Investor Business – 1031

Hope you are doing well today!
 
Occasionally it is great to send out an article related to real estate that explains one of the tax benefits.  In this case it is the investor, who really can be anyone who has a rental property, or is thinking of buying one. 
 
The 1031 exchange has been used for years to avoid paying taxes on the sale of real estate.  The the article below while brief, does offer a nice summary of this rule.
 

To your success! 
 
Don

The Financial Workshop Returns!

THURSDAY, March 7th, 6:30-8:30 PM

REGISTER NOW! (free but seating limited to 18)

Please use the form at the bottom of this post or email dparsons@commercemtg.com or call 714-801-5810 with name, number attending, phone number and best contact e-mail address.

Your Home is the Safest & Fastest Path to Financial Security – Wealth Building – Retirement Solutions

The most important workshop you will ever attend. It is critical to your financial future whether you are single, married, rent or own a home, are 20 or 80. Financial literacy is a must to navigate successfully the years in front of you, whether starting out or preparing for retirement. No invitations for fancy dinners and pitches to buy annuities or investments, just simple education for my private clients and friends, presented in a fast paced, light atmosphere setting.

Why do the rich get richer, and poor get poorer? It is literacy, handed down OR, LEARNED that makes the difference. Anyone with a desire to learn and some discipline with a plan/coaching, can be successful in building financial resources, even live or retire in style!

You will learn:

  • Why your 401K will not let you retire
  • Why renting is a disaster and how to buy with $500.00.
  • Why your home is the primary path to financial security and successful retirement
  • Should you pay your house off sooner than later?
  • Is real estate forming another bubble?
  • What an average person’s expenses today will look like in 5,10, 20, 30 years
  • What an average person’s investments may look like in 5, 10, 20, 30 years
  • Should you sell and relocate to another state?
  • How medical issues could upset the whole apple cart
  • If you inherit a property or receive a lump sum of cash what you should do?
  • Should you buy a rental property or rent out your residence and buy another home to move into….
  • Can you do all this without saving money? Often yes! (Caution)

Each of these areas are a workshop in itself, but we will cover enough of each to give you a basic understanding and hopefully some amazing solutions. This is a positive workshop with the best tools for success. Yes we will share the pain, but once understood, there is awesome gain!

Please fill out this form and we will send you a confirmation.
  • Enter the characters you see in the box below.

Thanks for being a great client!

Your host and servant for 30+ years,

Legal: Is Your View Home Protectable?

From J. Scott Souders, attorney:

1.    If You Pay Extra Money For A View Is It Protectable?

I have received many phone calls over the years from homeowners who want to sue their
neighbors or the City or their HOA because they have “lost their view” due to construction on a neighboring lot or the neighbor’s trees have grown like weeds.  Almost without question the aggrieved party feels strongly that they paid for this view and it’s a protectable right under California law.

How many times do you see in the MLS where the agent advertises and promotes what a great view their listing enjoys.  Obviously views come with a price, particularly along the coast here in Orange County.  Even non-coastal properties are hawked by agents as having panoramic views of mountains or city lights with the expectation that will cause a buyer to pay more money for the property.

The issue: Are all view rights protectable in California?

The answer to that question is yes if you happen to live in one of the handful of cities that have adopted view ordinances.  Those cities that I am aware of, which may not be exhaustive because I don’t track all of the cities that have view and/or tree ordinances, are as follows:

a.    Laguna Beach
b.    Del Mar
c.    Rancho Palos Verdes
d.    Orinda

If you live in one of those cities you can most probably file an action in court or petition the city to have your views maintained and/or restored as a result of a neighbor’s wrongful action.

If you live in an HOA your CC&Rs may provide for view protection if the view obstruction is within your community only.

Now for those who don’t live in HOAs that have CC&Rs that provide for view protection or within one of those handful of those cities what are your options if someone attempts to impair  your view by letting their trees grow or trying to develop their own property to their satisfaction and enjoyment.  The answer is there may not be much you can do and you could be wasting money starting a legal fight which you can’t finish successfully.  The reason why I say that is based upon the following:

a.    Just because you have someone blocking your view doesn’t necessarily
constitute a nuisance in which you can sue the neighbor claiming nuisance.  For instance a homeowner in Lake Tahoe sued his neighbor claiming that the neighbor’s new deck obstructed his views.  The homeowner lost.  The holding of the case was that a landowner has no natural right to air, light or an unobstructed view and the law is reluctant to imply such right. See Posey vs. Leavitt 229 Cal App 3rd 1236, 1240.

