The Improvement Tax Exchange in a Nutshell

Can I do an improvement tax exchange with a property I’m building? What must the home’s value be? I’ll cover that and more in today’s overview of this type of tax exchange.  

Some of you have expressed interest in or have had questions about improvement exchanges in
the way of taxes. In light of this fact, today I’ll help you gain a richer understanding of how this
process works.

One such question I’ve received is, “Can I do an exchange while I build a new home?” As
a matter of fact, that’s precisely what these types of exchanges are for. For example, say you
sold a home for $600,000, and you subsequently bought a new home for $450,000. Then, during
the 45-day identification period, you decide that, because you have additional land you can build
on, you’d like to do so. Further, let’s say the additional unit will cost another $100,000, bringing your
purchase total to $550,000.

Unfortunately, you’d still be short of the requirement for an improvement tax exchange. If you’re
selling a home and would like to make this exchange, the replacement property that you
purchase must be of equal or greater value to the one you’re selling. One thing of
note, though: Having two units will amount to $900,000 as long as you close exchange escrow
(not to be confused with traditional escrow) in 180 days.  

As you make your way through the process, the exchange accommodation titleholder will hold
the title while you’re conducting construction improvement on the property and, after that 180-day
window is up, it will close. There doesn’t need to be a certificate of occupancy on the property
nor does it have to be completed; the only stipulation is that its value has risen.

The magic number for the home’s value is $600,000 or more—if you can meet or exceed
this, you can bank on your ability to carry out an improvement tax exchange. Although there’s
a little more intricacy and finesse involved than with a 1031 exchange, this is a totally feasible option
for a range of buyer types, such as someone looking to convert a commercial office building into a
medical office building.

If the prospect of making an improvement tax exchange on property intrigues you or you have further questions related to this, I welcome you to give me a call at 626-643-7090 or email me at ReoAgent@ShawnLuong.com. I’d be happy to sit down and speak with you!

How Should You Use the Equity in Your Home?

If you have a lot of equity in your home, keep reading. I’ve got some great tips for how you can use it to create even more wealth.

If you have equity in your home and you’re looking for different ways to use it, I’ve got a few
recommendations for you today.

First, you can get a line of credit. Depending on the institution you’re working with, you could
use that line to take out money via arbitrage. You could also invest in stocks, such as the S&P
500 Index, which returns about 9.7% per year historically.

One of the best ways to use your current equity to create more wealth is by investing in
real estate. Nowadays, you can get a great return cash on cash and with appreciation. Since 1980, we’ve
seen roughly 6% appreciation every year. A $500,000 home appreciating conservatively at 5% will gain you
$25,000 a year in value. That return is pretty spectacular on paper.

Finally, for those preparing for retirement, you can use your equity to get a reverse
mortgage. This will allow you to make one large down payment and not have to make a
mortgage payment. You will have to cover yearly property taxes and insurance, but there will be
no monthly payment.

As you can see, there are a ton of different ways to use your equity. If you have any questions for
me about this topic or about anything else related to real estate, don’t hesitate to give me a call
or send me an email. I look forward to hearing from you soon.

How Has the Southern California Market changed in a Year?

The latest statistics are in for the Southern California market.

Here’s what we’ve been keeping an eye on.

Today I’ve got the latest numbers from our Southern California real estate market and I want to bring
that data to you. Our market is defined from Monterrey Park and Pasadena to the west, Rancho
Cucamonga to Eastvale on the east, and along the 60 and 210 freeways.

In summary, our real estate market is very healthy. Here are a few reasons why. For starters, our
unit sales have decreased by 4.75% in 2018 from what we saw from January to July in 2017. In
addition to that, the average price has increased by 6.43% from last year.

Last year in July, the average home sold for $633,000. Today, the average home is selling for
$665,000. That’s an 8.1% price increase in the summer market alone. This is partially a result
of increased demand. The average days on market has played a big role as well. We saw it drop
from 26 days last year to 18 days this year.

