What the Heck is a Short Sale?

That's the title of the cover story on my newsletter this month. This happens when you owe more money on your home than you can sell it for. Not everyone qualifies for a short sale. There is a very specific procedure that must be followed.

For my complete newsletter go to www.mysanmateorealestate.com and click on "Monthly Newsletter." You can opt to have it sent to you monthly or just view it one time.

Thanks.

Cost Basis and Your Taxes

When you sell a house, your adjusted cost basis is subtracted from your sales proceeds to determine your capital gain or loss. Basis starts with what you paid for the house. You can add capital improvements to basis, but not repairs or maintenance. However, if you sold a home before May 7, 1997 and deferred the capital gain by buying up into another home, that gain reduces the cost basis in your existing home.
For your primary residence as a single homeowner you can now exclude $250,000 in capital gains and married couples filing jointly can exclude up to $500,000. Any profit over these limits is taxed at the capital gains rate, which tops out at 15 percent.
According to Internal Revenue Service Publication 523, you can add to basis the cost of “additions and other improvements that have a useful life of more than one year.” So if you’ve added a family room, remodeled bathrooms or kitchens, added hardwood floors, or a deck, these all add to basis. Remember however, if you remodeled a kitchen 10 years ago, then decided to remodel it again today, you can’t add the cost of the first remodel since it doesn’t exist anymore. By the way, painting a house is considered maintenance and can’t be added to basis.
Also, when you sell you can deduct commissions, advertising, legal fees and any loan charges paid by the seller. Expenses to spruce up your home for sale such as painting or landscaping can’t be deducted or added to basis. I suggest you review your basis calculations with your accountant before preparing your taxes.

Sellers - Get the Bad News First

If you are putting your home up for sale, should you consider having your own building inspection? The answer is "Yes."
Once a buyer makes an offer and you accept it, you have a contract. One of the most common conditions of that contract is, "offer contingent upon satisfactory building inspection." The buyer is going to have a professional home inspector go through your house to make sure there are not any hidden problems.
The last thing that you want is to have your deal fall through because of an unknown problem uncovered by the buyer’s building inspector. This is especially true if it is a minor problem and could easily have been repaired ahead of time -- if only you had known about it.
When the buyer’s inspector finds a problem, it can throw a monkey wrench into the works. The buyer will ask you to fix the problems found by their inspector – or no deal. If you do not want to fix the problems, they will ask for a reduction in price or a cash credit at closing – or no deal. In some cases, they buyer may even cancel the purchase entirely, not giving you a chance to make any corrections.
If the buyer cancels the purchase, where does that leave you? It leaves you with a house that you will have to put back on the market – a house that has been stigmatized. Future potential buyers and their Realtors will always wonder, "What happened with that first deal?".

It's a Buyer's Market Out There!

That's the title of the cover story on my newsletter this month . Included are tips on making an offer in this type of market.

What kind of financial incentives can you ask for?
How to negotiate winning deals with your lender?
What closing costs can you get waived?

For my complete newsletter go to www.mysanmateorealestate.com and click on "Monthly Newsletter." You can opt to have it sent to you monthly or just view it one time.

Thanks.

DOWN PAYMENT DILEMMAS

One of the most frequent questions homebuyers ask me is, “How much money do I need for a down payment?” Fortunately, there are some mortgage options available that only require a down payment of 5% or less of the purchase price. But remember the larger the down payment, the less you have to borrow and the less you’ll have to pay in your monthly mortgage payment.

Loans with less than the industry standard of 20% down generally require a mortgage insurance policy to secure the loan. Also keep in mind that you’ll need money for closing costs, moving expenses and possibly, repairs, decorating and landscaping.

Lenders take all this into account when they are deciding the maximum loan amount that you can afford. They are also interested in where you got the money for the down payment. What business is it of theirs? Well, consider how carefully lenders look at your earnings, assets and credit history. They naturally are concerned that if you borrowed the money for your down payment, you may be over-extended. Expect lenders to look with suspicion on recent large deposits to your savings account. Even genuine gifts from family members will probably require documentation, if they allow them at all.

If you’d like a copy of my special report on how to buy a home with little or no down, dial this Toll Free 24-Hour Recorded Information Hotline – 1-800-530-0076 and enter extension #1035. You may have the report faxed or mailed to you.
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It's a Buyer's AND a Seller's Market.

