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California 1031 Exchange Audits

If you are attempting a 1031 exchange you need to keep your tax records squeaky clean because one of the top audit issues continues to be like kind exchanges, also known as 1031 exchanges. Under IRC Section 1031 and conforming California laws, if certain conditions are met, taxpayers may defer gain from the sale of property, either in part or full.

There are three general requirements:

  • There must be an exchange, as opposed to a separate sale and reinvestment, by the same taxpayer.
  • The relinquished property and replacement property must be “like kind.”  
  • Both the property given up and the replacement property must be held for investment or for productive use in a trade or business. Property held for personal use or primarily for sale is generally not eligible for nonrecognition treatment.

If at any time during the exchange, the taxpayer or his agent has receipt or control of any portion of the sales proceeds, this will generally result in gain recognition. Along similar lines, if the taxpayer does not reinvest the full amount of proceeds into eligible replacement property, or obtains other property in the exchange (referred to as “boot”), this may also result in gain recognition. If the transaction is done in accordance with IRC Section 1031 regulations, a qualified intermediary will not be considered the taxpayer’s agent.

The source of the original deferred gain on California property will remain with California, regardless of the location of the replacement property. When the replacement property is ultimately sold in a taxable transaction, the gain originally deferred on the California property will have its source in and be taxable by California.

Common Audit Issues

  • Sourcing of gains to California upon disposition of replacement property received in a California deferred exchange.
  • Taxpayer receives other property (boot) in the exchange but does not report the boot on their return.
  • Taxpayers do not meet identification or other technical requirements of IRC Section 1031.
  • Relinquished and/or replacement property are not held for investment or for productive use in a trade or business (i.e. property is used for personal purposes or is held primarily for sale).
  • The taxpayer who transfers relinquished property is a different taxpayer than the party who acquires replacement property.

We also continue to review certain “drop and swap” or “swap and drop” transactions. Not all of these transactions are ineligible due to varying facts and circumstances; however, where the form does not support the economic realities or substance of the transaction, we will recharacterize the taxpayer’s transaction as appropriate.

Recent Developments

Recently, the Board of Equalization decided several notable, although noncitable, like kind exchange cases. The three cases are:

  • Appeal of Frank and Mary Lou Aries, Appeal No. 464475 (swap and drop).
  • Appeal of Gerald J. and Carol L. Marcil, Appeal No. 458832 (different taxpayer acquired replacement property, rehearing granted).
  • Appeal of Howard Brief, Appeal No. 530872 (deemed contribution to a partnership).

The significance of these cases is that we are sustaining a taxable position where we have recharacterized the taxpayer’s transaction to reflect the realities of the transaction.

17 Tips for Packing Like a Pro

Moving to a new home can be stressful, to say the least. Make it easy on yourself by planning far in advance and making sure you ve covered all the bases.

1. Plan ahead by organizing and budgeting. Develop a master  to do list so you won t forget something critical on moving day, and create an estimate of moving costs. (A moving calculator is available at REALTOR.com)

2. Sort and get rid of things you no longer want or need. Have a garage sale, donate to a charity, or recycle.

3. But don t throw out everything. If your inclination is to just toss it, you’re probably right. However, it’s possible to go overboard in the heat of the moment. Ask yourself how frequently you use an item and how you d feel if you no longer had it. That will eliminate regrets after the move.

4. Pack similar items together. Put toys with toys, kitchen utensils with kitchen utensils. It will make your life easier when it’s time to unpack.

5. Decide what, if anything, you plan to move on your own. Precious items such as family photos, valuable breakables, or must-haves during the move should probably stay with you. Don’t forget to keep a “necessities” bag with tissues, snacks, and other items you’ll need that day.

6. Remember, most movers won t take plants. If you don’t want to leave them behind, you should plan on moving them yourself.

