Second Lien Holders Reluctant to Let Borrowers Off the Hook
Last month Wells Fargo sued a San Diego woman after her home was foreclosed on last year. She had 2 loans and the second - $72K left on a HELOC - was wiped out in the foreclosure. Both loans were refinanced but she did not take out any cash. Nevertheless, Wells Fargo filed suit last month to collect the $72K owed on the second. Check out the Wall Street Journal article from last week that reported this story.
http://online.wsj.com/article/SB10001424052702304846504575177720824287204.html?mod=WSJ_Real+Estate_LeftTopNews
Tax and legal experts who I’ve spoken with say that CA law protects most home owners who are foreclosed on or who complete a short sale (selling a home for less than what is owed with the deficit being forgiven) from being sued by a lender if the mortgages are “purchase money loans” meaning they were taken out to buy the property. This is quite different from home loans that have been refinanced, like the San Diego woman being sued. Many people have been wondering whether banks would come after home owners who refinanced but did not take cash out. At least in this case, we know the answer.
Congress and the administration are addressing this issue of second lien holders’ actions over the next couple of weeks. Stay tuned…
California Provides Tax Relief for Distressed Homeowners
Home buyers have been treated to lots of favorable news over the last couple of years, e.g., low home prices and interest rates, as well as federal - and now state - tax credits for purchasing a home.
Home owners and sellers have not enjoyed such good times. However, the state of California has just enacted a law that will forgive the income tax liability for a person who sells a home for less than the debt owed (a short sale, for example) anytime between January 1, 2009 - January 1, 2013. The move was intended to mirror a federal law that has been on the books for a few years now.
Many distressed home sellers are shocked to learn that when they complete a short sale, they get a bill from the IRS and the state tax authority, because under these tax codes, debt that is forgiven is treated as income, and we all know that any income earned must be taxed and paid by the person who “earned” it. The federal government has been forgiving this tax burden since 2007 and California has now followed suit.
Please note: I am NOT attempting to provide tax advice here. You should consult your tax advisor to get specific advice for your situation. For more information about the CA program, here is an article from the California Franchise Tax Board.
http://www.ftb.ca.gov/aboutFTB/Newsroom/Mortgage_Debt_Relief_Law.shtml
Call your tax expert for tax advice and call me with any real estate questions.
Kevin P. Cummins, J.D., e-PRO, SFR
Certified Relocation Specialist
Broker Sales Associate | Realtor
Coldwell Banker Residential Brokerage
3810 Valley Centre Drive #906
San Diego, CA 92130
cell: 858-750-9577
fax: 858-793-9944
web: kevincumminshomes.com
mail: kevinpcummins@gmail.com
blog: kevincumminshomes.tumblr.com
CA DRE Lic. # 01812762
More Good News for Homebuyers - Up to $18,000 in Tax Credits!
The State of California is now offering a brand new $10,000 tax credit for homebuyers allowing homebuyers who purchase a home between May 1, 2010 and December 31, 2010 to take advantage of continuing tax benefits after the federal tax credit expires in June, 2010. For first time homebuyers who enter into a contract to buy a home before April 30, 2010, and close escrow before June 30, 2010, that homebuyer will be able to qualify for the $8,000 federal tax credit and the $10,000 California credit for a total of $18,000!
And remember, a tax credit is not the same as a tax deduction. A tax credit means you can get up to $18,000 worth of credit against any tax burden owed which would offset that liability. If you have no taxes due to the IRS or to the State of California, you will get a check back from these governments for the unused credit amount. These are very powerful incentives for homebuyers - first time homebuyers and existing homebuyers. So call me today for more information and consult your tax advisor for specific tax advice.
Kevin P. Cummins, J.D., e-PRO, SFR
Realtor | Broker Sales Associate
Certified Relocation Specialist
Coldwell Banker Residential Brokerage
3810 Valley Centre Drive #906
San Diego, CA 92130
cell: 858-750-9577
web: www.kevincumminshomes.com
mail: kevinpcummins@gmail.com
blog: kevincumminshomes.tumblr.com
Now California Has It’s Own Home-Buyer Tax Credit
Yesterday, CA’s Governor Schwarzenegger signed into law new legislation that allocates $200M in tax credits for first-time home buyers: (1) $100M for buying new constrution and (2) $100M for buying a resale property. The tax credit would be the lesser of 5% of the purchase price or $10K and would be credited/paid over 3 years. The buyer must purchase the home between May 1 and December 31, 2010 and use the home as a primary residence for at least 2 years or face paying the credit back. As more information on the program becomes available, I will post it here. In the meantime, check out the press release from CAR. http://images.agentcenter.com/client/3/2/4/36423/CAR_Applauds_Homebuyer_Tax_Credit_Legislation.pdf
Call or email me with any questions.
