Consequences to Holding Title to Houses in Palos Verdes

Anyone buying houses in Palos Verdes or for that matter anywhere should give plenty of thought to the manner in which they hold title. It DOES make a difference! One of my clients, Mr. Gino Stumpo of UBS, has published a terrific article on this matter. Gino is the First Vice President of Investments and a Senior Managed Accounts Consultant with UBS.

Planning with real estate and houses in Palos Verdes: how is your property titled?

One of the most fundamental decisions you will make regarding property ownership is how to hold title to houses in Palos Verdes. This decision can impact many aspects of property ownership, including:

  • How much control you have over the propertyhouses in palos verdes
  • How well the property is protected against liabilities and/or creditors
  • How the property is valued for gifting purposes, and
  • How the property is treated when you die.

The issues of ownership and control of real estate, whether it be houses in Palos Verdes, as well as asset protection and estate planning are often inter-related. The type of ownership that is most appropriate for you will depend on your particular situation, goals and objectives and the laws of the state where you live as well as the laws of the state in which the real estate is located. As such, it is important that you consult with a professional who is competent in all of these disciplines to help you appropriately weigh each of these considerations. For more information on the tax and legal consequences of holding title to houses in Palos Verdes, please consult your CPA and/or Tax Attorney.

To read Gino’s full article and see how it may apply to ownership of houses in Palos Verdes, visit this link to download his report.

Houses in Palos Verdes Estates Market Report (Below the Search Map)

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As originally published at http://www.homeispalosverdes.com/consquences-to-holding-title-to-houses-in-palos-verdes/

What are the latest trends for Houses in Palos Verdes?

Houses in Palos Verdes Sale Trends; are they up or down? How can we tell what REALLY is going on?houses in palos verdes

The most recent data for sale trends of houses in Palos Verdes shows that the trend is up and more importantly, if you were to show this chart to any technical trader, one of the first things they would say for the houses in Palos Verdes trend since May of 2008 is that the “higher highs, higher lows” is a good sign. Many of my clients benefit from tapping into my houses in Palos Verdes and South Bay homes trend charts.

If you would like, you’re welcome to play the video here http://www.homeispalosverdes.com/palos-verdes-real-estate-trend-charts/ then you can decide if you want to subscribe to the houses in Palos Verdes trend charts. There’s no obligation; however, I’m sure you understand that as a customer service my expectation is that you will consider becoming a client and/or refer folks to me who are planning to buy or sell houses in Palos Verdes.

So what exactly is this snippet of one the charts I maintain telling us about the strength or weakness of the market? As with any other commodity, the prices of houses in Palos Verdes is determined by interaction of supply and demand. It’s really that simple.

So having an indicator that measures this “dance” can help us determine what is most likely to happen to the prices of houses in Palos Verdes at least in the short term. For more information, to get the full chart and other charts describing sale volume, sale prices and more for houses in Palos Verdes as well as general South Bay real estate trends, visit http://www.homeispalosverdes.com/palos-verdes-real-estate-trend-charts/

Free search of houses in Palos Verdes

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Palos Verdes Real Estate and Investment Property Tools

You’ve worked hard to buy and own Palos Verdes real estate and now you’re considering to rent it out. A bad tenant can cost you way more money than what the security deposit can pay for. So what are some ways to protect your Palos Verdes real estate investment?

New and established landlords are feeling the pressure to quickly fill vacancies. As landlords and investors look for predictable positive cash flow, the need for prospective tenant screening becomes a priority for Palos Verdes real estate.

Traditional ways of tenant screening help but neglect a very important factor – the feedback from previous landlords and property managers on a prospective tenant who may or may not have rented Palos Verdes real estate in the past. There are good property managers who take care of a property owner’s interests and mutually benefit with their landlords, but other less scrupulous landlords view this as a means to an end and fill the vacancy to get paid. Such property managers risk almost nothing on their end since they get paid before the consequences of a bad tenant are realized. The rental field lacks a service that would provide landlords with relevant feedback on prospective tenants of Palos Verdes real estate. palos verdes real estateWhat would be an ideal solution to the problem?

A free and easy to use online service to screen prospective tenants by searching through a large database of feedback left by landlords and property managers on their former tenants. Is such solution possible? If so what would be needed to make it available? There have been multiple attempts to build a website that would serve such a need. Most of them have failed due to lack of financing and/or a clear idea on how to gain user acceptance. While it is apparent that there are no quick ways to build a database of feedback on real estate rental transactions, the situation is not entirely hopeless.

Here is a list of important factors that could make a new type of screening service successful: The screening and reporting service should be free to attract more users, naturally leading to a faster growth of the tenant database. Registered users should be educated and encouraged to participate in the process of building the database content since it would be ultimately benefiting them. The service should be easy to use without the need for specialized training.

The owners (providers) of this database system should have enough resources to maintain and further develop and improve the service as well as conduct marketing campaigns. When landlords happen to also be technology professionals, the development of such a service begins to take shape. This is genesis of the new web site http://www.iscreentenants.com. A group of software developers who invested in real estate decided to devote their time and skills to make a long needed service a reality. Participating in such an initiative and referring/encouraging friends, colleagues and other Palos Verdes real estate landlords to do the same will build a database of the feedback that would benefit the entire rental community.

The site is designed with the novice user in mind and provides an intuitive layout where reports are free and can be entered in a matter of minutes. This valuable service is a small investment in time with potentially infinite cash on cash return. After seeing the substantial impact of community feedback on eBay, Amazon, and other online platforms, we can expect similar results when a similar concept is applied to rental transactions. All that is needed is to join the community of responsible real estate owners and spread the word to automatically contribute to the service that is much needed in today’s market.

Palos Verdes Real Estate Investment Property and South Bay Investment Property Search Tool

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Palos Verdes Home Prices

Palos Verdes Home Prices in Last 6 Months are found on this website. It’s the easiest single place to check in any time and from whatever date know what sales have occured in the last 6 months on the Palos Verdes Peninsula

  • Map based
  • Graphical Interface
  • Interactive
  • Lifestyle Search and filtering
  • Full pictures, details AND TREND DATA!

Palos Verdes Home Prices

palos verdes home prices

Palos Verdes home prices can be tracked by using my proprietary charting service. If you would like to get more information on the service I offer free of palos verdes home pricescharge to clients and folks that are considering to become a client, you can visit this website and learn more. Play the video and sign up from this page

Tracking Palos Verdes home prices shouldn’t be done without understanding the interaction between supply and demand so to to get deeper into trends, to understand the ebb and flow of the market you can consider following my other proprietary charting service available here for Palos Verdes home prices, volume trends and absorption rates of Palos Verdes home sales.

While no one has a crystal ball to predict what Palos Verdes home prices will do in the future, we can get a clue from the tools I provide. If you would like to contact me for more information, feel welcome to use the contact screen on the bottom right of this page (or that pops up). Feel welcome to share this page on your social media and don’t forget, every time you visit this page, the map will update automatically with the latest Palos Verdes home prices in the last 6 months.

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Palos Verdes Foreclosures, Credit History and Mysteries Explained

One of the concerns a consumer has after experiencing a bankruptcy, foreclosure, or short sale (referred to as a “preforeclosure sale” by Fannie Mae when the owner is in default) is the ability to obtain credit to purchase another home. Palos Verdes foreclosures are still a part of the real estate market here and whether you are a homeowner experiencing this event or a buyer, the information in this article palos verdes foreclosureswill help you immensely. While the article was written by FNMA in 2010, the information is just as valid today as it was then whether or not you are interested in Palos Verdes foreclosures or as a homeowner, are living through this traumatic time. As far as searching for Palos Verdes foreclosures, you may use this free and complete search site http://www.homeispalosverdes.com/palos-verdes-foreclosures-search-site/ Fannie Mae has updated its credit guidelines in the FNMA Selling Guide, June 30, 2010. [ Note: This is a 1,234 page PDF document that takes a long time to download.] This legal article summarizes those guidelines in Part I. In addition, since lenders use FICO scores in order to determine the creditworthiness of a borrower, this article covers the impact of a bankruptcy, foreclosure or short sale on FICO scores in Part II.