7. Use the right box for the item. Loose items are prone to breakage.

8. Put heavy items in small boxes so they re easier to lift. Keep the weight of each box under 50 pounds, if possible.

9. Don t over-pack boxes. It increases the likelihood that items inside the box will break.

10. Wrap every fragile item separately and pad bottom and sides of boxes. If necessary, purchase bubble-wrap or other packing materials from moving stores.

11. Label every box on all sides. You never know how they ll be stacked and you don t want to have to move other boxes aside to find out what s there.

12. Use color-coded labels to indicate which room each item should go in. Color-code a floor plan for your new house to help movers.

13. Keep your moving documents together in a file. Include important phone numbers, driver s name, and moving van number. Also keep your address book handy.

14. Print out a map and directions for movers. Make several copies, and highlight the route. Include your cell phone number on the map. You don t want movers to get lost! Also make copies for friends or family who are lending a hand on moving day.

15. Back up your computer files before moving your computer. Keep the backup in a safe place, preferably at an off-site location.

16. Inspect each box and all furniture for damage as soon as it arrives.

17. Make arrangements for small children and pets. Moving can be stressful and emotional. Kids can help organize their things and pack boxes ahead of time, but, if possible, it might be best to spare them from the moving-day madness.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

California Probate Code 10360 for Reverse Mortgage Short Sales

As an administrator dealing with a property that is upside-down, you can have the attorney fees covered as well as administrator fees. This is NOT LEGAL ADVICE, this is a personal note for me to remember the probate code section.

PROBATE CODE SECTION 10360-10363

10360. As used in this article:
(a) “Amount secured by the lien” includes interest and any costs and charges secured by the lien.
(b) “Encumbered property” means real or personal property that is subject to a lien for a secured debt which is a valid claim against the estate and which has been allowed or approved.
(c) “Lien” means a mortgage, deed of trust, or other lien.

10361. (a) If encumbered property is sold, the purchase money shall be applied in the following order:
(1) Expenses of administration which are reasonably related to the administration of the property sold as provided in paragraph (1) of subdivision (a) of Section 11420.
(2) The payment of the expenses of the sale.
(3) The payment and satisfaction of the amount secured by the lien on the property sold if payment and satisfaction of the lien is required under the terms of the sale.
(4) Application in the course of administration.

(b) The application of the purchase money, after the payment of those expenses set forth in paragraphs (1) and (2) of subdivision (a), to the payment and satisfaction of the amount secured by the lien on the property sold shall be made without delay; and, subject to Section 10362, the property sold remains subject to the lien until the purchase money has been actually so applied.

10361.5. The personal representative or any interested party may, at any time before payment is made to satisfy all liens on the encumbered property sold, petition for an order determining the amount of expenses of administration that are reasonably related to the administration of that encumbered property as provided in paragraph (1) of subdivision (a) of Section 11420. The petition may be heard as part of a petition for confirmation of sale of personal or real property as provided in Section 10260 or 10308, respectively or may be heard separately. If the petition is presented as part of a petition for confirmation of sale of real or personal property, the notice of hearing otherwise required by this code for a petition for confirmation of sale shall be given in addition to the notice requirements under Section 10361.6.

10361.6. (a) At least 30 days prior to the day of the hearing, the petitioner shall cause notice of the hearing and a copy of the petition to be served in the manner provided in Chapter 4 (commencing with Section 413.10) of Title 5 of Part 3 of the Code of Civil Procedure on all of the following persons:
(1) The personal representative, if the personal representative is not the petitioner.
(2) The holder of any mortgage or other lien secured by the property that is sold.
(3) All agents or brokers entitled to compensation from the proceeds of the property that is sold.

(b) Except for those persons given notice pursuant to subdivision (a), notice of the hearing, together with a copy of the petition, shall be given as provided in Section 1220 to all of the following persons:
(1) Each person listed in Section 1220.
(2) Each known heir whose interest in the estate would be affected by the petition.
(3) Each known devisee whose interest in the estate would be affected by the petition.
(4) The Attorney General, at the office of the Attorney General in Sacramento, if any portion of the estate is to escheat to the state and its interest in the estate would be affected by the petition.
(c) The court may not shorten the time for giving the notice of hearing under this section.

