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Facing capital gains on investment property? Here’s one way to defer taxes.

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

ORLANDO, Fla. – Feb. 9, 2012 – Florida’s existing home and existing condo sales continued their positive trend in fourth quarter 2011, posting gains compared to the same period a year earlier, according to the latest housing statistics from Florida Realtors®.

Existing home sales rose 7 percent in 4Q 2011 with a total of 42,038 homes changing hands statewide; during the same period the year before, a total of 39,355 homes sold, according to Florida Realtors. Statewide sales of existing condos in the fourth quarter rose 4 percent compared to the year-ago sales figure.

Florida’s existing-home median sales price was $132,000 for the three-month period, down only 1 percent from the $133,400 reported in 4Q 2010. The median is a typical market price where half the homes sold for more, half for less.

In the year-to-year quarterly comparison for existing condo sales, 18,558 units sold statewide in the fourth quarter compared to 17,922 units in 4Q 2010 for a 4 percent gain. The statewide existing-condo median sales price was $88,800 in the fourth quarter; a year earlier, it was $84,400 for a 5 percent increase.

“The quarterly numbers continue to show the steady improvement of the housing market in Florida,” says Florida Realtors Chief Economist Dr. John Tuccillo. “The upward movement in sales has been pretty much across the state. Prices have stabilized, and in general, the state’s economy is improving. With that improvement, we expect continued growth in housing activity.”

Mortgage rates continued to hover around historical lows in the fourth quarter. According to Freddie Mac, the national commitment rate for a 30-year conventional fixed-rate mortgage averaged 4.01 percent in 4Q 2011; one year earlier, it averaged 4.41 percent.

The 4Q 2011 sales data release is the last release handled under Florida Realtors’ partnership with the University of Florida’s Bergstrom Center for Real Estate Studies. Beginning with the January 2012 existing sales statistics, Florida Realtors will launch a new statewide housing market reporting partnership with 10K Research and Marketing, a division of the Minneapolis Area Association of Realtors and its Industry Data and Analysis department.

10K will collect and organize housing sales data from the state’s 63 local Realtor organizations. The goal is to provide unique, localized market reports to the local Realtor boards and associations, enabling the groups and their Realtor members to serve as the definitive voice of real estate in their respective local markets.

At the same time, Florida Realtors will provide more comprehensive statewide housing market statistics – but the data series will only include statewide numbers. Beginning with the January 2012 report, Florida Realtors will no longer report any market data for Realtor members’ sales in the state’s metropolitan statistical areas, as had previously been reported.

© 2012 Florida Realtors®

WASHINGTON – Feb. 6, 2012 – The list of housing markets showing measurable improvement expanded by 29 metros in February for a total of 98 entries on the National Association of Home Builders/First American Improving Markets Index (IMI).

With the latest addition of Miami, the list now includes seven Florida cities: Cape Coral, Deltona, Jacksonville, Miami, North Port, Punta Gorda and Tampa. Thirty-six states have at least one metro area that’s improving.

The index lists metropolitan areas that have shown improvement in housing permits, employment and house prices for at least six consecutive months. The February index adds some metropolitan areas that have been particularly weak. The IMI measures improvement from an economic trough, and NAHB says new notable entrants with six months of an upswing include Miami along with Boston; Detroit; Kansas City, Mo.; Portland, Ore.; Memphis, Tenn.; and Salt Lake City.

“The number of improving housing markets has risen for six consecutive months,” says NAHB Chairman Bob Nielsen. “Despite the many challenges that continue to drag on a housing recovery – including the tight lending environment for builders and buyers – improving conditions are slowly but surely spreading from one housing market to the next.”

“While many of the markets on the February IMI are far from fully recovered, the index points out where employment, home prices and housing production are no longer retreating and have held above their lowest recession troughs for six months or more,” said NAHB Chief Economist David Crowe. “This is a sign that a large cross section of the country is starting to turn the corner as local economic conditions stabilize.”

The IMI measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas (MSA). The three indicators are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac, and single-family housing permit growth from the U.S. Census Bureau. An MSA must have improvement in all three areas for at least six months following their respective troughs to be included on the improving markets list.

Seven markets dropped from the NAHB/First American Improving Markets Index in February as they experienced softening house prices: San Jose, Calif.; Washington, D.C.; Kankakee, Ill.; New Orleans; Worcester, Mass.; Jackson, Miss.; and Sherman, Tex.

A complete list of all 98 metropolitan areas currently on the IMI, and a separate breakout of metros newly added to the list in February, is available at: www.nahb.org/imi.