Another thing I wanted to bring up is our inventory levels. Our inventory is a measure of how long it
would take to sell all the homes on the market if no new homes were listed. This year, our inventory
has dropped from 2.87 months to 2.8 months.

That’s my real estate report in a nutshell. If you have any questions for me or want to know more
about the numbers for rental properties or the numbers in your specific area, I’d be happy to assist
you. I look forward to hearing from you soon.

How Accessory Dwelling Units Help Resolve Our Housing Shortage

Today I’d like to cover a few key points that California homeowners should know about accessory dwelling units.

Accessory dwelling units (or ADUs) are creating a lot of buzz in the market lately.

They even have the blessing of the state legislature in the form of Assembly Bill 2299 and Senate
Bill 1069, which Governor Jerry Brown signed into law in 2017. This legislation has unified all disparate
municipal codes in terms of the legality of ADUs.

The purpose behind these bills is to address housing availability. As you likely know, California is
seeing a housing shortage of more than half a million units. Accessory dwelling units help to
resolve issues related to this shortage. Elderly people who have an in-home healthcare worker,
for example, are just one demographic that benefit from the pieces of legislation I mentioned earlier.

Also, land is expensive. This makes accessory dwelling units an attractive option, since they are built
onto an existing structure or property. In turn, this eliminates additional expenses such as those related
to utilities or sewer connections.

Land is expensive, which makes accessory dwelling units an attractive option.

There are three types of accessory dwelling units: detached, attached, and those that
repurpose an existing structure—in other words, an existing home can be remodeled so that certain
rooms become classified as their own unit. This last type of ADU is particularly interesting because it is something the city of Chino has allowed homeowners here to pursue long before recent statewide
legislation came into play.

But how large can ADUs be built? Well, according to state law, an ADU may be no larger than 1,200
square feet. And ADUs attached to an existing structure may not exceed 50% of the total building.

There are a number of options for adding an ADU to your property. Adding an ADU above your
garage, for example, is another route homeowners may take. And parking restrictions will not apply to
these properties, as on-site parking is not required so long as the property is within a half-mile radius
of public transportation.

Of course, before you settle on any of these options, it’s important to determine whether adding an
ADU will be legal for your specific property. Zoning requirements stipulate that the current
residence on the property must be a single-family home.

If you have any other questions or would like to learn more about ADUs, feel free to give me a call
or send me an email. I look forward to hearing from you soon.

How to Avoid Probate Court and Settle Your Estate

There are many great San Gabriel Valley area homes for sale. Click here to perform a full home search, or if you're thinking of selling your home, click here for a FREE Home Price Evaluation so you know what buyers will pay for your home in today's market. You may also call me at (626) 643-7090 for a FREE home buying or selling consultation to answer any of your real estate questions.

Today I'm going to discuss a topic that a lot of people have been calling and asking me about. It's sometimes an intimidating and confusing topic because it involves real estate, law, and finance. However, I'm going to clear the air a bit for you.

Probate Law
Probate is a legal process that occurs after someone has died, which includes:

• Proving that the decedent's will is valid.
• Inventorying the decedent's property.
• Appraising the property.
• Paying debts and taxes.
• Distributing the remaining property in accordance with the will.

This can be a lengthy and costly process, but there is a way around it...

A Living Trust
Also called a revocable living trust, this is a way of avoiding probate court, which will always be costly to your beneficiaries. 

• This can help you to avoid probate court because when the trustmaker dies, the trust itself will live on.
• This allows for the successor trustee named in the trust agreement to legally take control of the trust and assume the position of the trustmaker, thereby gaining control of bank accounts and investments.

However, If You Are Stuck in Probate Court... 
If you are unfortunately stuck in the process of probate court, you can do something to help yourself.

• You can request the court or your attorney to file you as a full authority representative with the IAEA
• IAEA is the Independent Administration of Estates Act: If granted, this gives you the full authority to settle the estate with minimal interference from the courts.
• There are restrictions to this Act, so be sure to consult a real estate attorney if you are in this troubling situation.

