When something malfunctions in your home, wouldn't it be great if you could pick up the phone, request a service call, pay a nominal service charge and have the problem fixed? In theory, this is how a home protection plan works.
A home protection plan--also know as a home warranty-is an insurance policy that insures homeowners against defects in the major systems of their home. Precisely what is covered will vary from one company to the next. Most policies cover the heating, plumbing and electrical systems as well as built-in appliances like the stove, dishwasher and garbage disposal. Some companies will cover movable appliances like the refrigerator, washer and dryer for an extra charge. And some policies even include roof coverage-if you pay an additional fee.
Policy terms are usually for one year and they are renewable. The annual cost of a policy varies but you might expect to pay about $250 for a moderate-size home. Protection plans are available for both single-family residences and condominiums.
Home protection plans are popular in the home sale industry because they provide a relatively inexpensive way to take care of home defects that develop soon after the home sale closes. For example, let's say the water heater quits working the day after closing. Depending on the terms of the purchase agreement, the seller may be responsible for replacing the water heater. A new hot water heater can cost several hundred dollars. However, if there is a home protection plan in place at closing, the hot water heater will probably be replaced for the nominal cost of a service charge. Home warranty service charges vary but they are often in the range of $45-$55 per call.
Some sellers offer to pay for a home protection plan to cover the home for the buyer for one year. If problems arise during that year, the buyers simply call the warranty company and pay the service charge. The warranty company pays for the repair or replacement.
FIRST-TIME TIP: Be sure to read the policy carefully because there are exclusions from coverage. For example, pre-existing conditions are not usually covered. So if the furnace hasn't worked properly for years, it probably won't be covered by the buyer's home protection plan. Also, there are limitations on coverage. For instance, some policies offer roof and septic system coverage, but only up to $1,000 of work.
Seller coverage is also available to cover the home during the listing and sale period. Seller coverage works the same as buyer coverage except that there are usually more limitations on the coverage. For example, the furnace is usually covered under both buyer and seller coverage. But, the amount of coverage offered under seller coverage is often less than the amount that's available to the buyer if the furnace breaks down after closing.
One seller who had signed up for seller coverage was able to have some of the defects that were discovered during the buyer's inspections fixed by the home protection plan company for the cost of a service charge. This was a great deal for the seller because it saved him money and he didn't have to pay the policy premium until closing. Seller coverage is usually charged by the day. The cost varies, but it can run about 75 to 95 cents a day.
THE CLOSING: If the seller of a home you're buying does not offer to pay for a home protection plan, you can pay for one. Be sure to order it before the closing date.
There are a few companies that will allow you to purchase a home warranty at any time.
Showing posts with label tips. Show all posts
Showing posts with label tips. Show all posts
Thursday, April 28, 2011
Friday, March 25, 2011
Increase Your Home's Value
It is no secret. 2010 was a hard year for home values. While you cannot
protect yourself against market corrections, you can take small steps to help
increase your home's value and make it more marketable. The following tips
are meant to inspire and motivate you to treat your home like the investment it
was meant to be.
1. Make Repairs: Homes require regular maintenance and repairs are a
necessary component of home ownership. Procrastination gets you nowhere
when it comes to home value. Stay on top of repairs as they are needed. And
be sure to address large projects before placing your home on the market. For
example, roofs are expensive to replace or repair. Many buyers will pass up
your otherwise wonderful home when faced with roof issues.
2. Curb Appeal: Curb appeal is about first impressions. It is also about
neighborhood values. Drive down a street lined with manicured lawns and well maintained
homes and the values are sure to reflect the care their owners take.
On the other hand, streets with overgrown trees, junky yards, and chipped and
faded paint are fighting an uphill battle in the values game.
3. Community Involvement: The classic quote from Chinese philosopher
Lao-tzu says, "A journey of 1,000 miles begins with a single step." This is
especially true for improving the health and wealth of a community. Change
starts with yourself. By becoming an active member of your community, you
can inspire the change you desire. Family, friends, and neighbors will follow
your lead of civic duty. How can you get involved? Run for city council, join the
PTA, volunteer, and help organize fund raisers and events that inspire
community togetherness.
4. Updated Kitchen: Kitchens are a real selling point. Outdated cabinets,
counters, and appliances will stick out like a sore thumb to buyers. Be sure,
however, that you research your comparables before beginning a remodel. You
do not want to price yourself out of the running. This means if you love granite
and travertine, but other homes in your area are selling with laminate, you will
probably not be able to ask for a drastically higher price that covers the price of
the granite.
5. Updated Bath: Bathrooms also hold much of a home's value. New lowflush
toilets cost as little as $100. And tubs and showers can be easily replaced
or resurfaced. Be sure, above all else, that your bathrooms are clean for
showings.
6. Energy Savers: Buyers are looking for homes that are energy efficient.
Low-flush toilets, solar panels, water filtration systems, and insulated windows
are all inexpensive fixes for energy zappers.
Consider these simple tips and decide for yourself what may help your home retain its value.
protect yourself against market corrections, you can take small steps to help
increase your home's value and make it more marketable. The following tips
are meant to inspire and motivate you to treat your home like the investment it
was meant to be.
1. Make Repairs: Homes require regular maintenance and repairs are a
necessary component of home ownership. Procrastination gets you nowhere
when it comes to home value. Stay on top of repairs as they are needed. And
be sure to address large projects before placing your home on the market. For
example, roofs are expensive to replace or repair. Many buyers will pass up
your otherwise wonderful home when faced with roof issues.
2. Curb Appeal: Curb appeal is about first impressions. It is also about
neighborhood values. Drive down a street lined with manicured lawns and well maintained
homes and the values are sure to reflect the care their owners take.
On the other hand, streets with overgrown trees, junky yards, and chipped and
faded paint are fighting an uphill battle in the values game.
3. Community Involvement: The classic quote from Chinese philosopher
Lao-tzu says, "A journey of 1,000 miles begins with a single step." This is
especially true for improving the health and wealth of a community. Change
starts with yourself. By becoming an active member of your community, you
can inspire the change you desire. Family, friends, and neighbors will follow
your lead of civic duty. How can you get involved? Run for city council, join the
PTA, volunteer, and help organize fund raisers and events that inspire
community togetherness.
