(Originally published March 2011)
I try to attend at least one networking event in the community each week and I occasionally meet other Realtors. Because we’re working the same crowd it is easy for us to chat with a group of people. But sometimes I have to politely end a conversation with a Realtor and so should you. Here are four conversational clues that tell you you’re not talking with a professional.
“It is unbelievable!” If this is the response you get after you ask, “How’s the real estate market?” you should walk away. This reply was heavily touted in training materials in the 1950’s so that, whether the market was good or bad, the agent would have an immediate, positive reply. It is still being taught. This particular reply is also outdated, unconsidered and, literally, not to be believed. If I ever say this off hand you have permission to stomp on my foot.
“…but I used to be an engineer.” An immediate disclaimer to the question, “What do you do?” should not be “I’m a real estate agent, but I used to be…” This person is probably embarrassed about his/her career choice and may not be around long.
“It is a [insert possessive noun] market.” A professional won’t bifurcate the marketplace when you ask what the market is like. It is always a buyer’s or seller’s market. She or he should have a more academic answer.
Finally, if a Realtor you’re speaking with says, “Call me when you’re ready to buy or sell,” this person is putting profit over value. I want you to know that you may call me (352-1222) for any reason.
I truly appreciate your friendship and referrals.
Monday, March 28, 2011
What do I need to know about lead paint in older homes?
If you’re planning to buy, rent or renovate a home built before 1978, you need to read the Renovate Right brochure produced by the U.S. Environmental Protection Agency. (www.epa.gov/lead/pubs/renovaterightbrochure.pdf).
In it you’ll learn that lead-based paint, which is dangerous to adults but especially to children under six years of age, was used in more than 38 million homes until it was banned from residential use in 1978.
You have the option to hire a certified risk assessor or inspector to check for lead-based paint (call the National Lead Information Center for help finding one). Or you can assume that it’s present if your home was built prior to 1978 and follow the practices in the brochure.
Federal law now requires that contractors performing renovation, repair and painting projects that disturb painted surfaces in these homes be EPA Lead-Safe Certified. You can use the search tool on the EPA web site to find a certified renovator near you or call your local homebuilders’ association for a list of certified remodelers. After the job is complete, be sure to save the records so you can pass them on if you decide to sell your home.
If you have any questions, or need capable and trustworthy representation, please email at jmarshall@cbcworldwide.com.
In it you’ll learn that lead-based paint, which is dangerous to adults but especially to children under six years of age, was used in more than 38 million homes until it was banned from residential use in 1978.
You have the option to hire a certified risk assessor or inspector to check for lead-based paint (call the National Lead Information Center for help finding one). Or you can assume that it’s present if your home was built prior to 1978 and follow the practices in the brochure.
Federal law now requires that contractors performing renovation, repair and painting projects that disturb painted surfaces in these homes be EPA Lead-Safe Certified. You can use the search tool on the EPA web site to find a certified renovator near you or call your local homebuilders’ association for a list of certified remodelers. After the job is complete, be sure to save the records so you can pass them on if you decide to sell your home.
If you have any questions, or need capable and trustworthy representation, please email at jmarshall@cbcworldwide.com.
SCMPD Warns Savannah Residents
(Orginally published February 2011- you heard it here first!)
Savannah/Chatham County Police Department advises that they are experiencing a high amount of HVAC unit thefts in vacant homes listed for sale or for rent. Current target area is Southside and West Chatham county. Please call 911 to report any suspicious activity around vacant homes!
Savannah/Chatham County Police Department advises that they are experiencing a high amount of HVAC unit thefts in vacant homes listed for sale or for rent. Current target area is Southside and West Chatham county. Please call 911 to report any suspicious activity around vacant homes!
Professor promotes plight of real estate walkaways
By Mary Umberger, January 24, 2011.
Some people regard Brent T. White's point of view as an affront to basic notions of right and wrong -- perhaps even a threat to the general financial well-being of the country.
Others see him as a voice of reason, a calm explainer of a stance that just a few years ago was nearly unheard-of in this country: that walking away from a mortgage contract not only can make financial sense for some homeowners, but it also can be morally justifiable, an act that shouldn't be a source of shame.
White has written extensively on the legal and psychological aspects of "strategic default" -- the apparently burgeoning phenomenon in which homeowners deliberately default on their mortgages because their homes are so far underwater they figure that continuing to make payments amounts to throwing away money.
White's expertise in the realm of distressed real estate is both professional and personal: He's an associate professor of law at the University of Arizona who has studied the attitudes of underwater homeowners and published academic research on their behavior. He also said he recently sold his own home through a short sale, though in an interview he declined to elaborate on his own circumstances.
He has authored "Underwater Home: What Should You Do If You Owe More on Your Home Than It's Worth?" an e-book that's a how-to guide for homeowners who are struggling to understand their options, including bankruptcy, loan modification, short sale, walking away from the loan, or continuing to make their payments.
White contends that underwater homeowners suffer under what he describes as a "moral double standard" -- that although major corporations can and do default on soured business deals with some frequency (and with barely a ripple of public scorn), ordinary homeowners "who default on their mortgage are frequently portrayed as irresponsible (and) called deadbeats," he wrote in the book.
That attitude is unfair to walkaways, most of whom aren't guilty of reckless borrowing so much as they are of buying at the wrong time and watching helplessly as their home values plummet, White said in an interview. He said some of them would be right to consider dumping their loan -- and their home -- before their financial worlds cave in completely.
This advocacy of walking away -- under certain circumstances -- has made him a lightning rod in the arguments over strategic default.
But his extensive writings have generated significant media attention, including an appearance last year on "60 Minutes," where he said "people feel too shameful about letting go of their home, and in fact, people might be better off making economic decisions, rational decisions in their best interests."
He isn't surprised that many people have taken exception to his viewpoint, he said.
"I got lots of hate mail and I got a few threatening notes," said White. "I had people write to the university to demand that I be fired and people threatening not to give money to the university because of what I wrote."
