Dawn Rivera’s Fremont & East Bay Real Estate Blog

Buying a home

Homebuyers can make the most of several tax breaks that help lower their tax bill based on the purchase of an existing or new home. For instance:
-First-time homebuyers: The Recovery Act provides a credit of up to $8,000 if a taxpayer buys a home between Jan. 1, 2009 and Nov. 30, 2009. The homebuyer also must not have owned a home in the previous three years and the home must be the primary residence.
-Points: The points paid on a mortgage are generally deductible as interest if taxpayers paid enough of a down payment or earnest money at closing to cover the points. Homebuyers can deduct the points even if the seller paid them.
-PMI premiums: Buyers who make a down payment of less than 20% of the home’s cost usually pay private mortgage insurance (PMI). But the PMI premiums generally can be included in your home mortgage interest deduction.
-Job relocation: Taxpayers who moved due to a job change can deduct the cost of moving. In order to take the deduction, they must move within one year of starting the new job, work full-time at least 39 weeks during the first 12 months at the new location, and the new job must be at least 50 miles further than the old residence was from the old job. Qualified moving expenses include your out-of-pocket cost of moving yourself, your family, and belongings to the new location.

Owning a home

If a taxpayer typically has claimed the standard deduction, owning a home will likely mean itemizing for extra deductions. Some tax breaks for homeowners include:
-Mortgage interest: For most taxpayers, the biggest tax break comes from deducting mortgage interest. Taxpayers can deduct interest on up to $1 million of the loan used to buy, build, or make substantial improvements to a main or second home. Interest on a home equity loan up to $100,000 secured by the main or second home is deductible too.
-Real estate taxes: Taxpayers can deduct real property taxes they pay on real estate to their municipalities, whether made directly or through their lending company.
-Home improvements and energy credits: The Recovery Act gives incentives to homeowners making improvements and energy-efficient upgrades to their homes. Taxpayers can get credits for 30% of the cost of qualifying doors, windows, HVAC, water heaters, roofing and insulation, up to a maximum credit of $1,500. Solar energy and wind energy systems are each 30% of cost with no maximum.

Selling a home
Sellers won’t have to pay taxes on a profit up to $250,000 for single filers and $500,000 for joint filers. Taxpayers must have lived in the home for at least two of the past five years to claim this exclusion. In some cases, taxpayers can claim a partial exclusion if they are selling due to a change in employment status, health reasons, divorce or other unforeseen circumstances.

Taxpayers whose homes were foreclosed may be able to exclude the mortgage debt that was forgiven in connection with the foreclosure. This provision applies to debt forgiven in calendar years 2007 through 2012, of up to $2 million is eligible for this exclusion ($1 million if married filing separately).

The U.S. housing market continues to show signs of stabilization with a drop in the number of Multiple Listing Service (MLS)-listed homes for the twelfth consecutive month. The number of single family homes and condos listed for sale according to MLS data decreased in June 2009 from May by 2.1%, bringing the total number of active listings in 28 major U.S. markets to 696,858.

Other highlights from ZipRealty’s Housing Inventory Index, compiled from local Multiple Listing Service (MLS) data, for June 2009 include:

-Las Vegas, Los Angeles and Phoenix all recorded a decline in inventory which may have contributed to some homes receiving multiple bids.
-Median list prices have flattened or increased in Las Vegas, Phoenix, San Francisco Bay Area and Los Angeles, pointing toward stabilization in those areas.
-While South Florida has substantially fewer homes for sale than last summer, housing inventory there is plentiful. For example, Miami has 27.1% more homes listed for sale compared to Los Angeles even though Miami has a significantly smaller population than Los Angeles.
-California is seeing the most dramatic inventory declines with massive year-over-year inventory reductions: Los Angeles saw a 53.9% decrease year-over-year while Bakersfield/Fresno tracked a 56.2% decrease.
-Several major metros that have been hit hardest by foreclosures had limited inventory in June 2009, which is at levels not seen or experienced in years.

