Joe Capote

Economists Predict Housing Recovery

I just came across this article from the associated press:

Economic forecasters predict that 2010 will be the first year since 2005 for housing to contribute to the growth of the U.S. economy, according to a survey released by the National Association for Business Economics.  

Home prices are expected to rise 2 percent next year, but forecasters don’t believe the increase in prices will discourage homebuyers. 

More than 80 percent of economists surveyed by the NABE think the recession is over and recovery has begun, but they expect the expansion to be slow because unemployment persists. 

Source: Associated Press, Mae Anderson (10/12/2009)

For what seems like a little while now, a lot of enomists have been telling us that the recession is over and that recovery is nigh. Unfortunately, if this is the new global economy norm than we are in for one hell of an adjustment period. As of August, the California unemployment was at 12.1% (not seasonally adjusted, of course). The EDD is still so inundated with calls they cannot answer them fast enough. The outlook for job creation in Californa is less than rosy, as the California job creation index dropped 2.2 points in the month of September. Only 54% of polled workers had confidence in the future of their current employer. “The hiccup in this month’s California Employee Confidence Index can be attributed to a dip in confidence among workers’ personal employment situations,” explained Brian Veverka, senior branch manager for Spherion. “We were quite surprised to see that workers were feeling less secure in the future of their current employers, yet more confident in the health of the overall economy.”

Don’t get me wrong, I am quite happy to see the housing numbers going in the right direction. Traditionally, housing leads us in and out of recessions. I’m just not convinced that the recovery is on, until job creation and confidence is stable. Those who are out of work remain out of work, and those who are working aren’t inspired with confidence that they will continue to be. Until this turns around, it’s still a recession to me.

Posted via web from josephcapote’s posterous

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

Supplemental Property Tax FAQ

Who doesn’t love supplemental property taxes? Despite the lack of popularity around the subject, it is good to know what the California Revenue and Taxation Code is all about. Here is a FAQ that will help you navigate the Supplemental Tax code waters. Good luck, and remember to read this with a strong cup of coffee or the caffeinated beverage of your choice!

Q. When did this tax come into effect?
A. The supplemental Real Property Tax Law was signed by the Governor in July of 1983 and is part of an ambitious drive to aid California’s schools. This property tax revision is expected to produce over $300 million per year in revenue for schools.

Q. How will Supplemental Property Tax effect me?
A. If you don’t plan on buying new property or undertaking new construction, this new tax will not effect you at all. But if you do wish to do either of the two, you will be required to pay a supplemental property tax which will become a lien against your property as of the date of ownership change or the date of completion of new construction.

Q. When and How will I be billed?
A. “When” is not easy to predict. You could be billed in as few as three weeks, or it could take over six months. “When” will depend on the individual county and the workload of the County Assessor, the County Controller/Auditor and the County Tax Collector. The assessor will appraise your property and advise you of the new supplemental assessment amount. At that time you will have the opportunity to discuss your valuation, apply for a Homeowner’s Exemption and be informed of your right to file an Assessment Appeal. The County will calculate the amount of the supplemental tax bill. The supplemental tax bill will identify, among other things, the following information: the amount of the supplemental tax and the date on which the taxes will become delinquent.

Q. How will the amount of my bill be determined?
A. There is a formula used to determine your tax bill. The total supplemental assessment will be prorated based on the number of months remaining until the end of the tax year. June 30.

Q. Can I pay my Supplemental Tax Bill in installments?
A. All supplemental taxes on the secured roll are payable in two equal installments. The taxes are due on the date the bill is mailed and are delinquent on specified dates depending on the month the bill is mailed as follows: (1) If the bill is mailed within the months of July through October, the first installment shall become delinquent on December 10 of the same year. The second installment shallbecome delinquent on April 10 of the next year.(2) If the bill is mailed within the months of November throughJune, the first installment shall become delinquent on the last day of the month following the month in which the bill is mailed. The second installment shall become delinquent on the last day of the fourth calendar month following the date the first installment is delinquent.