He also has plenty of supporters, he said.
"I get 10-to-1 positive reactions as opposed to negative ones," he said.
White's basic premise is that a mortgage isn't a moral document -- it's a straightforward contract between a borrower and a lender in which both parties agree that if the borrower can't or won't make his payments, the lender will get something of value in return: the house.
"Think of the contract as similar to a prenuptial agreement when getting married," he wrote in the book. "Both parties hope things will work out and commit to try to make it work. But both also understand that it may not. As such, they agree in advance who gets what if they dissolve the relationship.
"Your agreement with your lender is that (the lender gets) the house."
Bankers are well aware of the tactic of strategic default, he said: They've engaged in it themselves. He cited the 2009 example of Morgan Stanley intentionally defaulting on a $2 billion loan after the value plunged on five San Francisco buildings it purchased in 2007 -- a situation he described as neither unusual nor illegal.
"What Morgan Stanley and other financial institutions don't want you to know, however, is that you have the same option to default on your mortgage," he wrote in the book.
Besides, he said, given a choice between making house payments or feeding and educating one's kids, homeowners' greater responsibility is toward their families' needs.
He also rejects the argument that homeowners are wrong to strategically default because of the potential collateral damage to the economic stability of their neighborhoods. Some critics take their concerns further: that if walkaways occur in large enough numbers, there's potential harm for the overall economy.
White said it's too much to ask individuals to "prop up" neighborhoods by carrying bad loans at the expense of squandering one's savings, forgoing retirement, raiding the children's college fund or using credit cards to pay for groceries.
And numerous researchers, he said, have disputed the contention that large numbers of walkaways will further undermine the economy.
Another caveat is that although walking away may lessen a homeowner's immediate problem, it could amount to financial suicide for his or her subsequent credit ratings.
But White said that's not necessarily so: The long-term effects on an individual walkaway's credit and whether the lender can sue to recoup losses on the loan can vary widely, depending on the state where the defaulter resides and other concerns; in some cases, a credit score may heal significantly within a few years, he said.
"What I argue is that there is not a moral obligation to pay your mortgage, and the consequences may be much less severe than people think," he said.
White is unwilling to elaborate on his own homeownership history. When asked about a Tucson house in his name that had been advertised as part of a foreclosure auction, he declined to discuss his own experiences.
"Like most people, I like to keep my personal affairs private," he said in an e-mail in response to an Inman News query.
"However, I did sell my property in a short sale at the end of the year. My writing wasn't inspired by this decision, but my decision was informed by my research. While I am happy to discuss my research, I won't talk further about my personal circumstances."
In the interview, White said that, rather than heaping scorn on walkaways, the public should focus their disapproval on those banks that fostered dubious lending standards and that now exploit people's sense of shame in order to dissuade them from defaulting. He's also critical of those in the housing industry who fanned unrealistic consumer expectations during the bubble buildup.
"Sure, some homeowners bought more than they should and behaved in an irrational way, but most people who are underwater are people who just bought at the wrong time," he said.
"They believed they were behaving responsibly," White said. "They were told you were irresponsible if you rented, that (buying a home) was the best investment you could make -- it came from the government, from (the U.S. Housing and Urban Development Department), from the media and the real estate industry."
He isn't finished on that topic: He plans to release a research report in February that takes the real estate industry to task.
White said in the interview that many in the real estate business contributed to the housing bubble by offering legal and investment expertise that exceeded their legally defined roles as sales agents. In his report, he'll call for increased regulation of the industry, he said.
"I believe that most real estate agents try to do a good job," White said. "(The report) is not an attack on the real estate industry."
But he expects it to generate another cloud of controversy.
"I think there are a lot of real estate agents out there who agree" that the bar for entry into the business needs to be raised, he said. "Others will be quite angry. But I think we need to have a conversation about it. I'm actually quite hopeful that it will begin a conversation."
What do you think? Leave a comment or send me an email at jmarshall@cbcworldwide.com.
Some people regard Brent T. White's point of view as an affront to basic notions of right and wrong -- perhaps even a threat to the general financial well-being of the country.
Others see him as a voice of reason, a calm explainer of a stance that just a few years ago was nearly unheard-of in this country: that walking away from a mortgage contract not only can make financial sense for some homeowners, but it also can be morally justifiable, an act that shouldn't be a source of shame.
White has written extensively on the legal and psychological aspects of "strategic default" -- the apparently burgeoning phenomenon in which homeowners deliberately default on their mortgages because their homes are so far underwater they figure that continuing to make payments amounts to throwing away money.
White's expertise in the realm of distressed real estate is both professional and personal: He's an associate professor of law at the University of Arizona who has studied the attitudes of underwater homeowners and published academic research on their behavior. He also said he recently sold his own home through a short sale, though in an interview he declined to elaborate on his own circumstances.
He has authored "Underwater Home: What Should You Do If You Owe More on Your Home Than It's Worth?" an e-book that's a how-to guide for homeowners who are struggling to understand their options, including bankruptcy, loan modification, short sale, walking away from the loan, or continuing to make their payments.
White contends that underwater homeowners suffer under what he describes as a "moral double standard" -- that although major corporations can and do default on soured business deals with some frequency (and with barely a ripple of public scorn), ordinary homeowners "who default on their mortgage are frequently portrayed as irresponsible (and) called deadbeats," he wrote in the book.
That attitude is unfair to walkaways, most of whom aren't guilty of reckless borrowing so much as they are of buying at the wrong time and watching helplessly as their home values plummet, White said in an interview. He said some of them would be right to consider dumping their loan -- and their home -- before their financial worlds cave in completely.
This advocacy of walking away -- under certain circumstances -- has made him a lightning rod in the arguments over strategic default.
But his extensive writings have generated significant media attention, including an appearance last year on "60 Minutes," where he said "people feel too shameful about letting go of their home, and in fact, people might be better off making economic decisions, rational decisions in their best interests."
