If enacted, the legislation would have ended all mortgage lending in the state because the higher valuations shown in appraisal reports would not reflect marketplace realities. Moreover, the legislation would have required licensed appraisers to violate both professional standards and federal law.

Introduced by 13 members of the House of Delegates, the legislation, HB 1309, provided that “in appraising a residential property, the licensed real estate appraiser or certified real estate appraiser shall use comparable sales only for an arms–length transaction in which the buyer and seller are not related in any way and are not entering into the transaction under duress or unusual circumstances, such as a foreclosure sale or short sale.”

So what’s wrong with this? Two things:

First, by excluding short sales and foreclosures appraised values would suddenly increase. This may seem like good news for sellers, but if you were a buyer would you pay full price for a property with an inflated value, say a house with a foreclosure across the street? No less important, if you were a lender would you make a loan based on a souped-up appraisal?

Second, according to the Appraisal Institute, “if these bills were enacted into law, appraisers would be put in the difficult position of having to choose which law to violate. Appraisers are required to adhere to comply with the Uniform Standards of Professional Appraisal Practice in federally related transactions. The standard mandates that appraisers ‘must analyze such comparables sales as are available.’ Further, the standard cannot be voided by a state or local government.”

When presented to the Maryland House Economic Matters Committee the non-partisan vote was 21 against and none in favor — a vote which included three of the original sponsors.

Huh? Why would sponsors vote against their own proposed legislation?

It’s a common practice in legislatures — including on Capitol Hill — for bills to be introduced as a courtesy to constituents (and lobbyists). In theory this means that proposed laws get a chance for enactment, in practice such bills tend to quickly die.

As to Maryland, the House Economic Matters Committee rejected the appraisal proposal with an unfavorable report, a cute expression meaning not now, not ever. Given that similar legislation has been introduced in other states, one hopes that the fate of such proposed laws is equally quick, decisive and non-partisan.

Maryland Rejects Foreclosure-Free Appraisals — What About Your State? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: appraisal, Appraisal Institute, appraiser, foreclosure, Law, legislation, Maryland, sale, short, short sale, Valuation

But for those with real estate the load is made lighter by tax rules which encourage the ownership of homes and investment property. Such rules are not only good for homeowners, they’re also good for the country: About 20 percent of all economic activity nationwide is related to real estate, so policies which encourage real estate activity help everyone.

It seems that almost every year changes to the tax code require the production of new forms and a re-education process. That said, the real estate basics remain in place and they’re good news for buyers, sellers, borrowers and owners.

Mortgage interest is generally deductible.

The IRS says there are three categories of deductible home mortgage interest:

1. Mortgages you took out on or before October 13, 1987 (called grandfathered debt).
2. Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2005 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).
3. Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2005 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).

Substantial profits can be sheltered when a prime residence is sold.

When a prime residence is sold, up to $500,000 in profits can be sheltered from federal taxes if married, $250,000 if single, providing the home has been used as a prime residence for two of the past five years. Generally this deduction cannot be used more than once every two years, according to the IRS.

There are also provisions which may be helpful to individuals who must sell a prime residence in less than two years. Under the 2004

safe harbor rules, individuals may be able to get some capital gains relief under certain circumstances, such as being forced to move because a job has been relocated at least 50 miles or a home that must be sold because of multiple births resulting from the same pregnancy.

Also, individuals in the Armed Forces and the Foreign Service may be entitled to special consideration under the Military Family Tax Relief Act of 2003 (MFTRA). For instance, you may have longer to take a capital gains deduction or to amend a tax return. There are other provisions under MFTRA that also may be helpful, so check with a tax professional for specifics.

Lastly, please see the information below regarding the new tax credit of up to $6,500 which is available to certain owners who obtain a contract to buy their current residence before April 30, 2010 and close before June 30, 2010.

Points may be deducible by both buyers and sellers.

Picture a situation where a home is sold for $500,000 and the owner — to help close the sale — offers to pay 1 point for the buyer. If the property was financed with a $350,000 mortgage, a point would be worth $3,500. According to the IRS, “the seller cannot deduct these fees as interest. But they are a selling expense that reduces the amount realized by the seller.”

Interestingly, in this situation the buyer can also deduct the points when the home is sold.

“The buyer,” says the IRS, “reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them.”

In effect, the seller gets to write-off the $3,500 cost by reducing any profit from the sale. The buyer essentially lowers the purchase price of the property when the home is sold at some point in the future — thus increasing the size of any profit. However, since up to $500,000 in sale profits may be untaxed, most buyers will effectively never pay a tax on the seller’s contribution for points.

