East Bay Realty Pro Blog

President Obama’s most recent budget proposal, from February, would decrease tax deductions for interest on mortgages, real estate taxes and charitable deductions for married couples earning over $250,000 and singles over $200,000.

The tax incentive to own a home began in the U.S. in 1913, at the time the federal income tax was first instituted. Since then, there have been many efforts to reduce or eliminate this deduction.

Naturally, organized real estate interests, such as the National Association of Realtors, as well as home builders and others, oppose this approach. They maintain that this will hurt the real estate industry, one of the hardest hit in the nation, at the very worst time.

It seems to me and many others, that whenever the tax benefit is diminished, the threshold is lowered for the next change. As an example, if the administration’s proposals are adopted, will the next adjustment, perhaps in several years, lower maximum earnings even more? Will the $1,000,000 maximum loan amount be reduced to $750,000? Each reduction creates the chance that this important benefit for all Americans will be actually eliminated in the future.

For further information, read the Wall Street Journal’s article,  “Bid to Curb Mortgage Tax Break Falters.”

Want an eco-friendly way to clean countertops? Use half a lemon to scrub and create a paste from lemon juice and soda.

How about a green disinfectant? One spray bottle filled with three per cent hydrogen peroxide and another filled with distilled white vinegar will do the trick. Spray either one first and wipe, then do the same with the other.

“Eco-wise Germ Repelling Recipes” will give you more ideas.

Living with a dog, cat, bird, hamster? Read “How to Eliminate Pet Dander” on the Global Healing Center site for advice  and information on how pet dander can lead to allergies and cold or flu symptoms.

Also see my previous post, “Green Way to Unclog Drains + Other Ideas.”

According to a survey by the California Association of Realtors (C.A.R.) of 2009 home sales in the state, “nearly three-quarters…sold as a result of financial difficulties.” These included “trouble making mortgage payments, job losses and increases in monthly mortgage payments.”

Interestingly, almost half of all sellers owned their homes for two years or less, up from one-third in the 2008 C.A.R. survey. Fifty-nine per cent of these were first time sellers.

Not surprising was the fact that over 92 per cent of 2009 sellers had an adjustable rate or short term, fixed rate loan. Some of these included negative amortization.

A statistic sure to catch Realtors’ attention is the fact that 64 per cent of all sellers were represented by an agent other than the one who sold them the home. To me, this is startling, perhaps suggesting that many sellers felt they did not receive adequate service or advice on the buying end.

In November 2009, to pump more life into the housing market, the federal government extended the $8000 tax credit for first time home buyers to April 30th, 2010. In addition, those who have previously owned a home can apply for a $6500 credit. Check the IRS website for answers to questions about the program and eligibility requirements.

Read the LA Times article, “IRS Issues New Guidelines on Obtaining Home Buyer Tax Credits.”

Looking to buy a house is like trying to find a mate; you have to be willing to go through a lot of frogs before you find your prince or princess. Despite numerous changes in the business, one thing has remained constant – too many buyers in this area, either out of frustration or pressure to purchase, settle for much less house than they could have had, or buy a good house, but at too high a price.

Read the rest of the article…

For the second time in the past year, the California Association of Realtors (C.A.R.) has headed off another state attempt to double tax its members, most of whom are independent contractors. The legislation would have required employing real estate brokers to deduct three per cent of each licensee’s commission payment and send this to the state.

This is not only an onerous and time-consuming proposition for brokers, it is double taxation on agents because they still would be responsible for paying quarterly estimated income taxes to the state. Those who advocate this plan say that independent contractors could apply in April to receive refunds for the withholdings, but there is no guarantee the state will actually have the money to do so.

Withdrawal of the Senate Budget Committee proposal is good news, but this may be only temporary. The concept is likely to resurface yet again later this year.

The typical buyer knows little about real estate contracts and less about how banks that own properties (REOs, Real Estate Owned, in Realtor talk) alter those agreements so they are much less friendly to purchasers.

If you are considering buying a bank-owned home, make sure to talk to your agent about the “addendum,” really a counteroffer, you will receive from the bank. Basically, it gives them all the power and puts you in a vulnerable position.

Before you sign any of these bank documents, it would be in your best interests to have them reviewed by a real estate attorney. The attorney will probably not like many of the clauses in the bank’s package and will advise you to change or remove that language. Problem is, if you do that, the bank will almost surely reject your offer.

As an example, one major bank, in its addendum, says that if the buyer does not cancel the contract after his inspections, “Buyer is obligated to complete the purchase or forfeit their earnest money deposit.” Aside from poor grammar, this stipulation is not found in standard real estate contracts used in this area. I would never sign that, but many buyers do because they feel they have no choice.

So, be forewarned, if you get an accepted offer on property where a bank is involved, including short sales, you will be rolling the dice that you do not suffer serious financial damage.

Got back yesterday from California Realtors meetings in Indian Wells — lots of sessions about problems in working with banks on short sales and bank-owned homes (REOs). Sellers who are underwater with their mortgage, and choose a short sale, need to make sure that is the best choice for them.

Banks are commonly having these sellers sign paperwork that allows the lender to pursue the borrower for deficiency judgments long after the sale closes. This is the case even when it is a “purchase money” loan, which, by law, prohibits banks from going after the borrower for money lost.

Sellers should get legal advice from an attorney and financial advice from a CPA before choosing how to dispose of their home when equity is less than the loan amount. Likewise, buyers need legal advice before accepting bank counteroffer language on an REO purchase. As I have written in previous posts, beware of banks.

Yesterday was a beautiful, sunny day here in Indian Wells. Directors of the California Association of Realtors  (C.A.R.) had a number of important things on the agenda, including the first major revision to the purchase contract in many years.

I thought that was going to be the hot topic  until I heard about the proposal to change the length of California real estate licenses from four years to two. Prediction: C.A.R. will put all of its considerable resources into defeating this. Stay tuned.

Effective February first, FHA will insure properties that have been purchased and resold with 90 days. The prohibition was instituted in 2003 in an attempt to discourage lender fraud related to inflated mortgages accompanied by dishonest appraisals. It has had the unintended consequence of preventing FHA purchasers from buying legitimately marketed homes that have been bought by investors on the courthouse steps at a foreclosure trustee sale and, then, quickly resold.

This move will help buyers and FHA itself. Unfortunately, it does not change the policies of Fannie Mae and Freddie Mac, the two, huge government-owned entities that purchase conventional loans.

Go HERE to read details about the FHA rule change (PDF – Adobe Reader required).

To read my article about how this rule almost cost my buyers the house they loved, see “Banking World Doesn’t Always Act Rationally.”