10362. (a) If encumbered property is sold, the purchase money, or so much of the purchase money as is sufficient to pay the amount secured by the lien on the property sold and the expenses of the sale, may be paid to the clerk of the court. Upon the payment being so made, the lien on the property sold ceases.

(b) The clerk of court without delay shall use the money paid to the clerk under this section to pay the expense of the sale and to pay and satisfy the amount secured by the lien on the property sold. The clerk shall at once return the surplus, if any, to the personal representative unless the court, for good cause shown and after notice to the personal representative, otherwise orders.

10363. (a) At a sale of real or personal property subject to a lien, the lienholder may become the purchaser of the property, even though no claim for the amount secured by the lien on the property sold has been, or could have been, filed, allowed, or approved.

(b) Unless the property is sold subject to the lien:
(1) If the lienholder becomes the purchaser of the property and the amount secured by the lien on the property is a valid claim against the estate and has been allowed or approved, the receipt of the lienholder for the amount due the lienholder from the proceeds of the sale is a payment pro tanto.
(2) If the lienholder becomes the purchaser of the property and no claim for the amount secured by the lien on the property has been filed, allowed, or approved, the court may at the hearing on the petition for confirmation of the sale examine into the validity and enforceability of the lien and the amount secured by the lien, and the court may authorize the personal representative to accept the receipt of the lienholder for the amount secured by the lien as payment pro tanto.
(3) If the lienholder becomes the purchaser of the property and the amount for which the property is purchased is insufficient to pay the expenses of the sale and to discharge the lienholder’s lien, whether or not a claim has been filed, allowed, or approved, the lienholder shall pay to the clerk of the court an amount sufficient to cover the expenses of the sale.

(c) Nothing permitted under this section shall be deemed to be an allowance or approval of a claim based upon the lien or the amount secured by the lien.

Bank of America Extends Modification Offers

More Than 200,000 Bank Customers May Qualify for Principal Reduction Under Government Agreement With Large Mortgage Servicers
CALABASAS, Calif., May 08, 2012 (BUSINESS WIRE) –Bank of America Home Loans has begun reaching out to customers who may be eligible for forgiveness of a portion of the principal balance on their mortgage under terms of a recent settlement among five major banks, 49 state attorneys general and the federal government.

The first letters in a targeted outreach to more than 200,000 potential candidates for this assistance are arriving in homes this week; most of the letters will be mailed by the third quarter of this year. The bank estimates average monthly savings of 30 percent on mortgage payments of customers who qualify for this program.

Click Me! To Find Out Everything
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Foreclosures and Short Sales

“Building on home retention and payment assistance programs already in place, we are meeting our obligation to deliver this additional relief to our customers following the completion of the recent global mortgage settlement,” said Ron Sturzenegger, Legacy Asset Servicing executive. “To the extent principal reduction and other modification tools help us turn mortgages headed for possible foreclosure into long-term performing loans, it will be positive for homeowners, mortgage investors and communities.”

Bank of America actually began making principal reduction offers under the program guidelines in March, initially concentrating on homeowners who were already in the modification review process. So far under this early initiative, about 5,000 trial modification offers have been mailed, providing a potential total of more than $700 million in forgiven principal. Homeowners are required to make at least three timely payments before the modification can become permanent.

The wave of mailings beginning this week will reach a broader base of customers who may be eligible for this principal reduction program. The letters provide each homeowner with a description of the program and an invitation to provide financial information to begin the review process.

To be eligible for this program, a homeowner must meet certain criteria, including:

 

  • Owes more on the mortgage than the property is worth today.
  • Was at least 60 days behind on payments on January 31, 2012.
  • Has a contractual monthly payment for principal, interest, property taxes, hazard insurance and any applicable homeowner association fees totaling more than 25 percent of gross household income.
  • Has a loan that is owned and serviced by Bank of America, or serviced for another investor that has given the bank delegated authority to do such modifications.

