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The Intero Insider: Missing Out On The Tax Credit Is OK. Really.

By Gino Blefari | April 27th, 2010 0 Comments

Ah, yes. The Homebuyer Tax Credit. It ranks right up there with health care reform and Eyjafjallajökull as the most-discussed news item of 2010. The proverbial dead horse has been beaten to a fare-thee-well, yet still keeps coming back for more.

The tax credit has, I think, driven many buyers who were on the fence about whether or not to purchase a home into the marketplace. It’s been something of a boon to those who have been able to take advantage of it. If you were able to qualify, that’s a great thing. $8000 (or $6500, if you were already a homeowner) is nothing at which to stick up one’s nose.

But is it, on its own, a reason to purchase a home? Absolutely not.

Everywhere I turn, I see advertisements, blog posts, and the like reminding people that the deadline for being able to claim the tax credit is rapidly approaching. To claim it, you must, in fact, be under contract by Friday, April 30, and you must be able to settle on that contract no later than June 30, 2010. At this point, however, any potential homebuyer who hasn’t been in the trenches and actively looking for a house — and looking seriously — should bide their time. They should not, under any circumstances, rush to sign a contract on a home by Friday, simply so they can claim an $8000 credit.

Why?

Because that $8000 isn’t worth the heartache and sleepless nights that will come with making a $300,000 mistake. Because of the pressure associated with meeting this deadline, lots of people are going to dive headlong into a decision that they’re not actually ready to make.

Any REALTOR worth his or her salt will stand up and say so. A good REALTOR — one who’s really looking out for his clients’ best interests — will not urge that decisions be made on a factor that, in the long run, won’t matter all that much.

And if you miss the credit? Don’t worry. The real estate market will, most likely, adjust once the credit expires. The bustling spring sales market will start to ebb. Sellers of real estate will have to consider absorbing some of the letdown, either by conceding some closing costs or, perhaps, agreeing to helping buyers buy points on their mortgages, or agreeing to other credits that will entice buyers to sign when the time is right.

A good REALTOR will understand these things and a good REALTOR will advise his clients of those options of which they might not have been aware.

So, yes. The Homebuyer Tax Credit was nice while it lasted. But don’t fret about having missed it. It’s OK. Really.

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Intero Insider: Wait – I Still Owe What?

By Gino Blefari | April 21st, 2010 0 Comments

Each day, the news brings us tiny glimmers of hope that the economic woes that have turned the real estate market into a morass of unpalatable realities might just be behind us. Each day, however, there seem to be items served alongside those glimmers that give me pause.

These items, after making me take several deep breaths, have me advising my clients, customers, and Intero agents that patience will be the better part of valor when it comes to economic recovery.

We know that millions of Americans, and lots and lots of Californians among them, have lost their homes to foreclosure. Going through that process is more difficult than most people can possibly imagine. It’s a pride-swallowing siege that affects every aspect of your life. Once it’s done, however, it’s done and, typically, people can begin the process of rebuilding their lives.

Unless they can’t.

What if, after going through a foreclosure and having a mortgage discharged, you also have a second mortgage to pay? What then?

California is a non-recourse state. This means that any loan taken for the purpose of buying a home is discharged once a foreclosure has taken place. Debt collectors cannot pursue borrowers for loans in default that were used to purchase a home.

Loans that were taken for other purposes? Lenders can, and often do, do whatever it takes to collect what is owed.

If a second mortgage was taken and that money was used to help finance the purchase of a home, then it’s non-recourse debt. But often, banks and lenders won’t tell the borrowers that. There’s a loophole in the legal speak that governs such things that says that there’s nothing preventing the borrower from “voluntarily” repaying the debt. So lots of people who’re not under an obligation to repay find themselves on the receiving end of dunning calls and letters and struggling to make payments when and where they can.

If a second mortgage was taken and it was not used as part of a home purchase? Well, those monies are due and payable, regardless.

Whether lenders will try and collect is another matter altogether.

In California alone, almost $500 billion in home equity lines of credit (or other such loans) were taken out by homeowners. Banks are going to collect when and where they can. Sadly, a borrower’s personal net worth may be the deciding factor in their decision to pursue or not to pursue.

So, what are the options?

