Dec. 30, 2008 - The 10 Year real estate cycle

The 10-Year Real Estate Cycle -- Interesting Information From RISMedia

First and foremost, all markets are cyclical. This is true of many places in the United States.  A good example is Southern California.  In 1960, 1970, 1980 and 1990, the real estate market was at it's lowest point.  There was excessive housing inventory, foreclosures and short sales.  In l994 the market stabilized from the 1990 downturn.  Just as markets began to climb, the Northridge Earthquake hit.  The resulting damage throughout Southern California, sent their real estate market into a downward plunge again.  It took 3 years for the market to stabilize.  The next upswing in the market began in 1998 and it peaked in 2005.  Seven years into the 1998 cycle  the present downward trend began.

Of course, the above is not evident in Texas at this time, and hopefully it won't be.  We are feeling some of the downward trend effects that are happening nationally but on a much lower scale.  Hallelujah for Texas. 

Source: RISMedia/Skye  

Dec. 4, 2008 - Mortgage Forgiveness Debt Relief Act

Here Is Interesting Info From RISMedia.com

Prior to December of 2007, if a homeowner lost his or her house due to a bank foreclosure, and the bank forgave any difference between the price it was sold for and what was owed, the homeowner would owe aditional income tax on that portion.  For example, if the homeowner owed $300,000 on the mortgage, and the foreclosure sale brought $200,000, the bank would forgive $100,000.  However, the homeowner would owe income tax on the $100,000 forgiven by the bank.

Presently, and because of the economic stress existing nationwide, last December Congress eliminated the income tax due on the forgiven portion of the foreclosure sale described above.  However, this only applies to the tax years of 2007, 2008, and 2009.  The old rule would be in effect in the tax year 2010 and beyond.  Eligibility requirements are: it must be the homeowners principal residence; not vacation, investment or other properties.  The ceiling on forgiven debt is $2,000,000.

In regard to home equity loans, if part of the forgiven debt was a home equity loan and was used for purposes other than to build, buy or make big improvements, that portion is still taxable.  Home equity loans used for vacations are taxable.

Short sales happen when a borrower falls behind in his or her mortgage payments and lender approves the sale of the property for less than what is owed on the mortgage.  All proceeds must be turned over to the lender or bank.  The taxable income includes: the portion of the mortgage the bank forgave, any commission or other selling costs if this debt is cancelled.  However, Congress has provided tax relief for the years 2007, 2008, and 2009.  A short sale is not automatic, the bank has to weigh its cost against the foreclosure cost.

If the bank forgives a percentage of debt, say, 25%, of an outstanding homeowner, this is also taxable except for the years 2007, 2008 and 2009.  Compliments of the U. S. Congress.

If the homeowner takes advantage of the debt cancellation by the lender, the homeowner is required,
when the property sells, to reduce the basis (original price of the home) equal to the amount forgiven.  A homeowner can now receive a $250,000 (single) and $500,000 (married) capital gain exclusion on the sale of their primary residence.  Here is an example to clarify the concept based on a purchase price of $300,000 with a married couple selling the property:

Home sells for $750,000
Less Original Basis* ($200,000)
Less Capital Gain Exclusion ($500,000)
Gain on Sale $50,000
Capital Gains Tax at 15%= $7500 (Owed by Owner)

*This is the original basis or price of home $300,000, less the $100,000 debt cancellation by the lender.

Consult your tax accountant or attorney for any complicated situations not as clear cut as above.

Dec. 2, 2008 - Staging A Home For A Quick Sale And High Sales Price

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Homeowners cannot stage their own homes and create space because of the emotional attachment they have with the house contents.  Clutter begins with that favorite picture of Fido playing with the children or the end table given to the owner by the parents.  The objectivity of creating space is lost in the nostalgia brought on by bygone occurrences.

The conflict staging creates in the minds of homeowners is shown by their reluctance to reduce furniture in a room or rooms. Again, creating space is lost with their inability to focus on increasing the concept of space in the home for the buyer's benefit.  Another factor that does not fit in with space creation is room functionality.  Because there is no table on which to place a vase does not outweigh the need to create space for the buyer. 

A professional stager will recommend to the homeowner that every functioning table be decorated with fresh flowers to create a pleasing atmosphere.  Outdoor patio tables are set for dinner and game tables are ready for action.  Calm tranquil music should emanate through the house enticing the buyer to look further into this or that corner for special needs.  All TVs should be off during the time the buyer is present on the premises.

It is not true that a professional stager is very expensive because of the furniture that they want you to have present in the home.  The professional stager will attempt to use the homeowner's furniture if it is a positive feature and enhances the salability.

It is highly recommended that the homeowner hire a professional stager to maximize the available space and create an atmosphere conducive to the buyer's reason for wanting to see the inside of the house.  The appeal must be to the greatest number of buyers and the professional stager knows what needs to be done to maximize this number.  He knows what it takes to focus the buyer on the house and fulfill their need to see it.

RISMedia/Skye