© 2012 Florida Realtors®

 RealtyTrac released its Year-End 2011 U.S. Foreclosure Market Report today. It shows a total of 2,698,967 foreclosure filing actions – default notices, scheduled auctions and bank repossessions – reported on 1,887,777 U.S. properties in 2011, a decrease of 34 percent in total properties from 2010. Foreclosure activity in 2011 was 33 percent below the 2009 total and 19 percent below the 2008 total.

In 2011, 1.45 percent of U.S. housing units (one in 69) had at least one foreclosure filing during the year, down from 2.23 percent in 2010, 2.21 percent in 2009, and 1.84 percent in 2008.

Total U.S. foreclosure activity and the U.S. foreclosure rate in 2011 were both at their lowest annual level since 2007. However, Brandon Moore, chief executive officer of RealtyTrac, says the decline in foreclosures can be blamed mainly on an inefficient foreclosure process.

“The lack of clarity regarding many of the documentation and legal issues … means that we are continuing to see a highly dysfunctional foreclosure process … particularly in states with a judicial foreclosure process,” Brandon says. “There were strong signs in the second half of 2011 that lenders are finally beginning to push through some of the delayed foreclosures in select local markets. We expect that trend to continue this year, boosting foreclosure activity for 2012 higher than it was in 2011 – though still below the peak of 2010.”

December activity hits 49-month low

Foreclosure filings were reported on 205,024 U.S. properties in December, a decrease of 9 percent from November and 20 percent from December 2010. December’s total was the lowest monthly total since November 2007.

December default notices decreased 19 percent from the previous month and were down 23 percent from December 2010; Scheduled foreclosure auctions decreased 12 percent from the previous month and were down 24 percent from December 2010; and bank repossessions (REO) increased 10 percent from the previous month but were still down 12 percent from December 2010.

Florida No. 7 in number of foreclosure actions

More than 6 percent of Nevada housing units (one in 16) had at least one foreclosure filing in 2011, giving it the nation’s highest state foreclosure rate for the fifth consecutive year despite a 31 percent decrease in foreclosure activity from 2010. Despite a 28 percent drop in foreclosure activity from November to December – caused largely by a 41 percent drop in scheduled foreclosure auctions – Arizona registered the nation’s second highest state foreclosure rate for the third year in a row, with 4.14 percent of its housing units (one in 24) with at least one foreclosure filing in 2011.

California logged the third-highest number of foreclosure actions in 2011 with 3.19 percent – one of every 31 housing units. Georgia ranked fourth with 2.71 percent of housing units (one in 37) in the foreclosure process; Utah ranked fifth with 2.32 percent of its housing units (one in 43) in the foreclosure process.

Other states in the top 10: 6) Michigan (2.21 percent), 7) Florida (2.06 percent), 8) Illinois (1.95 percent), 9) Colorado (1.78 percent) and 10) Idaho (1.77 percent).

Florida No. 3 in time it takes to process a foreclosure

Nationally, it took an average of 348 days to complete the foreclosure process in 2011 fourth quarter, up from 336 days in the third quarter and 305 days in the fourth quarter of 2010 – a 24 percent increase.

The average foreclosure process in New York has increased 37 percent during the time period and took an average of 1,019 days to complete. New Jersey documented the nation’s second longest average foreclosure process, at 964 days.

Florida documented the nation’s third longest average foreclosure process, at 806 days.

© 2012 Florida Realtors®

ORLANDO, Fla. – Jan. 20, 2012 – At the close of 2011, Florida’s existing home and condominium markets reported higher sales compared to the previous year, according to the latest housing data released by Florida Realtors®. It was the third consecutive year for statewide home and condo sales activity to end the year on a positive upswing – higher year-over-year sales also were reported at the close of 2010 and 2009, records show.

Looking back on 2011, Florida’s existing home sales rose 8 percent for the year, with a total of 185,921 homes sold compared to 172,462 homes sold in 2010. The statewide existing home median price for 2011 was $131,700; it was $135,900 in 2010 for a 3 percent decrease. In Florida’s condo market, a total of 87,581 units sold statewide in 2011, a gain of 15 percent compared to 76,209 units sold in 2010. The statewide existing condo median price in 2011 was $88,300; it was $90,000 in 2010 for a 2 percent decrease.

Sixteen of Florida’s metropolitan statistical areas (MSAs) reported higher existing home sales at the close of 2011 compared to 2010; the same number of MSAs also reported higher existing condos sales.

“Florida’s economy is continuing to strengthen, which is good news,” said 2012 Florida Realtors President Summer Greene, regional manager of Better Homes and Gardens Real Estate Florida 1st in Fort Lauderdale. “Many people are hoping to take advantage of the current record low mortgage rates and affordable conditions to find their Florida dream home – but overly restrictive lending requirements continue to create barriers to homeownership for qualified homebuyers. To re-energize the housing market and the economic recovery, we need improved access to affordable financing options for qualified buyers and investors.”