4. Updated Kitchen: Kitchens are a real selling point. Outdated cabinets,
counters, and appliances will stick out like a sore thumb to buyers. Be sure,
however, that you research your comparables before beginning a remodel. You
do not want to price yourself out of the running. This means if you love granite
and travertine, but other homes in your area are selling with laminate, you will
probably not be able to ask for a drastically higher price that covers the price of
the granite.
5. Updated Bath: Bathrooms also hold much of a home's value. New lowflush
toilets cost as little as $100. And tubs and showers can be easily replaced
or resurfaced. Be sure, above all else, that your bathrooms are clean for
showings.
6. Energy Savers: Buyers are looking for homes that are energy efficient.
Low-flush toilets, solar panels, water filtration systems, and insulated windows
are all inexpensive fixes for energy zappers.
Consider these simple tips and decide for yourself what may help your home retain its value.
Tuesday, October 12, 2010
The Homeowner Tax Credit– What It Is and Where It Is Headed
The Taxpayer Relief Act was a huge break for sellers of real estate back in 1997. Basically, Congress changed the tax laws so that a homeowner could exempt $250,000 in gains from the sale of the owner’s primary residence. This had outstanding tax benefits for sellers over the last ten years as properties seemed to exponentially increase in value and homeowners routinely sold homes for a profit. In fact, prior to the Taxpayer Relief Act of 1997, homeowners had little incentive to move out of their home into a smaller place because it would cost them too much money in capital gains tax.
However, the President and Congress have recently began hinting that they might roll back or repeal some of the tax benefits within The Taxpayer Relief Act of 1997. This talk stays somewhat under the radar because, presently, people are not routinely selling their homes for a profit. But my question is: “What happens when the market ticks up and this benefit is repealed or rolled back?” How will that affect our business?
The Taxpayer Relief Act
The rules are pretty simple and any good realtor should know them well. Essentially, a homeowner can sell a “primary residence” and keep the first $250,000 of profit tax free. If the homeowners are married and filing a joint tax return, the couple can keep the first $500,000 of profit tax free.
In order to be deemed a “primary residence” the home must 1) have been lived in by the seller for at least two of the last five years, 2) the seller and his/her spouse must not have collected this tax benefit within the last two years on a different home sale, and 3) the property must be residential (commercial properties are not eligible for this tax exemption). The seller need not have lived in the home for two consecutive years. Also, as long as a seller has not sold a “primary home” and taken this tax benefit within the last two years, the tax exemption can be claimed over and over again.
The rules were made more lenient in 2004 for sellers who have been deployed by the military, have had a major change in health, have been forced to move for work, or can demonstrate insurmountable hardship. In these special circumstances, the sellers do not have to show that they lived in the primary residence for two of the last five years. However, they still cannot collect the benefit if they already have done so on a different sale within the last two years.
The Proposed Change
Most business attorneys are aware that the current capital gains tax that individuals and businesses pay on “personal property” sales will rise in 2011 because of a “sunset provision” that was placed in the Tax Increase Prevention and Reconciliation Act of 2006. This means that the Act terminates on its own on January 1, 2011, and without an additional act of Congress, individuals and businesses will have to pay higher taxes on profits that they earn for selling certain assets next year. Generally, real estate sales are not included in this capital gains tax increase. However, as the debate has heated up about whether to save the current “personal property” capital gains tax rate, the President and many in Congress have taken a firm stand that they want “fairness” in tax paying. This has lead to a discussion about revisiting the capital gains tax structure, including a tax increase on the profits that individuals earn when they sell their real estate holdings.
In his 2008 debates with Hilary Clinton, then Senator Obama proposed changing the entire capital gains tax structure back to where it was prior to The Taxpayer Relief Act of 1997. This would have numerous affects. Most notably, the homeowner tax benefit would be rolled back and virtually eliminated. Prior to 1997, sellers were only entitled to a $125,000 capital gains credit – and that was only if the seller was 55 years old or older at the time of sale.
Some on Capitol Hill have recently argued that the homeowner tax credit should be reduced from a $250,000 credit for one seller and a $500,000 credit for married sellers to a blanket $125,000 credit regardless of whether the couple files jointly or separately. The White House has not taken an official stand since Mr. Obama became President. However, some notable leaders in Congress, including Chairman of the House Financial Services Committee Barney Frank and Senate Majority Whip Richard Durbin (both voted against the Taxpayer Relief Act of 1997), have recently suggested that the homeowner tax credit of 1997 should be on the table along with all other capital gains.
By Chris Moles
Brokerage Counsel
Intero Real Estate, Inc.
However, the President and Congress have recently began hinting that they might roll back or repeal some of the tax benefits within The Taxpayer Relief Act of 1997. This talk stays somewhat under the radar because, presently, people are not routinely selling their homes for a profit. But my question is: “What happens when the market ticks up and this benefit is repealed or rolled back?” How will that affect our business?
The Taxpayer Relief Act
The rules are pretty simple and any good realtor should know them well. Essentially, a homeowner can sell a “primary residence” and keep the first $250,000 of profit tax free. If the homeowners are married and filing a joint tax return, the couple can keep the first $500,000 of profit tax free.
In order to be deemed a “primary residence” the home must 1) have been lived in by the seller for at least two of the last five years, 2) the seller and his/her spouse must not have collected this tax benefit within the last two years on a different home sale, and 3) the property must be residential (commercial properties are not eligible for this tax exemption). The seller need not have lived in the home for two consecutive years. Also, as long as a seller has not sold a “primary home” and taken this tax benefit within the last two years, the tax exemption can be claimed over and over again.
The rules were made more lenient in 2004 for sellers who have been deployed by the military, have had a major change in health, have been forced to move for work, or can demonstrate insurmountable hardship. In these special circumstances, the sellers do not have to show that they lived in the primary residence for two of the last five years. However, they still cannot collect the benefit if they already have done so on a different sale within the last two years.
