My New Blog

Structuring the short sale as part of a 1031 tax deferred exchange may prevent unexpected tax consequences.

Claudia Kierman of ipx Investment Property Exchange Services Inc of Florida has sent us the below information.  The idea is very interesting and may well help you if you own an investment property.  It is more detailed but may work for your situation.  Please consult your CPA or Tax attorney about this information or reach Claudia Kiernan claudia.kiernan@ipx1031.com 

1031 Exchanges and Short Sales

"We are often asked whether the seller of investment property in a short sale can benefit from a 1031 exchange. The answer is yes. According to IPX 1031 Regional Manager, Jim Miller, in a short sale the lender is agreeing to release the property that is being sold from the lien of its Mortgage. Since the Mortgage Forgiveness Debt Relief Act of 2007 only applies to a principal residence, any debt forgiveness with regard to an investment property will be taxable.

For example, let's assume Ian Investor purchased 123 Main Street in 2005 for $240,000 with 100% financing. Over the past few years, the value of 123 Main Street has decreased and it is now only worth $200,000. Although Ian remains current on his loan payments he does not want to continue to own 123 Main Street because of its decreased value. Accordingly, he decides to sell 123 Main Street. His real estate agent finds a buyer and states the bank is willing to agree to accept $200,000 in a "short sale".

Although this is good news, Ian's accountant advises him that the debt forgiveness of nearly $40,000 (approximately $240,000 minus $200,000) will result in a tax liability of between eight and twelve thousand dollars. Ian does not want to pay taxes to sell a property that has already lost $40,000 in value and decides that a short sale is not a good option for him.

Ian's accountant suggests that he have his real estate agent contact his current bank to see if they are willing to exchange 123 Main Street with one of its "Bank Owned" properties. The benefit to the lender is that Ian is still solvent but "underwater" in 123 Main Street.; and by exchanging one of the properties it already owns (as a consequence of a prior foreclosure) Ian will remain financially stable and be more likely to continue paying his mortgage obligation. The benefit to Ian is that he will not be forced to recognize and pay taxes on "phantom income" and he will be able to acquire, as his replacement property, a better property which is equal in value to his original investment.

Accordingly, Ian's lender agrees to exchange 456 Park Place, worth $240,000, for 123 Main Street and transfer Ian's loan to the new property. As a result of the exchange, Ian has a better property without recognizing (paying taxes on) any gain. The lender still has one property to sell but has reduced the chance that Ian will walk away from his original $240,000 obligation.

Successfully achieving this type of transaction takes effort but it can be beneficial to investors, lenders and real estate agents. An investor could acquire the new property in an area which has stabilized and has a better chance of showing appreciation. Before selling any property in a short sale, it is very important to consult with your tax advisor. You need to receive competent advice as to what is best for your specific situation. A "do it yourself" approach may result in an unexpected tax bill which could have been reduced or avoided with proper planning."

My job is to help you with your real estate needs. Please call me at 239-765-5478 or email me at jerry@765LIST.com  anytime.

The US government has provided some sunshine for those who have been struggling with pre foreclosure and short sale homes.  Below is actual quotation from the IRS website and link which may be very useful to you and your family.    

"The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition."

For all the information details please use this link below:
http://www.irs.gov/individuals/article/0,,id=179414,00.html  

My job is to help you with your real estate needs.  If I can be of help call me at 239-765-5478 or email jerry@765LIST.com 

Area Homeowners who are looking at foreclosure in their future should take 2 and 1/2 minutes to view the video below to look at a real alternative to their plight.  The video explains the key new Federal Regulations for Short Sales.  Rules that could help make "short sale" an attractive alternative and save them lots of money and pain.

Buyers considering purchase of a short sale property should look at it also to see how those rules could affect them. 

I am pleased to be able to provide you the highlighted link below to click on which will open the snort video in a new window: PLEASE CLICK ON THE BELOW LINK TO VIEW.  Then call me anytime! 1-800-551-2223   

NEW RULES ON YOUR SHORT SALE PROPERTY WATCH THE NEW VIDEO THEN CALL JERRY 239-765-5478 YOUR SHORT SALE REALTOR! 