Well, one is to pay the debt if you’re able. If you can’t, my best advice would be to consult with an attorney to discuss your options.  You may find your attorney will tell you that a short sale would allow you to negotiate part or all of your deficiency away.  If this is the case, find a certified short sale agent within any of our offices to help guide you through the process.

There are options, but it’s best to explore them sooner, rather than later. If you have concerns relating to foreclosure or your ability to borrow money to purchase a home, please consult your Intero agent. The road to recovery is a tough one, but it can be ridden. We all just have to be patient.

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Intero Insider: Did You Hear That?

By Gino Blefari | April 13th, 2010 0 Comments

A collective sigh of relief is being issued by taxpayers who’d not only lost their homes, their dreams, and large chunks of their pride, but who were staring down tax bills that they couldn’t fathom how to pay.

It might not soothe all their wounds, but a measure passed last week by the California State Legislature will, when signed by Governor Schwarzenegger, give some much-needed breathing room to the thousands of Californians who lost their homes to foreclosure or who had to sell them in a short sale.

You see, mortgage debt that is forgiven, which happens when your mortgagor allows you to sell your home short or after a foreclosure, is taxable, both federally and at the state level. A moratorium was placed on the federal tax, but in California, a state riddled with crushing debt, there were serious questions about whether the tax would be levied.

Others affected by this measure are those who got loan modifications that lessened the amount that was owed to the mortgagor.

Assuming that the governor signs the bill, which he has said he will do, it will provide relief to upwards of 100,000 Californians through 2012, when the measure is set to expire.

Our state is certainly one that needs income, and it’s estimated that California will collect about $34 million less in taxes as a result of this bill. No matter how badly the money is needed, however, generating that income at the cost of rendering our taxpayers, quite literally, penniless is too much of a price to pay.

If you’ve been involved in a foreclosure, short sale, or have had mortgage debt forgiven, you may be eligible to claim the relief on your 2009 State and federal income tax returns.

As always, whenever you have questions relating to taxes, be sure to contact your accountant or financial planner; they’ll have the best advice and will give you the proper guidance.

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Intero Insider: Reality Check!

By Gino Blefari | April 7th, 2010 0 Comments

Each time a glimmer of positive news about the real estate market shows its face, economists, real estate professionals, and politicians alike begin to shout, “We’re on our way back up! Nothing but blue skies ahead!”

While I remain hopeful, I think assertions like this are foolhardy and irresponsible.

Anyone who lives in the State of California, or who’s considered moving here, knows that the real estate market for the past several years has been pretty grim. As quickly as California’s home values increased through 2005, they have since fallen considerably due to the economic downturn, and foreclosures have run rampant.

Recently, some improvements have been noted. In the last S&P/Case-Shiller home price index, for example, home prices in California were shown to have strong gains. In Los Angeles, prices rose 1.8% in January. There were gains in San Diego of 0.9% and in San Francisco, the gain was 0.6%.

This is terrific news, make no mistake, but I suggest that a more cautious view be taken.

Here’s why.

Historically, spring home sales (and the spring market doesn’t wait til March to begin, I assure you) are the strongest of any throughout the year. Weather improves, making it more pleasant to look at homes, and people want to be able to buy a new home, so that they can move at the end of the school year, or what-have-you.

This year, we also have the Homebuyer’s Tax Credit driving more buyers into the marketplace. Add to this the fact that mortgage rates are still at rock-bottom levels, which have been made possible, in large part due to the Federal Government’s sizable activity in mortgage-backed securities, and the market for buyers is very, very attractive.

Here’s where things get sticky.

The tax credit is set to expire in just a couple of weeks. The pressure to buy before it expires will be gone. Strike one. The Federal government is about to remove itself from the mortgage-backed securities game. Mortgage rates are going to rise. Strike two. There’s wide speculation that foreclosures are going to get worse before they get better (unfortunately). Strike three.

At Intero, we choose to stay level-headed. We choose to stay in the game that’s currently being played, not the one that may or may not come in the near future. We are hopeful that things will improve, but until they do, you need agents who are dealing with reality. You need agents who will tell you like it is. Agents who know the markets in which they work and live. Intero are those agents.

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Intero Insider: Why Would You Choose One Over The Other?

By Gino Blefari | March 31st, 2010 0 Comments

At a recent gathering of real estate professionals of which I was a part, a rather interesting question was posed.