In December, a total of 15,290 existing single-family homes sold statewide, a decrease of 2 percent from the 15,546 homes sold in December 2010. The statewide existing home median sales price last month was $134,300, up 1 percent from the $133,000 reported in December 2010, according to Florida Realtors’ data. The national median existing single-family home price was $165,100 in December, according to the National Association of Realtors® (NAR). The median is the midpoint; half the homes sold for more, half for less.

In the year-to-year comparison for statewide existing condo sales, a total of 6,836 units changed hands last month, compared to 6,985 condos sold in December 2010 for a decrease of 2 percent. The statewide existing condo median sales price in December was $91,900, up 4 percent from the $88,400 reported a year earlier. The national median existing condo price was $160,000 in December, according to NAR.

“Although sales were down slightly in December, they’re up strongly for the year, which reinforces the reality that Florida is in a slow real estate recovery,” said Florida Realtors Chief Economist Dr. John Tuccillo. “Our expectation is that recovery will continue through 2012. The major obstacle in the market is the inadequate accessibility to financing. Prices are moderating, but we don’t expect too much movement owing to the continuing significance of distressed properties.”

In December, the interest rate for a 30-year fixed-rate mortgage averaged 3.96 percent, down from the 4.71 percent average during the same month a year earlier, according to Freddie Mac. The annual average rate for a 30-year mortgage in 2011 was 4.45 percent. Florida Realtors’ sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

© 2012 Florida Realtors®

Perhaps you’ve found a house, or maybe you’ve just started the house hunt, but regardless of where you are in the home-buying process, you need to consider some key questions before you even think about making an offer. Buying a home is a big commitment — financial and otherwise — so take the time to weigh pros and cons.

Here are five questions every home buyer should ask themselves:

Will I own it for at least five years?

The first and most important item you should ask yourself before you consider buying any property is whether you will own it for a long time. People buy property in hopes of increasing wealth and five years is about the break-even point for earning appreciation in value above the buying and selling transaction costs. Therefore, if you don’t plan on holding the property for longer than five years, skip it! Renting a home is NOT necessarily throwing money away. Buying and selling quickly will usually leave you worse off financially than if you just held off on becoming a homeowner.

Do I love the home I want to buy?

One of the second most important items is do you love the property? Real estate should be held for the long term, and loving a property should perpetuate a happy enduring ownership. So don’t buy a property if you don’t love it or at least really like or want that particular property. And don’t buy just “to buy” or if someone tells you it is a good idea. Buy what you want, when you are ready, and buy a home that you will proudly boast about to your friends over the years and years.

Can I afford it?

It is more expensive to own a home than anyone anticipates. Even if the mortgage lender qualifies you for a certain loan amount and property price, you need to make sure YOU can afford it. Lenders don’t generally take into account child care expenses, health care expenses, expensive lifestyles and habits, etc. So make sure that you can comfortably afford your housing payment, still pay your other bills, and still save at least a little more for retirement. Also, if you are not sure of your continued employment situation for any reason, wait until your situation is stable so you can make those mortgage payments.

Is the home in good shape?

Here’s another warning: Fixer uppers rarely sell at a big enough discount to compensate for all the work that needs to be done. The cost of construction and property rehabilitation is outrageous, and unless you are a contractor, it almost undoubtedly will cost much more than you anticipate. So leave the “needs TLC” or “fixer-uppers” to the contractors. You want to buy something in decent shape and livable condition so you don’t get mired in rehab disaster. (Ever seen the movie “The Money Pit“?)

Do I know about the neighborhood?

Did you do adequate research, look at enough properties, learn the neighborhoods, and learn about property ownership before you made an offer? If you just moved into town or if you don’t know the area, rent for a while and search out the perfect community in which you would like to live within your financial means. As with any big investment, the better you educate yourself the lower your risk of something going wrong.

While there is no risk-free real estate, considering the questions above should increase your chances of having a great, long-term, property ownership experience.

Leonard Baron, MBA, CPA, is a San Diego State University Lecturer, a Zillow Blogger, the author of several books including “Real Estate Ownership, Investment and Due Diligence 101 – A Smarter Way to Buy Real Estate”, and loves kicking the tires of a good piece of dirt! 

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

NEW YORK (AP) – Jan. 12, 2012 – About 1.9 million homes entered the foreclosure process in 2011, the lowest level since 2007 when the recession began, according to a report Thursday by the foreclosure listing firm RealtyTrac Inc.

The firm cautioned that the decline does not necessarily indicate that the housing market is getting better, as many foreclosures have been delayed due to confusion over documentation and legal issues involved in the process.

