Jan 2016 – Emerging trends in real estate in 2016

Covered topics:

1. Coordinating offense and defense in 2016 – what you need to know

2. Value-add vs distressed vs Core vs Development – which strategy is making the most money

3. What is the forecast for Northern California’s market?

4. Where do the top 75 markets stand?

5. Top 20 markets of 2016

6. Changing trends in homeownership and renting

7. Job growth trends

8. The most important issues confronting real estate investors and pros in 2016

9. Mortgage rates – where are they going?

Foreclosure or Short Sale: Tax owed to the IRS and Franchise Tax Board

If a lender forecloses on my principal residence or agrees to a short sale, will I owe tax on the deficiency?

Generally, when there is either a foreclosure or a short sale a taxpayer will receive either (in some cases the lender may issue both) a federal Form 1099-A, Acquisition or Abandonment of Secured Property, or Form 1099-C, Cancellation of Debt, that provide the amount of debt cancelled, information to compute gain or loss, and whether the taxpayer is personally liable for the debt.

If you borrow money from a commercial or private lender and the lender later cancels or forgives the debt, you may have to include the canceled amount in income for tax purposes, depending on the circumstances. In a short sale, the lender agrees to accept less than full payment, and cancels the unpaid amount.

The most common situations when a foreclosure or a short sale does not result in cancellation of debt (COD) income involve a non-recourse loan. A non-recourse loan means the lender’s only remedy in case of default is to repossess the property the lender cannot pursue you personally in case of default. A purchase money loan (that is, a loan taken to “purchase” your home) is generally considered to be a non-recourse loan in California. Refinances, second mortgages, and “cash out” loans are generally recourse loans.

Although forgiveness of a non-recourse loan resulting from either a foreclosure or a short sale does not result in COD income, it may result in other tax consequences, like a reportable gain from the disposition. Even if the debt discharged is non-recourse, a taxpayer may have a gain to the extent the balance of the mortgage forgiven exceeds their adjusted basis of the property.

The gain, if any, from the foreclosure or short sale may or may not be taxable, depending on whether IRC section 121 applies and the amount of the gain. IRC section 121 only applies to principal residences, and limits the amount of gain that can be excluded from income.

If the loan is a recourse loan, then depending on the facts, you may have COD income, and potentially a reportable gain, in which case you would want to determine if one of the provisions in IRC section 108 would apply, allowing the COD income from the discharge of indebtedness to be excluded.

For 2007 and 2008, California conformed, with modifications to IRC section 108 (a)(1) (E) that allows a limited amount of COD income resulting from the foreclosure or short sale of a qualified principal residence to be excluded. However, this exclusion is currently not allowable for any foreclosure or short sale that occurs on or after January 1, 2009. (Note: There is pending legislation that would extend the California exclusion, SB 97 and AB 111.) One of the provisions available in IRC section 108 that might apply is the insolvency rule, which would apply if a taxpayer has COD income and is insolvent (total liabilities exceed total assets); in that case, the exclusion only applies up to the amount of insolvency, (to the extent, liabilities exceed assets).

More information regarding foreclosures and short sales is available at irs.gov. In particular, you may want to refer to the IRS webpage titled “Home Foreclosures and Cancellations

If your reporting position is audited by California, you should be prepared to provide documentation and an analysis of your facts in support of your position.

2882 Arlington Place, FREMONT, CA 94555 – Great 3br/2ba home with open living area and expanded master bedroom in Northgate

I’d like to introduce my newest listing at 2882 Arlington Place, Fremont, CA 94555.

This home is conveniently located in the Northgate area of Fremont with access to major commute roads, transportation and recreation.

This ranch home has a great, practical floor plan and offers 3 bedrooms, 2 full bathrooms, an open living area, 2 car garage and an entertainment ready backyard.      

Located on a cul-de-sac backing up to Alameda creek, this home has a private setting yet allows quick, convenient access to Paseo Padre Parkway and two major Highways.      

The front door leads into a formal entry hallway affording privacy to the nearby living area. Immediately to the right is the access door into the 2-car garage.

Stunning brazilian cherry engineered flooring flows throughout the the house and is enhanced by dramatic interior halogen track lighting. The result is an elegant, contemporary atmosphere.   

The kitchen features recessed lighting,  double-sided stainless steel sink, a garden window, breakfast bar pensinula, full-size fridge, oven, range combo and pantry with additional storage

Just steps away from the kitchen, the spacious dining area is ideal for formal entertaining. The space is enhanced by natural lighting and a serene view of the back garden which is conveniently accessed via the sliding glass door.

