Archive for May, 2010
Bill To Provide Borrowers Deficiency Liability Protections
INDUSTRY NEWS, REAL ESTATE LEGISLATION, SHASTA COUNTY, SHORT SALES, TIPS FOR SELLERS
Many homeowners are not aware of a loophole that allows banks to pursue certain borrowers for any cash loss they suffer as a result of a short sale or foreclosure. The existing law, which was passed in the 1930’s, protects homeowners from deficiency liability if the loan was used to purchase the home. The problem arises when the loan is refinanced. The protection does not apply to purchase money loans that are later refinanced, even if doing so allowed the borrower to benefitfrom a lower interest rate.
Senate Bill 1178, authored by Senator Ellen Corbett, does not protect borrowers that used cash-out refinances or equity lines to pay bills or buy cars, boats, RV’s or stock investments. Only borrowers that used cash generated from a refinance to improve their primary home would be protected by this bill if it passes. Most borrowers were unaware that a refinance caused a forfeiture of this liability protection. In legal terminology, purchase loans are non-recourse loans while refinanced loans are recourse loans.
Banks doing business in California understand that the property is the security for the loan, not the borrower. Purchasers that later refinanced had no idea they were losing this protection exposing themselves to personal liability and even new tax liability. Lenders can pursue the loss for up to ten years after a foreclosure or short sale. They can sell the accounts to aggressive collection agencies or bundle them as securities. This allows banks, which created this mess to begin with, to add insult to injury by chasing families that have already lost their home for money they don’t have.
Call your local State Senator and ask him or her to vote yes on SB 1178. In our area, call Senator Sam Aanestad at 530-225-3142.
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 SALES EXPERIENCE
Mosquitoes Bugging You?
LOCAL GOVERNMENT, SHASTA COUNTY
The wave of foreclosures in Shasta County has had a stinging side effect-abandoned pools and ponds have become mosquito breeding havens! If you know of a neglected water feature in your neighborhood, the Shasta Mosquito and Vector Control District would like to hear from you.
Every property owner in Shasta County pays for mosquito control through an assessment on their property tax bill. The district needs your help identifying problem pools and ponds that become production grounds this time of year for mosquitoes. These insects can potentially spread viruses including West Nile Virus.
Contact the district at 530-365-3768 and provide them the address of a property you are aware of which has an abandoned pool or water feature. They will investigate and attempt to contact the owner or bank to gain permission to evaluate the situation. If necessary, the district will treat the problem using guppy-like fish that eat mosquitoes or possibly a chemical larvicide will be applied. There is no charge for the service.
Besides inspecting and treating pools, the district also surveils disease by taking blood samples from chickens and sick or dead crows, magpies and jays which are first indicators that West Nile Virus is in the area. Other targets include ticks which can spread Rocky Mountain Spotted Fever and Lyme Disease.
The district needs your help because warmer weather perfect for breeding millions of mosquitoes is just around the corner. You can help make your outdoor leisure activities safer and more enjoyable by reporting neglected or abandoned pools where you live.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVIN REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN 25 YEARS LOCAL SALES EXPERIENCE
Safe Harbor Law Makes Vacation Home Purchase Attractive
INDUSTRY NEWS, REAL ESTATE LEGISLATION, TIPS FOR BUYERS, TIPS FOR SELLERS
The IRS has finally set ground rules for those that use a tax deferred 1031 exchange to purchase a vacation rental home that later becomes a primary or second residence. In the past, the IRS would penalize those that did this because it violated the tax deferment rules 1031 exchanges were designed to address. Many Americans found themselves with big tax bills when they exchanged their investment property for a vacation home which they later used as a primary or secondary residence.
Now the IRS has set rules for those that buy a vacation home using a 1031 exchange. The owner must use the home no more than two weeks a year and must rent the home out for at least two weeks a year for at least two years after purchase. After two years, the owner can convert the home to his or her second or primary residence while still avoiding the capital gains tax consequences provided by the exchange law. The owner must charge fair market rent, have a written lease for the rental period and it must be an arm’s length transaction- no renting to a family member.