I. Fannie Mae Credit Guidelines

A. Credit after Palos Verdes Foreclosures

Q 1. How long is the time period after a foreclosure before a consumer can be eligible to obtain credit to purchase a home?

A Seven years from the date the foreclosure sale was completed as reported on the credit report or other foreclosure documents provided by the borrower. See Question 2 below for exceptions.

(Source: FNMA Selling Guide, 6-30-10 at 426 )

Q 2. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the foreclosure?

A Yes. The borrower may again be eligible for a loan three years from the date the foreclosure sale was completed if the borrower has “extenuating circumstances” as defined in Question 3.

Additional requirements that apply after 3 years and up to 7 years following the completion date are as follows:

  • The purchase must be of a principal residence. Purchase of a second home or investment property is not permitted until the seven-year waiting period has elapsed.
  • The consumer is limited to a maximum loan to value ratio of 90 percent. If the Eligibility Matrix (https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf ) sets forth a lower maximum loan-to-value ratio for the transaction at hand, then the consumer is limited to the lower maximum loan-to-value ratio.
  • Limited cash-out refinances are permitted for all occupancy types. (Cash-out refinances are not permitted until a seven-year waiting period has elapsed.)

(Source: FNMA Selling Guide, 6-30-10 at 426-7 .)

Q 3. What are”extenuating circumstances”?

A Fannie Mae describes “extenuating circumstances” as follows:

Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations. As an aside, many Palos Verdes foreclosures have the auction dates “perpetually” postponed as a result of the circumstances If a borrower claims that derogatory information is the result of extenuating circumstances, the lender must substantiate the borrower’s claim. Examples of documentation that can be used to support extenuating circumstances include documents that confirm the event (such as a copy of a divorce decree, medical bills, notice of job layoff, job severance papers, etc.) and documents that illustrate factors that contributed to the borrower’s inability to resolve the problems that resulted from the event (such as a copy of insurance papers or claim settlements, listing agreements, lease agreements, tax returns (e.g., covering the periods prior to, during, and after a loss of employment). The lender must obtain a letter from the borrower explaining the relevance of the documentation. The letter must support the claims of extenuating circumstances, confirm the nature of the event that led to the bankruptcy or foreclosure-related action, and illustrate the borrower had no reasonable options other than to default on his or her financial obligations.

(Source: FNMA Selling Guide, 6-30-10, 6-30-10 at 429 .)

Q 4. What are the requirements to re-establish a credit history after a foreclosure?

A After a foreclosure, a credit history must meet the following requirements to be considered re-established:

palos verdes foreclosures• The elapsed time and the related requirements are met (as discussed in this article). • The loan receives a recommendation from Desktop Underwriter (an automated underwriting system) that is acceptable for delivery to Fannie Mae. If manually underwritten, then the loan must meet the minimum credit score requirements based on the parameters of the loan and the established eligibility requirements. • The borrower has traditional credit as outlined in the Selling Guide, B3-5.3, Traditional Credit History (https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sel043010.pdf). Nontraditional credit or “thin files” are not acceptable. A “thin file” exists where the borrower does not have a sufficient number of credit references to develop a traditional credit report.

(Source: FNMA Selling Guide, 6-30-10, 6-30-10 at 428).

B. Credit after Deed-in-Lieu (DIL) of Foreclosure

Q 5. How long is the time period after a deed-in-lieu of foreclosure before a consumer can be eligible to obtain credit to purchase a property?

A After two years from the date the deed in lieu was executed, but the consumer is limited to a maximum loan-to-value ratio of 80 percent. If the Eligibility Matrix (https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf) sets forth a lower maximum loan-to-value ratio for the transaction at hand, then the consumer is limited to the lower maximum loan-to-value ratio.

After four years, the consumer is limited to a maximum loan to value ratio of 90 percent. If the Eligibility Matrix (https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf) sets forth a lower maximum loan-to-value ratio for the transaction at hand, then the consumer is limited to the lower maximum loan-to-value ratio.

After seven years, the consumer is limited to the loan-to-value ratios set forth in the Eligibility Matrix. (https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf)

(Source: FNMA Selling Guide, 6-30-10, 6-30-10 at 427.)

Q 6. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the deed-in-lieu of foreclosure?

A Yes. Two years from the date the deed-in-lieu was executed, but the consumer is limited to a maximum loan-to-value ratio of 90 percent. If the Eligibility Matrix (https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf) sets forth a lower maximum loan-to-value ratio for the transaction at hand, then the consumer is limited to the lower maximum loan-to-value ratio.

(Source: FNMA Selling Guide, 6-30-10, 6-30-10 at 427.)

See Question 3 for the definition of “extenuating circumstances.”

Q 7. Are deed-in-lieu of foreclosure actions identified on a credit report?

A A deed-in-lieu of foreclosure may be reported by a remarks code indicating a deed-in-lieu.

(Source: FNMA Announcement 08-16 Q&A, 8-13-08. )

Q 8. What are the requirements to re-establish a credit history after a deed-in-lieu of foreclosure?

A After a deed-in-lieu of foreclosure, a credit history must meet the following requirements to be considered re-established:

• The elapsed time and the related requirements are met (as discussed in this article). • The loan receives a recommendation from Desktop Underwriter (an automated underwriting system) that is acceptable for delivery to Fannie Mae. If manually underwritten, then the loan must meet the minimum credit score requirements based on the parameters of the loan and the established eligibility requirements. • The borrower has traditional credit as outlined in the Selling Guide, B3-5.3, Traditional Credit History (https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sel043010.pdf). Nontraditional credit or “thin files” are not acceptable. A “thin file” exists where the borrower does not have a sufficient number of credit references to develop a traditional credit report.

(Source: FNMA Selling Guide, 6-30-10 at 428).

C. Credit after a Short Sale (Palos Verdes Forclosures Preforeclosure Sale)

Q 9. How long is the time period after a ” preforeclosure sale” before a consumer can be eligible to obtain credit to purchase a property?

A After two years from the date the preforeclosure sale was completed, but the consumer is limited to a maximum loan-to-value ratio of 80 percent. If the Eligibility Matrix (https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf) sets forth a lower maximum loan-to-value ratio for the transaction at hand, then the consumer is limited to the lower maximum loan-to-value ratio.

After four years, the consumer is limited to a maximum loan to value ratio of 90 percent. If the Eligibility Matrix (https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf) sets forth a lower maximum loan-to-value ratio for the transaction at hand, then the consumer is limited to the lower maximum loan-to-value ratio.

After seven years, the consumer is limited to the loan-to-value ratios set forth in the Eligibility Matrix (https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf).

(Source: FNMA Selling Guide, 6-30-10, 6-30-10 at 427.)

Q 10. What is a “preforeclosure sale” mentioned in Question 9 and is that the same as a short sale and Palos Verdes foreclosures?

A “A preforeclosure sale involves the sale of the property by the borrower to a third party for less than the amount owed to satify the delinquent mortgage, as agreed to by the lender, investor, and mortgage insurer”

Although the terms preforeclosure sale and short sale have been used interchangeably, there is a significant difference for purposes of obtaining credit. For Fannie Mae purposes, a preforeclosure assumes that the borrower has been delinquent in paying his or her mortgage and the lender agrees to accept a lesser amount to avoid the time and expense of a foreclousre action. A short-sale, however, can also refer to situations in which the lender of the mortgage agrees to a payoff of a lesser amount than is actually owed, even on a current mortgage, to facilitate the sale of the property to a third party.

(Source: FNMA Announcement 08-16 Q&A, 8-13-08. )

Q 11. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the preforeclosure (short) sale or Palos Verdes foreclosures?

A Yes. Two years from the date the preforeclosure sale was completed, but the consumer is limited to a maximum loan-to-value ratio of 90 percent. If the Eligibility Matrix (https://www.efanniemae.com/sf/refmaterials/eligibility/pdf/eligibilitymatrix.pdf) sets forth a lower maximum loan-to-value ratio for the transaction at hand, then the consumer is limited to the lower maximum loan-to-value ratio.

(Source: FNMA Selling Guide, 6-30-10 at 427 .)

Q 12. If a borrower sold his or her property as a short sale but was never delinquent on that mortgage and is now attempting to purchase a new primary residence, will Fannie Mae purchase the loan?

