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Time to Sell?

Clients! If you are thinking of selling this spring into summer, now is a great time to get prepared as well as get your home on the market.

Interest rates are up a bit over two years ago, but right now they have drifted down before the spring rush.  Mortgage rates are pegged to the ten year Treasury bond, not the Federal Reserve Committee’s funds rate bump up.

Person Giving Keys on Man

They float and, good news is, they have come down for a time into the mid 4’s for a 30 year mortgage.

Another thing to consider, you don’t want to do a ‘fire’ sale if you want to get the most you can for your home.  Property values are somewhat softer with affordability and demand down, and chances are, your home will remain on the market longer.  Thus, starting now IS the wise move.

Best test for the market is the simplest: notice the open house signs on Saturdays and Sundays?  In a booming sellers’ market, few open houses are happening. This ended about six months ago.

On any given weekend today the signs are out. In full force.

Your buyer can come from across the street, across the country, even from other lands.  Most importantly, we aggressively market your home, professionally and with hustle.

But, this IS where we excel: when there is more property on the market than last year, we just turn up the afterburners!

We serve from Ventura County to San Diego, in residential AND commercial, investment, residential income properties.  Happy to answer questions. We have good experience with court-involved property sales as well, including probate and trust.

Our listings are available on over 80 listing sites, the multiple listing service is the engine and we are not troubled about doing open houses.

I have been helping homesellers and buyers since 1988; I am ready to help you get your home sold.  Same with our buyers: we work hard to find the right property for you!

–Len Beckman 
Broker/Owner of Millennium 3 Real Estate

(714) 267-1413 .   Yes, we STILL make house calls.

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Holiday Greetings!

Clients, family and friends!

I hope your Christmas was Cheery! … and Hannukah Happy, Mawlid an-Nabi Magnificent, Kwanzaa Krazy-fun, et al.!  We are a blessed nation. I am thankful we have more that unites than divides us, and I would like to thank those who serve us selflessly such as our firemen, police personnel, and the many military at home or deployed, etc. 

Can’t forget to wish you all a Happy New Years!   2019, already?

The New Year has always been a time of resolutions and taking time to think about personal goals for yourself and for your family. It can be a perfect time to talk about your housing goals!

If you are thinking of selling this coming year, we are happy to give you a values “check up”! Preparing now, even if you want to wait to spring, is a good thing.  But warning! No one knows how high the interest rates can go and if the demand slack off will continue into spring.  Murky crystal ball…

Whether you own or someday will buy, it is wise to have a basic understanding of the market, both housing and financial.  Properties are staying unsold longer currently, due in part to the interest rate rise, pricing levels and other factors. However, loan limits are also up which is a blessing for many here living in SoCal’s housing market.

We at Millennium 3 are ready to help!  If you are thinking 2019 is time to sell, now is the time to prepare and get accurate data on your home and the market.  And buyers, time to get pre-approved!  After all, we still make house calls.  Your “condition” is always different than the Jones or Smiths next door: ASK.  Your tax accountant is your confessor; I’m your house doctor.

Happy Holidays and Blessed New Years,
Len Beckman

(714) 267-1413
Lenbeckman@m3real.com
Millennium 3 Real Estate

DRE#:00989193

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Super HEROes and PACE Loans… Owners & Buyers Beware

Free money is always an alluring thing; and it takes a while to believe that “there is no such thing as a free lunch.”  And have you ever heard the phrase: “We’re gonna be in your neighborhood helping your neighbors get free (or inexpensive) energy efficient improvements.  Can we come by and give you an estimate?”

There are two popular programs that people use to add and upgrade to their home: The HERO Program is an energy efficient financing program in the United States; HERO stands for Home Energy Renovation Opportunity.  The mothership is known as “PACE: Property Assessed Clean Energy (PACE) which is a means of financing energy efficiency upgrades or renewable energy installations for residential, commercial and industrial property owners. … PACE can also be used to finance leases and power purchase agreements (PPAs).”