Visiting the home to perform maintenance does not count toward the owner’s two-week time limit. The benefit here is someone with investment property such as income units, commercial buildings or land that has substantially increased in value can exchange it for a home they eventually want as a primary or secondary residence. Until now, selling one to buy the other would trigger a capital gains tax event or prevent the owner from using the home for personal use.
For specifics on this safe harbor provision in the tax code, contact Russell Marsan of IPX Exchanges at 800-406-1031. He can give you particulars on the tax law and assist as an exchange facilitator. I can assist you with the sale or purchase of the investment or vacation property.
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 SALES EXPERIENCE
Shasta County Entry-Level Home Sales Activity Doubles
Looking over April home sales numbers and comparing them to a year ago one thing stands out- pending home sales priced under $200,000 are nearly double the volume as last year. In April 2009, 33 homes priced under $150,000 sold. This year that number was 62. Twenty seven homes priced from $150,000 to $200,000 sold in April 2009. This year that price bracket saw 45 homes sold.
The number of homes sold in all price catergories year-to-year saw a 21% jump in April. Of the 168 sales reported on the Shasta Multiple Listing Service, 74% were priced under $300,000, roughly the same percentage as last year. The number of homes currently listed for sale is about 5% lower than a year ago at 1467. 160 of those active listings are bank-owned homes and another 254 home listings are short sales. These two distress sale catergories represent about 28% of the active listings. Just over 600 homes have closed escrow year to date. 529 homes are pending sale currently, up from 424 a year ago.
Even though distress sales only make up 28% of the active listings, they represent 60% of the pending sales. Buyers are attracted to these properties indicating traditional sellers are not pricing their homes competitively. Most of the people I talk to in the housing industry believe the best case scenario is prices will stabilize while many believe prices will go lower, especially in the middle and upper price points which are homes priced above $250,000 and $500,000 respectively.
Analyzing the year-to-date closings, just over half were short sales or bank-owned properties. The difference between pending and closed distress properties points to the difficulty buyers face while attempting to buy a property which is typically in rougher condition than traditional homes. In most cases buyers are required to buy these properties “as is”. Even if the buyer is willing to take on the deferred maintenance common with distress sales, the buyer’s lender may balk at loaning money on a subpar home. In many cases, these homes sell two or three times before the right buyer comes along able to offer price and terms acceptable to both the seller and lender.
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 SALES EXPERIENCE
2010 Not A Good Year To Die
INDUSTRY NEWS, REAL ESTATE LEGISLATION, TIPS FOR SENIORS
Most are unaware of the capital gains and estate tax tax law changes for 2010. If you stand to inherit real estate from a family member, you may want to do everything possible to keep them alive until 2011! Why? Two changes are in effect for this year only which could have significant tax consequences for those that inherit real estate that has appreciated substantially.
The first change is there is no estate tax for those that die this year. However, there is also no stepped-up tax basis for real property transferred from one’s estate to their heirs. Confused? Perhaps an example will help:
Uncle Buck bought an investment property for $100,000 years ago but today he died and the current market value is $1,000,000. His heirs immediately sell the investment and pocket $1,000,000 (for the sake of this example there were no sale costs deducted from the gross sales price). No estate tax is due but the heirs will pay capital gains tax on the gain of $900,000 (The sales price minus the base purchase price of $100,000). If Uncle Buck had died in 2009, the basis value of the investment would have been “stepped-up” to current market value ($1,000,000). If the heirs sold the property today for $1,000,000, no estate tax or capital gains tax would be due.
Next year, the rule that allows a step-up in basis will once again apply and estate tax will only be due if the estate exceeds several million (the exact number has yet to be determined). Last year, the first $3.5 million was exempt from estate tax for a single person and $7 million for married couples. It’s expected the 2011 exemption limits will be similar to those that sunset-ed last year.
The bottom line is keep grandpa and grandma alive until next year when this lapse in favorable tax treatment is restored. This may not be something you can control, but seeking tax advice may be beneficial if you expect a big inheritance due to the untimely death of a wealthy friend or family member who has you in their will.
A tax deferred 1031 exchange may allow you to postpone or eliminate tax liability if you follow the law. Russell Marsan, certified exchange specialist for IPX, can answer any questions regarding these tax law changes at 800-406-1031.
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 SALES EXPERIENCE
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