Plastic Bag Ban defeated…what a shame!

A plastic bag ban failed to pass the California Senate.

No surprise here, the plastic and chemistry lobbies won again, reports the Marin Independent Journal:  ”The bill’s largest opposition came from the American Chemistry Council (representing plastic bag makers like Dow Chemical and ExxonMobil), which the AP reports “spent millions in lobbying fees, radio ads and even a prime-time television ad attacking the measure.” The same council helped defeat a bill last year in Seattle that would have tacked a 20-cent fee on the use of plastic or paper grocery bags.”   

I believe it is only a matter of time until plastic bags are banned in California, and then the rest of the country will follow… They are such an awful problem…  

Read the full article from the Marin IJ here. 

San Anselmo-Fairfax Patch, CA – Hike the Bon Tempe Lake trail

San Anselmo-Fairfax Patch, CA – Hike the Bon Tempe Lake trail

via San Anselmo-Fairfax Patch, CA – Hike the Bon Tempe Lake trail.

Bay Area Private Schools – Marin Magazine – September 2010 – Marin County, California

 

Another great resource from Marin Magazine.  This is a very comprehensive report on Bay Area Private Schools. 

Bay Area Private School Catalogue, Marin Magazine, Sept. 2010

Should Marin Buyers Wait for Lower Prices?

    

 Marin County Market Update – July 2010   

Redwood trees - Crown Road, Kentfield, CA

With the tax credit no longer propping up home sales, the Marin Market experienced a month over month decrease in July in the number of sold single family homes for the first time since January.  It’s almost as if the market took a hint from our unseasonably cold summer and decided to cool down after heating up and increasing steadily month over month for the first half of the year.  

 

The stability we have experienced in the past few months hinges on a fragile balance between two factors: the lending environment and the economy.  The current low-interest rates are giving a boost to the Marin market. The million dollar question is: are these incredibly low rates here for much longer?  On the other hand, the economy’s hesitant recovery and resulting high unemployment are preventing would-be homebuyers who are worried about finding a job–or losing the one they have– to take advantage of these low rates. Without a significant improvement in the economy, loan modification efforts may only succeed in delaying loan defaults and we could continue to experience foreclosure activity along with a corresponding softness in home prices.     

MARIN COUNTY MARKET STATISTICS    

Sales of single family homes in Marin were down in July with 172 homes sold compared to 221 in June. The loss of steam can be blamed on a combination of (1) the typical seasonal hiatus in market activity as many prospective buyers place their home search on hold while vacationing  and (2) the expiration of the tax credit.  As many first time buyers and sellers rushed to buy and sell, respectively, to beat the deadline of April 30, we experienced unusually 

Pending sign

 

high sales activity in the spring at the detriment of the typical summer bustle. But is there more to it?  As the economy and unemployment have not progressed as expected by most,  there is still some  uncertainty as to how our market will perform in the upcoming months, despite definite signs of improvement.  Comparing to the highs and lows over the past five years, here is where we are:   

Sold single family homes: 
            High: August 2005 – 259
            Low: February 2009 – 62
            July 2010 – 172 -        

Average Median Sales Price:
             High: September 2007 – $1,160,000
             Low: February 2009 – $649,000 
             July 2010: $800,000  

Expired/Cancelled:
            High: December 2008 - 206 
            Low:  August, October 2005, January-March 2006 – 0
           July 2010: 125 

 These numbers tell the story of our market:  
 -       As they become more realistic about the current market value of their home, fewer sellers are unable to sell their homes as reflected by the lower number of expired or cancelled listings.  
-       The number of sales and the average median price may appear low compared to what they were at the height of the market, but they continue their steady trend upward.   