If a prime residence is refinanced then the deal with points is different: The expense of a point must deducted over the life of the loan. If the home is sold before the loan term ends, then any cost not deducted for points can be used to reduce owner’s profit from the sale.

Home offices may be deductible.

If a portion of your home is used regularly and exclusively as your principal place of business or for the convenience of your employer it may be possible to write off a portion of such costs as mortgage interest, property taxes and utilities. There are a number of tests which must be met to take this deduction, see IRS Publication 587, Business Use of Your Home for details.

In some cases there may be tax advantages associated with not deducting your home office in the year or two before you move. Speak with a tax professional for specifics.

Mortgage insurance premiums may be deductible.

Mortgage insurance premiums should be deductible. The catch? Not all premiums are deductible by all borrowers. In general, the rules look like this:

• The deduction applies to loans made after January 1st, 2007.
• The deduction applies to both private mortgage insurance (MI) as well as mortgage insurance through the Federal Housing Administration (FHA), the Veterans Department (VA) and the Rural Housing Administration.
• The deduction applies to acquisition indebtedness, meaning debt used to acquire a home.
• If you refinance remaining “acquisition indebtedness” then you can write off mortgage insurance on the new debt.
• You can take the deduction if you’re married, file jointly and have a gross adjusted income of $100,000 or less. If you’re single or married and filing separately the income limit is $50,000.
• The deduction phases out once income limits are passed. For married couples, the deduction is reduced by 10 percent for each $1,000 in income over $100,000. This means there is no deduction for incomes above $110,000. For singles and those married and filing separately, the deduction is reduced by 10 percent for each $500 in additional income — this means there is no deduction above $55,000.
• The mortgage premium write-off begins January 1, 2007 and is scheduled to end December 31st, 2010. However, the program is likely to be extended.
• Speak with a tax professional for specifics.

Natural Disasters

The Katrina Emergency Tax Relief Act of 2005 provides extensive tax benefits and assistance to those who were victims of hurricanes Katrina, Rita and Wilma. For details, go to the IRS Katrina relief page or call 1-866-562-5227.

If you have been in a natural disaster — a flood, hurricane, tornado, etc., contact your local congressional office to see if special tax help is available. Links to congressional offices can be found by pressing here.

Mortgage Forgiveness Act

Traditionally if you do not pay a mortgage in full any money not paid is regarded as “imputed” income — income which is taxable. However, with the passage of the Mortgage Forgiveness Debt Relief Act of 2007, a bill sponsored by Rep. Charles Rangel (D-NY), if you can negotiate a partial pay-off with a lender, the amount forgiven will not be taxed by the federal government.

This legislation makes sense because people who have lost their homes, been foreclosed or gone bankrupt have no money to pay. However, the maximum write-off is limited to forgiveness worth no more than $2 million (not a problem for most folks) and — more importantly — the rule applies only to a principal residence.

Some questions to ask: When does this law end? Are home equity loans covered? What about state rules?

$8,000 Tax Credit For First Time Buyers Extended Until April 30, 2010

Under the FHA reform package passed by the Congress during the summer of 2008, first-time home buyers could be entitled to a tax credit equal to 10 percent of the purchase price of the residence. This credit is limited to $7,500 for married couples and single taxpayers but can be no more than $3,750 for married individuals filing separately.

Since most homes are valued at more than $75,000 the credit will likely be used up with the purchase of a home or condo. The property must be occupied after April 9, 2008 but before July 1, 2009 to qualify. Also, a “first-time” buyer is defined as someone who has not held title to real estate for at least three years. The credit phases out for married couples earning above $150,000 a year and for singles earning more than $75,000.

The catch.

The $7,500 is a credit against taxes due to Uncle Sam. If you owe $10,000 to the IRS you can deduct up to $7,500. But, when you sell the property the $7,500 must be repaid over 15 years — that’s just $500 a year at some point in the future.

Okay, it’s really a $7,500 loan — without interest and when you really need it.

2009 First-Time Homebuyer Credit (Part 1)

In 2009 the deal changed. Under the American Recovery and Reinvestment Act of 2009 the credit amount was raised to $8,000 and NO repayment is required if a first-time homebuyer purchases a residence before December 1, 2009. There is still an income phase out and buyers must own their homes for at least three years.

2009 First-Time Homebuyer Credit (Part 2)

In November 2009 the deadline for the first-time homebuyer credit was extended under the Worker, Homeownership, and Business Assistance Act of 2009 from December 1, 2009 to include contracts made before April 30, 2010 and closed before June 30th.

Also, the income cap to get the full credit was raised from $75,000 if single or $150,000 if married to $125,000 for singles and $225,000 for joint filers. Above the $125,000/$225,000 levels the credit phases out to nothing at $145,000 for singles and $245,000 for couples.