There have also been problems with the way some lenders were handling foreclosures. Specifically, signing off on home foreclosures without first verifying documents – a practice referred to as “robo-signing.” Many of the largest U.S. banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases and revisiting pending cases to prevent errors.

“Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year,” RealtyTrac CEO Brandon Moore said in a statement.

The listing firm anticipates that 2012’s foreclosure rate will be higher than last year’s, but will remain below the peak of 2010.

High unemployment, a sluggish housing market and falling home values remain major factors in homeowners falling behind on their mortgage payments. Many borrowers also have simply stopped paying their mortgage because they owe more on the mortgage than the home is worth.

RealtyTrac said that 2011’s foreclosure activity is 34 percent lower than 2010 and the lowest since 2007. The Great Recession began in December 2007 and ended in June 2009.

In 2011, Nevada, Arizona and California were among those with the most foreclosures. Other states among those with the highest foreclosure rates for the year were Georgia, Michigan, Florida, Illinois, Colorado and Idaho.

The company said that December’s foreclosure filings on 205,024 homes were the lowest monthly total since November 2007. The figure was also 20 percent below the prior-year period’s results.

In the fourth quarter, there were foreclosure filings for 586,133 homes in the U.S., down 27 percent from a year earlier.
Copyright © 2012 The Associated Press.

Chaim Gleitmann of Xena Vallone Realty Earns CPC Designation.

Xena Vallone Realty’s Chaim Gleitmann earns the Certified Professional Commercial (CPC) designation. Gleitmann completed comprehensive training on assisting sellers and buyers with listing, selling and leasing commercial real estate.

“The CPC designation is one more indication of Chaim’s knowledge and professionalism in helping commercial clients achieve their commercial real estate goals,” said Broker-Owner Xena Vallone. “Chaim is committed to excellent service and his dedication in earning the CPC designation is proof of that.”

Gleitmann also holds Certified International Property Specialist (CIPS) designation, Short Sales and Foreclosure Resources (SFR) certification, Transnational Referral Certification (TRC) and Resort and Second Home Specialist (RSPS) Certification.

Gleitmann may be reached at (941) 312 1214 or Chaim@XenaValloneRealty.com.

Property sales up 8.2 percent for full year 2011; prices stable For the full year 2011, property sales of members of the Sarasota Association of Realtors® jumped by 8.2 percent to 8,224, achieving the highest level since 2005. The surge in sales was accompanied by stabilization in the median sale prices, which now stand at $155,925 for single family homes and $156,800 for condos over the full year, and have not fluctuated much for the past 12 months.   Once again, the market has demonstrated that Sarasota is a destination of choice for many homebuyers. For the overall year of 2011, the resurgence in sales was dramatic, and represents a 44 percent increase over the low point of the downturn in 2008, when only 5,820 properties changed hands.   "This is really incredible news, and demonstrates how far this market has improved in only three short years," said SAR President Laura Benson. "Now, we also offer very affordable pricing. Combined with the high quality of homes and condos on the market, I think we clearly have the best values in Florida, without question."   Property transactions in the Sarasota real estate market jumped 7.3 percent in December 2011, compared to the November totals. Combined sales stood at 648, up from last month's figure of 602 and the October 2011 sales of 577. This sales resurgence has paralleled the drop in the available inventory, and put the remaining months of inventory in the range of a seller's market.   The inventory of available properties for sale in Sarasota was at 4,567 in December, down slightly from the 4,672 in November. The inventory fell to a 10-year low of 4,408 in August 2011. As the inventory has slid, the months of inventory has dropped and now stands at 6.3 months for single family homes and 9.2 months for condos. A figure of 6 months is considered equilibrium between a buyer's and a seller's market.   The December 2011 median sale price for condos recovered strongly to $150,000 from November's figure of $127,000. This was the highest level since August 2011. Condo prices have been fluctuating for several months, with the year-to-date median sale price at $156,800.   For single family homes, the median sale price dropped slightly in December to $160,000 from $162,000 in November 2011. For the overall year, the figures have remained remarkably steady, indicating a stabilizing market.   "There is a real sense of optimism and excitement returning to the market," Benson noted. "We're entering the height of the season, and the open houses have been bustling with energy and interest. Recent news of new home sales doubling in one community and setting records for annual sales in another are clear signs of the strength of the current market."   Pending sales were at 694 in December 2011, down slightly from the November 2011 number of 782. Last month, 504 single family homes and 190 condos went under contract.   Distressed property sales continued to represent a higher percentage than normal in the local market for the fourth quarter of 2011. In total, 41.7 percent of sales in the fourth quarter were distressed property sales (foreclosures and short sales). This was somewhat higher than the third quarter, when the overall percentage was 38.8 percent, but well below the market high of over 50 percent in the second quarter of 2010.   Median sale prices continued to show three distinct markets, with normal market transaction sales prices more than double those for bank-owned transactions. But the price gap has narrowed somewhat, particularly during the past two quarters. For the second quarter of 2011, foreclosed condos sold for a median price of $62,250, while market condo transactions saw a $270,000 median. For the quarter just ended, those prices were at $73,500 and $193,500, respectively.   "Realtors® and consumers have adjusted to the market realities, and it appears that pricing in all categories has become more reflective of the current conditions," said Benson. "We continue to watch and hope for a break in the distressed property cycle, and we anticipate the improving economy and lower unemployment rate will eventually bring these figures down to lower levels. The positive side is that our market offers incredible buying opportunities that won't last long."   Click HERE for the complete press release in PDF format, plus six pages of statistical charts.