“Do people choose an individual real estate agent, or do they choose the brokerage for whom they work?”

The ensuing discussion was exhaustive and filled with more than a little hot air, but it got me thinking. What really matters to our customers and clients? What really matters to you?

At Intero, we take the approach that everything matters. Everything is important. We are only as strong as our weakest link.

We take great care to hire only the best agents. And by “best”, I don’t just mean those who make lots of sales or who bring business to our offices. When I say “best”, I mean those agents who continually set higher standards for their work, to embrace innovation. I mean those who are willing to go the extra mile (and further, if necessary) for their clients and customers.

While many brokerages see fit to hire anyone with a pulse, we have no interest in merely filling our offices with bodies. At Intero, our agents are the ambassadors of our brand. They’re carrying our name out into the field and their actions, good or bad, polish or tarnish our brand accordingly. Their skill, caring, and expertise is a direct reflection on us and the sort of business we endeavor to run.

You might ask yourself, “If I have a great agent, why should it matter to me whom he works for?”

On the surface, that question makes sense. But scratch just below it, and it makes no sense at all. Why does it matter?

It matters because, when push comes to shove, you want someone who is backed up by resources. There are plenty of real estate brokerages who hire agents (more to the point, who collect fees from agents and do very little else) and send them on their merry way with a few yard signs, never to give them another thought. Is that the sort of company that you want representing you?

At Intero, we do things differently. We stand behind every one of our real estate professionals. We put the strongest resources and best technology behind them. We want everyone to know that Intero stands for quality, not just a stable of relatively warm bodies who’re doing the bare minimum. Our agents deserve our support, and our clients most certainly do as well.

Why this question should matter, why you should want both a great agent and a great brokerage is that while each is great individually, the strength generated by their combination is unbeatable. When you’re embarking on what is, arguably, one of the most important decisions — financial or otherwise — of your life, why would you settle for anything less?

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Intero Insider: It’s a Great Time To Buy! Or Is It?

By Gino Blefari | March 17th, 2010 0 Comments

Think back to any point in recent memory — or not all that recent, it really doesn’t matter — to conversations you’ve had with real estate agents, or ads you’ve heard about the real estate market. I can’t be certain, but I’m betting that the lion’s share of those contained some reference to that moment in time being “a great time to buy”.

And, in reality, real estate always has been a great long-term investment, hasn’t it? Ask somebody who bought real estate thirty, forty, or fifty years how they look at their investment today. I guarantee you they’ll say they wished they had bought more.

But let’s look a this a little differently for a moment – and look at the issue of “it’s a great time to buy” in a new way.

Is it a great time to buy … for you?

That’s the real question, isn’t it? Regardless of market conditions, regardless of interest rates or tax credits or anything like that, the best time to buy a home is when it’s best for you.

People tend not to look for new homes “just because”. There has to be a reason. There has to be some sort of need. If there are bonuses like rock bottom mortgage rates, or economic factors that have driven home prices to levels lower than moss, so much the better. But if you don’t have a reason to buy a home, do those factors make it a great time to buy? Probably not.

Often, we hear people say, in retrospect, “Man! I should’ve bought that house back then.” But really, would you have? If there was no reason for you to move, no real reason to buy “back then”, chances are that the idea of a home purchase wouldn’t even have been on your radar screen. Hindsight is 20/20, but none of us is a fortune teller; no one knows, in advance, what the trends in home pricing will be.

Maybe now is the best time for you to buy. If your family has expanded, if your work circumstances have changed, or if you simply want to, then yes. It’s a great time to buy.

When you decide that it’s the best time for you, make sure you arm yourself with knowledge. Make sure that you have an agent who knows your market. Make sure you have someone who’s an advocate for your needs, someone who’s looking out for your best interests. Each and every Intero agent is abreast of the latest market trends and is an expert in the communities that they serve.

So, ask yourself, “Is it a great time to buy?” Only you can answer that question definitively, but once you say “Yes!”, the team at Intero will be here to make it as great an experience as possible.

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Intero Insider: To Forgive Or Not To Forgive? That Is The Question.

By Gino Blefari | March 10th, 2010 0 Comments

Even in a “normal” year (when someone actually finds one of those, please tell me), I am bombarded each spring with questions about real estate transactions and their implications on Federal and State income taxes.

