flooded basement, water damage, and potential toxic exposure to mold both inside the home and within the neighborhood.  If the homeowner had stayed, damage could have been avoided to the property, and the neighbors would be spared from their property values deteriorating further.

In addition, leaving before the bank really owns the home can open the homeowner up to several other problems.  These can include: 

•     a restarted foreclosure process months or years later (after it was assumed things were settled)

•     a sold mortgage and a new, more agressive debt collection service coming after the homeowner

•     possible legal issues related to taxes, fines, upkeep, code violations, repairs or even demolition costs. 

What should a homeowner do if they're facing foreclosure?  More experts are advising that they stay in the home, even if they aren't paying their mortgage.  While it is still unclear what legal tangles bank walkaways will create, the additional problems homeowners might face if they abandon the property could make the nightmare even worse.  In the short term, people will be living in their home without having to pay - in some cases, homeowners will go for a year or more with no one asking for money.  If possible, homeowners should be putting away what would have been their monthly mortgage payment in a bank account each month and leaving it there.  It could be used in future loan modification negotiations with the mortgage company if it reappears, or as a security deposit on a rental, if people have to move quickly.

Have foreclosure questions?  Give me, Yonas Woldu a call - I'm your real estate expert in the Las Vegas valley!  Also visit my Vegas Real Property website and the new AskYonas website.  For more information on Nevada foreclosure laws, you can also read this online article, and visit RealtyTrac.com to find out what to expect if you're facing foreclosure on your home. 

With foreclosure rates increasing across the nation and here in the Las Vegas valley, more and more homeowners are receiving notices for the sheriff's sale.  The conventional advice from legal experts has been to immediately pack up and move, but that is changing.  Recently, we've been seeing a new phenomenon coined "bank walkaways," when the bank begins the foreclosure process, then walks away with no word or explanation, leaving the homeowners wondering what happens next.  And legal experts aren't sure, either.

Today, if a homeowner leaves after getting a foreclosure notice and the bank fails to finish the foreclosure, the homeowner opens themselves up to being sued by the city for failing to maintain the abandoned property.  After all, the home is still in their name.  In some cases, water pipes have burst in abandoned homes, creating a flooded basement, water damage, and potential toxic exposure to mold both inside the home and within the neighborhood.  If the homeowner had stayed, damage could have been avoided to the property, and the neighbors would be spared from their property values deteriorating further.

In addition, leaving before the bank really owns the home can open the homeowner up to several other problems.  These can include: 

•     a restarted foreclosure process months or years later (after it was assumed things were settled)

•     a sold mortgage and a new, more agressive debt collection service coming after the homeowner

•     possible legal issues related to taxes, fines, upkeep, code violations, repairs or even demolition costs. 

What should a homeowner do if they're facing foreclosure?  More experts are advising that they stay in the home, even if they aren't paying their mortgage.  While it is still unclear what legal tangles bank walkaways will create, the additional problems homeowners might face if they abandon the property could make the nightmare even worse.  In the short term, people will be living in their home without having to pay - in some cases, homeowners will go for a year or more with no one asking for money.  If possible, homeowners should be putting away what would have been their monthly mortgage payment in a bank account each month and leaving it there.  It could be used in future loan modification negotiations with the mortgage company if it reappears, or as a security deposit on a rental, if people have to move quickly.

Have foreclosure questions?  Give me, Yonas Woldu a call - I'm your real estate expert in the Las Vegas valley!  Also visit my Vegas Real Property website and the new AskYonas website.  For more information on Nevada foreclosure laws, you can also read this online article, and visit RealtyTrac.com to find out what to expect if you're facing foreclosure on your home. 

I don't think our kids know what an apron is.

The  use of Grandma's apron was to protect her dress underneath, because she only had a few, it was easier to wash aprons than dresses. And they used less material, but along with that, it served as a potholder for removing hot pans from the oven.

It was good  for drying children's tears, and even used for cleaning out dirty ears. From the chicken coop, the apron was used for carrying eggs, fussy chicks, and sometimes half-hatched eggs to be finished in the warming oven.

When company came, those aprons were ideal hiding places for shy kids.
 
And when the weather was cold, grandma wrapped it around her arms.

Those big old aprons wiped many a perspiring brow, bent over the hot wood stove.

Chips and kindling wood were brought into the kitchen in that apron.

From the garden, it carried all sorts of vegetables.
After the peas had been shelled, it carried out the hulls.