“‘Affordability’ has been the buzz word in real estate this summer, and with a significant number of listed homes bank-owned, we’re seeing instances in some areas of banks dropping prices to generate more offers from buyers,” said Zip RealtyZip Realty President and CEO Patrick Lashinsky. “If the number of home listings continue declining and buyer interest and activity remains strong, we should see sales prices and home values increase as we head into the fall.”

In challenging markets…like the one we currently face…it’s difficult to find new clients.

Why would you even consider firing a client?

Purely and simply, even the best client relationships can turn bad…and when they do, it’s time to end them by firing the client.

Most of us are too busy to allow deteriorating client relationships to drain time and energy from attracting new clients and serving existing clients. With that in mind, here are 5 reasons for firing a client.

1. Perfection Obsession

These are the buyers who are obsessed with finding a perfect home, in a perfect location and at a perfect purchase price.

Or they are sellers who insist on selling their homes terms and conditions that they consider perfect.

Perfection rarely exists in our world, and besides, your responsibility is to give clients the best possible service, helping them find the best possible deal…not the perfect one.

2. Lack of Trust

This can cut both ways.

For whatever reason, you no longer trust your client or vice versa.

Since trust is a key element of all client relationships, once the trust is gone for either party, the relationship is essentially over.

3. Miscommunication

Sometimes miscommunication is inadvertent or accidental.

Others times it is deliberate.

In either case, when miscommunication becomes a common element it represents a problem to be addressed.

If the problem of miscommunication itself cannot be resolved, it’s time to end the relationship.

4. Conflicting Advice

We all have advisor’s who offer opinions and suggestions on our decisions.

Some of these people are professionally trained, qualified and well informed. Others are well intentioned but otherwise poorly informed and mis-directed friends relatives and acquaintances.

It is the second group of advice-givers that have the most potential for causing problems in client relationships.

When clients start to be guided more by this group than by your professional advice, it’s best to reserve your time, energy and expertise for clients who value it.

If clients do not value what you offer them…fire them.

5. Indecision

Certainly changed circumstances result in changes in clients needs and wants.

However, when clients continually change their minds for no obvious reason, it’s hard to be sure of what they really want.

If they don’t know what they really want…how can you help them?

Is it not better to devote your resources to helping clients achieve what they know they want?

What other reasons might there be for firing clients?

What stories do you have about firing clients?

Federal Reserve governors, unanimously proposed tough new consumer-friendly disclosure rules for mortgages and home equity loans last month, tackling one of the less-appreciated causes of the nation’s deep financial crisis.

After 18 months of study and consumer testing, the Fed’s division of consumer affairs proposed, and governors accepted, a change to how finance charges and the annual percentage rate would be calculated. They also proposed restricting some bonus compensation from lenders to those who originate loans.

The action by the Fed’s Board of Governors, which requires a four-month comment period before becoming final, came as Congress is weighing an Obama administration proposal to strip the central bank of some of its regulatory authority over consumer credit products such as mortgages and credit cards. The administration favors giving those powers to a new Consumer Financial Protection Agency, which would have the sole mandate of protecting consumers from abusive practices such as the weakened lending standards that triggered a collapse of the housing sector. This crisis in mortgage lending quickly morphed into a global financial crisis.

Last month’s Fed vote also came hours after the National Association of Realtors reported that sales of existing homes rose 3.6% in June, the third consecutive month of increasing sales. All regions of the country posted growth, and the percentage of distress sales fell to 31% from 33% in May.

This report provides further evidence that activity in the housing market is stabilizing and that price declines are slowing. The increase in home sales over the last three months was the fastest since May 2004 (in percentage terms) and the NAR reports that the share of distressed sales is declining. This report, along with recent data on housing starts, building permits suggests that we may have seen the bottom in home sales and housing construction.

Wall Street cheered the housing news.

The Dow Jones Industrial Average closed up 188.03 points to 9069.29, crossing the psychological threshold of 9,000. The S&P 500 finished up 22.22 points to 976.29, and the Nasdaq wrapped up the day with a gain of 47.22 points to 1973.60.

Under the Fed proposal, lenders or other originators of mortgages-such as mortgage brokers-would have to provide borrowers with clear one-page explanations of how adjustable-rate mortgages, like those that triggered the housing crisis, differ from fixed-rate products. They’d have to provide clearer examples of what borrowers’ true costs would be, using the loans themselves rather than generic examples.

