Gov. Schwarzenegger Signs 10K State Tax Credit Into Law Today

*Caveat: But you better hurry–limited funds = limited time in which to collect.  Here’s the quick scoop below provided by the California Association of Realtors.

“AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

The positive impact of the federal home buyer tax credit is clear. Nearly 40 percent of first-time home buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered, according to C.A.R. research conducted last year.
 
*The state’s previous home buyer tax credit program was so successful that it ran out of tax credits by the end of June 2009, eight months before it was set to expire and just as housing markets appeared to be turning a corner.  Unlike last year’s legislation, AB 183 adds a tax credit for the purchase of an existing home by a first-time home buyer.
 
AB 183 will significantly contribute to the effort to stimulate jobs-creation within California’s housing market by helping to incentivize first-time home buyers to purchase homes that have been abandoned, foreclosed upon and returned to the lender, or have been sitting on the market for extended periods of time. It is these homes that will require substantial rehabilitation by the new owners, which will in turn generate a tremendous increase in jobs and accessory purchases connected to home improvement activities.”

For more information, visit: http://gov.ca.gov/press-release/14712/ OR http://www.car.org/governmentaffairs/stategovernmentaffairs/homebuyertaxcredit/

Please feel free to call me with questions and further details,  858-869-9454!  Or go to my website www.findigs.com to start your custom search today.

Stay Classy San Diego!

UNDISCLOSED SHORT SALE PAYMENTS MAY BE ILLEGAL

Undisclosed payments in short sale transactions, especially those paid outside of escrow, may violate the law, including RESPA, laws against loan fraud, and licensing laws. Short sale agents have increasingly reported to C.A.R. about requests for agents and their clients to pay junior lienholders and others, oftentimes outside of escrow.
One common scenario is when a short sale seller’s senior lender authorizes a payment of $3,000, for example, to extinguish a junior lien, but the junior lender demands that the buyer pays an additional $9,000 outside of escrow. Not only would it be risky for a buyer to pay outside of escrow, but concealing this additional payment from a federally-insured senior lender may constitute loan fraud, which is a crime punishable by 30 years imprisonment plus a $1 million fine (18 U.S.C. section 1014). Furthermore, omitting from the HUD-1 Statement any charges paid at settlement by either a buyer or seller may violate the Real Estate Settlement Procedures Act (RESPA) (Appendix A to 24 C.F.R. Part 3500). Depending on the specific circumstances, carrying out these payment requests may also violate other laws and regulations, and an agent’s participation in the scheme may be subject to license revocation by the Department of Real Estate or other disciplinary action.
Agents and their clients are encouraged to file any complaints regarding fraudulent activities to the proper authorities, including the following agencies:

Attorney General’s Office
California Department of Justice
800-952-5225 Phone
http://ag.ca.gov/consumers/mailform.htm

Department of Housing and Urban Development (HUD)
HUD Office of Inspector General Hotline (GFI)
800-347-3735 Phone
http://www.hud.gov/offices/oig/hotline

Federal Bureau of Investigation (FBI)
202-324-3000 Phone
https://tips.fbi.gov

Reference:
Realegal® is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing more than 175,000 REALTORS® statewide.

Edited by: Stella Ling, stellal@car.org

IRS Clarifies What’s Needed to Claim Tax Credit

The Internal Revenue Service has clarified which documentation taxpayers need to submit to claim the first-time and move-up homebuyer tax credit.

While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties’ signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn’t common.

The IRS clarification says: “In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. … The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.”

For repeat buyers, the IRS is seeking documentation that home buyers have lived in the previous property for a consecutive five of the past eight years. Proof can include property tax records, home owner insurance records, or mortgage interest statements.

Source: Washington Post (02/20/2010)

Tips for First Time Home Buyers in San Diego

If you’re trying to buy a home for the first time in San Diego, you may have discovered that the difficulty is not just in the pre-qualification process for financing a new home. The real challenge is getting one of your multitude of offers accepted. Here’s a few tips to keep your excitement intact and hopefully get that offer accepted earlier, especially if you’re scrambling to make the April 30th tax credit deadline:

1) Patience is a virtue. Understand your market, and know from the get-go, you may be putting in more than 30 offers before one bites, and before one counters with acceptable terms. For instance, because inventory is down, and short sales take a while to get bank approval, we are in what is called a Seller’s Market. While this is true, over 70% of listed homes in San Diego are still traditional sales. I just got one accepted yesterday, but it did take about a month of offer after offer. 

2) Define the terms. Educate yourself, so you know what terms to look for on a listing that indicate the Seller/Owner will move quickly.  For instance,

• REO–these are bank owned properties, so they’ve been through the foreclosure process and tend to take about the same amount of time as traditional sales to close.
• Approved Short Sale–this means the Bank has approved an amount and is looking for the highest and best offer to close asap.
• Distressed or Traditional sales–this is something your Real Estate Agent can set up for you in a custom search as well, so don’t forget to ask them.

