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Real Estate @ a Glance: October 2014 Edition

October 27, 2014

Better RE glance

Here is the most recent information on the San Diego housing market. For specific information on your neighborhood or a market analysis on your home, please send me an email or call me at 619-888-2117.

Reportable Period :: September 2014 :: SAN DIEGO ASSOCIATION OF REALTORS®

Markets across the nation seem to be back on the recovery track after a brief pause. One of the more encouraging aspects of this renewed recovery is that new construction of single-family homes reached six-year highs in August, according to the U.S. Commerce Department. Consumers are also finding more listings in their search results than they have in years. Inventory is rising in many neighborhoods as higher prices have motivated more sellers to list. The departure of investors from the scene should benefit first-time homebuyers, but student debt and sluggish wage growth have slowed that transition. The economy is growing, but it’s growing at a slower pace than desired. Thankfully, inflation remains tame, partly enabling the Federal Reserve to keep rates low for longer, contrary to the forecasts of most economists.

Median Sales Price: $455,000
Days on the Market Until Sale: 43
Housing Affordability Index: 30%
Months Supply: 3.3marketoverview9-2014

 

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Buyer Optimism at an All-Time High

October 23, 2014

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

BuyerOptimism

The Best and Worst Uses for HELOCs

October 16, 2014

helocHome equity is a valuable asset for every homeowner and can provide funds for just about anything. However, when deciding to tap into your home equity, homeowners should use extreme caution and decide how valuable the investment will be in a few years.

An advantage to tapping into your home equity loan is the interest is often tax-deductible. But before you decide to borrow from your home equity, make sure it makes sense to put your home at risk.

Here a three uses for cashing out your home equity that will help you in the future:

Home Improvements
Homeowners can improve the value of their home with updating the style of the home, adding square footage, and bringing the house up to code. Updated kitchens and bathrooms will add the most value to the house.

Paying for an Education
Using a home equity loan to further your education or your children’s education is an efficient way to pay for college. A higher education will also make you more valuable in the workplace.

Consolidating Debt
The most common use for a home equity loan is consolidating multiple balances into a single home loan. Since the loan is secure on your home, the interest on the loan will be lower than interest on a credit card. This can also be very risky and will require discipline. It is best to cut up all your credit cards and keep one for emergencies only, to prevent you from running up your credit card balance. If you do run your credit card balance up again, you’ll be in worse shape than before.

Home equity shouldn’t be used on things you won’t be using years from now. Anything that loses its value or doesn’t last longer than your payment for the loan isn’t worth the risk of losing your home.

You shouldn’t use your home equity on anything that gives you an instant gratification such as a vacation or a new wardrobe. Sure it’s nice to splurge on fancy resorts and the latest fall trends, but that vacation won’t help you years from now and those fall clothes won’t be in style next season.

Buying a car with home equity can be debatable on whether or not it is a good investment. Although a car loan generally has a higher interest rate, the loan typically matches the life span of the car and if something happens to you financially making you miss a payment, you could lose your home.

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

Looking at a Home Like a House Inspector

October 9, 2014
Real Estate Home Inspector

By:  Jill Hamilton, ClientDirect

Although you should hire a qualified professional home inspector when buying a home, it’s useful to learn the basics of home inspection yourself. Being able to see a house though an inspector’s eyes allows you to get a general assessment of a home in a short amount of time, helps you know how to prepare for an inspection, and provides guidelines for giving your home an occasional checkup. Although this list isn’t a substitute for a professional home inspection, here are some things to look for when assessing a house.

Assess the outside
Look at the house as a whole and make sure it’s not leaning and the roof is unbowed. Walk around the house, checking for large cracks in the foundation (small cracks are ok.) Look at the roof for broken, missing, or curling shingles. Check the gutters and downspouts to make sure they aren’t clogged, broken or detached. Make sure the chimney looks straight and doesn’t have cracks or loose bricks or mortar. Look to see if the exterior surface of the house is in good condition, checking for peeling paint, missing siding, exposed wood, or cracked stucco. Check for an acceptable clearance between the ground and siding material—there should be at least six inches. The yard should be sloped away from the house allowing for proper drainage. Look for standing water or evidence of flooding. Check for termite tunnels and other evidence of infestation.

Check the hardscape
Look at driveways, sidewalks, and steps to make sure they are properly sealed and don’t present tripping hazards. Check that hand railings are securely attached. Look at decks and porches to make sure they’re structurally sound and in good condition. Check wood fences and decks for rot or termite damage and make sure gates open and lock properly. Check the outdoor lights and outlets to make sure they’re working. Make sure the automatic garage door functions properly and that it will stop for an obstacle.

Start at the top of the house
Go into the attic, if there is one, and make sure that there is enough insulation and that it’s in good shape. Look for proper venting and no water damage. Check ceilings and walls throughout the house for water marks, soft spots, or other signs of leaking. Don’t forget to check around skylights for evidence of leaks.