Just because the neighbor’s view obstruction causes a loss of value to your property does not constitute a cause of action in favor of the aggrieved homeowner.  It is not a nuisance according to case law.  See Oliver vs. AT&T Wireless Services 76 Cal App. 4th 521, 530.  In that case the aggrieved homeowner got to “enjoy” a new 130ft. cell tower on the adjoining property.  This was held not to constitute a nuisance even though it substantially decreased the value of the homeowner’s property.  Applying those two aforementioned cases, if the neighbor legally erects a structure that blocks your view you many have no remedy or cause of action.  If the neighbor lets the trees fill in and grow, again, you may not have a case unless the neighbor is violating any city tree view ordinance or CC&Rs of an HOA.

b.    You can’t claim inverse condemnation against the city that planted large redwood
trees in a nearby park thereby impairing the view from the owner’s backyard which previously had an unobstructed view of the city lights of Los Angeles and the Hollywood Hills.  In the case of Boxer vs. City of Beverly Hills 246 Cal App. 4th 1212, the homeowner claimed inverse condemnation because his views were negatively effected.  Therefore, the value of his property tanked.  The homeowner claimed that the city owned him just compensation for the loss of the value to his property.

The court of appeal said no way. There has been no physical invasion or physical damage to the homeowner’s property.  Nothing has been taken within the meaning of the California Constitution.  Diminution of the value of the home without more does not constitute a compensable taking.

Conclusion: Before you have your clients shell out big bucks to buy into that perpetual view that they are paying extra for familiarize yourself with these cases.  If the subject property is not located in one of those handful of cities that has a view or tree ordinance or an HOA who has view restrictions in the CC&Rs be prepared to punt on questions dealing with the ability of the buyer to enforce views if the neighbor impairs their view.  Always pass on that type of question to an attorney and, even better, put it in writing that you cannot give legal advise, consult an attorney.

Scott Souders is a real estate attorney who has practiced real estate law in excess of 42 years in Southern California.

Disclaimer:  The Real Estate Law Update cites cases or statutes which are summarized and should not be relied upon without fully reading the cases or statute in the advance sheets and shepardizing the same and consulting with your own attorney.

Very truly yours,

J. SCOTT SOUDERS

To read more Law Updates, visit ScottSouders.com

 

Copyright © 2019 Law Office Of J. Scott Souders, All rights reserved.
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881 Dover Dr., Suite 390

Newport Beach, CA 92663

New Laws for 2018

Fannie Mae Guidance on Federal Income Tax Repayment Plans

We’re officially in the midst of tax season (if you haven’t done yours already, consider this your reminder!), which magnifies the amount of borrowers we encounter who owe back taxes to the IRS.

Owed taxes that aren’t paid can result in tax liens, which take superior position to mortgage liens – an item of great concern for lenders.

While Tax Liens will always need to be repaid before a borrower is eligible for a Conventional loan, per a recent change to the Fannie Mae Selling Guide borrowers who have entered into e repayment plan are eligible under the following conditions:

When a borrower has entered into an installment agreement with the IRS to repay delinquent federal income taxes, the lender may include the monthly payment amount as part of the borrower’s monthly debt obligations (in lieu of requiring payment in full) if:

  • There is no indication that a Notice of Federal Tax Lien has been filed against the borrower in the county in which the subject property is located.
  • The lender obtains the following documentation:
    • an approved IRS installment agreement with the terms of repayment, including the monthly payment amount and total amount due; and
    • evidence the borrower is current on the payments associated with the tax installment plan. Acceptable evidence includes the most recent payment reminder from the IRS, reflecting the last payment amount and date and the next payment amount owed and due date. At least one payment must have been made prior to closing.

Note: The payments on a federal income tax installment agreement can be excluded from the borrower’s DTI ratio if the agreement meets the Fannie Mae terms for Debts Paid by Others, or Installment Debt.

1st time buyers – new CalHFA income limits – wow!

A very strange move after many years, related to 1st time buyer programs with the state of CA. Formerly, until a few days ago, the down payment and closing cost assistance programs with CalHFA were pretty restrictive regarding the maximum amount of income a family could make and still use the programs.

On average, in OC that seemed to be in the $75,000 to $85,000 range roughly, unless you had a very large family.

But now you can make up to $174,2000 per year in OC, and $128,300 in LA county. San Diego county is $157,050, Riverside and San Bern. $128,700 and San Fran. county $228,300.

Now that’s some income relief for 1st time buyers. And, for ALL the state, the maximum sales price is $660,000. So now, if a prospective 1st time buyer (anyone who has not had a home in the last 3 years) has the income to qualify for a property, they can do it much easier and with ridiculously little cash needed.

I and our company are fully approved to do these loans. Recommendation is 40 day escrows. Conventional, FHA & VA products are available on these assistance programs. Gifts are also allowed.

This would work really well, using the “Cost of Renting” illustration I may have sent you personally earlier in the week, and then down payment and closing cost assistance. 🙂 Start those engines!!!!!

Don

PS If you did not receive the “Cost of Renting” illustration, e-mail me for a copy.