3) Get Pre-qualified. Do not start looking until you have direct underwriting or prequalification of your lender and know the amount you can finance and the type of loan that is best for you, for instance FHA or Conventional.

4) Ask Your Advisors. If you are able to go all cash–that will obviously give you a competitive edge, but it isn’t always what’s in your best financial interest, so consult a trusted advisor to look at your overall financial position. This could be a CPA, Financial Planner, or Attorney to give a few examples. It is a good idea to have these as contacts throughout any purchase, so get your team together. You may never have to use them, but if you need them, then you’re prepared. It might be a bit pricey, but better than learning the hard way, which tends to be more costly in the end.

5) A personal touch. Because Sellers and Banks are in multiple offer situations, a suggestion that may make your offer stand out among others is a letter about you and your family and a picture to go along. It puts a human face on the review of each contract coming in, and just might give your offer the edge it needs to get accepted.

5) To thine own self be true. Be clear about what you are looking for. The clearer your search criteria, the faster you’ll find those properties that meet the needs of your family. It also helps your Real Estate Agent customize a great search for you, and will allow them to keep their eye out too when showing other clients around town.

6) Check Your Mindset.  If you’ve done all of the above you’re ready to begin your quest for your first home.  Decide not to get attached to any one property.  Most likely the first few you love, will not get accepted.  Instead of getting down, just treat searching like a game.  Fire off offers on all that seem to meet your criteria and see what sticks.  If at first you don’t succeed, keep firing, and eventually timing, price, and all the other factors you’re looking for in your first home will fall into place.  It is not just winning, but how you play the game that makes you a real champion, so have fun.

I hope these words of wisdom will keep the excitement rolling and help you as you embark on your journey toward home ownership. Good luck, and happy house hunting everyone!

Harder to get an Uncle Sam Mortgage

Here’s a great article on the changes in FHA Financing due to the number of defaults on FHA. You may want to review with your Lender whether FHA or Conventional Financing is more advantageous for you.

http://money.cnn.com/2010/01/19/real_estate/fha_loan_requirements/index.htm

Moneywise Tip of the Day

If you’re thinking of buying a house, the first step is getting pre-approved so that you know how much house you can afford. The process of pre-approval takes a snapshot of your current financial position and gives you an estimate on the amount a Lender is willing to give you to buy a home or investment property. The amount of money a Lender is willing to lend you is based on your debt to income ratio, so if there is a disturbance in the force, so to speak, between the time you have your hot pre-approval in your hand and the time your loan is set to fund, your financing could be jeopardized. Disturbances in the force could be buying a new car, brand new appliances, or taking that cruise and putting it on your credit card. I’m not saying fast cars, clean clothes, and cool vacations should be put on hold indefinitely. I am saying these will all affect your income to debt ratio in a negative way prior to your loan funding. It is therefore, a good idea to hold off on large purchases of any kind prior to the close of escrow. This will save you a lot of heart ache. Trust me, buy the house, then go buy the red Camaro with T-tops you always wanted in High School, sport the cut-off T-Shirt, and turn-up the Guns-N-Roses because you’re a home owner!!!

Moneywise Tip of the Day

If you’ve used a credit card convenience check to make a large purchase at what you thought was a great interest rate, and you like to pay your monthly charges off at the end of each month BEWARE. It turns out that what credit card companies don’t tell you, is that they apply any payments you make to the convienence check balance first. So when you think you are paying off your monthly charges, you’re actually paying down your convenience check charges that are sitting at 3% or less. And, here’s the kicker, essentially transferring the debt sitting at 3% or less to your average daily balance charged at your card’s annual percentage rate, and hopefully that is not more than 10% for most of you. Sneaky, but apparently, they claim it is written somewhere in microscopic font size, I assume, on the check or terms that come along with the check. For those of you who are starting to have chest pains, the good news is the new regulations on credit card companies are putting a stop to this misleading practice come the end of February 2010. Just to be sure, I’d double check my statements, and call your card companies, and make sure you’re not paying more interest than you thought. My husband and I just figured this out the hard way, but thankfully, we caught the problem early. Have a great Sunday!

Should You Sack Your Realtor?

Ever since I first became a Realtor in a land far away and a time long ago, the principle of fiduciary duty has been mentioned time and time again. I’m sure many people who have dealt with a Realtor or read any of the agency clauses (as you should) are familiar with this word, but the meaning is often lost in the legal rhetoric. Before diving into the full meaning of fiduciary, I would like to emphasize that it is one of the most important terms Buyers and Sellers should understand in its entirety. Furthermore, it is this duty that makes the blatant lack of web marketing skills in a Realtor inexcuseable and deserving of a sacking. And because I’m a consumer protection nazi, I would take it one step further, and make the lack of web marketing skills, grounds for having one’s licensed revoked.

