Archive for April, 2010
California And IRS Ramping Up Audits Of Homebuyers Claiming Tax Credits
INDUSTRY NEWS, TIPS FOR BUYERS
Fraud is rampant according to state and federal taxing authorities triggering a high number of audits of those who filed returns claiming one or more of the various homebuyer tax credits. The Feds have offered a $7,500-$8,000 tax credit for first-time buyers and California has a $10,000 tax credit for new home purchasers. The Feds also added a $6,500 tax credit for existing homeowners purchasing another home.
IRS Form 5405 is attached to the tax return to prove one is eligible for the tax credit. Unfortunately, some see an opportunity to get a size-able check from the government as easy money. Audits have found many claiming the tax credit never bought a home.
In response, state and federal tax agencies have hired thousands of auditors to verify these claims. The only documentation requested to prove eligibilty is a certified copy of the closing statement provided by the escrow company. This form can be hard to come by in California because real estate closings are handled differently here than most states. The buyer is provided a partial HUD-1 closing statement reflecting their costs but do not receive the seller’s version of this statement. The IRS prefers a certified HUD-1 signed by both buyer and seller.
To prove a buyer has actually purchased a home and qualifies for one of the credits, a local tax preparer recommends including optional documentation including any of the following:
- driver’s license showing the address of the home purchased
- utility bill in the buyer’s name for the new home
- copy of homeowner’s insurance policy
- copy of grant deed
Though not required, these items may speed the approval and issuance of the tax credit check. The incidence of fraud is not unlike the problems the IRS has been dealing with concerning the Earned Income Tax Credit for dependants. The IRS has discovered multiple people claiming the same children resulting in over-payments.
The fact our state and federal governments are broke has made combatting this type of fraud a top priority for the IRS and Franchise Tax Board. Tough economic times may also be motivation for some who wish to cheat the system.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEARS LOCAL REAL ESTATE EXPERIENCE
County Candidates Face Off Before Realtors
All but one of the candidates running for Shasta County office attended a debate sponsored by the Shasta Association of Realtors. The only candidate not in attendance was Russell Hunt. Sheriff Tom Bosenko attended and addressed the group briefly, in light of running unopposed in the upcoming June election.
The debate lasted just over an hour. Candidates running in a contested race were asked 3 questions. First, they were given an opportunity to briefly review their qualifications for the office they seek to be elected or re-elected. Then they were asked to state their single most important goalif elected or re-elected. Finally, one office-specific question was asked of each participant. Only two minutes were allowed for participants to respond to each of the three questions. Marie Whitacre, Government Affairs Director for the Shasta Association of Realtors, served as timekeeper.
Several candidates spoke passionately about their reasons for wanting to unseat the incumbent. This was particularly true of the Assessor-Recorder, DA and Auditor candidates. Even while being verbally attacked by their opponents, all candidates responded with civility. Some rebutted statements made by opponents while others focused on what they would do differently if elected or re-elected.
The budget crisisfacing Shasta County was cited by the supervisor and DA candidates as being the largest challenge
for their departments. Les Baugh pointed to recent union concessions regarding retirement benefits as one step toward reducing future budgetary obligations to taxpayers. Jerry Benito’s office has coped with the closure of one floor of the jail with programs to monitor those released using funds paid for by offenders. Leslie Morgan indicated Prop. 8 property reassessments are well ahead of Butte County,which shares similar type and number of properties on their tax role.
Randal Faulkner harped on several negative Grand Juryreport findings regarding the Auditors office which cited low morale and high employee turnover. Connie Regnell fired back that those reports were done before she officially took the reins of office in 2007. Randal would implement more audits if elected. Connie claims recent upgrades to computer software programs have increased efficiency and automation of vendor payments.
Supervisor candidate Les Baugh said his focus will be keeping Shasta County’s budget in the black.Chris Young believes job creation should be Shasta County’s top priority. Corkey Harmon stated the county must do a better job eliminating departmental red tape that slows development and the jobs they create. He cited personal experiences as a local businessman jumping through all the permit process hoops to get a local project approved.
I believe those in attendance, myself included, have a much better understanding of candidate’s positions and public demeanor upon conclusion of the debate. I hope they found the forum useful, though all probably wished for more time to detail their platform. This format forced the candidates to stay on topic and be as clear and concise as possible, a rarity in the political arena.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEARS LOCAL REAL ESTATE EXPERIENCE
Liar Loans Recede, But Still Common
A reporter for The Wall Street Journal recently outlined the latest mortgage fraud strategies. James Haggerty points out that the rate has declined but hotspots remain. He quotes data published by First American Core Logic, a company which tracks real estate related information. “Liar loans” as they are called in the business, were common during the subprime boom that peaked in 2007.