 

Fannie Mae, Freddie Mac and FHA/VA are not participating in the principal reduction program, but other modification programs which may provide comparable reductions in monthly payments are available on those loans.

A key goal of mortgage modifications is to provide an affordable monthly payment, based on borrower’s ability to pay. Most modification plans begin with a reduction of the interest rate, then an extension of the number of years to pay off the mortgage, then if necessary, interest-free forbearance of principal to be paid back at the end of the loan. Bank of America has offered principal forgiveness, but in more limited, targeted situations to eligible borrowers with certain types of mortgages.

Under the terms of the government settlement, the bank will strive to provide an affordable payment to qualified under-water homeowners by first reducing the principal balance to as low as 100 percent of the current property value, then lowering the interest rate and forbearing additional principal, as necessary, to reach the target payment. The settlement terms require a final calculation to determine that the cost incurred by the mortgage investor to modify the loan does not exceed the expected loss to the investor if it goes to foreclosure instead, commonly known as positive net present value.

For further information on the settlement programs, Bank of America Home Loans customers may call 1.877.488.7814.

Bank of America

Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with approximately 5,700 retail banking offices and approximately 17,250 ATMs and award-winning online banking with 30 million active users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE:BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.

SOURCE: Bank of America

7 Tips for Staging Your Home

By: G. M. Filisko

Make your home warm and inviting to boost your home’s value and speed up the sale process.

The first step to getting buyers to make an offer on your home is to impress them with its appearance so they begin to envision themselves living there. Here are seven tips for making your home look bigger, brighter, and more desirable.

1. Start with a clean slate
Before you can worry about where to place furniture and which wall hanging should go where, each room in your home must be spotless. Do a thorough cleaning right down to the nitpicky details like wiping down light switch covers. Deep clean and deodorize carpets and window coverings.

2. Stow away your clutter
It’s harder for buyers to picture themselves in your home when they’re looking at your family photos, collectibles, and knickknacks. Pack up all your personal decorations. However, don’t make spaces like mantles and coffee and end tables barren. Leave three items of varying heights on each surface, suggests Barb Schwarz of www.StagedHomes.com (http://www.StagedHomes.com) in Concord, Pa. For example, place a lamp, a small plant, and a book on an end table.

3. Scale back on your furniture
When a room is packed with furniture, it looks smaller, which will make buyers think your home is less valuable than it is. Make sure buyers appreciate the size of each room by removing one or two pieces of furniture. If you have an eat-in dining area, using a small table and chair set makes the area seem bigger.

4. Rethink your furniture placement
Highlight the flow of your rooms by arranging the furniture to guide buyers from one room to another. In each room, create a focal point on the farthest wall from the doorway and arrange the other pieces of furniture in a triangle around the focal point, advises Schwarz. In the bedroom, the bed should be the focal point. In the living room, it may be the fireplace, and your couch and sofa can form the triangle in front of it.

5. Add color to brighten your rooms
Brush on a fresh coat of warm, neutral-color paint in each room. Ask your real estate agent for help choosing the right shade. Then accessorize. Adding a vibrant afghan, throw, or accent pillows for the couch will jazz up a muted living room, as will a healthy plant or a bright vase on your mantle. High-wattage bulbs in your light fixtures will also brighten up rooms and basements.

6. Set the scene
Lay logs in the fireplace, and set your dining room table with dishes and a centerpiece of fresh fruit or flowers. Create other vignettes throughout the home-such as a chess game in progress-to help buyers envision living there. Replace heavy curtains with sheer ones that let in more light.
Make your bathrooms feel luxurious by adding a new shower curtain, towels, and fancy guest soaps (after you put all your personal toiletry items are out of sight). Judiciously add subtle potpourri, scented candles, or boil water with a bit of vanilla mixed in. If you have pets, clean bedding frequently and spray an odor remover before each showing.

7. Make the entrance grand
Mow your lawn and trim your hedges, and turn on the sprinklers for 30 minutes before showings to make your lawn sparkle. If flowers or plants don’t surround your home’s entrance, add a pot of bright flowers. Top it all off by buying a new doormat and adding a seasonal wreath to your front door.