 In terms of other market data, here is a quick rundown of the numbers for Single Family Homes for the whole county:   

Corte Madera Creek - Greenbrae, CA

 

  -   Inventory up slightly year over year from 1,287 as of 7/31/2009 to 1,306 as of 7/31/2010
-   Median price slightly up from $758,000 to $799,750,000 in July 2010.
-   New listings slightly down from 285 in July 2009 to 282 in July 2010.
-   Expired listings inched higher to 119 from 117.
-   Average days on market showing improvement at 76 for July 2010 vs. 107 in July 2009.
-   Months’ Supply Inventory hovering over 6%, practically unchanged year over year.  Months’ supply of inventory is a reflection of the rate at which the current inventory is being sold: it represents the number of months it would take at the current level of sales to liquidate the entire current inventory.  Six months’ supply is generally considered a balanced market: the lowest number in recent years was 1.8 in June and August 2005 and the highest was 15.4 in February 2009.  We are currently experiencing a balanced market.   

 BREAKDOWN BY PRICE RANGE: 

Marin County – Single Family Residences as of July 20, 2010
	Total Active	In Contract	% In Contract	Type of Market
ALL PRICES	1270	293	23.07%	Buyer’s
0-$999K	682	213	31.23%	Seller’s
1MIL-$1,999K	365	60	16.44%	Buyer’s
2MIL-$2,999K	113	11	9.73%	Strong Buyer’s
$3MIL +	110	9	8.18%	Strong Buyer’s

 The hottest segment of the market for properties under a million remains a strong seller’s market at almost a third of all properties for sale in contract as of July 20.  Even though sales could be stronger if jumbo loans were easier to obtain, the luxury housing market continues to improve: the number of million dollars properties sold surged to its highest level in two years in the Bay Area in the month of July.   

 MARIN IS STILL MADE UP OF MANY MICRO-MARKETS:

City by City Analysis-Single Family & Condos July 1, 2010. All price ranges combined.
City	Total Active	In Contract	% In Contract	Type of Market
Sausalito	87	19	21.84%	Buyer’s
Belvedere	40	2	5.00%	Strong Buyer’s
Tiburon	127	18	14.17%	Strong Buyer’s
Mill Valley	211	47	22.27%	Buyer’s
Corte Madera	51	18	35.29%	Strong Seller’s
Larkspur	41	12	29.27%	Seller’s
Greenbrae	41	13	31.71%	Seller’s
Kentfield	43	10	23.26%	Buyer’s
Ross	27	3	11.11%	Strong Buyer’s
San Anselmo	82	20	24.39%	Buyer’s
Fairfax	45	10	22.22%	Buyer’s
San Rafael	385	112	29.09%	Seller’s
Novato	333	116	34.83

SHOULD MARIN COUNTY BUYERS WAIT FOR LOWER PRICES?  

Because prices are so location specific and have remained unstable due to continued short sale and foreclosure activity, fear of overpaying is not uncommon among Marin County buyers who are looking for “deals.”   

City Hall - Larkspur, CA

 

Here are some factors to keep in mind if you are thinking of waiting for lower prices:
 -       Waiting for the right time can cost you in the long run: some buyers would have more equity today, despite falling prices, if they had bought when they were first considering it, instead of continuing to pay rent.  
-       Financing is becoming increasingly fickle.  Some buyers who were qualified a few months back can’t secure financing now because the credit market has significantly tightened or their financial situation now makes them an undesirable borrower.  Lenders are adding more hurdles for buyers to qualify throughout the escrow period.   
-       Many buyers are very complacent about the sublimely low rates we are enjoying today.  It is only a matter of time before they start heading up.  As a rule of thumb, remember that if prices decline by another 10 percent but interest rates increase by 1 percentage point, the monthly payment will be the same.  

I make it my business to understand the numbers, and follow the trends closely.  I know the neighborhoods and can provide you with the right guidance.  There are a lot of great “deals” to be had in Marin County right now.  Whether you are thinking of buying or selling, or are just curious to find out how much your home is worth, call me at 415.925.3231 or send me an email at Sylvie@YourPieceOfMarin.com.  You won’t regret it!    

Good Faith Estimate contains some quirks

As of Jan. 1, 2010, the Department of Housing and Urban Development (HUD) required lenders to provide mortgage borrowers with a new three-page Good Faith Estimate (GFE) to protect consumers who are applying for a mortgage.