This is your time and you have a $6,500 added tax credit (a direct reduction in your taxes) as a homeowner who already own a property but want to buy another.  According to RISMEDIA today they report this expansion of the first time home buyers tax credit program due to expire to include existing homeowners too! Here's the details:

The US Senate has "cleared the way to pass a seven month extension and expansion of the tax credit for homebuyers. By an 85 to 2 roll call vote, the Senate voted to cut off debate on a package of measures that includes the homebuyer credit, making it virtually certain that the legislation will reach President Obama for his signature this week. 

The homebuyer tax credit, due to expire at the end of November would be extended through April 30 of next year. First-time buyers who are in the process of making a purchase would not need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. 

For the first time, the legislation that was recently cleared makes move-up buyers as well as first-time buyers eligible for a credit. The $8,000 maximum first-timer credit will continue and will now be available to couples with income up to $225,000, a nearly $55,000 increase above the level in existing law. A new $6,500 maximum credit would also be available to move-up homeowners who have lived in their current residence for five of the prior eight years. 

For homebuyers across the country, the expanded tax credit would allow more people to qualify for the credit. While two-thirds of American families own their own home, and most earn less than the income limits that have been established within the extension, more buyers may be eligible. Move-up buyers don’t have to sell their current home to qualify for the new credit, but the money cannot be used to buy a vacation home. “It’s only for a primary residence,” said Regan Lachapelle, a spokeswoman for Sen. Harry Reid (D-Nev.), who helped engineer the deal. “In expanding the tax credit, we are helping first-time home buyers, as well as homeowners looking to move up to a new home, but we would exclude from the credit speculators who may have recently purchased a home intending to flip it for a fast profit,” said Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee. 

The tax credit has fired-up the housing market, driving existing home sales to the highest level in over two years."

With news like this likely to stimulate purchasing of existing homes and condominiums in our area, now is the time to get the best selection of properties and take advantage of this stimulus offering.  All good things come to an end so you may want to act now to take advantage of receiving $6,500 when you make that move!  Please feel free to contact me with your questions or to start looking now.  800-551-2223 or jerry@765LIST.com

Read more: http://rismedia.com/2009-11-04/senate-clears-homebuyer-tax-credit-extension-may-pass-as-early-as-this-week/#ixzz0W0XZUzQC

Florida's Chief Financial Officer Alex Sink reports that property and cash valued at more than one hundred seventy million dollars is being held unclaimed and waiting for the true owners. She has set up a website where you can look to see if you have any assets which you need to claim before the State auctions the assets later this month!!! If you reside or ever have resided in Florida it is worth a couple of minutes to check and is very easy to do.

Just click the link below:

http://www.fltreasurehunt.org

Buyers remained rabid in Ft. Myers, bidding up prices in order to snap up low end homes. Our traffic index fell to 72 in September from 82 in August, but this still indicates strong levels of demand (readings above 50 point to traffic above agents’ expectations) and this was the highest reading of any market surveyed this month. Agents indicated buyers have a growing sense that the bottom is here or very near and want to get in before prices increase.

Agents continued to note tough competition at the low end, with one commenting, “72% of our deals have multiple offers over list price, and most buyers start their offer over list price.” This is quite a sharp change in tone from the downward spiral experienced throughout most of the past three plus years, but prices have fallen so sharply that the affordability is very compelling. The most challenging aspects of the market appear to be getting a good appraisal and qualifying for a loan, but most foreclosure-buyers are investors paying cash so this is not an issue on those homes.

Agents said prices were stable again in September, marking the fourth consecutive month of stable or higher prices. Our home price index improved to 54 from 50, consistent with a neutral reading.This should encourage more buyers to get off the fence by giving them confidence in their investment.

However, agents did note that the stable pricing is occurring primarily at the low end and that higher end homes are still falling in value. Healthy demand led to lower inventory levels again in September, as our home listings index measured 72 (down from 78 but well above a neutral reading of 50). These are positive indicators, but the key will be continuing to make progress on inventory levels, especially as foreclosures continue to come to market."

This report is very useful for planning for our local buyers and sellers and, though not my words, it reflects the state of our local market into October!  If you would like a copy of the complete September report on the area please email me jerry@765LIST.com  and I will be happy to send it to you. 