The Proposed Change
Most business attorneys are aware that the current capital gains tax that individuals and businesses pay on “personal property” sales will rise in 2011 because of a “sunset provision” that was placed in the Tax Increase Prevention and Reconciliation Act of 2006. This means that the Act terminates on its own on January 1, 2011, and without an additional act of Congress, individuals and businesses will have to pay higher taxes on profits that they earn for selling certain assets next year. Generally, real estate sales are not included in this capital gains tax increase. However, as the debate has heated up about whether to save the current “personal property” capital gains tax rate, the President and many in Congress have taken a firm stand that they want “fairness” in tax paying. This has lead to a discussion about revisiting the capital gains tax structure, including a tax increase on the profits that individuals earn when they sell their real estate holdings.
In his 2008 debates with Hilary Clinton, then Senator Obama proposed changing the entire capital gains tax structure back to where it was prior to The Taxpayer Relief Act of 1997. This would have numerous affects. Most notably, the homeowner tax benefit would be rolled back and virtually eliminated. Prior to 1997, sellers were only entitled to a $125,000 capital gains credit – and that was only if the seller was 55 years old or older at the time of sale.
Some on Capitol Hill have recently argued that the homeowner tax credit should be reduced from a $250,000 credit for one seller and a $500,000 credit for married sellers to a blanket $125,000 credit regardless of whether the couple files jointly or separately. The White House has not taken an official stand since Mr. Obama became President. However, some notable leaders in Congress, including Chairman of the House Financial Services Committee Barney Frank and Senate Majority Whip Richard Durbin (both voted against the Taxpayer Relief Act of 1997), have recently suggested that the homeowner tax credit of 1997 should be on the table along with all other capital gains.
By Chris Moles
Brokerage Counsel
Intero Real Estate, Inc.
Wednesday, September 23, 2009
Home Maintenance Tips
It's Fall: Time to Prepare Your Home for Winter
Fall maintenance is important because it helps make homes more energy efficient during the winter months, and will safeguard homes against potential seasonal 'disasters' such as leaking roofs or home fires caused by neglected chimneys. Here are ten tips to a safer, warmer winter.
TIP #1 -- Check the heating system. Check the filter, pilot light and burners in a system fueled by gas or oil. Fireplaces, boilers, water heaters, space heaters and wood burning stoves should also be serviced every year. Have the specialist inspecting your unit show you how to change the filter and then you should change it at least once every 2 months. Clean ducts in the heating system. Clean and vacuum dust from vents, baseboard heaters and cold air returns. Dust build-up in ducts is a major cause of indoor pollutants. Ducts should be professionally cleaned about every three years.
TIP #2 -- Have the chimney inspected by a qualified chimney professional. Chimneys should be checked and cleaned, if necessary, on an annual basis. If you are using a wood stove this season, be sure that the stovepipe was installed correctly according to the manufacturer's recommendations and local codes. If there is any doubt, a building inspector or fire official can determine whether the system is properly installed. If you have a chimney that will not be used, consider having it sealed shut.
TIP #3 -- Test fire alarms, smoke detectors and carbon monoxide detectors, and vacuum out the dust. Batteries should be checked every six months to ensure that they're working.
TIP #4 -- Remove excess leaves and damaged branches from trees surrounding the house. Dead branches have the potential to break and fall, ruining roofs, decks, or vehicles and the possibly causing injuries to people.
TIP #5 -- Maintain gutters. Remove all debris that can slow or impede the ability of water to drain effectively from the roof. Trapped water can be destructive not only to the gutters themselves but to the adjoining roof as well. Make sure gutter water drains away from your home.
TIP #6 -- Inspect the roof. Look for damaged or loose shingles, gaps in the flashing at joints with siding, vents and flues, as well as damaged mortar around the chimney.
TIP #7 -- Inspect exterior walls, doors and windows. Check walls and window sills for damage such as cracks, gaps, loose or crumbling mortar, along with splitting and decaying wood. Caulk exterior joints around windows and doors, which helps keep the home weather tight and lower heating bills. Check windows and doors to make sure locks work properly and that they are in good condition. Clean tracks and lubricate hinges. Repair or replace any cracked windows.
TIP #8 -- Maintain steps and handrails. Repair broken steps and secure loose banisters and handrails. Broken steps can cause a dangerous fall. Similarly, a person slipping will grab a handrail for support.
TIP #9 -- Inspect the attic and basement or crawlspace. Insulate voids in the attic - the entire attic floor above a living space should be insulated with at least six inches of insulation, except around electrical fixtures such as recessed lights that aren't rated for contact with insulation. Damp basements and crawl spaces can become mold and mildew problems. Watch for leaks from your water heater, plumbing system and seeping rain water from the roof. Locate and maintain a clear access to your main water shut off valve. If you have a sump pump, test, clean and lubricate it.
TIP #10 -- Shut down sprinkler systems and outside faucets. Homeowners can shut down outside faucets, however weatherizing the underground sprinkler system is best performed by industry professionals who will flush the system before the cold sets in, preventing cracked pipes.
Excerpted from http://rentonwa.gov/
Fall maintenance is important because it helps make homes more energy efficient during the winter months, and will safeguard homes against potential seasonal 'disasters' such as leaking roofs or home fires caused by neglected chimneys. Here are ten tips to a safer, warmer winter.
TIP #1 -- Check the heating system. Check the filter, pilot light and burners in a system fueled by gas or oil. Fireplaces, boilers, water heaters, space heaters and wood burning stoves should also be serviced every year. Have the specialist inspecting your unit show you how to change the filter and then you should change it at least once every 2 months. Clean ducts in the heating system. Clean and vacuum dust from vents, baseboard heaters and cold air returns. Dust build-up in ducts is a major cause of indoor pollutants. Ducts should be professionally cleaned about every three years.
TIP #2 -- Have the chimney inspected by a qualified chimney professional. Chimneys should be checked and cleaned, if necessary, on an annual basis. If you are using a wood stove this season, be sure that the stovepipe was installed correctly according to the manufacturer's recommendations and local codes. If there is any doubt, a building inspector or fire official can determine whether the system is properly installed. If you have a chimney that will not be used, consider having it sealed shut.
