Are You Feeling More Confident?

We hear a lot about consumer confidence. It's up. It's down. It holds steady. I don't know about you, but my confidence can change depending on how much it cost for me to fill up my gas tank or my basket at Costco (horrors!).

Apparently there are people who measure how confident we are as a nation for a living. And this Conference Board samples 5,000 households all over the United States each month on how confident they feel. If 5,000 representative families feel more confident about a variety of issues, chances are, many of us feel the same way.

Well, then. You are feeling more confident than you did in March! You might not have realized that, so I thought I would let you know! And, you felt more confident in March than you did in February! Feeling better yet?

According to the survey, we are less concerned about current business and labor market conditions! More of us believe that present-day conditions are "good," and less of us think now that they are "bad." More of us are perceiving that "jobs are plentiful," and less of us are saying jobs are "hard to get."

You and I have a better outlook than we did in March, and more of us are expecting business conditions to improve over the next six months.

What I love about being an American, and being an East Countian specifically, is our resiliance. Most of us know others who are out of work or fearful of losing their job. Pay raises have not been plentiful for most of us. Yet we Americans refuse to lose our optimish, continue to work hard and look ahead to better days, at the same time enjoying the day we have been given.

Worry can't add a single inch to your height or a single dollar to your wallet! Confidence is contagious - and it is good for us, and it is good for our economy. Now that you know you are more confident than you were last month, go get 'em! And make sure you are registered to vote and use that American individualism to make a difference. It's contagious.

Revealed For the First Time: How Bad Foreclosure Hurts

I am often questioned about what a foreclosure would do to a credit rating. Not much has been made public concerning this issue and I have had to refer my clients to their tax professional for questions concerning foreclosing or declaring bankruptsy. And now for the first time, we are given a peek behind the financial curtain, thanks to CNN Money.

Here is a basic average hit your credit will take:

30 days late: 40 - 110 points

90 days late: 70 - 135 points

Foreclosure, short sale or deed-in-lieu: 85 - 160

Bankruptcy: 130 - 240

Mortgage borrowers can lose their homes three basic ways:

1. Foreclosure.

2. Short sale, where the home is sold for less than than is owed and the bank (generally) forgives the difference.

3. Deed-in-lieu, in which the borrower gives back the property and the bank again forgives any unpaid balance.

Some borrowers may think that because they never missed a payment, they can "walk away" from their homes with relatively little impact on scores. Not true. When a deed-in-lieu or short sale is reported as a partial payment, it's treated as a serious delinquency, just like a foreclosure.

Even if borrowers made payments faithfully for years before short selling or doing a deed-in-lieu, their credit score will still take a hit. The total decline will run about 85 points for the 680 score borrower to as much as 160 for the 780 score.

However, the worst thing that can happen to your credit score, according to the article, is bankruptcy because the effects are long-lasting. In a Chapter 13 bankruptcy, which involves partial repayment over several years, the stain will take seven years to remove. A Chapter 7 bankruptcy, which involves liquidation, takes 10 years to get over.

What Does It Matter If I Lost the House Anyway?

It matters! Absorbing a big credit-score hit can make many transactions more costly. It's not just paying more for credit card debt and auto loans, insurance can cost more as well.

The average savings for someone with a good versus mediocre credit score is about $115 a year for auto insurance and $60 for home, according to Loretta Sorters, of the Insurance Information Institute.

A low credit score can even make it harder to rent a home because landlords often use credit scores to weed out prospective renters. Ouch!

Despite the problems a poor credit score can cause, if you are in a totally unaffordable financial situation it's better to recognize that and cut your losses quickly; don't prolong the problem.

Although it certainly is easier to walk away, your credit score will certainly fare better if you sell your home before it forecloses. Banks have now come on board and are simplifying the process for sellers and agents. I have done many successful short sales for clients who have been underwater in their mortgage. If you believe you are headed for foreclosure, give me a call and I will help you determine if a short sale would be in your best interest.

http://money.cnn.com/2010/04/22/real_estate/foreclosure_credit_score/index.htm

Military Buyers Have an EXTRA Year to Use Tax Credit!

If you are currently serving in the military or if you are a veteran, member of the Foreign Service or an employee of the intelligence community, your service has earned you a one-year federal homebuyer tax credit extension.

Military service personnel now have through June 2011 to buy a principal residence in the U.S. and claim the federal tax credit. The deadline for entering a binding contract is April 30, 2011; the deadline to close a purchase is June 30, 2011.

The extension applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010. All other home buyers must be under contract by April 30, 2010 and close by June 30, 2010 to qualify for the federal tax credit.

Home Sellers and Landlords

If you are planning to do some renovation to your home before you sell, or if you are a Landlord, and your property was built before 1978, it may pay you to read on.

Starting April 22, renovations that disturb lead-based paint in older homes and child-occupied facilities must now generally comply with the Lead-Based Paint Renovation Rule of the Environmental Protection Agency (EPA).

Under the newly implemented rule, renovators of target housing built before 1978 must now be trained and EPA-certified to perform safe work practices to prevent lead contamination. Landlord's renovating their properties must deliver EPA's lead renovation pamphlet to their tenant within 60 days before a project begins (and, if mailed, at least seven days before a project begins). Renovators must also obtain the tenant's signed acknowledgment of receipt or substitute documentation as specified.