He isn't surprised that many people have taken exception to his viewpoint, he said.
"I got lots of hate mail and I got a few threatening notes," said White. "I had people write to the university to demand that I be fired and people threatening not to give money to the university because of what I wrote."
He also has plenty of supporters, he said.
"I get 10-to-1 positive reactions as opposed to negative ones," he said.
White's basic premise is that a mortgage isn't a moral document -- it's a straightforward contract between a borrower and a lender in which both parties agree that if the borrower can't or won't make his payments, the lender will get something of value in return: the house.
"Think of the contract as similar to a prenuptial agreement when getting married," he wrote in the book. "Both parties hope things will work out and commit to try to make it work. But both also understand that it may not. As such, they agree in advance who gets what if they dissolve the relationship.
"Your agreement with your lender is that (the lender gets) the house."
Bankers are well aware of the tactic of strategic default, he said: They've engaged in it themselves. He cited the 2009 example of Morgan Stanley intentionally defaulting on a $2 billion loan after the value plunged on five San Francisco buildings it purchased in 2007 -- a situation he described as neither unusual nor illegal.
"What Morgan Stanley and other financial institutions don't want you to know, however, is that you have the same option to default on your mortgage," he wrote in the book.
Besides, he said, given a choice between making house payments or feeding and educating one's kids, homeowners' greater responsibility is toward their families' needs.
He also rejects the argument that homeowners are wrong to strategically default because of the potential collateral damage to the economic stability of their neighborhoods. Some critics take their concerns further: that if walkaways occur in large enough numbers, there's potential harm for the overall economy.
White said it's too much to ask individuals to "prop up" neighborhoods by carrying bad loans at the expense of squandering one's savings, forgoing retirement, raiding the children's college fund or using credit cards to pay for groceries.
And numerous researchers, he said, have disputed the contention that large numbers of walkaways will further undermine the economy.
Another caveat is that although walking away may lessen a homeowner's immediate problem, it could amount to financial suicide for his or her subsequent credit ratings.
But White said that's not necessarily so: The long-term effects on an individual walkaway's credit and whether the lender can sue to recoup losses on the loan can vary widely, depending on the state where the defaulter resides and other concerns; in some cases, a credit score may heal significantly within a few years, he said.
"What I argue is that there is not a moral obligation to pay your mortgage, and the consequences may be much less severe than people think," he said.
White is unwilling to elaborate on his own homeownership history. When asked about a Tucson house in his name that had been advertised as part of a foreclosure auction, he declined to discuss his own experiences.
"Like most people, I like to keep my personal affairs private," he said in an e-mail in response to an Inman News query.
"However, I did sell my property in a short sale at the end of the year. My writing wasn't inspired by this decision, but my decision was informed by my research. While I am happy to discuss my research, I won't talk further about my personal circumstances."
In the interview, White said that, rather than heaping scorn on walkaways, the public should focus their disapproval on those banks that fostered dubious lending standards and that now exploit people's sense of shame in order to dissuade them from defaulting. He's also critical of those in the housing industry who fanned unrealistic consumer expectations during the bubble buildup.
"Sure, some homeowners bought more than they should and behaved in an irrational way, but most people who are underwater are people who just bought at the wrong time," he said.
"They believed they were behaving responsibly," White said. "They were told you were irresponsible if you rented, that (buying a home) was the best investment you could make -- it came from the government, from (the U.S. Housing and Urban Development Department), from the media and the real estate industry."
He isn't finished on that topic: He plans to release a research report in February that takes the real estate industry to task.
White said in the interview that many in the real estate business contributed to the housing bubble by offering legal and investment expertise that exceeded their legally defined roles as sales agents. In his report, he'll call for increased regulation of the industry, he said.
"I believe that most real estate agents try to do a good job," White said. "(The report) is not an attack on the real estate industry."
But he expects it to generate another cloud of controversy.
"I think there are a lot of real estate agents out there who agree" that the bar for entry into the business needs to be raised, he said. "Others will be quite angry. But I think we need to have a conversation about it. I'm actually quite hopeful that it will begin a conversation."
What do you think? Leave a comment or send me an email at jmarshall@cbcworldwide.com.
Capital Gain Taxes – The Same for Now
(Originally published December 2010).
Toward the end of 2010, many people wondered what would happen to capital gain tax rates on January 1, 2011. Some even scrambled to close the sale of property before the end of the year.
As it turned out, Congress extended the capital gain rates in mid December; at least for two years. The following is a brief summary of portions of the Tax Relief, Unemployment Insurance Reauthorization and Jobs Creation Act of 2010 (referred to as “the extension of the Bush Era Tax Cuts”) which are likely to impact real estate investors.
Capital Gain and Dividend Rates – Current rates were extended for two-years for all taxpayers with a maximum rate of 15% for both.
Personal Tax Rates – Current rates were extended for two-years for all taxpayers with the top rate remaining at 35%.
Social Security Tax – The employee tax rate of 6.2% on the first $106,800 of wages drops to 4.2% in 2011.
Alternative Minimum Tax – Current exemptions were extended for all taxpayers for two-years.
Death/Inheritance/Estate Tax – An exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years; the exclusion will become indexed beginning in 2012.
Gift Tax – Like the Death Tax, a Gift Tax exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years, with the exclusion being indexed beginning in 2012.
Other Extensions – The $1000 child credit; an additional standard deduction for real-estate taxes; extension of 15-year cost recovery for certain leasehold improvements, restaurant buildings and qualified retail improvements (through 2011); and the extension of various energy credits (through 2011).
Although the legislation provides some certainty for two years, we may find ourselves questioning our future rates again in 2012. Since that is also an election year, it may be interesting!
This information is accurate, yet not cited and was provided to me by Connie Ray, broker of Platinum Partners.
Toward the end of 2010, many people wondered what would happen to capital gain tax rates on January 1, 2011. Some even scrambled to close the sale of property before the end of the year.