New Credit for Existing Home Sellers

The November 2009 legislation also created a new tax credit for existing home sellers. In basic terms, if you have owned your home for five consecutive years out of the last eight you can get a tax credit for as much as $6,500. The contract to sell your replacement residence must be signed before April 30, 2010 and the deal must be closed before June 30, 2010.

For specifics regarding the November 2009 changes, speak with a tax professional and get a copy of IRS Form 5405. Also, see the IRS first-time homebuyer site for details regarding the new legislation.

Investment real estate can generate substantial write-offs.

If you own rental property you must seek a fair market rental for your property. You may generally deduct mortgage interest, property taxes, repair costs, management by an outside party, depreciation, advertising, insurance, utilities, legal services and other expenses.

It’s possible with rental properties to have both a positive cashflow and a loss for tax purposes. However, the ability to use real estate losses to reduce overall taxes may be phased out as income rises above $100,000.

If a rental involves relatives special rules and restrictions may apply. Check with a tax pro for details.

A 1031 exchange may allow investors to defer all capital gains taxes.

With a 1031 transaction, investment property is exchanged for “like” real estate. The basic requirements are that within 45 days after the “relinquished” property has been sold, a “replacement” property must be identified. The identified replacement property must then be acquired within 180 days after the sale of the relinquished property.

What’s important about a 1031 exchange is that the capital gains tax on the relinquished property is deferred — but it does not disappear. What really happens is that the basis for the new property (the “replacement property”) is reduced by the adjusted value of the “relinquished property” (the old property).

A 1031 exchange is complex and requires the services of a “qualified intermediary.” Among other tasks, a qualified intermediary holds the money from the sale of the relinquished property and applies it to the purchase of the replacement real estate. This must be done because under the rules for 1031 exchanges, the seller of a relinquished property cannot touch money from the sale — it must be held by the qualified intermediary.

Accounting for a 1031 exchange is also complex. Essentially there is a need to figure out the sale value of the relinquished property, add back depreciation and account for financing. Ed Horan, a well-known exchange authority and the author of How To Do a Like Kind Exchange of Real Estate, has posted a free 13-page exchanging guide with an accounting worksheet that’s well worth reviewing before meeting with a tax pro.

Death of a Spouse

The capital gains write-off for the sale of a home is $500,000 if married and $250,000 if single. But what happens if a spouse dies?

For years the rule has been that if the couple’s home was not sold by December 31, 2007 then the surviving spouse would be treated as a single home seller. In other words, the maximum write-off would go from $500,000 to $250,000.

There is a certain logic to this approach — and also a certain cruelty. If a spouse dies on November 30th the surviving spouse would have about four weeks to sell the home. This hardly seems right but now the rule has been changed.

Under new legislation passed by Congress, after December 31, 2007 surviving spouses will now have two years from the date of passing to sell the property and still qualify for the $500,000 write-off.

Gifts

For 2009 you can give someone as much as $13,000 per year, tax free. This is up from $12,000 in 2008. For gift information from the IRS, press here.

Sources and Publications

You can be certain that the information presented here is not a substitute for professional advice. As always with taxes, nothing is ever simple or easy. Speak with a qualified tax professional for specific advice — an enrolled agent, a CPA or an attorney who specializes in tax issues.

Also, the IRS itself has excellent information at its website, www.irs.gov, by phone at 1-800-829-1040 and with specialized publications such as those below:

• Publication 523, Selling Your Home
• Publication 527, Residential Rental Property
• Publication 530, Tax Information for First-Time Homeowners
• Publication 535, Business Expenses
• Publication 587, Business Use of Your Home
• Publication 936, Home Mortgage Interest Deduction
• Publication 946, How To Depreciate Property

A Basic Guide To Real Estate, Mortgages & Taxes is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Total state existing-home sales, including single-family and condo, rose 3.8 percent to a seasonally adjusted annual rate of 4.76 million units in the second quarter from 4.58 million units in the first quarter, but remain 2.9 percent below the 4.90 million-unit pace in the second quarter of 2008.

Thirty-nine states experienced sales increases from the first quarter, and nine states were higher than a year ago; the District of Columbia showed both quarterly and annual rises.

Lawrence Yun, NAR chief economist, said the sales gain appears to be sustainable.

“With low interest rates, lower home prices and a first-time buyer tax credit, we’ve been seeing healthy increases in home sales, which are a hopeful sign for the economy,– he said. “There have been sustained sales gains in Arizona, Nevada and Florida, as well as diverse areas such as Maryland, the District of Columbia and Nebraska. More recently, we’ve seen strong double-digit gains in Idaho, Utah, New Mexico, Washington, Hawaii, New York, New Jersey, Maine, Vermont, Wisconsin, Indiana, South Dakota and Montana.”