Kevin P. Cummins, J.D., e-PRO, SFR
Certified Relocation Specialist
Broker Sales Associate | Realtor
Coldwell Banker Residential Brokerage
3810 Valley Centre Drive #906
San Diego, CA 92130
cell: 858-750-9577
fax: 858-793-9944
web: kevincumminshomes.com
mail: kevinpcummins@gmail.com
blog: kevincumminshomes.tumblr.com
CA DRE Lic. # 01812762
Changes in the Homestead Exemption as of 1/1/2010
San Diego real estate attorney, Harold Small, Esq., informed me recently that the CA legislature has increased the homestead exemption amounts as of the 1st of the year. Here is his posting:
The law is constantly in a state of flux with changes happening either because of changes in statutes or case law. An area that has been relatively unchanged for some years had a change that became effective January 1, 2010. California homeowner’s now have an increased equity that is protected from creditors with the amounts having been increased (by Assembly Bill 1046) as to the following amounts:
Individual $ 75,000
Married couples $100,000
Seniors (over 65), disabled or over 55 with limited income $175,000
While these changes are not important to all homeowners, given the current financial condition of our society and people facing financial challenges, daily, this information may be of assistance to them. For creditors, it is important to be aware of these limitations as they may impact decisions to be made relating to settlement of claims/issues with borrowers.
THE FOREGOING CONCEPTS AND IDEAS ARE GENERAL STATEMENTS AND ARE INTENDED TO PROVIDE CONCEPTS FOR CONSIDERATION IN BUSINESS AND TAX PLANNING. CAREFUL CONSIDERATION NEEDS TO BE GIVEN BY THE READER REGARDING THE USE AND APPLICATION OF THE CONCEPTS. YOUR LEGAL AND TAX COUNSEL SHOULD BE CONSULTED BEFORE THE IMPLEMENTATION OF ANY OF THE IDEAS INDICATED HEREIN OR USE OF THE INFORMATION CONTAINED ABOVE. SHOULD YOU HAVE QUESTIONS REGARDING THIS MATTER, HAROLD S. SMALL, ESQ., CAN BE REACHED AT 12526 HIGH BLUFF DRIVE, SUITE 300, SAN DIEGO, CALIFORNIA 92130 OR AT 858.759.4600.
© 2010 by Harold S. Small, J.D., CPA (inactive), AEP
Call Harold directly for any questions. Harold is my “go-to” attorney for all real estate matters. Call me with any questions that you may have.
Kevin P. Cummins, J.D.
Broker Sales Associate | Realtor
Coldwell Banker Residential Brokerage
3810 Valley Centre Drive #906
San Diego, CA 92130
cell: 858-750-9577
fax: 858-793-9944
web: kevincumminshomes.com
mail: kevinpcummins@gmail.com
blog: kevincumminshomes.tumblr.com
CA DRE Lic. # 01812762
Now, a Few Words About the Other ($6,500) Home Buyer Tax Credit…
Most people have heard about the $8,000 tax credit for first-time home buyers. And that it has been extended to the spring. That means that the buyer must enter into a contract to purchase a home by April 30th and close the deal by June 30th. But not many people know about the other tax credit: the one for $6,500 available to exisiting homeowners if they buy a home (used as their primary residence) according the timeframe mentioned above.
I have asked Cameron Williams, an experienced CPA who specializes in real estate investment advice and planning, to write a few words about the new credit.
From Cameron Williams, CPA…
Long-time residents of the same principal residence, may be treated as a first-time home buyer under certain conditions. If an individual (and, if married, the individual’s spouse) who has maintained the same principal residence for any 5-consecutive year period during the 8-year period ending on the date of the purchase of a subsequent principal residence may qualify for a maximum credit of $6,500.
There are several other limitations that need to be considered. First, the new residence must be the new primary residence (for the 36 months from the purchase date), home must have been purchased from November 7, 2009 thru April 30, 2010, (unless under a written binding contract as of April 30, 2010, then you will have until June 30, 2010 to complete the purchase). The purchase price must not exceed $800,000.
The credit will start to phase out for a single taxpayer who’s modified adjusted gross income is between $125,000 and $145,000 ($225,000 to $245,000 for married filing joint return). There is no provision for the old principal residence to be sold to claim this credit.
You should consult your tax advisor to determine if you are eligible to receive this tax credit.
H. Cameron Williams, Jr., CPA
Duffy, Kruspodin & Company, LLP
Certified Public Accountants
4225 Executive Square, Suite 900
La Jolla, CA 92037-1485
Phone: (858) 642-5050 ext 2044
Fax: (858) 642-5065
Email: hcameron@dkllpcpa.com
www.dkllpcpa.com
A Few Pointers on Figuring Out Condo Insurance…
As a Realtor I help homebuyers purchase single family (detached) homes as well as townhomes and condominiums. While everyone understands that you need homeowner’s (or hazard) insurance in order to close the deal (in fact, lenders require it), there is a lot of confusion about (a) what condo insurance is, and (b) whether it is even required.