Simply put, these programs work by adding the payments of the loan onto your property taxes. The two main PACE financiers are Renovate America and Renew Financial.  Typically a 20 year repay, $3.6 billion was loaned last year for these renovate and tax loans.

Doing due diligence is incredibly important here. PACE/HERO tend to have some control of which contractors and such are hired to do the job. A good amount of the time this means that the home owner doesn’t get to shop around and find a fair market value on their upgrades resulting in quite an inflated cost. It is also becoming all too common for seasoned seniors who used PACE to upgrade their homes to lose their homes because of it…  Too many are being forced out of their homes because they are on limited or fixed income and can’t afford the increase on their property taxes for the windows or concrete upgrades. 

One example a local lender provided was a $70,000 price tag (for maybe $30,000 worth of work): all financed thru PACE loans.  It involved concrete and drought tolerant plantings on a small lot. When they saw their first tax bill, with a $7000 add on for clients on low income, they about died from the sticker shock.

The problem for seniors and other owners dawns often when they see that first property tax bill.  And that’s just the beginning…

You don’t pay your taxes monthly unless through an escrow account for taxes and insurance.  Normally, you pay half each, with the two annual prop tax payments on April 10 and Dec 10.

If you don’t pay, because you are choosing between taxes and tamales or other luxuries like food and gas, you get penalties.  Expensive penalties…

Note:  these are “breath on a mirror” loans.  No equity check nor debt ratio and you can borrow up to 15% (10% up to $700k home value).  Also, it is NOT deductible since it is repayment of improvements NOT property tax.

All these temptations leads to a growing problem: strapped new homeowners as well as seniors who get sticker shock in October when the tax bill comes due. Think about it: you get behind on your taxes, and the assessor will penalize you 10% for a late bill AND, to add salt to the wound, 18% per year (1.5% per month) penalties on the loan. What’s owed can grow exponentially. All for that drought tolerant lawn or windows that don’t pay you a monthly dividend like solar can.

Triple whammy: if you are forced to sell to prevent foreclosure or just because it’s time, Freddie Mac and Fannie Mae are out, FHA now as well. You have to pay off the outstanding debt in escrow: $50K? $70K?   You could be upside down, especially if the tax penalties are accruing, even with the positive market value increases since 2011. 

Call with your questions: we can help if you are in this situation.

There can be some situations where the loan helped out the owner, but it takes a lot of planning and knowledge on the part of the home owner.

When looking for a home for my niece and nephew in law, we found a great home in Norco that had solar.  I spent considerable hours talking to the current owners (who knew little about their two year old system) and the contractors and HERO/PACE people.

The PACE related upgrades for my Norco clients involved solar only; and Norco is an area of high summer heat AND rising electricity costs.  The jury is still out on the decision but in this case, there is visible returns on their decision. They have been selling energy back to the grid but again, this is no lottery: look for the devils AND angels in the details.

Suggestion:

GET AT LEAST TWO OR THREE BIDS FROM CONTRACTORS.  YOU WILL BE AMAZED.

Often, the contractors have a captive audience, you! The cost of the improvements may be a third or twice as much as if you are paying cash. The dirty secret is you ARE paying cash!  They get paid thru PACE and generally cashed out (except for solar)

Kids, tell your parents NOT to do this without a family conference; seniors are targeted by cell centers, neighborhood walkers and more.  Get multiple bids and ‘buy’ only what you need.  Solar has some payback but even then, you often are paying for the power over time if leased.  You could own the equipment but pay for the “access”

Super HEROes can become a villain in a hurry.  Don’t risk your home without some serious effort to know the facts.

Committed to helping you with your real estate needs, wants and questions.

Len Beckman
Broker/Owner of M3RealEstate

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Your Capital Gains may NOT be Taxed; Ask Me How!

A client recently asked when he and his wife should use his one time $125,000 over age 55 capital gains tax protection; they were approaching their mid 50s. To his surprise, I told him since 1996, you can keep the first $500,000 in real property “lottery winnings” when you sell your home, and do this every two years.  I googled and found that you can get 1990 (older) articles still talking about this outdated information on capital gains!