As it turned out, Congress extended the capital gain rates in mid December; at least for two years. The following is a brief summary of portions of the Tax Relief, Unemployment Insurance Reauthorization and Jobs Creation Act of 2010 (referred to as “the extension of the Bush Era Tax Cuts”) which are likely to impact real estate investors.
Capital Gain and Dividend Rates – Current rates were extended for two-years for all taxpayers with a maximum rate of 15% for both.
Personal Tax Rates – Current rates were extended for two-years for all taxpayers with the top rate remaining at 35%.
Social Security Tax – The employee tax rate of 6.2% on the first $106,800 of wages drops to 4.2% in 2011.
Alternative Minimum Tax – Current exemptions were extended for all taxpayers for two-years.
Death/Inheritance/Estate Tax – An exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years; the exclusion will become indexed beginning in 2012.
Gift Tax – Like the Death Tax, a Gift Tax exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years, with the exclusion being indexed beginning in 2012.
Other Extensions – The $1000 child credit; an additional standard deduction for real-estate taxes; extension of 15-year cost recovery for certain leasehold improvements, restaurant buildings and qualified retail improvements (through 2011); and the extension of various energy credits (through 2011).
Although the legislation provides some certainty for two years, we may find ourselves questioning our future rates again in 2012. Since that is also an election year, it may be interesting!
This information is accurate, yet not cited and was provided to me by Connie Ray, broker of Platinum Partners.
Generous Tax Code Exclusion for Sellers?
(Originally published December 2010).
Sellers! I know what you're going through. It is a buyer's market extraordinaire, you're worried about getting a good sale price, you hope the home you purchase next won't drop in value, and let's not even think about closing costs and taxes! Many of you have just decided not to sell your home.
I am not a tax lawyer, but before you decide to stay put, or move and rent out your home, carefully consider this little known loophole.
First, you must realize that the home sale exclusion is one of the most generous tax breaks in the tax code. As it stands, if you have owned a home and used it as a primary residence for 24 months out of the last 60 months, all the gain is tax free upon sale. So if you made $50,000 on the sale of your home and your tax bracket is 27% you wouldn't have to pay $13,500 capital gain tax.
Second, it is easy to use the home sale exclusion even if you don't meet the two year test. If you have to move because of an unforeseen circumstance before being in the house for two years, you may still get a PARTIAL tax break.
Third, these unforeseen circumstances have broad definitions. IRS Publication 523 states:
You may qualify for a reduced maximum exclusion if you are: fired; promoted; demoted; changed jobs; became self-employed; or even had twins.
So that's all fine and dandy you're thinking, but so what? Well, what if you started a business, changed your business or closed your business? What if this was a home-based business? Did you know there are low cost and even no cost home-based businesses out there? The fact is any change in employment arguably affects your reasonable basic living expenses.
And if you can demonstrate that this unforeseen circumstance impacted your reasonable basic living expenses, guess what- you get a partial tax break.
Sellers! I know what you're going through. It is a buyer's market extraordinaire, you're worried about getting a good sale price, you hope the home you purchase next won't drop in value, and let's not even think about closing costs and taxes! Many of you have just decided not to sell your home.
I am not a tax lawyer, but before you decide to stay put, or move and rent out your home, carefully consider this little known loophole.
First, you must realize that the home sale exclusion is one of the most generous tax breaks in the tax code. As it stands, if you have owned a home and used it as a primary residence for 24 months out of the last 60 months, all the gain is tax free upon sale. So if you made $50,000 on the sale of your home and your tax bracket is 27% you wouldn't have to pay $13,500 capital gain tax.
Second, it is easy to use the home sale exclusion even if you don't meet the two year test. If you have to move because of an unforeseen circumstance before being in the house for two years, you may still get a PARTIAL tax break.
Third, these unforeseen circumstances have broad definitions. IRS Publication 523 states:
"The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved."
You may qualify for a reduced maximum exclusion if you are: fired; promoted; demoted; changed jobs; became self-employed; or even had twins.
So that's all fine and dandy you're thinking, but so what? Well, what if you started a business, changed your business or closed your business? What if this was a home-based business? Did you know there are low cost and even no cost home-based businesses out there? The fact is any change in employment arguably affects your reasonable basic living expenses.
And if you can demonstrate that this unforeseen circumstance impacted your reasonable basic living expenses, guess what- you get a partial tax break.
Fixes for Chinese Drywall Homes
(Originally published November 2010).
As part of a major legal settlement reached in mid-October, Chinese drywall manufacturer Knauf Plasterboard Tianjin- along with suppliers, builders and insurers- will pay to fix as many as 300 homes damaged by corrosive drywall. If the program is successful, it may be expanded to thousands of other properties built with Knauf drywall.
Builders used Chinese gypsum board as a cheaper alternative to American products, but in the past several years more than 7,000 home owners have filed suits alleging that noxious sulfuric fumes have caused extensive property damage, including corrosion of plumbling, electrical wiring and appliances.
Knauf is among many Chinese drywall manufacturers, but attorneys for the home owners in this case say the outcome will have a huge impact on drywall litigation pending with other manufacturers around the country.
November/December 2010 REALTOR Magazine, p. 11.
As part of a major legal settlement reached in mid-October, Chinese drywall manufacturer Knauf Plasterboard Tianjin- along with suppliers, builders and insurers- will pay to fix as many as 300 homes damaged by corrosive drywall. If the program is successful, it may be expanded to thousands of other properties built with Knauf drywall.
Builders used Chinese gypsum board as a cheaper alternative to American products, but in the past several years more than 7,000 home owners have filed suits alleging that noxious sulfuric fumes have caused extensive property damage, including corrosion of plumbling, electrical wiring and appliances.
Knauf is among many Chinese drywall manufacturers, but attorneys for the home owners in this case say the outcome will have a huge impact on drywall litigation pending with other manufacturers around the country.
November/December 2010 REALTOR Magazine, p. 11.
Money for Small Businesses
(Originally published November 2010).
