NO MERCY: The End of Tax-Free Mortgage Debt Forgiveness?

A recent online article brings to light some turbulence that may be ahead for homeowners who are underwater on their homes:

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The Mortgage Debt Relief Act of 2007 is scheduled to expire at the end of the year. The legislation allows borrowers to avoid paying income taxes on the amount of principal that is being forgiven as part of a loan modification or a short sale. If the law expires, homeowners will have to pay taxes on the debt reduction.

Consider: an individual buys a home for $150,000. The economy tanks, he loses his job and faces foreclosure. He manages a short sale of the home for $80,000. Unless the law is extended, he would be taxed on the $70,000 debt that is being forgiven, as if the value that doesn't exist were personal income.

The tax also would be imposed if the bank modified the loan, reducing the principal so that the homeowner could better manage payments.

Obviously, the expiration of this law is bad news for folks who are considering doing a short sale.  I remember working with homeowners on short sales prior to this law.  At that time, it was up to the particular bank whether they issued a 1099 to the owner or not for the debt forgiven in the short sale.  The whole premise of a short sale is the lack of money available by the owner.  Having the IRS tax that owner for "phantom" income is bad policy and simply ads insult to injury.  Let's hope that this law is not allowed to expire.  

JUST SOLD! Victorian Cottage Bargain

I just closed on this purchase for a client.  It is a 3 bed 1 bath victorian era cottage located at 777 27th St.  The home has had an interesting history.  In 2006 the home sold for $54,900 cash as a fixer upper.  Later, in 2008, the home sold for $109,900.

By 2010 the home was nearing foreclosure and was listed on the market as a short sale.  The short sale failed and in 2011 the home came on the market as an REO listing.  The property sold in May of 2011 for $33,000 cash.

In September 2012 the owner listed the property for sale at $56,800.  After two weeks the price was dropped to $53,500.  That is about when I began generating interest in the property from my client base.

After two failed contracts (there were some structural repairs needed), my third client committed to the project and we finally negotiated a sale at $49,500 with the seller paying $1,500 in closing costs.

The home is worth about $85K-$90K after repairs and needs an immediate $5,000 in repairs to begin renting.  New carpet, a new furnace, floor joist repair, and curb appeal are on the priority list.  The home will make an excellent rent-to-rehab-to-flip project.  It has a good floorplan and all the cute trimmings you would expect in a home of this vintage.

If you are looking for a fixer upper or rental home, CONTACT ME and let's find one that works for you.

JUST SOLD! Classic Bungalow

I just closed on this home for a seller.  This property was a 3 bed 1 bath bungalow built in 1913.  It had much of the original craftsmanship from its constructions including original windows, casing, doors, hardware, and more.

My seller rehabbed the home with a more convenient and conventional kitchen and bath setup.  With the home finished and ready for the market, we listed the home in June of 2011 for $84,900.

Unfortunately, the location of this property was problematic.  We had many showings but the tight quarters of the neighborhood and some neglected road surfaces turned many buyers away at our list price.  In September 2011 we reduced our price to $79,900.  We maintained that price through August 2012.  At that time we finally reduced the price to $74,900.  Within a couple weeks we had a buyer who made us a near full price offer.  Unfortunately, he was under qualified and had to excuse himself from the contract.

Shortly after that contract failed, we received a cash offer for $69,000 from a well-funded investor from outside the Ogden area.  We countered at $73,000 and they accepted and that is the price we closed at.

This home was an example of trying to flip a property in an adverse market.  Prices dropped so quickly and significantly that our resale price was not bearable by the market for almost a year.  To bide the time, my clients rented the home while we had it for sale.  As our price dropped, the market finally began to catch up to us and we consummated the sale.  The key to this transactions' success, I believe, was accounting for the location of the home and it's impact on value.  Any home will sell if it is priced right.

If you are thinking of selling your home, CONTACT ME, and let's find out what your home is worth.  

Perils of Landlording: Dance of the Deadbeats

I recently moved out two tenants who absconded on paying their rent.  Fortunately,  I didn't have to evict them.  Rather, I used the art of persuasion with one, and the other was "constructively" evicted by their own ineptness.