A The loan will be eligible for delivery to Fannie Mae provided that the borrower’s previous mortgage history complies with Fannie Mae’s excessive prior mortgage delinquency policy–that is the borrower does not have one or more 60-, 90-, 120-, or 150-day delinquencies reported within the 12 months prior to the credit report date–and the borrower has not entered into any agreement with the short sale lender to repay any amounts associated with the short sale, including a deficiency judgment.

(Source: FNMA Announcement 08-16 Q&A, 8-13-08 ; FNMA Selling Guide, Part X, Chapter 3, Section 302.09. .)

Q 13. Are preforeclosure sales (short sales) or Palos Verdes foreclosures identified on a credit report?

A Preforeclosure sales may be reported as “paid in full” with a “settled for less than owed” remarks code, and the mortgage tradeline would indicate any recent delinquency.

(Source: FNMA Announcement 08-16 Q&A, 8-13-08. )

D. Credit after a Bankruptcy

Q 14. How long is the time period after a Chapter 7 or Chapter 11 bankruptcy before a consumer can be eligible to obtain credit to purchase a property?

A Four years from the discharge or dismissal date of the bankruptcy action.

(Source: FNMA Selling Guide, 6-30-10 at 425 .)

Q 15. How long is the time period after a Chapter 13 bankruptcy before a consumer can be eligible to obtain credit to purchase a property?

A Two years from the discharge date and four years from the dismissal date. The shorter waiting period based on the discharge date recognizes that borrowers have already met a portion of the waiting period within the time needed for the successful completion of a Chapter 13 plan and subsequent discharge.

(Source: FNMA Selling Guide, 6-30-10 at 425 .)

Q 16. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the bankruptcy (all actions)?

A Yes. Two years from the discharge or dismissal; however, no exceptions are permitted to the 2-year time period after a Chapter 13 discharge.

(Source: FNMA Selling Guide, 6-30-10 at 425-6 .)

See Question 3 for the definition of “extenuating circumstances.”

Q 17. How long is the time period after multiple bankruptcy filings before a consumer can be eligible to obtain credit to purchase a property?

A Five years from the most recent dismissal or discharge date for borrowers with more than one bankruptcy filing within the past 7 years.

(Source: FNMA Selling Guide, 6-30-10 at 426 .)

Q 18. What are “multiple bankruptcy filings”?

A This means an individual borrower has filed for bankruptcy more than one time. Two or more borrowers with individual bankruptcies are not cumulative, and do not constitute multiple bankruptcies. For example, if the borrower has one bankruptcy and the co-borrower has one bankruptcy, this is not considered a multiple bankruptcy.

(Source: FNMA Selling Guide, 6-30-10 at 426 .)

Q 19. Does a shorter time period apply if the borrower has “extenuating circumstances” that led to the multiple bankruptcies?

A Yes. Three years from the most recent discharge or dismissal date. The most recent bankruptcy filing must have been the result of extenuating circumstances.

(Source: FNMA Selling Guide, 6-30-10 at 426 .)

See Question 3 for the definition of “extenuating circumstances.”

Q 20. What is the difference between a Chapter 13 bankruptcy and a Chapter 7 bankruptcy?

A Chapter 13 permits a borrower with a regular income to propose a plan to repay some or all of his or her obligations over a period of up to five years. A borrower who files a Chapter 7 is permitted to retain exempt assets and receive a discharge of the borrower’s debts. Chapter 7 is a relatively quick liquidation process that is generally completed within 120 days. Chapter 7 cases are rarely dismissed.

(Source: FNMA Announcement 08-16 Q&A, 8-13-08. )

Q 21. What is the difference between a Chapter 13 dismissal and a Chapter 13 discharge?

A A borrower who files a Chapter 13 can dismiss the case at any time (voluntary dismissal) or the case may be dismissed by the court based on the borrower’s failure to comply with the requirements of the Bankruptcy Code or to make the required payments. If the borrower who files a Chapter 13 case makes all of the payments required by the plan, the borrower receives a discharge at the end of the plan. A borrower who doesn’t make all the payment required by the plan may still receive a discharge if the court finds, among other things, that the borrower made a certain amount of the payments and the borrower’s failure to make all of the payments was due to circumstances beyond the borrower’s control.

(Source: FNMA Announcement 08-16 Q&A, 8-13-08. )

Q 22. What are the requirements to re-establish a credit history or if Palos Verdes foreclosures were in the credit history?

A After a bankruptcy, a credit history must meet the following requirements to be considered re-established:

• The elapsed time and the related requirements are met (as discussed in this article). • The loan receives a recommendation from Desktop Underwriter (an automated underwriting system) that is acceptable for delivery to Fannie Mae. If manually underwritten, then the loan must meet the minimum credit score requirements based on the parameters of the loan and the established eligibility requirements. • The borrower has traditional credit as outlined in the Selling Guide, B3-5.3, Traditional Credit History (https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sel043010.pdf). Nontraditional credit or “thin files” are not acceptable. A “thin file” exists where the borrower does not have a sufficient number of credit references to develop a traditional credit report.

(Source: FNMA Selling Guide, 6-30-10 at 428).

II. Bankruptcy, Palos Verdes Foreclosures, and Short Sale and the Impact on a FICO ®Score

Q 23. What is a FICO® Score? This is critical information for any buyer or seller of Palos Verdes Foreclosures or conventional property

AA FICO® score is a number representing the creditworthiness of a person or the likelihood that person will pay his or her debts. The three credit reporting agencies, Equifax, Experian, and TransUnion, collect data about consumers in order to compile credit reports. The credit agencies use FICO® software to generate FICO® scores, which are then sold to lenders. Actually FICO® is just one of the several credit scoring systems available. The Fair Isaac Corporation (known as FICO®) created the first credit scoring system in 1958. Others are NextGen, VantageScore, and the CE Score. They all evaluate the creditworthiness of a borrower. However, FICO appears to be the most-used credit scoring system. A FICO® score is between 300 and 850. The higher the better the credit.

Each consumer has three credit scores at any given time for any given scoring model because the three credit agencies have their own databases, gather reports from different creditors, and receive information from creditors at different times.

Q 24. What factors go into determining a FICO® score?

ACredit scores are designed to measure the risk of default by taking into account various factors in a person’s financial history. Although the exact formulas for calculating credit scores are closely-guarded secrets, FICO® has disclosed the following components and the approximate weighted contribution of each:

35% — Payment History – Late payments on bills, such as a mortgage, credit card or automobile loan, can cause a consumer’s FICO® score to drop. Paying bills as agreed over time will improve a consumer’s FICO® score.

30% — Credit Utilization – The ratio of current revolving debt (such as credit card balances) to the total available revolving credit (credit limits). Consumers can improve their FICO® scores by paying off debt and lowering their utilization ratio. The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on the FICO® score.

15% — Length of Credit History – As a consumer’s credit history ages, assuming the consumer pays his or her bills, it can have a positive impact on the FICO® score.

10% — Types of Credit Used (installment, revolving, consumer finance) – Consumers can benefit by having a history of managing different types of credit.

10% — Recent search for credit and/or amount of credit obtained recently – Multiple credit inquiries for a consumer seeking to open new credit, such as credit cards, retail store accounts, and personal loans, can hurt an individual’s score. Applying for lots of new credit in a short period of time is also viewed as risky and can cause a drop in an individual’s score. However, individuals shopping for a mortgage or auto loan over a short period will likely not experience a decrease in their scores as a result of these types of inquiries.

(Source: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx)

Q 25. How does a mortgage modification affect my FICO® score?

 

A FICO® credit scores are calculated from the information in consumer credit reports. Whether a loan modification affects the borrower’s FICO® score depends on whether and how the lender chooses to report the event to the credit bureau, as well as on the person’s overall credit profile. If a lender indicates to a credit bureau that the consumer has not made payments on a mortgage as originally agreed, that information on the consumer’s credit report could cause the consumer’s FICO® score to decrease or it could have little to no impact on the score.

(Source: http://www.myfico.com/crediteducation/questions/Mortgage_Modification.aspx)

Q 26. How does a bankruptcy affect my FICO® score?

