Citigroup will hold off on foreclosures effective February 12th and will do so until either March 12th, 2009 or until the government finalizes all the details of its foreclosure relief package (whichever comes first).  JPMorgan will hold off on its foreclosures until March 6th (extending a program they had initiated last year).

To do your own search for foreclosed homes in the Twin Cities, click here and check the boxes in the Foreclosure option to see Minnesota homes in foreclosure that are listed on the MLS.

NAR President-Elect Charles McMillan sits down with NAR Chief Lobbyist Jerry Giovaniello to discuss the importance of the Housing Stimulus legislation currently pending on Capitol Hill.

There are currently at least 29 short sales that are available for sale in the Edina and Southwest Minneapolis markets (found by searching in agent comments for “bank approval” and “short sale”). In the Camden area of Minneapolis, there are at least 70. If I look at Minneapolis proper, the number is over 315…St. Paul proper gives us over 300 as well. So, needless to say, there are a good amount of short sales out there. The question is, what does that mean to you, the buyer? How can you keep your dream home from vanishing before your eyes (like the one above)? Short sales open a whole new can of worms throughout the buying process…but first, a short (no pun intended) explanation of them.

In the current market, its no secret that inventory is high. If you look back in history, you can see spikes of inventory followed by lulls. What makes this time around a little different are the sheer number of foreclosures and “short sales” that make up the inventory. Most people are familiar with foreclosures, but when I mention short sales to people, the glazed look over their eyes has led me into deeper explanations almost every time. A short sale usually occurs when a seller owes more on their mortgage than their house can sell for in the current market. The bank or lender agrees to reduce the loan due from the seller. The homeowner sells the home for the current market price and the bank or lender receives the proceeds from the sale. They will then release the homeowner from their debt obligation. I’ll get much more detailed regarding the short sale process in my next post (What Every Seller Should Know About Short Sales).

First, the good news…

Short Sales can bring great opportunities for home buyers. In the transactions that have involved a short sale where we have represented the buyers this year, the buyers have typically purchased the home at a good discount in comparison to similar homes in the neighborhood (analyzed through a comprehensive comparable market analysis). The homes are usually in pretty good shape as well, as they are more often owner occupied than foreclosures by owners who are looking to just get out from under their mortgages, rather than being forced to vacate by their bank or lender. It call all look like a pretty rosy picture…until

Now, the bad news…

Short Sales can be a nightmare to navigate through on the buyer side. First, lets assume a house has been selected by the buyer. In the comments of the listing, it says something like “sale subject to bank approval”. That’s your first clue that a short sale is being attempted by the seller. Now, one of two scenarios has taken place:

1. The listing agent and the seller did their homework before they put the home on the market and contacted the bank or lender. They talked to the bank or lender about what they were going to do, how they were going to price the home, and the proper steps and paperwork needed by the bank to help the short sale move along smoothly

2. More often, the listing agent and the seller have talked about doing the short sale with each other…but not with the most important entity in the transaction, the bank or lender.

We write up an offer on the property (including the dreaded phrase “Purchase Agreement Subject To Bank Approval”). We spend a couple of days negotiating with the homeowner and come to an agreement on all terms. Usually, that makes it close to a done deal (only inspection, financing, escrow to worry about)… But in a short sale, that’s only the first step. After we have worked hard to get an offer the buyer and seller can agree on, it gets submitted to the bank. The bank will assign it to someone in their “Loss Mitigation Department”. Now, keep in mind that the Loss Mitigation Department is probably grossly understaffed due to the recent influx of short sales an foreclosures. Its now typical to wait and hear absolutely nothing for 30 to 60 days (so make your closing dates realistic…ie “within 30 days of final bank approval”). And now here is the really bad news…after waiting for maybe 6 weeks, the bank can come back and accept, reject, or counter your previously negotiated agreement. So you could have agreed to this offer on May 1st, not received a response until June 15th and then gotten a flat rejection from the bank or lender. Or you could get a counter offer (read ultimatum many times ) of maybe $20,000 more than the previous agreed upon offer. Not to say we haven’t had short sale transactions accepted by the bank or lender within 30 days of submission with the agreed upon terms, but that is not the norm.