A new $30 billion small business fund, created in September as part of the Small Business Jobs and Credit Act of 2010, will provide caplital to community banks, along with incentives for small-business lending.
The government estimates that the $0 billion could leverage up to $300 billion in new loans. The bill also permanently increases the maximum loan amount (from $2 million to $5 million) for two Small Business Administration loan programs- SBA 7a and SBA 504- and introduces noteworthy tax breaks for the self-employed, including one for 2010 health insurance costs.
From the December/November 2010 REALTOR magazine p. 11.
A new $30 billion small business fund, created in September as part of the Small Business Jobs and Credit Act of 2010, will provide caplital to community banks, along with incentives for small-business lending.
The government estimates that the $0 billion could leverage up to $300 billion in new loans. The bill also permanently increases the maximum loan amount (from $2 million to $5 million) for two Small Business Administration loan programs- SBA 7a and SBA 504- and introduces noteworthy tax breaks for the self-employed, including one for 2010 health insurance costs.
From the December/November 2010 REALTOR magazine p. 11.
New Law Requires More Documentation on Rental Properties
(Originally published November 2010).
January 1st, a new law went into effect that requires rental property owners to submit additional accounting records to the IRS.
This is a provision of the Small Business Jobs Act passed by your Congressional representatives that dictates that rental income be in the same tax category as a business or trade. You are required to complete an information return (typically
Form 1099-MISC) to the vendor and IRS if you pay $600 or more to a service provider while receiving rental income.
If you plan to have any work done on your building this year, you must keep those receipts! Fines will range from $60 to $250,000 at the discretion of the IRS for not providing these new tax documents.
This information is accurate yet not my own. It was received as an uncited news alert.
January 1st, a new law went into effect that requires rental property owners to submit additional accounting records to the IRS.
This is a provision of the Small Business Jobs Act passed by your Congressional representatives that dictates that rental income be in the same tax category as a business or trade. You are required to complete an information return (typically
Form 1099-MISC) to the vendor and IRS if you pay $600 or more to a service provider while receiving rental income.
If you plan to have any work done on your building this year, you must keep those receipts! Fines will range from $60 to $250,000 at the discretion of the IRS for not providing these new tax documents.
This information is accurate yet not my own. It was received as an uncited news alert.
Green Home Basics
(Originally Published November 2010)
A reader asks, "Joseph, I want to buy a "green" home. What do I need to look for?"
Here are some of the features you should look for, according to the National Association of Home Builders (NAHB):
Energy-efficient. Look for appliances, windows and water heating systems with ENERGY STAR& ratings and efficient lighting fixtures and bulbs. Renewable energy sources further decrease energy consumption in the home.
Water-efficient. Look for programmed, low-volume irrigation systems, rainwater collection systems, wastewater treatment systems and hot water recirculation systems.
Resource-efficient. The home should use strategies to reduce heat gain in the summer and heat loss in the winter. It should contain renewable materials and recycled-content materials in carpets, tiles and concrete formulations.
Indoor Air Quality. The heating, air conditioning and ventilation system must be appropriately sized. Look for low-VOC (volatile organic compounds) paints and finishes.
To ensure the home is "green" look for the Green Certified mark issued by the NAHB Research Center.
If you have any questions, or need capable and trustworthy representation, please call me at 912-352-1222.
A reader asks, "Joseph, I want to buy a "green" home. What do I need to look for?"
Here are some of the features you should look for, according to the National Association of Home Builders (NAHB):
Energy-efficient. Look for appliances, windows and water heating systems with ENERGY STAR& ratings and efficient lighting fixtures and bulbs. Renewable energy sources further decrease energy consumption in the home.
Water-efficient. Look for programmed, low-volume irrigation systems, rainwater collection systems, wastewater treatment systems and hot water recirculation systems.
Resource-efficient. The home should use strategies to reduce heat gain in the summer and heat loss in the winter. It should contain renewable materials and recycled-content materials in carpets, tiles and concrete formulations.
Indoor Air Quality. The heating, air conditioning and ventilation system must be appropriately sized. Look for low-VOC (volatile organic compounds) paints and finishes.
To ensure the home is "green" look for the Green Certified mark issued by the NAHB Research Center.
If you have any questions, or need capable and trustworthy representation, please call me at 912-352-1222.
FHA 203(k) Loans for Foreclosures or Properties in Disrepair
As we are all aware, there are plenty of foreclosures out there and more coming on the market. While each property has unique challenges and opportunities, it is not true that you need to pay all cash for one.
If the property in question is in need of substantial repair you can apply for a FHA 203(k) loan. Upon acceptance, qualified buyers can purchase the house as-is and finance the purchase, repairs, and improvements with a single mortgage loan. The loan amount is based on the value of the home after the construction is finished and the loan down payment is only 3.5%
Lenders, like Bank of America's Buy and Renovate home financing program, are even providing extra help by lining up contractors and project management services before the loan is entered into. The service provider, like Lowe's Home
Improvement, works with the customer and the lender through the entire repair process. If you have questions about a foreclosure you're interested in, give me a call- 912-352-1222.
Special thanks to Jim Ragan with Bank of America Home Loans for the 203(k) information. RealEstate Vol. 28, #12, 2010.
If the property in question is in need of substantial repair you can apply for a FHA 203(k) loan. Upon acceptance, qualified buyers can purchase the house as-is and finance the purchase, repairs, and improvements with a single mortgage loan. The loan amount is based on the value of the home after the construction is finished and the loan down payment is only 3.5%
Lenders, like Bank of America's Buy and Renovate home financing program, are even providing extra help by lining up contractors and project management services before the loan is entered into. The service provider, like Lowe's Home
Improvement, works with the customer and the lender through the entire repair process. If you have questions about a foreclosure you're interested in, give me a call- 912-352-1222.
Special thanks to Jim Ragan with Bank of America Home Loans for the 203(k) information. RealEstate Vol. 28, #12, 2010.
