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gregory@kush.comPonte Vedra Real Estate Market Update 2/19
February 19, 2012
In Ponte Vedra Beach 35 single-family homes went “Pending” during the past four weeks. Last year 33 houses went under contract during the same time span. The five year average for this four week interval is 27 contracts. A contract becomes “Pending” when all contingencies (e.g. inspections, financing, lien holder approval, etc.) have been removed. Typically the closing will then take place within 30 days.
Thirty-year fixed rate conforming mortgages edged up this week to an average of 4.08% in the Jacksonville area, up from 4.07% the previous week. APR’s on thirty-year fixed rate jumbo mortgages rose to 4.62%, up from 4.60% a week earlier. Mortgage rates have been largely steady and have fluctuated in a narrow range for the past several months.
Posted in The Ponte Vedra Real Estate Market | Leave a commentSoutheast Jacksonville Real Estate Market Update 2/19
February 19, 2012
In Southeast Jacksonville 48 single-family homes went “Pending” (with all contingencies removed) during the past four weeks. A year ago 53 houses went under contract during the same time span. The five year average for this four week interval is 39 contracts. A contract becomes “Pending” when all contingencies (e.g. inspections, financing, lien holder approval, etc.) have been removed. Typically the closing will then take place within 30 days.
Thirty-year fixed rate conforming mortgages edged up this week to an average of 4.08% in the Jacksonville area, up from 4.07% the previous week. APR’s on thirty-year fixed rate jumbo mortgages rose to 4.62%, up from 4.60% a week earlier. Mortgage rates have been largely steady and have fluctuated in a narrow range for the past several months.
Posted in The Southeast Jacksonville Real Estate Market | Leave a commentFacing capital gains on investment property? Here is one way to defer taxes.
February 14, 2012
WASHINGTON – Feb. 13, 2012 – “Taxation with representation ain’t so hot either.” – Gerald Barzan, humorist
If you own investment property, and you sell it this year, you will have to pay 15 percent capital gains tax to the Internal Revenue Service.
This does not include the up-to-25 percent recapture tax on any depreciation that you took over the years. Next year, unless the Supreme Court throws out the new health-care law, the tax rate will be 18.8 percent.
Why? Because of a special 3.8 percent Medicare surtax on unearned income, which includes the sale of rental properties and even your second home at the beach. This will kick in Jan. 1.
There is a way to defer your tax obligation. It is called a Starker exchange, named after a man who successfully convinced the courts that based on the exchange of real estate, no tax was immediately due.
The law establishing this like-kind exchange can be found in Section 1031 of the Internal Revenue Code. The rules are complex, but here is a general overview of the process.
Section 1031 permits a delay (non-recognition) of gain only if the following conditions are met:
First, the property transferred (the “relinquished property”) and the exchange property (“replacement property”) must be “property held for productive use in trade, in business or for investment.” Neither property in this exchange can be your principal residence, unless you have abandoned the property as your personal house.
Second, there must be an exchange; the IRS wants to ensure that this is not really a sale and a subsequent purchase.
Third, the replacement property must be of “like kind.” As a general rule, all real estate is considered “like kind” with all other real estate. Thus, a farm can be exchanged for a condominium unit, a single-family home for an office building, or raw land for commercial or industrial property.
There are some tax consequences. If you do a like-kind exchange, your profit will be deferred until you sell the replacement property. However, the cost basis of the new property in most cases will be the basis of the old property. Discuss this with your accountant to determine whether the savings by using the like-kind exchange will make up for the lower cost basis on your new property.
A simple exchange (A and B swap properties) rarely works. Not everyone is able to find replacement property before they sell their own property. In the case involving Starker, the court held that the exchange does not have to be simultaneous.
However, it is not an open-ended interpretation. There are two major limitations:
• The replacement property must be identified within 45 days after you transfer the “relinquished property.” You may identify more than one property as replacement property. However, the maximum number of replacement properties that the taxpayer may identify is either three properties of any fair market value or any number of properties as long as their aggregate fair market value does not exceed 200 percent of the aggregate fair market value of all of the relinquished properties.
Furthermore, the replacement property or properties must be unambiguously described in a written document. According to the IRS, real property must be described by a legal description, street address or distinguishable name (e.g., “The Excalibur Apartment Building”).