In the fall, the apron was used to bring in apples that had fallen from the trees.

When unexpected company drove up the road, it was surprising how much furniture that old apron could dust in a matter of seconds.

When dinner was ready, Grandma walked out onto the porch, waved her apron, and the men knew it was time to come in from the fields to Dinner.

It will be a long time before someone invents something that will replace that 'old-time apron' that served so many purposes.


REMEMBER: 

Grandma used to set her hot baked apple pies on the window sill to cool. Her granddaughters set theirs on the window sill to thaw. They would go crazy now trying to figure out how many germs were on that apron. I don't think I ever caught anything from an apron.

We have a client who just closed on his condo last week. Several weeks ago he determined this property would fit his needs, and he asked us to represent him during the negotiation process. One of his main goals was to purchase the condo at a very good price.

We started by researching the condo market in the neighborhood and within the condo development itself. Our review of recent MLS transactions showed this condo was already competitively priced.

Next, we looked at the condo's listing and sales history. This condo had been on the market for 22 months. During that time it had undergone 3 price reductions, with the most recent reduction dropping the price $57,000 below the orginal list.

Then we researched the mortgage and checked for other liens on the property. We found there was still plenty of equity left in the condo even though it would end up selling for well below the seller's original purchase price.

Last, we looked for evidence of delinquent property taxes and evidence of foreclosure. We didn't find any issues on either front.  

Now we were ready to draft the offer to purchase. We drafted the offer, and along with that we submitted a cover letter. The cover letter outlined the justification for the price. We included recent sales data from the condo development, and we cited data from the MLS which showed a very strong trend toward lower condo prices. We stated in the letter that the offer price was not only based on recent sales data, but the overall direction of the market. 

In our letter we acknowledged the offer price was well below what the seller was hoping to receive, but we politely stated the price was non-negotiable. We thanked the sellers in advance for their consideration, and we awaited their response.

Two days later the sellers signed the offer. The buyer's inspection went well and we proceeded smoothly to closing. As it turned out the sellers did not like our tactics and decided they did not want to sit with us at the closing table. They completed their closing paperwork several days prior to the buyers.

I sympathize with the sellers and understand why they were unhappy with the results of their sale. It was a bitter pill to swallow.  But our job was to advance our client's goals and protect his best interests. And as it turned out, our strategy worked. It's also worth mentioning that although the buyer hired us to represent him for his purchase, it was the sellers who paid our commission.

For more information on buyer representation and how the buyer agency agreement works, you can check out this link on DaneCountyMarket.com .

Dan Miller, Realtor, Certified Distressed Property Expert, Keller Williams Realty and DaneCountyMarket.com     

A 1031 exchange is an excellent tool available to owners of investment real estate. Section 1031 of the Internal Revenue Code states, in effect, that upon the sale of an investment property or real property used in a trade or business, the owner can use the funds from the sold property to purchase a similar, or "like-kind" property, and thus not be liable for capital gains taxes on the proceeds from the initial property. To complete a 1031 exchange, there are some basic rules that must be followed, however there are many benefits of this type of exchange.

More to Invest. Federal income taxes are deferred, the exchanger has greater leverage than if the tax liability was paid. The additional equity available for the reinvestment can also assist the exchanger in obtaining more financing, if needed.

Greater Earning Potential. Since more of the capital is reinvested than would be the case if taxes were paid, there is potential for greater earnings for the investor.

Compounding Effect. Exchange after exchange can be done creating a positive compounding effect of reinvesting the additional deferred taxes on each subsequent exchange. The deferred tax liability can ultimately be forgiven upon death of the investor, giving heirs a stepped up basis on inherited property. Pricing Flexibility. The investor can experience greater pricing flexibility because the sale price of the relinquished property will not need to be inflated to cover capital gains taxes. This enables the seller to have increased flexibility with the selling price.

 Learn more about a 1301 Exchange with this list of Frequently Asked Questions.

What is a like-kind exchange?
A like-kind exchange, also known as a 1301 Exchange, is a technique for deferring the gain on the sale of property by re-investing the proceeds in like-kind property.

What is the primary benefit of a Deferred Exchange?
The primary benefit for owners disposing of business or investment held property is the opportunity to defer the payment of Capital Gains Tax.