More from HouseLogic
Spring cleaning guide (http://www.houselogic.com/articles/spring-cleaning-guide/)

Green cleaning products for the bathroom (http://www.houselogic.com/articles/green-cleaning-products-for-the-bathroom/)

Green cleaning products for the kitchen (http://www.houselogic.com/articles/green-cleaning-products-for-the-bathroom/)

Other web resources
How to make a small room look larger (http://www.lowes.com/cd_Ten+Ways+to+Make+a+Small+Room+Look+Larger_506205068_)

How to arrange bedrooms (http://www.dummies.com/how-to/content/arranging-your-bedroom-furniture.html)

G.M. Filisko is an attorney and award-winning writer who occasionally rearranges her furniture to find the best placement-and keep her dog on his toes. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

Neighborhood Housing Services of Los Angeles County

They are a really great organization and they have programs that can help you with homeownership and down payment assistance. Here is a little information about them and visit their website, links are at the end of this post

Neighborhood Housing Services of Los Angeles County (NHS) serves as a catalyst for local residents, business and government representatives to work together to build stronger neighborhoods, improve the quality of life for low to moderate income families of modest means and to revitalize communities into neighborhoods of choice.

NHS strengthens communities through the development and maintenance of quality affordable housing, creation and preservation of affordable homeownership opportunities, support of local leaders, providing financial education and increasing the financial independence of families and people in need.

Incorporated in 1984, Neighborhood Housing Services of Los Angeles County (NHS) has catapulted from a small local housing agency to the largest, non-profit affordable homeownership provider in Southern California. NHS is part of the NeighborWorks® America national network.

Today, NHS provides work for over 45 employees serving clients throughout Los Angeles County. Fueled by passion and determination, the staff and volunteers are committed to revitalizing communities, building stronger neighborhoods and helping families of modest means actualize their dream of homeownership.

Since 1984, NHS has developed and rehabilitated over 13,000 housing and commercial units, placed 2.47 million families on the road to homeownership, created 175 block clubs, employed 200 neighborhood youth, and invested more than $2.43 billion back into some of Los Angeles’ toughest neighborhoods.

Programs and Services

NHS helps families become lifelong homeowners. Through its programs and services, NHS helps to build stable neighborhoods and knowledgeable, empowered homeowners.

NHS uses a Community Asset Building model based on four major program areas:

  1. Asset Creation – Increase the supply of affordable housing
  2. Asset Promotion – Increase families’ financial knowledge and access
  3. Asset Protection – Prevent foreclosures and protect families’ investment
  4. Asset Preservation – Maintain and improve homes and neighborhoods

NHS delivers its programs and services through a business-like approach in the following five program areas:

Call toll-free at 888-895-2NHS or 888-895-2647

Q-A Series – YOU’VE FOUND IT

Q. WHAT DOES A HOME INSPECTOR DO, AND HOW DOES AN INSPECTION FIGURE IN THE PURCHASE OF A HOME

An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs,that are needed.

The Inspector does not evaluate whether or not you’re getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.

It’s a good idea to have an inspection before you sign a written offer since, once the deal is closed, you’ve bought the house as is.” Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection t clause gives you an ‘out” on buying the house if serious problems are found,or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.

Q. DO I NEED TO BE THERE FOR THE INSPECTION

It’s not required, but it’s a good idea. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you’d I like to purchase and it is a good time to ask general, maintenance questions.

Q. ARE OTHER TYPES OF INSPECTIONS REQUIRED

If your home inspector discovers a serious problem a more specific Inspection may be recommended. It’s a good idea to consider having your home inspected for the presence of a variety of health-related risks like radon gas asbestos, or possible problems with the water or waste disposal system.