Check windows, doors and floors
Inspect windows and doors looking for gaps, improper sealing, and dry rot. Check to see that they sit square in their frames (misaligned frames can indicate a shifting foundation.) Open and close doors and windows to make sure they fit properly and don’t stick. Check that locks and latches work, sliding doors slide smoothly, and that windows aren’t painted shut. Look for broken windows or missing or damaged screens. Check to see that floors appear level and are in good condition without missing tiles, bowed wood or torn carpeting.

Assess the bathrooms
Turn on the water and let it run for a few minutes to make sure the drains are working properly in sinks, showers and tubs. Flush toilets to see if the water pressure changes or there are unusual noises. Make sure toilet and sinks are securely fastened. Open the cabinetry under sinks, checking for water damage and making sure doors work properly. Check the condition of the grout and caulking. Turn on the fan, making sure it works and vents outside. Check for signs of a poor ventilation like mildew, mold, peeling paint or wallpaper or a musty smell.

Look at the electrical system
Check the electrical system for obvious problems like frayed wires, overloaded outlets, and exposed wiring. Take the cover plate off the service panel and check for burned wiring, wiring that is too large or too small, improperly connected or spliced wires, or wiring that was not professionally installed. Make sure Ground Fault Circuit Interrupters (GFCI) are installed near wet or damp locations. Check to make sure that outlets are working and updated, they have coverplates and that there are enough of them in each room. Make sure lights and fans work.

Check the kitchen and laundry areas
Make sure the cabinet doors and drawers work and that they’re in good condition. Run water in the sink for a few minutes to make sure it drains properly. Look under the sink for evidence of leaky pipes. Run all the appliances, including garbage disposals, trash compactors, built-in ovens, ice makers and microwaves, to make sure they work. Make sure the kitchen exhaust fan works and vents to the outside. Run the dishwasher, clothes washer and dryer for a cycle, checking to see that they work, that doors seal properly and there are no leaks or strange noises. Check to make sure that dryer vents outside and that the vent isn’t blocked.

Look at the heating and cooling system
Turn on the units to make sure they’re working properly and that there’s good airflow. Check for dirty or missing filters and whether the ducts are in good shape. Check for problems like odd noises, rusty parts, a gas odor, worn wiring or blocked coils.

Give the house a final walkthrough
Check stairs to make sure they’re level and safe and that railings are securely attached. Look inside the fireplace for cracks and make sure the damper is working. Check the water heater to make sure it’s functioning properly, anchored and free of rusted or broken parts. Test smoke and carbon monoxide detectors to make sure they’re working and not painted over.

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

Negotiating the Deal

October 3, 2014

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.







Negotiating Real Estate Deals

This Is Your Home’s Most Valuable Asset

September 26, 2014

Realtor Logo

By: Anne Miller, REALTOR.com

 

A home isn’t just a building.

Land is truly real estate’s most valuable asset. The planet isn’t making more land. You can’t move your land.

You wouldn’t own a house without understanding its history and upkeep needs. The same holds true for the land.

While the property beneath the foundation may feel secondary to your big purchase, your investment also rides on the land under your home—the most valuable asset.

Why Land Matters

Say you want to erect a fence around your backyard. You’ll need to know exactly where your property line runs. Carving out a driveway or a garden triggers the same need. You don’t want to pave over the neighbor’s lot line.

The issue isn’t limited to bonus features you want to install:

How does drainage run on your property?
Who’s responsible for fixing it?
If you want to retrench a ditch that no longer drains correctly, do you have the right?
Who’s responsible for trimming trees? Or mowing certain sections?
These issues get to the heart of quality-of-life in your new home. It’s worth taking a few minutes to understand exactly where you—and your home—stand on the dirt.

History Lessons on Your Most Valuable Asset

The history of your land could date back 200 years to the time of land grants and squatters, but it likely began with your parcel’s development as part of a tract in a subdivision.

Building and planning departments usually have this information, because they oversee development, construction, home improvements, building codes, permits, demolition, zoning rights, crop farming, environmental issues and other activities affecting the land.

Depending on where you live, you can check with a local municipality or a county office. They should have records for your land’s legal description and boundaries—and the clerks to help you find them. They should be able to give you a copy of the map of your parcel within a tract or subdivision. Some files include photos.

The file containing your land’s description will include the legal specifications or schematics of septic tanks, aquifers, wells, easements, the floor plan of your home, and other evidence of how your land has been used over time.

Title Searches

When you open escrow during a real estate transaction, you likely will trigger a title search that tracks recorded interests, encumbrances, claims of title, and other forms of ownership or claims against your land and its components.

That can include the current owner’s mortgage, titles, deeds, liens, judgments and other legal actions, the status of property tax payments, easements, and other claims against the property and its use.

However, the title search doesn’t stop at the current owner: it examines public records and any other depository holding a record of your property as far back as necessary to be certain you are buying a home with a clear title. That could include the assessor’s files, appraisal reports and homeowners association records.

A preliminary title report will document what the title search discovers.

If you live in a condo, you own land jointly with other homeowners association members—which partially explains why condos are less costly than single-family homes.

