Portland Real Estate Update by Janeese Jackson » buying or selling a home in Portland Oregon

Tax Saving Strategies Utilizing a 1031 Tax-Deferred LEGAL Exchange!!!

Janeese Jackson — Tue, 15 May 2012 17:56:21 +0000

“There’s Taxes Everywhere” – Matt Cline

reprinted from the First American Title Company Exchange Newsletter! Remember: having a strategy for your investment properties, 2nd homes and even re-thinking your primary residence could save you big bucks on the tax front. Just something to think about…..

Tax Saving Strategies Utilizing 1031 Exchanges

The 1031 tax deferred exchange is widely known and utilized by investors to defer capital gains tax when selling and buying investment property. To qualify under IRC Section 1031 the basic requirements to maximize your tax-deferral are:

Acquire “like-kind” property to be held for investment or productive use in a trade or business;
Identify replacement property within 45 days of closing the relinquished property;
Reinvest all your cash and acquire replacement property(ies) of the same value or more 180 days from the first closing; and
Use a qualified intermediary to meet the safe harbor.

There are however, additional tax savings that are not as widely known that can be beneficial when it comes to selling your primary residence or vacation/second home. A few of the strategies are briefly described below and when properly executed can help you save tax dollars.

Personal Residence To Rental

When a personal residence is sold, IRC section 121 allows for capital gain tax exclusion of up to $250,000 if a taxpayer is single and $500,000 if a taxpayer is married, as long as the residence has been owned and personally used by the taxpayer for an aggregate of two of the preceding five years before the sale. Although this amount is generous, what if you have more gain than the exclusion allows? Rev. Proc. 2005-14 provides guidance for a way to combine Section 121 and Section 1031 to defer taxes on all of the gain.

For example: Rick and Sue a married couple purchased their home for $100,000 20 years ago and it is now valued at $1 million, the taxable gain is $900,000. Upon the sale, the couple would receive their $500,000 exclusion but taxes would be owed on $400,000 of gain. However with the proper tax advice and planning, they could move out of the property and convert it to a rental for a period of time, then they could exclude $500,000 tax free at closing under Section 121, and then perform a 1031 exchange by purchasing an investment property for $500,000 to exclude the remaining $400,000 of gain!

Now they have excluded or deferred all their taxable gain and they own an investment property that could possibly bring them income and/or appreciation.

Converting Investment Property To Primary Residence

Another tax saving strategy that can be utilized with a 1031 exchange is converting investment property you own to your primary residence. Let’s say that Rick and Sue in the example above exchanged into a rental house. They rented the property for two years (per their tax advisor) and then moved into it converting it into their primary residence. Since they acquired the property in a 1031 exchange and then converted it to their primary residence, they must own the property at least five years before being eligible for the 121 exclusion.¹ Additionally if they acquired the property in the exchange after January 1, 2009 federal law limits the amount of gain that can be excluded when selling a house used as a primary residence if the house was also used as a rental.² While they may not receive the entire $250,000/$500,000 exclusion, they will still reap the benefits of tax savings.

When considering this strategy consult with your tax advisor regarding your specific circumstances to determine the tax free benefits.

Qualifying Vacation Homes For 1031 Treatment

Many properties are owned as vacation homes, and a common area of confusion has been whether or not a vacation home qualifies for a 1031 exchange. In 2008 a revenue procedure was issued that provides a safe harbor for vacation homes.³ The following are the requirements under the safe harbor:

Both the relinquished and replacement properties must have been owned by the taxpayer for at least 24 months immediately before and after the exchange.
In each of the two 12-month periods immediately before and after the exchange the properties must be rented at a fair market value for 14 days or more.
The taxpayer’s personal use cannot exceed the greater of 14 days or 10% of the days during each 12-month period that the property was rented at a fair market value.
Personal use includes; the taxpayer’s family members, any other person with an interest in the property or their families, anyone using the property under an arrangement which enables the taxpayer to use some other property (even if no rent is charged); or if the property is rented for less than fair market value rent.

With a bit of planning you can take advantage of the1031 exchange and defer taxes on your gain when you sell your vacation home.

Understanding the tax saving strategies available through the 1031 exchange, along with proper planning and tax advice can help you save tax dollars! For additional information about the tax deferred exchange and these concepts contact your local representative at First American Exchange.

Short Sales Might Get Easier???? I’ll Believe It When I See IT!!