Now, I don’t want to scare all of you off from pursuing homes that are attempting to do a short sale. Just make sure you are working with an agent that does their homework upfront to see if the listing agent and seller have already contacted the bank or lender. Make sure you arepersistent with getting info from the listing agent (thus prompting them to stay in contact with the Loss Mitigation Department of the lender). Also, ensure you are looking at other homes throughout this offer process. There’s a good chance your short sale offer will not be accepted, or will be countered. If this is the case, its good to have some backup homes in place so you don’t have to go through the entire homebuying process from the start again and waste valuable time.

That’s it for now. I’ll be posting shortly on What Every Seller Needs To Know About Short Sales. Until then, if you have any further questions about short sales or real estate in general, feel free to leave a comment or contact us.

Owning a home tops the dream list for most Americans, and for plenty of good reasons. It’s a shelter for your family, a gathering place for your friends and a good long-term investment.

Tax breaks are also frequently cited as motivation for moving from renting to owning, and there are many ways a home can cut your tax bill.

But, as is often the case with the U.S. tax code, homeownership tax benefits are not always clear-cut. That frequently leads to some bad information floating around.

While myths, half-truths and misconceptions may abound, Bankrate.com has narrowed it down to five that, if you buy into them, could cost you.

1. My mortgage interest will reduce my tax bill.
This is true for the majority of homeowners, but not for all. And this tax break won’t work forever.

To take tax advantage of your home loan’s interest, you must itemize and come up with a total that exceeds your standard amount. On 2007 tax returns, the standard deductions are $5,350 for single taxpayers, $7,850 for head of household filers and $10,700 for married couples who file jointly. These amounts increase a bit each year to account for inflation.

“Given home prices these days, most owners are itemizing,” says Mark Luscombe, principal tax analyst with CCH of Riverwoods, Ill. By the time they count mortgage interest, property taxes and other nonhome deductions, such as state taxes and charitable gifts, their itemized totals easily surpass their allowable standard deductions.

But most is not all.

Taxpayers who buy a home late in the year, for instance, might find the standard deduction is more beneficial, at least initially, says Kathy Tollaksen, a CPA at Sikich in Aurora, Ill. In these cases, where you make only a few payments in a tax year, depending on your loan you might not pay much interest, at least not enough to exceed standard amounts.

Timing also could reduce or eliminate other home-related tax breaks.

“Quite a few states have real-estate taxes that are calculated in arrears. That is, they have already been paid or mostly paid (by the seller) by the time you buy,” says Tollaksen. “In the first year, you’re seeing taxes that are someone else’s responsibility so you’re not getting the full tax value of your real-estate taxes.”

The benefit of mortgage interest also could be a myth if you’ve lived in your home for a long time. In this case, you likely are paying more toward your loan’s principal instead of interest. So homeowners at the end of a loan term don’t get much, if any, from this tax break.

Or, as Bob D. Scharin, senior tax analyst and editor of Warren, Gorham & Lamont/RIA’s monthly tax journal “Practical Tax Strategies,” puts it, “Every deductible expense you incur may not produce a deduction.”

2. All costs related to my home are deductible.
There are no two ways about this one. It’s flat-out false.

“Some buyers think, hope, they can write off everything connected with the house,” says Tollaksen. “Not so. Association fees and property-insurance costs are not deductible.”

Neither, in most cases, is private mortgage insurance, which your lender probably required if your down payment was less than 20%. However, a new law changes the deductibility of PMI for mortgages originated or refinanced between Jan. 1, 2007, and Dec. 31, 2009.

If you got your mortgage and policy in that time frame, you might be able to deduct your insurance-premium payments. The law also extends beyond private insurance to others, including FHA, VA and rural housing.

There are some limits, though. The PMI deduction is phased out for taxpayers with adjusted gross incomes exceeding $100,000 and is totally eliminated once adjusted gross income reaches $110,000.

Don’t try to deduct basic maintenance, repair or home-improvement costs either.

Tollaksen says, “I’ve had people say, ‘I put a new roof on my home; can I deduct that?’ No.”

If you try to write off these expenses, expect to hear from the Internal Revenue Service and to pay a higher tax bill (and possible penalties and interest) after you refigure your taxes without the disallowed deductions.

However, you still need to keep track of these expenses.

