Sacramento Home Prices Rise in the Midst of Low Inventory…

Sacramento-area home prices rise in February amid low inventory

 

 

Advertisements

Why Short Sales Take So Long…

Why Short Sales Take So Long

 

When buyers hear the term “short sale,” they typically think about distressed sellers and good deals — especially in markets where prices have ticked upwards. But the word “sale” can be misleading. In fact, many real estate agents have renamed “short sales” as “long-and-drawn-out sales.”

Here’s why short sales often take a long time to complete.

Banks and Bureaucracy

In a short sale, you need the seller’s bank to approve before you can close. Banks require dozens of pages of paperwork to evaluate whether or not to approve a short sale. Since the seller is asking the bank to accept a sale price that’s less than the mortgage amount, the bank needs to verify that a short sale is the right thing to do. Banks want to make sure the seller is indeed unable to stay in the home and can’t afford to pay off the difference between the market value and the bank’s loan amount.
Just as a bank scrutinizes a buyer’s finances in order to approve their loan, the financial institution wants to closely examine the seller’s finances to be sure that it is not giving its money away. With many thousands of dollars at stake, banks don’t want to rush through this process. By comparison, when you’re buying from a person, he or she is more motivated to keep things moving.

Paperwork Gets Lost in the Process

Banks require many documents, disclosures and signatures to complete a short sale. Many times they request that they are faxed in. If just one signature or page is missing from a file, the bank will likely hold off on the process until the file is complete. Given that these banks are losing money on short sales, they don’t allocate the same amount of resources they would to the customer service department for paying (and profitable) customers. With limited staff and so much paperwork, things get lost — and then the short sale process drags on.

Two Lenders = Double the Time

Many times a short sale seller has two loans. The larger loan is being shorted while the second, smaller loan — usually a home equity line of credit — is being completely wiped out. Often, these loans are with two separate banks. Each bank has its own system that doesn’t in any way communicate with the other bank’s system. The second bank may approve the short sale but put on a 30-day expiration. If the first bank’s approval comes at day 31, the seller must go back to the second bank and start over. As you can see, this too can drag out the short sale.

How to Expedite a Short Sale

Is it possible to work the system and speed up short sales? Absolutely.

If you’re selling a home as a short sale, don’t use an agent who doesn’t not have short sale experience. There are so many areas where short sales can get tripped up, so look for an experienced agent who knows how to push through the process.

If you’re a buyer and you found a short sale home you love, determine if the agent is an expert in short sales. If the agent doesn’t have much (or any) short sale experience, expect a long, rocky road.
Short sales are a different animal from traditional home sales — from how they’re priced, how they’re marketed and the lengthy sales timeframe. A savvy short sale agent will know exactly what they’re dealing with and what to expect, and can shorten the process immensely.

Best Regards, Chris Mesunas.

 

3 Valuable tax deductions real estate pros often overlook…

3 valuable tax deductions that real estate pros often overlook

Real Estate Tax Talk

Tax deductions are worth a lot. Exactly how much depends, of course, on your top tax bracket.

If, for example, you’re in the 28 percent federal income tax bracket, every $100 in deductions will save you $280 in federal income taxes.

If you’re self-employed, and the deduction is a business deduction, it will also save you on self-employment taxes as well — a combined Social Security and Medicare tax of 15.3 percent tax up to an annual ceiling (for 2013, $113,700 in net self-employment income) and a 2.9 percent Medicare tax thereafter (with an extra .9 percent tax for very high earners).

If your state has income taxes, your deductions will save on these, too.

So you want to make sure you claim every tax deduction you can on your 2013 taxes. Here are three potentially valuable tax deductions that real estate pros can easily overlook:

Home office deduction

Almost any real estate professional who uses a portion of his or her home exclusively for business can qualify for this deduction. This is so even if you do the bulk of your work outside your home.