Everyone has been crying for 4 years how much they have lost in the real estate market and now in the stock market.  The best way to recover is to buy in when the prices are low! Fence sitters beware: I always say: "You make your profit when you buy not when you sell!"  

What are you doing this Fall?

For those Lee County property owners who received their property assessments this past week and disagree with the new valuation the county has a more simplified way for you to file a tax protest with them at last! 

You can now do it online!  I am providing the link below for your convenience:

 http://www.leeclerk.org/VAB2009/

Guess what?  They are buying!

In the latest Credit Suisse market study from last month for the Lee County

Buyer traffic increased in July and remained above agents’ expectations (a neutral reading of 50), as our traffic index increased to 69, up from 62 in June. It seems that RSW should have seen plenty of traffic, given all of the investor activity in the market. Agents indicated that about half of all buyers are investors with some agents saying that 80-100% of their business is coming from investors. One agent described the feeding frenzy on foreclosures by noting that “prices are as low as they can go…Investors are everywhere” .A common theme was also the view that buyers are active as they have confidence that prices have bottomed.

Rising home prices, falling inventory levels. Agents noted increasing prices in July, as investors bid up the prices of foreclosures. This is the first increase we have seen in the market in many years and we expect that many investors will be further encouraged by the increasing prices. Our home price index measured 57 in July, up from 50 in June, with any reading above 50 pointing to rising prices. The intense investor demand led to another decrease in inventory with our home listings index coming in at 71, down from 92 in June, but with anything above 50 pointing to falling inventory."

With news like this and the stock markets climb, the signs are that for all who have been sitting on the sidelines it is time to get in!  We stand ready to help you do that through our great researching and 24 years local market experience.  Contact us today 800-551-2223 or jerry@765LIST.com

Want to receive property info by email only? Sign up at http://www.765list.com/MARKETREPORT

An explosion as occurred here in SW. Florida.  It started at the very low priced properties under $100,000 bargains and spread to the $200,000 price range.  At the beach and in resort properties we are seeing it in the $300,000-$400,000 price range and above. 

You need to know this: prices are not yet rising but inventory of good and great values is rapidly declining and thus far not being replaced.  The market alert I issued months ago is now close to my last call for great values and low interest rates.  You can ignore this but please do not complain this winter or beyond about missing out or lack of great values.

Number of properties under contract to close is now exploding. Call me now to take advantage of owning the best values.  239-765-5478 o 1-800-551-2223. 

Here's a Tip on another subject: Cell Phone Numbers Go Public next month. ... all cell phone numbers are being released to telemarketing companies and you will start to receive sales calls. ...... YOU WILL  BE CHARGED FOR THESE CALLS  Even if the message is saved on your phone, you will be charged for the minutes to listen to it.

To prevent this, call the following number FROM your cell phone:    

FTC Do Not Call: 888-382-1222 .

This is the National DO NOT CALL list. It will only take a minute of your time. It blocks your number for five (5) years.  

You must call from the cell phone number you want to have blocked.  

You cannot call from a different phone number. 

Hope this helps you save for that Lee County Property.  It surely will be less annoying!

"While it may be early to call this a true bottom since all of the activity is on the distressed side and foreclosures continue at a rapid pace, it is certainly encouraging to see that there seems to be a clearing price in the market. The only problem is it may be a painful mark to hit for traditional (nonforeclosure) sellers. Home prices continue to fall as foreclosures drive almost all sales activity."

Potential Buyers who really do not want to miss the market take note.  Start planning your buying trip during "off season" -now thru October.  Having been in real estate sales here for 23 plus years, my local market knowledge tells me that many non foreclosed or short sale properties have better prices than their foreclosed brothers and sisters.  Many Sellers have become realistic and aggressive. 

Remember: Many of them want to buy a bigger smaller or different type property for their lifestyle so they want to take advantage of the lower prices while they last too!

Buyers should keep in mind that not all bargains, foreclosures and short sales, are the best buys for you just because they're cheap. Price growth and your lifestyle may make another property better for you in the long run.

Please feel free to put my counseling and expertise to work for you. Contact me at 239-765-5478 or jerry@765LIST.com