The tax code (Section 25C) states that the credit is available for 30% or up to $1500.00 for a lifetime limit. If you’re in the process of building this is not something you can apply towards your building costs as it is specifically intended for existing principle homes. One thing to beware of is that not all Energy-Star rated products qualify for the tax credit, so check their website before you buy. Also, it prohibits most installation costs so keep that in mind when shopping.

 Among the items included that don’t ordinarily come to mind are skylights, smart vents or whole house fans and wood burning stoves and fireplace inserts. I know what you’re thinking…wood burning stoves? In this valley? Yes, Martha, the manufacturers have vastly improved them to the point that some meet the federal requirements for efficiency and most importantly the tax credit. This is also an exception where the installation can be included so long as it is a requirement from the manufacturer to ensure safe functioning.

 So how does all this relate to short sales? Well, if you’re in the process of purchasing a short sale it might not be a bad idea to keep energy efficiency in mind when doing your inspections. For example, if you find that the home you are considering needs new windows and your budget doesn’t allow for that after closing there are loans structured specifically for that need. Rolling the costs into the loan keeps cash in your pocket and the tax credit will help at the end of the year. Lenders who specialize in home improvement loans can walk you through the process.

 One last thing to remember is to ask for the manufacturer’s certification that the item qualifies for the tax credit. The items installed must also meet the requirement that they remain in use for at least five years. For more information go to NAHB’s website at www.nahb.org/remodel

Folsom is a great place to live and an even better place to own an investment property evidenced by the numbers of first time investors who came through my open house this past Sunday. Many are just starting their investigation and some don’t really know what to expect so I’ve complied the answers to the seven most common questions about real estate investing.

1. How important is location? Investing in the best location you can afford will dictate the kind of tenants you will attract, and in turn, how much rent you can charge. More desirable neighborhoods appreciate more over time and are less susceptible to the ups and downs of the real estate market.

2. What about repairs? Expect to spend some money on repairs and resist the urge to upgrade. Your thinking should be based on an investment NOT what you would want if you were living there. The rule of thumb is light, bright and clean and remember you will need to factor in new paint and carpet every few years.

3. How do I avoid capital gains? There is a tax rule (1031) that allows for investors to exchange like properties and avoid capital gains so long as you don’t take any profit from the sale. This will allow you to build a nice real estate portfolio if that is your retirement strategy. For most small investors real estate is a buy-and-hold investment and a time frame of at least seven to ten years will allow you to ride out any swings in the market and provide a nice cushion for your retirement. Leave the flipping to the seasoned vets and think long term.

4. What are the costs involved? Calculating the  property taxes, insurance, utilities, maintenance, and repairs are considered the cost of doing business…more than just the mortgage payment. Vacancy rates vary but if you buy smart you should be able to figure in a conservative 5% which is standard in the industry.

5. Are fixers a good deal? Buying the worst house in the best neighborhood can work to your advantage. Renters look for better schools and neighborhoods and are  less picky about floor plans. Deferred maintenance is the usual cause of property repair so if you have the cash on hand and are not afraid of a little work, you can increase your value by some sweat equity. Don’t skimp on the major repairs though, always hire a licensed contractor.

6. Can I do the credit checks myself? Pay the extra money to run a full background check when screening future tenants. I can’t stress this enough! Running a credit check will give you the basic information that is available electronically but doesn’t address issues that can only be found by a phone call or letter. Some states don’t make information available electronically so you won’t know  if they’ve got child support or other obligations that could impact their ability to pay rent.

7.Where do I learn about landlord rights?  The Dept. of Consumer Affairs and HUD websites have everything spelled out. Learn about the eviction process and other potential issues so you can do things right, saving time and money. Remember the goal is to find tenants that pay the rent on time, leave the property in good condition, and don’t cause problems with the neighbors. If you would like help finding investment property in Folsom please email me for more information.

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They looked a little uncomfortable and then said rather sheepishly yes, “and you know what he advised us to do?” “You see,” the wife said, “we just got married and we haven’t finished up the paperwork yet so I still have my maiden name. I already own a house that I bought while in college…my parents helped me. The lender suggested that my husband buy a house in his name, even though we’re married, but not tell the bank so he could take advantage of the $8000 tax credit.”

Did I see red lights flashing or what? Loan fraud by any other name is still loan fraud!

First time buyers are vulnerable to whatever the lender tells them and the temptation to commit loan fraud is apparently alive and well. Just remember that if the lender finds out that you have committed fraud they WILL foreclose and take back your home so when shopping for a lender or real estate agent make sure you check their integrity credential.

Another scenario to be wary of is when a property is being flipped by a seller without every recording the sale. Here’s how it works. Seller A is in dire straits and needs to sell his home. Mr.Realtor lists the home for sale and conveniently has a buyer who is also an investor. He encourages the seller to sell the property to his investor but continues to advertise your home for sale.