Lenders also would have to notify borrowers of payment changes 60 days beforehand, rather than the current 25 days. Similarly, for home-equity lines of credit, the notification period would be 45 days instead of 15.

Those moves are decidedly more consumer-friendly, giving borrowers more notice to adjust to pending changes and perhaps seek refinancing in the case of adjustable-rate loans.

The most controversial proposed change is restricting special compensation from lenders when mortgage brokers get borrowers into higher-priced loans when they qualified for lower rates. This bonus, called a yield-spread premium, was a factor in the explosion of sub-prime lending, which involved high-cost loans given to the weakest borrowers.

The National Association of Mortgage Brokers has defended these special commissions but it declined immediate comment on the proposed rule change, which expressly would prohibit steering consumers to higher-priced products in pursuit of personal gain.

During the comment period, the Fed will work to create similar disclosures at the Department of Housing and Urban Development, which has jurisdiction over the settlement documents involved in home purchases.

“It is a complex and comprehensive proposal, so I think an extended comment period is appropriate,” Fed Chairman Ben Bernanke said.

More information on this will be available approx. November 2009

Despite efforts by the federal government and banks to stop the home foreclosure disaster, frustrated borrowers are still battling red tape and delays in their attempts to negotiate lower payments, even as hundreds of thousands of them lose their homes every month. Banks say they’re swamped with inquiries and are just now completing the first mortgage “loan modifications” under the Obama administration’s Making Home Affordable plan, the program begun in April 2009 requiring borrowers to make three months of renegotiated payments before securing new loan terms.

Though the reasons are many, the problem is simple: Banks aren’t renegotiating enough loans to stem the rising tide of foreclosures, either through the federal program or on their own. If the banks wanted it to work, it would work.

The banks, however, continue to urge patience, particularly with the federal plan: “A lot of people had expectations about this program who didn’t understand it would take time, but the intention is there and we will move ahead,” said Rick Simon of Bank of America Home Loans.

Many banks started their own programs for modifying mortgages-lowering payments by changing the interest rate or the length of the loan, or in rare cases, forbearing some principal-before the administration’s plan was unveiled.

Foreclosures continue at a high rate. There are something like 2.5 million U.S. homes in foreclosure now, and 250,000 new foreclosures started every month.

Bankruptcy lawyers are particularly critical of the banks. The banks’ current efforts are “largely a farce,” according to Cathy Moran, a bankruptcy lawyer in Mountain View. She said most of her clients have been unable to modify their home loans. “I don’t think the people in the loan modification departments at banks are empowered to make deals,” Moran said.

“There is an amazing lack of staffing to support the flood of modification requests the banks are getting,” said San Jose bankruptcy lawyer Norma Hammes, past president of the National Association of Consumer Bankruptcy Attorneys. “Lenders lose stuff all the time, and they ask for stuff they don’t need. We have to jump over hurdles and through hoops.”

Chase is moving through a backlog of 155,000 loans “as fast as we can, having hired nearly 3,000 people to help in the process, including 950 loan counselors,” spokesman Thomas Kelly said. The bank, which took over failed sub prime lender Washington Mutual, has approved 87,100 trial loan modifications under the federal plan, Kelly said, and an additional 50,900 under the bank’s own program.

Help for homeowners

The Obama administration is working with banks to help homeowners refinance into new loans or modify the terms of their existing loans. Here’s how the programs work:

-Refinancing program: Helps homeowners with existing Fannie Mae or Freddie Mac loans who are current on their mortgage payments but unable to refinance to a lower interest rate because the value of their home has declined.

-Loan modification program: Helps homeowners who have fallen behind on their payments because of a loss of income or other change in circumstance. Banks may agree through this program to change the interest rate, length of the loan, or even forebear some of the principal.

For information, visit www.makinghomeaffordable.gov.

The worst U.S. recession in 70 years should end over the next three to six months, judging by recently released data that showed that the economy’s contraction eased considerably from April through June.