Prevent Water Damage
Leaking roofs, plumbing leaks and backed-up drains can destroy floors, walls, ceilings, furniture and cause mold related health problems.
If you own, rent or are buying a property, consider the following tips to help prevent water damage:
Inspect supply line hoses to appliances that use water, including washing machines, ice makers, garbage disposals and dishwashers. Look for evidence of leaks in those areas before you purchase or rent a property, especially one being sold "As Is".
Re-caulk and grout around sinks, showers, drains and tubs.
Inspect the roof and gutters of a property you might purchase for damage and remove accumulated debris to uncover potentially rotted areas.
Check the ceilings and walls for evidence of roof leaks.
In colder weather, disconnect all exterior hoses to allow water to drain and avoid bursting pipes. If you are leaving town, maintain the interior tempurature at a minimum of 55 degrees F.
If your property is vacant, consider shutting off the water service.
Consider installing a water leak detection system in your home.
Thanks to Bill Richard's State Farm office for this core information!
If you own, rent or are buying a property, consider the following tips to help prevent water damage:
Inspect supply line hoses to appliances that use water, including washing machines, ice makers, garbage disposals and dishwashers. Look for evidence of leaks in those areas before you purchase or rent a property, especially one being sold "As Is".
Re-caulk and grout around sinks, showers, drains and tubs.
Inspect the roof and gutters of a property you might purchase for damage and remove accumulated debris to uncover potentially rotted areas.
Check the ceilings and walls for evidence of roof leaks.
In colder weather, disconnect all exterior hoses to allow water to drain and avoid bursting pipes. If you are leaving town, maintain the interior tempurature at a minimum of 55 degrees F.
If your property is vacant, consider shutting off the water service.
Consider installing a water leak detection system in your home.
Thanks to Bill Richard's State Farm office for this core information!
Electrical Safeguards for Buying or Renting.
Whether you have just purchased a home or office, are temporarily renting or are considering a purchase, be sure to protect your equipment and calculate the cost of the protection!
To help protect electrical equipment and appliances in your home/office from electrical surges, consider installing whole house surge protection on the main electrical service to the home. This device can be installed by an electrician on the main electrical fuse or circuit breaker panel.
Install point-of-use surge protection devices to help protect individual electronics and appliances. These devices should:
Be tested to UL 1449.
Prevent electricity from being conducted to the appliance if the surge protection capability fails.
Protect all power and signal lines that are connected to the equipment such as phone and coaxial cables.
Have a working indicator light.
A surge protection system can't protect against all direct lightning strikes, but it will protect against most power surges.
Thanks to Bill Richard's State Farm office for sharing this information!
To help protect electrical equipment and appliances in your home/office from electrical surges, consider installing whole house surge protection on the main electrical service to the home. This device can be installed by an electrician on the main electrical fuse or circuit breaker panel.
Install point-of-use surge protection devices to help protect individual electronics and appliances. These devices should:
Be tested to UL 1449.
Prevent electricity from being conducted to the appliance if the surge protection capability fails.
Protect all power and signal lines that are connected to the equipment such as phone and coaxial cables.
Have a working indicator light.
A surge protection system can't protect against all direct lightning strikes, but it will protect against most power surges.
Thanks to Bill Richard's State Farm office for sharing this information!
Carpet installer shout-out.
If you are in need of a carpet installer, please contact Rick Duke at 912.441.0472. He did a great job installing my berber carpet; it looks great. Thanks Rick!
A reminder for military personnel about the tax credit extension.
(Originally published October 2010)
Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the $8,000 homebuyers credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011.
If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase. Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual's spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
Thank you Steve Nimmer in Coldwell Banker Mortgage for this additional info!
Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the $8,000 homebuyers credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011.
If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase. Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual's spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
Thank you Steve Nimmer in Coldwell Banker Mortgage for this additional info!
Are mortgage rates rising?
(Originally published October 2010)
YES!
The Fed's second round of Quantitative Easing (QE2) has pushed mortgage rates higher in the last 3 weeks. But why? Several reasons. As investors look ahead they see little reason for mortgage rates to decrease and four possible causes for them to increase.
These causes include stronger than expected economic data which could lead to stronger economic growth. Stronger growth decreases the need for additional Fed stimulus, and it generally leads to higher inflation.
Domestic and foreign opposition to QE2 means the Fed will most likely not expand the program, meaning that the Fed will face strong resistance to an expansion of the program. Investors had viewed the $600 billion figure as a first step which would likely be increased in the future. Stronger economic growth and opposition to quantitative easing reduce the likelihood that the program will be increased and possibly could cause the program to end early.
Printing an extra $600 billion weakened the value of the dollar relative to other currencies. When foreign investors sell US securities, they must convert the US dollars they receive into their own currency. If the value of the dollar falls, then the value of their US investment falls in relative terms to their own currency. As a result, foreign investors may reduce their purchases of US securities, including mortgage-backed securities (MBS), which would cause yields to increase. This fear of weaker foreign demand hurt mortgage rates.
China also announced a rate hike which requires yields to rise in other foreign markets to remain competitive.
The good news is that current inflation levels are low and the Consumer Price Index data released mid November shows annual core inflation at a record low in October.
In conclusion, we shouldn't be surprised that mortgage rates are rising; because they've been extremely low they are positioned to increase very quickly!
Thank you to Jeffery Grossman in SunTrust Mortgage and MBSQuoteline!
YES!
The Fed's second round of Quantitative Easing (QE2) has pushed mortgage rates higher in the last 3 weeks. But why? Several reasons. As investors look ahead they see little reason for mortgage rates to decrease and four possible causes for them to increase.
These causes include stronger than expected economic data which could lead to stronger economic growth. Stronger growth decreases the need for additional Fed stimulus, and it generally leads to higher inflation.
Domestic and foreign opposition to QE2 means the Fed will most likely not expand the program, meaning that the Fed will face strong resistance to an expansion of the program. Investors had viewed the $600 billion figure as a first step which would likely be increased in the future. Stronger economic growth and opposition to quantitative easing reduce the likelihood that the program will be increased and possibly could cause the program to end early.