Q. HOW CAN I PROTECT MY FAMILY FROM LEAD IN THE HOME

If the house you’re considering was built before 1978 and you have children under the age of seven, you will want to have an inspection for lead-based point. It’s important to know that lead flakes from paint can be present in both the home and in the soil surrounding the house. The problem can be fixed temporarily by repairing damaged paint surfaces or planting grass over effected soil. Hiring a lead abatement contractor to remove paint chips and seal damaged areas will fix the problem permanently.

Q. ARE POWER LINES A HEALTH HAZARD

There are no definitive research findings that indicate exposure to power lines results in greater instances of disease or illness.

Q. DO I NEED A LAWYER TO BUY A HOME

Laws vary by state. Some states require a lawyer to assist in several aspects of the home buying process while other states do not, as long as a qualified real estate professional is involved. Even if your state doesn’t require one, you may want to hire a lawyer to help with the complex paperwork and legal contracts. A lawyer can review contracts, make you aware of special considerations, and assist you with the closing process. Your real estate agent may be able to recommend a lawyer. If not, shop around. Find out what services are provided for what fee, and whether the attorney is experienced at representing homebuyers.

Q. DO I REALLY NEED HOMEOWNER’S INSURANCE

Yes. A paid homeowner’s insurance policy (or a paid receipt for one) is required at closing, so arrangements will have to be made prior to that day. Plus, involving the insurance agent early in the home buying process can save you money. Insurance agents are a great resource for information on home safety and they can give tips on how to keep insurance premiums low.

Q. WHAT STEPS COULD I TAKE TO LOWER MY HOMEOWNER’S INSURANCE COSTS

Be sure to shop around among several insurance companies. Also, consider the cost of insurance when you look at homes. Newer homes and homes constructed with materials like brick tend to have lower premiums. Think about avoiding areas prone to natural disasters, like flooding. Choose a home with a fire hydrant or a fire department nearby.

Q. IS THE HOME LOCATED IN A FLOOD PLAIN

Your real estate agent or lender can help you answer this question. If you live in a flood plain, the lender will require that you have flood insurance before lending any money to you. But if you live near a flood plain, you may choose whether or not to get flood insurance coverage for your home. Work with an insurance agent to construct a policy that fits your needs.

Q. WHAT OTHER ISSUES SHOULD I CONSIDER BEFORE I BUY MY HOME

Always check to see if the house is in a low-lying area, in a high-risk area for natural disasters (like earthquakes, hurricanes, tornadoes, etc.), or in a hazardous materials area. Be sure the house meets building codes. Also consider local zoning laws, which could affect remodeling or making an addition in the future. Your real estate agent should be able to help you with these questions.

Q. HOW DO I MAKE AN OFFER

Your real estate agent will assist you in making an offer, which will include the following information:
– Complete legal description of the property
– Amount of earnest money
– Down payment and financing details
– Proposed move-in date
– Price you are offering
– Proposed closing date
– Length of time the offer is valid
– Details of the deal

Remember that a sale commitment depends on negotiating a satisfactory contract with the seller, not just Making an offer.

Other ways to lower ins-insurance costs include insuring your home and car(s) with the same company, increasing home security, and seeking group coverage through alumni or business associations. Insurance costs are always lowered by raising your deductibles, but this exposes you to a higher out-of-pocket cost if you have to file a claim.

Q. HOW DO I DETERMINE THE INITIAL OFFER

Unless you have a buyer’s agent, remember that the agent works for the seller. Make a point of asking him or her to keep your discussions and information confidential. Listen to your real estate agent’s advice, but follow your own instincts on deciding a fair price. Calculating your offer should involve several factors: what homes sell for in the area, the home’s condition, how long it’s been on the market, financing terms, and the seller’s situation. By the time you’re ready to make an offer, you should have a good idea of what the home is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a price.

Q. WHAT IS EARNEST MONEY HOW MUCH SHOULD I SET ASIDE

Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.

Q. WHAT ARE “HOME WARRANTIES”, AND SHOULD I CONSIDER THEM

Home warranties offer you protection for a specific period of time (e.g., one year) against potentially costly problems, like unexpected repairs on appliances or home systems, which are not covered by homeowner’s insurance. Warranties are becoming more popular because they offer protection during the time immediately following the purchase of a home, a time when many people find themselves cash-strapped.