The first tenant seemed to be in a great situation when he applied in August.  He had work, he had no credit (rather than bad credit), and was just starting out in life.  Unfortunately, he did not have a good educational background and ended up being cut back at work by his employer.  Apparently, his job required a high school diploma and he only had a GED.

He was forthright about the situation.  I asked him to pay the last month's rent and I negotiated a lease break fee with him.  He agreed.

Unfortunately, his follow through was very poor.  Each week a payment was promised and each week a promise was broken.  After a month of non-payment I was fed up.  He was living there about one day a week or so.  I finally posted a 3-day notice to pay or quit and threatened further eviction action if he did not remove his things.  He finally came and retrieved them.

Tenant number two was more sly.  They also experienced work problems immediately upon moving in.  They were also a roomate situation and one roommate moved out quickly after the lease started.  That left the remaining two unable to pay all the bills.  Payments were slow, and then non-existent.  Promises to pay were made and broken.

Finally, a couple days before the next month's rent was due, they called and said they didn't like the place anymore and were moving.  I was fine with that since they hadn't paid and appeared unwilling to pay.

After they moved out I called the utility company to transfer service back into my name.  They indicated that the gas had been shut off and the power was scheduled to be turned off for non payment.  Interestingly, the day my tenant called to tell me they didn't want to live there anymore was the day the hot water was turned off.  It appears cold water is an excellent motivator to move.

Where I went wrong on both of these tenants was with the deposit.  Both of these tenants were higher risk due to their credit histories.  Given such, their deposits were higher to compesate.  Yet, I agreed to "work" with them on paying the necessary deposit in installments.  That didn't work out.  I received one deposit payment and then nothing afterwards.

So, the moral of the story is if a tenant doesn't have up front the required deposit to compensate for the risk of renting to them, move on to the next applicant.  

Deadline Drama: When Moments Count

I have been working on selling a difficult investment property to some buyers.  I placed the home under contract with my first buyer and after we determined half the floor joists were ruined, he excused himself from the transaction.  I placed the home under contract again a second time with another buyer.  This buyer obtained further bids on repairs and was uncomfortable with a settling crack in the foundation.   He excused himself from the transaction.

Undaunted, I presented the property to a third buyer.  I reviewed the property's known deficiencies with him and we proceed forward.  Our due diligence deadline was three weeks from our contract date.  We gave ourselves an extra week due to the Thanksgiving holiday.

We began getting repair bids for plumbing, HVAC, roofing, structural repairs, and landscaping.  One issue was that the gas was not turned on to the property.  We couldn't check out the furnace.  I contacted the property manager two weeks prior to our deadline and told him that we needed the furnace turned on so the pipes didn't freeze.  He concurred.

Well, it appears that conversation was forgotten because four days prior to our due diligence deadline the gas was still off...with the water still turned on to the property...in December.  Fortunately, our mild winter prevented any damage.  However, we still hadn't had the furnace checked.  All our other bids checked out and finally with three hours before our deadline left, our HVAC tech tells us that the furnace is at the end of its life and needs to be replaced.  That was unexpected.  My buyer asked for a $2k a price concession even though we had already negotiated the "rock bottom" price that the seller was willing to go.

We quickly submitted our request.  The listing agent said she would get back to me quickly.  An hour passed. Since my client's earnest money was on the line, I forwarded him a Contract Cancellation that we planned to submit 15 minutes prior to the contract due diligence deadline if we had not heard back from the seller.  At 15 minutes to our deadline I called the agent.  She still didn't have word.  I notified her of our intent to cancel if we didn't get a response.  With 10 minutes to our deadline I called her again, she said the seller agreed to the concession and would have the addendum signed and to us in a half hour.

My fear at this point was that with our backs up against the wall the seller would reconsider after our deadline had passed.  In our business we live and die by our paperwork.  So,  I suggested to her that a 30 minutes wasn't good enough.  I asked her to have it to me in five.  Three minutes later we had our signed addendum.

