Joe Capote

November 8, 2010 • 2:54 pm 0

Avoiding Foreclosure: What is a Short Sale?

1 in 7 borrowers across the country are not paying their mortgage. Look down your street and count seven doors. One of your friends or neighbors are struggling to make their mortgage payments, or are missing their payments altogether. According to the Mortgage Banker’s Association’s second quarter 2010 National Delinquency Survey, nearly 14% of loans are in foreclosure or are past due.

For homeowners struggling to make mortgage payments, there are more options today than ever before. Short sales now account for more than 12 percent of all residential real estate sales. In San Bruno, short sales account for nearly 50% of the available housing market. Helping homeowners avoid foreclosure and understanding the options available to them is something I am passionate about. In an effort to continue to advocate on foreclosure avoidance in my community, I offer this small background on short sales.

What is a short sale? To put it simply, a short sale transaction is a sale of a property in which the outstanding debt (in the form of mortgages – such as purchase loans, refinance loans, home-equity loans, or one of the various other types of loans secured by your property) was more than the price for which the property was sold. Example: 1st and 2nd mortgages totaled $470,000.00 and the property was sold for $325,000.00. The sale price was $145,000.00 “short” of the amount that the seller had originally borrowed – thus the term “short sale.” Since the banks/lenders were essentially paid back less than what you borrowed, you could be deemed to have received a debt “forgiveness” of $145,000.00. A sale of this type requires bank/lender approval.

While there are many reasons why a bank/lender would choose this manner of sale, the important question is: What should you (as the seller of the property) know about this type of sale? If you participate in this type of sale, please be aware that:

  1. In some instances, you may be sued by the lender/bank for the money that was “forgiven”.
  2. The amount you did not pay back, which is a form of “debt forgiveness”, may be taxed by tax agencies for the “forgiven” amount. In the example above, you may be taxed on $145,000.00. For Mortgage Forgiveness Debt Relief Act and Debt Cancellation tax information visit: http://www.irs.gov/individuals/article/0,,id=179414,00.html
  3. If there are other lenders or lien holders (such as a 2nd or 3rd loan), the holders of the second or subordinate liens, may file a deficiency judgment in civil court against you to get their money back, even though the first lien holder allowed debt forgiveness.

These are just three major consequences of choosing to sell through a short sale. Therefore, it is very important that you seek:

  1. A licensed and qualified real estate agent to represent you in these types of transactions. To determine if the person is licensed by the California State Department of Real Estate and/or to check on a license status, please visit our website at http://www.dre.ca.gov.
  2. The advice of an accountant. To obtain the status of a Certified Public Accountant or a Public Accountant, please visit the California Department of Consumer Affairs – California Board of Accountancy at http://www.dca.ca.gov.
  3. The advice of a lawyer. To obtain the status of an attorney, please visit the State Bar of California at http://www.calbar.gov.

In addition, contact a free United States Department of Housing and Urban Development (HUD)-approved housing counselor at http://www.hud.gov or contact your lender directly.

In April of 2010, the federal government will offer financial incentives to push short sales through a program called Home Affordable Foreclosure Alternatives. The program is designed to spur home sales and one of its components will be providing government payments to homeowners (for moving and/or relocation expenses). For more information, please visit www.makinghomeaffordable.gov.

Foreclosure is avoidable and homeowners need solutions. Today more than ever, they need educated professionals to help them learn about their options. As a Alain Pinel Distressed Property Certified Agent, I can help assist homeowners in distress. If you would like a private consultation to discuss your foreclosure avoidance options, please contact me. I look forward to hearing from you.

Filed under: Buyer's Blog, Seller's Blog

August 31, 2010 • 12:19 pm 0

Announcing my Partnership with Alain Pinel Realtors!

This week I decided to switch office affiliations. I’ve joined Alain Pinel Realtors in Burlingame. Alain Pinel is an established company with a track record of success throughout the bay area. I’m stoked to have joined them! Check out my new website!