There are a number of Real Estate "gurus" that I monitor - mostly to improve my skills, provide a different perspective and challenge my thinking. One such person is Randy Roussie and today he offered these thoughts regarding today's market. His comments are more national in nature because here in San Mateo County, prices have actually risen on average 2% in the first and second quarters of 2007. Randy says:

It's a Buyer's Market. After 4 years it is finally here - a buyer's market. What does this mean? It means you will pay less for a home - and that's good news for all buyers.

But what about Sellers - is this a good time for homeowners to sell? You bet, and here's why. Let's say you live in a $500,000 home and you are going to move up to a $1,000,000 home. Let's also say the market has decreased 10% over the past year. So your home decreased $50,000 while the home you want to purchase has decreased $100,000. In other words, you save $50,000.

That's why its is good for both sellers and buyers to make selling and buying decisions when the market is in the "buyer's" favor.

It means you will carry less mortgage too. Since yoiu save $50,000, it also means you will need less of a mortgage. Now that's a win-win for sellers and buyers. So don't delay. Now is the BEST TIME to find your next dream home!

Food for thought.

How to Manage Your Retirement Without Going Broke

Real estate has become the buzz word for savvy investors who have been watching their IRAs and 401ks lose money with little or no gain in the stock market. At least in real estate you have a solid, tangible asset with a deed of trust and title insurance; and there are no penalties or early withdrawal fees involved.

That being said, the first thing you need to do is some retirement thinking. How much will you need to receive every month when you retire? Did you know that our Social Security system pays for 89% of the total American retirement income? That means that nine out of 10 retirees depend on Social Security, averaging only $1,250 per month! Is that enough for you? Did you know that for every $5,000 per month that you’d like to receive in guaranteed retirement income you need a nest egg of over $2 million dollars? How do you do that?

Your retirement is all about investing and holding for 10, 20 years or more. Homes that sold 30 years ago in San Jose for $25,000 are today worth $750,000 to $1 million dollars. We have identified key profitable areas in California with exactly the same growth characteristics that Silicon Valley had back then. We show you how your IRA can acquire properties at a low price now before population arrives and sell them when they’ve appreciated enough to satisfy your retirement goals. If you have at least $30,000 sitting in your IRA or 401(K) you can jumpstart your retirement now by contacting me to arrange a personal and confidential meeting.

I Need to Invest, But What???

It's Labor Day Weekend and most folks are off taking it easy. That is unless you're in real estate. Then you end up like me, working the phones and meeting prospects and writing some ideas down in my blog to share with whomever.

It this case, I have a prospect discussing properties with me. She wants to buy something in the central peninsula area that she'll rent for a few years and perhaps move into after that. Everything she likes is in the $750,000 - $975,000 area and many of those need some fair amount of fix up investment before she'll be comfortable renting them out.

Recognizing that break-even cash flow is basically impossible in this market, I asked her what she was trying to accomplish with such a purchase. She wasn't really sure. She knew she wanted to make money, with little to no effort as a result of her investment. Good plan. Most investors don't even get to the point that they should be making money.

Now I sell houses for a living, but it's hard for me to do that if it doesn't meet the needs of my client because I have this ethical quirk whirling around inside me. That doesn't mean I can't help her. I did my best to probe what her needs were and got her to explain that she's concerned about her retirement well-being. Now that I told her, is an entirely different situation, but one that is managable.

Tomorrow - How to manage your retirement without going broke.

If it's Tuesday it Must Be Brokers' Tour

Well it is Tuesday and in San Mateo County, that's Brokers' Tour day for the thousands of Realtors who try to stay on top of all the new listings coming on the market.

Today there were 94 new single family homes and 34 new condo/townhomes. So now there's a total of 2,136 listings available for sale in San Mateo County. And you still can't find something you like? Last month there were a total of 743 new listings and 90 sales. You do the math. It's a buyers market with so many more homes coming on the market than there are selling. But it's not going to stay that way.

I held one of my listings at 720 Franklin Street in Montara open this past weekend. I spoke to over a dozen interested parties and asked them what was holding them back from making an offer on the property. A few of them had a home that had to sell before they would do that. But the others were just waiting. For what? For prices to drop, for the election to be over, for interest rates to go down? I just think that buyers are just plain scared. They haven't gotten over being shell shocked from the multiple offer syndrome that has just plain immobilized them in the past couple of years.