“If you convert the home to rental property or sell it,” she says, “these costs will affect the property’s tax basis.”

A home’s basis is critical when it comes time to sell. And selling is also a tax area in which many people fall for myth No. 3.

3. I must use money from my home sale to buy another residence.
This used to be the only way to get around a tax bill on a home sale. Even then, you were only able to defer taxes by purchasing a new residence of equal or greater value with the profits from your other house. When you sold your final house, you’d owe those long-deferred taxes you had rolled over throughout the years. Home sellers age 55 or older were allowed a once-in-a-lifetime tax exemption of up to $125,000 in sale profit.

But on May 7, 1997, home-sale tax law changed. Still, a decade later, many homeowners are confused about the tax implications of selling.

“I recently heard some neighbors talking about having to buy another house when they sell to avoid the taxes,” says Scharin. “If the last time you sold the house was before 1997, you’re thinking of those old rules.”

Don’t worry. Most taxpayers still get a nice break. Now, if you live in the house for two of the five years before you sell, the IRS won’t collect tax on sale profit of up to $250,000 if you’re single or $500,000 if you and your spouse file a joint return.

“The law change has really affected people’s behavior,” says Luscombe. “Before, it didn’t really matter much whether you sold frequently or held onto your home for a long term. You basically could roll over the gain into a larger home and people could avoid tax until they sold for the final time without putting it into a replacement home.

“Now the law rewards people who sell frequently. In this current market, people who sell every couple of years can get and keep their gain,” Luscombe says. “But people who buy and hold might find they have reached the point where the gain exceeds the exclusion.”

That means they face unexpectedly high tax bills, even at the lower 15% capital-gains rate. The profit could also push them into a higher overall tax bracket, meaning they would make too much to claim some deductions, credits or exemptions. They also might even end up owing alternative minimum tax.

Another problematic consequence, says Luscombe, is that when the new rules took effect, people basically quit keeping records related to their homes.

“They thought: Since we’re never going to be taxed on the sale, there’s no need to keep track of what we paid and what improvements we made,” he says. The improvements add to your home’s basis, which you subtract from the sale price to determine your profit and whether any of it is taxable.

“Now with inflation in the housing market, a lot of people are selling homes in excess of the gains without any way to show that their tax bill should be less,” says Luscombe.

4. Putting my child on my home’s title is a smart tax move.
Worries about taxes on a residence sometimes lead homeowners to fall for this myth. It’s a particularly tricky one, because it combines confusion about residential taxes with the even more complex estate-tax area.

“Sometimes we’ll hear about taxpayers who, in doing some quick back-of-the-envelope estate planning, decide to put their home in the children’s names,” says Tollaksen. “The thinking is: My son or daughter won’t have to worry about this when I die.”

The goals: Avoid probate, keep the home in the family and get the property out of the parent’s estate for those tax purposes. Such a move, however, could produce other tax problems for your children.

Unless the child moves into the newly deeded house with the parent and lives there long enough (two of the previous five years) to make the house the child’s main residence, too, says Tollaksen, the son or daughter won’t get the $250,000 or $500,000 residential tax break when the child later decides to sell. Without establishing primary residency in the house, either before or after the parent passes away, the child’s ownership is viewed as an investment property.

Other parents opt to simply add a child’s name along with theirs on the title to the house, known legally as a joint tenancy. It doesn’t mean that all the owners live in the home, but simply that two or more people hold title to the property.

This, too, can produce tax complications.

Generally, when someone inherits a property, its value is stepped up. That means when the owner dies, the property becomes worth its fair market value that day.

But if the child co-owns the property with his parent, the child doesn’t get to fully use stepped-up basis. Tax law considers the addition of the child’s name to the title as a gift. And, along with that half of the home, the child receives half the basis that his or her parent has in the property.

This is known as the property’s carry-over basis. And it could be costly.

Consider, for example, that you bought your house many years ago and your basis in the property is $50,000. You add your daughter to the title. When you die, she inherits your half of the home, which by then is worth $250,000. A buyer offers $300,000 for the home.

Pretty good deal, right? From a real-estate perspective, yes. But not when it comes to your daughter’s tax bill on the sale.

