Tag Archives: government

Money Monday: Tax advantages of owning real estate

Usually, it would be expected that the government would take money for the real estate that you own. Since you are gaining a profit off of it for a livelihood it should work like any other job that you have. However, you can take advantage of several tax breaks for your real estate, all which will help you with the ownership of your property.

taxes

If you own a home, then you can also expect for it to be tax deductible. All home related expenses and refinancing that you decide to do for your home will be a way for you to take off money at the end of the year. You can also receive tax deductions from the mortgage interest that you pay. If you just own a home or if you are considering home equity, you can easily find a way to break off some of what you would owe.

When you are working on owning a home, you will be paying property taxes in your monthly payment towards your loan. If you have been paying these taxes throughout the year, they will be deductible on your taxes. In order to make sure this is part of the deduction, you will have to get a statement from the person who carried out the loan as well as find the interest that is connected to the property taxes that you have been paying.

If you have to sell your home and owe tax, you can allow a request for tax relief. This will be given to you by the IRS if they find a significant cause in selling your home. If there are uncertain circumstances that have forced you to sell your home, than the IRS can give you some benefits in taxes.

By finding the necessary forms and conditions, you can easily benefit by gaining tax relief with your ownership. You can easily find how to do this by researching possibilities and finding what the categories are for getting a tax break for the year.

These are all general benefits of owning real estate, for information on your own available tax breaks and how to fully cash in on the tax benefits you should talk to your tax advisor.

Good news for California homeowners facing short sales

short saleUnder regular tax rules, when a lender forgives a debt — that is, relieves the borrower from having to pay it back — the amount of the debt is taxable income to the borrower.

A homeowner who has $100,000 in mortgage debt forgiven through a short sale, for example, would have to pay income tax on the $100,000.

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HUD is Here to Help!

The Department of Housing and Urban Development (HUD) is a government entity that helps both cities and individual homeowners across the country. HUD can help you buy a home, but it’s a little known fact that HUD can also help you improve your home.

Buying a home can be a difficult process, but what if the home of your dreams isn’t quite dreamy enough? What if it’s in need of some serious repairs? That’s where HUD comes in.

What is HUD’s 203(k) program?

HUDWhen a home buyer wants to purchase a house in need of repair or modernization, the buyer usually has to obtain financing first to purchase the dwelling; additional financing for the rehabilitation; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation.

With HUD’s 203(k) program, the borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. The mortgage amount is based on the projected value of the property once the work completed, taking into account the cost of the work.

What types of homes are eligible?

For a property to be eligible for a 203(k), it must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements, and all newly constructed units must be attached to the existing dwelling.

Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided the existing foundation system remains in place.

Other options

This HUD program not only allows home buyers to complete rehab projects, such as painting, tiling, roofing, etc., it also provides the option of turning a single-family home into a multi-unit dwelling (up to four families), or taking a multi-unit dwelling and converting it into a single family home.

You can also move a modular home onto the site of the mortgaged home, but the HUD funds can’t be used to fix up that property until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation.

How the Program Can Be Used

There are three ways you can use a HUD 203 (k) to rehab or improve a one-to-four unit dwelling:
1. To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.
2. To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
3. To refinance existing liens secured against the subject property and rehabilitate such a dwelling.

Home buyers can use the 203(k) program for painting, room additions, decks, and other items even if the home does not need any other improvements; however, all health, safety and energy conservation items must be addressed prior to completing general home improvements.

The 203(k) cannot be used for luxury improvements, such as adding a Jacuzzi or a wine cellar.

For more detailed information about the program, visit the HUD website at hud.gov.

Will Strategic Defaults Increase?

Have you considered strategically defaulting on your mortgage? According to the article below by DSNews.com, there are many homeowners who are now more seriously considering stopping their mortgage payments. What’s changed their mind? The presidential election. Another reason for the proposed future raise in strategic defaults is the soon-to-expire Mortgage Debt Relief Act of 2007. Read more about this topic below:

“A foreclosure agency suggested borrowers may be more encouraged to strategically default due to the expectation that little will change over the next four years surrounding policies on housing and the economy.

Strategic default occurs when a borrower stops making mortgage payments on a property he or she can afford. Typically, strategic defaulters are also underwater. In a recent survey of YouWalkAway.com customers, 47 percent said they believe the Obama administration had no effect on the foreclosure crisis.