• The replacement property must be purchased no later than 180 days after the taxpayer transfers his original property, or the due date (with any extension) of the taxpayer’s return of the tax imposed for the year in which the transfer is made. These are very important time limitations, which should be noted on your calendar when you first enter into a 1031 exchange.
In 1989, Congress added two additional technical restrictions. First, property located in the United States cannot be exchanged for property outside the United States.
Second, if property received in a like-kind exchange between related people is disposed of within two years after the date of the last transfer, the original exchange will not qualify for non-recognition of gain.
There is an interesting loophole that might be attractive to many owners of rental property. Say you have found your dream retirement house in Florida, or Delaware, or anywhere in the United States, for that matter. If you do a 1031 exchange now, and obtain title to the replacement property where you ultimately want to live when you retire, you can rent out that property until you decide to move. Then, once you have established the new property as your principal residence, if you live in it for at least two years – and more than two years have elapsed since you sold your last principal residence – once again you can exclude up to $250,000 (or $500,000 if married and you file jointly) of the gain you have made.
Although the IRS has given us no guidance as to how long you have to use the replacement property as “investment” property, the general consensus is that you should rent out the property for at least one complete tax year.
Thus, depending on the numbers and the facts, you may ultimately be able to avoid some – or even all – of the capital gains tax which would normally be due when you sold your investment property.
The IRS has also authorized taxpayers to engage in “reverse Starkers,” where you buy the replacement property first and then exchange (sell) the relinquished property. This is much more complex, and you should consult your own legal and tax advisers.
Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel.
Copyright washingtonpost.com, Benny L. Kass
Posted in Real Estate Alerts, Taxes and Real Estate | Leave a commentSoutheast Jacksonville Real Estate Market Update 2/12
February 12, 2012
In Southeast Jacksonville 54 single-family homes went “Pending” (with all contingencies removed) during the past four weeks. A year ago 45 houses went under contract during the same time span. The five year average for this four week interval is 38 contracts. A contract becomes “Pending” when all contingencies (e.g. inspections, financing, lien holder approval, etc.) have been removed. Typically the closing will take place within 30 days.
Thirty-year fixed rate conforming mortgages rose this week to an average of 4.07% in the Jacksonville area, up from 4.05% the previous week. APR’s on thirty-year fixed rate jumbo mortgages fell to 4.60%, down from 4.62% a week earlier. Mortgage rates have been largely steady and have fluctuated in a narrow range for the past several months.
Posted in The Southeast Jacksonville Real Estate Market | Leave a commentPonte Vedra Real Estate Market Update 2/11
February 12, 2012
In Ponte Vedra Beach 29 single-family homes went “Pending” during the past four weeks. Last year 31 houses went under contract during the same time span. The five year average for this four week interval is 25 contracts. A contract becomes “Pending” when all contingencies (e.g. inspections, financing, lien holder approval, etc.) have been removed. Typically the closing will take place within 30 days.
Thirty-year fixed rate conforming mortgages rose this week to an average of 4.07% in the Jacksonville area, up from 4.05% the previous week. APR’s on thirty-year fixed rate jumbo mortgages fell to 4.60%, down from 4.62% a week earlier. Mortgage rates have been largely steady and have fluctuated in a narrow range for the past several months.
Posted in The Ponte Vedra Real Estate Market | Leave a commentShort sale sellers need to close in 2012
February 5, 2012
WASHINGTON – Feb. 3, 2012 – If a bank writes off debt in a short sale, it’s a “taxable event,” and the lender tells the Internal Revenue Service about the deal by submitting a “Form 1099-C, Cancellation of Debt” at the end of the year. Home sellers must acknowledge the amount when they fill out their federal taxes. Through Dec. 31, 2012, however, the federal government forgives any tax liability associated with forgiveness of a mortgage loan.
“In general, homeowners believe the government will extend this tax provision,” says San Diego Realtor Joy Bender. “However, as evidenced by the First Time Homebuyer Credit expiration in 2010, you can’t always count on the government to bail you out.”
The government generally considers forgiven debt to be income. If a seller has signed legal loan papers to take out a $200,000 mortgage and the lender accepts $100,000 in a short sale, for example, the seller received the equivalent of $100,000 in free money by government estimates. As a result, the IRS taxes it. For tax year 2012, however, the government still forgives the debt; in 2013, it might not.
The tax amount can be significant. On a debt of $100,000, a short-sale seller in the 25 percent tax bracket could end up owing $25,000 in income taxes.
Since short sales can take months and even fall through, homeowners considering a short sale may want to start the process sooner rather than later.