The intent of the GFE is to educate consumers about the key terms and costs of a mortgage, both at origination and ongoing. A loan originator completes the form, giving the borrower a summary of the loan particulars and information necessary to shop rates and to be sure they’re comparing like-type mortgages.

Although there’s grumbling, mostly from mortgage brokers, lenders and closing/escrow agents, the format and information included in the new GFE is a step in the right direction. There are, however, some quirks.

For example, the GFE doesn’t provide a complete and accurate account of the borrower’s costs. Page two provides an itemization of loan origination and settlement costs. The origination charge is itemized as one lump sum; it’s not broken down.

So, you don’t know how much you’re paying the appraiser for the appraisal, the loan originator for the origination fee, or other miscellaneous fees.

Another shortcoming is in the way transfer taxes are disclosed. The entire amount of any transfer taxes is entered on the GFE, even if the sellers pay part or all of it. This could inflate the buyer’s estimated settlement costs.

To get around having to generate a GFE for buyers before they have committed to a given loan originator, some mortgage originators have developed worksheet quotes for buyers to use if they want to shop rates. HUD is adamant that these worksheets can’t be used instead of a GFE. Furthermore, they provide the borrower no protection.

HOUSE HUNTING TIP: The new federally mandated GFE provides protection for borrowers against being charged extra fees at closing that weren’t disclosed on the GFE. An informal worksheet provides no such protection.

Origination and settlement fees are grouped into three different categories. The first category is fees that can’t increase between the time the GFE is issued and closing. Included in this category are the lender or mortgage broker’s origination fee, transfer taxes and adjustments to loan origination charges after the borrower locks in an interest rate.

Loan originators who miscalculate, causing fees to run higher at closing, have to make up the difference out of pocket. To cover themselves, some loan originators pad the Category one figure.

The second category of fees can increase up to 10 percent at closing and includes such things as government recording charges and title insurance — if the title insurer is identified by the lender, not by the borrower. This is done to encourage lenders to shop for the most cost-effective coverage for the consumer.

The third category of fees can change at settlement and includes homeowners insurance and title insurance coverage if the borrower, not the lender, identifies the title insurer.

The new GFE also includes a tradeoff table that shows what the interest rate would be if you paid a higher origination fee vs. a lower origination fee: the higher the fee, the lower the rate; the lower the fee, the higher the rate.

Finally, there’s a loan-shopping chart to use the mortgage information provided by one lender to compare with other lenders. There is no obligation to use a loan originator who completes a GFE for you. A loan originator can’t refuse to provide a GFE to a prospective borrower who asks for one.

As soon as a prospective borrower provides essential application information, such as Social Security number, property address, etc., the originator is to provide a GFE.

THE CLOSING: Lenders are required to provide a GFE within three days of receiving the borrower’s application.

This article was written by Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author.

Interior Designers Share Their Favorite Wall Colors

  

Have you ever picked a color for a room from a paint chip (even a large one) to find that it looks very different–darker, or yellower, or greener–once it was applied to the walls? 

Well, here is help and  some great tips from interior designers featured in a Better Homes and Gardens slide show to help you choose the right paint color for your walls.  The slides include both pictures of rooms painted in a certain color and the name and brand of the paint they used.  See example below: 

Picture of a room painted with Sea Salt

 

“Gray-blue is a color that’s both modern and classic. It has the versatility of a blue and the contemporary cool of a gray. Sea Salt will look great with almost any accent.” 

The name of the paint is Sea Salt SW 6204 by Sherwin-Williams 

Click on  Interior Designers Share Their Favorite Wall Colors to see all 13 slides. 

If you are repainting the entire house however, you may want to consider hiring a color consultant.  Many of my clients use color consultants to recommend a color palette with different colors that complement each other within the home .  They usually find it a well worth investment and are very satisfied with the results. 

Feel free to contact me for a recommendation for a color consultant in Marin County.  Call me at 415-505-4789.