AA bankruptcy is considered a very negative event regardless of the type. A bankruptcy is factored into your FICO® score until it is removed from your credit report. As long as the bankruptcy is listed on your credit report, it will be factored into your score. If you are considering bankruptcy as an alternative to foreclosure, keep in mind that it may have a greater impact on your FICO® score.

Typically, you can expect bankruptcies to impact your FICO® score, from the date filed, as follows:

(1) Chapter 11 and Chapter 7 bankruptcies up to 10 years. (2) Completed Chapter 13 bankruptcies up to 7 years.

These time periods refer to the public record item associated with filing for bankruptcy. All of the individual accounts included in the bankruptcy should be removed from your credit report after 7 years.

(Source: http://www.myfico.com/crediteducation/Questions/Bankruptcy-Types.aspx)

If you plan to file a bankruptcy, here are some things you should do to make sure your creditors are accurately reporting the bankruptcy filing:

(1) Check your credit report to ensure that accounts that were not part of the bankruptcy filing are not being reported with a bankruptcy status. (2) Make sure your bankruptcy is removed as soon as it is eligible to be “purged” from your credit report.

After a bankruptcy has been filed, the sooner you begin re-establishing credit in good standing, the sooner you can expect your FICO® score to rebound. A good practice is to obtain a secured credit card and continually make all of your payments on time. As time passes and the impact of the bankruptcy lessens, you might apply for a traditional credit card and also continually make all of your payments on time.

(Source: http://www.myfico.com/crediteducation/questions/Bankruptcy-Reach.aspx)

Q 27. How does a short sale, deed-in-lieu-of foreclosure, a foreclosure or Palos Verdes foreclosures affect my FICO® score?

AThe alternatives to foreclosure, such as a deed-in-lieu of foreclosure or a short sale, aren’t any better as far as a FICO® score is concerned.

The common alternatives to foreclosure, such as short sales, and deeds-in-lieu of foreclosure are all “not paid as agreed” accounts, and considered the same by your FICO® score. This is not to say that these may not be better options for you from a financial or tax perspective, just that they will be considered no better or worse for your FICO® score.

[Note for many Palos Verdes foreclosures homeowners, this has changed. See this update]

If you are considering bankruptcy as an alternative to foreclosure, that may have a greater impact on your FICO® score. While a foreclosure is a single account that you default on, declaring bankruptcy has the opportunity to affect multiple accounts and therefore has potential to have a greater negative impact on your FICO® score.

(Source: http://www.myfico.com/CreditEducation/Questions/foreclosure-alternatives-fico-score.aspx)

Q 28. What won’t affect my FICO® score?

AThe following information is not considered by the FICO® scoring formula:

. Your race, color, religion, national origin, sex, or marital status

. Your age . Your salary, occupation, title, employer, date employed, or employment history . Where you live . Any interest rate being charged on a particular credit card or other account . Certain types of inquiries (such as promotional, account review, insurance or employment-related inquiries) . Credit counseling . Any information not found in your credit report . Any information that is not proven to be predictive of future credit performance

(Source: http://myfico.custhelp.com/cgi-bin/myfico.cfg/php/enduser/std_adp.php?p_faqid=55)

Q 29. Where can I get more information?

A For a credit missteps comparison (i.e., affect on credit scores after certain events), go to http://www.myfico.com/crediteducation/questions/Credit_Problem_Comparison.aspx.

This legal article is just one of the many legal publications and services offered by C.A.R. to its members. For a complete listing of C.A.R.’s legal products and services, please visit car.org.

Readers who require specific advice should consult an attorney.

To search for Palos Verdes Foreclosures, you are welcome to visit this site http://www.homeispalosverdes.com/palos-verdes-foreclosures-search-site/

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Is there a best day for listing Palos Verdes homes

Is there a best day of the week to list Palos Verdes homes? I was forwarded an article by a client of mine (by the way, I really appreciate when you care enough to help me in my business so please continue to forward me articles for which you think I would have interest) written in the Wall Street Journal about what day of the week is optimal for listing a home.

Of course my mind immediately went to how this effects Palos Verdes homes and whether or not different parts of the country or different price ranges would react differently in this regard. palos verdes homesA national study was conducted in which it was determined that homes listed on Fridays, when sold, ended up selling for 99.1% of the sellers’ original asking price but homes listed on Sundays sold for 98.4% of the original asking price. Now for Palos Verdes homes, realize first of all that over the last 6 months, for Palos Verdes homes, the number is 94.1%. Understand that the reason the “discount” from original asking price is much greater for Palos Verdes homes because the price range is so much greater than national averages and with higher prices, comes higher uncertainty.

Best day to put Palos Verdes homes on the market

 

But getting back to the study, the difference between 99.1% and 98.4% may not seem like a lot; however as the article pointed out when a property debuts on the market, the traffic is four times greater on the date of debut than any other time during the week. That’s a big difference! So you only have one chance to debut. It was observed that the worst day of the week to list your home (and this is true for Palos Verdes homes too) is Sunday. Fridays it was found was the best. What defines best?

The clearest measure of all – price, what the home sold for. It was found that the difference was about $5,000 for a $500,000 home. As a percentage, that may not be a lot, but let me ask you this. If you were walking down the sidewalk and saw a roll of $5,000 laying on the ground, would you pick it up? “Properties listed on Fridays also sell the fastest—81 days, on average, according to the analysis. What makes Fridays so special (other than a six-pack and takeout pizza)? Adults who have a Monday-to-Friday workweek tend to be more positive and happier on Fridays, an effect that lasts through the weekend, says Richard Ryan, professor of psychology at the University of Rochester. They also tend to report more vitality and energy on the weekends, which may prompt them to be more proactive in searching for homes, says Prof. Ryan, who has studied how the day of the week affects mood.

Conversely, Sunday listings have to sit around for a few days before people start lining up home tours for the following weekend. By that time, newer listings may make Sunday listings seem stale. One other day seems to dominate the real-estate world: Tuesday. Homes that are listed on a Tuesday garner the most interest for home tours, seeing 2.41 home-tour requests.” Regardless of what this study says, you’ve heard me say time and time again, “…real estate is ALL local…” What is true for one part of the country, may not at all be true for Palos Verdes homes. For example, the day most often picked for broker open houses, the day that Palos Verdes homes debut, is Tuesday.

That means to get on the tour for a Tuesday, Palos Verdes homes have to be listed and on the market Monday night at the latest. Yet more important that the day of the week to optimally list Palos Verdes homes, is how to optimally make Palos Verdes homes viewed by buyers around the world. This, by far, is a much more important topic. Think about it, whether you list a property on Sunday, Tuesday, Friday, whatever is its first impression to the world. What do you think that first impression is; in what format does that take place? I will address this in a future post, but you’re more than welcome to post a comment sooner.

Meanwhile, to study Palos Verdes homes, follow the links below

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Rancho Palos Verdes Catalina View Estates New 9 Hole Golf Course and Organic Gardens

Developer Jim York, who was denied the necessary permits four years ago, plans to develop the vacant 94-acre tract in Rancho Palos Verdes, Calif., into an organic farm, golf course and outdoor dining and reception area. Construction will include a 100-foot-long, 12-foot-high sound wall enclosing the “event garden,” a 2.5-acre turf golf course and 250-sq. ft. greenhouse all within the new Catalina View Estates

A vacant 94-acre Rancho Palos Verdes, Calif., tract where dozens of Palos Verdes homes could have risen will instead accommodate an organic farm, golf course and outdoor dining and reception area, the Torrance (Calif.) Daily Breeze reported.catalina view estates Developer Jim York, who headed a real estate investment group that bought and sold the land that became Terranea Resort, hopes to start work within a month on what he’s calling Catalina View Estates, the Daily Breeze reported.

POINT VIEW or CATALINA VIEW ESTATES information

The Planning Commission approved the hillside project January 8 on a 3-2 vote, four years after York was first denied the necessary permits for the project on what’s known locally as the Point View tract. No one has appealed that decision, the Daily Breeze reported. Here is a link on the Rancho Palos Verdes website to get more information http://www.palosverdes.com/rpv/planning/Point-View/

“After four years we’re glad to have this behind us and we can start holding events,” York said. “Compared to getting Terranea planned and built, this [Catalina View Estates] was easy.” Construction will include an “earth-tone” half-mile-long road into the property, a 100-foot-long and 12-foot-high sound wall enclosing the “event garden” to shield nearby homes from the noise, a 2.5-acre golf course and 250-sq. ft. greenhouse, the Daily Breeze reported. York also won approval for 25.5 acres of agricultural land, although he said he doesn’t expect to plant quite that much land for the Catalina View Estates development.

