Capital Gains Rate – What Now?

Many people I spoke to prior to the end of 2010 wondered what would happen to capital gain tax rates on January 1, 2011.  Some even jumped through hoops to complete the sale of property before the end of the year.  As it turned out, the boys in Congress extended the capital gain rates in mid December; for at least for two years.  Thanks guys.

What to do now?  Do you understand how Congresses actions will affect you?  If not, you’re not alone.  Now that we are well into 2011, here are some details about what it all means.  I’m not an accountant by any means.  However, here is a brief summary of portions of the Tax Relief, Unemployment Insurance Reauthorization and Jobs Creation Act of 2010 (not surprisingly referred to as “the extension of the Bush Era Tax Cuts”) which are likely to impact real estate investors.

Capital Gain and Dividend Rates – Current rates were extended for two-years for all taxpayers with a maximum rate of 15% for both.
Personal Tax Rates – Current rates were extended for two-years for all taxpayers with the top rate remaining at 35%.

Social Security Tax – The employee tax rate of 6.2% on the first $106,800 of wages drops to 4.2% in 2011.

Alternative Minimum Tax – Current exemptions were extended for all taxpayers for two-years.

Estate Tax – An exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years; the exclusion will become indexed beginning in 2012.

Gift Tax – Like the Estate Tax, a Gift Tax exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years, with the exclusion being indexed beginning in 2012.

Other Extensions – The $1,000 child credit; an additional standard deduction for real-estate taxes; extension of 15-year cost recovery for certain leasehold improvements, restaurant buildings and qualified retail improvements (through 2011); and the extension of various energy credits (through 2011).

Although the legislation provides some certainty for two years, we will find ourselves dealing with this question again in 2012.  Since that is also an election year, it may be interesting. Stay tuned!

Best Real Estate Markets

More than 15 states are projected to experience housing inflation or appreciation during the year, according to Housing Predictor, which releases an annual report of its choices for best and worst housing markets.

The top five housing markets are:
1. Portland, Maine
2. Kansas City, Kan.
3. Tri-Cities, Wash.
4. Omaha, Neb.
5. Fargo, N.D.

Time is not your friend and neither is poor information!

There are plenty of real estate agents running around who call themselves short sale specialists because they slept through a 3-hour class somewhere but have closed few, if any, actual short sale transactions. We don’t pretend to have all the answers . . nobody does as things change everyday. However, we know where to go for good solid information. If you, or someone you care deeply about, is having trouble with making their mortgage, please call us today. Time is not your friend and neither is poor information!

Relocation survey shows America’s growing preference for smaller homes

The really big McMansions are quickly becoming the housing equivalent of “harvest gold” or “avocado green” appliances as more Americans are going for smaller residential footprints, according to a new Relocation.com consumer lifestyle survey.

Nearly half the respondents of the survey said their ideal home size would range from 1,000-1,999 square feet. Nearly three of every ten buyers (29 percent) prefer homes that are 2,000 to 2,999 square feet. Only 2 percent reported a home would have to be larger than 5,000 square feet to match their ideal residence.

Five years ago, the average home’s size was 2,400 square feet — about 400 square feet larger than what is desired today — according to the National Association of Homebuilders (NAHB). Relocation.com conducted the survey to gauge lifestyle factors that drive moving and relocation decisions in the U.S. Read more

Take our Poll!

Q: Why do agents make appointments and don’t show?

Q:  A Home Seller recently asked “Why do agents make a appointment for showing and don’t show up and don’t even call to cancel the appointment?” The person made arrangements to be out of the house, cleaned really good picking up after the kids and pets. She found out the agent never did come by and never called to cancel.  She said this has happened more than once and is very frustrating.

A:  Fortunately, this situation does not happen that often, at least with my listings in the Seattle area.  Most agents will call back to cancel or postpone the showing. Sometimes there are delays, clients will take longer at each of the other homes they are touring, or clients cancel or have to postpone. I advise my client sellers to get the name and phone of the agent making the appointment.  If they don’t show, I give them a call to ask a few “pointed questions.  Good luck!

2011’s Strongest and Weakest Housing Markets

Home prices are expected to rise in 40 percent of major metropolitan areas, according to Veros Real Estate Solutions, a research firm that provides information to the mortgage industry.

The markets Veros expects to be strongest are:

1. San Diego/Carlsbad/San Marcos, Calif.
2. Kennewick/Richland/Pasco, Wash.
3. Pittsburgh
4. Fargo, N.D.
5. Washington, D.C. metro area

The five markets Veros expects to be weakest are:

1. Reno/Sparks, Nev.
2. Orlando/Kissimmee, Fla.
3. Boise City/Nampa, Idaho
4. Deltona/Daytona Beach/Ormond Beach, Fla.
5. Port St. Lucie/Fort Pierce, Fla.

Brown Air?

The American Lung Association, in its report State Of The Air 2010, lists metropolitan areas with air quality bad enough that they make it onto the list of the Top 10 Dirtiest Cities in America. The 20 million people in these cities are at higher risk of asthma and chronic bronchitis.  Is your city on the list?  Do you live “down wind” of one of the toxic cities?  There are seven cities in the Top-10 List located in one state.  Do you know which one?  Click here to find out!

How important are contract dates when buying real estate?

How important are contract dates when buying real estate?  What if I don’t have a time limit on how long the seller has to respond to my offer?  How much time do they have?

In Western Washington, MLS purchase-and-sale agreements have expiration dates written into the boilerplate.

For a regular home purchase, (not a foreclosure or short sale) there’s an expiration clause at the in the contract. This simply means you can specify a date, or, if none is specified, the contract defers to the default language.

If the contract is a “distressed sale”, for example a short sale purchase, there is an additional addendum which specifies a date under which the contract becomes voidable if the lender (not the seller) has not approved the short sale.

Dates are very important in real estate purchase and sale transactions.  They allow for certain protections such as the return of an earnest money deposit if buyer and seller cannot come to terms. Or it could allow the seller the right to cancel in the same manner, so be sure your agent discusses all contract dates with you.  Your tactics and strategy matter!

How Much Do You Pay In Taxes?

How much do you really pay in taxes?  Bet you have an idea but don’t know for sure.  How does the Beatles song Taxman go, “Let me tell you how it will be, there’s one for you, nineteen for me, Cause I’m the Taxman.”

Are you in the top 1% or the bottom 50% of all earners? Most of you know I really hate taxes, especially when my money is spent of dumb stuff, especially in the Seattle area.

I ran across this cool tool from Kiplinger the other day and thought I’d share with you.  Find out what portion of the tax burden you bear according to your income status.