The truth is that in this market, you CAN MAKE AN OFFER. That's how the buying process begins. A buyer puts in writing what they feel they want to pay. The seller responds to that offer. The multiple offer syndrome had sellers rejecting offers outright and not responding at all. That made buyers gun shy. But times have changed. Sellers need to hear what you will pay and they need to respond.

So what I'm saying is you don't have to wait until later in the year, or for interest rates to drop, or for consumer confidence to return, or the deficit to disappear, or for any of the other lame excuses I'm sick and tired of hearing. There will always be some excuse if you don't take action. If you're really serious about buying a home, call me now. Remember I'll cut your first year property taxes in half with a tax rebate at the close so you're already ahead of the game.

Don't Say That!

There I was talking with a prospective buyer this morning, when he uttered that knee-jerk response, "I'm waiting until the market adjusts." Buyers - other than wishful thinking, what evidence do you have that prices in San Mateo County are going to drop anytime soon? For the past 6 months, prices have edged approximately 2% higher overall (year over year) but in some of the hot cities like Belmont and San Carlos they're up 5-6%. Interest rates are somewhat stable, but who knows for how long?

Sales are down particularly in the entry to mid-range because buyers are sitting on their hands. There's plenty of inventory to choose from. And loans are still being made in spite of the shrinking pool of qualified buyers. But well priced homes in decent shape are selling, often with multiple offers and over asking. What are you waiting for?

Countrywide Answers Back

The news last week that Countrywide Home Loans had arranged an $11.5 billion loan to stabilize their position in the lending maket made a lot of folks nervous. What did it mean?

To bolster consumer confidence this morning's edition of the San Francisco Chronicle carried a full page ad from the head of Countrywide Bank assuring that mortgage related issues didn't impact the safety of deposits at Countrywide Bank. In fact, they were pitching a new 12 month CD.

Countrywide's strategy is to fund nearly all of their loans through their bank by the end of September. That should help them through the uncertainity of the moment as the mortgage industry seeks stability.

Already the major lenders who are backed by banking institutions, have made it clear that good credit scores will still be able to obtain good loans.

Coastside Wavecrest Sold to POST

The Wavecrest development has been debated for years by the City Council, Coastal Commission, environmentalists, and others. The development called for over 200 new homes and proposals for schools, retail shops, rec areas, etc. Two previous developers that built Ocean Colony tried to develop the area without success.

The issue came to rest this AM when the Kenmark Group (Ocean Colony Partners) sold the land to POST. Thus, this land will never be developed. It may end up as open space or parts could be made into a city or county park. In any event, there will be 200 fewer homes and no additional traffic.

Here is the press release:

The Peninsula Open Space Trust (POST) announced today that it has reached an agreement with the owners of Wavecrest to purchase the contentious site.

Wavecrest is a 216 acre property located at the southern end of Half Moon Bay, between Highway 1 and the ocean. “Wavecrest is a breathtaking window to the Pacific Ocean,” said Audrey Rust, president and CEO of POST, in the press release. “This agreement will help preserve the rural coastside character of the Half Moon Bay area for countless generations to come.”

“Economic considerations, environmental concerns and community input led the sellers to approach POST about purchasing this land,” Bruce Russell, CEO of Kenmark Real Estate Group and representative of the land’s sellers, said in the same release. “It’s the best plan for all parties involved, including the sellers, the city, residents and visitors. The community can enjoy the land for recreation today and in the years to come while protecting a unique natural environment.”

Give Me A Break!

I constantly strive to find new and innovative ways to do my real estate job better and more effectively. I embrace new ideas as they come along, revisit old ones and seek advice from prior clients to discover how I can better serve them.

So today I found myself along with about 80 to 100 other Realtors in San Jose at a Steven Cates Seminar - "The Secret of Real Estate Success" or How to List More-Sell More in a Changing Market. And not a moment too soon. The local newspaper was screaming that home sales were at a 12 year low and the stock market was reeling from a 10% correction. As for me, when things are falling apart, go learn something new.

So what's the secret? Not really anything revolutionary. A lot of the basic approach to being true to yourself, establishing goals and putting systems into place to achieve them. Recognize that as we think we are and we need to get out of the way of our success. Prepare and implement a business plan, just the way successful businesses operate. But the new mantra that most of the Real Estate Training gurus are chanting is ... get a Coach! A Coach will hold you accountable. What a concept. I agree. Accountability keeps us moving forward. But do I really need to pay someone to keep me accountable? I'm pretty tough on myself as it is. I'll think about it.