We talk about the laws, but what exactly are capital gains…? It’s about gaining capital, right? Not exactly… Simply put, “capital gain” refers to the profit you gained after selling your property (or investments, stocks, etc.).  There are varying tax brackets depending on income level and whether it was short-term or long-term, and in the case of selling your personal residence that little percentage change can make quite a difference (this is also why knowing your tax basis on your home is important when you are trying to sell!).

Regarding your home:

That “one time” rule of capital gains is long gone, yet often people hear it from a friend of their neighbor’s third sister, who’s married and read some where….  you get the drift.  Ask a professional, or call with questions! Buying and selling real estate are epic, life changing events and should be done with ALL the pertinent information.  Acting now or doing absolutely nothing both could be the right answer at this time in your life, but how do you know which it is?

The “new” tax law can be found here on the IRS website, but simply put:
“If you meet certain conditions, you may exclude the first $250,000 of gain from the sale of your home from your income and avoid paying taxes on it. The exclusion is increased to $500,000 for a married couple filing jointly.”  ~Publication 523 Cat. No. 15044W of the Internal Revenue Service (IRS)

Here’s an example:
The Smiths bought 123 4th street for $300,000 in 2011; today it is worth $700,000. That equals $400,000 in capital gains. Married, they get to exclude up to $500K (of the $400K), meaning they had no capital gain tax!  Single, Mr. Smith would exclude the first $250K, meaning he had $150K left waiting to be taxed.

However, you can also factor in selling costs, buying costs, and improvements to cut the capital gains taxes. Your tax basis or basis to compute the tax goes up (a positive thing!) with improvements like a home addition, pool, etc; basic maintenance isn’t necessarily usable. The costs of selling, like title, broker fees, and escrow, reduces the sales price. Together you get a number that you must report the next tax year. If the “gain” is less than 250/500K, dependent on single or married, you pay ZERO cap gains tax on the sale.

Of the eligibility rules, there is an “ownership requirement” that states that the home being sold had to be your primary residence for two of the last 5 years.  And it need not be continuous, but cumulative. Eligibility rules can be found in more detail starting on page three of the IRS document mentioned above.

Why should you care? If the Smiths hadn’t had a capital gains exemption, they could have been paying tens to hundreds of thousands of dollars on the federal and/or state level (depends on your income tax bracket).  Buying and selling a home is best done with a level head and all the facts.  We topped out in values in 2007-8; then the so-called mortgage meltdown.  Short sales, losing homes, misery AND opportunity.  Come 2011 or so, we hit home values bottom here in Southern California.  Since then, the last 7 years has seen the rebound in values.  Many homes purchased since 2005 are worth more, from $1 to hundreds of thousands.  Doing nothing IS a decision… so is planning ahead.

Is it time to sell? If it is, note that a dollar in a bank called “bank” or a bank called “home equity” have equal paper value until you do something; of course, the bank dollar is more liquid but inflation is eating away at it.

The bank dollar gathers a couple per cent interest (rates are rising, but savings rates do go up like mortgage rates), a good thing and savings for another day; the equity dollar, in fact up to $500,000 (adjusted up and down by improvements and costs of sale & purchase) of them, can be converted to gold, silver or ?? upon sale with NO tax exposure.  And it may be time to sell; demand has softened, but values are still up.

I am not a real estate attorney or CPA, so I do recommend your tax guy gets your call for details.  He or she knows your particulars, but this factor can mean turning your equity gold into a new home, trade up or go smaller, keeping or using some equity free of taxes for other purposes, increasing or changing your asset picture, etc.

I STILL make house calls.

Len Beckman

Broker/Owner of M3RealEstate

 

LOOK FOR OUR NEXT POSTING: HOW CAPITAL GAINS AND 1031 WORKS FOR YOU ON RENTAL/INVESTMENT PROPERTY

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Quick Tips on Trusts, Probate, and Living Wills

Everyone older than 18 should have a trust.   Aretha Franklin, what a voice…but she died, sadly, intestate, a fancy word for no will or trust. When this happens, the state is forced to make decisions for you.  And, as the sample Living Will (below) proves, we don’t always understand what these legal terms mean.

