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Friday, November 30, 2012

3.8% Tax: What's True, What's Not

Ever since health care reform was enacted into law more than two years ago, rumors have been circulating on the Internet and in e-mails that the law contains a 3.8 percent tax on real estate. NAR quickly released material to show that the tax doesn’t target real estate and will in fact affect very few home sales, because it’s a tax that will only affect high-income households that realize a substantial gain on an asset sale, including on a home sale, once other factors are taken into account. Maybe 2-3 percent of home sellers will be affected.
Nevertheless, the rumors persist and the latest version that’s circulating falsely say NAR is advocating for the tax’s repeal. But while NAR doesn’t support the tax (it was added into the health care law at the last minute and never considered in hearings), it’s not advocating for its repeal at this time.
The characterization of the 3.8 percent tax as a tax on real estate is an example of an Internet rumor, says Heather Elias, NAR’s director of social business media. Elias and Linda Goold, NAR’s director of tax policy, sat down for a discussion of how the tax works and how Internet rumors work and you can find their remarks in the 6-minute video below.
Goold says the tax will affect few home sellers because so many different pieces must fall into place a certain way for the tax to apply. First, any home sale gain must be more than the $250,000-$500,000 capital gains exclusion that’s in effect today. That’s gain, not sales amount, so you really have to reap a substantial amount for the tax to even come into play. Very few people are walking away with a gain of more than half a million dollars today, even in the high-end home market, so right off the bat only a few home sellers would be a candidate for the tax.
For the few households that do see a gain of more than the $250,000-$500,000 exclusion (that’s $250,000 for single filers and $500,000 for joint filers), only the amount above the exclusion would be factored into the tax calculation, and that would still only apply to high-income households, which the law defines as single people earning $200,000 a year and joint filers earning $250,000 a year.
So, if you are a households with annual income of $250,000 or more and you earn a gain of more than $500,000 on your house (again, that’s after the $500,000 exclusion), any amount of gain above the exclusion would be plugged into a formula to see if it’s taxable. If it turns out that it’s taxable, then the amount could be subject to the 3.8 percent tax. If the household had a gain of more than $500,000 but only earned $249,000 a year in income, the tax wouldn’t apply.
(Note that these are just hypothetical examples. To know if a case would really be subject to the tax, a professional tax preparer or tax attorney has to look at all the particulars of the tax filer’s case. Only a tax professional is in a position to say the tax is applicable, but the examples cited here could help you get a sense of how the tax works.)
The other thing about the tax worth noting is that, although it takes effect in 2013, any impact on taxes wouldn’t happen until 2014. That’s because the tax filer would do the calculation in 2014 for the 2013 tax year. Because it’s not a tax on a real estate sale but rather on a capital gain, it’s not calculated at the time of an asset sale, whether that asset is a house or something else. It’s calculated at the time the filer figures his or her tax.
This is all explained clearly in the video, so if you have questions about how the tax works, or if you’re still hearing rumors about the tax and you’re not certain of the accuracy of what you’re hearing, the video should prove helpful.
Information provided by REALTOR.ORG  | SEPTEMBER 2012 | BY ROBERT FREEDMAN

Tuesday, November 27, 2012

Prequalification vs. preapproval: What's the difference?

Seller's want to know you have the ability to obtain a loan before you enter their home and as agents, we want to ensure that the time we spend showing homes is with preapproved customers.  These two home mortgage terms often get used interchangeably, but in fact, they're very different.

  • Prequalification is an estimate of the loan amount a lender may be willing to lend based on the preliminary information provided.  A prequalification is really just a general figure to help the buyer get started shopping for a home.

  • Preapproval is more formal than a prequalification and means that a lender has tentatively committed to an amount for a buyer's loan.  It is based on a preliminary review of the buyer's credit information and provides the approximate mortgage loan amount and monthly payment for which the buyer qualifies.
As always, I can give you names of lenders who can help you with the process.  Just let me know.

Thursday, November 1, 2012

The West Wins: Top 10 'Turnaround' Housing Markets

Western states continue to dominate, showing some of the fastest paces of recovery in the nation’s housing markets. With inventories falling, national median list prices increased 2.54 percent year-over-year during the third quarter, reports. 

I sold this Olympia home in July for full asking price in less than 30 days.

The site released its rankings of the top 10 turnaround towns, based on third quarter housing data of median list price increases, inventory levels, and employment rates.

1.     Oakland, CA
2.     Sacramento, CA
3.     San Jose, CA
4.     San Francisco, CA
5.    Seattle-Bellevue-Everett, WA
6.     Bakersfield, CA
7.     Santa Barbara-Santa Maria-Lompoc, CA
8.     Phoenix-Mesa, AZ
9.     Fresno, CA
10.   Miami, FL