Buyer Bob comes along and and writes an offer higher than what Seller A is selling the home to the investor for. That difference is not disclosed to him and the lender isn’t aware of it either. So who benefits here? Does the seller…no…because he doesn’t get a dime from a short sale. Does buyer Bob…no…because he is paying top dollar. The investor and the realtor make bank because the spread covers the double commission for the agent and give the investor a great return for tying his money up for a couple of months.  Non-disclosure is risky business and not worth the trouble it causes.

Real estate agents can offer referrals but if they are working with lenders like this one their advice is just as toxic. They might lose their license to sell real estate but YOU will lose your HOME if loan fraud is committed. Working with ethical people will never hurt you. You won’t have to deceive anyone and can be assured they have your back.

Great news! Sales are up, prices are down and interest rates are holding! If you can afford to buy a home now is definitely the time to do it! According to DATAQUICK Sacramento has seen a reduction in price point of 30% since 2008 and so long as interest rates keep steady we’re expecting to see a good summer for real estate sales. The actual numbers reveal that Placer & El Dorado counties are each down 16% with Sacramento closing 2130 homes in April 2009, Placer coming in at 457 and El Dorado at 155 homes sold. To put this in perspective you need to understand that Sacramento county had 4786 homes on the market in April so we’re absorbing a lot of inventory and starting to see multiple offers on the nicer properties.

My local banker tells me that the interest rates are slowly climbing and we’re up from 4.6% to 5.25% in some instances. For every .25 point increase in the interest rate you can expect to to pay anywhere from $30-$130 more per month depending on your loan amount. For a $300,000 home expect to see an increase around $50 per month. There needs to be a sense of urgency because as we get closer to the end of the buying season rates will most likely increase just as the inventory starts to decrease. Remember that on average it takes 2-3 months to find and purchase a home from start to finish.

Another piece of good news is the $8000 tax credit can be used  for closing costs. For a VA loan that means you don’t have to pay a penny to buy a house!  There are also FHA loans available with as little as 3.5% down. On a $300,000 home that’s only $10,500 down and your closing costs are pretty much covered. There are lots of other opportunities for vets and their families as well as those who need a helping hand through FHA. For instance there is a FHA  loan to improve the property that rolls the costs of the improvements into the loan. If you would like to talk to a lender who can explain these loans I can offer a couple of seasoned professionals who specialize in VA  and FHA who would be happy to go over the details with you.

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There is a company sending out official looking tax reassessment statements claiming they can help you get your property reassessed and thereby save you money on your property taxes all for the low cost of $179.00. The fake document contains all your tax information which is readily available via the county’s tax records. The simple truth is that you can contact your county tax assessor and ask for a reduction in your taxes for FREE and all it requires is that you submit comparable homes sold since Jan 1, 2009. As a realtor we provide this information when we do a market analysis prior to listing homes for sale. This window of opportunity extends until June 30, 2009 so you will need to have your request submitted by that date.

This company, Property Tax Reassessment, is located in Los Angeles and does not have a website available. From the moment I called them they discriminate between people who have sent their ”service fee” in and those who have not.  I chose option two and was directed to an operator who was able to tell me I could direct questions to an email but there was not a website to get more information. According to Consumerist.com they have been mailing out these official looking documents across the state and the public is advised to contact their local attorney general and of course don’t send them any money!

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According to Bankrate in order to qualify for the $8000 tax credit you must meet the following:

Rules for 2009 first-time homebuyers tax credit

• Does not have to be repaid unless the home is sold within three years.
• Applies only to first-time homebuyers, defined as those who have not owned a home within the previous three tax years.
• Available only for homes purchased between Jan. 1, 2009, and Dec. 1, 2009.
• Restricted by income; phases out for individuals with an adjusted gross income of $75,000 or above and for married couples with a combined adjusted gross income of $150,000 or above.
• Tax credit is for up to 10 percent of the purchase price, up to a maximum of $8,000. For example, a buyer of a $150,000 home could receive a tax credit of a maximum of $8,000, while a first-time buyer of a $70,000 home would be eligible for a tax credit of $7,000.
• The credit can be taken on 2008 taxes even when the purchase is made in 2009.

It’s obvious that first time homebuyers will be the winners so if you need to go shopping and haven’t found a Realtor send me an email and let’s get started.

Good news for first time home buyers in California. As part of the state budget you can now get up to $10,000 credit or 5% of the purchase price of an owner occupied newly constructed home. This applies only to “have never been occupied” properties. This is a tax credit that is good only from March 1, 2009 to March 1, 2010. There isn’t any information regarding down payments or loan caps but a tax credit works like cash in your account at tax time so those of you who were on the fence it’s time to go shopping.

Currently there is a tax credit up to $8000 for first time homeowners which will expire at the end of 2009 which is an expansion of last year’s tax credit of $7500 with some changes. I don’t know if the credit will be retroactive to last year’s purchases but since tax season is upon us I’m sure more information regarding exactly how this plays out will start to surface.

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