Condo buildings go up, so air space can become part of your “land”; your condo unit file may describe and map the air space (a different kind of valuable asset) you own within your association’s development—including the land beneath it all.

Room for Error

While most government records are complete and accurate, the sheer volume of records leaves plenty of room for errors and omissions.

If there’s a question about the boundaries of your land, its use, easements or zoning, you may need to hire a survey company or seek a title company’s interpretation. Have a surveyor or a real estate attorney review any documents you receive.

Ask a REALTOR® for their experiential knowledge as well, for one who has worked in the area for a long time may know some tidbits no one else does.

And if you make any changes to your property, document those as well. You never know when it might matter.

Based on an original article by Broderick Perkins.

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

How to Deduct Your Mortgage Interest and Equity Loan Costs

September 18, 2014

Mortgage Tax Deduction

 

Written by: Richard Koreto for Client Direct


This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.

 

Deducting mortgage interest is a great tax benefit that can make home ownership more affordable. Your first mortgage isn’t the only loan that qualifies, either. In many cases, you can also deduct interest on home equity loans, second mortgages, and home equity lines of credit, or HELOCs.

You need to itemize your return to reap the benefits of these deductions. Calculations can be complicated, so consult a tax adviser.

Know your loan limits

A good place to check out what you can deduct before you borrow is the chart on page 3 of IRS Publication 936. It’ll walk you through the requirements you must meet to deduct all of your home loan interest.

The first hurdle you’ll run into is the total amount of your loan or loans. In general, individuals and couples filing jointly can deduct interest on loans up to $1 million ($500,000 if you’re married and filing separately). The money must have been used for acquisition costs — that is the cost to buy, build, or substantially improve a home, explains Scott O’Sullivan, a certified public accountant with Margolin, Winer & Evens in Garden City, N.Y. Any interest paid on loan amounts above the $1 million threshold isn’t deductible.

The same $1 million limit applies whether you have one home or two. Buying a vacation home doesn’t double your loan limits. And two homes is the max; you can’t deduct a mortgage for a third home. If you have a mortgage you took out before Oct. 13, 1987, you have fewer restrictions on claiming a full deduction. The calculations for “grandfathered debt” can get complex, so get help from a tax professional or refer to IRS Publication 936.

Whatever you do, don’t forget that you can also deduct the points and fees associated with a first or second mortgage when you initially buy your home, says Jeff Rattiner, a CPA with JR Financial Group in Centennial, Colo. If you refinance the same house, you have to deduct those costs over the entire term of the loan. If you refinance again, you can deduct all the costs from the earlier refi in the year you take out the new loan.

Spend loan proceeds wisely

The other limitation comes into play when you take out a home equity loan or HELOC, even if you don’t use the proceeds to buy, build, or improve your home. In that case, you can deduct interest on up to $100,000 ($50,000 if married filing separately) on outstanding home equity debt. This loan limit also applies in a cash-out refi, in which you refinance and take out part of the equity you’ve built up as cash, says John R. Lieberman, a CPA with Perelson Weiner in New York City.

That means if you decide to take out a $115,000 home equity loan to buy that Porsche, you can deduct the interest on the first $100,000 but not on the $15,000 that exceeds the limit. Use the same $115,000 to add a new bedroom, however, and the full amount is allowable under the $1 million cap. Keep in mind, though, that the $115,000 gets added into the pot of whatever else you owe on your other home loans. In many cases, points and loan origination costs for HELOCs are deductible.

Consider this simplified scenario: You borrow $250,000 against your home at 8% interest. That means you’ll pay $20,000 in interest the first year. Spend the $250,000 on home improvements, and all of the interest is deductible. Spend $150,000 on improvements and $100,000 on your kids’ college tuition, and all the interest is still deductible.

But spend $100,000 on improvements and $150,000 on tuition, and the improvement outlays are deductible, though $50,000 of the tuition expense isn’t. That’ll cost you $4,000 in interest deductions. Preserve the $4,000 deduction by coming up with the extra money for tuition from another source, perhaps a low-interest student loan or by borrowing from a retirement plan. For someone in a 25% bracket, a $4,000 deduction lowers taxes by $1,000, plus applicable state income taxes.

Beware the dreaded AMT

Even if you’ve followed all the loan limit rules, you can still get stuck paying tax on mortgage interest. How come? It’s all thanks to the Alternative Minimum Tax. Congress created the AMT, which limits or eliminates many deductions, as a way to keep the wealthy from dodging their fair share of taxes.

Calculating the AMT can be complex, but if you make more than $75,000 and have several kids or other deductions, you might well be subject to it. Problem is, if you fall into the AMT group, you may not be able to deduct interest on a home equity loan, even if the loan falls within the $1 million/$100,000 limit. If you’re subject to the AMT and borrow money against the value of your home, you’ll have to use it to buy, build, or improve your place, or you may not have a chance to deduct the interest, says Rattiner, the Colorado CPA.

Consider me your resource for all things real estate!  Selling, buying, upsizing, downsizing, relocating, investing, vendor referrals, shoulder to cry on during renovations and more.  Just send me an email or call me at 619-888-2117.

 

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