The Commerce Department reported that the economy shrank at an annualized rate of 1% in the year’s second quarter, less than most analysts had expected, and far less than the dramatic 6.4% shrinkage in the first quarter, a figure revised downward from the initial estimate of 5.5%.

Independent economists think the economy now is poised to grow, albeit slowly.

The key point is that this is the last negative (growth) report in the Great Recession, signaling the end of the downturn. The economy won’t come charging back, but at it’s back.

Recent reports on improving home and auto sales also argue well for the near future. Leading indicators of activity are pointing up, and the housing sector appears to be stabilizing. As more stimulus dollars hit the street, we should see improvement in the difficult employment and financial conditions in many hard-hit regions of the country.

President Barack Obama credited the $787 billion economic stimulus plan that passed earlier this year for the emerging signs of recovery. “This and other difficult but important steps that we’ve taken over the last six months have helped us put the brakes on recession,” he said at the White House. “I am guardedly optimistic about the direction that our economy is going, but we’ve got a lot more work to do.”

There’s plenty that still can go wrong, I worry that we don’t have the foundations for a durable recovery, that we still have banks with large unrecognized losses. Layoffs were expected to continue throughout the year, with the jobless rate rising above 10%. That’ll test bank balance sheets. That’ll test business models generally. A lot of manufacturing and retail activity doesn’t look good when the unemployment rate is above 10 percent. 2010 remains a question, and nothing in these numbers tells you anything about 2010.”

In another worrisome sign, real personal-consumption expenditures fell 1.2% in the second quarter, after increasing 0.6% from January through March. Consumer spending powers two-thirds of U.S. economic activity. Sales of durable goods-big-ticket items such as large appliances and wide-screen televisions-shrunk 7.1% from April to June after expanding at a 3.9% annual rate in the three previous months. Consumer spending is unlikely to return to pre-recession levels until the nation stops shedding jobs. That’s bad news for retailers and restaurants. I think consumers are going to need a little more proof. These are certainly welcome signs, but I think it is going to take a little more time before we see consumers shift from necessity to discretionary purchases.

The National Restaurant Association was equally cautious. Its latest outlook, said that June marked the 13th consecutive month of sales declines for restaurant owners. Restaurant operators continued to report declines in same-store sales and customer traffic in June, and their outlook for sales growth in the months ahead remains mixed.

All in all it is starting to look the like the end of the recession in is sight.

Following are the top 7 reasons why it’s better to buy than rent in 2009

1. Buying doesn’t always cost much more than renting. According to a recent study by the Associated Press, the gap between monthly mortgage payments on a median-priced home and the median rent has decreased from $777 to just $221 in the last three years.

2. Affordability is at an all-time high. In markets across the nation, including the inland areas of California, prices have declined by nearly 40%.

3. Buyers can take advantage of tax benefits of home ownership. Perhaps the biggest tax break is reflected in the house payment homeowners make each month. For most, the bulk of that payment goes towards interest. All interest is deductible, unless the amount is more than $1 million. Property taxes are also deductible.

4. Buyers can purchase homes with little or no down payment. Qualified first-time buyers may be eligible for loans insured by the Veterans Administration (VA), which does not require a down payment. Another loan product gaining popularity are those insured by the Federal Housing Administration (FHA), which require only a down payment of 3.5%.

5. The Tax Credit. First time homebuyers-defined as anyone who hasn’t owned a home in the last three years- are entitled to an $8,000 tax credit. (Ownership of a vacation property or a rental property doesn’t disqualify homebuyers from this program.) No repayment is required for homes sold after 36 months of occupancy and ownership.

6. Mortgage rates are at all-time lows. Take advantage of low 30 year fixed rates. We haven’t seen rates this low in the last 3 decades.

7. It’s yours. It feels good to own your own home. After all, you can paint it any color you want, make improvements, and plant a little garden.

So…..Find a Realtor, Get pre approved and get out there to find your piece of the American Dream!!

RealtyTrac®, a leading online marketplace for foreclosure properties, has released its Midyear 2009 U.S. Foreclosure Market Report, which shows a total of 1,905,723 foreclosure filings – default notices, auction sale notices and bank repossessions – were reported on 1,528,364 U.S. properties in the first six months of 2009, a 9 percent increase in total properties from the previous six months and a nearly 15 percent increase in total properties from the first six months of 2008. The report also shows that 1.19 percent of all U.S. housing units (one in 84) received at least one foreclosure filing in the first half of the year.