“I’m basically doing organic farming,” he said. “I’m doing avocados, citrus, olives, vegetables and then finally we’ll plant a vineyard. I want to have fun with this property. I enjoy growing things. [Catalina View Estates] It will be my retirement gift to myself.” Catalina View Wines originating in the Catalina View Estates grounds, as York is calling his modest vineyard, will use cloned vines from the Santa Rita Hills appellation between Lompoc and Buellton on the Central Coast, best known for its Pinot Noir grapes that create big, sweet cola-like wines, the Daily Breeze reported. Because of long-standing concerns in the area over the stability of the land (part of the access road will cross an ancient landslide complex), York is restricted to using drip irrigation for the agriculture.

Artificial turf will cover the nine-hole, two-green golf course, the Daily Breeze reported. It was the golf course that enabled the rest of the project to move forward on land zoned residential, York said.catalina view estates By building the course, which is allowed in that zoning, York is permitted ancillary structures like the event facility. York held a dozen private events on the property last year, receiving noise and other complaints from some neighbors, the Daily Breeze reported. “It’s been a learning experience,” York said.

The Planning Commission imposed 94 different conditions for operation of Catalina View Estates, including stringent noise restrictions. York has hired prominent Torrance chef Michael Shafer to cater events, including those York held last year, the Daily Breeze reported. “It’s phenomenal,” Shafer said of the property. “You have a 360-degree view of beauty, it’s really that simple.

On one side you view the complete coastline and on the other side there’s rolling hills, forest and nature.” York originally bought the land which will be known as Catalina View Estates, with partners in 1994, intending to develop almost 100 homes on the site. In 2009, he bought out his partners, the Daily Breeze reported.

Other documentation from the City of Rancho Palos Verdes concerning Catalina View Estates

Final initial Study/Mitigated negative declaration

Citizen comments concerning the project  

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1031 Tax Deferred Exchange Application for Palos Verdes homes

Palos Verdes Homes and 1031 Tax Deferred Exchanges

This article is written as a summary for investors considering either purchasing or selling Palos Verdes homes as investments or any South Bay real estate. While the information contained here is deemed to be accurate, please understand, this is article shall not be considered as anything but to stimulate questions for you as an investor. I am not a CPA and you should absolutely check with your CPA and/or Tax Attorney before relying on any of the data presented herein.

1031 Tax Deferred Exchange FAQs for Palos Verdes homes and South Bay Real Estate

Every Section 1031 Exchange transaction is different. These “Frequently Asked Questions” are intended to answer general inquiries. The application of these principles will depend on the specific facts of each transaction. Always consult a competent Qualified Intermediary, attorney, or tax advisor to determine how an exchange may best be structured to accomplish your investment objectives.

Q – What is a tax-deferred exchange?

In a typical transaction, the property owner is taxed on any gain realized from the sale. However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date.

Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a property owner trades one or more relinquished properties for one or more replacement properties of “like-kind”, while deferring the payment of federal income taxes and some state taxes on the transaction. palos verdes homes

The theory behind Section 1031 is that when a property owner has reinvested the sale proceeds into another property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer’s investment is still the same, only the form has changed (e.g. vacant land exchanged for apartment building). Therefore, it would be unfair to force the taxpayer to pay tax on a “paper” gain.

The like-kind exchange under Section 1031 is tax-deferred, not tax-free. When the replacement property, such as Palos Verdes homes, is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

Q – What are the benefits of exchanging v. selling?

A Section 1031 exchange is one of the few techniques available to postpone or potentially eliminate taxes due on the sale of qualifying properties and Palos Verdes homes.

By deferring the tax, you have more money available to invest in another property. In effect, you receive an interest free loan from the federal government, in the amount you would have paid in taxes.

Any gain from depreciation recapture is postponed.

You can acquire and dispose of properties to reallocate your investment portfolio without paying tax on any gain.

Q – What are the different types of exchanges for real estate and/or Palos Verdes homes?

Simultaneous Exchange: The exchange of the relinquished property for the replacement property occurs at the same time.

Delayed Exchange: This is the most common type of exchange. A Delayed Exchange occurs when there is a time gap between the transfer of the Relinquished Property and the acquisition of the Replacement Property. A Delayed Exchange is subject to strict time limits, which are set forth in the Treasury Regulations.

Build-to-Suit (Improvement or Construction) Exchange: This technique allows the taxpayer to build on, or make improvements to, the replacement property, using the exchange proceeds.

Reverse Exchange: A situation where the replacement property is acquired prior to transferring the relinquished property. The IRS has offered a safe harbor for reverse exchanges, as outlined in Rev. Proc. 2000-37, effective September 15, 2000. These transactions are sometimes referred to as “parking arrangements” and may also be structured in ways which are outside the safe harbor.

Personal Property Exchange: Exchanges are not limited to real property. Personal property can also be exchanged for other personal property of like-kind or like-class.

Q – What are the requirements for a valid exchange?

Qualifying Property – Certain types of property are specifically excluded from Section 1031 treatment: property held primarily for sale; inventories; stocks, bonds or notes; other securities or evidences of indebtedness; interests in a partnership; certificates of trusts or beneficial interest; and choses in action. In general, if property is not specifically excluded, it can qualify for tax-deferred treatment.

Proper Purpose – Both the relinquished property and replacement property must be held for productive use in a trade or business or for investment. Property acquired for immediate resale will not qualify. The taxpayer’s personal residence will not qualify.

Like Kind – Replacement property acquired in an exchange must be “like-kind” to the property being relinquished. All qualifying real property located in the United States is like-kind. Personal property that is relinquished must be either like-kind or like-class to the personal property which is acquired. Property located outside the United States is not like-kind to property located in the United States.

Exchange Requirement – The relinquished property must be exchanged for other property, rather than sold for cash and using the proceeds to buy the replacement property. Most deferred exchanges are facilitated by Qualified Intermediaries, who assist the taxpayer in meeting the requirements of Section 1031.

Q – What are the general guidelines to follow in order for a taxpayer to defer all the taxable gain?

The value of the replacement property must be equal to or greater than the value of the relinquished property.

The equity in the replacement property must be equal to or greater than the equity in the relinquished property.

The debt on the replacement property must be equal to or greater than the debt on the relinquished property.

All of the net proceeds from the sale of the relinquished property must be used to acquire the replacement property.

Q – When can I take money out of the exchange account?

Once the money is deposited into an exchange account, funds can only be withdrawn in accordance with the Regulations. The taxpayer cannot receive any money until the exchange is complete. If you want to receive a portion of the proceeds in cash, this must be done before the funds are deposited with the Qualified Intermediary.

Q – Can the replacement property eventually be converted to the taxpayer’s primary residence or a vacation home?

Yes, but the holding requirements of Section 1031 must be met prior to changing the primary use of the property. The IRS has no specific regulations on holding periods. However, many experts feel that to be on the safe side, the taxpayer should hold the replacement property for a proper use for a period of at least one year.

If the owner later on wants to take advantage of the home owner’s exemption (up to $250,000 or $500,000 for a couple), there is now a five year holding period requirement.

Q – What is a Qualified Intermediary (QI)?

A Qualified Intermediary is an independent party who facilitates tax-deferred exchanges pursuant to Section 1031 of the Internal Revenue Code. The QI cannot be the taxpayer or a disqualified person.

Acting under a written agreement with the taxpayer, the QI acquires the relinquished property or Palos Verdes homes and transfers it to the buyer.

The QI holds the sales proceeds, to prevent the taxpayer from having actual or constructive receipt of the funds.

Finally, the QI acquires the replacement property and transfers it to the taxpayer to complete the exchange within the appropriate time limits.

Q – Why is a Qualified Intermediary needed?