1031 Exchanges and Foreclosures, Short Sales and Deeds in Lieu?

 

While most people understand that foreclosures, short sales and deeds in lieu of foreclosure have significant economic consequences (loss of property; loss of equity; and loss of credit rating), what is not apparent to most people is that there are significant taxable consequences even if the owner walks away with no cash. While an IRC §1031 Tax Deferred Exchange can, in theory, be utilized under these circumstances to defer the capital gain tax consequences, certain practical and technical challenges may make a tax deferred exchange problematic for many taxpayers.

Foreclosures, Short Sales and Deeds in Lieu, are defined, as follows:

Foreclosure: Foreclosure is an involuntary process whereby a lender repossesses property that was pledged as collateral for mortgage debt. Foreclosure can occur judicially (i.e. through a court action) or non-judicially, where a third party, such as a trustee, has the power to conduct a sale of the property after the lender has declared a default of the loan. 

Short Sale: A short sale occurs when an owner sells property for less than the debt owed on the property. The lender must consent to the sale, agree to accept less than the full loan amount, and agree to release the property from the mortgage lien.

Deed in Lieu of Foreclosure: A deed in lieu of foreclosure occurs when an owner conveys property to the existing lender in exchange for cancellation of the mortgage debt—i.e. “in lieu” of a foreclosure by the lender.

Taxable Consequences of Foreclosures, Short Sales and Deeds in Lieu:

Each of the above circumstances results in two potential taxable consequences to the owner; (1) tax on gain; and/or (2) tax on cancelled or forgiven debt. Whether the debt is recourse or non recourse dictates whether there is one or both of these tax consequences.

Non-Recourse Debt: (borrower not personally liable)
There is one tax consequence. Capital gain is taxed at the applicable capital gains rate—either 5% (for those in the 10% and 15% income tax brackets) or 15% (for those in the 25% or higher income tax brackets). The amount taxed is the difference between the debt and the adjusted basis. There is no tax on cancellation or forgiveness of debt.

Recourse Debt: (personal liability to borrower)
There are two tax consequences:

(1) Cancellation or forgiveness of debt is taxed as ordinary income. The amount taxed is the difference between the debt and the fair market value (“FMV”); and

(2) Capital gain is taxed at the applicable capital gains rate—either 5% (for those in the 10% and 15% income tax brackets) or 15% (for those in the 25% or higher income tax brackets). The amount taxed is the difference between the adjusted basis and the FMV.

Given the foregoing, there is always the possibility that there is a taxable gain even when the owner receives no cash.

For example: Smith buys an apartment building in 1978 for $400,000 cash. The property appreciates in value, and in 1992, he obtains a loan of $350,000. The property continues to appreciate and—by 2004—the building’s FMV is $2 million. Smith obtains a second loan of $850,000. However, in 2010, the property diminishes in value to $1 million, but his outstanding loans total $1.2 million and he is struggling to make the payments. Smith considers a short sale for the FMV of $1 million. Since Smith has owned the building for over 33 years, he has fully depreciated it and the adjusted basis is $0.

Tax consequences if debt is non-recourse:
If the debt which is the subject of the foreclosure, short sale or deed in lieu of foreclosure, is non-recourse, capital gain must be recognized to the extent the debt exceeds the owner’s adjusted basis.

In the example above, Smith’s debt is $1.2 million and his adjusted basis is $0. Hence, he must pay federal capital gains tax (either 5% or 15%, depending on his income tax bracket) on $1,200,000 (5% would be $60,000—15% would be $180,000). Additionally, unless he lives in a state with no income tax, he will pay state income tax on his capital gain.

Tax consequences if debt is recourse:
If the debt which is the subject of the foreclosure, short sale or deed in lieu of foreclosure, is recourse, capital gain must be recognized to the extent of the difference between the FMV of the property (here, $1 million) and the adjusted basis (here, $0). Hence, Mr. Smith must pay capital gains tax (either 5% or 15%) on $1 million.

In addition, there is a second tax consequence—i.e. cancellation of debt income. Mr. Smith must pay ordinary income tax (anywhere between 10% and 35%, depending on his income) on the difference between the FMV ($1 million) and the existing debt ($1.2 million). Thus, he must pay income tax on $200,000.

