INDUSTRY NEWS Category
Need To Refinance An Underwater Loan?
FHA LOANS, HOME LOANS, INDUSTRY NEWS, TIPS FOR SELLERS
FHA just announced a new loan program for homeowners that owe more than the current market value for their home. In less than a month, the FHA Short Refinance program will enable some borrowers who owe more than the current market value of their home to qualify for a new FHA insued mortgage. Here are some important points:
- The loan to be refinanced can not be an FHA loan
- The homeowner must be current on their mortgage payments
- Must have a credit score of 500 or higher
- Must be the borrowers primary residence
- Existing lender must agree to write off at least 10% of the loan balance bringing the total loan-to-value ratio to no greater than 115% of fair market value
The first step for borrowers wishing to take advantage of this program would be to contact their existing lender(s) and see if they are willing to write off at least 10% of the unpaid principal balance. If so, contact a local FHA lender for more information.
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
Do You Know Your Redding Home’s Walkability Score?
INDUSTRY NEWS, LOCAL GOVERNMENT, SHASTA COUNTY, TIPS FOR BUYERS
Location, location, location is taking on a new meaning in the 21st century as home buyers switch from focusing on schools and neighborhoods to proximity to stores and public transportation. Urban planners cite concerns over future oil prices as the main reason for the shift. They say baby boomers with empty nests and their children buying their first home both are shying away from large lots in remote areas prefering neighborhoods near big box stores, public transportation and entertainment venues.
According to an article published recently in THE WALL STREET JOURNAL,many websites have sprung up to assist home buyers rate a property’s walkability. One such site, www.WalkScore.com allows users to enter a property address and receive a score from 0-100 pegging the walkability of the neighborhood. The scale goes from “car dependant” to “walkers paradise”.
Redding is slowly catching up to this trend with recent zoning changes that allow mixed uses for downtown area parcels. The new Kobe’s Steakhouse location is one example of allowing restaurant,offices and residential units under one roof. Unfortunately, Redding planners for decades preferred island subdivisions away from retail and commercial areas. Most Redding residents must hop in their car to go grocery shopping, take in a movie or eat out. Urban sprawl has been the norm as Redding sought to expand the city limits to gain additional land for development. In recent times, our city officials have experienced the financial pain of extending utilities, maintaining streets and providing police and fire protection to those furthest from the city’s core.
There is mounting evidence that housing prices are higher for properties within walking distance of amenities.One such study was published by the non-profit group CEOs for Cities. For each one point increase in a Walk Score values increased by as much as $3,000!
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
Majority Of Californians Willing To Pay More Taxes?
INDUSTRY NEWS, LOCAL GOVERNMENT
Apparently so according to the California Taxpayers Association(Cal Tax) reporting on recent election victories for bonds, hotel, parcel, sales and utility taxes. 44 of 64 local tax measures passed on the June 8 ballot with three more remaining too close to call. Based on these results, expect more cities up and down the state to place tax initiatives on the November ballot.
Cal Tax cited the following new tax proposals as proof local officials are cooking up new revenue schemes:
- San Fransisco Supervisors are considering a tax on commercial rents, a parking tax and an increase in the property transfer tax
- Santa Rosa is pondering an extension of the utility user’s tax to cell phones and asking area hoteliers to add 3% to the bed tax
- Los Angeles is considering a parcel tax to help fund the libraries, despite the failure just days ago of a tax measure to help schools
Redding has kicked around the idea of placing a sales tax hike on the ballot in recent times. I suspect Northstate residents would vote down any new tax regardless of the intended usage of those revenues.
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
Unscrupulos Interests Blamed For Housing Market Meltdown
Henry Cisneros pinned the housing crisis on greedy Wall Street firms, not government policies he championed as HUD Secretary during the Clinton Administration. Exotic instruments were created to collateralize mortgages then packaged and sold around the world by profiteers wishing to take advantage of the housing boom. Henry is credited with expanding homeownership during his term as HUD Secretary from 1993-1997.
He also believes insurance agencies that rated these new financial instruments failed to accurately assess the riskiness of these investments. Cisneros addressed a group of real estate editors recently in Austin, Texas. However, he did place some blame on government’s unwillingness to regulate risky financial instruments during the Clinton and Bush Administrations.
Many have blamed the government for policies designed to increase homeownership among minorities for causing the housing bubble. Few would disagree that Fannie Mae and Freddie Mac facilitated the crisis by buying, repackaging and selling mortgage-backed securities that fell short of previous standards. Whistle-blowers at Fannie Mae alerted superiors that loans being presented by banks for purchase were not underwritten to their standards.
I believe there is plenty of blame to go around. If any of the players necessary to create this fiasco would have done their job, this crisis would have been averted. Overzealous lenders, Wall Street investment bankers, insurance companies and government regulators all failed to protect the integrity of time tested policies designed to prevent just such a tragedy. Unfortunately, few will be punished leaving them to enjoy their millions in profits as long as they live in this world.
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
Redding Real Estate Prices Stabilizing?
HOME LOANS, INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
According to one Redding appraiser who tracks average home prices, prices are slowly ticking upward. The low point since the bubble burst in 2006 was March with 91 home sales with an average sales price of $203,830 or $121.08 per square foot. May saw 99 home sales averaging $214,352 or $124.6 per square foot. It would not be unreasonable to say the market is showing signs of stability especially if we’re talking about entry level homes priced below $250,000.
Inventory of available homes on the Shasta Multiple listing service is 1552 today, up from early January’s low of 1301. Pending home sales sit at 467 today, down from the peak of 529 the first week of May. This is likely due to the rush to buy before federal tax credits expired at the end of April. Closed sales for residential properties in 2010 total 824 units thus far.
Nearly 200 homes listed for sale are bank-owned homes, an all-time high for this market cycle. Another 248 homeowners are short sales or pre-foreclosure homes. 141 bank-owned properties are in escrow. 137 short sale listings are also in escrow. These two categories of distress sales represent 60% of the pending sales activity but less than 30% of the active listings.
Shasta County is still experiencing a high number of properties working their way through the foreclosure process. Unemployment is dropping slightly but remains nearly double the national average. Mortgage rates dropped unexpectedly due to European financial turmoil causing investors to move money into US securities. The 30-year fixed rate is around 4.75%!
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
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
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
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
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