Q. Can you give me an idea of how the proration factor works?
A. The supplemental tax becomes effective on the first day of the month following the month in which the change of ownership or completion of new construction actually occurred. If the effective date is July 1, then there will be no supplemental assessment on the current tax roll and the entire supplemental assessment will be made to the tax roll being prepared which will then reflect the full cash value. In the event the effective date is not on July 1, then the table of factors represented on the following panel is used to compute the supplemental assessment on the current tax roll. The County Auditor finds that the supplemental property taxes on your new home would be $1,000 for a full year. The change of ownership took place on September 15 with the effective date being October 1: the supplemental property taxes would, therefore, be subject to a proration factor of .75 and your supplemental tax would be $750.

If the effective date is:                               The proration factor is:
August 1                                                         .92
September 1                                                 .83
October 1                                                      .75
November 1                                                .67
December 1                                                 .58
January 1                                                     .50
February 1                                                   .42
March 1                                                         .33
April 1                                                           .25
May 1                                                            .17
June 1                                                           .08

Q. Will my taxes be prorated in escrow?
A. No, unlike your ordinary annual taxes, the supplemental tax is a one time tax which dates from the date you take ownership of your property or complete the construction until the end of the year on June 30. The obligation for this tax is entirely that of the property owner.

Source: CLTA

Still awake? Then visit my website at www.JosephCapote.com for more information on this and other real estate topics.

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

Choosing the Right Tenants

Managing investment properties is tough business. Almost every landlord has heard of or dealt with the horrors of an unruly tenant and tenant evictions. Property managers must know the law, rental policies and practices, the pertinent documentation and disclosures to provide their tenants, and how to negotiate and write a lease, to name a few qualifications. One of the skills a good property manager must possess is the ability to properly screen tenants.  While most tenants are good folks, there are steps that every landlord should take to protect themselves against leasing their property to unruly tenants. Here are a few tips to get started.

Federal and state antidiscrimination laws limit what you can say and do in the tenant selection process. When choosing tenants, keep in mind the following best practices.

Check credit, income, and references. Today you can easily run a credit check for a minimal fee. Also, you can and should call the tenant’s references, especially former landlords. You should also verify an applicant’s employment, income, and bank account information. Be consistent in your screening. Make it your policy, for example, to always require credit reports; don’t just get a credit report for a single parent or people of a particular nationality.

Make decisions based on business reasons. You are legally free to choose among prospective tenants as long as your decisions are based on legitimate business criteria. Don’t make choices based on personal reasons. You are entitled to reject applicants with bad credit histories, income that you reasonably regard as insufficient to pay the rent, or past behavior — such as property damage or consistent late rent payments — that makes someone a bad risk. It goes without saying that you may legally refuse to rent to someone who can’t come up with the security deposit or meet some other condition of the tenancy.

Understand fair housing rules. Fair housing laws specify clearly illegal reasons to refuse to rent to a tenant. The Federal Fair Housing Acts (42 U.S. Code §§3601-3619, 3631) prohibit discrimination on the basis of race, religion, national origin, gender, age, familial status, physical or mental disability (including recovering alcoholics and people with a past drug addiction). Many states and cities also prohibit discrimination based on marital status or sexual orientation.

Train your staff to understand the rules, too. Anybody who deals with prospective tenants must follow fair housing laws. This includes owners, landlords, managers and real estate agents, and all of their employees. As the property owner, you may be held legally responsible for your employees’ discriminatory statements or conduct, including sexual harassment.

Be consistent. Consistency is crucial when dealing with prospective tenants. If you don’t treat all tenants more or less equally — for example, if you arbitrarily set tougher standards when renting to members of a racial minority — you are violating federal laws and opening yourself up to lawsuits. And if you give one person a break (such as lowering the security deposit for a single mother but not for other tenants), you’ll likewise risk a charge of discrimination from other tenants.

At Franco Real Estate, our property management department prides itself on devloping a systematic procedure for managing properties. We offer end to end packages, from procuring tenants and writing the lease to collecting rents and working directly with tenants. For more information on our products and services, visit our property management center at www.JosephCapote.com.

Follow my blog of real estate news, economics and technology at http://www.JosephCapote.com

This information is does not constitute investment, financial, or tax advice. We are not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided in this letter.

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6 Ways to Stage Your Home for Less Than $1,000

Staging a home for sale is all about making it inviting to the largest number of potential buyers. If a home is vacant, a stager will haul in furniture and décor so buyers can imagine themselves living there. If it’s occupied, the stager will declutter, neutralize and decorate for the masses.