TIP #3 -- Test fire alarms, smoke detectors and carbon monoxide detectors, and vacuum out the dust. Batteries should be checked every six months to ensure that they're working.
TIP #4 -- Remove excess leaves and damaged branches from trees surrounding the house. Dead branches have the potential to break and fall, ruining roofs, decks, or vehicles and the possibly causing injuries to people.
TIP #5 -- Maintain gutters. Remove all debris that can slow or impede the ability of water to drain effectively from the roof. Trapped water can be destructive not only to the gutters themselves but to the adjoining roof as well. Make sure gutter water drains away from your home.
TIP #6 -- Inspect the roof. Look for damaged or loose shingles, gaps in the flashing at joints with siding, vents and flues, as well as damaged mortar around the chimney.
TIP #7 -- Inspect exterior walls, doors and windows. Check walls and window sills for damage such as cracks, gaps, loose or crumbling mortar, along with splitting and decaying wood. Caulk exterior joints around windows and doors, which helps keep the home weather tight and lower heating bills. Check windows and doors to make sure locks work properly and that they are in good condition. Clean tracks and lubricate hinges. Repair or replace any cracked windows.
TIP #8 -- Maintain steps and handrails. Repair broken steps and secure loose banisters and handrails. Broken steps can cause a dangerous fall. Similarly, a person slipping will grab a handrail for support.
TIP #9 -- Inspect the attic and basement or crawlspace. Insulate voids in the attic - the entire attic floor above a living space should be insulated with at least six inches of insulation, except around electrical fixtures such as recessed lights that aren't rated for contact with insulation. Damp basements and crawl spaces can become mold and mildew problems. Watch for leaks from your water heater, plumbing system and seeping rain water from the roof. Locate and maintain a clear access to your main water shut off valve. If you have a sump pump, test, clean and lubricate it.
TIP #10 -- Shut down sprinkler systems and outside faucets. Homeowners can shut down outside faucets, however weatherizing the underground sprinkler system is best performed by industry professionals who will flush the system before the cold sets in, preventing cracked pipes.
Excerpted from http://rentonwa.gov/
Tuesday, September 8, 2009
Building Your House: Inspirational Story
An elderly carpenter was ready to retire. He told his employer-contractor of his plans to leave the house building business to live a more leisurely life with his wife and enjoy his extended family. He would miss the paycheck each week, but he wanted to retire. They could get by.
The contractor was sorry to see his good worker go and asked if he could build just one more house as a personal favor. The carpenter said yes, but over time it was easy to see that his heart was not in his work. He resorted to shoddy workmanship and used inferior materials. It was an unfortunate way to end a dedicated career.
When the carpenter finished his work, his employer came to inspect the house. Then he handed the front door key to the carpenter and said, “This is your house… my gift to you.”
The carpenter was shocked!
What a shame! If he had only known he was building his own house, he would have done it all so differently.
So it is with us. We build our lives, a day at a time, often putting less than our best into the building. Then, with a shock, we realize we have to live in the house we have built. If we could do it over, we would do it much differently.
But, you cannot go back. You are the carpenter, and every day you hammer a nail, place a board, or erect a wall. Someone once said, “life is a do it yourself project.” Your attitude and the choices you make today, help build the “house” you will live in tomorrow. Therefore, Build Wisely.
The contractor was sorry to see his good worker go and asked if he could build just one more house as a personal favor. The carpenter said yes, but over time it was easy to see that his heart was not in his work. He resorted to shoddy workmanship and used inferior materials. It was an unfortunate way to end a dedicated career.
When the carpenter finished his work, his employer came to inspect the house. Then he handed the front door key to the carpenter and said, “This is your house… my gift to you.”
The carpenter was shocked!
What a shame! If he had only known he was building his own house, he would have done it all so differently.
So it is with us. We build our lives, a day at a time, often putting less than our best into the building. Then, with a shock, we realize we have to live in the house we have built. If we could do it over, we would do it much differently.
But, you cannot go back. You are the carpenter, and every day you hammer a nail, place a board, or erect a wall. Someone once said, “life is a do it yourself project.” Your attitude and the choices you make today, help build the “house” you will live in tomorrow. Therefore, Build Wisely.
Wednesday, September 2, 2009
Mortgage Market Commentary
Rates were GREAT yesterday and yet have IMPROVED today!!
If you’re an honest, law-biding citizen, should you care if the IRS starts comparing mortgage payments and income? What about if you’re a roofer who makes half his income in cash? If Jane Doe claims she makes $2,000 per month on her taxes, yet her mortgage payment is $3,500, should that be a reason for Ms. Doe to be investigated? In yet another story yesterday, it appears that the IRS “will study whether it should make greater use of data on mortgage-interest payments provided to it by banks.” The IRS currently uses such data to send notices to non-filers who it believes should have filed a return. The data could also be used to target for audits individuals who don't file tax returns, or who report less income than they paid in mortgage interest. Of course, if you’re a struggling borrower that is using money out of your savings account, or from Mom & Dad, to make the mortgage payment, you don’t need two guys with badges showing up at your office….
Wells Fargo was in the rumor mill yesterday, not for anything mortgage-related but rather on if and when it is going to pay back the government TARP money. The rumors prompted its CEO to make a statement that Wells will not be selling more stock to pay back its TARP monies but rather use its earnings. Wells, in addition to Citi and Bank of America, have not paid back any TARP money yet. Although $25 or $26 billion is a big chunk of change, Wells has been having its best results in its history and has had made money by cutting its dividend. Let’s hope that they keep buying mortgages!
Yesterday was one of those days when it was better to own fixed-income securities than to own stocks. As it turned out, there were rumors swirling about Wells Fargo (see above), and this caused the herd to shuffle into the proverbial “flight to quality”. Besides, many think that the stock market has gotten a little ahead of itself in recent weeks, and took some profits by selling. Regardless, bonds did well, and rates came down. But as I have said, few are complaining about rates – they are too busy wondering if guidelines will ever loosen up.