Rather than owing taxes on just $50,000 more than the house’s stepped-up market value, your daughter will owe on three times that amount. Here’s the math:

What had been done with the best parental intention turned out to carry a big price because of this homeownership tax myth.

5. If I take a capital loss when I sell my home, I can write it off.
This myth, like No. 2, was probably started by wishful homeowners. Sorry, it’s just as wrong.

It is true that real estate, like any other asset, has the potential to go down as well as up in value. But unlike most of those other holdings, you cannot write off any loss you suffer if you must sell your main residence for less than what you paid.

That’s because your residence, under tax law, is considered personal property.

“When you sell your home for a loss, it’s not like other capital items,” says Scharin. “You don’t get to deduct personal property that you sell for a loss.”

“It’s the same as any personal property that declines in value,” says Luscombe, “like that old TV you sold to the neighbor kid so he could take it to college. You sold it for much less than you paid, but you can’t take a loss.”

You do, however, have to pay tax on gains you make when selling personal property.

But at least you now know the difference between fact and fiction when it comes to your residential property, which will help you make appropriate real-estate and tax decisions in the future. Full Story

When it comes to the environment, being a good global citizen starts at your doorstep. From recycling to using alternative cleaning materials, minor changes at home can add up to real benefits for the planet, not to mention your own health and happiness.

It may be a cliché, but the best way to be Earth-friendly is to cut down on what you consume and recycle whenever you can. The U.S. generates about 208 million tons of municipal solid waste a year, according to the National Institutes of Health. That’s more than 4 pounds per person per day. Every little bit helps; recycling just one glass bottle saves enough electricity to light a 100-watt bulb for four hours.

Here are 10 more easy ways from MSN.com to green your home:

1. Green up your appliances. Getting rid of that old refrigerator in the garage could save you as much as $150 a year, according to the Environmental Protection Agency. Appliance use comprises about 18% of a typical home’s total energy bill, with the fridge being one of the biggest energy hogs. If any of your appliances is more than 10 years old, the EPA suggests replacing them with energy-efficient models that bear their “Energy Star” logo. Energy Star-qualified appliances use 10%-50% less energy and water than standard models. According to the Energy Star site, if just one in 10 homes used energy-efficient appliances, it would be equivalent to planting 1.7 million new acres of trees.

Also, consider what you put in that energy-efficient refrigerator. Pesticides, transportation and packaging are all things to consider when stocking up. Buying local cuts down on the fossil fuels burned to get the food to you while organic foods are produced without potentially harmful pesticides and fertilizers.

2. Watch the temp. Almost half a home’s energy consumption is due to heating and cooling.

• Turn down the thermostat in cold weather and keep it higher in warm weather. Each degree below 68°F (20°C) during colder weather saves 3%-5% more heating energy, while keeping your thermostat at 78°F in warmer weather will save you energy and money. A programmable thermostat will make these temperature changes for you automatically.
• Clean your furnace’s air filter monthly during heavy usage.
• Consider a new furnace. Today’s furnaces are about 25% more efficient than they were in the 1980s. (And don’t forget to check out furnaces carrying the Energy Star label.)
• To keep your cool in warmer weather, shade your east and west windows and delay heat-generating activities such as dishwashing until evening.
• Use ceiling fans instead of air conditioners. Light clothing in summer is typically comfortable between 72°F and 78°F. But moving air feels cooler, so a slow-moving fan easily can extend the comfort range to 82°F, according to “Consumer Guide to Home Energy Savings” by Alex Wilson.

3. Save water. The Web site “Water — Use it Wisely,” created by a group of Arizona cities, lists 100 simple ways to save water. We’ll share just a few here:

• Put an aerator on all household faucets and cut your annual water consumption by 50%.
• Install a low-flow toilet. They use only 1.6 gallons per flush, compared to 3.5 gallons per flush for pre-1994 models. If you have an older model, adjust your float valve to admit less water into the toilet’s tank.

Of course, you don’t need products to save water — behavioral changes also add up quickly: using a broom instead of the garden hose to clean your driveway can save 80 gallons of water and turning the water off when you brush your teeth will save 4.5 gallons each time.