Yun explained housing’s impact on the overall economy. “Given the need for
related goods and services, each home sale pumps an additional $63,000 into the economy — that’s how the housing engine traditionally pulls us out of recession. In addition, sales are drawing down inventory and that will help stabilize home values, which in turn will lessen foreclosure pressure and boost credit availability for other sectors of the economy.”

Lower Prices

During the second quarter, 129 out of 155 metropolitan statistical areas reported lower median existing single-family home prices in comparison with the second quarter of 2008, while 26 areas had price gains.

Distressed sales — foreclosures and short sales — accounted for 36 percent of transactions in the second quarter, which continued to weigh down median home prices because they typically are sold at a 15 to 20 percent discount; first-time buyers accounted for one-third of transactions. The national median existing single-family price was $174,100, which is 15.6 percent below the second quarter of 2008. The median is where half sold for more and half sold for less.

Real Estate: Second Quarter Sales Rise, Prices Fall is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: 2009, distressed, Foreclosures, prices, quarter, Realtors, sale, second, unit

But for those with real estate the load is made lighter by tax rules which encourage the ownership of homes and investment property. Such rules are not only good for homeowners, they’re also good for the country: About 20 percent of all economic activity nationwide is related to real estate, so policies which encourage real estate activity help everyone.

It seems that almost every year changes to the tax code require the production of new forms and a re-education process. That said, the real estate basics remain in place and they’re good news for buyers, sellers, borrowers and owners.

Mortgage interest is generally deductible.

The IRS says there are three categories of deductible home mortgage interest:

1. Mortgages you took out on or before October 13, 1987 (called grandfathered debt).
2. Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2005 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).
3. Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2005 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).

Substantial profits can be sheltered when a prime residence is sold.

When a prime residence is sold, up to $500,000 in profits can be sheltered from federal taxes if married, $250,000 if single, providing the home has been used as a prime residence for two of the past five years. Generally this deduction cannot be used more than once every two years, according to the IRS.

There are also provisions which may be helpful to individuals who must sell a prime residence in less than two years. Under the 2004
safe harbor rules, individuals may be able to get some capital gains relief under certain circumstances, such as being forced to move because a job has been relocated at least 50 miles or a home that must be sold because of multiple births resulting from the same pregnancy.

Also, individuals in the Armed Forces and the Foreign Service may be entitled to special consideration under the Military Family Tax Relief Act of 2003 (MFTRA). For instance, you may have longer to take a capital gains deduction or to amend a tax return. There are other provisions under MFTRA that also may be helpful, so check with a tax professional for specifics.

Points may be deducible by both buyers and sellers.

Picture a situation where a home is sold for $500,000 and the owner — to help close the sale — offers to pay 1 point for the buyer. If the property was financed with a $350,000 mortgage, a point would be worth $3,500. According to the IRS, “the seller cannot deduct these fees as interest. But they are a selling expense that reduces the amount realized by the seller.”

Interestingly, in this situation the buyer can also deduct the points when the home is sold.

“The buyer,” says the IRS, “reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them.”

In effect, the seller gets to write-off the $3,500 cost by reducing any profit from the sale. The buyer essentially lowers the purchase price of the property when the home is sold at some point in the future — thus increasing the size of any profit. However, since up to $500,000 in sale profits may be untaxed, most buyers will effectively never pay a tax on the seller’s contribution for points.

If a prime residence is refinanced then the deal with points is different: The expense of a point must deducted over the life of the loan. If the home is sold before the loan term ends, then any cost not deducted for points can be used to reduce owner’s profit from the sale.

Home offices may be deductible.

If a portion of your home is used regularly and exclusively as your principal place of business or for the convenience of your employer it may be possible to write off a portion of such costs as mortgage interest, property taxes and utilities. There are a number of tests which must be met to take this deduction, see IRS Publication 587, Business Use of Your Home for details.

In some cases there may be tax advantages associated with not deducting your home office in the year or two before you move. Speak with a tax professional for specifics.

Mortgage insurance premiums may be deductible.