DID YOU KNOW? Fannie Mae Pending Sale Option

(this has been around for awhile)

Purchase transactions can be made difficult when the borrower retains or plans to sell their departing residence, but will not be rented or sold prior to closing.

For this reason, Fannie Mae provides an opportunity to omit the liability from the vacated property, as outlined below:

If the borrower’s current principal residence is pending sale, but the transaction will not close with title transfer to the new owner prior to the subject transaction, and the borrower is purchasing a new principal residence, the current PITIA and the proposed PITIA must be used in qualifying the borrower for the new mortgage loan…

However, Fannie Mae will not require the current principal residence’s PITIA to be used in qualifying the borrower as long as the following documentation is provided:

  • the executed sales contract for the current residence, and
  • confirmation that any financing contingencies have been cleared.

Hopefully, when you really need a purchase to close and can’t due to the PITIA debt on their current residence in escrow, and they don’t have to have that cash to close, or can creatively get it (legally, and per guidelines 🙂 somewhere else, then this option foots the bill!

Have a great weekend!

Don

County Loan Limits Increased for 2018!

Happy Friday!

Wednesday, November 29th, the Federal Housing Finance Agency (FHFA) announced updated county loan limits for 2018.

Fannie Mae and Freddie Mac employ the FHFA established loan limits, and recognized the newly increased limits (applicable to both Conforming and High Balance loan amounts) as shown below:

Conforming Loan Limit:

  • 1-Unit: $453,100
  • 2-Unit: $580,150
  • 3-Unit: $701,250
  • 4-Unit: $871,450

High-Cost Loan Limit:

  • 1-Unit: $679,650
  • 2-Unit: $870,225
  • 3-Unit: $1,051,875
  • 4-Unit: $1,307,175

Note: Maximum high-cost loan limits are not available in all counties.

If you’re interested in obtaining the new limits on a per county basis, Fannie Mae has provided an updated spreadsheet for 2018 which can be found https://www.fanniemae.com/singlefamily/loan-limits

This news presents a great opportunity for clients to refinance who recently used High Balance or Jumbo products and could benefit from an improved Conforming or High Balance rate! J

A blurb in a flyer or newsletter to your clients or farm could generate some interest and/or contact! 🙂

Have a great weekend!

Don

Why Buy Real Estate?

Happy Saturday!

YES, Why Buy Real Estate?

When you talk with a client and attempt to encourage them to buy real estate, whether it is their first home or a second home or an investment property what can you say that is convincing? When talking to a clerk, your auto mechanic, hairstylist, acquaintance or friend, what can you say or do that will captivate their attention or create a “NEED” to inquire further to get information that will absolutely “convince” them that they need to buy, “regardless of the market”?

There are only two aspects of this that really matter:

Shelter, or Financial.

[Read more…]

NEW California Real Estate Fees!

Happy Friday! (this one may require a happy hour!)

The California Senate passed Senate Bill No. 2 (“Building Houses and Jobs Act”) which the Governor signed into law.

Commencing January 1, 2018, the bill will impose a fee, except as provided below, of $75.00 to be paid at the time of recording of every real estate instrument, paper, notice required or permitted by law to be recorded, per each single parcel of real property, not to exceed $225.00 per transaction.

The bill defined “real estate instrument, paper or notice” broadly to include: deeds, grant deed, trustees deed, deed of trust, reconveyance, quit claim deed, assignment of deed of trust, request for notice of default, subordination agreement, notice of default, release or discharge, etc.

The rule exempts: (1) transactions where a documentary transfer tax is imposed as defined in IRC 11911, and (2) any real estate instrument, paper, or notice recorded in connection with a transfer of real property that is a residential dwelling to an owner-occupier.

The rule contains several ambiguities which means that county recorders may interpret application of the rule differently. Some examples are:

** The rule doesn’t define “parcel.” Since the tax imposed is on a per parcel basis, does a piece of land with two APN numbers count as two parcels doubling the tax?

** The rule doesn’t define “transaction.” Since the tax is capped at $225.00 per transaction, if a lender needs to file a satisfaction of a loan that is paid off, is that a new transaction meaning a new tax?

** The rule doesn’t provide clarity on a transfer of real property as referenced in the exemption. Would a quit claim deed to remove a property out of a trust or add/remove a spouse count as a transfer permitting use of the exemption?

Considering the ambiguity in light of the 10% tolerances imposed by TRID, we as an industry foresee a significant cost as it relates to tolerances for recording fee in will provide further guidance as we move closer to January; however, I wanted everyone to be aware of the coming change.

This was from our compliance department this week and I will keep you posted from our end, but you may get additional clarification from CAR, title companies or your broker.

(My opinion, pure and simple: another subterfuge to find more money for out of control Sacramento government spending and “give aways” of hard earned tax-payer money)

All the best,

Don