WASHINGTON – Jan. 9, 2012 – You may owe federal income taxes in 2013 if you have a short sale, foreclosure after this year. Now is the time to make the hard decision: Are you going to walk away from your underwater home?

Uncle Sam is still giving homeowners until Dec. 31, 2012, to go through a short sale or foreclosure without tax consequences – as long as the lender officially releases the debt.

But on Jan. 1, 2013, the rules change: The amount a lender forgives, ether in a short sale or foreclosure, on a primary residence will be taxable on federal income taxes.

So if a house sold $50,000 short of what is owed on the mortgage, then the selling homeowners will owe federal income taxes on that $50,000. Homeowners would owe $12,500 if they’re in the 25 percent bracket; $7,500 if in the 15 percent tax section.

Homeowners would be on the hook even if the house sold but the bank had not formally forgiven the loan in a letter: The banks must officially sign off in writing before Dec. 31.

“It’s a huge issue – it will be a shock to many taxpayers after 2012,” said Mark Steber, the Florida-based chief tax officer for Jackson Hewitt Tax Service.

The law first came into affect five years ago as the housing market went bust nationwide.

The Mortgage Debt Relief Act of 2007 “generally allows taxpayers to exclude income from the discharge of debt on their principal residence,” according to the Internal Revenue Service. “Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”

Up to $2 million of forgiven debt can be forgiven this year, $1 million if married and filing separately, according to the IRS.

Homeowners declaring bankruptcy could escape paying income taxes on any cancellation of debt income if the debt is forgiven in the bankruptcy even if the debtor is solvent, said Nick Jovanovich, a board-certified tax attorney in Fort Lauderdale, Fla.

“Bankruptcy trumps everything,” he said.

Or homeowners might not have to pay income taxes on any cancellation of debt income to the extent that they are insolvent immediately before the cancellation – that is, their debts exceed the value of their assets, Jovanovich added.

Steber and Jovanovich said homeowners should decide now what they are going to do – to give themselves time.

Short sales can take a long time, said Timothy Singer of Coldwell Banker in Fort Lauderdale.

He said he knows of one that had been pending for three years.

But lenders “have been gearing up” and speeding up the process, Singer added.

But even if banks quickly approve a short sale, the would-be buyer may get cold feet and the deal fall through, Singer said.

Then the sellers have to begin again, he said.

Copyright © 2012 the Sun Sentinel (Fort Lauderdale, Fla.), Donna Gehrke-White. Distributed by McClatchy-Tribune News Service.

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How affordable is housing for potential buyers? Today’s Housing Affordability Index produced by the National Association of Realtors® yields some insight—the best in decades.

• The headlines have recently screamed about record low mortgage rates and still soft house prices. How does this translate into affordability for potential buyers? NAR combines this information along with data on median family income into a Housing Affordability Index—an index designed to track how affordable a median priced home is to a median income family. The data show that the median priced home is more affordable to the median income family than is has been in decades.
• In short, the higher the index the more affordable the median priced home is for the median income family. (A more detailed explanation is available at this footnote[1].) November’s index is the second highest on record. The highest index on record was the previous month, October 2011. For a full look at the data, click here.
• Of course, affordability is only one aspect potential home buyers are likely to consider when deciding whether now is the right time to purchase. Family situation, work situation, and the desire to own a home are all important considerations motivating buyers according to the Profile of Home Buyers and Sellers. Additionally, potential buyers will weigh the affordability of buying against the alternative of renting. NAR has several resources that equip you to help your clients with thisdecision including a field guide, rent vs. buy brochure, and regular short articles on our blog.

• 

[1] An index of 100 means that the family with median income earns exactly the income needed to qualify to purchase the median priced home. Anything greater than 100 signals that the median income family has more income than is necessary to qualify to purchase the median priced home, and the greater the index, the greater the median income is relative to the qualifying income. Conversely, an index value less than 100 indicates that the median income family does not have enough income to qualify to purchase the median priced home.