Janeese Jackson — Fri, 11 May 2012 21:43:12 +0000

“Falling Short” – Generation Song

Short-sales have been a challenge in our market for the last few years. New legislation is supposed to make it better. My personal experience is that, “I’ll believe it when I see it”!! But, of course, I hope that it’s true!! Here is an article from RisMedia:

(MCT)—The short sale process could get a lot quicker starting this summer under new rules that will require lenders to respond to offers within a month.

Fannie Mae and Freddie Mac, the nation’s two largest mortgage backers, will implement the guidelines on June 15. The changes require mortgage servicers to make a decision within 30 days of receiving a short sale offer. They also must consider requests for pre-approved short sales within that same timeframe.

If the lender needs more than 30 days, it must give borrowers weekly status updates and a decision within 60 days of the initial application. This extension gives lenders more time to determine the value of the property or to get the approval of a mortgage insurer.

The moves are aimed at streamlining the short sale process, which often takes months to complete.

Such transactions can get so complicated that many prospective buyers won’t even consider making an offer on a short-sale property. And many of those who bid often walk away from the offer because lenders take so long to make a decision.

“Short sales are more complex than routine home sales since they may involve multiple parties and long-distance negotiating,” says Tracy Mooney, a Freddie Mac senior vice president. The new rules “are intended to help make the decision process more transparent and timely.”

Short sales involve homes that are sold at a price that’s lower than the balance owed.

There are many reasons why such deals are a better alternative to foreclosure, including fewer fees and faster transfer of ownership, eliminating all the problems that arise when a house is left vacant after foreclosure.

Because the lender and investors are being asked to take a loss, the process can get lengthy. All parties with a financial interest negotiate who will take what share of the sale proceeds.

So far, efforts to make that process easier have largely been unsuccessful, but the need has never been more critical.

Chris Willette, a short-sale expert in Edina, Minn., says that such rules are a critical step toward a housing recovery.

“We’re going to get rid of the inventory a lot more quickly,” he says. “And once you do that, you get your pricing back.”

But Willette remains skeptical. His primary concern is that the paperwork problems that currently plague the short sale process will only continue. He said getting all the forms together to complete such a transaction can be a major challenge.

Brad German, a Freddie Mac spokesperson in Virginia, says the organization will provide consistent reviews of lenders and will rank them monthly based on that performance. Those rankings are used to determine their compensation or penalties. Fannie and Freddie will continue to work on other avenues for enforcement.

Article printed from RISMedia: http://rismedia.com

URL to article: http://rismedia.com/2012-04-25/new-rules-aim-to-speed-up-short-sales/

The History of Interest Rates (and Why You Should Care)!! :-)

Janeese Jackson — Thu, 03 May 2012 21:17:28 +0000

“Why Should I Care” – Diana Krall

These are some very revealing and interesting historical statistics on mortgage interest rates. If nothing else dire happens in our very small one-world economy to “rock the boat”, we may look back and see that this is the time span when the market (at least in Portland, Oregon) really began to repair itself. I know we have a ways to go in completing our economic recovery and regaining some of our lost equity in housing but our local housing market is definitely changing! We have a shortage of good inventory and a resurgence of buying interest and the combination will inevitably affect the pricing of homes. These are all positive signs for our local economy and local attitude (now, if we could just get some sunshine!!!). These are also signs that is you are thinking of making a move or a purchase or have a higher than current market interest rate, you might want to consider refinancing or making your new housing dreams a reality sooner rather than later.

Click Here for the 30 Year FHLMC Rates On 30-Year Fixed-Rate Mortgage Chart

Click Here for the 200 Year Historical Rates On 30-Year Fixed-Rate Mortgage Chart

Click Here for the Rent vs. Buy Index Chart

April 2012 Portland Metro Real Estate Update!!

Janeese Jackson — Fri, 20 Apr 2012 19:58:58 +0000

“Crazy” – Gnarls Barkley

APRIL 2012 PORTLAND METRO REAL ESTATE UPDATE!!!

Hi again…what, so soon???!!! Yes, last month’s update was late and so here I am again in your “in-box”!!! What’s happening in our real estate market??? It’s a bit crazy, a “gold-rush”! There is a lot of pent-up buying energy, mixed with some positive economic news, add in a dash of “close-to-bottomed-out-prices” (if not totally bottomed out), then stir with a hint of the possibility of interest rates rising and you have a “flambé” (I’m talking like I actually know how or have time to cook?). Now, month after month, the “theme” is “improvement”. March 2012 figures show definite improvement in both pending and closed sales (plus they were up from last month…but, of course, that’s to be expected at this time of year). There were 2,272 accepted offers, which is 12.8% more than the 2,014 reported in March 2011. New listings continue to be down and we have only 5 months of inventory at the end of March. This explains the continuation of multiple offers on well-priced, show-condition listings. And the total days on market (DOM) has decreased by 17.9%, going from 165 in the first quarter of last year to 135 DOM in the first quarter of 2012. All of this speaks well for confidence in our economy and the willingness for buyers to get back into the market.