I was once unfortunate enough to lose real estate property because I was not aware of the inner workings of probate court. I would be very disappointed to see this happen to one of my clients, so if you have any questions or require any assistance with this process, please contact me because I know professionals that would be willing to assist you. You can call me at (626) 643-7090 or email me at reoagent@shawnluong.com

Happy Chinese New Year: The Year of the Horse!

Today I'm changing my usual real estate theme on my video blog to something a little more important. Happy Chinese New Year!

I'd like to wish you a strong and energetic New Year.

Until next time, stay safe and happy. I look forward to visiting with you again soon.

2014 in real estate - from Orange to Riverside County

Welcome back and happy New Year. I hope 2014 is a year of prosperity, health and happiness for you. You may be wondering what is in store for the real estate market.

Price appreciation is still high. Bruce Norris, a noted real estate guru, believes Riverside County will do much better than Los Angeles.

FHA has decreased their loan limits. In Orange County and Los Angeles the limit dropped almost $100,000 and is now $625,000.  In San Bernardino and Riverside Counties the limit is $355,000.  However, there are some great new 5-year Adjustable Rate Mortgages available.

Happy Holidays!

Hello and happy holiday season! I hope this magical time of year finds you warm, happy, healthy, and full of the giving spirit.

The end of the year is quickly approaching, and you may be wondering if it's really worth putting your house on the market. The time is NOW! There's been a paradigm shift lately in the San Gabriel Valley within the housing market. During the last couple of years, we've seen a big increase in Asian (mostly Chinese) buyers; now comprising 1/3 of the market. It's Christmas season and New Year's is just around the corner. This means a bump in tourism and a much larger holiday market for sellers. Conventional thought dictated that the real estate buying season started in April, but jump onto this trend as a seller now and you'll be grateful!

Until next time, Happy New Year and a very Merry Christmas! 

HUD Home Program Update

 Hello everyone and thank you for joining me on my video blog. There has been an update in the Housing and Urban Development (HUD) Program for home buyers and I wanted to fill you in. You can see my original blog post on the HUD Program by clicking here.

As I detailed in my original post, the HUD program has to do with homes acquired through the consequence of foreclosure on an FHA Loan. There are two ways to take advantage of this service, first: law enforcement, firefighters, emergency medical technicians and teachers (k-12) can buy a HUD home in a nice area for up to a 50 percent discount on the list price. Second, when using the HUD Program the buyer has a 30 day period to purchase a home before anyone else in the marketplace.

However! This 30 day period, starting on the first of December, turned into a 15 day period! This means there is less time to take advantage, so act swiftly!

Finally, in addition to the HUD update I wanted to let all of you know that tickets are still available for my home buying class. Through the HUD program, completing this class makes you eligible for down payment assistance! Be sure to sign up if you live in the Covina, CA area and are in the market to buy a house.

Thank you for joining me on my video blog and have a safe and productive week! 

2013 Property Tax

Welcome back to my video blog. Thank you for joining me today. As many of you know, property taxes are due Dec. 10th. No one looks forward to this, but I have great news if you purchased your home anywhere between 2004 and 2008. There is a decline-in-value reassessment application.  

What does it do? It could save you thousands! It reassesses the value of your property. Just the other week I helped a client reduce his property tax from $14,000 to just around $8,000. Don't miss this chance and end up paying double what you should. You need to hurry, though. The deadline to file your assessment claim is Nov. 30th.

Give me a call at 626.643.7090 and I can email you the form. Also call if you have any questions! Thanks for watching!

HUD Homes

Welcome back to my video blog! Today, I wanted to share two well-kept secrets about the Housing and Urban Development (HUD) Program. What is the HUD program? It’s home acquired through the consequence of foreclosure on an FHA Loan. I have two secrets to help you fairly take advantage of the program.

The first is for the first 30 days a home is insured, owner occupants are able to purchase those homes before anyone else through FHA or conventional financing. The cash investor, who does not occupy the property, is shut out for the initial time period. You have a 2 to 1 advantage because 35 percent of the market is cash-buyers.