Mortgage insurance premiums should be deductible. The catch? Not all premiums are deductible by all borrowers. In general, the rules look like this:

• The deduction applies to loans made after January 1st, 2007.
• The deduction applies to both private mortgage insurance (MI) as well as mortgage insurance through the Federal Housing Administration (FHA), the Veterans Department (VA) and the Rural Housing Administration.
• The deduction applies to acquisition indebtedness, meaning debt used to acquire a home.
• If you refinance remaining “acquisition indebtedness” then you can write off mortgage insurance on the new debt.
• You can take the deduction if you’re married, file jointly and have a gross adjusted income of $100,000 or less. If you’re single or married and filing separately the income limit is $50,000.
• The deduction phases out once income limits are passed. For married couples, the deduction is reduced by 10 percent for each $1,000 in income over $100,000. This means there is no deduction for incomes above $110,000. For singles and those married and filing separately, the deduction is reduced by 10 percent for each $500 in additional income — this means there is no deduction above $55,000.
• The mortgage premium write-off begins January 1, 2007 and is scheduled to end December 31st, 2010. However, the program is likely to be extended.
• Speak with a tax professional for specifics.

Natural Disasters

The Katrina Emergency Tax Relief Act of 2005 provides extensive tax benefits and assistance to those who were victims of hurricanes Katrina, Rita and Wilma. For details, go to the IRS Katrina relief page or call 1-866-562-5227.

If you have been in a natural disaster — a flood, hurricane, tornado, etc., contact your local congressional office to see if special tax help is available. Links to congressional offices can be found by pressing here.

Mortgage Forgiveness Act

Traditionally if you do not pay a mortgage in full any money not paid is regarded as “imputed” income — income which is taxable. However, with the passage of the Mortgage Forgiveness Debt Relief Act of 2007, a bill sponsored by Rep. Charles Rangel (D-NY), if you can negotiate a partial pay-off with a lender, the amount forgiven will not be taxed by the federal government.

This legislation makes sense because people who have lost their homes, been foreclosed or gone bankrupt have no money to pay. However, the maximum write-off is limited to forgiveness worth no more than $2 million (not a problem for most folks) and — more importantly — the rule applies only to a principal residence.

Some questions to ask: When does this law end? Are home equity loans covered? What about state rules?

$8,000 Tax Credit For First Time Buyers

Under the FHA reform package passed by the Congress during the summer of 2008, first-time home buyers may be entitled to a tax credit equal to 10 percent of the purchase price of the residence. This credit is limited to $7,500 for married couples and single taxpayers but can be no more than $3,750 for married individuals filing separately.

Since most homes are valued at more than $75,000 the credit will likely be used up with the purchase of a home or condo. The property must be occupied after April 9, 2008 but before July 1, 2009 to qualify. Also, a “first-time” buyer is defined as someone who has not held title to real estate for at least three years. The credit phases out for married couples earning above $150,000 a year and for singles earning more than $75,000.

The catch.

The $7,500 is a credit against taxes due to Uncle Sam. If you owe $10,000 to the IRS you can deduct up to $7,500. But, when you sell the property the $7,500 must be repaid over 15 years — that’s just $500 a year at some point in the future.

Okay, it’s really a $7,500 loan — without interest and when you really need it.

In 2009 the deal changed. Under the American Recovery and Reinvestment Act of 2009 the credit amount was raised to $8,000 and NO repayment is required if a first-time homebuyer purchases a residence before December 1, 2009. There is still an income phase out and buyers must own their homes for at least three years.

For specifics, speak with a tax professional before you go house hunting.

Investment real estate can generate substantial write-offs.

If you own rental property you must seek a fair market rental for your property. You may generally deduct mortgage interest, property taxes, repair costs, management by an outside party, depreciation, advertising, insurance, utilities, legal services and other expenses.

It’s possible with rental properties to have both a positive cashflow and a loss for tax purposes. However, the ability to use real estate losses to reduce overall taxes may be phased out as income rises above $100,000.

If a rental involves relatives special rules and restrictions may apply. Check with a tax pro for details.

A 1031 exchange may allow investors to defer all capital gains taxes.

With a 1031 transaction, investment property is exchanged for “like” real estate. The basic requirements are that within 45 days after the “relinquished” property has been sold, a “replacement” property must be identified. The identified replacement property must then be acquired within 180 days after the sale of the relinquished property.

What’s important about a 1031 exchange is that the capital gains tax on the relinquished property is deferred — but it does not disappear. What really happens is that the basis for the new property (the “replacement property”) is reduced by the adjusted value of the “relinquished property” (the old property).

A 1031 exchange is complex and requires the services of a “qualified intermediary.” Among other tasks, a qualified intermediary holds the money from the sale of the relinquished property and applies it to the purchase of the replacement real estate. This must be done because under the rules for 1031 exchanges, the seller of a relinquished property cannot touch money from the sale — it must be held by the qualified intermediary.

Accounting for a 1031 exchange is also complex. Essentially there is a need to figure out the sale value of the relinquished property, add back depreciation and account for financing. Ed Horan, a well-known exchange authority and the author of How To Do a Like Kind Exchange of Real Estate, has posted a free 13-page exchanging guide with an accounting worksheet that’s well worth reviewing before meeting with a tax pro.