When was the idea of a 1031 Exchange developed?
In 1921 the first exchange laws were enacted. Changes have been made, but it wasn't until 1991 when the Regulations were made available that this concept of dispositions has become very popular. The theory is that if one does not cash out of an investment, the economic gain has not been realized in a way that produces the cash to pay the tax.

Can I acquire more than one piece of property? 
You can come out of one relinquished property and acquire any number of 1031 replacement properties. As long as the value that you sell is at least the value you purchase, there will not be a taxable event.

What is the term trading up?
It is adding money to an exchange and acquiring an even more expensive piece of property than you sold. Or, you can increase your debt, but you must use all of the proceeds from the relinquished property as well.

Can I use part of the cash from the transaction for other means and use the remaining proceeds to do a real estate exchange?
Yes, but the cash will be subject to taxation. This is called a partial exchange.

Can I add an additional investor in the new piece of property I am acquiring?
Yes, but he must be an Investor and not a partner.

What is a deferred/delayed Exchange?
You surrender your relinquished property at one time and acquire the new 1031 replacement property, no later than 180 days from the closing of the relinquished property, or the due date for the tax return for the year of the sale, whichever is earlier.

How much time do I have?
You will have 45 days from the day you close your relinquished property (escrow) to identify the candidate(s) you wish to acquire, this is known as the Identification Period. You will then have an additional 135 days in which to close your replacement property purchase. You cannot exceed the maximum 180-day period for the exchange to take place. This is known as the Exchange Period. The IRS has absolutely no forgiveness for missed time deadlines for any reason.

Will I ever have to pay taxes on the property?
Only when you finally sell the property you exchanged into, without doing another exchange. You can continue to roll over sold properties into new properties without any tax obligation.

Can I build on property I already own?
Not with deferred tax dollars.

Can I use a Build to Suit Exchange as a replacement property?
Yes, but you must take title within 180 days.

How will this affect my Estate Planning?
If you hold the exchanged property until death, your heirs receive a stepped up basis to fair market value, and the capital gain is never taxed. Which means the income taxes that were deferred by you now become permanently tax-free to your heirs.

If I want to use a 1031 Exchange, but my co-owner wants to cash out and take his money, is that allowed?
Yes, however, his portion will be subjected to the tax on any profit/gain. Partnership interests cannot be used as exchanges.

Can I exchange my property for a property in another state?
Yes, anywhere in the U.S.A.

What types of real estate qualify for a 1031 Exchange?
Vacant land, office building, warehouse, apartment building, mini-storage, motel/hotel, farm/ranch, rental house, rental condo, resort rental, shopping center, owner-occupied double/duplex.

Plus: any other commercial, industrial, business, or investment-held property. The only provision where 1031 exchanges don't qualify is when you are a dealer in real estate. This simply means that if a person or corporation acquires property with the intent of a fast re-sale, then the transaction won't qualify. The IRS has limited exchanges to those properties held for productive use in a trade or business or for investment, and necessarily excludes those held primarily for sale.

What are the requirements to do a 1031 Deferred Exchange?
The seller must dispose of either business- or investment-held property. The seller must acquire other business- or investment-held property of equal or greater value than the value (sale price) and existing debt of the property being sold, and all of the equity from the property being sold must go into acquiring the replacement property.

Can I trade out several smaller properties for a larger one?
Yes, as long as the value of the properties are equal.

Why does our government allow Deferred Exchanges?
The government perceives it as a continuity of investment.

Is a Partially Taxable Exchange possible?
Yes, you acquire with part of the funds, and you pay taxes on the balance of the funds.

Can I refinance my old or new property before or after I have made an Exchange?
Yes, the benefit is that the proceeds from financing or re-financing are tax-free.

Can I hold a mortgage on my relinquished property and still have an exchange performed?
Yes, the mortgage payment received is considered an installment sale and is subject to taxation as deemed received. The balance of the taxpayer's equity can be used as a deferred exchange.

Is a Leasehold Interest considered like-kind?
Yes, leasehold interest may be either relinquished property or replacement property in an exchange as long as there are 30 or more years remaining on the lease.

What happens with a failed exchange?
If a taxpayer executing an exchange does not acquire a replacement property and the exchange period straddles two tax years, the transaction becomes an installment sale and is taxable in the subsequent year.

Can I have an Exchange performed on personal property?
Yes, 1031's pertain to personal properties too. Some examples would common: equipment, furniture, aircraft, vehicles, vessels, livestock, and coins.