A half wall separating the kitchen-dining area from the living room creates a sense of openness & light while maintaining a subtle division between the eating & living areas.  The expansive living room is punctuated by step-downs from the foyer & the dining room. Natural light and a view of the lovely back yard are enjoyed via the living room window. The unobstructed floor & wall space allows flexibility for furniture & audio/visual equipment placement.

Strategically placed interior halogen lighting in the living room and hallway combine functionality with atmosphere.

Dimmer-controlled light switches allow users the flexibility of tailoring light intensity to suit their activities and needs.

Two guest bedrooms are located off the hallway on the north side of the home.

Bedroom 1 faces the front of the home and is currently used as a child’s bedroom. Storage is provided by built in drawers and organizers. Overhead lighting & temperature comfort is provided via the ceiling fan.

Bedroom 2 also faces the front garden and features crown moulding and a full size closet with organizers. This room also features a ceiling fan with light package.

The guest bathroom is situated just off the hallway in convenient proximity to the guest bedrooms and features vanity with below-sink storage cabinet, mirrored storage cabinet above the sink, shower over tub and of course a toilet.

The spacious master suite is situated at the very end of the hallway on the back side of the home for maximum privacy.

The master bathroom features a full-size shower stall w/ sliding glass door, storage cabinet above the toilet and a vanity w/ convenient below-sink storage cabinetry.

The Master Bedroom has two built-in closets and a recessed nook ideal for a chest of drawers, armoire or Television & Audio equipment.

The Master bedroom was expanded by a previous owner and features a step-down level that’s currently being used as an in-home office space, but is equally well-suited as a home exercise area, private sitting room or baby’s crib area.

Two wide windows face the back garden providing a lovely view and abundant natural light.

The private back garden is entertainment-ready with its lush lawn area and expansive patio. The Dining Room glass sliding door can remain open to accommodate the flow of many guests in and out of the home. 

The lawn area features 3 planting beds – one raised bed along the back fence, and two flower beds one of which is ideal for a vegetable garden.

The wide side yard leads to the garage and is a practical area for a storage shed, BBQ grill or potted fruits and vegetable plants.

For the commuter, there is convenient access to Highways 84 and 880, or one can easily hop onto Bart in nearby Union City.

Outdoor & sports enthusiasts will enjoy the home’s close proximity to well-known Alameda Creek trail.  Quick & easy trail access is available via the Beard Staging Ground entrance on Beard, or the Stern Pl trail entrance…both only blocks away!  For family recreation the Alameda Creek trail can be taken to Quarry Lakes, or for an even closer destination, Northgate Community park is just a walk away & features a children’s play area.

Parents will be happy to know their children would attend the desirable Warwick Elementary school. With it’s API above median scores when compared to similar schools. And, it’s less than a mile away!

Come see what this beautiful Fremont home and lovely family neighborhood have to offer.

High balance loan limits are back up to $729,750

Good news for you buyers out there: The loan limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs, which were bumped back down to $625,500 in high-cost areas on Jan. 1, were restored to the temporary $729,750 – approved by Congress a year ago in the Economic Stimulus Act of 2008 – courtesy of the Stimulus bill that was recently passed.

Loans up to this amount should start to originate starting beginning of March. This is of course a good step forward for Santa Clara, San Mateoa and San Francisco counties which will all max out at this level.

Fannie Mae increases limit on how many properties an investor can buy from 4 to 10

Investor Eligibility Requirements

Investor Eligibility Requirements

Investors buying the 5th through 10th home will need to meet the standards illustrated above and the following:

1. 720 credit score

2. 25% downpayment for a 1-unit (30% for a 2-4 unit)

3. No mortgage delinquencies in the last 12 months

4. 6 months of reserves for each investment property

445 Oak Grove Ave Menlo Park condo with 3 bedrooms, 2 bathrooms

My newest listing at 445 Oak Grove Ave in Menlo Park is a great alternative to a single family home. With 3 bedrooms, 2 bathrooms spread out over 1,286 sf (source: dataquick) it makes for a very flexible floor plan able to accommodate to different life styles and family sizes.

It has been extensively remodeled since it was built in 1975 and features a modern kitchen with an island style breakfast bar, recessed halogen lighting, remodeled bathrooms, inside laundry and wood flooring in the living areas. The living space is further enhanced by the deck and small yard.

Enjoy the gated parking, community pool and proximity to downtown, which together with Kepler’s and Cafe Borrone’s is just a block or so away.

Other Menlo Park institutions you would enjoy while living here: Beltramos, Applewood pizza, Dreager’s, Gambardella’s, Kaygetsu, Left Bank, etc.