May 2010
Can't Move? Remodel Instead Many homeowners are looking to remodel or upgrade their existing homes rather than selling and moving into a newer or larger space. Today's remodels are more about making the existing home fit a family's lifestyle and adding energy efficiency. So many homeowners are improving their homes that a report released in April suggests annual spending on home remodeling will accelerate, with nearly five percent growth in 2010. "The gradual recovery in the broader economy should encourage more remodeling spending by homeowners," says Nicolas P. Retsinas, director of the Joint Center for Housing Studies of Harvard University which monitors remodeling activity. "This year could produce the first annual spending increase for the industry since 2006." And, according to the National Association of the Remodeling Industry, homeowners are opting to do a series of remodels in phases as their schedules, budgets and lifestyles evolve over time. A Consumer Reports poll on home remodeling shows that 36 percent of homeowners who plan to remodel plan to do so in phases. For homeowners who can't fund the entire project upfront, breaking elements of a major home remodel into stages can help extend costs over time and buy homeowners more time to save or find funding. Embarking on a series of smaller projects also keeps homeowners less stressed. GLVAR reports first year-over-year increase in home prices since 2007 Local housing statistics released by the Greater Las Vegas Association of REALTORS® (GLVAR) showed local home prices increased in April compared to the previous month and increased on a year-over-year basis for the first time in more than three years. According to GLVAR data, the median price of a single-family home sold in Southern Nevada during April was $142,000. That's an increase of 4.4 percent from $136,000 in March and an increase of 0.2 percent from $141,720 in April 2009. This is the first time GLVAR has reported a year-over-year increase in the median price since February 2007, when the median sales price of a local single-family home was $310,000. April's median price of $142,000 was also the highest median sales price since March of 2009. One factor in April's price increase was the federal tax credit for homebuyers, which expired April 30 and prompted many people to buy before the deadline. This fueled an already strong demand for homes here in Southern Nevada and may have pushed up home prices, which had already been fairly stable month after month. As in past months, GLVAR reported a continued increase in short sales and decrease in sales involving foreclosed homes. In February, 22 percent of all existing homes sold in Southern Nevada were short sales. That number increased to 25 percent in March and climbed to 27 percent in April. At the same time, bank-owned homes are accounting for a decreasing percentage of all local home sales, dropping from 53.0 percent in February to 50.0 percent in March to 43.0 percent in April. This shift is being supported by government efforts to encourage short sales over foreclosures and lenders being more willing to work with homeowners to work out short sales as an alternative to foreclosing on homes. How to Get an Offer on Your Home 1. Price it right. Set a price at the lower end of your property's realistic price range. 2. Prepare for visitors. Get your house market ready at least two weeks before you begin showing it. 3. Be flexible about showings. It's often disruptive to have a house ready to show at the spur of the moment. But the more amenable you can be about letting people see your home, the sooner you'll find a buyer. 4. Anticipate the offers. Decide in advance what price and terms you'll find acceptable. 5. Don't refuse to drop the price. If your home has been on the market for more than 30 days without an offer, you should be prepared to at least consider lowering your asking price. The Tax Aspects of Short Sales Generally, gross income includes any amount of discharged indebtedness. The rationale behind the income inclusion is that because the original loan proceeds were not taxable upon receipt by the borrower, the proceeds are taxable to him in the year his loan is discharged and he does not have to repay his debt. Notwithstanding the general rule that discharge of debt is income in the year of discharge, Internal Revenue Code (hereinafter "Code") §108 provides an exception for certain specifically enumerated discharges of debt. Pursuant to Code §108(a)(1)(E) one of those exceptions is for the discharge of "qualified principal residence indebtedness" occurring after 2006 and discharged before January 1, 2013. The Mortgage Debt Relief Act of 2007 was enacted on December 20, 2007. Generally, the Act allows exclusion of income realized as a result of modification of the terms of a mortgage or foreclosure (hereinafter called "short sale") of "qualified principal residence indebtedness". By: Robert D Grossman, Jr. Esq., 5/1/2010 Robert D. Grossman, Jr. is a tax attorney in Las Vegas, Nevada. He is a member of the State Bar of Nevada. He has a B.A. in Economics from the University of Virginia, a Juris Doctor degree from the University of Florida and an LLM (Master of Laws) in Taxation from N.Y.U. He was formerly a trial attorney for the IRS, Office of Chief Counsel, Tax Court Litigation Division, Trial Branch, in Washington D.C. He left that office as a Senior Trial Attorney. He has been in his own law practice for the last 36 years where he represents taxpayers before IRS and in tax planning. Editor's Note: As this article demonstrates, the tax consequences of a short sale are very detailed and complex. REALTORS® should always advise their sellers to seek qualified legal and tax advice. This is two paragraphs of the FULL article. Click Here to read the FULL article. SALES STATISTICS Total conventional residential closings year to date 14,339 Total short sale closings year to date 3,447 Total bank owned closing year to date 7,373 The Graph above depicts the number of Residential Sales for the past three months of 2010 versus the same period of 2009. The number of sales for April 2010 is down slightly from April 2009, however the number of sales exceeds February 2009 and 2010. Short sale closings continue to increase and we expect that trend to continue with the implementation of the HAFA program. Please see the article in this issue explaining HAFA and call me if you have questions. Email me at rakesh@lvrealestates.com or call me at (702) 285-0586 for more information regarding the market.	Brought to you by... Rakesh Verma Encore Realty Group (702) 285-0586 Click for Website Click to Email Why Use a REALTOR®? The REALTOR® mark shows that your real estate agent is a member of the National Association of REALTORS® and adheres to a strict Code of Ethics. There are many reasons to use a REALTOR® to help you buy or sell a home. Here's one: A REALTOR® can give you up-to-date information on what is happening your local marketplace and the price, financing, terms and condition of competing properties. For information on choosing and using a REALTOR®, click here. Pending Home Sales on an Upswing Pending home sales increased again in March, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of REALTORS®. The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, rose 5.3 percent to 102.9 from 97.7 in February, and is 21.1 percent above March 2009 when it was 85.0; this follows an 8.3 percent increase in February. The data reflects contracts and not closings, which usually occur with a lag time of one or two months. 8 Tips to Guide for Your Home Search 1. Research before you look. Decide what features you most want to have in a home, what neighborhoods you prefer, and how much you'd be willing to spend each month for housing. 2. Be realistic. It's OK to be picky, but don't be unrealistic with your expectations. There's no such thing as a perfect home. Use your list of priorities as a guide to evaluate each property. 3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down payment and closing costs. Then, talk to a lender and get prequalified for a mortgage. This will save you the heartache later of falling in love with a house you can't afford. 4. Don't ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion, but be ready to make the final decision on your own. 5. Decide your moving timeline. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area? All of these factors will help you determine when you should move. 6. Think long term. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in this home for a longer period? This decision may dictate what type of home you'll buy as well as the type of mortgage terms that will best suit you. 7. Insist on a home inspection. If possible, get a warranty from the seller to cover defects for one year. 8. Get help from a REALTOR®. Hire a real estate professional who specializes in buyer representation. Unlike a listing agent, whose first duty is to the seller, a buyer's representative is working only for you. Buyer's reps are usually paid out of the seller's commission payment. Help for Short Sale Properties - HAFA The Home Affordable Foreclosure Alternatives (HAFA) program became effective on April 5, 2010. This program is funded from the federal government's $75 billion stimulus program and is designed for homeowners who are in financial trouble but don't qualify for a mortgage modification. The objective is to speed up the short sale (properties with less value than the mortgage balance) process and prevent lenders from filing deficiency judgments against the home seller. The program could improve or at least minimize the foreclosure crisis. It may provide relief for an estimated 70 percent of Las Vegas homeowners who have mortgage balances larger than the value of their home. Lenders are on board with the HAFA program and are prepared for an expected onslaught of inquires. HAFA will be offered after a lender declines a homeowner's request to modify their existing mortgage. The lender will send out solicitation letters regarding the HAFA program shortly after the decline of a modification. Participation in the HAFA program will shorten the time to process a short sale approval once the homeowner enters into a purchase agreement with a buyer. Click here for a list of participating lenders and loan servicers. Call me for more information. Mortgage Calculator