Staging won’t make a home sell for more than it’s worth. But it can set your home apart and boost the selling price to the top of the range for comparable homes. It can also cut the time on the market. Because nearly 90% of home buyers start their search on the Internet, staging is a good way to make sure online photos pop.

Home sellers spend an average of $1,800 to stage a home, but costs can range from a couple of hundred dollars to $5,000 or more. Here are six ways to stage your home for less than $1,000.

Virtually stage your vacant property. Virtual staging is aimed at online shoppers who may quickly lose interest in a slide show full of floors, ceilings and bare walls. Sellers or their real estate agents send pictures of the empty rooms — a 2- or 3-megapixel camera is all you need — to a virtual stager, who sends back images of the same rooms, tastefully furnished, for use online and in marketing materials.

Ethical stagers won’t alter the color of floors or walls, improve the view, change light fixtures or fix imperfections. Nor will they work from photos of furnished rooms because they don’t know what lurks under the existing rug or behind the real-life sofa. Still, for buyers, it goes without saying that there’s no substitute for an in-person tour.

Virtually Staging Properties, in Atlanta, charges $225 for three virtually staged photos, $280 for four and $325 for five. Send in a high-quality photo (at least 5 megapixels) and for $50 you can get an 8-by-11-inch paper enlargement to mount on the wall so that open-house visitors can see an empty room’s potential.

Virtual Staging Solutions, in Cranford, N.J., recently offered three virtually staged photos for $197.

Pay for a plan, do the labor yourself. Many stagers work as consultants, touring your house and offering suggestions on how best to present it. Barb Schwarz, a longtime home stager and founder of the International Association of Home Staging Professionals, says the average fee for a consultation is $350 and often involves a tour of the property that lasts two hours or longer, photos and a 30- to 50-page report.

No Vacancy in Atlanta, Virtually Staging Properties’ sister company, charges $250 for a three- to four-hour consultation split over two days — the first to give you ideas and the second a couple of weeks later to suggest finishing touches. In Minneapolis, Lori Matzke, founder of Center Stage Home, charges $250 for a 90-minute walk-through. Customers are in charge of taking notes, so she encourages them to follow along with a video camera.

When working with a consultant, you do the cleaning, the decluttering and the trips to the dump, or rental of storage space. Load up an 8-by-8-by-12-foot or 8-by-8-by-16-foot portable storage unit from PODs, which will deliver the unit to your driveway for $75, transport it to a secure storage facility for another $75 and charge you a monthly storage fee of around $150, depending on where you live, the time of year and other factors.

Among the accoutrements of home you’ll need to jettison or stow: family photos, magazines, toys, cosmetics and other grooming supplies in the bathroom, and countertop appliances and cutting boards in the kitchen. “Pretend you’re camping,” says Schwarz. Leave only necessities, and store them in cabinets

Paint rooms in light, neutral colors, which are widely appealing and make your rooms look bigger. “Different-colored bedrooms are like Ginsu knives that chop up space,” says Schwarz. Put a touch of greenery in every room — preferably harvested from the backyard.

Negotiate a vignette. A staged home calls for scenery—for example, a ficus tree, a beautiful chair and a side table with accessories. If you don’t need furniture brought into an otherwise empty space, you may be able to negotiate for décor only — call it a pizazz package. No Vacancy will bring in wall art, area rugs, lamps and other accessories to neutralize and update a customer’s existing furnishings. The service runs roughly $250 per month, with a three-month minimum, plus one month’s fee for setup and breakdown. Center Stage Home charges just $600 for three months; adding heavy pieces, such as a sofa, tacks another $300 to the tab.

Focus on just a few rooms. Spend your budget on the entryway, main living area, kitchen and master bedroom. Many stagers charge an hourly rate — $75 to $125 is typical. Ignoring secondary rooms, or doing them yourself once you’ve seen how the pro works, can save hundreds of dollars.

Do tackle particularly challenging areas — say, an attic bedroom with odd angles and crannies or a pink-tiled bathroom in an older home. You needn’t go overboard. A soft, creamy paint color, such as a pale gold, on the attic walls and ceiling will downplay angles and make the ceiling seem higher. Tone down a Pepto-Bismol look in the bathroom with white and black — tie a white shower curtain on the rod with black-and-white ribbons, and hang black bath towels.