About 31 percent believe the administration had a negative effect, and 22 percent of respondents said they think the Obama administration had a positive effect on the foreclosure crisis, the agency reported.

Due to the perception that housing issues are not a priority for the current administration, YouWalkAway said, ‘underwater homeowners who were previously undecided about whether or not they should strategically default are choosing to do so given the election results’…”

Read more of this article by going to DSNews.com.

Are you facing foreclosure? Curious about short selling your home? Please contact me–I would appreciate the opportunity to see if I can help your situation!

A Memorial Day & Real Estate

2012 Memorial Day was one to put in the record books for the rest of your life, wasn’t it? While the proper and fitting focus was on our United States Military, who have in most cases spilled their BLOOD for ALL Americans, we also remember our immediate family as well as those who have passed on. If ever aligned with the military or not, EVERY AMERICAN has been touched by Memorial Day, 2012–and ALL Americans have a connection to someone in the military, whether still alive, not survived, or wounded. Of those three latter-mentioned scenarios, my heart goes out to the wounded who are still alive which are the most important example for all living Americans, they continue to push ahead no matter what the road brings. As Americans, this men and woman are our pinnacle example for ALL; but in most cases ALL our problems are so insignificant in comparison!Memorial Day 2012

Which brings us to the current real estate market and the effect on it that the government has on the economy, from being able to buy a property for a 1st time buyer or a family purchase, to a family trying to keep their home while being innocent bystanders so to speak, meaning these families become victims of ultimately the government and banks. The government and the banks work hand-in-hand, have the ability to save a majority of people’s homes, while keeping them in their homes, and until there is justice for the hardworking families, who do whatever is necessary in the eyes of common sense and good, but to consistently get put back in a position of rejection makes seeing the American Dream Ideal appear as faint as a lightower on a coast subjected to immense fog.

My job includes finding homes for people who are so excited to buy a home that it is such an exhilarating experience on the surface.  However in today’s market, the average buyer knows little about how difficult it is to buy, from getting a loan secured and closed to just securing a property. Competition from “all cash” buyers who are holding and renting to flipping the home for a profit that needs renovation, presents an owner-occupant buyer the immensely daunting task of securing a home. Because buyers who need loans are second class due to sellers getting a higher net and avoiding buyer loan problems in closing, these non-investment buyers have a difficult time ahead of them. The average 1st time buyer has no chance unless they literally hit the lotto or find a great experienced full-time agent to represent them in tandem with the same experienced lender to weave their way through the maze of securing a home. I am that real estate agent and work with a strong lender who can in most cases get a better rate, loan program, and a higher qualifying loan amount than most other lenders.

Then the other side of the spectrum is for owners trying to keep their home who need the right advice dealing with their bank or servicer. Or they may not really know the positive results for getting out of debt in selling an upside-down home and avoiding bankruptcy in the process. Don’t you owe it to yourself to know ALL the details? Call me now before the laws that could immensely benefit you expire.

2012 could be record year for short sales

2012 is on track to become a record year for short sales, according to a report from foreclosure data aggregator RealtyTrac.

Sales of U.S. homes in the foreclosure process, typically short sales, rose 33 percent year over year, to 35,000, in January. A total of 32 states saw annual increases in short sales, and 12 states saw more short sales than REO (real estate owned) sales.

The short-sale increase comes after three years of declines following the inauguration of “a new presidential administration with a new approach to the foreclosure problem,” wrote Daren Blomquist, RealtyTrac’s vice president and author of the report.

“Short sales have long held great promise as a market-based solution to the nation’s foreclosure problem, but short sales transactions over the past three years have actually declined after peaking in the first quarter of 2009,” Blomquist said in a statement.

“January foreclosure sales numbers, along with first-quarter foreclosure activity, strongly indicate that downward trend is ending, and we believe 2012 could be a record year for short sales.”

Several states saw triple- or double-digit yearly jumps in short sales in January, including Georgia (up 113 percent), Michigan (90 percent), California (52 percent), Texas (48 percent), Arizona (44 percent), Nevada (36 percent), and Florida (20 percent).

Although REOs continue to outnumber short sales nationwide, there were only 2,600 more REO sales than short sales in January. Nearly a quarter of states had more short sales than REO sales, including Utah, California, Arizona, Florida, Indiana, Colorado, New York and New Jersey, according to the report.