I asked Jill Harris from Farmer’s Insurance to explain it so my clients and readers of this blog can better understand this insurnace product.
From Jill Harris, Farmer’s Insurance…
I have been receiving numerous calls recently from clients whom are buying or re-financing their condos, and that proof of HO6 coverage is required for the loan to be approved.
So, what is HO6 coverage?
HO6 is designed for condo owners. The HOA condo insurance policy does not typically cover your actual unit or any of your belongings. Condo & co-op owners naturally assume that adequate insurance is covered in their association fees, which helps fund a master policy. However, this policy only covers common walkways, hallways, boiler, elevator, roof and basement for physical damage and liability. To protect themselves and the property within their unit, owners need to purchase a personal home insurance policy - a.k.a. HO-6 - designed for condos and co-op apartments.
Many people have HO6 insurance because they are required to if they have a mortgage on the condo, but the truth is that all condo owners should have a HO6 policy. Since the HOA insurance policy typically only cover up to the beams, the condo unit owner would be responsible for everything else, including the drywall. In the event of a loss, the condo unit owner would be left with an empty box, and they would be responsible for the re-build of everything else, including drywall, interior walls, fixtures, floor covering, kitchen, bathroom, cabinets, paint, etc. Thus, HO6 coverage is offered to help protect such costs against perils, and more!
HO6 policies can also include personal property liability protection, jewelry floaters, artwork floaters, and many more. I suggest increasing ones personal Liability at a high limit, like 300,000-500,000 this is very inexpensive for a good amount of coverage.
Loss Assessment is another endorsement that can be added. This is an inexpensive way to protect the individual unit owner against sums that the individual unit owner may be legally liable for as a result of bodily injury or property damage. Loss Assessment Coverage will protect the unit owner for special assessments as a result of liability claims (such as bodily injury and property damage lawsuits) or due to a covered perils like lightning, explosion, hail, windstorm, fire, civil disturbance, vandalism, theft, damage from falling objects, aircrafts or other vehicles and smoke. I would suggest getting adequate loss assessment coverage, since $50,000 in loss assessment coverage could cost a little as $20 a year.
Jill can be reached directly at 619-917-8164 or at jklug1@farmersagent.com
SoCal median home prices increased 2% last month as inventory of homes continued to shrink
According to the following article in the SD Union Tribune, dated November 17, 2009, “median home prices in Southern CA rose nearly 2 percent last month from September, as the inventory of homes for sale continued to shrink and lenders worked to avoid fresh foreclosures”. Read more here: http://www.signonsandiego.com/news/2009/nov/17/firm-socal-median-home-price-increases-in-october/
Carmel Valley’s Housing Market Data Tells Two Very Different Stories
That’s right. I did some analysis this week to look at home prices, inventory, etc. for detached homes in 92130. I was surprised at the results.
For detached homes up to $1M, median prices are flat compared to October 2008, and there is only 1.9 months of inventory - one sign of a seller’s market.
For 92130 homes between $2M - $7M, however, median prices are down 15% from October 2008 and there is, get ready, 51 months of inventory on the market right now! This is an important data point because it means that, at current rates buyers are closing escrows, it would take 51 months - more than 4 years - to sell all of the homes on the market between $2M - $7M in Carmel Valley, 92130. And that is only if no other homes come on the market in the meantime! If more new listings continue to come on the market at these prices, it will push a full recovery out that much further.
What does it all mean.? Simply, that we have more of a balanced market for homes under $1M and a lot of improvement to go in the luxury home market. It is not quite a traditional buyers’ market either because of tightening in the lending and credit market, the current economic climate, unemployment, general cautiousness of buyers, etc. This also means that prices, unfortunately for luxury home sellers, still have to come down more. This will thin out the inventory which is a necessary step before luxury prices will stabilize and recover. So, in other words, things must get “worse” (for sellers) before they better.
Call or email me with any questions.
Kevin P. Cummins, J.D.
Realtor / Broker / Attorney
Coldwell Banker – Carmel Valley
CA Lic. # 01812762
Cell: 858-750-9577
Fax: 858-793-9944
kcummins@san.rr.com
www.kevincumminshomes.com
Housing Economists Say Interest Rates Won’t Get Much Better Than This
Housing economists say interest rates won’t get much better than this because they are already so low they can only go up. The state of the overall economy is keeping some would-be buyers from making a move. But for those buyers who feel secure in their own financial situation and future, it is a good time to buy real estate for the long-term. Check out this article from cnbc.com which provides some good context. http://www.cnbc.com/id/32895358
Kevin P. Cummins
Realtor / Broker / Attorney
Coldwell Banker – Carmel Valley
CA Lic. # 01812762
Cell: 858-750-9577
kcummins@san.rr.com
Search the MLS on my new website at kevincumminshomes.com.