This deduction is particularly valuable if you are a renter because it enables you to deduct a portion of your monthly rent, a sizable expense that is ordinarily not deductible. If you own your home, it is not worth as much, but still permits you to deduct a portion of your utilities and other home expenses and depreciation for the area of your home office.

Even though they qualify for the home office deduction, many people don’t take it because it can be complicated and/or they fear it will increase their chances of getting audited. There is no empirical evidence that taking this deduction increases your chances of being audited. For years, the IRS has denied that the deduction is an audit flag.

In fact, the IRS has created an optional simplified version of the deduction in attempt to encourage people to take it. Using the simplified method, you merely deduct $5 per square foot of your home office space, up to a maximum of 300 square feet. The simplified home office deduction can be used only for 2013 and future tax years. So this is the first tax filing season it is available. We discussed the simplified method in detail in a prior article (see “Simplified home office deduction may not be the best option”).

State sales taxes

If you itemize your deductions, you have a choice between deducting the state and local income tax or state sales tax you paid in 2013. If you live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington or Wyoming, you don’t pay any state income taxes and can only take the sales tax deduction. If you live in one of the other 42 states that has income taxes, you’ll usually be better off deducting such taxes, rather than sales tax. However, this may not be the case if you bought an expensive item during 2013, such as a car or boat, that required you to pay substantial sales tax.

Since figuring out how much you actually paid in sales tax during 2013 (or any other year) is likely impossible, the IRS has estimated how much sales tax people at various income levels pay on average in each state based on that state’s sales tax rates. Its results are contained in the sales tax tables in the instructions to IRS Schedule A. But you are allowed to add to the total in the table the actual sales tax you pay for:

  • a motor vehicle (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle).
  • a leased motor vehicle.
  • an aircraft or boat.
  • a home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home).

To make things as easy as possible for you, the IRS has created an online sales tax deduction calculator you can use instead of its printed tables and worksheet.

Moving expenses

If you moved during 2013, the cost is deductible if your new workplace is at least 50 miles farther from your old home than your old job location was from your old home. In addition, you must work full time at your new job for at least 39 weeks during the first 12 months after the move, and for a total of at least 78 weeks during the first 24 months following the move. If you meet these requirements, you can deduct the reasonable expenses of:

  • moving your household goods and personal effects (including in-transit or foreign-move storage expenses).
  • traveling (including lodging but not meals) to your new home.

Moving expenses are figured on IRS Form 3903, Moving Expenses, and deducted as an adjustment to income on your Form 1040. This makes them a particularly attractive deduction because they are not a miscellaneous itemized deduction that must be listed on Schedule A and are not subject to the 2 percent of adjusted gross income limitation on such deductions (miscellaneous itemized deductions are deductible only if, and to the extent, they exceed 2 percent of AGI).

best Regards, Chris Mesunas.

House Passes Flood Insurance Bill…

House passes flood insurance billDeborah Barfield Berry and Ledyard King, Gannett Washington Bureau

 

Congress moved closer Tuesday to final passage of legislation that would roll back sharp increases in premiums under the National Flood Insurance Program.

WASHINGTON — The House voted overwhelmingly Tuesday to approve bipartisan legislation that would block dramatic increases in premiums paid by some property owners covered under the federal flood insurance program.

The 306-91 vote follows a Senate vote on Jan. 30 approving similar legislation. The Senate could vote on the House version by the end of the week.

"Relief is on the way,'' Rep. Maxine Waters, D-Calif., said before the vote.

Under the House bill, called the Homeowner Flood Insurance Affordability Act, premiums under the National Flood Insurance Program (NFIP) could increase no more than 18% per property annually.

The legislation was crafted by Republican Rep. Michael Grimm of New York in response to premiums that in some cases had increased tenfold.

Rep. Bill Cassidy, R-La., who worked on the compromise, said the House measure strikes "the right balance'' between fiscal solvency for the flood insurance program and consumer affordability.

Supporters of the measure, including Gulf Coast lawmakers, said the increases were making it impossible for many people to keep their homes or sell them.