Shop at home. Scour the house, yard, garden shed and garage to carry out your home’s transformation. Schwarz recalls facing a challenging boy’s bedroom once, which had a broken curtain rod, torn drapes and a collection of disturbing posters. A tour of the shed, yard and garage yielded a trove of fishing equipment and—voilà—a new theme. A fishing pole replaced the broken curtain rod, and a sheet from the linen closet, tied back with rope, became the curtain. Atop the dresser: a tackle box, some fishing books and a lamp placed inside a cleaned-up fishing boot. The other boot became a planter for some alder branches from the backyard. The headboard was draped in a fishing net adorned with lures. Cost: virtually zero. And when the house sold, the buyers asked that the décor convey.

In the main living areas, though, themes are best avoided. “The whole idea is to appeal to as many buyers as possible,” says Matzke. “Themes can be distracting.” Think flexibly as you rearrange furniture: a nightstand can be an end table, a bureau can be a buffet, and a hutch can double as a bookcase. Cardboard moving boxes can stand in for a bed in an unfurnished bedroom. Cover with a gorgeous spread and pillows and no one will know. Still missing something? Shop Craigslist.org, or ask family and friends for a loan.

Step outside. Clean up debris and pull dead plants or shrubs. Trim remaining greenery, especially anything blocking a window. Banish planters, barbecue grills and toys from the deck. You can’t paint your home’s entire exterior for less than a grand, but you can refresh the front and garage doors with a coat or two; ditto for the shutters and trim, especially window ledges, and the mailbox. Clean up rust spots or streaks on downspouts while you’re at it, and repaint or restain the fence. Typical cost for exterior touch-up, including repairs to chimney, gutters, roof and porch: $660 to $940, according to HomeGain.com, a home-marketing Web site. 

 I came across this article while researching better ways to stage some of our listings. I thought they wer nice and easy ways to add value to your home for sale.

Posted via web from josephcapote’s posterous

Filed under: Seller's Blog,

U.S. Begins to Crack Down on Loan Modification Scams

Source: by Mike Webb, Pro Publica & NBC Los Angeles
Posted on: 12th October 2009
 

21st Century Legal Services, Fidelity National Legal Services under federal investigation

You’ve probably heard ads on the radio from those companies that promise to get your mortgage payments slashed, sometimes in half. They’re called loan modification companies.

Authorities say many of them are scammers and con artists, but they haven’t always been able to shut them down. NBC investigative reporter Joel Grover exposes how one of the biggest loan modification companies has managed to stay in business, even though authorities in several states have tried to stop it.

The company has been widely known as 21st Century Legal Services, and its ads say it can get you a lower monthly payment and lower interest rate on your home mortage.

Joanne and Dave Steffin signed up with 21st Century, because they say the company promised to help them avoid foreclosure on their Rancho Cucamonga home. But the Steffins say all 21st Century did was take their money and not deliever on its promises.

“It’s not even the fact that they took your money. It’s the fact that you may lose the home still,” Joanne Steffin said.

In the last year, 21st Century became a giant in the loan modification business, operating out of a business park in Rancho Cucamonga, with dozens of employees working the phones, signing up homeowners desperate to avoid foreclosure. But two ex-employees tell NBC that the majority of 21st Century clients never got their loans modified.

“You were told to promise (clients) that they could get their loan modified?” Grover asked one of the former employees.

“Yeah, 100 percent,” the ex-employee answered.

Four states have sued 21st Century, and the Better Business Bureau says 21st Century has more complaints than any other loan modification company in business. But that didn’t stop 21st Century from signing up more and more clients.

Those two ex-employees explained to NBC about how 21st did business. The company always asked homeowners to pay them a hefty fee upfront, supposedly to get their loan modified.

Joanne and Dave Steffin had to fork over $3,500, and were told that 21st Century would be “working diligently with their lender” to try and get their payments cut in half.

“I just felt that if this is what they’re going to do and they can do this, we’re stupid not to do it,” said Dave Steffin.

But months later, the Steffins say 21st Century had cashed their checks, wouldn’t return their calls and didn’t even contact their lender.

“Do you feel like you were scammed?” Grover asked the Steffins.

“Yes, very much,” said Dave Steffin.

And those ex-employees interviewed by NBC say the customers they signed up kept calling them, saying things like, “You’ve taken my money,” “Nothing has been done to help my home,” and “Now I’m in foreclosure.”