Six out of the 10 states with the highest share of short sales in January were in the West.

Of the 50 largest U.S. metro areas, nine out of the 10 metros with the highest share of short sales in January were in the West, six of them in California.

Even as short sales increase, the prices buyers pay for them have decreased. In fourth-quarter 2011, a pre-foreclosure property sold for an average $184,221, down 11.3 percent from fourth-quarter 2010. In January, such a property sold for $174,120, down 10 percent year over year.

Short sales are also selling for bigger discounts when compared to the average sales prices of nondistressed homes. Short-sale buyers received an average 21 percent discount in January, up from an average discount of 17 percent the year before. RealtyTrac does not take into account property condition or size when calculating discounts for distressed properties.

Short sales in Massachusetts, Missouri and California saw the biggest discounts in January.

Short-sale timelines appear to be getting shorter. After peaking at 318 days in third-quarter 2011, the average number of days it took for a property to go from the start of the foreclosure process to its sale as a pre-foreclosure was 306 days in the first quarter, slightly down from 308 days in the fourth quarter.’

Although foreclosure starts — either default notices or scheduled foreclosure auctions, depending on the state — were down 11 percent from the previous year in March, last month also saw the third straight monthly rise in foreclosure starts.

There are nearly 3.5 million delinquent borrowers nationwide; 41 percent of those borrowers are seriously delinquent and therefore at high risk for entering the foreclosure process and becoming short sales, RealtyTrac said.

Another, bigger potential pool of short-sellers are borrowers with underwater mortgages. More than 12.5 million borrowers owe at least 25 percent more on their mortgage than their home is worth.

“Even if these homeowners aren’t struggling to make mortgage payments and therefore are at low risk for foreclosure, if they need to sell sometime in the next five years it’s likely they’ll need to sell via short sale,” the report said.

Among lenders and loan servicers, Bank of America had the highest short-sale volume in January, followed by Chase and Wells Fargo.

PNC Financial saw the biggest annual jump in short sales, followed by the Federal Housing Administration, Fannie Mae and Freddie Mac combined.

Those three government-backed entities also had the lowest average short-sale prices in January, the biggest declines in average sales price for short sales, the lowest number of average days to sale, and the biggest decrease in time to sell.

Low Rates, High Obstacles to Refinancing Mortgage

As interest rates have slid over the past couple of years, Gabriel Bousbib of Englewood, N.J., refinanced his 15-year mortgage not once, but twice-cutting his interest rate in two steps from about 4.6 percent to 3.375 percent.

He’s one of a number of homeowners who refinanced just a year or two ago, but decided it was worth considering again as mortgage rates hit record lows-now averaging around 4 percent for a 30-year loan.

refinancing your home“When you’re quoting rates in the high 3s, people are saying, ‘It’s worth it to me,'” says Steve Hoogerhyde, executive vice president at Clifton Savings Bank.

“My monthly savings are going down a few hundred dollars; it adds up over 15 years,” said Bousbib, a financial services executive. “And if rates keep going down, I would refinance again.”

Refinance applications have more than doubled over the past year, though they’re not as high as in previous refinancing booms because it’s harder to qualify in the current atmosphere of tighter credit standards, according to the Mortgage Bankers Association. With the volume of home purchases still low, refinancing accounts for about 80 percent of recent activity.

Although the old guideline used to be that you should consider refinancing only when rates drop at least 2 percentage points, the new wisdom is that it can be worthwhile even with smaller drops.

“For most people, if you can shave three-quarters of a percentage point off your interest rate, it’s worth looking at,” says Greg McBride, an analyst with Bankrate.com, a personal finance website.

For homeowners who plan to stick with the same loan term and want to lower their monthly payments, the math is straightforward. Find out how much it will cost to refinance, figure out how much you’ll save each month and then how long it will take to break even. If you can save enough to offset the refinancing costs within a year or two-or even longer if you expect to stay in the house for a number of years-it’s worth considering.

Though low-interest rates are eye-poppingly low, the refinancing climate has changed from the easy-money days of five years ago. Generally, to get the best rates, homeowners need a 740 FICO credit score, well above the median score of 711. They also usually need at least 10 to 20 percent equity in the property. A recent expansion in the federal Home Affordable Refinance Program should allow refinancing this year by more so-called underwater borrowers – those who owe more than their homes are worth.