This experience was a good lesson in the importance of contract deadlines and the importance of paperwork.  Earnest money keeps the parties interested in the contract and acting in good faith to move the contract forward.  I am glad we were able work out the final wrinkles in our transaction and move forward...even if by the hair on our chin.  Now on to closing...

     

JUST SOLD! Washington Terrace Estate Sale

I just sold this home for a client at 543 W. 5350 S. in Washington Terrace.

This 1440 SQFT 3 Bed 1 and 3/4 Bath home was held in a trust for the original occupant.  Her children were charged with liquidating the estate and asked me to market the property.

Our first challenge was finding tri-level homes in the area to compare the home to.  There were many sales but this particular floorplan was difficult to find in the database.  The condition of the home was also a mixture of old and new.  To test the market, we started our price at $119,900.  My clients were eager to move the property.  After a few showings and market feedback, we reduced our price a couple weeks later to $109,900 and then again to $100,900.  The rapid reduction in price helped stir interest and showings began in earnest.

About a week later we received an offer of $93,000 and we accepted.  Unfortunately, this buyer was woefully under-qualified.  Their loan approval was dependent on receiving an inheritance.  When it became apparent that the money wasn't coming, they cancelled the contract.

About 10 days later we received another offer at $93,000 but this time asking for about $3,000 in closing costs.  We accepted this one as well.  The buyer was using a Utah Housing loan to purchase the property.

Unlike the previous contract though, the appraiser for this loan was much more rigorous than the prior one.  We were issued a laundry list of repairs.  One of those repairs included plumbing.  I coordinated vendors to get the repairs done.  In a nightmare scenario, the city turned the water back on to the property after our repairs were made but did not watch the meter to make sure it wasn't running.  Our upstairs bathroom had the tub faucet left open and the stopper plugging the tub.  D'oh!  It took our handyman quite some time to clean up the mess. 

The appraiser also required a roof review.  Our roof inspector indicated the roof had 2 years of life left in it.  That wasn't good enough for the bank.  We were compelled to agree to escrow $4,290 for the buyer to repair the roof.  After a few more underwriting delays on the buyer's part, we closed.

Congratulations to my clients on liquidating their estate.  Because this home was older and had some deferred maintenance, this created some additional hurdles for us.  However, with a little patience and an experienced agent, we were able to jump over them.

If you are needing help with your family real estate, CONTACT ME, and lets discuss some options that will work for you.  

Victorian Houses: Front Porches and Vintage Decor

One of Ogden's most endearing qualities is the sheer quantity of old Victorian houses that adorn its streets.  Ogden benefited from the economic boom of the late 1800's that was mostly spurred by the railroad industry.  With that boom came lots of construction.

However, despite the abundance of stately designed Victorian edifices from that era, those same buildings are missing much of their original charm and grandeur. 

What's missing?  Decorative and ornamental woodwork...especially on front porches. 

For those of you contemplating restoring an Ogden Victorian home, I thought I would present a few examples of what a Victorian front porch is supposed to look like.  Join me for a brief tour in front porch design and restoration.

Our first stop takes us to 28th Street and Adams avenue to an old 1880's farmhouse.  It's now in the city but hasn't always been that way.  Notice the turned columns and brackets decorating either side.  A very simple design.

Next is an excellent example of how a nicely done front porch can make even the most simple home look prominent.  This home is located at 322 31st Street.  Most folks don't notice it because it is on a busy one way road headed into town.  Take a look next time you drive by.  Notice the turned colums, brackets, and top railing that decorate the home.  Original top railings are hard to find intact these days but add a ton of charm to a home.  

The next two homes are Italianate Victorians.  The are characterized by tall vertical lines and low hipped roofs.   

Each of these homes has original front porch woodwork.  Very nice.

The Jefferson Ave. Historic District has many examples of finely restored front porch decoration.

Finally, here are some other examples of fine front porch and ornamental work.

I have a great book that references old Victorian design elements and floorplans.  If you are looking to restore a Victorian home, CONTACT ME, and I can point you to the right resources. 

Flophouse Fire

A subdivided Victorian era home burned yesterday in Ogden.  The Standard Examiner reports:

The wood-frame house contained four apartments, Ogden Deputy Fire Chief Eric Bauman said at the scene.