The most common types of fraud as it relates to mortgage loan origination include:
- Misstating a borrower’s income
- Misrepresenting the borrower’s identity
- Incorrectly designating who will occupy the property upon purchase
- Misleading information about the type of property or its condition
- Misrepresenting the borrower’s employment
- Misrepresenting the borrower’s debts and/or assets
Specific areas of the country have fraud occurring at a rate several times the national average. They include:
- Orlando, Fla
- Miami, Fla
- Jamaica, NY
- Atlanta, Ga
- Detroit, Mi
Government backed loans, including FHA, are estimated to have fraud rates of 1.22%. Conventional loans had a corresponding rate of 0.55% according to a First American representative. He estimates 25% of all loans currently in foreclosure show “some evidence of fraud”.
During the subprime meltdown, I heard estimates of fraud of 50% for these hard-money loans from staff at the California Association of Realtor’s business meetings. They stated the fraud was perpetrated by the borrower, the loan officer, or both. In response, lenders are requiring more documentation from borrowers than is actually needed. This action is apparently due to banks being required to buy back billions of dollars of “fraud-infested” loans.
I guess the new mantra in today’s lending environment is “trust but verify”!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN A QUARTER CENTURY LOCAL SALES EXPERIENCE
Turtle Hunters Outrage Mary Lake Park Visitors
REDDING RECREATION, SHASTA COUNTY
A Honda coupe with two upset ladies pulled up alongside my wife and I as we began a walk around Mary Lake yesterday afternoon. They had just jotted down the license number of a suspected turtle hunter’s Jeep and informed us two guys were trapping turtles for resale on EBay. We love the turtles. We shared their dismay. How dare these guys steal our turtles to make some quick bucks on the Internet!
I suggested the ladies call the local fish and game office to see if this type of hunting was legal. They said they would and also planned to call the police because the Jeep’s license tags were expired. They went on to say they grabbed their buckets of captured turtles and threw them back in the lake. We promised to talk to the guys when we crossed the dam where they were again fishing for turtles using a net and fishing pole.
Just then, a vehicle emblazoned with City of Redding Fire Department decals drove by and was flagged down by another group of ladies also angry with the turtle hunters. He offered to speak to them and we decided to tag along. The two men calmly explained why they were trapping the turtles. The turtles they were after are non-native turtles such as those purchased from pet stores apparently released into the lake by owners that no longer wanted them.
Dozens of turtles perch on logs scattered around the lake sunning themselves this time of year. They are shy, usually dropping into the water when approached. These guys easily lured the turtles using baited fishing poles and trapped them with nets. Regardless of the legality of catching the turtles, many folks let these guys know in no uncertain terms their for-profit hobby was not appreciated one bit!
The gentleman from the fire department agreed with the men that ridding the lake of these turtles was probably legal and beneficial. I was torn by this reasonable explanation-not wanting to surrender our local terrapins to these guys motivated primarily by dollar signs. They said it is perfectly legal and were actually encouraged by fish and game officials to rid this lake of these competitors of native turtles.
That explanation didn’t fly with park users who confronted the two men. They eventually left with a couple turtles -far less than their original catch. I doubt they will be deterred from returning to trap more turtles in coming weeks believing they are doing us a service.
Last year, several beavers were found dead in the lake apparently victims of a teenage prank. One neighbor saw several youths pelting the beavers with large rocks. Mary Lake residents and park users are sensitive to those that would exploit the wildlife for their own amusement or profit. Hopefully the lake will remain a home for water fowl, beavers, otters, fish and yes, even turtles!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN A QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Luxury Home Loans See Rise In Delinquencies
HOME LOANS, INDUSTRY NEWS, TIPS FOR SELLERS
Jumbo loans, as we call them in real estate jargon, are showing a steady uptick in the number of delinquencies for the 33rd consecutive month according to a recent article in The Wall Street Journal. Depending on what part of California you reside, jumbo loans could be loan amounts exceeding $417,000 or $729,750 for high-cost areas. February saw 11.6% delinquency rate as reported by Fitch Ratings, a global company that renders independent opinions of credit markets.
California has the lion’s share of jumbo loans at 44% due to the fact real estate prices here are higher than most. New York is second with 7% followed by Florida at 6%. These loans are difficult to qualify for- usually requiring larger down payments and interest rates about 1% above conforming conventional loans. The biggest problem has been the drop in values leaving many luxury homeowners without enough equity to refinance or in some cases they are now underwater-owing more than the current market value of their home.
One exampleof how hard the high-end market has been hit was the recent sale of Hilton Hotels CEO’s Los Angeles home. Christopher Nassetta sold his home for $18 million which was $10 million less than the asking price and 35% less than what he bought it for in 2007!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN A QUARTER CENTURY LOCAL REAL ESTATE SALES EXPERIENCE
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