Are you ready for a bigger home?

These questions will help you decide whether you’re ready for a home that’s larger or in a more desirable location. If you answer yes to most of the questions, it’s a sign that you may be ready to move.

  1. Have you built substantial equity in your current home? Look at your annual mortgage statement or call your lender to find out. Usually, you don’t build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you’ve owned your home for five or more years, you may have significant, unrealized gains.
  2. Has your income or financial situation improved? If you’re making more money, you may be able to afford higher mortgage payments and cover the costs of moving.
  3. Have you outgrown your neighborhood? The neighborhood you pick for your first home might not be the same neighborhood you want to settle down in for good. For example, you may have realized that you’d like to be closer to your job or live in a better school district.
  4. Are there reasons why you can’t remodel or add on? Sometimes you can create a bigger home by adding a new room or building up. But if your property isn’t large enough, your municipality doesn’t allow it, or you’re simply not interested in remodeling, then moving to a bigger home may be your best option.
  5. Are you comfortable moving in the current housing market? If your market is hot, your home may sell quickly and for top dollar, but the home you buy also will be more expensive. If your market is slow, finding a buyer may take longer, but you’ll have more selection and better pricing as you seek your new home.
  6. Are interest rates attractive? A low rate not only helps you buy a larger home, but also makes it easier to find a buyer.

If you can say YES to most of these questions, now is a great time to move into that nicer home. Call me at 323-215-9836

Website Resources for Foreclosure Help

Here are some legitimate resources to help you fight the foreclosure crisis.

You’ve been warned about foreclosure scams. But sometimes it’s really hard to tell if something is a scam or not. Some less-than-reliable outfits have even taken to including “hud” or “gov” in their URLs to fool you into thinking they are legitimate foreclosure counselors. It pays to be wary. Below are some websites from government and non-profit agencies that can help you with foreclosure. Some are seeking volunteers and donations to help stop the foreclosure crisis.

HOPENOW.COM
Research your options with this web form (http://www.hopenow.com/homeowner-options.php)
Find your mortgage lender (http://www.hopenow.com/mortgage-directory.php)
Find a foreclosure counselor in your area (http://www.hopenow.com/hopenow-counseling.php)
Focused on helping homeowners in crisis, this alliance helps you determine your options

FTC.GOV
Find a foreclosure counselor (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre26.shtm)
Raise your own credit score (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm)
Fix mistakes on your credit report (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm)
The Federal Trade Commission has expert advice

FINDAFORECLOSURECOUNSELOR.ORG
Find a legitimate foreclosure counselor near you (http://www.findaforeclosurecounselor.org/network/nfmc%5Flookup/)
This non-profit organization was created by Congress to provide financial support, technical assistance, and training for community-based revitalization efforts

MAKINGHOMEAFFORDABLE.GOV
Making Home Affordable (http://www.makinghomeaffordable.gov/)
Making Home Affordable: short sale documents (https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html)
Making Home Affordable: deed in lieu documents (https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html)
The official government site for loan modifications and foreclosure alternatives

PORTAL.HUD.GOV
Find resources to avoid foreclosure in your state (http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure/local)
Consult state and local resources

MYFICO.COM
Improve You Credit Score
(http://www.myfico.com/CreditEducation/ImproveYourScore.aspx) Credit Q&A (http://www.myfico.com/crediteducation/questions/)
Credit Basics ( http://www.myfico.com/crediteducation/articles/)

Understand credit and your credit scores

ANNUALCREDITREPORT.COM
See your credit report (https://www.annualcreditreport.com/cra/index.jsp)
Get all the details on late payments and other information, but not your actual credit score

RESPONSIBLELENDING.ORG
The Center for Responsible Lending (http://www.responsiblelending.org/)
A non-profit organization that works to stop predatory lending practices

CREDITEDUCATION.ORG
Volunteer to be a credit counselor (http://www.crediteducation.org/Become-a-Volunteer.aspx)
Non-profit agency that works to provide financial literacy

LIVEUNITED.ORG
United Way (http://www.liveunited.org/income/)
Donate or volunteer to decrease the number of families that are financially unstable

NCRC.ORG
Donate to the National Community Reinvestment Coalition (http://www.ncrc.org/index.php)
Send a donation to help NCRC “ensure that people in traditionally underserved communities are treated fairly and justly when applying for credit, opening a bank account, getting a mortgage, a loan, or other financial product or service.”