Foreclosure filings were reported on 336,173 U.S. properties in June, the fourth straight monthly total exceeding 300,000 and helping to boost the second quarter total to the highest quarterly total since RealtyTrac began issuing its report in the first quarter of 2005. Foreclosure filings were reported on 889,829 U.S. properties in the second quarter, an increase of nearly 11 percent from the previous quarter and a 20 percent increase from the second quarter of 2008.

“In spite of the industry-wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” noted James J. Saccacio, chief executive officer of RealtyTrac.

“Unemployment-related foreclosures account for much of this increased activity, and the high number of
borrowers who find themselves owing more on their mortgages than their homes’ are now worth represent
a potentially significant future risk. Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue.”

Nevada, Arizona, Florida post top state foreclosure rates
More than 6 percent of Nevada housing units (one in 16) received at least one foreclosure filing in the first half of 2009, giving it the nation’s highest foreclosure rate during the six-month period. A total of 68,708 Nevada properties received a foreclosure filing from January to June, an increase of 23 percent from the previous six months and an increase of 61 percent from the first half of 2008.

Arizona registered the nation’s second highest state foreclosure rate in the first half of 2009, with 3.37 percent of its housing units (one in 30) receiving at least one foreclosure filing, and Florida registered the nation’s third highest state foreclosure rate, with 3.08 percent of its housing units (one in 33) receiving at least one foreclosure filing. Other states with foreclosure rates ranking among the nation’s 10 highest were California (2.94 percent), Utah (1.46 percent), Georgia (1.42 percent), Michigan (1.34 percent), Illinois (1.31 percent), Idaho (1.26 percent) and Colorado (1.25 percent).

California, Florida, Arizona post highest foreclosure totals
A total of 391,611 California properties received a foreclosure filing in the first half of 2009, the nation’s highest total and 2.94 percent of the state’s housing units (one in 34) – the nation’s fourth highest state foreclosure rate. California foreclosure activity in the first half of 2009 increased nearly 14 percent from the previous six months and increased nearly 15 percent from the first half of 2008.

With 268,064 properties receiving a foreclosure filing in the first six months of 2009, Florida documented the second highest state total. Florida foreclosure activity in the first half of 2009 increased 7 percent from the previous six months and was up nearly 42 percent from the first half of 2008.

Arizona’s 89,799 properties receiving a foreclosure filing in the first six months of 2009 was the third highest state total. Arizona foreclosure activity in the first half of 2009 increased 13 percent from the previous six months and was up nearly 55 percent from the first half of 2008.Other states with totals among the 10 highest in the country were Illinois (68,932), Nevada (68,708), Michigan (60,786), Ohio (58,937), Georgia (56,391), Texas (49,144) and Virginia (28,368).

Report methodology
The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing reported during the first half of the year at the state and national level. Data is also available at the individual county level. Data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population.

RealtyTrac’s report incorporates documents filed in all three phases of foreclosure: Default – Notice of Default (NOD) and Lis Pendens (LIS); Auction – Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS) and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). If more than one foreclosure document is filed against a property during six-month period, only the most recent filing is counted in the report.

Positive News: U.S. Housing Starts up Second Straight Month in June

(Market Watch)-New construction of U.S. houses expanded for the second straight month in June after hitting a record low in April, the Commerce Department estimated Friday.

Starts rose 3.6% in June to a seasonally adjusted 582,000 annualized units stronger than the 531,000 pace expected by economists surveyed by Market Watch. This is the highest level of starts since last November.

Starts of new single-family homes rose by 14.4% to 470,000 in June, while starts of large apartment units fell 29.4% to 101,000. Building permits, a leading indicator of housing construction, rose 8.7% to a seasonally adjusted annual rate of 563,000. This is the highest level of permits since December.

Home prices have moderated, interest rates are reasonable, supply is abundant-and then there’s that $8,000 tax credit. Yes, it’s a great time to buy your first house.