What moved rates yesterday? Construction Spending was -0.2% in July, and year-over-year spending is down 10.5%. The Institute for Supply Management’s Factory Index increased to 52.9 in August, better than expected. We also had the National Association of Realtors report that Pending Home Sales were up 3.2%, more than forecast, and once again attributed to lower rates, less expensive houses, and the tax credit (which expires around Thanksgiving). So go figure: better news across the board should have moved the stock market higher and bonds lower, but the reverse happened.
Today we have Factory Orders and the FOMC Minutes, although we have already seen mortgage applications. U.S. mortgage applications were down last week a little over 2%, with purchase apps declining for the first time since early July. Purchase loan applications dipped 1%, and applications to refinance fell about 3%. We also had the ADP employment numbers, which don’t include government jobs, which showed that job losses in the U.S. private sector fell to their lowest monthly level in nearly a year. “Only” 298,000 jobs were cut in August. After this tidbit we find the 10-yr at 3.36% and mortgage securities about unchanged.
Make it a great day!!!
If you’re an honest, law-biding citizen, should you care if the IRS starts comparing mortgage payments and income? What about if you’re a roofer who makes half his income in cash? If Jane Doe claims she makes $2,000 per month on her taxes, yet her mortgage payment is $3,500, should that be a reason for Ms. Doe to be investigated? In yet another story yesterday, it appears that the IRS “will study whether it should make greater use of data on mortgage-interest payments provided to it by banks.” The IRS currently uses such data to send notices to non-filers who it believes should have filed a return. The data could also be used to target for audits individuals who don't file tax returns, or who report less income than they paid in mortgage interest. Of course, if you’re a struggling borrower that is using money out of your savings account, or from Mom & Dad, to make the mortgage payment, you don’t need two guys with badges showing up at your office….
Wells Fargo was in the rumor mill yesterday, not for anything mortgage-related but rather on if and when it is going to pay back the government TARP money. The rumors prompted its CEO to make a statement that Wells will not be selling more stock to pay back its TARP monies but rather use its earnings. Wells, in addition to Citi and Bank of America, have not paid back any TARP money yet. Although $25 or $26 billion is a big chunk of change, Wells has been having its best results in its history and has had made money by cutting its dividend. Let’s hope that they keep buying mortgages!
Yesterday was one of those days when it was better to own fixed-income securities than to own stocks. As it turned out, there were rumors swirling about Wells Fargo (see above), and this caused the herd to shuffle into the proverbial “flight to quality”. Besides, many think that the stock market has gotten a little ahead of itself in recent weeks, and took some profits by selling. Regardless, bonds did well, and rates came down. But as I have said, few are complaining about rates – they are too busy wondering if guidelines will ever loosen up.
What moved rates yesterday? Construction Spending was -0.2% in July, and year-over-year spending is down 10.5%. The Institute for Supply Management’s Factory Index increased to 52.9 in August, better than expected. We also had the National Association of Realtors report that Pending Home Sales were up 3.2%, more than forecast, and once again attributed to lower rates, less expensive houses, and the tax credit (which expires around Thanksgiving). So go figure: better news across the board should have moved the stock market higher and bonds lower, but the reverse happened.
Today we have Factory Orders and the FOMC Minutes, although we have already seen mortgage applications. U.S. mortgage applications were down last week a little over 2%, with purchase apps declining for the first time since early July. Purchase loan applications dipped 1%, and applications to refinance fell about 3%. We also had the ADP employment numbers, which don’t include government jobs, which showed that job losses in the U.S. private sector fell to their lowest monthly level in nearly a year. “Only” 298,000 jobs were cut in August. After this tidbit we find the 10-yr at 3.36% and mortgage securities about unchanged.
Make it a great day!!!
Cost Segregation – Save Taxes and Increase Your Cash Flow
Cost Segregation – Save Taxes and Increase Your Cash Flow
What is Cost Segregation?
Cost segregation is the IRS sanctioned process by which real property components are re-classified as personal property. Re-classifying real property to personal property creates larger depreciation deductions because personal property is depreciated over much shorter periods (5, 7 or 15 years) than real property (27.5 years for residential or 39 years for commercial). And, creating larger tax deductions reduces current taxable income and allows the taxpayer increased cash flow.
Does the IRS approve of Cost Segregation?
Cost segregation studies are accepted and approved by the IRS. There are various IRS rulings, regulations and court cases which provide the basis for cost segregation studies.
For more detailed information, see the below link to the IRS Cost Segregation Audit Techniques Guide revised in March of 2008.
http://www.irs.gov/businesses/article/0,,id=134180,00.html
Who Can Utilize Cost Segregation and When Can It be Implemented?
Any taxpayer can use cost segregation for buildings acquired in prior tax years; when constructing a building; buying an existing one; or, in certain circumstances, years after disposing of one.
A taxpayer that uses cost segregation for a previously acquired structure must file IRS Form 3115, Change in Accounting Method.
How is a cost segregation study prepared?
Typically, the taxpayer engages an accountant and an engineer to analyze the components of the building structure to determine which components can be re-classified as personal property and re-allocated shorter depreciation periods. These professionals analyze architectural drawings, mechanical and electrical plans, and other blueprints to identify and segregate the structural and general building elements including electrical and mechanical components from those linked to personal property.
The following is an estimate of the range of building costs eligible for re-classification through a cost segregation study to personal property resulting in accelerated depreciation.
Apartment Buildings 21-36%
Auto Dealerships 26-39%
Banks 26-38%
Hotel 26-41%
Manufacturing Facilities 26-39%
Medical/Dental Facilities 25-40%
Office Buildings 22-37%
Restaurants 30-45%
Shopping Centers 21-37%
Warehouses 18-31%
What are the benefits of Cost Segregation?
The primary benefit is greater depreciation deductions and increased cash flow.
For example, if a taxpayer acquires a small residential apartment complex for $1.5 million and thereafter obtains a cost segregation study, which re-classifies 35% of the property as 5 year personal property, the taxpayer’s depreciation deductions increase from $54,545 each year to $140,454 each year – an increase of 157%.1
There are, however, other significant benefits:
If a building component needs replacement at some point after the cost segregation, the taxpayer may take, as a deductible loss, the value of the component at the time of replacement.