The second secret I have is for law enforcement, firefighters, emergency medical technicians and teachers (k-12). You can buy a HUD home in a nice area for up to a 50 percent discount on the list price. You don’t have to pay any interest on that 50 percent as long as you occupy the home for three years.

If you would like more information you can give me a call 626.643.7090

Thanks for watching!

Government Shutdown Risks Hurting The Housing Recovery

From: http://www.forbes.com/sites/morganbrennan/2013/10/01/heres-how-the-government-shutdown-will-affect-housing/

By:  Morgan Brennan, Forbes Staff

The government shutdown is here. Whether it’s not being able to get a new Social Security card or visit a national park, Americans will immediately feel the effects. But there’s one bright spot of the economy that stands to be affected as well: housing.

One of the biggest questions regarding the shutdown and how it will affect housing has revolved around the mortgage market, specifically prospective buyers’ access to new home loans. After all, more than 90% of all loan activity is underwritten, insured, or owned by the government and its affiliated entities.

Initially at least, the mortgage market is likely to be only minimally impacted. New loans will continue to push through most government agency pipelines. What will change is how long the process takes, as many agencies expect to experience delays.

Mortgages purchased and securitized by Fannie Mae and Freddie Mac will be unaffected because their operations are paid for by fees charged to lenders. And the Department of Veterans Affairs will continue to guarantee mortgages for Americans that have served in the military since these loans are funded by user fees as well.

But if the government shutdown of 1995-1996 is any indicator, the process will take longer than usual. “Loan Guaranty certificates of eligibility and certificates of reasonable value were delayed,” the VA warned in its September 25th contingency plan.

Where there has been mounting concern is the Federal Housing Administration, which currently endorses about 15% of the entire single-family mortgage market. Several media outlets recently reported that the FHA would be unable to endorse any single-family loans and that no staff would be available underwrite and approve new loans.

That prospect would be somewhat worrisome – if it were actually true. The FHA’s Office of Single Family Housing will indeed remain open for business, albeit with a smaller staff. “FHA will be able to endorse single family loans during the shutdown. A limited number of FHA staff will be available to underwrite and approve new loans,” the report now states. In other words, other lenders’ loans will continue to be insured and some in-house lending will continue to take place at a reduced rate.

The reason for that mix-up: the initial draft of the U.S. Department of Housing and Urban Development’s contingency plan mistakenly stated that single-family loan operations would cease. The report was amended over the weekend.

The FHA’s single-family loan operations are funded through multi-year appropriations, meaning their budget is not tied to the government’s standoff over funding for the new fiscal year that starts in October. On the other hand, what will be more affected is the agency’s Multifamily Housing Office, which is funded through yearly appropriations.

“Because we are able to endorse loans, we don’t expect the impact on the housing market to be significant, as long as the shutdown is brief,” continues the HUD report. “If the shutdown lasts and our commitment authority runs out, we do expect that potential homeowners will be impacted, as well as home sellers and the entire housing market.”

One government lender that will indeed suspend its home loan activity, however, is the Department of Agriculture. The USDA says that no new housing loans or guarantees will be issued through its Rural Development programs in a shutdown. The department also warns that such a scenario could cause “a setback in construction start-up,” and if the shutdown lasts for an extended period, “a substantial reduction in housing available in rural areas relative to population.”

“The government doesn’t generally approve loans, they basically just insure them,” says Don Frommeyer, president of the National Association of Mortgage Brokers and a vice president at Amtrust Mortgage Funding. “For the most part you aren’t going to see much of a hit in the mortgage market unless it goes for a long period of time.”

If it does stretch on, he adds, the worry will be what mortgage rates do in a market shrouded in fiscal uncertainty and how that will affect the home buying, especially in light of recent rate spikes.

Home lending aside, many economists and real estate experts are keeping a close watch on how Americans will react to this shutdown. “Administratively everything should keep moving along, but it’s more about the confidence of consumers and whether they perceive that the government shutdown could lead to a recession,” says Lawrence Yun, chief economist at the National Association of Realtors.

Moody’s Analytics chief economist Mark Zandi recently told the Senate Budget Committee that a partial shutdown could shave as much as 1.4 percentage points off of fourth quarter economic growth if it drags on for several weeks.