In a year in which we’re experiencing continued economic hardships, and since many of those hardships relate directly to home sales and foreclosures, I’m getting far more than usual.

Right out of the blocks, I tell them that I’m not a tax professional and that any questions that they have ought to be directed to their accountants and financial advisors. That said, I like to do all I can to help folks out, so I answer questions where I am able.

One of the most frequent questions I hear — and the one whose answer seems somewhat out of reach — pertains to short sales.

“I sold my house this year, but it was a short sale. Can the IRS or my state tax the forgiven debt?”

The answer is, “Yes. Yes, they can.” A better question is, “Will they?”

With regard to the Federal Government, the answer is “no”. In a move meant to encourage homeowners to work out alternatives to foreclosure, the Federal Government has placed a moratorium on the taxation of forgiven mortgage debt through 2012.

Many states have followed suit, but there are a great many who have not. One of the states in which the question has yet to be answered is California, a state that has been hit harder than most in this period of crisis, and also one whose economic woes far exceed that of any other.

While it may sound unfair, forgiven debt has always been treated as income and, until the Mortgage Forgiveness Debt Relief Act of 2007 was enacted, that income could (and would) be taxable.

At the time of this writing, Governor Schwarzenegger had not made a decision with regard to the state collecting taxes on forgiven debts, but in a state that is as cash-starved as California, there is a strong possibility that he’ll have no choice but to do so.

If you sold your home last year and that sale was a short sale, there are heady tax implications attached to it. It is imperative that you consult with your accountant or financial advisor, so that you can adequately prepare to meet the tax man, should he come a’calling.

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Intero Insider: It’s almost April … Do You Know Where Your Tax Credit Is?

By Gino Blefari | February 23rd, 2010 0 Comments

Over the course of the last year or so, I’ve written a lot about the Homebuyer Tax Credit. There are some faint rumblings among lobbyists and in Congress about whether it’s going to be extended yet again (I’m betting that it won’t), but for those who are already eligible, how exactly to claim the credit isn’t exactly … straightforward.

For one thing, there are two different credits with which to be concerned: the original First-Time Homebuyer Tax Credit, and the extended Homebuyer Tax Credit. Each has different rules, each has its own set of quirks and foibles.

First, let’s recap who’s eligible to claim the credits in the first place.

If you purchased a home between January 1, 2009 and November 6, 2009, you may be eligible for the Homebuyer Tax Credit, as it originally stood.

To qualify, you (the buyer) must not have owned a home for three years prior to your purchase. Your new home must be your primary residence, meaning you can’t use it for a vacation home or an investment property — you actually have to live there. The maximum allowable credit is equal to 10% of the purchase price, up to $8,000. Single buyers with incomes up to $75,000 per year or married couples with incomes of up to $150,000 are eligible.

That’s pretty clear. When it comes to the extended tax credit, things are a bit hazier.

If you purchased (or if you intend to purchase) a home between November 7, 2009 and April 30, 2010, you may qualify for the extended Homebuyer Tax Credit.

If you are a first-time homebuyer (meaning that you hadn’t owned home for at least three years prior to your purchase) OR a current homeowner who had lived in a house as a primary residence for five years in a row out of the last eight, you may qualify.

For first-time homebuyers, the maximum allowable credit is $8000. For current homeowners, the maximum credit is $6,500. As with the original credit, the buyer’s eligibility depends on the price of the home (this may not exceed $800,000) and his income. For the extended credit, income levels were increased to $125,000 for single buyers and to $225,000 for married couples. Even if your income exceeds these levels, check with your tax professional to see if you might qualify for a portion of the credit.

As long as there is a contract to purchase in place prior to April 30, 2010, and so long as that transaction is closed before July 1, 2010, buyers can claim the credit on their 2009 income tax returns.

In all cases, buyers will need IRS Form 5405, as well as a fully-executed HUD-1 statement from the property closing.

As always, be sure to consult your tax professional for any questions that you may have on matters such as these. The tax credit won’t be around forever; be sure to take advantage if you’re able!

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Intero Insider: Selling Short? Keep Track of Everything

By Gino Blefari | February 17th, 2010 0 Comments

It’s that time of year again. The Winter Holidays are behind us, we’ve cheered a new Super Bowl champion and exchanged boxes of chocolates for Valentine’s Day. That can only mean one thing: Tax Season is upon us.