If real property is reclassified as 5-, 7- or 15-year personal property, it may qualify for bonus depreciation. Bonus depreciation allows an owner to depreciate 50% of the asset immediately.
Cost Segregation and tax deferred exchanges
If a taxpayer obtains a cost segregation study and thereafter exchanges the property, he must remember to be cognizant of the new real and personal property allocation to ensure that any replacement property acquired has the same proportion of real and personal property.
What is the cost to prepare a Cost Segregation Study?
Fees for a cost segregation study are based on the size and type of building and the anticipated time required to complete the study and thus can vary substantially from project to project.
I use OREXCO and refer all my investors to check with them and their tax adviser before making a purchase or exchange. OREXCO’s choice of vendor for cost segregation studies, Tax Strategies Group, LLC, will provide clients with a free analysis to determine whether the taxpayer will benefit from a study. Tax Strategies’ estimate includes the projected increase in depreciation, showing the net present value to the client. Clients should expect to receive benefits between five and ten times the cost of the Study. Tax Strategies’ free estimate allows taxpayers to examine and weigh the benefits of its services without risk or expense. Likewise, Tax Strategies’ studies are backed by a policy of insurance issued through Lloyd’s syndicates providing for payment of taxes or fines imposed as a result of a finding that the study is defective or unsupported.
Tax Strategies Group, LLC may be contacted at (877) 394-3300 and info@tax4cash.com. Further information about Tax Strategies Group, LLC can be obtained at their website, www.tax4cash.com.
OREXCO gratefully acknowledges the participation of Jim Davis, Esq. of Tax Strategies Group, LLC in the preparation of this article.
What is Cost Segregation?
Cost segregation is the IRS sanctioned process by which real property components are re-classified as personal property. Re-classifying real property to personal property creates larger depreciation deductions because personal property is depreciated over much shorter periods (5, 7 or 15 years) than real property (27.5 years for residential or 39 years for commercial). And, creating larger tax deductions reduces current taxable income and allows the taxpayer increased cash flow.
Does the IRS approve of Cost Segregation?
Cost segregation studies are accepted and approved by the IRS. There are various IRS rulings, regulations and court cases which provide the basis for cost segregation studies.
For more detailed information, see the below link to the IRS Cost Segregation Audit Techniques Guide revised in March of 2008.
http://www.irs.gov/businesses/article/0,,id=134180,00.html
Who Can Utilize Cost Segregation and When Can It be Implemented?
Any taxpayer can use cost segregation for buildings acquired in prior tax years; when constructing a building; buying an existing one; or, in certain circumstances, years after disposing of one.
A taxpayer that uses cost segregation for a previously acquired structure must file IRS Form 3115, Change in Accounting Method.
How is a cost segregation study prepared?
Typically, the taxpayer engages an accountant and an engineer to analyze the components of the building structure to determine which components can be re-classified as personal property and re-allocated shorter depreciation periods. These professionals analyze architectural drawings, mechanical and electrical plans, and other blueprints to identify and segregate the structural and general building elements including electrical and mechanical components from those linked to personal property.
The following is an estimate of the range of building costs eligible for re-classification through a cost segregation study to personal property resulting in accelerated depreciation.
Apartment Buildings 21-36%
Auto Dealerships 26-39%
Banks 26-38%
Hotel 26-41%
Manufacturing Facilities 26-39%
Medical/Dental Facilities 25-40%
Office Buildings 22-37%
Restaurants 30-45%
Shopping Centers 21-37%
Warehouses 18-31%
What are the benefits of Cost Segregation?
The primary benefit is greater depreciation deductions and increased cash flow.
For example, if a taxpayer acquires a small residential apartment complex for $1.5 million and thereafter obtains a cost segregation study, which re-classifies 35% of the property as 5 year personal property, the taxpayer’s depreciation deductions increase from $54,545 each year to $140,454 each year – an increase of 157%.1
There are, however, other significant benefits:
If a building component needs replacement at some point after the cost segregation, the taxpayer may take, as a deductible loss, the value of the component at the time of replacement.
If real property is reclassified as 5-, 7- or 15-year personal property, it may qualify for bonus depreciation. Bonus depreciation allows an owner to depreciate 50% of the asset immediately.
Cost Segregation and tax deferred exchanges
If a taxpayer obtains a cost segregation study and thereafter exchanges the property, he must remember to be cognizant of the new real and personal property allocation to ensure that any replacement property acquired has the same proportion of real and personal property.
What is the cost to prepare a Cost Segregation Study?
Fees for a cost segregation study are based on the size and type of building and the anticipated time required to complete the study and thus can vary substantially from project to project.
I use OREXCO and refer all my investors to check with them and their tax adviser before making a purchase or exchange. OREXCO’s choice of vendor for cost segregation studies, Tax Strategies Group, LLC, will provide clients with a free analysis to determine whether the taxpayer will benefit from a study. Tax Strategies’ estimate includes the projected increase in depreciation, showing the net present value to the client. Clients should expect to receive benefits between five and ten times the cost of the Study. Tax Strategies’ free estimate allows taxpayers to examine and weigh the benefits of its services without risk or expense. Likewise, Tax Strategies’ studies are backed by a policy of insurance issued through Lloyd’s syndicates providing for payment of taxes or fines imposed as a result of a finding that the study is defective or unsupported.
Tax Strategies Group, LLC may be contacted at (877) 394-3300 and info@tax4cash.com. Further information about Tax Strategies Group, LLC can be obtained at their website, www.tax4cash.com.
OREXCO gratefully acknowledges the participation of Jim Davis, Esq. of Tax Strategies Group, LLC in the preparation of this article.
Tuesday, September 1, 2009
Would you want your child to go into real estate?
By:Rick Soukoulis
Chairman and CEO
Intero Mortgage
Kind of an interesting question, isn’t it?