Death of a Spouse

The capital gains write-off for the sale of a home is $500,000 if married and $250,000 if single. But what happens if a spouse dies?

For years the rule has been that if the couple’s home was not sold by December 31, 2007 then the surviving spouse would be treated as a single home seller. In other words, the maximum write-off would go from $500,000 to $250,000.

There is a certain logic to this approach — and also a certain cruelty. If a spouse dies on November 30th the surviving spouse would have about four weeks to sell the home. This hardly seems right but now the rule has been changed.

Under new legislation passed by Congress, after December 31, 2007 surviving spouses will now have two years from the date of passing to sell the property and still qualify for the $500,000 write-off.

Gifts

For 2009 you can give someone as much as $13,000 per year, tax free. This is up from $12,000 in 2008. For gift information from the IRS, press here.

Sources and Publications

You can be certain that the information presented here is not a substitute for professional advice. As always with taxes, nothing is ever simple or easy. Speak with a qualified tax professional for specific advice — an enrolled agent, a CPA or an attorney who specializes in tax issues.

Also, the IRS itself has excellent information at its website, www.irs.gov, by phone at 1-800-829-1040 and with specialized publications such as those below:

• Publication 523, Selling Your Home
• Publication 527, Residential Rental Property
• Publication 530, Tax Information for First-Time Homeowners
• Publication 535, Business Expenses
• Publication 587, Business Use of Your Home
• Publication 936, Home Mortgage Interest Deduction
• Publication 946, How To Depreciate Property

2009 Real Estate, Mortgages & Taxes is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: 2008, 2009, Buyers, capital gains, credit, interest, investors, limits, points, sale, sell, Sellers, shelter, tax, taxes

So you might think: Foreclosure. That will never happen to me. No way. But lurking in millions of mailboxes each month is a financial time bomb, a threat to homeownership never before seen in this country.

For the past few years the nation has been flooded with forms of financing which allow buyers to purchase homes that were once unaffordable. The essential deal is this: You buy now, pay less than you should each month and then within five years sell at a big profit or refinance.

Truth is, it’s been a great ride. Many people have followed the formula and made a ton of money. But like musical chairs, you just know that a bunch of people will be caught in the wrong place at the wrong time.

In a growing number of metropolitan areas, the wrong time is now. Just look at what’s happened to home prices during the past few years.

Okay, so why are falling metro prices a problem? If you’re not selling and you’re not refinancing, who cares?

Falling prices are not an instant problem for those with fixed-rate loans. But for millions of borrowers with the latest forms of low-ball financing, falling prices can be financially lethal.

Imagine that you bought a property a few years ago. Since values were going up it made sense to buy the biggest home you could afford and to buy that big house you got a $400,000 interest-only loan at 5.6 percent, a mortgage amount that covered 100% of the purchase price.

For the first years the loan was wonderful: Monthly payments were $1,867 plus taxes and insurance. But after five years the loan automatically converted to a one-year ARM. The 1-year rate that was originally at 3.60 percent rose to 5.45 percent. Combine the index with a 2.0 percent “margin” and your new rate for the loan would be 7.45 percent.

After five years not only does the rate go up, the mortgage bill now includes the expense of monthly principal payments to reduce the loan balance. The monthly cost for principal and interest? It’s now $2,943. Taxes and insurance are again extra. < !- http://www.fanniemae.com/tools/libor/2006.jhtml __ http://www.fanniemae.com/tools/libor/2001.jhtml-->

“Those low-payment loans that looked so good a few years ago are going into their second phase,” says Jim Saccacio, Chairman and CEO at RealtyTrac.com. “Each day more and more borrowers are finding that the low ‘start’ payment is gone and that steeper, fully-amortizing payments have now kicked in. At the same time, homes that were once easy to sell are now tough to market. It’s a brutal combination and what we’re seeing is likely to get worse.”

The instant solution to high monthly costs is to sell the property. During the past five years many areas have seen huge price increases. The odds are good in most markets that a seller with several years of ownership at this can readily sell, often with a significant profit.

But as the market evolves the odds may become less attractive. Not all markets have seen double-digit growth. In such areas price stagnation or actual declines can lead to huge inventory increases. To sell in down markets homes owners will be forced to offer not only price discounts but other incentives such as “seller contributions” to help buyers at closing, new carpets, new kitchens, moving allowances, etc.

But selling also may not be an option. Not only can a sale in a down market produce a bankrupting loss, but losses on the sale of a personal residence are not tax deductible.

What can you do to avoid being a foreclosure statistic, to not get caught in the impossible position of loan costs that are too high and market values that are too low?