BUYERS: what does this mean for buyers? Housing affordability could be at one of the best we’ll see in our lifetime! I guess it’s “get it while the getting’s good”! If the economy continues to recover, then interest rates will go up! If the inventory continues to be absorbed, that will put upward pressure on pricing! There is a shortage of good inventory and that makes for a climate that encourages multiple offers. I’ve now been in multiple offer situations 7 times since the first of the year. And, I was just in a situation where my buyers made an offer within 24 hours of a listing coming on the market and there were 6 (count ‘em…6) other offers!!! An Inman News article just listed Portland as one of the Top Ten Metro areas with the greatest drop in “for-sale” inventory!! This puts a lot of pressure on buyers to have to make a rather large, life-changing decision in a very short amount of time. What can you do in a multiple offer situation? Really, the only thing you can do is decide just how much the house is worth to you (and that you can afford) and make the very best offer you can make! Then, just know you did the best you could do! If you are pressured into making an offer you feel is above market value, you will be stressed and dissatisfied throughout the escrow and when you close on the property. And, remember your State of Oregon mandated 5-day “Right of Rescission”!!

SELLERS: what does this mean for sellers? If you are in an equity position to sell and you need to make a housing change, we just could be entering a modified “sellers’ market”! Our market is totally “value based” at this moment. What does “value based” mean? It means, the reason that there is a sudden surge in our local market is a combination of aggressive pricing (because you must incorporate short-sales, foreclosures and ALL market information to price correctly…because the appraisers will) and low interest rates (at or below 4%). Buyers are looking for the “perfect storm” in value. It is still absolutely paramount to be competitively priced. Even with the low inventory and pricing (along with low interest rates) driving the market, even slightly over-priced properties will sit on the market. Check out this recent story to see just how “finicky” our buying market is at this juncture. If you are “priced to entice” you will move very quickly!!

INVESTORS: what does this mean for investors? If you can take advantageous of the opportunities to begin or add to your real estate investment portfolio and feel you have “the right stuff” for managing properties (or the latitude to hire someone else to do so), I would not hesitate! I would start with speaking with a trusted mortgage broker to either get pre-approved or establish a game-plan for an eventual approval. It’s a little more difficult if you own more than 4 properties total, but can be done. Read here for how lenders consider and calculate existing rental income. Or here for “How to Become a Successful Real Estate Investor”!!

A Visual of How Interest Rates Affect Mortgage Payments!

Janeese Jackson — Wed, 18 Apr 2012 21:15:16 +0000

A simple one-percent increase in interest rates can have a dramatic effect on the payment. Making a loan application and locking in the rate are key strategies to keeping your payments as low as possible.

Call me (503-709-0802) or write (jj@janeesejackson.com ) and Ill help you make an appointment with a mortgage professional. We will form a partnership to find your new home or investment!!

Housing Affordability Could Be at the Best Levels We Might See in Our Lifetime???

Janeese Jackson — Thu, 12 Apr 2012 19:08:15 +0000

“Money’s Too Tight to Mention” – Simply Red

The Housing Affordability Index was developed over thirty years ago to help consumers determine when it is a good time to buy a home. It’s considered advantageous to the buyer when the index is over 100 because a median income family can qualify for a median price home.

Recent figures released by the National Association of REALTORS‘ economic department show that the 2011 index of 184.5 is the highest annual average since it has been calculated. The most recent month released, December 2011, was 194.9. The index is also broken down into four regions of the country.

The two major components that contribute to the index are home prices and mortgage interest rates which are lower than they’ve been in the last five years which account for the dramatic rise in the index since 2006.

The Housing Affordability Index is just another indication that this is a good time to buy a home for people who have good credit, a down payment and want a home. It could be the “perfect storm” with diminished pricing + the lowest interest rates in 50 years!! It just could be the best time we’ll see in our lifetimes. Mortgage lending for primary residences and 2nd homes has become more accessible. Now if they would only loosen up the reigns on investor financing!!! If you are thinking about purchasing a new investment property, you might be interested in how lenders calculate rental income!

Real Estate EXCITEMENT! And, What This REALLY Means for Portland Oregon Real Estate Pricing!!!