4. Clean green. Stop buying household cleaners that are potentially toxic to both you and the environment. In his book, “The Safe Shopper’s Bible,” David Steinman suggests reading labels for specific, eco-friendly ingredients that also perform effectively. These include grain alcohol instead of toxic butyl cellosolve, commonly found in carpet cleaner and some window cleaners as a solvent; coconut or other plant oils rather than petroleum in detergents; and plant-oil disinfectants such as eucalyptus, rosemary or sage rather than triclosan, an antifungal agent found in soaps and deodorant. Or, skip buying altogether and make your own cleaning products. Use simple ingredients such as plain soap, water, baking soda (sodium bicarbonate), vinegar, washing soda (sodium carbonate), lemon juice and borax and save money at the same time. Check out these books by Annie Bertold-Bond for cleaning recipes: “Clean and Green” and “Better Basics for the Home.”

5. Let there be energy-efficient light. Compact Fluorescent Light bulbs (CFLs) use 66% less energy than a standard incandescent bulb and last up to 10 times longer. Replacing a 100-watt incandescent bulb with a 32-watt CFL can save $30 in energy costs over the life of the bulb.

6. Save a tree, use less paper. You can buy “tree-free” 100% post-consumer recycled paper for everything from greeting cards to toilet paper. Paper with a high post-consumer waste content uses less virgin pulp and keeps more waste paper out of landfills.

Other tips:

• Remove yourself from junk mail lists. Each person will receive almost 560 pieces of junk mail this year, which adds up nationally to 4.5 million tons, according to the Native Forest Network. About 44% of all junk mail is thrown in the trash, unopened and unread, and ends up in a landfill. To stem the flow into your own home, contact the Direct Marketing Association’s Mail Preference Service at P.O. Box 643, Carmel, NY 10512, or download the online form. Opt out of credit card or insurance offers at OptOutPrescreen.com or by calling 888-567-8688, a single automated phone line maintained by the major credit bureaus.
• Buy unbleached paper. Many paper products, including some made from recycled fibers, are bleached with chlorine. The bleaching process can create harmful byproducts, including dioxins, which accumulate in our air, water and soil over time.

Finally, here’s a third answer to the old “paper or plastic” question: No thanks. Carry your own cloth bags to the store to avoid using store bags.

7. Want hardwood floors? Opt for bamboo. Bamboo is considered an environmentally friendly flooring material due to its high yield and the relatively fast rate at which it replenishes itself. It takes just four to six years for bamboo to mature, compared to 50-100 years for typical hardwoods. Just be sure to look for sources that use formaldehyde-free glues.

8. Reduce plastics, reduce global warming. Each year, Americans throw away some 100 billion polyethylene plastic bags — from grocery and trash bags to those ultra-convenient sandwich bags. Unfortunately, plastics are made from petroleum — the processing and burning of which is considered one of the main contributors to global warming, according to the EPA. In addition, sending plastics to the landfill also increases greenhouse gases. Reduce, re-use and recycle your plastics for one of the best ways to combat global warming.

9. Use healthier paint. Conventional paints contain solvents, toxic metals and volatile organic compounds (VOCs) that can cause smog, ozone pollution and indoor air quality problems with negative health effects, according to the EPA. These unhealthy ingredients are released into the air while you’re painting, while the paint dries and even after the paints are completely dry. Opt instead for zero- or low-VOC paint, made by most major paint manufacturers today.

10. Garden green. First, use compost instead of synthetic fertilizers. Compost provides a full complement of soil organisms and the balance of nutrients needed to maintain the soil’s well-being without the chemicals of synthetic fertilizers. And healthy soil minimizes weeds and is key to producing healthy plants, which in turn can prevent many pest problems from developing to begin with.

• Use native plants as much as possible. Native plants have adapted over time to the local environment and support native animals. They also use less water and require less of your attention.
• Focus on perennials. Gardening with plants that live for more than one year means you don’t have to pay for new plants every year; it also saves the resources used commercially to grow annuals.
• Stop using chemical pesticides. American households use 80 million pounds of pesticides each year, according to the EPA. These toxic chemicals escape gardens and concentrate in the environment, posing threats to animals and people, especially children. A better alternative is to try a variety of organic and physical pest control methods, such as using diatomaceous earth to kill insects, pouring boiling water on weeds or using beer to bait slugs. You can find more non-chemical pest control tips at the National Audubon Society’s site.