IRS YouTube Video: April 17th Tax Deadline

WASHINGTON — The Internal Revenue Service today opened the 2012 tax filing season by announcing that taxpayers have until April 17 to file their tax returns. The IRS encourages taxpayers to e-file as it is the best way to ensure accurate tax returns and get faster refunds.

The IRS also announced a number of improvements to help make this tax season easy for taxpayers. This includes new navigation features and helpful information on IRS.gov and a new pilot to allow taxpayers to use interactive video to get help with tax issues.

“At the IRS, we’re working hard to make the process of filing your taxes as quick and easy as possible,” said IRS Commissioner Doug Shulman. “Providing quality service is one of our top priorities. It not only reduces the burden on taxpayers, but also helps in filing an accurate return right from the start.”

Taxpayers will have until Tuesday, April 17 to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16. According to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year. Taxpayers requesting an extension will have until Oct. 15 to file their 2011 tax returns.

The IRS expects to receive more than 144 million individual tax returns this year, with most of those being filed by the April 17 deadline.

The IRS will begin accepting e-file and Free File returns on Jan. 17, 2012. Additional details about e-file and Free File will be announced later this month. IRS Free File provides options for free brand-name tax software or online fillable forms plus free electronic filing. Everyone can use Free File to prepare a federal tax return. Taxpayers who make $57,000 or less can choose from approximately 20 commercial software providers. There’s no income limit for Free File Fillable Forms, the electronic version of IRS paper forms, which also includes free e-filing.

The IRS also reminds paid tax return preparers they must have and include a Preparer Tax Identification Number (PTIN) on all returns they prepare. All PTINs must be renewed for 2012. Tax return preparers can obtain or renew PTINs online.

Assistance Options

The IRS continues to focus on taxpayer service. The best way for taxpayers to get answers to their questions is by visiting the IRS website at IRS.gov. The IRS has updated the front page of the IRS website to make it easier for taxpayers to get key forms, information and file tax returns. The front page also has links to taxpayer-friendly videos on the IRS YouTube channel. More improvements are planned for IRS.gov in the months ahead.  

Last year, the IRS unveiled IRS2Go, its first smartphone application that lets taxpayers check on the status of their tax refund and obtain helpful tax information. The IRS reminds Apple users that they can download the free IRS2Go application by visiting the Apple App Store and Android users can visit the Android Marketplace to download the free IRS2Go app.

Individuals making $50,000 or less can use the Volunteer Income Tax Assistance program for free tax preparation and, in many cases, free electronic filing. Individuals age 60 and older can take advantage of free tax counseling and basic income tax preparation through Tax Counseling for the Elderly. Information on these programs can be found at IRS.gov.

For tax law questions or account inquiries, taxpayers can also call our toll-free number (7 a.m. to 7 p.m. local time) or visit a taxpayer assistance center, the locations of which are listed on IRS.gov.

Virtual Service

The IRS has begun a new pilot program where taxpayers can get assistance through two-way video conferencing. The IRS is conducting a limited roll out of this new video conferencing technology at 10 IRS offices and two other sites, and may expand to further sites in the future. A list of locations is available on IRS.gov.

Check for a Refund

Once taxpayers file their federal return, they can track the status of their refunds by using the “Where's My Refund?” tool, which taxpayers can get to using the IRS2Go phone app or from the front page of www.IRS.gov. By providing their Taxpayer Identification Numbers, filing status, and the exact whole dollar amount of their anticipated refund taxpayers can generally get information about their refund 72 hours after the IRS acknowledges receipt of their e-filed returns, or three to four weeks after mailing a paper return.

SARASOTA, FL – Chaim Gleitmann of Xena Vallone Realty has earned the Resort and Second Home Specialist (RSPS) Certification. Awarded by the National Association of REALTORS®, this nationally recognized designation indicates expertise in the resort and second home specialty.

REALTORS® who receive the RSPS certification have successfully completed the Resort & Second Home Markets Course along with another designation or additional advanced courses in the field of resort and second home real estate. Gleitmann is qualified to facilitate the buying, selling or management of properties for investment, development, retirement, or second homes in a resort, recreational and/or vacation destination.

Gleitmann also hold the Certified International Property Specialist (CIPS) designation, the Short Sales and Foreclosure Resources (SFR) certification, the Transnational Referral Certification (TRC) and the Certified Professional Commercial (CPC) designation.

“Through his ongoing education and training, Chaim continues to demonstrate his commitment to professionalism and expertly serving his clients,” said Broker Owner Xena Vallone. “We are proud of his accomplishment and his value to our organization and the real estate industry.”