“Act now,” says RealtyTrac’s Saccacio. “Don’t wait for the hammer to fall. If you see a mortgage problem looming in the next year or so, refinance to a long-term, fixed-rate loan before your credit report shows any late or missed payments. Take a careful look at traditional loans with liberal qualification standards such as FHA or VA financing. Speak with your lender about a loan modification and see if your adjustable-rate mortgage has a conversion feature, a right to switch to a fixed-rate within the first few years of the loan term. Because a conversion is a loan modification and not new financing, conversion can be quick and cheap.”

If you find a situation where the property cannot be reasonably refinanced, if unaffordable monthly costs are certain, then it makes sense to sell now and move to a less-expensive home with reduced debt, lower monthly costs and fixed-rate financing. Moving is a way to avoid foreclosure and dodge bankruptcy — two events no property owner should experience.

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Published originally by RealtyTrac.com during September 2006 and posted with permission.

Will You Become A Foreclosure Statistic? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Answer: The matter of “as is” sales has evolved during the past decade or so. The best advice used to be “caveat emptor” –- buyer beware, but now it is both buyer and seller use care.

The issue here is that you can plainly sell a home on an “as is” basis. At the same, many would argue that “as is” does not mean a seller has a license to simply sell a damaged property to an unwary buyer. In general, owners must disclose what they know about a property even in an “as is” sale situation.

Given the current trend, sellers wishing to sell on an “as is” basis should take several steps.

First, require the buyer to obtain an independent home inspection with an inspector selected, hired and paid for by the purchaser. In exchange for the right of the inspector to enter the property, require the buyer to give you a copy of the completed inspection for your records. Keep this document with your closing papers.

Second, “as is” requirements vary by state. Depending on the state, either a real estate broker working with language from an attorney or an attorney directly should write a proper “as is” clause. This clause should be written to “survive” closing (have standing after the sale is completed and the matter goes to court).

Third, properly and fully complete any required seller disclosure form to the best of your ability. Review with a broker or attorney – this document should be seen as relating to the “as is” agreement.

Fourth, if you are not living in the property, see if it can be sold as “commercial” real estate. An attorney can explain if this is possible and the advantages which might be available in a given jurisdiction.

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Syndicated originally by Content That Works and posted with permission.

Can I Sell “As Is” A House I Inherited? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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These changes follow record year after record year, a pace that’s not sustainable. The catch is that a softer marketplace means sellers will have to fight harder to get top prices and quick sales. Here are 10 ways to get more out of your local marketplace.

1. Go for the junk — and get rid of it. A house with less stuff looks bigger and roomier. If what you want to throw out can have value to others, see if you can help by donating goods to local charities.

2. Price within reason. Trying to sell a home for $700,000 when like homes go for $525,000 is a non-starter. The days of “testing” the market with huge price increases is finished in many areas. Overprice and you won’t be competitive.

3. Use the best local broker you can find. Experience, connections and reputation can be a real edge when marketing a property.

4. Require your broker to have a marketing plan that makes sense for you and your property. The technique that sells one property may not be appropriate for another, so find the approach that’s right for you.

5. If the home doesn’t sell within a reasonable time period, think about changing the deal rather than lowering the price. In other words, rather than cutting the price from $500,000 to $480,000, instead keep the $500,000 price and offer a 2 percent “seller contribution” to help a buyer pay for closing costs. This approach is cheaper ($10,000 in closing cost help rather than a $20,000 price reduction) plus it gets to the real need of many buyers, closing assistance.

6. Have a home equity line of credit in place — even if you don’t expect to sell for several years. This way you can have funds available if you want to buy a replacement home while the current property is being sold. Just be aware of the risk — if your current home does not sell in a reasonable period you could face lots of mortgage payments.

7. Make sure everything works — and nothing leaks. Expect buyers to ask for a home inspection and be prepared to make reasonable repairs if requested. Remember that it may be better to upgrade an electrical service box than to look for a new buyer.

8. Find out what buyers thought after a showing or open house. Don’t take negative comments personally. Look for ideas that can help you make a better impression with the next prospect.

9. Beware of buyers who want you to take back financing. At a time when loans with little or nothing down are available from every lender, don’t go into the banking business and take back a loan when there is less risk to you with an outright sale.

10. Don’t get upset with small inconveniences. If a prospect wants to see a home with little notice or at an odd hour, don’t worry about it. It’s better to show the property than to have a home which is both undisturbed and unsold.

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Published originally by Realty Times on March 21, 2006 and posted with permission.

10 Ways To Make Your Home Sell Faster In A Tough Market is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: appeal, curb, home, mortgage, prep, real estate, sale, show, showcase

For home sellers the situation is much the same: First impressions count and while you may not be able to tell a book by its cover, you’ll likely pay more for a book if the cover is inviting, alluring and attractive.?,?