Seven people in two families resided in the apartments. Three people were treated for minor smoke inhalation at the scene but did not require hospitalization, Bauman said.

Fortunately, everyone made it out safe.  I cruised by today to take a picture and the owner was preparing to place his tenants in other buildings around town.

 The home is a completely loss. 

What About Condos?

I have a few clients who are trying to sell condominiums or townhomes.  In light of that, I thought I would do some research into the market and see how inventories are shaping up.

Queue chart please...

This chart contrasts the inventory levels of 2 bedroom condos and 3 bedroom condos for various zip codes in Weber County.

As you can see, with the exception of 84405 (S. Ogden/Riverdale/Washington Terrace) the differences are quite remarkable.  This indicates that overall demand for 2 bedroom condos is still quite low.

Also 84403 (S. Ogden/WSU Area) and 84404 (Ogden north of 12th Street) both have elevated inventory levels for each category of condo.  Anything above 6 months is normally considered a buyer's market. 

The three areas that can no longer be considered buyer's markets are 3 bedroom condos in 84405, 84414 (North Ogden), and 84401 (Downtown Ogden/West Haven).

Condos have some unique qualities that can cause problems getting them sold.  The first is the HOA.  If it isn't FHA approved, that can cause the whole complex to be unmarketable to FHA buyers.  The second consideration is HOA dues which are an added expense not associated with single family homes.  Sometimes the numbers work for a purchase price but don't work for buyers after HOA dues are factored in.

Despite this, I have closed a number of condo transactions this past year using seller financing.  It is a very fast way to sell condo and has tax benefits as well.

If you are looking to sell a condo, CONTACT ME, and let's see if the market is right to sell your property.   

Eminent Domain - Chinese Style

I was reading the news this morning and came across this story about eminent domain in China.  The photo above is of home of a man who refused to accept the government's offer when it came time to make room for a new highway.  The government simply tore down everything around it and paved the highway up to his doorstep.

For those of you who feel eminent domain is heavy handed here in the States, take a look at how they do business in China:

Luo had just completed his house at a cost of about 600,000 yuan ($95,000) when the government first approached him with their standard offer of 220,000 ($35,000) to move out — which he refused, Chen said. The offer has since gone up to 260,000 yuan ($41,000).

Nice!  So much for just compensation.  Our Constitution and laws do a much better job of protecting homeowners from this kind of injustice.  The article continues:

What is unusual in Luo's case is that his house has been allowed to stand for so long. It is common for local authorities in China to take extreme measures, such as cutting off utilities or moving in to demolish when residents are out for the day.

 Luo told local reporters his electricity and water are still flowing, and that he and his wife sleep in separate parts of the home to deter any partial demolition.

So it appears that the Chinese government typically follows a policy of constructive eviction for unruly homeowners who feel like they have been stiffed. 

The United States is a great place to buy, sell, and own real estate. 

Things To Do In Ogden: The Birdsong Trail

Our family badly needed an outdoor diversion.  Fortunately, the mild fall weather and the kids being out of school for Thanksgiving provided us the perfect opportunity to explore.  Today we chose to hike the Birdsong Trail.

The Birdsong Trail is a one way path that intersects near the end with the Bonneville Shoreline trail and on to the scenic Ogden River Parkway.  There is also a loop within the trail called the Rainbow Trail loop.  Our journey today started at the upper trailhead located at the end of Fillmore Ave. just north of 20th Street at the edge of the bench.    

The trail slowly descends and makes a great mountain bike trail.  We ran across many bikers.  

The trail is thickly wooded in parts.  There are also some natural springs that pop up in a couple places.  

Despite being in the city, the trail seems very secluded and quiet.  It is a quick escape.

The trail is about 1 mile long and gains/loses a couple hundred feet in elevation depending on which direction you go.  The trail ends at the Rainbow Gardens parking lot.  While you are there, you can eat at the Greenery Restaurant and order a Mormon Muffin.

Notice the warning signs on the entry gate.  Rattlesnakes are a natural predator in this area.  Keep your eyes peeled during warmer weather.  We saw quite a few burrows near the trail that would make a great place for snakes to live. 