My mother Marilyn, who started her real estate career in 1974, once wrote an article on changing office affiliations. Though many things have changed since she wrote that piece, many things have remained the same. As per her advice, I did plenty of research before I made the jump. I really though about what was important to me and what I wanted out of my career as a Realtor. I really wanted to work for an established company with a stong online presence and name recognition. I also knew I wanted to work for a company that could provide superior marketing tools and cutting edge technologies. Finally, I really wanted to work for a company that was professional and team oriented.

After interviewing with many companies, I really felt like Alain Pinel Realtors in Burlingame fit all that criteria. I am proud to announce my new partnership with Alain Pinel and look forward to meeting the needs of my clients for years to come!

Filed under: Buyer's Blog, Market Data, Realtor Trends, Seller's Blog, Technology, Uncategorized

February 22, 2010 • 2:03 pm 1

Deductible Closing Costs in a 1031 Tax Deferred Exchange

When participating in a 1031 tax deferred exchange, it is wise to know what closing costs are tax deductible and which are not. Certainly it’s good business for one to consult with an accountant or a tax professional on this, but here is the quick and dirty overview.

Costs that can be deducted

  • Real estate commissions
  • Title insurance premiums
  • Closing or escrow fees
  • Legal fees
  • Transfer taxes and Notary fees
  • Recording fees
  • Costs related to the 1031 exchange such as Qualified Intermediary Fees

Costs that cannot be deducted

  • Mortgage points
  • Assumption fees
  • Credit Reports
  • Lender’s title insurance
  • Prorated mortgage insurance
  • Loan fees such as application fees
  • Property taxes
  • Utility charges
  • Association fees
  • Hazard insurance
  • Credits for lease deposits
  • Prepaid rents and security deposits

Interested in finding out more about how a 1031 deferred exchange can help you make real estate investments while deferring your tax obligations, visit my website at www.JosephCapote.com.

Filed under: Buyer's Blog, Seller's Blog,

February 18, 2010 • 9:41 am 0

Tax Breaks You Don’t Want to Forget About

With tax season fast approaching and April 15th around the corner, we figured it would be appropriate to discuss the significant tax benefits that accompany real estate ownership. Remember when filing your return to take full advantage of the following:

Mortgage Interest Expense

The government allows all of the interest associated with the financing of the property to be written off as an expense of owning the property. For many real estate investors, especially those with interest only loans, this expense deduction can be substantial.

Depreciation

Depreciation is a method for matching the costs of acquiring property over the properties estimated economic life. The IRS now requires that most properties be depreciated using the straight-line method of depreciation (27.5 years for residential properties, 39 years for commercial properties). Depreciation will act as an intangible expense and will shelter income from taxes.

Expense Deductions

Many of the costs associated with owning and managing a real estate investment, such as management fees and insurance premiums, are deductible. One deductible expense worthy of note is the travel expense. Many real estate investors acquire real estate in places they like to (or have to) visit, and each time they travel to the property, the travel costs are a deductible expense. Not a bad deal if the property happens to be in Maui or around the corner from a relative.

Passive Losses

Due to depreciation and expense deductions, it is possible to own a property that is producing positive cash flow, but for tax purposes showing a loss. These “passive losses” are subject to certain restrictions, but in many circumstances can be used to offset passive income from another investment. In the event an investor qualifies as a “full time real estate professional” passive losses can be used to offset ordinary income. Full time real estate agents should have no problem qualifying for maximum passive loss benefits (see recent US tax court opinion).

For more information, visit my website as www.JosephCapote.com.

Taken from Leonard Spoto, Asset Exchange Company.