Complaints like those caught the attention of the attorneys general in Ohio, Indiana, Arkansas and North Carolina. All four states banned 21st Century from doing business in their states.

But authorities say 21st Century Legal Services changed its name to Fidelity National Legal Services and continued signing up new clients.

Ex-employees say Fidelity was run out of the same office as 21st Century; was owned by the same woman, Andrea Ramirez; and even used the same ads to snare customers.

But the feds might finally be catching up with the owners of 21st Century and Fidelity. The FBI recently served search warrants on the home of Ramirez and searched the company’s offices. The FBI says the company is now under federal investigation. The company’s lawyer didn’t return our calls for comment.

NBC did this investigation with help from the non-profit investigative journalism organization Propublica.

California homeowners can get advice avoiding scammers at Attorney General Jerry Brown’s website.

Posted via web from josephcapote’s posterous

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

Loan Modification Attorneys Under Investigation

In a recent newsletter courtesy of the California Association of Realtors, the California state bar has launched numerous investigations into the practices of a number of attorneys with regards to loan modification practices. The attorneys have taken fees for loan modification services, but have failed to perform any services to date. Worse, they have failed to communicate with their clients who face the possible loss of their homes.

Not all attorneys that offer loan modification services are unscrupulous. However, it is good to see that the C.A.R and the California state bar is taking this matter seriously. It also serves as a reminder to me (as it should to all Realtors) that we should be careful when dealing with and advising our clients regarding loan modification. Additionally, scam artists have been known to align themselves with attorneys to lend credence to their fraudulent schemes. The list of attorneys under investigation can be found HERE.

I recently published a post on the five steps to help avoid loan modification schemes. That post can be found HERE. The number one tip is NEVER pay upfront fees. Go figure.

For more information on this and other exciting topics, visit my site at http://www.JosephCapote.com.

Filed under: Seller's Blog, , ,

10 Questions to Ask Home Inspectors

Before you make your final buying or selling decision, you should have the home inspected by a professional. An inspection can alert you to potential problems with a property and allow you to make an informed decision. Ask these questions to prospective home inspectors:

1. Will your inspection meet recognized standards? Ask whether the inspection and the inspection report will meet all state requirements and comply with a well-recognized standard of practice and code of ethics, such as the one adopted by the American Society of Home Inspectors or the National Association of Home Inspectors. Customers can view each group’s standards of practice and code of ethics online at http://www.ashi.org or http://www.nahi.org. ASHI’s Web site also provides a database of state regulations.

2. Do you belong to a professional home inspector association? There are many state and national associations for home inspectors, including the two groups mentioned in No. 1. Unfortunately, some groups confer questionable credentials or certifications in return for nothing more than a fee. Insist on members of reputable, nonprofit trade organizations; request to see a membership ID.

3. How experienced are you? Ask how long inspectors have been in the profession and how many inspections they’ve completed. They should provide customer referrals on request. New inspectors also may be highly qualified, but they should describe their training and let you know whether they plan to work with a more experienced partner.

4. How do you keep your expertise up to date? Inspectors’ commitment to continuing education is a good measure of their professionalism and service. Advanced knowledge is especially important in cases in which a home is older or includes unique elements requiring additional or updated training.

5. Do you focus on residential inspection? Make sure the inspector has training and experience in the unique discipline of home inspection, which is very different from inspecting commercial buildings or a construction site. If your customers are buying a unique property, such as a historic home, they may want to ask whether the inspector has experience with that type of property in particular.

6. Will you offer to do repairs or improvements? Some state laws and trade associations allow the inspector to provide repair work on problems uncovered during the inspection. However, other states and associations forbid it as a conflict of interest. Contact your local ASHI chapter to learn about the rules in your state.

7. How long will the inspection take? On average, an inspector working alone inspects a typical single-family house in two to three hours; anything significantly less may not be thorough. If your customers are purchasing an especially large property, they may want to ask whether additional inspectors will be brought in.

8. What’s the cost? Costs can vary dramatically, depending on your region, the size and age of the house, and the scope of services. The national average for single-family homes is about $320, but customers with large homes can expect to pay more. Customers should be wary of deals that seem too good to be true.

9. What type of inspection report do you provide? Ask to see samples to determine whether you will understand the inspector’s reporting style. Also, most inspectors provide their full report within 24 hours of the inspection.