Janeese Jackson — Tue, 10 Apr 2012 19:20:43 +0000

“I’m So Excited” – The Pointer Sisters

Something different is definitely happening in our local Portland Oregon real estate market!!! And, this is a good thing for our local real estate, our local economy and our local attitude (of course, just a little sunshine might fix that). However, what is really happening? I’m still assessing, but it’s definitely not “the sky is falling” environment that we have endured the last few years. I want to share a story or two, so you can get perspective on just how “finicky” our market might be AND how important it might be to be “priced right”! I really angst over pricing properties. #1: I’m aware that there is no absolute “God of Real Estate” that can (beyond a shadow of a doubt) predict for what price your home will sell (but my “gut” is right more than it’s wrong). #2: I don’t want to leave money on the table for my sellers. #3: I know that the “real estate adage” I have heard since I began (25+ yrs ago) is true and that is “if you overprice your property, you will most likely get less than you might have had you priced it correctly to begin with” (only it’s MORE true now).

So, why is it possibly more true now? Our market is totally “value based” at this moment. What does “value based” mean? It means, the reason that there is a sudden surge in our local market is a combination of aggressive pricing (because you must incorporate short-sales, foreclosures and ALL market information to price correctly…because the appraisers will) and low interest rates (at or below 4%). Buyers are looking for the “perfect storm” in value. I”m not kidding about a “finicky” market. Recent story: home price at $309K, lots of showings, no negative feedback about price, drop price to $299k, immediately 3 offers. Really???!!! Only $10k would make the property seem more attractive??? YES!! And, remember those “markers”: $25k, $50k, $75K, $100k DO matter. It’s not that people won’t see your home, it’s just that possibly the right people WON’T see your home or the right people WILL see it and decide to “wait it out”! (Buyers: never a good idea…just make an offer, what’s the worst that could happen? I’ll tell you: they say “no”…ok!). However, in everyday reality, pricing is a psychological barrier. A sense of urgency needs to be present for current buyers to make a move!!!

Like I shared in my most recent real estate update, our inventory is VERY low. This will eventually result in appreciation, but it will most likely be slow, slow, slow. That being said, if you want to get in the market (either as a first-time buyer, investor or move-up buyer), I would try to see if you could make the numbers work. WHY? Because interest rates trump price. And, if the economy continues to improve, interest rates will go up. If demand continues to absorb supply, pricing is sure to go up. I am never a big fan of people losing money but if you really need to make a change (move-up, move-down, move-around), if you lose a bit of $$ on your current residence you will most likely make it up on the next purchase (as long as you’re buying and selling in the same market)(especially with the current low interest rates). Think about it or use the multitude of mortgage calculators on the web (there is one on my web site) or call a trusted mortgage professional and have him/her run the numbers!!!

CH-CH-CH Changes…Once Again Changes are a-coming in FHA Financing!

Janeese Jackson — Thu, 05 Apr 2012 18:09:43 +0000

“Changes” – David Bowie/Ziggy Stardust

Ch-Ch-Ch-Changes! Once again changes to FHA (Federal Housing Authority) mortgage lending:

HUD has made several announcements regarding changes to FHA financing recently. Below are a few highlights and key dates for you to know. These are especially important if you are considering FHA financing and currently looking for a home!!

FHA Changes Coming in April 2012:
1.      Self Employed borrowers will be required in most cases to provide a current P&L (profit & loss) statement and a Balance Sheet for qualification
2.      More Borrowers will have to pay off collections in order to qualify for FHA loans – (current disputed/collection accounts in excess of $1000 must be ‘resolved’ (details in letter)
a.      Paying “down” of balances on disputed accounts and collections to reduce the singular or cumulative balance to below $1,000, is not an acceptable resolution of accounts.
3.      FHA’s Upfront Mortgage Insurance Premium (UFMIP) will be raised from 1% to 1.75%.
4.      Monthly Mortgage Insurance (MMI) goes from 1.15% to 1.25%

FHA Changes Coming in June 2012:
1. Streamlined Refinances – REDUCTION in UFMIP from 1.0% to 0.01%
2. Streamlined Refinances – REDUCTION in MMI from 1.15% to .55%

March 2012 Portland Metro Real Estate Update (Better Late than Never)!!

Janeese Jackson — Tue, 03 Apr 2012 18:19:19 +0000

“I’m Late” from Alice in Wonderland

MARCH 2012 PORTLAND METRO REAL ESTATE UPDATE!!