When it comes to your home, there is plenty of documentation of which you need to keep track when it comes time to file your annual return. For those of you filing “standard” income tax returns, this is all fairly clear and straightforward.

With the current real estate climate, however, there are scores situations, like having lost a home to foreclosure, or staring personal bankruptcy in the face, in which many never thought they’d find themselves. Situations like these can make filing taxes a bit trickier.

There’s one circumstance in particular on which I’d like to focus today:

Short sales.

If you’ve gone through the short sale process (where you can no longer afford the payments on your home, but your lender allows you to sell the home at loss, rather than go through with foreclosure), then you know it’s long, it’s arduous, and it’s one in which things have the potential to be very murky.

When completing the reams and reams of paperwork required by your lender to complete the short sale process, it’s likely that you signed a promissory note, or other like document, granting the lender the right to take action against you to collect the deficient amount. This is pretty standard. It’s possible, though, that you also got a copy of a document with the heading 1099-C, which the lender has filed with the IRS, indicating that the unpaid portion of the loan has been canceled. This is a trigger for the IRS to assess taxes against the forgiven debt.

Wait. What?

“How is that possible?” you might ask. Good question. It doesn’t stand to reason that a lender can pursue you for unpaid debt and that the IRS can assess taxes, as well. Logic would dictate that one or the other is reasonable, but not both.

Keep copies of everything having to do with anything related to the transaction.

If you signed paperwork indicating that the lender can take collection action against you, but you’ve also received a 1099-C for the uncollected debt, you’ll have plenty of documented proof to show the IRS that you don’t owe taxes on that amount. Similarly, if there is nothing in your sale paperwork that gives the bank the right to collect the debt, nor is there any other reference to it, the 1099-C will serve as evidence should the bank, at some point, decide to take action against you.

They can’t have it both ways.

I’m not a tax professional. I’m not certified to give that sort of advice. But I can advise you to seek the counsel of a tax professional, so that negotiating the maze of tax ramifications that come with a short sale is made somewhat easier.

For additional information you can also download IRS Publication 4681 from the IRS website at www.IRS.gov

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Intero Insider: A Delicate Balance

By Gino Blefari | February 10th, 2010 0 Comments

For the past two years or so, our nation’s economy has been floundering, doing all it could to get its head above water. The real estate industry has played — and continues to play — rather a large role in how the story pans out. But contributing to successes and failures in our own industry are untold numbers of mitigating factors, from fraudulent lending and sub-prime mortgages, to over-inflated sales prices, foreclosures, tax credits, and the some of the best sales prices in recent memory. When working together properly, these things can spur wonderful upward movement.

When something is knocked even slightly askew, however, that delicate balance can be thrown into a tailspin.

There has been great news of late, of course. Many neighborhoods across the nation have seen upticks in sales prices, many listings are, once again, seeing multiple offers, and interest rates are at astonishingly low levels.

Now, though, we are holding our collective breath, as several things that have helped spur the market along are poised to come to a halt.

First, the homebuyer tax credit. It’s been credited (no pun intended) with getting a lot of buyers into the market that wouldn’t have been otherwise. It was expanded in the Fall, but will expire this Spring.

Strike one.

Second, foreclosures. As we’ve reported already, the incidence of foreclosure continues to rise. Many homeowners in financial distress are simply making the decision to walk away from their homes, and their debts right along with them.

Strike two.

Third, we have another wrinkle. Those low interest rates that we just mentioned? They’re due in large part to Federal Reserve purchases of mortgage-backed securities. Thus far, the Fed’s purchases total almost $1.25 trillion dollars, but those purchases are due to stop near the end of March. This move will likely cause interest rates to turn upward. How much will they rise? That remains to be seen, but initial estimates have them climbing by more than a percentage point by year’s end.

Strike three.

These three factors coming together at roughly the same time could, potentially, throw the tenuous balance and modest signs of recovery we’ve seen thus far completely off kilter. The ever-changing conditions make the handling of a real estate transaction, whether for a buyer or a seller, all the more difficult. Intero’s real estate professionals stay up-to-date with the latest trends and will know which will affect you, and which won’t.

Negotiating the most important financial decisions of your life requires all of the information.  Your Intero real estate professional has that information and will help you keep things in balance.

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