There is no doubt in this real estate dad of 11’s mind, it is important.  You don’t want arbitrary bureaucrats, even if they might mean well, trying to read your mind beyond this world. 

For example, ‘My Living Will’ shows creative ideas & strict interpretation of the law and familial needs, but I don’t think the little B’s really were born outside of wedlock.  They just interpreted mom’s comments literally but differently than she meant.

Put simply, if you don’t take care of your affairs, property and intentions, your “will”, guess what: the state happily will.

Your desires and intentions must be written;  This is where a living trust comes in. Take the verbal “Living Will” pictured above; it’s more than a little humor.  Her wishes were real but misinterpreted. With legal advice, she’d better understand HIPPA and other issues.

A trust is a contract to specify your wishes for your assets andyour heirs.  Life Insurance IS a kind of trust between you (trustor), your insurance company (trustee), and your beneficiaries, where the beneficiaries are paid without probate, since your wishes are legally specified.  Often the insurance policies are included in the trust listing of assets for convenience, but it is a contract that stands on its own as well.

Mom expressed her health wishes regarding the vegetative state that can happen; the kids took swift action to separate mom from wine and facebook.  So, if your will is not “contractually” housed inside a trust, as well as your bank accounts and real property, etc., a judge, who works hard to do it right, will decide usually with the aid of a good or not so good estate/trust attorney, a.k.a. probate. The judge works hard to do it right, 

In simple terms, probate is the state deciding for you; a trust is you deciding for you. The “little bastards” sired by Mr. and Mrs. B demonstrated a miniature probate by deciding her future based on imperfect interpretation of her audibles, her spoken will.  A trust is a contract with specific beneficiaries; probate is a dart board with people outside the family making decisions for you.  Of course, the state is not soulless, and there are rules of succession when it comes to probate. Who will be appointed to personally represent you (legal term is personal representative), however, could be a turkey shoot; next in line just may be Scofflaw, Jr. who frequents the casinos more than a Vegas janitor at the Golden Horseshoe.

If you have lots of kids, you can do trusts within a trust to guide future events; use wisdom not expediency.

I have been doing real estate since ’88, and part of my practice has been at the courthouse selling properties for court appointed receivers, judges and trust attorneys.

Example: partition hearings where owners disagree about selling, such as the property from three siblings, brother & sisters that co-owned but memories of who did what have oddly changed.  Or a large $100 million MediCal fraud case with 77 victims and property needing to be sold to satisfy restitution required by the excellent judge. Among others. The tragic and the triumph stories side by side all indicate you must make your wishes known.  

Sure, you can go online to get forms, but that online form won’t represent your heirs or you in court when a major defect in the legal is discovered.  Or it lacks sufficiency in really recording your wishes. And, you don’t need to own $10.98 million in GROSS wealth for this to be important; smaller “estates” need protection because probate fees are legislated and not cheap.

Recall Aretha Franklin’s four sons now must battle it out, since there was no trust. Not even a will. But, no, the probate judge must decide on the best information available. Her life work is up for years of court battles, unless the judge assigns an honorable person. Rumor has it, her longtime attorney often recommended a trust but she never did it.  News flash:  ALL of us will die someday and there aren’t  UHaul trailer hitches on hearses.

Best way is to hire a good estate/trust attorney to do it right.  It’ll cost you more than a $2 independence bill but not a million. My conclusion is a simple one: get with a good trust/estate attorney for a living trust; codify your wishes for your offspring and what you have acquired should be your own.  Concerned you will resemble the Matrix, held together by wires and tubes?  Then you need a knowledgeable honest trust atty who understands medical laws AND your wishes regarding DNR (do not resuscitate) or other medical needs.  BOTH are important. Otherwise, probate and/or conservatorship (if you CAN’T physically make your own decisions) could result.

If you don’t put your wishes in writing with a good trust attorney (we can give you the names of some): then  you don’t control much of anything. 

People, start your engines and get your trust going.

Len Beckman
Broker/Owner of M3RealEstate