IRS.GOV
The Mortgage Forgiveness Debt Relief Act (http://www.irs.gov/individuals/article/0,,id=179414,00.html)
Get the details about when you might owe taxes on any debt that is canceled through a short sale or deed in lieu of foreclosure

OCC.GOV
Download a PDF on identifying a loan modification scam (http://www.occ.gov/ftp/advisory/2009-1.pdf)
The Office of the Comptroller of the Currency provides detail about scams, including “10 Warning Signs of a Loan Modification Scam.”

Visit houselogic.com for more articles like this. Reprinted from HouseLogic with permission of the NATIONAL ASSOCIATION OF REALTORS
Copyright 2010. All rights reserved.

10 Questions to Ask Home Inspectors

Before you make your final buying or selling decision, you should have the home inspected by a professional. An inspection can alert you to potential problems with a property and allow you to make an informed decision. Ask these questions to prospective home inspectors:

1. Will your inspection meet recognized standards Ask whether the inspection and the inspection report will meet all state requirements and comply with a well-recognized standard of practice and code of ethics, such as the one adopted by the American Society of Home Inspectors or the National Association of Home Inspectors. Customers can view each group s standards of practice and code of ethics online at www.ashi.org or www.nahi.org. ASHI s Web site also provides a database of state regulations.

2. Do you belong to a professional home inspector association There are many state and national associations for home inspectors, including the two groups mentioned in No. 1. Unfortunately, some groups confer questionable credentials or certifications in return for nothing more than a fee. Insist on members of reputable, nonprofit trade organizations; request to see a membership ID.

3. How experienced are you Ask how long inspectors have been in the profession and how many inspections they ve completed. They should provide customer referrals on request. New inspectors also may be highly qualified, but they should describe their training and let you know whether they plan to work with a more experienced partner.

4. How do you keep your expertise up to date Inspectors commitment to continuing education is a good measure of their professionalism and service. Advanced knowledge is especially important in cases in which a home is older or includes unique elements requiring additional or updated training.

5. Do you focus on residential inspection Make sure the inspector has training and experience in the unique discipline of home inspection, which is very different from inspecting commercial buildings or a construction site. If your customers are buying a unique property, such as a historic home, they may want to ask whether the inspector has experience with that type of property in particular.

6. Will you offer to do repairs or improvements Some state laws and trade associations allow the inspector to provide repair work on problems uncovered during the inspection. However, other states and associations forbid it as a conflict of interest. Contact your local ASHI chapter to learn about the rules in your state.

7. How long will the inspection take On average, an inspector working alone inspects a typical single-family house in two to three hours; anything significantly less may not be thorough. If your customers are purchasing an especially large property, they may want to ask whether additional inspectors will be brought in.

8. What s the cost Costs can vary dramatically, depending on your region, the size and age of the house, and the scope of services. The national average for single-family homes is about $320, but customers with large homes can expect to pay more. Customers should be wary of deals that seem too good to be true.

9. What type of inspection report do you provide Ask to see samples to determine whether you will understand the inspector’s reporting style. Also, most inspectors provide their full report within 24 hours of the inspection.

10. Will I be able to attend the inspection The answer should be yes. A home inspection is a valuable educational opportunity for the buyer. An inspector’s refusal to let the buyer attend should raise a red flag.

Source: Rob Paterkiewicz, executive director, American Society of Home Inspectors, Des Plaines, Ill., www.ashi.org.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

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