In sum, if the debt is non-recourse, Mr. Smith pays capital gains tax on $1.2 million. Alternatively, if Mr. Smith’s debt is recourse, he will pay capital gains tax on $1 million and he will pay ordinary income tax on $200,000.

Can the tax consequences of a foreclosure, short sale or deed in lieu be ameliorated by a §1031 exchange?

In theory, although structuring a foreclosure, short sale or deed in lieu in the context of an exchange may ameliorate the capital gain tax consequences, these transactions present practical and technical difficulties—if not, complete obstacles – to including them as part of a tax deferred exchange, such as:

•No cash is available to complete acquisition of replacement property;
•Credit is adversely impacted and thus financing to purchase replacement
• property is unlikely;
•In a foreclosure there is no contract of sale for the taxpayer to assign to the Qualified
• Intermediary (required by the Treasury Regulations for an exchange);
•A short sale or deed in lieu may have a written agreement to assign to the Qualified
• Intermediary, but it is questionable as to whether the IRS would accept such an
• assignment.

In sum, owners should recognize that even though their property is under water and they will receive no cash from its disposition, the tax consequences remain significant. Owners facing foreclosure, short sale or a deed in lieu should plan as far in advance as possible for the taxable consequence resulting from the transaction.

For further information regarding the above, you may wish to visit the following link located on the IRS website: http://www.irs.gov/newsroom/article/0,,id=174034,00.html

Choose OREXCO to handle your next exchange. We have offices nationwide to serve you and/or your client’s exchange needs. For more information about OREXCO and its QI services, please go to www.orexco1031.com.

Taxpayers contemplating an exchange should always consult their tax or legal advisor.

Guest Writer Toni Esposti, CES®/CSEO/CEI  is the Vice President for OREXCO 1031 Exchange (Old Republic Exchange Company), a Qualified Intermediary company specializing in IRC § 1031 exchanges in the North Bay.  For more detailed information call Toni at 888.677.1031.

Old Republic Exchange Company 545 4th Street, Suite 210 • San Rafael, CA 94901 www.orexco1031.com

© 2010 Old Republic Exchange Company™

 

How to build wealth and save taxes

 

 

If I told you I knew how you could get an interest free loan that you didn’t have to pay back until you were ready, would you be interested?  Who wouldn’t!?  Essentially, this is what you get when you use an Internal Revenue Code Section 1031 Tax Deferred Exchange (IRC § 1031) to your advantage.  When you sell real property that you hold for investment purposes and replace it with other real property provided both properties are either held for investment of used in a trade or business.

 With a combined rate for both Federal and California State tax of approximately 25% and the potential of it being more if you have to consider recapture of depreciation, the motivation to use an exchange to defer capital gains is clear.  If the Capital Gain on a property being sold is $100,000, the tax may be in excess of $25,000.

 By using an exchange, an investor (exchanger) can sell his property, defer the capital gain tax and leverage the entire equity to acquire replacement property.  In order to complete a successful exchange and fully defer capital gains, the exchanger must comply with certain requirements and strict time lines that are outlined in the code.

For example, the exchanger has 45 days from the day escrow closes on the relinquished property, to identify in writing potential replacement properties.  After the 45^th day, the exchanger cannot change the properties identified and the Exchanger has 180 days from the close of escrow of the relinquished property to close escrow on one or more of the identified replacement properties.

 To fully defer capital gains, the exchanger must acquire replacement property that is equal to or greater than the net value of the relinquished property.  Likewise, he must fully reinvest all the net equity and replace the existing loan with either a new loan on the replacement property or add cash equal to or greater than the debt existing on the relinquished property when purchasing the replacement property.

 It is always advisable to consult with your legal or tax advisor when considering an exchange.  Used correctly, the IRC § 1031 Tax Deferred Exchange can help an investor build wealth and save taxes.

Guest Writer Toni Esposti, CES®/CSEO/CEI is the Vice President for OREXCO 1031 Exchange (Old Republic Exchange Company), a Qualified Intermediary company specializing in IRC § 1031 exchanges in the North Bay.  For more detailed information call Toni at 888.677.1031.