10. Will I be able to attend the inspection? The answer should be yes. A home inspection is a valuable educational opportunity for the buyer. An inspector’s refusal to let the buyer attend should raise a red flag.

For more information on the home inspection process, and other eduction about buying a home, visit my buyer’s center at http://www.JosephCapote.com.

Source: Rob Paterkiewicz, executive director, American Society of Home Inspectors, Des Plaines, Ill., http://www.ashi.org.

Filed under: Buyer's Blog, , ,

Should I Buy a Home or Continue Renting?

Many folks as the question, “Should I rent or should I own?”. The answer is maybe. It depends on your particular situation to see what is right for you. When pondering the decision, consider the following factors:

It’s not just about paying the mortgage. There are other financial factors that you need to take into consideration when it comes to your monthly payments. While it’s true that with every mortgage payment you make, you build equity, there are other expenses to consider besides your mortgage payment. For example, you will have to pay property taxes on your home and will also face additional monthly and periodic expenses, such as homeowner’s insurance, repair and maintenance costs. If you’re considering buying a condo, the homeowner’s association fees should be factored.
Don’t forget the cost of buying a home. In most cases, you’ll need a down payment (usually between 5 percent and 20 percent of the purchase price) and have to pay closing costssuch as attorneys’ fees, loan origination fees (often referred to as “points”) and recording fees. Be sure to find out approximately how much you’ll need in total closing costs before you buy any property. Your realtor can provide you with all the estimated closing costs, and your lender is required to provide a ‘good faith’ estimate within three days of submitting the loan application.
There are tax advantages to owning a home. For example, the mortgage interest you pay is, in many cases, tax deductible. So, too, are your property taxes in most instances.
A home can be a good investment. In addition to simply putting a roof over your head, your home can also be an excellent investment. That’s because home prices often rise from one year to the next. (When you sell your home, you can cash in on this appreciation. Buying and selling your primary residences can incur stiff taxes and penalties, so check with a tax advisor prior to looking to sell your home.) As with any investment, however, “past performance is no guarantee of future returns.” Simply stated, home prices don’t necessarily rise every year. Some years, they actually fall instead of rise. For that reason, it’s possible to lose money if you “buy high” and “sell low”.

How long do you plan to live in your home? If you know you have a job transfer that will take you to a different geographic region within the next year or so—or you aren’t sure you want to stay in the area in which you currently live—it may not make sense to purchase a home. Why? Because you pay closing costs when you both buy and sell a property. And your out-of-pocket costs in both transactions could be high, especially if your home doesn’t appreciate much in value while you own it. In such instances, you could actually have to come up additional cash to pay the bank when you sell your home.

Benefits of home ownership are good, but it’s up to you to determine whether is is right.

For more information, visit my buyer’s center at http://www.JosephCapote.com

Filed under: Buyer's Blog, ,

Tax Benefits of Home Ownership

Home ownership—it’s the American dream, isn’t it? It’s also a taxpayer’s dream, because home ownership is full of tax benefits. The interest on your mortgage payments and real estate taxes—it’s deductible. Settlement or closing costs when you buy your home—some are deductible. Capital gains you realize when you sell your home—exempt from taxes, with some restrictions. And if you use a part of your home for business, you may be able to claim a tax deduction for some of your house expenses. In short, home ownership may be your most profitable investment, from a tax standpoint.

Let’s take a closer look at some of these tax benefits. Keep in mind that this article is for informational purposes only and is not intended as legal, accounting, or tax advice. You should consult a tax professional for details.

The Home Mortgage Interest Deduction
If you itemize deductions on your federal income tax return, you can generally deduct all of the interest you pay on any loan that is secured by your home, whether that loan is called a mortgage, a second mortgage, a home equity loan, a line of credit, or a home improvement loan. This applies to both your principal residence and a second home. You can deduct the interest on up to $1 million of home acquisition debt ($500,000 if you’re married and file separately). You can also deduct the interest on certain home equity loans, regardless of how you use the loan proceeds, with two limitations:

•Your deduction is limited to interest on the amount of debt that does not exceed the equity in your home (the fair market value of your home minus the total acquisition debt on that home)
•Your deduction is limited to interest on up to $100,000 (or $50,000 if you’re married and file separately)
For complete information on the home mortgage interest deduction, see IRS Publication 936 Home Mortgage Interest Deduction, available online at http://www.irs.gov or at your local IRS office.