Americans’ confidence in their ability to buy and sell homes hit a record high in May, according to a Fannie Mae survey. Since then, as mortgage rates jumped more than a percentage point, that confidence level has plateaued.  If prospective homebuyers fear that the country’s economic recovery will stall, or worse slip back into recession, they will pull back on purchases, worries Yun.

“Home sales is always the first housing variable that changes so one would see sales declining and that would naturally lead to more inventory on the market and eventually put pressure on prices,” he says. But that would be a worst-case scenario based on a long-term shutdown.

Jed Kolko, chief economist at Trulia TRLA +6.43%, notes that if the shutdown lasts longer than a few days, the first places to feel the impact will be local economies with large concentrations of federal government workers. Metro areas like Washington, D.C. and Bethesda, Md., where 19% and 13% respectively of total local wages go to federal employees, would be the feel the negative effects of unpaid furloughs and with them, tightened consumer spending and weakening local economic growth. Though not all will be equally affected, other metro areas like Virginia Beach, Va., Honolulu, Hawaii, and Dayton, Ohio are areas that Kolko is keeping an eye on: “Whether there is a big effect depends on how long the shutdown lasts, how long people think the shutdown lasts, and whether people get back-pay. All those things matter for the impact.”

Still others are worrying even more about the next fiscal standoff, in  mid-October, surrounding the debt ceiling debate and its accompanying threat of debt default by the U.S.  ”With the threat of an impending partial government shutdown and yet another battle over the nation’s debt ceiling, in particular, we are really messing with fire right now—even if it doesn’t seem to bother some legislators,” says Stan Humphries, chief economist at Zillow.

“But the effects of a government default associated with the impending debt-ceiling deadline would be more pronounced because of its greater impact on domestic and international markets. This will rattle consumers and investors alike, slow down the overall economic recovery and further slow the housing recovery, which is already undergoing a moderation in the pace of home value gains due to rising mortgage rates,” he warns.

Market Update Fall 2013

Thanks for visiting my real estate blog! The summer is over and I wanted to give you an update on how our market is compared to this time last year.

In 2012 at this time there were 665 listings, today there are 882 current listings. This means a lot of sellers have been taking advantage of our great market.

We have also seen a drop in the average days on market from 66 days to 30 days. The average days on market is from the day the home is listed on the market to the day it goes into escrow. Part of the reason this number has cut in half is because we have seen less short sales.

The average sales price has increased from $694,000 to $722,000.  The number of listings sold rose from 731 to 743.

Our market is steadily improving and you need to take advantage of it now. If you have any questions about your home please give me a call and I can do a market analysis.

Thanks for watching!

What's the Difference Between Down Payment Assistance and a Mortgage Credit Certificate?

Hello, everyone. Welcome back to my video blog!

Last time we talked about down payment assistance. Today, I wanted to talk about a mortgage credit certificate.

What’s the difference?

For down payment assistance, you must qualify. If your income is too high and if you have owned a home in the past three years, you do not qualify.

The mortgage credit certificate is available to both first time homebuyers as well as non-first time homebuyers in federally designated target areas. You do not have to be low income to qualify...up to $118,000 for a household of 3 and you do not have to buy a lower cost home....up to $823,000. Depending on the state, the credit certificate amount varies. It is a dollar-to-dollar tax credit available to you as long as you stay in your house and pay your mortgage. For example, in California they will provide 20 percent of tax credit on the mortgage interest you pay per year.

So, let’s say your mortgage interest per year is $20,000, you would save $4,000! In turn, because your payment is lower, you can qualify for a larger mortgage and purchase a nicer home.

When you close the home, you give the certificate to your tax accountant who will then calculate it into your taxes and you will receive a refund!

This is a great program and very few people know about it! So, if you have any questions either about a mortgage credit certificate or down payment assistance, please give me a call at 626-643-7090. I'd love to explain more about how the process works!

Be sure to check out our next post; I'll tell you about what's happening in our current market!