If your home is for sale or soon to be for sale, in addition to a general cleaning there are 10 steps you can take to benefit from that all-important first look:?,?

• Start with the outside. Mow the law, prune bushes, remove dead branches and get rid of outdoor furniture you don\’t intend to move.?,?
• Paint the front door and lintels, or at least clean them up.?,?
• Check for leaks. A drip may not seem important, but does it suggest poor maintenance in places which can\’t be seen? Eliminate buyer worries and fix the little items which may be seen as clues relating to the general condition of the home.?,?
• Clean out closets and storage areas. Donate old clothes and furniture to local charities. This will create a sense of greater space — and mean less to move.?,?
• Have a professional service clean carpets. This is especially important if the carpets are to stay.?,?
• Caulk around tubs and sinks. New caulk invariably looks better than old caulk, and you’ll also prevent leaks.?,?
• Replace bulbs that don\’t work and use as much wattage as is appropriate for each fixture. Bright lights make homes seem, well, light and airy.
• Have a lot of books and magazines that you don\’t want? See if you can donate to a local library, hospital or charity. you’ll get both more space and maybe a write-off.
• Is there anything in the house that will surprise visitors? As an example, mirrors in poorly-lit basements can be dangerous. Look at the property from the perspective of a first-time visitor. Things which are known to you may be uncomfortable to visitors.?,?
• Clean out medicine cabinets. Remove out-of-date items. Also, if you have prescription medicines, consider removing them when buyers visit.?,?
• People have both allergies and concerns when it comes to animals. If you have a pet, make arrangements to have it elsewhere when a home is being shown.?,?
• Homes in a given location and price range battle for a common pool of buyers. Ask your broker to examine the property for specific showing tips to make your home more competitive.

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Published originally by Realty Times on October 18, 2001 and posted with permission.

A Dozen Ways To Make Your Home Show Better When Selling is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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It’s easy to understand that the value of a home will be reduced if the roof leaks or the basement floods, but matters become more complex when the issue is psychological rather than physical.

Suppose a home is in flawless physical condition, but suppose as well that it’s also been the site of a murder or a suicide. Everything works, nothing leaks or floods, but is the home as valuable as a similar property where such events have not occurred?

Some prospective buyers would plainly be discomforted by such news with the result that either they would not bid on the property or they would reduce their offers.

While the feelings of many buyers are entirely understandable, it’s also easy to see that sellers may be unfairly hurt in this process.

Suppose a home is the site of a suicide or murder. If the individual who died was a friend or relative of the owners, they no doubt feel enormous loss and perhaps wish to move. But under some state rules, when they offer their home for sale the owners must tell buyers of recent events at the home, thereby lowering its value.

The catch is that a number of states have so-called “stigmatized housing” rules which say that owners and their brokers need not disclose the events at the home related to suicides, accidental deaths, natural deaths, ghosts, or felonies. These rules are inconsistent, however, so that the disclosure requirements in one state may be vastly different than another. And many states have no rules dealing with stigmatized homes, a legal gap which offers no guidance to buyers, sellers, or brokers.

The result is that what must be said depends on where you live. A murder, for example, may have to be disclosed in one state, not disclosed in another, or disclosed today but not after several years.

Moreover, HUD has taken the position that owners and their brokers can say nothing if an owner has AIDS or has died from AIDS. The logic is that those with AIDS have a disability and are therefore a protected class under federal anti-discrimination rules.

In looking at the various guidelines which impact stigmatized homes, it’s little wonder that state rules are often divided on this issue. Stigmas relate to personal values, preferences, and perceptions, matters difficult to legislate.

If you own a property which is or may be sitgmatized, or if you are considering the purchase of such a property, be certain to first speak with knowledgeable brokers and attorneys in your state to see what disclosures, if any, are required.

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Published originally by Realty Times on May 25th 1999 and posted with permission.

Stigmatized Housing — Will Ghosts Get Your Equity? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Answer: Is this your property or is title still held by the estate? In the latter case, see what rights you have to sell and whether court approval is required before you can list or accept a purchase offer.

As to finding a broker, start with the thought that all real estate is local. Thus you want someone who successfully markets homes in the community where the property is located. Ask candidates such questions as: How many properties have you sold in the past year? On average, how long was each property on the market? What trends do you see in the local market? What was the difference between the original listing price and the final sale price? In this community, what concessions – if any – are sellers making? What repairs are needed to maximize the value of this property? How would you market the home if we list with you? Can you give us three recent references?

Can we sell our late mother-in-law’s house? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: court, death, estate, sale, sell