Critics, however, say taxpayers will be left to foot the bill for the financially troubled insurance program.

The premium increases were required under a 2012 law known as Biggert-Waters that was designed to designed to make the government's flood insurance program financially solvent by bringing rates in line with true flooding risks.

Premiums under the program have been heavily subsidized by taxpayers, and the program is $24 billion in debt.

The House measure also would repeal a provision in the Biggert-Waters law that increases premiums — up to the full-risk rate over five years — when the Federal Emergency Management Agency adopts new flood maps.

Waters, a co-author of the 2012 Biggert-Waters law, worked with Republicans on the recent compromise.

Under the compromise, homes that met code when they were built would be protected from rate spikes due to new flood mapping.

Biggert-Waters imposes 25% rate hikes on some but not all properties that have received premium subsidies through the NFIP. The program, run by FEMA, has traditionally charged premiums at about 40% to 45% of their full cost, with taxpayers subsidizing the rest.

The Senate-passed bill, by Democratic Sen. Robert Menendez of New Jersey and Republican Sen. Johnny Isakson of Georgia, would delay some of the premium increases for four years. The Federal Emergency Management Agency would use the time to complete a study of how to make the higher rates affordable.

"I'm encouraged by this progress and hope we can bring the bill over the finish line very, very soon," Menendez said Tuesday.

The successful effort to win passage of the bill reflected a rare moment of bipartisanship in a highly partisan Congress.

But conservative lawmakers and government watchdog groups oppose the effort to roll back the increased premiums, saying taxpayers should not have to subsidize flood insurance coverage for homeowners who build or buy in high-risk areas.

"It's not going to be very affordable for taxpayers,'' said Steve Ellis, vice president of Taxpayers for Common Sense. "This program, that's $24 billion in debt to the Treasury, is going to be saddled with these changes.''

Critics of the legislation complain it didn't go through the regular committee process.

"Everybody we talked to, virtually without fail, recognize that these delay and repeal efforts are damaging and counterproductive,'' said Andrew Moylan, a senior fellow at the R Street Institute. "Rushing a vote the way that they are is an indication that in their heart of hearts, they know it's the wrong thing to do.''

Rep. Randy Neugebauer, R-Texas, chairman of the House Financial Services Subcommittee on Housing and Insurance, opposed the measure, saying the federal flood insurance program is in "deep debt and it's putting taxpayers at risk for another government bailout.''

"Maintaining these subsidies hurts everyone in the long run,'' Neugebauer said.

In addition to capping annual premium increases at 18%, the House bill also would allow people buying homes covered under the federal flood insurance program to pay the subsidized premium rate at first, rather than the higher rate reflecting true flooding risk.

The House bill would be financed through small assessments on all NFIP policyholders that would go into a reserve fund for FEMA to pay future claims.

 

Buying vs. Renting…

Buy vs. rent: What you'll pay in the 10 biggest cities

Despite rising home prices and climbing mortgage rates, it's still cheaper to buy a home than rent one in these 10 major cities, according to Trulia. Here's how much you'll save.

Despite rising home prices and climbing mortgage rates, it's still cheaper to buy a home than rent one in major cities across the country, according to real estate web site Trulia, which analyzed data in 100 metro areas.

But home prices are just one factor to consider. Deciding whether to buy or rent also depends on the location and how long you plan to stay there. In most of the Rust-Belt cities, like Toledo and Detroit, the math overwhelmingly favors buying. In more expensive coastal markets, like Los Angeles and New York, it's a closer call.

Nationwide, homebuyers who remain in their homes for seven years will save an average of 38% over renting, Trulia found. A year ago, buying was 44% cheaper.

That means all of the initial transaction costs of buying a home — the broker's commission, title insurance, legal fees and other closing costs — will be offset by benefits, like tax write-offs and price appreciation. And those costs will become cheaper than the total costs of renting, which include insurance and agent commissions.

Best Regards, Chris Mesunas.

http://bit.ly/1dmHgm2