Printing an extra $600 billion weakened the value of the dollar relative to other currencies. When foreign investors sell US securities, they must convert the US dollars they receive into their own currency. If the value of the dollar falls, then the value of their US investment falls in relative terms to their own currency. As a result, foreign investors may reduce their purchases of US securities, including mortgage-backed securities (MBS), which would cause yields to increase. This fear of weaker foreign demand hurt mortgage rates.
China also announced a rate hike which requires yields to rise in other foreign markets to remain competitive.
The good news is that current inflation levels are low and the Consumer Price Index data released mid November shows annual core inflation at a record low in October.
In conclusion, we shouldn't be surprised that mortgage rates are rising; because they've been extremely low they are positioned to increase very quickly!
Thank you to Jeffery Grossman in SunTrust Mortgage and MBSQuoteline!
How do I know if my home is underinsured?
(Originally published October 2010)
The Insurance Information Institute recommends the following:
It's a good idea to insure your home for the cost of rebuilding it. Check your homeowner's policy to see the maximum amount your insurance company would pay if it had to be rebuilt.
Find out what it would cost to rebuild your home. Your insurance agent can calculate rebuilding costs for you or you can hire an appraiser (call or email me for references). Make sure your insurance agent knows about all improvements you've made, such as a deck or larger kitchen.
Make sure the value of your policy is keeping up with increases in local building costs. Many policies include an inflation guard; if yours doesn't, consider purchasing one.
Find out if you have a replacement cost policy for your house. If you own an older home, you may have a modified replacement cost policy.
For the contents of your home, find out whether you have replacement cost or actual cash value insurance. Check the limits on certain personal possessions, such as jewelry. Consider buying an endorsement to insure valuables separately.
If you have any questions, or need capable and trustworthy representation, please call me at 912-352-1222.
The Insurance Information Institute recommends the following:
It's a good idea to insure your home for the cost of rebuilding it. Check your homeowner's policy to see the maximum amount your insurance company would pay if it had to be rebuilt.
Find out what it would cost to rebuild your home. Your insurance agent can calculate rebuilding costs for you or you can hire an appraiser (call or email me for references). Make sure your insurance agent knows about all improvements you've made, such as a deck or larger kitchen.
Make sure the value of your policy is keeping up with increases in local building costs. Many policies include an inflation guard; if yours doesn't, consider purchasing one.
Find out if you have a replacement cost policy for your house. If you own an older home, you may have a modified replacement cost policy.
For the contents of your home, find out whether you have replacement cost or actual cash value insurance. Check the limits on certain personal possessions, such as jewelry. Consider buying an endorsement to insure valuables separately.
If you have any questions, or need capable and trustworthy representation, please call me at 912-352-1222.
How the construction industry is affecting your neighborhood
(Originally published October 2010)
You might think the construction industry only affects your neighborhood when a new house or business is built nearby. Nothing could be further from the truth. Construction in any area affects the economy in terms of tax revenues, jobs and growth.
Currently, local new home and commercial construction costs are at record lows; 10%-15% less than they were 3-4 years ago. However, these costs will go up during the next 6-24 months, but builders won't be able to charge more for their work.
Builders are only guaranteeing their quotes for 30 days because materials prices are fluctuating.
When build costs increase that does not mean the price of the building will. Unfortunately, most of these costs will come out of the builder's profit margin and the consumer will make up the rest.
Financing for large projects is still very difficult to obtain. Federal regulators are tying banks up and private investment money is hard to come by. Therefore, smaller, local investors are really the only ones available to fund new construction.
The $8,000 buyer tax credit, which was great for Realtors like me, slammed home builders. For example, let's say a builder finished a house on April 30, 2010 and planned the closing in 30 days. Then the program deadline was extended another 90 days. Suddenly that builder is left paying loans on their construction for 120 days instead of 30, which significantly decreased their profit.
Construction is most hampered by foreclosures, which are still steadily coming on the market. A home buyer will go to the bank for a loan, and upon telling the banker she intends to buy a new home, the banker will say, "Why do you want to buy a new home when we've got all these great foreclosures at bargain basement prices?" Suddenly that new home is not sold.
It happens just like that every day.
The bottom line is the local construction industry is 60% off what it was 3 years ago and putting downward pressure on our economy. But, if you have the capital and want to build your business or dream home the timing is perfect.
You might think the construction industry only affects your neighborhood when a new house or business is built nearby. Nothing could be further from the truth. Construction in any area affects the economy in terms of tax revenues, jobs and growth.
Currently, local new home and commercial construction costs are at record lows; 10%-15% less than they were 3-4 years ago. However, these costs will go up during the next 6-24 months, but builders won't be able to charge more for their work.
Builders are only guaranteeing their quotes for 30 days because materials prices are fluctuating.
When build costs increase that does not mean the price of the building will. Unfortunately, most of these costs will come out of the builder's profit margin and the consumer will make up the rest.
Financing for large projects is still very difficult to obtain. Federal regulators are tying banks up and private investment money is hard to come by. Therefore, smaller, local investors are really the only ones available to fund new construction.
The $8,000 buyer tax credit, which was great for Realtors like me, slammed home builders. For example, let's say a builder finished a house on April 30, 2010 and planned the closing in 30 days. Then the program deadline was extended another 90 days. Suddenly that builder is left paying loans on their construction for 120 days instead of 30, which significantly decreased their profit.
Construction is most hampered by foreclosures, which are still steadily coming on the market. A home buyer will go to the bank for a loan, and upon telling the banker she intends to buy a new home, the banker will say, "Why do you want to buy a new home when we've got all these great foreclosures at bargain basement prices?" Suddenly that new home is not sold.
It happens just like that every day.
The bottom line is the local construction industry is 60% off what it was 3 years ago and putting downward pressure on our economy. But, if you have the capital and want to build your business or dream home the timing is perfect.