Gleitmann can be reached at (941) 706-1717 or Chaim@XenaValloneRealty.com.

 

As the foreclosure crisis continues to affect the real estate market, many troubled homeowners, and even some realtors, may not fully understand the severity of a foreclosure. In a foreclosure situation, the mortgage lender is a secured creditor which has a piece of collateral securing its debt. In this case the collateral is the real property.  Should the borrower/homeowner not pay their mortgage lender, then obviously that secured creditor would reclaim possession of that property.

In the vast majority of cases, the borrower/homeowner would have signed a promissory note at the time of the closing which gives the lender the right to recover the entire amount of the loan, regardless of the current fair market value of the collateral property. In most foreclosure cases, the judge will order that the borrower pay the lender the difference between the full amount of the loan and the current value of the property. This is known as a deficiency judgment. Deficiency judgments are then collected by the creditors unless they agree to write off the debt.

Deficiency judgments are one contributor to the rise in bankruptcies since bankruptcy can be a useful tool in discharging this kind of debt. Even though the real property is no longer an asset, the related deficiency judgment is still a debt that is now unsecured, which in most cases, can be discharged in a bankruptcy. Anyone in this situation who speaks to a bankruptcy attorney should make it clear that even though the property has been foreclosed upon and they may not own it anymore, it must be added on the bankruptcy petition in order to discharge the deficiency judgment.

 

Washington, DC, December 21, 2011

Existing-home sales rose again in November and remain above a year ago, according to the National Association of Realtors®. Also released today were periodic benchmark revisions with downward adjustments to sales and inventory data since 2007, led by a decline in for-sale-by-owners.

Although rebenchmarking resulted in lower adjustments to several years of home sales data, the month-to-month characterization of market conditions did not change. There are no changes to home prices or month’s supply.

The latest monthly data shows total existing-home sales¹, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 4.0 percent to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October, and are 12.2 percent above the 3.94 million-unit pace in November 2010.

Lawrence Yun, NAR chief economist, said more people are taking advantage of the buyer’s market. “Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing,” he said. “We’ve seen healthy gains in contract activity, so it looks like more people are realizing the great opportunity that exists in today’s market for buyers with long-term plans.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.99 percent in November from 4.07 percent in October; the rate was 4.30 percent in November 2010; records date back to 1971.

NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said housing affordability conditions have set a new record high. “With record low mortgage interest rates and bargain home prices, NAR’s housing affordability index shows that a median-income family can easily afford a median-priced home,” he said.

“With consumer price inflation rising by more than 3 percent this year, consumers are looking to lock-in steady payments by taking out long-term fixed-rate mortgages. However, the problem remains that some financially qualified families who are willing to stay well within their means are being denied the opportunity to buy in today’s market by the overly restrictive mortgage underwriting situation,” Veissi said.

An elevated level of contract failures continues to hold back a broader sales recovery. Contract failures² were reported by 33 percent of NAR members in November, unchanged from October but notably above a year ago when it was 9 percent.

Contract failures are cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including lower conforming mortgage loan limits, home inspections and employment losses.

Also released today are benchmark revisions³ to historic existing-home sales. The 2010 benchmark shows there were 4,190,000 existing-home sales last year, a 14.6 percent revision from the previously projected 4,908,000 sales. For the total period of 2007 through 2010, sales and inventory were downwardly revised by 14.3 percent. The revisions are expected to have a minor impact on future revisions to Gross Domestic Product.

“From a consumer’s perspective, only the local market information matters and there are no changes to local multiple listing service (MLS) data or local supply-and-demand balance, or to local home prices,” Yun explained.

A divergence developed over time between sales reported by MLSs and sales determined by a U.S. Census benchmark; the variance began in 2007. Reasons include growth in MLS coverage areas from which sales data is collected, and geographic population shifts. “It appears that about half of the revisions result solely from a decline in for-sale-by-owners (FSBOs), with more sellers turning to Realtors® to market their homes when the market softened. The FSBO market was overwhelmed during the housing downturn, and since most FSBOs are not reported in MLSs, national estimates of existing-home sales began to diverge based on previous assumptions,” Yun said.

NAR consumer survey data in 2000 showed FSBOs accounted for a 16 percent market share, which fell to a record low 9 percent in 2010.

“In essence, Realtors® began to capture a greater market share. In addition to a decline in FSBO transactions, more builders began marketing new properties through real estate brokers that weren’t completely filtered from the existing-home data,” Yun said. “Some property listings on more than one MLS, and issues related to house flipping, also contributed to the downward revisions.” The new independent benchmark was discussed with government agencies and outside housing market experts, and will allow for annual revisions in the future.