Contact us today: 214.923.0261 or email us: info@archwoodproperties.com 

 

 

www.archwoodproperties.com

  

Harris Real Estate University Question of the Week:

Every week we receive literally hundreds of question from HREU Coaching Students……..One of the most common question we have been receiving this week has been….

“When will the housing markets FINALLY hit bottom?”

Here is a great article from Yahoo.news.com

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If you thought home prices were bottoming out, you may be wrong. They’re expected to head a lot lower.

Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices.

Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%.

In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years — though it underestimated the scope.

Mark Zandi, chief economist with Moody’s Economy.com, agreed with Fiserv’s current assessments. “I think more price declines are coming because the foreclosure crisis is not over,” he said.

In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to plunge 29.9% by next June — after having already fallen a whopping 48% during the past three years.

Realtors, what should YOU do now. How about this…learn how-to list REOs. Its NOT TOO late for you to become a REO listing agent. The simple fact is that there are more REOs that the banks need sold than there are REO Listing Agents. Watch the FREE Agent REO Secrets video and grab your FREE Agent REO Secrets book NOW.

If Fiserv’s forecast holds, Miami real median home price will tumble to $142,000 by June 2011.

In Orlando, Fla., the second-worst performing market, Fiserv anticipates a 27% price collapse by June 2010, followed by a less severe drop the following year. In Hanford, Calif., prices are estimated to drop 26.9% and continue falling 9.5% in 2011; in Naples, Fla., they’re expected to fall 26.8% and then flatten out.

Other notable losers include Las Vegas, where prices have already fallen 54.6% and are expected to lose another 23.9% by June 2010. In Phoenix values have already collapsed by 54% and could fall another 23.4%. In both cities, Fiserv anticipates the losses to continue into 2011, but they will be less than 5%.

E-GAD….we live in Las Vegas….I hope this guy is wrong…but, I bet he is not. What will this kind of epic depreciation mean to your real estate business…regardless of where you sell real estate? Understand…accept and take action knowing that you simply must become a Short Sale Specialist. Learn the NEW ways to easily list and sell short sales. Watch the FREE Agent Short Sale Secrets vode and grab your FREE Agent Short Sale Secrets book.

Prices had stabilized

The latest forecast is at odds with the past few months of the S&P/Case-Shiller Home Price index. That report has given hope that most housing markets may have already stabilized because the composite index of 20 cities rose in May, June and July. Nationally, it found that home prices have gained 3.6%.

Check out the video interview of Robert Shiller….listen what he says is happening now in real estate.

Brad Hunter, chief economist for Metrostudy, which provides housing market information to the industry, however, expects a change in fortunes, however.

“I’m afraid Case-Shiller may be just a temporary reprieve,” he said.

He pointed out that the tax credit for first-time home buyers helped support prices during the three months of Case-Shiller gains. By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors. But the market assistance ends when the credit expires on Dec. 1.

Will the tax credit be renewed? Watch this CNBC video we just posted to learn the lastest news on the tax credit. WARNING: You might not like what you are about to learn.

Hunter also sees a new wave of foreclosure problems coming from higher priced loans and prime mortgages. He expects a high failure rate for option ARM loans that were issued to prime customers so they could buy homes in bubble markets, such as California and Florida. In those areas, prices for even modest homes had skyrocketed.

Winners

A handful of metro areas will buck the trend, according to Fiserv. Six markets will remain flat, and 33 will actually post gains. The biggest winner will be the Kennewick, Wash., metro area, where home prices have ramped up 8.9% over the past three years and are expected to increase another 3.4% by June 2010.

Fairbanks, Alaska, prices are anticipated to rise 2.5%, while Anchorage will climb 2.1%. Elmira, N.Y., prices may inch up 1.8%.

The nation’s biggest metro area, New York City, will underperform the nation as a whole over the next two years, according to Fiserv. Prices, which have already fallen 21.7% to a median of $375,000, are expected to fall 17.4% by June 2011.

Home values in the nation’s second largest city, Los Angeles, have fallen 43.3% since June 2006 to a median of $313,000. They are expected to dive another 20.2% over by June 2010, and then start to climb in 2011. Chicago prices, which have fallen 25.2% to $227,000, will drop only 4.1% over the next 12 months and then starting to climb.

The Detroit metro area now has the dubious distinction of having the lowest home prices in the country. Prices have dropped 51.7% to a median of $50,000. They’re expected to fall another 9.1% and then stabilize