So the next time you are looking for something to do, check out the Birdsong Trail and enjoy all the great outdoor spaces Ogden has to offer.

Happy Hiking!

House Prices Surge!

In a previous post discussing sales volume and market trends, I alluded that we are seeing signs of house price appreciation after years of languishing values.  Here is the chart proving the trend:

As you can see, in mid 2008, prices completed their crescendo and began a steady decline that ended in March 2012.  Prices have consistently trended upwards ever since.

Let's take a look at the numbers on a year over year basis to see what our trend looks like:

The area to focus on here is the 0% line.  Any time the trend is below that, house prices decreased from the same month a year prior.  We have spent most of the past 3 years in negative territory which coincides with the top chart showing a consistent trend downward...until recently.  We have been in positive territory since the first quarter of this year.

 House prices may not be what they were in 2007; but, the shift in appreciation will help the market heal as improved values and mortgage amortization combine to return equity to homeowners.

If you want to know what your home is worth, CONTACT ME and let's do a market analysis to determine your home's value in today's market. 

Weber County Market Recovery In Charts: November 2012

With the passage of time, the evidence of a housing market recovery becomes more and more convincing.  Inventories are down, sales times are down, sales volume is up, and it appears that we are finally seeing some evidence of long elusive price appreciation.

Today's charts deal strictly with sales volume.  Our first chart is the long running total since the inception of the electronic MLS back in 1996.  Our trendline has just surpassed the peak last seen during the dead-cat bounce that occurred due to tax credit gimmickry in 2009.  FACTOID:  August's sales of 324 homes eclipsed the previous highs of the summer of 2008 and was the highest sales month since JUNE 2007.   

Below you can see the months from previous years stacked next to one another.  This helps us see through the seasonal cycle.  Things look good!

To understand how good, here is the percentage difference on Year-Over-Year sales for each month.  We have seen positive growth on a monthly basis since July 2011.

Going back a little further in time, here is the annotated history of what we have experienced.  Anything below ZERO means sales were contracting Year-Over-Year. 

If you are considering selling your home, CONTACT ME, and lets see how quickly your home would sell in today's market.

CNN Money: Ogden is THE Most Affordable Place in America

If you are looking for affordable living, Ogden is your place.  At least according to a CNN Money report.

Here is an excerpt:

About 40 miles north of Salt Lake City, Ogden is the most affordable metro area to buy a home in the U.S. This is the first time Ogden tops the Housing Opportunity Index. The city offers an enviable combo: Incomes are 10% higher than the national median, while home prices are about 14% lower.

There are many beautiful and historic homes available.  If you are looking to purchase a home in Ogden, CONTACT ME, and lets find a home that is right for you.  

Whoops! Water Woes

I have a listing that we were making plumbing repairs on.  Due to a chain of unfortunate coincidences, we had a major issue occur when a valve on the tub was on and the city activated water service to the property.  That alone wouldn't have been a problem except the stopper on the tub was closed.  This all occurred in the upstairs bathroom.  D'oh!

Latex paint acts like a balloon sometimes.  The water pooled behind it until it burst through the hole in the ceiling below.

Of course, it ruins sheetrock tapelines and makes a mess of wallpaper too.

Interestingly, water vapor in the home condensed and caused grime on the walls to become visible as it dripped down.  

This makes me wonder how dirty my walls really are.  Maybe I should leave standing water in my house to find out. 

Rental Repair: Concrete Stair Makeover

One of the rental properties that I manage for a client needed some new concrete stairs.  The stairs were probably poured sometime in the 1940's by our estimate.  You can see that the lower stair was actually rotting out from the bottom.

I called our concrete contractor and he installed some new stairs for us.  The job cost about $500.

If we estimate a 72 year lifespan like the previous steps, these new stairs cost about $0.02 per day...highly affordable and an attractive addition to the home. 

Making meaningful improvements to your rental property increases your tenant quality, reduces vacancy rates, and improves your bottom line.  Don't be afraid to invest in your property.  If done within reason, it makes good things happen for you, your tenants, and your community.