Total housing inventory at the end of November fell 5.8 percent to 2.58 million existing homes available for sale, which represents a 7.0-month supply⁴ at the current sales pace, down from a 7.7-month supply in October. “Since setting a record of 4.04 million in July 2007, inventories have trended down and supplies are moving close to price stabilization levels,” Yun said.

The national median existing-home price⁵ for all housing types was $164,200 in November, down 3.5 percent from a year ago. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 29 percent of sales in November (19 percent were foreclosures and 10 percent were short sales), compared with 28 percent in October and 33 percent in November 2010.

All-cash sales accounted for 28 percent of purchases in November; they were 29 percent in October and 31 percent in November 2010. Investors make up the bulk of cash transactions.

Investors purchased 19 percent of homes in November, little changed from 18 percent in October and 19 percent in November 2010. First-time buyers accounted for 35 percent of transactions in November, up from 34 percent in October and 32 percent in November 2010.

Single-family home sales rose 4.5 percent to a seasonally adjusted annual rate of 3.95 million in November from 3.78 million in October, and are 12.9 percent above the 3.50 million-unit level in November 2010. The median existing single-family home price was $164,100 in November, down 4.0 percent from a year ago.

Existing condominium and co-op sales were unchanged at a seasonally adjusted annual rate of 470,000 in November and are 6.8 percent higher than the 440,000-unit pace one year ago. The median existing condo price⁶ was $164,600 in November, which is 0.2 percent below November 2010.

Regionally, existing-home sales in the Northeast jumped 9.8 percent to an annual pace of 560,000 in November and are 7.7 percent above a year ago. The median price in the Northeast was $240,200, which is 0.1 percent below November 2010.

Existing-home sales in the Midwest rose 4.3 percent in November to a level of 960,000 and are 15.7 percent higher than November 2010. The median price in the Midwest was $133,400, down 4.0 percent from a year ago.

In the South, existing-home sales increased 2.4 percent to an annual pace of 1.74 million in November and are 12.3 percent above a year ago. The median price in the South was $143,300, which is 2.1 percent below November 2010.

Existing-home sales in the West rose 3.6 percent to an annual level of 1.16 million in November and are 11.5 percent higher than November 2010. The median price in the West was $195,300, down 8.4 percent below a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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NOTE: NAR also tracks monthly comparisons of existing single-family home sales and median prices for select metropolitan statistical areas, which is posted with other tables at: www.realtor.org/research/research/ehsdata. For information on areas not included in the report, please contact the local association of Realtors®.

¹Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

² Contract failures, all-cash transactions, investors, first-time buyers, and distressed sales are from a monthly survey for the Realtors® Confidence Index, posted at Realtor.org.

³Periodic benchmark revisions have been made to historic data back through 2007. Although there are downward revisions for total sales, there is little change to previously reported monthly comparisons or characterizations based on percentage change. There are comparable downward revisions to unsold inventory, so there is no change to relative month’s supply. Also, there is no change to median home prices.

A divergence in sales projections developed over time between the fixed model for calculating annualized sales rates and the actual marketplace, including a decline in for-sale-by-owner transactions, growth in multiple listing service coverage areas, geographic population shifts, some new-home sales trickling into MLS data and some individual sales being recorded in more than one MLS. Divergence of the data with other housing data metrics began in 2007.

NAR began to capture a larger share of actual transactions than was assumed in the calculation model based on the 2000 Census; resolving these issues has taking longer than anticipated in the absence of decennial data from the U.S. Census Bureau, which are no longer collected. Other major statistical series such as Gross Domestic Product and employment figures go through comparable periodic benchmark revisions to produce the most accurate data possible; the new benchmark process will permit annual revisions.

NAR began its normally scheduled process for benchmarking sales at the beginning of 2011 in consultation with outside housing market experts. Data for the new benchmark was discussed with representatives of organizations including the Federal Reserve Board, U.S. Treasury, Department of Housing and Urban Development, Freddie Mac, Fannie Mae, Mortgage Bankers Association, National Association of Home Builders, CoreLogic, etc.; and some individual economists.

The data and background are posted at http://www.realtor.org/research/research/ehs_benchmarking.

⁴Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, condos were measured quarterly while single-family sales accounted for more than 90 percent of transactions).

⁵The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.

⁶Because there is a concentration of condos in high-cost metro areas, the national median condo price often is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

The Pending Home Sales Index for November will be released December 29, and existing-home sales for December is scheduled for January 20; release times are 10:00 a.m. EST.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section. Statistical data in this release, other tables and surveys also may be found by clicking on Research.

REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics. Not all real estate agents are REALTORS®. All REALTORS® are members of NAR.