Now before I illicit a tongue lashing from some of you (most likely Realtors who have made little effort to provide web marketing of any kind to their clients even though they KNOW 90% of Buyers look online for properties), let me state my case:

I shall begin by defining Fiduciary Duty, well I say I, but Wikipedia does it quite well, so why remake the wheel!

A fiduciary duty is a legal or ethical relationship of confidence or trust between two or more parties, most commonly a fiduciary and a principal. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relation one person, in a position of vulnerability, justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests.

“A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. [1]“

 

A fiduciary duty[1] is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the “principal“): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents. The word itself comes originally from the Latin fides, meaning faith, and fiducia, trust. (Ref. http://en.wikipedia.org/wiki/Fiduciary).

To summarize, Fiduciary Duty is both a legal and ethical relationship of trust that requires the party who is entrusted (fiduciary) to act in the best interests of the principal–the person who places their trust in the fiduciary (Client, Seller, Buyer). The fiduciary “Must not put his personal interests before the duty” to his principal/client’s best interests. To take this faith and trust and abuse it or misuse it is a criminal offense.

One does not have to maliciously intend to abuse or misuse this duty, one can also just be negligent, but negligence still carries the same harm to the principal/client that intentional abuses can.

For instance, all the studies, all the media out there through the National Association of Realtors, Californian Association of Realtors, Realtor.com, and I could go on, communicate the need for online marketing skills. These same professional associations have events you can go to that are often FREE, to learn how to become an effective online marketing specialist. They also emphasize the studies showing that 90% of Buyers look online for real estate. But the truth is, less than 1% of Realtors in San Diego know how to create a virtual tour of any kind and fail to market or effectively market their client’s properties online. You do the math and tell me if you think negligence exists?

The advent of the internet has shook the foundations of the way news is reported, and put many paper publications out of business. Why doesn’t it follow that there has also been a paradigm shift in the Real Estate World? As a Seller, especially in this market, if your Realtor is not providing you with web marketing exposure, and it is not a part of their listing presentation and marketing plan, it is time to evaluate whether they are keeping up on their end of the bargain. When considering a Realtor to list your home, there are a few questions the savvy Seller should ask:

1. What major real estate sites will my property be advertised on?

2. Do you do virtual tours? Video Tours/Picture Tours?

3. How long will it take before the virtual tour is available on the local MLS, and on these major sites?

If they can’t give you an answer. Move on! If you are currently with a Realtor, who took 1 picture of your property or didn’t bother taking one at all, or they do not have a strategy for getting exposure online, it may be time to re-evaluate their contract. In my professional opinion it is a violation of fiduciary duty, to go back to you, the Seller, and ask you for a price reduction after 30/60/90 days on the market if a Realtor neglected to put adequate pictures on the MLS, and neglected to provide additional exposure through other web-marketing tools. Your Realtor just kept your property a secret from 90% of Buyers! Ninety percent! And now they want a price reduction so they can close and get their commission! If that isn’t criminal and doesn’t deserve a sacking–I don’t know what does? It is like saying, “Look I’ve done nothing to get your property in front of 90% of all buyers out there, but the real reason your house isn’t selling is the list price.” Really!?!

I will surely get a tongue lashing for this Blog, but I’m not concerned with pleasing my fellow Realtors, I’m concerned with upholding my fiduciary responsibility and ensuring that people know that Realtors are not all alike. In fact, if we honored our fiduciary duty, by becoming web-marketing specialists it would be a win-win for everyone. More Sellers getting what their property is worth with more potential for multiple offer situations, and Realtor commissions would go up just because we were able to get our Seller/ Client/ Principal what they wanted and needed for their property. I won’t leave Buyers out in the cold. With more properties visible to them, they have more choices, and are more likely to find exactly what they are looking for in a timely manner and at a price they can afford.

There you have it! The lack of web marketing skills in a Realtor is inexcuseable and a violation of the fiduciary duty, which requires one to act in the best interest of one’s principal. Being a web marketing guru not only allows a Realtor to achieve the highest level of fiduciary enlightentment, but it is also a win-win for all parties involved. It also furthers the principle of competition, which is a predecessor of a thriving economy. And with that, I rest my case. The jury is no longer out, they are well informed, and ready to let you hang if all the facts don’t add up. Power to the people! ; ).