The Real Estate Tax Deduction
Homeowners can also deduct real estate taxes, whether the state, county, city, township, or some other local government body imposes them. This applies to all the real estate you own—this deduction is not limited to just your primary and secondary homes, as is the home mortgage deduction. Only the person who owns the property can claim the deduction.

The Closing Costs Deduction
When you buy a home, or refinance an existing one, there are generally a number of closing costs, including attorney’s fees, recording fees, title search fees, document preparation and processing fees, as well as points. Points are fees charged by your lender when you take a loan secured by your home. Each point is one percent of the amount borrowed. Generally, you could deduct points as mortgage interest but you’d have to spread your deduction out over the entire life of the loan. If you itemize deductions on your tax return, you can deduct points in the year you buy your principal home, provided you meet certain requirements (these requirements are listed in IRS Publication 936). You can even deduct points that the seller pays for you.

Other non-deductible closing costs that can be added to the tax basis of your home include attorney’s fees, abstract fees, charges for installing utility services, recording fees, title search fees, document preparation and processing fees. For more information, see IRS Publication 530 Tax Information for First-Time Homeowners available online at http://www.irs.gov or at your local IRS office.

The Home Office Deduction
You may be able to claim a deduction for certain home expenses if you use a part of your home for business. Even if you don’t qualify for a home office deduction, you may be able to deduct certain business expenses, such as office supplies, postage, or the cost of adding a second telephone line. You may also be able to depreciate the cost of computers and other business machines as well as office furniture you use at home. The requirements for the home office deduction are fairly strict, and the calculations fairly complicated—see IRS Form 8829 Expenses for Business Use of Your Home and the Instructions for Form 8829 available online at http://www.irs.gov or at your local IRS office.

The Tax Treatment When You Sell Your Home
If you’re lucky enough to sell your home for more than you paid for it, you may be able to exclude the gain from federal income taxes. You can exclude up to $500,000 of gain if you are married, file a joint tax return, and the home was your principal residence for at least two out of the last five years preceding the sale. If you’re not married or file a separate return, you may exclude up to $250,000 of gain. For example, let’s say you and your spouse bought your house five years ago for $100,000 and are selling it today for $300,000. Your entire gain of $200,000 ($300,000 – $100,000) is excludable, which means you don’t have to report it on your income tax return. This exclusion can be used every two years. In certain situations, you may be able to prorate exclusion of the gain if it occurs within two years of a previous capital gain exclusion if the sale of your home was due to a change in place of employment, health reasons, or other unforeseen circumstances. If you sell your principal residence at a loss, you generally cannot deduct the loss on your tax return. For more information, see IRS Publication 523 Selling Your Home available online at http://www.irs.gov or at your local IRS office.

The tax benefits associated with buying a home, selling a home, and all the time in between truly make home ownership a taxpayer’s dream. Consult your tax professional to make sure you take advantage of all the tax benefits you’re entitled to.

For more info, visit the buyer’s center at http://www.JosephCapote.com

Pilfered from IRS.gov – http://www.irs.gov

Filed under: Buyer's Blog, , ,

5 Tips to Avoid a Loan Modification Scam

There has been a lot of talk about loan modifications and loan mod scams in the news lately. Recently, law firms as well as credit specialists have jumped headfirst into the fray, working with (or possibly preying) on good people in bad situations. While loan modifications are possible and can help many borrowers make it through these tough times, here are five tips to help you avoid a possible loan modification scam.

1. DON’T pay up-front fees. Foreclosure consultants are prohibited by law from collecting money before services are performed.
2. DON’T ignore letters from your lender or loan servicer. Responding to those letters is your best bet for saving your house.
3. DON’T transfer title or sell your house to a “foreclosure rescuer.” Beware! This is a scam to convince homeowners they can stay in the home as renters and buy their home back later. It might also be part of a fraudulent bankruptcy filing. Either way, a scammer can then evict the victim and take the home.
4. DON’T pay your mortgage payments to anyone other than your lender or loan servicer. Mortgage consultants often keep the money for themselves.
5. NEVER sign any documents without reading them first. Many homeowners think that they are signing documents for a loan modification or for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership of their home to someone who is now trying to evict them.

Courtesy of the State of California’s Attorney General, Department of Justice.

For more information, visit the Short Sales Center my website at http://www.JosephCapote.com.

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