The EPA issued this rule in 2008, but delayed implementation until now. The rule generally applies to building contractors, handymen, residential landlords, property managers, and anyone else who is paid to perform renovations or to direct workers to perform renovations as specified. The lead renovation rule does not apply to homeowners renovating the homes they live in. However, sellers of target housing must, among other things, disclose to their buyers any known lead-based paint and lead-based paint hazards (C.A.R. Form FLD). Home buyers today are certainly more environmentally aware than ever, so when in doubt, it always pays to seek the advice of an informed real estate professional.

Renovation work covered by the lead renovation rule is defined as a modification of an existing structure that disturbs a painted surface, such as surface restoration or surface preparation activity. Excluded are minor repair and maintenance activities that disrupt up to 6 square feet of interior painted surface or 20 square feet of exterior painted surface. Demolitions and window replacements are not considered minor repairs.

If you need more information about the lead renovation rule, just email me and I will send you a legal article entitled Federal Lead-Based Paint Renovation Rule. You can also go to the EPA's Renovation, Repair and Painting webpage which includes the new requirements, pamphlets, and other resources. To locate an EPA-certified renovation firm contact me for a company nearest you, or go to http://cfpub.epa.gov/flpp/searchrrp_firm.htm.

So, Should You Buy or Should You Rent?

Awhile back I posted a question on my Facebook page asking what the pros and cons were about buying a home and renting a home. Some of the pros of renting were that repairs would be made by the landlord and renters don't have to pay that dreaded property tax bill!

Some of the cons of renting: All landlords don't jump to make needed repairs and some tenants, afraid that their rent will be raised, won't ask! Also, you never know when you may have to move should the landlord need to sell his property.

Well, it turns out that financially speaking, the cost gap has narrowed. Affordable home prices and low interest rates have created an ideal time for many diehard renters to purchase homes, and now a new week-long look at homeownership confirms it.

A national study, conducted for The Associated Press, shows that the difference between monthly rents and mortgage payments is at its lowest level in nearly 20 years!

The analysis of 45 metro areas found the difference between the monthly mortgage payment on a median-priced home and the median rent has declined to $256. In some areas, the difference is as low as $100, according to the study. The last time the price gap was that close was in 1993, when it decreased to $264!

The study, conducted by Marcus & Milichap Real Estate Investment Services, used median prices for the last three months of 2009 and calculated mortgage payments by assuming a 10-percent down payment and a 30-year fixed loan at 5.07 percent. It also assumed borrowers paid for private mortgage insurance and didn’t include repair costs and tax benefits.

And don't forget, owning a home does have significant tax benefits, including deductions for those dreaded property taxes and loan interest. Homeowners also can enjoy building equity and creating a means of forced savings as they pay down the principal on the home.

If you are a renter and think you might want to wade in to a home purchase, you can prepare by ensuring your credit reports are up to date and save for a down payment of at least 20 percent, or at least enough to pay for your closing costs.

Although home buyers should not focus solely on future home price appreciation, according to data collected by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) over the last 40 years, homeowners who purchase a median-priced house, live in it for at least five years, and sell it at the then-current median price, have averaged an annual rate of return of more than 11 percent.

As a long-term homeowner, in my opinion, owning our home has rewards that far outweigh any cons. Planting a tree and knowing that more than likely we will be here to see it get bigger each year! Christmas dinners and our traditional Easter egg hunts. Yes, it is good, and Lord willing, will continue to be so.

$10,000? Going, Going .....

Attention First-Time Home Buyers and Buyers of New Construction: CALIFORNIA'S TAX CREDIT MONIES MAY GO FAST

The $100 million allocated for California's first-time homebuyer tax credits may be depleted in about 10 to 20 days or sooner, according to C.A.R.'s Economics team. California's Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time homebuyers and for homes that have never been previously occupied. However, the total tax credit allocation for all taxpayers is $100 million for first-time homebuyers and $100 million for new homes, both on a first-come, first-served basis.

C.A.R.'s forecast of 10 to 20 days to deplete the $100 million allocation for first-time home buyers is based on estimated May sales figures and other parameters. It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit. If a shift in closings from April to May occurs, the first-time homebuyer tax credits may be depleted even more quickly than indicated above.

Applications for the California tax credit must be faxed to the FTB after escrow closes. The FTB will update its website when the 2010 application form and other information become available.

What does this mean for East County buyers? Get yourself pre-qualified ASAP, and call or email me for a list of Santee Lake view homes, Eucalyptus Hills homes, Granite Hills homes, Rancho San Diego Homes, or any homes in our beautiful East County! Foreclosures go fast, so be ready, and there are still traditional sales available, many at bargain prices. Get started today and YOU may be a recipient of that $10,000 California tax exemption!

No More CA State Tax on Forgiven Mortgage Debt

Can California afford this? Will it make "walking away" from a mortgage that much easier? Or is this a necessary exemption to get the economy going again?

Governor Schwarzenegger on Monday signed SB 401 (Wolk) into law providing distressed homeowners with state tax exemption on debt forgiven in a short sale, foreclosure, or loan modification. Effective immediately, this bill generally aligns California's tax treatment of mortgage debt relief income with federal law. For debt forgiven on a loan secured by a qualified principal residence, borrowers now will be exempt both from federal and state income tax consequences.

"Qualified principal residence" indebtedness is defined as debt incurred in acquiring, constructing, or substantially improving a principal residence. It includes both first and second trust deeds. It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified. If a homeowner used the equity in the home to purchase a boat, technically that would not qualify!

The tax breaks apply to debts discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.

Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be exempt under other provisions. Most notably, taxpayers who are bankrupt are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.

For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board's Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service's Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage. The full text of Senate Bill 401 is available at www.leginfo.ca.gov.