Should I walk away from my home?
(Originally published October, 2010)
My Selling Savannah Now newsletter, which is currently more read than my website, generated a reader question:
"Joseph, my home is valued far less than what I paid for it and I can't afford my mortgage payments. I am tired of struggling; should I just walk away?"
Dear Reader, The answer is NO!
Please consider all your options. Perhaps you could rent a room in your house for $500 a month. Could you rent your home and downsize to an apartment? Have you explored all refinancing options? If your lender agrees, you can renegotiate the interest rate, the number of payments and even the balance due. Talk with your lender about obtaining permission to sell the house for less than the balance due on the mortgage in a short sale. Talk with a lawyer about bankruptcy. Please do not walk away. Here's three reasons why.
Even though the Whitehouse officially rejected a foreclosure moratorium on October 12, 2010, that is not a "green light" to have your home foreclosed on. This is an election year and, as we've seen so far, a foreclosure moratorium is still a big issue in battleground states.
And remember that on June 24, 2010 Fannie Mae amended policy "to encourage borrowers to work with their servicers and pursue alternatives to foreclosure." And by "encourage" they meant punish defaulting borrowers who walked away and did not have that capacity to pay or did not complete a work-out alternative in good faith with their lender.
Punish how? By making the borrower ineligible for a new Fannie Mae loan for seven years starting on the foreclosure date.
Now that this policy is in place, I'm willing to bet it will become more stringent to encourage even more people to pursure foreclosure alternatives.
Lastly, Georgia is a judicial foreclosure state and deficiency judgments are allowed. This means that if you walk away a lender can sue you for the difference between what you owe on the house and what it is worth. And this could occur years down the road after you've gotten back on your feet.
Go over your budget carefully and do your research. Walking away seems easy, but in the long run it definitely is not.
http://www.fanniemae.com/newsreleases/2010/5071.jhtml?p=Media&s=News+Releases&searchid=1287691844653
My Selling Savannah Now newsletter, which is currently more read than my website, generated a reader question:
"Joseph, my home is valued far less than what I paid for it and I can't afford my mortgage payments. I am tired of struggling; should I just walk away?"
Dear Reader, The answer is NO!
Please consider all your options. Perhaps you could rent a room in your house for $500 a month. Could you rent your home and downsize to an apartment? Have you explored all refinancing options? If your lender agrees, you can renegotiate the interest rate, the number of payments and even the balance due. Talk with your lender about obtaining permission to sell the house for less than the balance due on the mortgage in a short sale. Talk with a lawyer about bankruptcy. Please do not walk away. Here's three reasons why.
Even though the Whitehouse officially rejected a foreclosure moratorium on October 12, 2010, that is not a "green light" to have your home foreclosed on. This is an election year and, as we've seen so far, a foreclosure moratorium is still a big issue in battleground states.
And remember that on June 24, 2010 Fannie Mae amended policy "to encourage borrowers to work with their servicers and pursue alternatives to foreclosure." And by "encourage" they meant punish defaulting borrowers who walked away and did not have that capacity to pay or did not complete a work-out alternative in good faith with their lender.
Punish how? By making the borrower ineligible for a new Fannie Mae loan for seven years starting on the foreclosure date.
Now that this policy is in place, I'm willing to bet it will become more stringent to encourage even more people to pursure foreclosure alternatives.
Lastly, Georgia is a judicial foreclosure state and deficiency judgments are allowed. This means that if you walk away a lender can sue you for the difference between what you owe on the house and what it is worth. And this could occur years down the road after you've gotten back on your feet.
Go over your budget carefully and do your research. Walking away seems easy, but in the long run it definitely is not.
http://www.fanniemae.com/newsreleases/2010/5071.jhtml?p=Media&s=News+Releases&searchid=1287691844653
What should I know about buying a foreclosed home?
(Originally published Oct. 2010)
Virtually every potential buyer that contacts my office asks about our Savannah area foreclosure listings.
We've all the heard or read the stories about buyers who bought a $120,000 home from a desparate bank for $70,000. Or buyers who found a distressed seller who sold her house at a fraction of what it was worth.
Unfortunately, most of these callers are very excited about buying a foreclosure, but have no idea what they are getting into. There are advantages and disadvantages to buying a foreclosed home. Here are some general tips anyone can follow if they want to purchase a home in forclosure or in a short sale:
See the house in person. Don't rely on a low price and internet pictures.
Conduct a title search. Find out whether it has a second mortgage or a lien on it.
Get an up-to-date inspection. Conditions change and older inspections probably no longer apply.
Budget for repairs and renovations. Chances are the longer the house has been vacant, the more problems there may be.
Study the neighborhood. Is the house in a crime area or surrounded by other foreclosures?
Get expert help. Work with a real estate agent who is experienced in foreclosures.
If you have additional questions, or need capable and trustworthy representation, please call me at 912-352-1222.
Virtually every potential buyer that contacts my office asks about our Savannah area foreclosure listings.
We've all the heard or read the stories about buyers who bought a $120,000 home from a desparate bank for $70,000. Or buyers who found a distressed seller who sold her house at a fraction of what it was worth.
Unfortunately, most of these callers are very excited about buying a foreclosure, but have no idea what they are getting into. There are advantages and disadvantages to buying a foreclosed home. Here are some general tips anyone can follow if they want to purchase a home in forclosure or in a short sale:
See the house in person. Don't rely on a low price and internet pictures.
Conduct a title search. Find out whether it has a second mortgage or a lien on it.
Get an up-to-date inspection. Conditions change and older inspections probably no longer apply.
Budget for repairs and renovations. Chances are the longer the house has been vacant, the more problems there may be.
Study the neighborhood. Is the house in a crime area or surrounded by other foreclosures?
Get expert help. Work with a real estate agent who is experienced in foreclosures.
If you have additional questions, or need capable and trustworthy representation, please call me at 912-352-1222.
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