Fence Sitter or Savvy Investor: Choose One

It has come to my attention that there are still a few people out there who are able to buy in this market and who are sitting on the fence for one reason or another. A few reasons may be:

• Waiting for the market to bottom out.
• Waiting for interest rates to go a 1/2 point lower or better.
• Trying to save just a little more before they buy.
• They just do not understand the $8000 first time home buyer tax credit or the $6500 repeat-buyer or move-up buyer tax credit.

1. If you are waiting for the market to bottom out, you missed it. All current reports for San Diego show the market reached its lowest point in 2008 Q3 at approximately -40%, and was last reported at -37.2% in 2009 Q3 a year later (N.A.R. Market Report 2009, Q3). Sales of single-family, re-sale homes surged in December, up 20.7% from November and up 8.1% year-over-year. For the year, home sales were up 17.2%. With the surge of 2009 Q4, the current market low is now approximately -33.17% over the home values of 2006. I’d say -33% is still something to get excited about as a buyer, but it won’t last forever.

2. If you are waiting for interest rates to go lower than they are, don’t go trying to sell crazy here because we’re all stocked up! Interest rates are still at all time lows. In fact, if interest rates go up a 1/2 point tomorrow, that is $25,000 of your buying power today–gone! Kiss it good-bye. This means if you qualified for a 225K home, you can only afford a 200K home. If interest rates go up 1 point, you throw away 50K of your buying power, so you’re looking at a studio for 175K rather than that nice 2 to 3 bedroom you wanted. How’s that fence feeling now? The fact is that the price to borrow now is still at all time lows, just ask anyone who purchased a home in the 80′s, but all indicators predict it won’t be that way forever. With that I’ll give you some economist speak to add clout to my layman rant:

“The spread between the 30-year fixed rate mortgage and the 10-year Treasury bond fell again in the third quarter and stands close to the historic average. This decline of the spread suggests that the financial markets view the risk on mortgage debt as close to a “normal” state and that the private sector will buy up excess demand if yields rise. Consequently, the Fed is likely to phase out its program of buying up mortgages in the secondary market to keep rates low, leaving the private sector to fill the void. Mortgage rates are likely to rise in first or second quarter of 2010 as the Fed exits the mortgage market.” –N.A.R. 2009, Q3 Report.

3. For those trying to save just a little more before you buy, please read point #2 above, and pay special attention to point #4 below. If you wait, you wipe out any impact you can make by saving just a little more. Also, show me a mutual fund, 401(k), IRA, CD, stock that has a historic rate of 4% appreciation beating the historic rate of inflation (roughly 3%). We all know at one time all of those I listed beat 4%, but for sake of argument I’m addressing conservative investors, which most people are since our savings rate is 0% in the U.S. That means if you have savings and leverage you’re doing pretty damn good, so pat yourself on the back. It goes without saying that Real Estate is a cornerstone of wealth building (that’s a blog for another time).

4. Finally, time to clear the air on the extension of the 8K tax credit and introduction of the 6.5K repeat home-buyer tax credit. For you fence sitters, this is a credit (not a loan) from the government to you. As long as you stay put for 36 months beginning at the purchase date (date of C.O.E.=Close of Escrow). I work hard and have paid my share, just like you, in the form of taxes and if the government wants to hand me 8K while I enjoy the low-cost of borrowing to by my first home, I’m not going to just sit there. I’m going to shout, “Show me the MONEY!” And for those of you, who have not purchased a primary residence in the last three years, Uncle Sam wants to give you a big fat $6500 incentive to move-up or just move! I STRONGLY encourage each person reading this to read the IRS.gov site regarding these tax credits along with the Federal Housing Tax Credit site. I’ve even made it easy. Just click and read. Knowledge is power, so don’t let yourself be in the dark. These sites spell out everything, and it is easy to read and understand–I mean if I can figure it out, so can you!

In sum, prices of homes are still selling at -33% compared with the height of the bubble in 2006, the price to borrow is still at an all time historical low (remember each point of increase is a cost to you of 50K!), and the government wants to give you between $6500 and $8000 just to hop off the fence. Now that you are duly informed, you’re ready to make the right choice. I trust you. You’re good enough, smart enough, and dog-on-it people like you.

Raining Cats & Dogs!

If you’re out and about or have been here in San Diego this week, you’ve seen the avalanche of water pouring off roof tops into the streets, so be extra careful. Needless to say this record-breaking rainfall has caused widespread flooding, and with that much water on the road you’re going to hydroplane. Just make sure you have a cup of warm joe if you have to be out, and be patient with other drivers–and the pedestrians making bee-lines for shelter. Oh, and for those of you who think it’s fun, don’t drive fast by people on the sidewalk or waiting for the bus, that’s just bad form. Weather happens, but it isn’t worth anyone getting hurt. Keep dry, drive safe, be good to your neighbor, and above all “Stay classy San Diego!”