Lenders are also demanding much more documentation – including pay stubs, tax returns and bank statements – than they did five years ago, at the insistence of government regulators as well as Fannie Mae and Freddie Mac, which buy mortgages from lenders.

“You have to have a taste for doing paperwork,” says Keith Gumbinger of HSH Associates, a Pompton Plains, N.J., company that tracks mortgage data. “You’re going to be asked for lots of documents. No one loves the process to begin with, and in today’s environment, it’s even less palatable.”

These stricter requirements are simply a return to the kind of underwriting standards that prevailed before lending standards slackened a few years back, leading to the housing bust and foreclosure crisis, McBride says.

“We’re in this mess because money was too easy to get,” he says.

Refinancing costs roughly $3,000, according to several mortgage companies. That covers costs like an appraisal, title insurance, application fees, attorney’s fees and recording the mortgage. Some lenders also offer low- or no-cost options, which they can do by either adding the closing costs to the mortgage amount or charging a slightly higher interest rate.

Bousbib, for example, took a no-cost refinance with Equity Now, a New York-based lender that also lends in New Jersey. “It didn’t cost me a penny,” he says. Equity Now says it charges a slightly higher interest rate on no-cost loans.

Lowering the monthly payment is not the only reason people are refinancing. Many are shifting from a 30-year loan to shorter terms, said Matthew Gratalo of Real Estate Mortgage Network in River Edge, N.J. He has worked with clients in their 40s who hate the thought of carrying a mortgage into retirement.

“They’re looking ahead and saying, ‘I don’t want to pay a mortgage forever; can I get this done in 15 years? Can I be done with this and have it paid off?’ ” Gratalo says.

“Certainly shortening the term makes a lot of sense because you can cut years of mortgage payments,” says Carl Nielsen of Mortgage Master Inc.’s Wayne office.

Nielsen, for example, recently talked to a customer with a $375,000, 30-year mortgage at 4.5 percent. The customer is considering a 20-year mortgage at 3.75 percent. His monthly payments would go from $1,900 to about $2,223, but by shortening the life of the loan, he’ll save more than $150,000 in interest payments.

“That’s kind of a no-brainer,” says Nielsen.

Sources: Greg McBride, Bankrate.com ©2012 The Record (Hackensack, N.J.), Distributed by RISMedia and MCT Information Services.

Mortgage Reform, Refinance, Really?

My Thoughts on the Current Real Estate Market: Mortgage Reform, Refinance, Really?

With interest rates at the lowest rate in history, and foreclosures bursting through the ceiling still at this writing, I ask myself, why is this still happening?  How does the 1-in-4 upside-down homeowner out there, staring at their bank and scratching their head, get help to avoid walking away?

The empty promises, or the so-called “helping hand” being offered by the banks and the government, is still a joke to say the least. For the people who sold their home in recent years, they are in a position to buy or have already bought another home and recovered from that stress of “What do I do?” while taking advantage of the low interest rates and prices.

upside-downIt still is not too late to make that leap and start over–because the faster you do, the faster you will recover. Property values are not expected to go anywhere for at least two more years, and the laws for selling short sales that protect homeowners will expire at the end of this year. Laws allow a purchase after two years of selling a short sale. With a consultation with me and strategy, you could pay off most of your unsecured debt, while not paying your mortgage. This can only be done with someone who has had experience with this. I have done this with clients that have recouped while living in their home for over 3 years without paying a mortgage.

The latest reform laws are offering a glimmer of hope; however, when and how these guidelines are implemented by the banks and government is clear to not happen for awhile.  The state governments will have to also be on board. At this time, California is weighing the settlement being offered for unlawful foreclosure practices from five of the larger banks that have agreed to pay a settlement.

My opinion is that any settlement should accompany a mandate that the banks must reduce every upside-down property out there to fair market values, to allow the homeowner an opportunity to keep their home; granted that the home is not dilapidated to the point that the owner does not have the funds to repair the home or care for it after the refinance. This exclusion is warranted to the extent that a home that is in bad shape is only dropping or keeping the values low in the neighborhood and should be taken care of. In a perfect world, the banks would allow the homeowner funds after the refinance to repair the home–heck, let’s go for it all!

As always, my gratitude to you for reading my blog.  Please share your opinions or questions–I look forward to any questions I can answer or help I can give!

John A. Silva, Realtor

(619) 890-3648 | www.JohnASilva.com