The exchange ends the moment the taxpayer has actual or constructive receipt (i.e. direct or indirect use or control) of the proceeds from the sale of the relinquished property. The use of a QI is a safe harbor established by the Treasury Regulations. If the taxpayer meets the requirements of this safe harbor, the IRS will not consider the taxpayer to be in receipt of the funds. The sale proceeds go directly to the QI, who holds them until they are needed to acquire the replacement property. The QI then delivers the funds directly to the closing agent.

Q – Can the taxpayer just sell the relinquished property and put the money in a separate bank account, only to be used for the purchase of the replacement property?

The IRS regulations are very clear. The taxpayer may not receive the proceeds or take constructive receipt of the funds in any way, without disqualifying the exchange.

Q – If the taxpayer has already signed a contract to sell the relinquished property, is it too late to start a tax-deferred exchange?

No, as long as the taxpayer has not transferred title, or the benefits and burdens of the relinquished property, she can still set up a tax-deferred Exchange. Once the closing occurs, it is too late to take advantage of a Section 1031 tax-deferred exchange (even if the taxpayer has not cashed the proceeds check).

Q – Does the Qualified Intermediary actually take title to the properties?

No, not in most situations. The IRS regulations allow the properties to be deeded directly between the parties, just as in a normal sale transaction. The taxpayer’s interests in the property purchase and sale contracts are assigned to the QI. The QI then instructs the property owner to deed the property directly to the appropriate party (for the relinquished property, its buyer; for the replacement property, taxpayer).

Q – What are the time restrictions on completing a Section 1031 exchange?

A taxpayer has 45 days after the date that the relinquished property is transferred to properly identify potential replacement properties such as Palos Verdes homes. The exchange must be completed by the date that is 180 days after the transfer of the relinquished property, or the due date of the taxpayer’s federal tax return for the year in which the relinquished property was transferred, whichever is earlier. Thus, for a calendar year taxpayer, the exchange period may be cut short for any exchange that begins after October 17th. However, the taxpayer can get the full 180 days, by obtaining an extension of the due date for filing the tax return.

Q – What if the taxpayer cannot identify any replacement property within 45 days, or close on a replacement property before the end of the exchange period?

Unfortunately, there are no extensions available. If the taxpayer does not meet the time limits, the exchange will fail and the taxpayer will have to pay any taxes arising from the sale of the relinquished property, unless the IRS has expressly granted extensions in specified disaster area(s).

Q – Is there any limit to the number of properties that can be identified?

There are three rules that limit the number of properties that can be identified. The taxpayer must meet the requirements of at least one of these rules:

3-Property Rule: The taxpayer may identify up to 3 potential replacement properties, without regard to their value; or

200% Rule: Any number of properties may be identified, but their total value cannot exceed twice the value of the relinquished property, or

95% Rule: The taxpayer may identify as many properties as he wants, but before the end of the exchange period the taxpayer must acquire replacement properties with an aggregate fair market value equal to at least 95% of the aggregate fair market value of all the identified properties.

Q – What are the requirements to properly identify replacement property?

Potential replacement property must be identified in a writing, signed by the taxpayer, and delivered to a party to the exchange who is not considered a “disqualified person”. A “disqualified” person is any one who has a relationship with the taxpayer that is so close that the person is presumed to be under the control of the taxpayer. Examples include blood relatives, and any person who is or has been the taxpayer’s attorney, accountant, investment banker or real estate agent within the two years prior to the closing of the relinquished property. The identification cannot be made orally.

Q – Are Section 1031 Exchanges limited only to real estate?

No. Any property that is held for productive use in a trade or business, or for investment, may qualify for tax-deferred treatment under Section 1031. In fact, many exchanges are “multi-asset” exchanges, involving both real property and personal property.

1031 exchangeQ – What is a “multi-asset” exchange?

A multi-asset exchange involves both real and personal property. For example, the sale of a hotel will typically include the underlying land and buildings, as well as the furnishings and equipment. If the taxpayer wants to exchange the hotel for a similar property, he would exchange the land and buildings as one part of the exchange. The furnishings and equipment would be separated into groups of like-kind or like-class property, with the groups of relinquished property being exchanged for groups of replacement property.

Although the definition of like-kind is much narrower for personal property and business equipment, careful planning will allow the taxpayer to enjoy the benefits of an exchange for the entire relinquished property, not just for the real estate portion.

Q – What is a reverse exchange?

A reverse exchange, sometimes called a “parking arrangement,” occurs when a taxpayer acquires a Replacement Property before disposing of their Relinquished Property. A “pure” reverse exchange, where the taxpayer owns both the Relinquished and Replacement properties at the same time, is not allowed. The actual acquisition of the “parked” property is done by an Exchange Accommodation Titleholder (EAT) or parking entity.

Q – Is a reverse exchange permissible?

Yes. Although the Treasury Regulations still do not apply to reverse exchanges, the IRS issued “safe harbor” guidelines for reverse exchanges on September 15th, 2000, in Revenue Procedure 2000-37. Compliance with the safe harbor creates certain presumptions that will enable the transaction to qualify for Section 1031 tax-deferred exchange treatment.

Q – How does a reverse exchange work?

In a typical reverse (or “parking”) exchange, the “Exchange Accommodation Titleholder” (EAT) takes title to (“parks”) the replacement property and holds it until the taxpayer is able to sell the relinquished property. The taxpayer then exchanges with the EAT, who now owns the replacement property. An exchange structured within the safe harbor of Rev. Proc. 2000-37 cannot have a parking period that goes beyond 180 days.

Q – What happens if the exchange cannot be completed within 180 days?

If the reverse exchange period exceeds 180 days, then the exchange is outside the safe harbor of Rev. Proc. 2000-37. With careful planning, it is possible to structure a reverse exchange that will go beyond 180 days, but the taxpayer will lose the presumptions that accompany compliance with the safe harbor.

Q – Can the proceeds from the relinquished property be used to make improvements to the replacement property?

Yes. This is known as a Build-to-Suit or Construction or Improvement Exchange. It is similar in concept to a reverse exchange. The taxpayer is not permitted to build on property she already owns. Therefore, an unrelated party or parking entity must take title to the replacement property, make the improvements, and convey title to the taxpayer before the end of the exchange period.

Q- What is the difference between “realized” gain and “recognized” gain?

Realized gain is the increase in the taxpayer’s economic position as a result of the exchange. In a sale, tax is paid on the realized gain. Recognized gain is the taxable gain. Recognized gain is the lesser of realized gain or the net boot received.

Q – What is Boot?

Boot is any property received by the taxpayer in the exchange which is not like-kind to the relinquished property. Boot is characterized as either “cash” boot or “mortgage” boot. Realized Gain is recognized to the extent of net boot received.

Q – What is Mortgage Boot?

Mortgage Boot consists of liabilities assumed or given up by the taxpayer. The taxpayer pays mortgage boot when he assumes or places debt on the replacement property. The taxpayer receives mortgage boot when he is relieved of debt on the replacement property. If the taxpayer does not acquire debt that is equal to or greater than the debt that was paid off, they are considered to be relieved of debt. The debt relief portion is taxable, unless offset when netted against other boot in the transaction.

Q – What is Cash Boot?

Cash Boot is any boot received by the taxpayer, other than mortgage boot. Cash boot may be in the form of money or other property.

Q – What are the boot “netting” rules?

Cash boot paid offsets cash boot received

Cash boot paid offsets mortgage boot received (debt relief)

Mortgage boot paid (debt assumed) offsets mortgage boot received

Mortgage boot paid does not offset cash boot received

Q – I bought the property as a single person and I would like to acquire the replacement property together with my spouse?

The most conservative way is to stay consistent and complete the exchange the same way it was started and to add the spouse after the completion of the exchange. An exception can be made if there is a lender requirement that the spouse has to be added in order to qualify for a loan. If an exchange is planned well ahead of time, another solution would be to add the spouse to the title of the currently held property. Timing should be discussed with the CPA.

Q – I closed escrow on my first replacement property within the 45 day identificationperiod. Can I now identify three more properties within my 45 day identification period?

If you are using the three property rule, the completed acquisition counts as one and you may identify only up to two additional properties.

Q – How do I identify two different properties (or percentages of ownership through a TIC) covered by ONE purchase contract?

If the properties could be sold separately at a later date, they should be identified as two properties.