Filed under: Buyer's Blog, Seller's Blog, ,

February 17, 2010 • 10:20 am 1

6 Creative Ways to Afford a Home

1. Investigate local, state, and national down payment assistance programs. These programs give qualified applicants loans or grants to cover all or part of your required down payment. National programs include the Nehemiah program, www.getdownpayment.com, and the American Dream Down Payment Fund from the Department of Housing and Urban Development, www.hud.gov.
2. Explore seller financing. In some cases, sellers may be willing to finance all or part of the purchase price of the home and let you repay them gradually, just as you would do with a mortgage.
3. Consider a shared-appreciation or shared-equity arrangement. Under this arrangement, your family, friends, or even a third-party may buy a portion of the home and share in any appreciation when the home is sold. The owner/occupant usually pays the mortgage, property taxes, and maintenance costs, but all the investors’ names are usually on the mortgage. Companies are available that can help you find such an investor, if your family can’t participate.
4. Ask your family for help. Perhaps a family member will loan you money for the down payment or act as a co-signer for the mortgage. Lenders often like to have a co-signer if you have little credit history.
5. Lease with the option to buy. Renting the home for a year or more will give you the chance to save more toward your down payment. And in many cases, owners will apply some of the rental amount toward the purchase price. You usually have to pay a small, nonrefundable option fee to the owner.
6. Consider a short-term second mortgage. If you can qualify for a short-term second mortgage, this would give you money to make a larger down payment. This may be possible if you’re in good financial standing, with a strong income and little other debt.

For more tips on home affordability, visit my website at www.JosephCapote.com.

Filed under: Buyer's Blog

February 12, 2010 • 2:08 pm 0

What is Appraised Value?

  • Appraisals provide an objective opinion of value, but it’s not an exact science so appraisals may
    differ.
  • For buying and selling purposes, appraisals are usually based on market value — what the property could probably be sold for. Other types of value include insurance value, replacement value, and assessed value for property tax purposes.
  • Appraised value is not a constant number. Changes in market conditions can dramatically alter appraised value. 
  • Appraised value doesn’t take into account special considerations, like the need to sell rapidly.
  • Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer.

For this and other fun real estate stuff, visit my website at www.JosephCapote.com

Used with permission from Kim Daugherty, Real Estate Checklists and Systems, http://www.realestatechecklists.com

Filed under: Buyer's Blog, Seller's Blog

February 11, 2010 • 12:17 pm 0

10 Questions to Ask Your Lender

1. What are the most popular mortgages you offer? Why are they so popular?

2. Which type of mortgage plan do you think would be best for me? Why?

3. Are your rates, terms, fees, and closing costs negotiable?

4. Will I have to buy private mortgage insurance? If so, how much will it cost, and how long will it be required? (NOTE: Private mortgage insurance is usually required if your down payment is less than 20 percent. However, most lenders will let you discontinue PMI when you’ve acquired a certain amount of equity by paying down the loan.)

5. Who will service the loan — your bank or another company?

6. What escrow requirements do you have?

7. How long will this loan be in a lock-in period (in other words, the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if it drops during this period?

8. How long will the loan approval process take?

9. How long will it take to close the loan?

10. Are there any charges or penalties for prepaying the loan?

Used with permission from Real Estate Checklists & Systems, http://www.realestatechecklists.com.

Filed under: Buyer's Blog, , , , ,

February 9, 2010 • 2:17 pm 0

Pros and Cons of Going Condo

Condominiums and townhouses offer an affordable option to single-family homes in many markets, and they’re ideal for those who appreciate a maintenance-free lifestyle. But before you buy, make sure you do your legwork. These are some of the important elements to consider:

• Storage. Some condos have storage lockers, but usually there are no attics or basements to hold extra belongings.
• Outdoor space. Yards and outdoor areas are usually smaller in condos, so if you like to garden or entertain outdoors, this may not be a good fit. However, if you dread yard work, this may be the perfect option for you.
• Amenities. Many condo properties have swimming pools, fitness centers, and other facilities that would be very expensive in a single-family home.
• Maintenance. Many condos have onsite maintenance personnel to care for common areas, do repairs in your unit, and let in workers when you’re not home — good news if you like to travel.
• Security. Keyed entries and even doormen are common in many condos. You’re also closer to other people in case of an emergency.
• Reserve funds and association fees. Although fees generally help pay for amenities and provide savings for future repairs, you will have to pay the fees decided by the condo board, whether or not you’re interested in the amenity.
• Resale. The ease of selling your unit may be dependent on what else is for sale in your building, since units are usually fairly similar.
• Condo rules. Although you have a vote, the rules of the condo association can affect your ability to use your property. For example, some condos prohibit home-based businesses. Others prohibit pets, or don’t allow owners to rent out their units. Read the covenants, restrictions, and bylaws of the condo carefully before you make an offer.
• Neighbors. You’re much closer to your neighbors in a condo or town home. If possible, try to meet your closest prospective neighbors.

For these and other great tips on home buying and selling, check out my buyer’s center at www.JosephCapote.com

Filed under: Buyer's Blog

February 9, 2010 • 2:11 pm 1

Tips for Lowering Homeowner’s Insurance Costs

No matter what the economic climate, saving money is always a good thing. Use these handy tips to lower your homeowner’s insurance costs.

1. Review the Comprehensive Loss Underwriting Exchange (CLUE) report on the property you’re interested in buying. CLUE reports detail the property’s claims history for the most recent five years, which insurers may use to deny coverage. Make the sale contingent on a home inspection to ensure that problems identified in the CLUE report have been repaired.
2. Seek insurance coverage as soon as your offer is approved. You must obtain insurance to buy. And you don’t want to be told at closing that the insurer has denied your coverage.
3. Maintain good credit. Insurers often use credit-based insurance scores to determine premiums.
4. Buy your home owners and auto policies from the same company and you’ll usually qualify for savings. But make sure the discount really yields the lowest price.
5. Raise your deductible. If you can afford to pay more toward a loss that occurs, your premiums will be lower. Avoid making claims under $1,000.
6. Ask about other discounts. For example, retirees who tend to be home more than full-time workers may qualify for a discount on theft insurance. You also may be able to obtain discounts for having smoke detectors, a burglar alarm, or dead-bolt locks.
7. Seek group discounts. If you belong to any groups, such as associations or alumni organizations, they may have deals on insurance coverage.
8. Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage.
9. Investigate a government-backed insurance plan. In some high-risk areas, federal or state government may back plans to lower rates. Ask your agent.
10. Be sure you insure your house for the correct amount. Remember, you’re covering replacement cost, not market value.

For more information regarding these and other topics for homebuyers, check out my buyers center at http://www.JosephCapote.com.

Filed under: Buyer's Blog,

February 5, 2010 • 10:10 am 0

What Not to Overlook on a Final Walk-through

It’s guaranteed to be hectic right before closing, but you should always make time for a final walk-through. Your goal is to make sure that your home is in the same condition you expected it would be. Ideally, the sellers already have moved out. This is your last chance to check that appliances are in working condition and that agreed-upon repairs have been made. Here’s a detailed list of what not to overlook for on your final walk-through.

Make sure that:

• Repairs you’ve requested have been made. Obtain copies of paid bills and warranties.
• There are no major changes to the property since you last viewed it.
• All items that were included in the sale price — draperies, lighting fixtures, etc. — are still there.
• Screens and storm windows are in place or stored.
• All appliances are operating, such as the dishwasher, washer and dryer, oven, etc.
• Intercom, doorbell, and alarm are operational.
• Hot water heater is working.
• No plants or shrubs have been removed from the yard.
• Heating and air conditioning system is working
• Garage door opener and other remotes are available.
• Instruction books and warranties on appliances and fixtures are available.
• All personal items of the sellers and all debris have been removed. Check the basement, attic, and every room, closet, and crawlspace.

For home buyers and first time homebuyers, this list is a useful for your final walkthrough. For more information on this and other Real Estate topics, visit my website at www.JosephCapote.com or call me at (650) 269-3000.

Filed under: Buyer's Blog, ,

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