It reminds me of that Willie Nelson song, “Mothers, don’t let your babies grow up to be cowboys…”
So what is it? Do you or don’t you want your kids to follow your foot paths into real estate?
First, let’s look at the choices. Your child could be a Realtor, a mortgage broker, a bank lending officer , an appraiser, or a title or escrow officer.
The first thing is that yes, it can be a very lucrative field. This is especially true for Realtors and mortgage brokers.
It’s not unusual, at least in a good year, for a Realtor or mortgage loan officer to make $100,000-200,000 in a year.
The obvious downside is volatility. I know one person who was an account executive for the sub-prime mortgage arm of Lehman Brothers. She was making about $300,000 a year during the good times, but she’s now working as a bookkeeper at a plumbing supply company.
If your kids do go into real estate, teach them early to set aside money during the good times to help them ride out the bad times.
Along with the lack of predictability of income, there is one huge positive: It’s the ability to help people. This is especially true for Realtors who work so hard to help people find their piece of the American Dream.
Being a Realtor was once considered almost a hobby. The cliché was that bored housewives did it to have something to do. I don’t know if that was really the case, but today’s Realtor is highly trained and extremely professional.
A final benefit to being a Realtor or being in the mortgage business is that these careers present all sorts of interesting investment opportunities. If your son or daughter goes into these or related fields, they will learn about good buildings for sale way before an ad shows up in the Sunday paper.
So along with the potential for good compensation, there is the chance to make good money through smart investing.
All in all, would I want my kids to go into real estate?
The answer is, quite simply, yes. And I’d be proud of them for doing so.
Chairman and CEO
Intero Mortgage
Kind of an interesting question, isn’t it?
It reminds me of that Willie Nelson song, “Mothers, don’t let your babies grow up to be cowboys…”
So what is it? Do you or don’t you want your kids to follow your foot paths into real estate?
First, let’s look at the choices. Your child could be a Realtor, a mortgage broker, a bank lending officer , an appraiser, or a title or escrow officer.
The first thing is that yes, it can be a very lucrative field. This is especially true for Realtors and mortgage brokers.
It’s not unusual, at least in a good year, for a Realtor or mortgage loan officer to make $100,000-200,000 in a year.
The obvious downside is volatility. I know one person who was an account executive for the sub-prime mortgage arm of Lehman Brothers. She was making about $300,000 a year during the good times, but she’s now working as a bookkeeper at a plumbing supply company.
If your kids do go into real estate, teach them early to set aside money during the good times to help them ride out the bad times.
Along with the lack of predictability of income, there is one huge positive: It’s the ability to help people. This is especially true for Realtors who work so hard to help people find their piece of the American Dream.
Being a Realtor was once considered almost a hobby. The cliché was that bored housewives did it to have something to do. I don’t know if that was really the case, but today’s Realtor is highly trained and extremely professional.
A final benefit to being a Realtor or being in the mortgage business is that these careers present all sorts of interesting investment opportunities. If your son or daughter goes into these or related fields, they will learn about good buildings for sale way before an ad shows up in the Sunday paper.
So along with the potential for good compensation, there is the chance to make good money through smart investing.
All in all, would I want my kids to go into real estate?
The answer is, quite simply, yes. And I’d be proud of them for doing so.
Thursday, August 27, 2009
Mortgage fraud bill proposed by Santa Clara County prosecutors close to becoming law
By Mark Gomez
mgomez@mercurynews.com
Posted: 08/26/2009 04:55:52 PM PDT
Updated: 08/27/2009 03:13:47 AM PDT
Santa Clara County prosecutors are hoping they will soon have a new tool that allows them to put crooked mortgage brokers out of business more efficiently.
Prosecutors are awaiting a signature from Gov. Arnold Schwarzenegger on a bill that will make it easier to obtain financial documents of mortgage brokers and lenders to determine if fraud has been committed. The legislation, SB 239, sailed through the Legislature with unanimous votes in both houses and could be approved by the governor in the next few weeks.
The legislation was originally drafted earlier this year by a Santa Clara County prosecutor as a way to better handle the growing number of complaints about mortgage fraud.
"We found it increasingly difficult to handle all of the complaints," prosecutor Mike Fitzsimmons said. "We were barely keeping our head above water. Not only us, but prosecutors all across the state."
Under current law, prosecutors must obtain search warrants to get financial records from brokers and lenders, a process that can be "time-consuming and expensive," according to Fitzsimmons.
Under the proposed law, prosecutors will need only a court order to obtain those records, Fitzsimmons said.
"This will be a much more efficient way for us to evaluate cases," he said
The Santa Clara County District Attorney's real estate fraud unit began receiving more and more complaints about crooked mortgage brokers about three years ago. In doing research
Advertisement
for the legislation, Fitzsimmons found a report that indicated reports of mortgage fraud rose more than 1,400 percent from 2000 to 2008.
SB239, authored by Sen. Fran Pavley, D-Santa Monica, and sponsored by the California District Attorneys Association, will create a provision to existing mortgage fraud law that will classify the crime as a felony or misdemeanor. Currently, mortgage fraud has only misdemeanor status in California, and prosecutors are forced to pursue serious cases under other statutes, such as grand theft.
To get the measure through the Senate and Assembly, prosecutors had to assure legislators that the law would not send more people to prison, Fitzsimmons said. The legislation is intended to help prosecutors obtain financial documents from lenders and brokers
"We're not going to be putting a demand on prison beds," Fitzsimmons said. "Defendants usually don't get prison. They get county jail time unless there are multiple counts or they are a repeat offender."
If the bill reaches the governor's desk by Friday as expected, he will have 12 days to make a decision.
Other states that have recently adopted dedicated felony mortgage fraud statutes with similar wording include Georgia, Arizona, Nevada, North Carolina and Florida.
In one of the larger mortgage broker scams prosecuted by the Santa Clara County District Attorney's Office, a San Jose couple received hefty prison sentences in May for running a scheme that involved lying to five banks about borrowers' ability to repay $8 million in subprime loans and lying to borrowers about the terms of the loans.