A 92 Year-Old Solution for Real Estate Investors of Palos Verdes Homes or South Bay Real Estate
Facing Higher Taxes in 2013:


1031 Exchanges Offer Full Deferral of the
New 3.8% Medicare Surtax and 20% Capital Gain Tax

The familiar adage, “It’s not how much you make, but how much you keep” rings truer than ever for real estate investors in 2013. Not only have capital gain taxes increased significantly for high earners, but many investors below the top tax bracket face an additional 3.8% surtax on passive investment income like capital gains. Fortunately, IRC Section 1031, a provision which has been in the tax code since 1921, provides critically needed tax relief.

Under the American Taxpayer Relief Act of 2012, the top capital gain tax rate has been permanently increased to 20% (up from 15%) for single filers with incomes above $400,000 and married couples filing jointly with incomes exceeding $450,000. In addition, the new IRC Section 1411 3.8% Medicare surtax on net investment income, which includes capital gains, results in an overall rate for higher-income taxpayers of 23.8% — a staggering 58% increase from 2012 tax rates!

Four Steps Involved in Determining Capital Gain Taxation

Absent the tax deferral benefits of a 1031 exchange, below is a summary of the four ways investors will be taxed on the sale of an investment property:

  1. Depreciation Recapture: Taxpayers will be taxed at a rate of 25% on all depreciation recapture.
  2. Federal Capital Gain Taxes: Investors owe Federal capital gain taxes on the remaining economic gain depending upon their taxable income. Since a new higher capital gain tax rate of 20% has been added to the tax code, investors exceeding the $400,000 taxable income threshold for single filers and married couples filing jointly with over $450,000 in taxable income will be subject to the new higher tax rate. The previous Federal capital gain tax rate of 15% remains for investors below these threshold income amounts.
  3. New Medicare Surtax Pursuant to IRC Section 1411: The Health Care and Education Reconciliation Act of 2010 added a new 3.8% Medicare Surtax on “net investment income.” This 3.8% Medicare surtax applies to taxpayers with “net investment income” who exceed threshold income amounts of $200,000 for single filers and $250,000 for married couples filing jointly. Pursuant to IRC Section 1411, “net investment income” includes interest, dividends, capital gains, retirement income and income from partnerships (as well as other forms of “unearned income”).
  4. State Taxes: Taxpayers must also take into account the applicable state tax, if any, to determine their total tax owed. Some states have no state taxes at all, while other states, like California, have a 13.3% top tax rate.

Snapshot of 2013 Federal Capital Gain Tax Rates

Single Taxpayer
Married Filing Jointly
Capital Gain
Tax Rate
Section 1411
Medicare Surtax
Combined
Tax Rate
$0 – $36,250
$0 – $72,500
0%
0%
0%
$36,250 – $200,000
$72,500 – $250,000
15%
0%
15%
$200,000 – $400,000
$250,000 – $450,000
15%
3.8%
18.8%
$400,001+
$450,001+
20%
3.8%
23.8%

*The 3.8% Medicare surtax only applies to “net investment income” as defined in IRC §1411.

1031 Exchanges Help Investors Defer the New 3.8% Medicare Surtax

Under recently proposed regulations, REG-130507-11, taxpayers have received proposed guidance from the IRS that notes: “to the extent gain from a like-kind exchange is not recognized for income tax purposes under Section 1031, it is not recognized for purposes of determining net investment income under Section 1411.” [§1.1411-5(C)(i)(2)(ii)]. Although these regulations are not yet finalized, taxpayers may rely on the proposed regulations to be in compliance with Section 1411 until the effective date of the final regulations.

Despite these new tax increases, one aspect of the tax code provides real estate investors with a huge tax advantage. Section 1031 allows property owners holding property for investment purposes to defer taxes that would otherwise be recognized upon the sale of investment property. Savvy investors use 1031 exchanges to redeploy their investment capital into better performing investment properties. An exchange provides a fantastic opportunity for investment property owners to defer all capital gain taxes that would otherwise be owed.

CAPITAL GAIN TAXES GOING UP, WAY UP (#135)
“58 PERCENT INCREASE IN CAPITAL GAIN TAXES IS COMING”

Written 2012

TAX INCREASE #1 – 20 PERCENT CAPITAL GAIN TAX IN 2013

The Tax Relief, Unemployment Insurance Reauthorization and Jobs Creation Act of 2010 extends the Bush-era tax cuts until the end of 2012. Beginning January 1, 2013, the tax rate will revert from the current 15 percent rate back to the former 20 percent capital gain tax rate that was in effect prior to 2003.

TAX INCREASE #2 – 3.8 PERCENT MEDICARE TAX IN 2013

Beginning in 2013, the national health care reform legislation that became law in March, 2010, imposes a new 3.8 percent tax on certain investment income. The new tax will apply to single filers with incomes over $200,000 and married taxpayers with incomes over $250,000. Under the law, the investment tax provisions in Chapter 2A of the Internal Revenue Code are placed under the heading “Unearned Income Medicare Contribution.” In general, this new Medicare tax will apply to investment income that is subject to income tax, which includes capital gains. Pursuant to IRC Section 1402 (C)(1)(A)(iii), the investment income to which this new tax applies includes “net gain” (to the extent taken into account in computing taxable income) attributed to the disposition of property that qualifies as a capital asset under Section 121 (capital gains), as well as gains on other property that are considered part of ordinary income. Also of relevance for rental property owners, this new tax applies to a real estate investor’s rental income if they have income above the $200,000/$250,000 income thresholds.

The net effect of both capital gain tax increases is a new 23.8 percent tax rate for higher earners—the highest rate for long-term capital gains since 1997. The Joint Committee on Taxation estimates the new Medicare tax on investments will cost taxpayers over $30 billion annually. Additionally, the modified adjusted gross income threshold at which this Medicare tax will apply will not be indexed for inflation, which means an increasing number of taxpayers will be snared by this tax provision.

Overall, the economic impact of these tax increases will be felt by the very investors who help promote long-term economic growth. In 2007, taxpayers with incomes greater than $200,000 reported 47 percent of all interest income, 60 percent of all dividends and an amazing 84 percent of all capital gains.

THE COMING TAX INCREASES – A COMPARISON

Current January 2013
Conventional Short-Term 35.0% 43.4%
Conventional Long-Term 15.0% 23.8%
AMT Short-Term 28.0% 31.8%
AMT Long-Term 15.0% 23.8%

A SOLUTION AND WAY TO DEFER TAXES – 1031 EXCHANGES

Since 1921, 1031 exchanges have been a proven tax saving strategy that helps real estate investors improve their investment position through the ability to not recognize Federal or state capital gain taxes. Contact Asset Preservation at 800.282.1031 or via email at info@apiexchange.com!

Use Asset Preservation’s Capital Gain Tax Calculator to obtain an approximate estimate of your capital gain tax liability. Enter your figures in the fields provided and click on the ‘Calculate’ button in each area to determine your capital gain.Calculate Your Capital Gain Taxes Now.

10 MOST POPULAR ARTICLES:
Ordinary Income vs. Capital Gain
2012 Reviewed and Changes for 2013
Impact of New 3.8% Medicare Tax on Investors
What is a 1031 Exchange?
What is a Qualified Intermediary?
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1031 Exchange Basics
FIRPTA Withholding Rules
The Delayed Exchange
Calculating Capital Gain

 

 

 

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Increasing Palos Verdes Homes Resale Appeal Cheaply

Owning a valuable asset like one of the Palos Verdes homes means making improvements to keep things up. Some improvements can be costly but some can be very cost effective and really improve resale value.

10 Low-Cost Tips to Improve Palos Verdes Homes Appeal

When selling Palos Verdes homes, the goal is to sell it quickly for the highest price while investing as little as possible in renovations. With a limited budget and a little effort, you can greatly increase your home’s appeal by focusing on what prospective buyers can see on their first visit. Here are some recommendations I’ve gathered for preparing a house for sale and staging it for showings. palos verdes homes
Tip #1: Refresh the exterior
First impressions count when it comes to selling Palos Verdes homes. Most buyers won’t even leave their car if they don’t find the exterior appealing. The best ways to improve your home’s exterior include:
-Repairing and/or replacing trims, shutters, gutters, shingles, mailboxes, window screens, walkways and the driveway.
-Painting siding, trim and shutters and lamp and mailbox posts.
-Pressure washing vinyl siding, roofs, walkways and the driveway.
-Washing windows.