Finally, consider using an old-fashioned push mower. The only energy expended is yours. Full Story ]]> http://donedam.com/2008/02/15/more-green-living-10-easy-tips-for-greening-your-home/feed/ 1 http://donedam.com/2008/02/15/will-paying-your-mortgage-off-early-payoff-for-you/ http://donedam.com/2008/02/15/will-paying-your-mortgage-off-early-payoff-for-you/#comments Sat, 16 Feb 2008 04:04:26 +0000 Don http://donedam.com/2008/02/15/will-paying-your-mortgage-off-early-payoff-for-you/

Does it ever make sense for a homeowner to pay off a mortgage early?

According to Kiplinger.com, the answer depends on the interest rate of the loan and the timing of the payoff.

Paying down a 6% mortgage is the equivalent of earning a 6% taxable return on your money. You should be able to beat that return by investing your money elsewhere, especially when investing for the long term.

“If you have a very low interest rate on your loan and know that you can earn a higher return with additional money you have to invest, it’s OK to keep the mortgage,” says Los Angeles CPA Michael Eisenberg.

Investing outside your mortgage also gives you easier access to your funds because you don’t have to borrow against your home equity to get your money. Paying more toward your mortgage can reduce the total interest paid, and you might pay off your loan earlier. But it doesn’t lower your payments, and if you’re still in the early years of the loan, you might not see the difference for a decade or more.

How many times have you done your taxes and, three weeks later, learned you had missed the opportunity for a deduction? Too many, I’m sure. How can you not miss these deductions the next time? Start planning now.

I’ve posted previously about What is Deductibe When Buying a Home, but here are two of the most often overlooked tax deductions for current homeowners that can affect your tax bill for 2007 and your tax planning for 2008.

New points on refinancing

With interest rates so low over the past few years — even in 2007 and 2008 — lots of homes have been refinanced, sometimes more than once.

Any points you pay to refinance your home can be deducted on a monthly basis over the life of the new loan. So, if you refinanced your mortgage on June 1, 2007, for a 20-year term, seven out of 240 months will have passed after Dec. 31. If you paid $2,400 in points, you can write off $70 ($10 a month for seven months) for 2007. You can write off $120 for 2007 and each year thereafter until the points have been deducted in full. The amount may not be huge, but every little bit helps.

Old points on refinancing

This is one deduction lots of people miss. All unamortized points on an old refinancing are deducted in the year of a new refinancing.

So, let’s say you refinanced on June 1, 2006, and paid $2,400 in points. You refinanced again on June 1, 2007. You can deduct all the remaining points on the 2006 loan. That’s $2,280 plus the $50 you could deduct for January through May 2007. Likewise, if you refinance the 2007 loan in 2008 (if interest rates stay low), you will be able to write off the remaining balance on your 2008 return. Full Story

With rents in many cities skyrocketing, men and women marrying later and a divorce rate for first-time marriages that hovers at about 45%, it’s no wonder more American couples are deciding to shack up.

There were an estimated 6.02 million unmarried-partner households in the U.S. in 2006, according to the Census Bureau’s latest research. This number includes 779,867 same-sex households. When the census began measuring unmarried partners in 1996, there were only 2.86 million opposite-sex couples.

Though you likely know at least one cohabiting pair, unlike their married and single peers, unmarried couples are not an easy group to quantify. They cannot check the single or married box truthfully, and there is little but a shared address to signify their official commitment.

But couples who live together have needs, too. In the Forbes.com roundup of the best cities for couples, they’ve identified what this growing demographic requires to maintain a stable relationship while on the path to marriage or something less traditional. They selected the country’s 40 largest metropolitan areas and collected data on marriage and divorce rates for the 20- to 34-year-olds who live there, the affordability of a starter home, the area’s income disparity and the availability of family counseling.

Dallas, the city made famous on television for its scheming lovers and dysfunctional relationships, topped the list. Four other Texas cities are in the top 10: Houston, Austin and San Antonio. Cities at the bottom of our list, with low marriage rates, high income disparity or poor housing affordability, included Cleveland, Providence, R.I., and Miami.

Top 5 cities for couples

1. Dallas
2. Houston
3. Minneapolis
4. Denver
5. Austin, TX

You can see Forbes’ full slide show of best cities for couples here. Full Story