Happy “Spring-Time” (if you come up from being under-water long enough to read this)! I’m so late with my March 2012 Portland Real Estate Update that it’s actually April. All I can tell you is that moving all your documents, files, contacts, e-mails, contacts, photos, marketing materials and more while trying to learn a new computer operating system and carrying-on “business-as-usual” is not to be taken lightly! Buyer Beware!! But, I’m almost through the “eye of the needle” and I just thought I’d let you know a few tidbits about our local Portland real estate market!! Closed sales were up 17.5% in February 2012 as compared to February 2011. Pending sales up 32.5%. And, inventory is down, DOWN, DOWN! Just to give you some perspective on our current inventory, we ended 2011 with 5.3 months of inventory (that number is always lower during the holidays) and we began 2012 with 7 months of inventory. We are now at 6.5 months. It was 12.5 months in January 2010 and 19+ months in 2009…ouch! All I can say is there is a lot of pent-up “buying energy” and homes are moving. But, again…only if you are priced correctly. One of my biggest challenges is coming up with a price for property that will move the property (and make the seller happy)!!

Supply and demand! This is always an element of what controls economics! Our local real estate market lacks good inventory thus I have found myself in a multiple offer situation 5 times since the first of the year. So,considering the “state of real estate” in the last few years, why the lack of inventory? Part of the equation is that due to depressed prices, some who might sell, can’t or choose not to right now because they may owe more than the price the current market will bear! Another element is the lack of “good” inventory! This refers to the number of short-sales (an unreliable thus unacceptable option for some buyers), the number of properties that are in less than stellar condition (i.e: some foreclosures or poorly staged homes) and finally over-priced properties! Thus, competitively priced properties are selling relatively quickly. Certain price points are moving more quickly than others!

Warren Buffet recently wrote that he felt housing was a very attractive investment right now. Then Donald Trump joined the bandwagon! There has been lots of press regarding our improving economy. Home prices are diminished, interest rates are at record lows and buyers with decent credit and the where-with-all to come up with a down-payment are turning back to real estate (remember it takes as little as a 3.5% down payment to get FHA financing, VA financing for qualified vets = 0% down). Investors have been rounding out their financial portfolios with real estate purchases with decent ROI (return on investment). However, this hasn’t yet made a huge impact on over-all local home values!!

BUYERS: What does this mean for buyers? Something different this way comes! I am sensing a change in our local Portland real estate marketplace; in that well-priced, well-staged properties, good condition properties are being snatched up by eager buyers!! Remember, as a buyer interest rates still trump price! I would “get in the game” if you can!!

SELLERS: What does this mean for sellers? We are still back down to 2003-2005 pricing (according to the location of the property). Our market does seem to have begun some of the first steps to recovery but I still believe it will be “slowly, slowly…step-by-step”. As a seller….yes, properties are selling but “pricing, pricing, pricing” is still the new “location, location, location”!!

INVESTORS: What does this mean for investors? The new restrictions and requirements for financing while owning multiple properties is one of the biggest obstacles for able and interested investors!! But, if you have some $$$ to invest, good credit and want to diversify with some real estate investments I can share my personal experiences and some info that might help. I believe in the long-term viability of real estate as an investment (and I’ve put my money where my mouth is). Let the tenants pay off your mortgage (passive equity) while you enjoy a little cash-flow, tax benefits and the eventual appreciation!!

“After-Shocks” – Lasting Effects of Getting Your Mortgage Debt Cancelled!

Janeese Jackson — Thu, 29 Mar 2012 20:19:55 +0000

“After Shock Song”
“After-Shocks”: When Mortgage Debt is Cancelled

The Mortgage Forgiveness Relief Act of 2007 was passed by Congress to avoid additional financial hardship that some homeowners might experience due to a foreclosure or short sale. The law affects mortgage relief that occurs from January 1, 2007 to December 31, 2012.
The forgiveness is only applicable to taxpayers’ principal residence and only acquisition debt used to buy, build or improve the home. The additional cash taken out when refinancing a home will not be eligible for the relief unless it is used for capital improvements.Normally, IRS considers partial or total debt forgiven by a lender to be treated as ordinary income. This not only affects foreclosures but even short sales where only part of the debt is forgiven would trigger additional taxes for the homeowner. There are exceptions that apply such as bankruptcy and insolvency.

The lender is required to submit a 1099 form to IRS and provide the homeowner a copy who will file the forgiven amount on Form 982 as part of their 1040 tax return. How this affects your individual situation may differ due to other circumstances and advice from a tax professional is recommended.