If you do, you’ll have to furnish it, and that can be a challenge, especially if you have put much of your disposable income into a down payment. But you’re a grown-up now, and your first real home is no place for that grungy old futon or bookcases constructed with bricks and boards. It deserves better.

So what’s the best way to go about furnishing your new home? We’ve asked a variety of experts for their ideas on what to do after your offer has been accepted. Here are their ideas:

“Before you get carried away, take some time to determine what you have, what you need and what you want,” says Milwaukee-area interior designer Susan Michalek of Desumi Design Inc. “Deal with what you need first. That should be your highest priority.”

Wanda M. Colon, a designer who can be seen as host of TLC’s “Home Made Simple” and HGTV’s “24-Hour Design,” suggests that any assessment should include the amount of money you have to spend.

“It’s easy to overspend or make impulse purchases if you don’t have a budget,” she says. If you watch what you spend and stay within your limits, “as a bonus you might have money left over to purchase some extra goodies.”

Evaluate each room, says interior designer Jane Klein, and figure out how you plan to live in the house, considering: “Where you will spend most of your time, what you will do in each room? Will you want a table in the family room for work space, for example, or a comfortable chair and good lighting in the bedroom for relaxing and reading?

“Also think about the size of each room and the appropriate scale for the furniture,” Klein says. “You might fall in love with a sectional, but the reality is that it might not fit in a small room.”

Go Shopping.

If you’re shopping with your significant other, have some discussions about what you like and don’t like, and what you think works well together and with the style of your home.

“You don’t have to choose strictly contemporary or strictly traditional,” Steinhafel says. “More likely the choice will be made based on whether you are going for a casual or more formal look.”

But remember that while an “eclectic” look works, that doesn’t mean anything goes. There should be some continuity or unifying elements so that the result isn’t a hodgepodge.

“Don’t buy everything in one place,” she says. “This allows you to compare styles and prices.”

As you peruse what’s available, take pictures of what you like, Klein says. “If you think it might work, take a picture, at stores, consignment shops, wherever you go. Then look at the pictures when you get home to remind you of the choices and to see which pieces work together.”

Get to Work

It’s easier to paint a house when it’s empty and to refinish or replace flooring or knock down walls when you’re not living there. So if there’s work to be done, allow time for that after closing but before you move in.

Make Major Purchases

At minimum you will need: a good mattress and box spring and a bed or headboard to give the room a polished look; a quality sofa and chairs; a console unit for the television; and a table and chairs for dining (either for the kitchen or dining room).

Bette Kahn, spokeswoman for Crate & Barrel and CB2 stores, says microfibers are a good fabric choice for sofas because they’re so durable.

She suggests going with neutrals for big pieces, “but if that’s too basic, they can always be made more interesting with pops of color through pillows, which can be changed.”

“Make sure the frame of your sofa or chairs is high quality,” says Kahn, adding that if the piece wears out or looks outdated, it can be slip-covered or reupholstered if necessary.

If you buy high-quality pieces, you can build a room around them for years to come.

Fill in Creatively

After you’ve found the big pieces that serve as the foundation for a room, it’s time to fill in with smaller pieces. This is where you can have some fun, save money and add a touch of personal style.

Consignment stores, estate sales, resale shops and even Grandma’s attic are great places to find furniture, especially if you’re willing to fix it up.

For example, if you’ve purchased a bed but need a dresser or two, you might be able to find used pieces with similar lines. You can refinish or paint the dressers to match (assuming they aren’t valuable antiques, in which case the original finish should be preserved) and change the hardware for a coordinated look.

Area rugs, artwork and accent pieces are fun to shop for and also add personality to a room.

It probably took awhile to find the right house. It stands to reason it won’t be furnished in a week, a month or perhaps even a year.

“Many purchases can be put off, especially the decorative pieces,” Kahn says. “Besides, you’ll have more fun collecting those as you go through life.”

Colon warns first-time homeowners to take their time. “Don’t impulse-buy and end up feeling stuck because you acted too hastily,” she says.

Klein says: “Give yourself a little time. When you make a decision, use your head and your heart. Look at different options, ask lots of questions.

“When you see it, you’ll know if it’s right.”