Prosecutors accused Esperanza Valverde and Herman Covarrubias, who operated Summit Mortgage One of Milpitas, of obtaining loans for 22 clients by supplying lenders with false tax returns, W-2 statements, pay stubs and employment verification letters. They both received prison sentences of about 20 years.
"Mortgage fraud is one of the linchpins in the demise of the California real estate market and the related crises in the financial sectors," Santa Clara County District Attorney Dolores Carr said in a statement. "It is critical that something is done to assist law enforcement in handling the flood of mortgage fraud offenses that we continue to receive."
In typical cases of mortgage fraud, crooked brokers falsify loan documents by inflating a client's income by as much as 250 percent, manufacture bogus bank statements that show tens of thousands of dollars for deposits, and falsify employer information, Fitzsimmons said.
"Frequently we come across cases in which mortgage brokers have borrowers sign blank applications and fill them in later as they see fit in order to grease the skids and facilitate getting their commissions and fees," Fitzsimmons said. "It's only a year or two when mortgages adjust and everything hits the fan when a borrower comes to us."
Contact Mark Gomez at 408-920-5869.
mgomez@mercurynews.com
Posted: 08/26/2009 04:55:52 PM PDT
Updated: 08/27/2009 03:13:47 AM PDT
Santa Clara County prosecutors are hoping they will soon have a new tool that allows them to put crooked mortgage brokers out of business more efficiently.
Prosecutors are awaiting a signature from Gov. Arnold Schwarzenegger on a bill that will make it easier to obtain financial documents of mortgage brokers and lenders to determine if fraud has been committed. The legislation, SB 239, sailed through the Legislature with unanimous votes in both houses and could be approved by the governor in the next few weeks.
The legislation was originally drafted earlier this year by a Santa Clara County prosecutor as a way to better handle the growing number of complaints about mortgage fraud.
"We found it increasingly difficult to handle all of the complaints," prosecutor Mike Fitzsimmons said. "We were barely keeping our head above water. Not only us, but prosecutors all across the state."
Under current law, prosecutors must obtain search warrants to get financial records from brokers and lenders, a process that can be "time-consuming and expensive," according to Fitzsimmons.
Under the proposed law, prosecutors will need only a court order to obtain those records, Fitzsimmons said.
"This will be a much more efficient way for us to evaluate cases," he said
The Santa Clara County District Attorney's real estate fraud unit began receiving more and more complaints about crooked mortgage brokers about three years ago. In doing research
Advertisement
for the legislation, Fitzsimmons found a report that indicated reports of mortgage fraud rose more than 1,400 percent from 2000 to 2008.
SB239, authored by Sen. Fran Pavley, D-Santa Monica, and sponsored by the California District Attorneys Association, will create a provision to existing mortgage fraud law that will classify the crime as a felony or misdemeanor. Currently, mortgage fraud has only misdemeanor status in California, and prosecutors are forced to pursue serious cases under other statutes, such as grand theft.
To get the measure through the Senate and Assembly, prosecutors had to assure legislators that the law would not send more people to prison, Fitzsimmons said. The legislation is intended to help prosecutors obtain financial documents from lenders and brokers
"We're not going to be putting a demand on prison beds," Fitzsimmons said. "Defendants usually don't get prison. They get county jail time unless there are multiple counts or they are a repeat offender."
If the bill reaches the governor's desk by Friday as expected, he will have 12 days to make a decision.
Other states that have recently adopted dedicated felony mortgage fraud statutes with similar wording include Georgia, Arizona, Nevada, North Carolina and Florida.
In one of the larger mortgage broker scams prosecuted by the Santa Clara County District Attorney's Office, a San Jose couple received hefty prison sentences in May for running a scheme that involved lying to five banks about borrowers' ability to repay $8 million in subprime loans and lying to borrowers about the terms of the loans.
Prosecutors accused Esperanza Valverde and Herman Covarrubias, who operated Summit Mortgage One of Milpitas, of obtaining loans for 22 clients by supplying lenders with false tax returns, W-2 statements, pay stubs and employment verification letters. They both received prison sentences of about 20 years.
"Mortgage fraud is one of the linchpins in the demise of the California real estate market and the related crises in the financial sectors," Santa Clara County District Attorney Dolores Carr said in a statement. "It is critical that something is done to assist law enforcement in handling the flood of mortgage fraud offenses that we continue to receive."
In typical cases of mortgage fraud, crooked brokers falsify loan documents by inflating a client's income by as much as 250 percent, manufacture bogus bank statements that show tens of thousands of dollars for deposits, and falsify employer information, Fitzsimmons said.
"Frequently we come across cases in which mortgage brokers have borrowers sign blank applications and fill them in later as they see fit in order to grease the skids and facilitate getting their commissions and fees," Fitzsimmons said. "It's only a year or two when mortgages adjust and everything hits the fan when a borrower comes to us."
Contact Mark Gomez at 408-920-5869.
Monday, August 24, 2009
Home Maintenance Tip -
Conserve Water and Reduce Pocketbook Pressure!
You may love the forceful flow of water at your faucets, showerheads and toilets, but did you know that installing low-flow aerators could cut your annual water consumption by more than half? You can also conserve water and save money on your water bill just by adopting a few new habits:
-While waiting for water to warm up, catch excess water in a bowl or bucket and use for houseplants or pets
-Only run the dishwasher when it is fully loaded
-Instead of using the in-sink garbage disposal, compost your food scraps
-Simply cutting your shower by 2 minutes will save 1,000 gallons a year!
-Turn off the water while you brush your teeth, shave, and while you lather up when washing your hands.
You may love the forceful flow of water at your faucets, showerheads and toilets, but did you know that installing low-flow aerators could cut your annual water consumption by more than half? You can also conserve water and save money on your water bill just by adopting a few new habits:
-While waiting for water to warm up, catch excess water in a bowl or bucket and use for houseplants or pets
-Only run the dishwasher when it is fully loaded
-Instead of using the in-sink garbage disposal, compost your food scraps
-Simply cutting your shower by 2 minutes will save 1,000 gallons a year!
-Turn off the water while you brush your teeth, shave, and while you lather up when washing your hands.
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