© 2012 Florida Realtors®
Posted in Real Estate Alerts, Real Estate Recommendations, Taxes and Real Estate | Leave a commentPonte Vedra Real Estate Market Update 2/4
February 5, 2012
The Ponte Vedra real estate market appears to have regained its footing following the holidays. Showing activity has renewed and new contracts are being written.
And prices are beginning to show stabilization across all market segments. The cost per square foot of single-family homes sold in Ponte Vedra Beach during the past three months has actually ticked up. While certainly too early to pronounce home value erosion as a thing of the past, it is nevertheless most welcome news.
Posted in The Ponte Vedra Real Estate Market | Leave a commentPonte Vedra Real Estate Market Update 1/29
January 29, 2012
For the second week in a row the number of pending contracts in Ponte Vedra Beach failed to keep pace with the same interval last year. While disappointing, it is not surprising. Several months ago we indicated that the number of newly written contracts (with contingencies) had fallen off sharply. The good news is that showing activity appears to have picked up substantially in the past two weeks. Hopefully we will regain the lost momentum.
The cycle is as follows. Showing activity leads to newly written contingent contracts. Once the contingencies have been satisfied (typically inspections and financing) the contracts go “Pending”. Pending contracts result closed transactions several weeks later.
Because showing activity is difficult to quantify and newly written contingent contracts are somewhat soft, we do not generally report these events. Rather we report the number pending contracts on a rolling four week basis and compare that number to the same time period the previous year.
Posted in The Ponte Vedra Real Estate Market | Leave a commentLoan Modification Scam Alert
January 17, 2012WASHINGTON – Jan. 16, 2012 – According to Loan Modification Scam Alert, a program backed by NeighborWorks America and supported by the U.S. Congress, there is a new foreclosure filing every 15 seconds in America.
NeighborWorks is working with 235 community-based affiliates to educate and protect homeowners from unethical practices. The program says it has three goals: First, alert homeowners about scams. Second, help them spot a scam before it’s too late. Third, encourage them to report scammers to the authorities. The campaign hopes to educate owners at higher risk of scams by telling real-life scam stories in fliers, postcards, door hangers, e-cards, posters, print advertising, local PSAs, events, word of mouth and social media.
Three signs of a scam
According to Loan Modification Scam Alert, foreclosure scams generally have three possible red flags:
• The company asks for a fee in advance.
• The offer comes with a guarantee that a foreclosure can be stopped or a loan modified.
• The homeowner is told to stop paying the mortgage and, in some cases, told to pay the foreclosure relief company instead.
Since the U.S. has a new foreclosure filing every 15 seconds – more than 6,100 per day – and more than 4.5 million households at risk, scam artists see an opportunity, and Florida remains the top state for foreclosure-related scams.
“Loan modification scams are proliferating at a rapid pace,” the program claims on its website. “Every day, more homeowners are falling prey to the slick advertising and sales pitches that guarantee to keep them in their homes. Many scam artists are openly taking advantage of people in difficult circumstances – online, on the telephone, and sometimes audaciously knocking on doors.”
For more information, to read stories of harmed homeowners or to report a scam, visit the Loan Modification Scam Alert website. (Link underlined to: http://loanscamalert.org/)
Posted in Real Estate Alerts | Leave a commentPonte Vedra Real Estate Market Update 1/15
January 15, 2012
We are always keen to accentuate the positive; we are also keen to accentuate reality. The reality is that a return to 2006-era home prices and transaction activity likely resides in the very distant future.
We looked at other bubbles that have burst – the stock market in 1929, the gold market in 1980, the tech market in 2000 – and found that it can take years, if not decades, for the market to return to pre-bubble levels. As we all know, the housing bubble burst in 2006 and prices tumbled hard over the subsequent five years.
The good news is that the hard sell-off that marks a bursting bubble is an acute not a chronic event. That means once the sell-off is complete, the healing process begins and markets move forward, though at a relatively slower pace compared to the pre-bubble pace.
The frustrating aspect of the recovery is that little can be done to accelerate it. To be sure, the housing market is recovering, but it is going to be awhile before it reaches the level of activity we were accustomed to a few years ago. Keeping that fact in mind not only helps mitigate frustration but also helps us stick to our guns as we focus on the long-term trend, which, fortunately, will be up.
Posted in The Ponte Vedra Real Estate Market | Leave a comment ← Older posts