Tip #2: Spruce up the lawn and landscape
Palos Verdes homes buyers associate the condition of your lawn and landscaping with the condition of your home’s interior. By improving the outside, you affect buyers’ impression of the entire property. The best ways to enhance the yard include:
-Mowing and edging the lawn.
-Seeding, fertilizing and weeding the lawn.
-Keeping up with regular lawn maintenance by frequent watering.
-Trimming and/or removing overgrown trees, shrubs and hedges.
-Weeding and mulching plant beds.
-Planting colorful seasonal flowers in existing plant beds.
-Removing trash, especially along fences and underneath hedges.
-Sweeping and weeding the street curb along your property.

Tip #3: Create an inviting entrance
The front door to Palos Verdes homes should invite buyers to enter. The best ways to improve your entry include:
-Painting the front door in a glossy, cheerful color that complements the exterior.
-Cleaning, polishing and/or replacing the door knocker, locks and handles.
-Repairing and/or replacing the screen door, the doorbell, porch lights and house numbers.
-Placing a new welcome mat and a group of seasonal potted plants and flowers by the entry.

Tip #4: Reduce clutter and furniture
A buyer cannot envision living in any of the Palos Verdes homes for sale without seeing it. A home filled with clutter or even too much furniture distracts buyers from seeing how they can utilize the space your home offers. If you have limited storage space, you may want to consider renting a temporary storage unit to place items you wish to keep. The best ways to declutter your home include:
-Holding a garage sale to prepare for your move, getting rid of unnecessary items.
-Removing clutter such as books, magazines, toys, tools, supplies and unused items from counter tops, open shelves, storage closets, the garage and basements.
-Storing out-of-season clothing and shoes out of sight to make bedroom closets seem roomier.
-Removing any visibly damaged furniture.
-Organizing bookshelves, closets, cabinets and pantries. Buyers will inspect everything.
-Putting away your personal photographs, unless they showcase the home. Let buyers see themselves in your home.
-De-personalize rooms as much as you can.

Tip #5: Clean, clean, clean
The cleanliness of Palos Verdes homes for sale also influences a buyer’s perception of its condition. The appearance of the kitchen and bathrooms will play a considerable role in a buyer’s decision process, so pay particular attention to these areas. The best ways to improve these areas include:
-Cleaning windows, fixtures, hardware, ceiling fans, vent covers and appliances.
-Cleaning carpets, area rugs and draperies.
-Cleaning inside the refrigerator, the stove and all cabinets.
-Removing stains from carpets, floors, counters, sinks, baths, tile, walls and grout.
-Eliminating house odors, especially if you have pets.
-Considering air fresheners or potpourri.

Tip #6: Make minor repairs
The small stuff does count, especially with first-time home buyers or with experienced sophisticated buyers who just don’t have time to do the small stuff when buying one of the Palos Verdes homes that are for sale. Without dismissing the importance of repairing major items such as a leaky roof or plumbing, you do not need to spend money on replacing these items. Instead, focus on the minor repairs that will make your home visually appealing. The best ways to improve your home include:
-Repairing ceilings and wall cracks.
-Repairing faucets, banisters, handrails, cabinets, drawers, doors, floors and tile.
-Caulking and grouting tubs, showers, sinks and tile.
-Adding fresh paint to ceilings, walls, trim, doors and cabinets.
-Tightening door handles, drawer pulls, light switches and electrical plates.
-Lubricating door hinges and locks.

Tip #7: Showcase the kitchen
The heart of any home is the kitchen; the same is true for Palos Verdes homes. If you are going to spend any money on renovations, this is the one area where you will see the greatest return. Even with a modest budget, focusing on a few key areas can make a great difference in getting the asking price for your property. The best ways to showcase the kitchen include:
-Replacing cabinet doors and hardware.
-Installing under-cabinet lighting.
-Replacing light fixtures.
-Replacing outdated shelving with pantry and cabinet organizers to maximize space.
-Baking cookies or cupcakes for a showing, to create a homey smell.

Tip #8: Stage furniture
Furniture placement can enhance the space of Palos Verdes homes while giving buyers an idea of how to best utilize the space with their own belongings. Take some time to rethink how different areas in your house could be used. Some ideas to think about include:
-Moving couches and chairs away from walls in your sitting and family rooms to create cozy conversational groups.
-Creating a reading corner in the master bedroom.
-Clearing an empty room to set up a reading space.
-Turning an awkward space into a home office.
-Setting the dining room table with your best china.
-Set wine glasses in front of the fireplace or next to a Jacuzzi tub.

Tip #9: Light up the house
Create a sense of openness and cheerfulness in your home through its lighting. To improve the lighting try:
-Opening shades and drapes to let the sunshine warm and brighten rooms.
-Installing brighter light bulbs in rooms that tend to be dark.
-Adding additional lamps for ambient lighting.
-Turning on all the lights for a showing.

Tip #10: Add fresh touches
You can easily add color and style to Palos Verdes homes by adding fresh touches throughout. Some ideas to consider include:
-Placing fresh floral arrangements in the entry and master bedroom.
-Placing bowls of bright-colored fruit in the family room and the kitchen.
-Filling an empty corner with a potted leafy plant.
-Setting new hand soap in the bathrooms.
-Displaying fresh towels near sinks.

Feel welcome to use the search tool in the proprietary map solution below to find Palos Verdes homes for sale AND find those that have sold to compare and contrast with those homes currently on the market.   +George Fotion  

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Palos Verdes Estates CA Real Estate Huge Market Changes

Palos Verdes Estates CA Real Estate News and Market Report Snippet

For the first time in over thirteen years the balance between listing volume (supply) and pending sale volume (demand) has turned positive.  It’s unusual for Palos Verdes Estates CA Real Estate supply/demand balance to EVER (and the same is true for any market area in the South Bay) be in positive territory as there will always be a certain number of Palos Verdes homes that get listed that for whatever reason* just don’t sell.

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That it is unusual for the balance between supply and demand for Palos Verdes Estates CA Real Estate be so high and hence positive for sellers of Palos Verdes Estates CA Real Estate is not the entire story, in fact it’s not the most important part of the story.  Seeing this high level in perspective to what price trends were of Palos Verdes Estates homes the last time the balance ratio was this high compared to what the price trends are now for Palos Verdes Estates CA real estate – that is the really interesting thing. 

Let’s understand this statement.  It’s important.  The red arrows are pointing at the times when my Palos Verdes Estates CA Real Estate supply demand PROPRIETARY indicator went positive.  The last time was in August of 2000. 

What happened with prices of Palos Verdes Estates CA Real Estate after August of 2000?  Let’s take a look.

Palos Verdes Estates CA Real Estate Market Data

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So now we have evidence based on historical fact that the Palos Verdes Estates CA Real Estate market could now be poised for another breakout price appreciation cycle.

Time will only tell of course and I certainly don’t possess any crystal ball.  HOWEVER, there is someone a lot smarter than me that said, “That men do not learn very much from the lessons of history is the most important of all the lessons that history has to teach.” ~Aldous Huxley

For both buyers and sellers of Palos Verdes Estates CA real estate, there are some important clues here and information to help you maximize your goals.  If you’re a seller, be careful on relying too much on competitive sale values of homes more than 3 months ago; use of “comps” such as these may cause you to underprice your Palos Verdes Estates CA real estate.  For buyers, have you wondered why you’ve been getting outbid and lost out on Palos Verdes homes on which you’ve offered?  Other buyers are beating you because they know, long term, they are “stepping up to the plate” at price levels, yes more than what the comps would suggest, but at levels that will appear low in years to come. 

This is a dynamic time in the Palos Verdes Estates CA real estate market … Keep checking in to this website and make sure to so that you too can have your finger on the pulse of the market.  You will be more aware than 99% of the agents out there!

 

*usually they are over priced

Feel welcome to search for Palos Verdes Estates CA Real Estate in this Palos Verdes homes map search tool

 

+George Fotion


Contact George Fotion

Set a Meeting or Send a Message

George Fotion on Google+