Finished the California International Marathon 2013...together, just like we planned!

If you have been reading my blog for a while, or follow me on Facebook, Twitter, or Instagram, then you will already know that early this year my husband and I made a pact; that I would do a Century (100 mile bike race) with him, and that he would run a marathon (26.2 miles) with me.

Back in September I successfully completed my first Century, and then in November I successfully completed my first 200km (124 miles) bike ride....well this weekend was the California International Marathon. Despite the FRIGID weather conditions, we both finished in about 5 hours, 12 minutes. We arrived in Folsom at the start line around 6:15am and it was about 25 degrees out. Thankfully since we are members of the Sacramento Running Association, we were allowed to spend time before the 7am start in a heated tent! But the race itself was super cold. We had to be on constant look-out for icy pavement, and my hands, feet and face were constantly numb. Needless to say, it was exhilarating to finally cross the finish line shortly after noon. We were greeted by my mom and step-son Cameron, who whisked us away in a warm car. We then celebrated at Hoppy Brewing with a pint and some food, and then went home and rested. It was a great experience to train for this together and complete it together. Looking forward to more running and cycling adventures in 2014!

California short sale sellers not liable for federal or state income tax per IRS and CA FTB!!!

Is this a Christmas or Thanksgivingukkah Miracle?? The IRS and the California Franchise Tax Board have formally declared that California home sellers are NOT liable for federal or state income tax on short sales.

Really!? The California Association of Realtors and the National Association of Realtors been lobbying the state and federal government really hard to extend provisions of legislation from 2007 to protect folks who sold a home via a short sale from having to pay income tax on "forgiven debt" -- aka tax on your loss from a short sale.

I first caught wind of this last month via some communication from the California Association of Realtors when the IRS made a written determination that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so-called “cancellation of debt” income to the underwater home seller for federal income tax purposes. C.A.R. then aggressively started lobbying the Franchise Tax Board to issue similar written clarification. And today they did!!

You can read C.A.R.'s press release here. Please note short sale sellers -- please continue to get tax and legal advice when entering into a short sale...but this is great news that many people have been waiting for!

California AB 1404: Neighbors and adjoining landowners must now share the cost of fencing...

Have you ever heard the expression that "good fences make good neighbors"? Well thanks to California Assembly Bill 1404, starting January 1, 2014, good neighbors will now legally have to share the expense of good fences.

The legislation makes the assumption that adjoining property owners share an equal benefit from any fence dividing their properties, and unless otherwise agreed to in writing, are  equally responsible for the reasonable costs of construction, maintenance, or replacement of the fence. So if one neighbor decides repair, build, etc. a fence, there is a process to notify the neighbors. A property owner must give each affected adjoining owner a 30-day prior written notice of any intent to incur costs for a division fence. The notice must include the following:

1. A notice of the presumption of equal responsibility for the reasonable costs of construction, maintenance, or necessary replacement of the fence; 
2. A description of the nature of the problem with the shared fence; 
3. The proposed solution for the problem; 
4. The estimated construction or maintenance costs to address the problem; 
5. The proposed cost sharing approach; and
6. The proposed timeline for addressing the problem.

Sounds reasonable, right? So if you have a house and the fence is in need of being rebuilt, just send your neighbor a letter with all of that info. Building a regular 6-foot pine or redwood fence with 4x4 posts and 2x4 rails? Sounds like what typical fences are made of in the Sacramento area...BUT, what if your neighbor wants to build an expensive masonry wall with a mural that's 10x the cost of a regular wood fence, and they want you to pay half??

An adjoining property owner can dispute the assumptions mentioned above by demonstrating by a imposing equal responsibility for that kind of fence would be unjust. To determine whether equal responsibility for the reasonable costs would be unjust, a court will consider the following:

1. Whether the financial burden on one property owner is substantially disproportionate to the benefit conferred upon that property owner by the fence;
2. Whether the costs of the fence would exceed the difference in the value of the property before and after its installation;
3. Whether the financial burden to one property owner would impose an undue financial hardship given that party's financial circumstances as demonstrated by reasonable proof;
4. The reasonableness of a particular construction or maintenance project, including the extent to which the costs appear to be unnecessary, excessive, or the result of one landowner's personal aesthetic, architectural, or other preferences, and;
5. Any other equitable factors appropriate under the circumstances. 

There are some exclusions to this law -- it does not apply to a city, county, political subdivision, public body, or public agency.  This new law is known as California Civil Code section 841.

How to make a "Contingent Offer" on a Sacramento home. AKA, how to concurrently sell and buy a new home...

A couple weeks ago, I wrote about how Sacramento home buyers wishing to "move-up" from one home to another home might go about doing that. There are basically four ways to sell your home and buy your replacement home...today I am going to describe in more detail how to make a "contingent" offer to purchase another home and then sell your current home.

A "contingent" offer is essentially one that hinges on the sale of your current home in order to complete the purchase of your replacement home. You are not obligated to complete the purchase of the replacement house until your current home sells. Sounds amazingly great right? Well, there are pro's and con's.

First let me explain how this really works and start with the basics...by all means, before you decide to do this -- start working with your Realtor and loan officer and lay out a game plan. Have your Realtor do an estimate of value for your current home and a "net sheet." A net sheet will itemize all of the costs associated with selling your home, like title insurance, escrow fees, property and transfer taxes, natural hazard disclosure, commissions, inspection reports, repairs, etc. It will also give you an estimate of how much money you will have left over at the end of the transaction to put toward the next house. I'd encourage you to plan for the worst case scenario and be somewhat conservative with the estimates -- for example, I typically base my estimated net sheets on the low end of the price range I come up with, and the assumption that you the seller will absorb all of the transaction costs, and I even add a little miscellaneous padding. The last thing we would want is to over-estimate how much money you will have after the sale...and then find you don't have enough for your next home purchase.

Once you have figured out approximately how much money you will walk away from the sale of your home with, visit your loan officer armed with this information. You may have other funds (savings, a monetary gift, etc) in addition to the proceeds of your home sale to put toward the next house. Your loan officer will then take this hypothetical amount, run your credit, look at your income and employment, and help you come up with a budget and loan pre-approval for the purchase of the next home.

Next you have two choices: (a) list your home and start shopping for your new home immediately, OR, (b) start shopping immediately. Listing your home and getting it on the market (a) is what I typically suggest -- when you make an offer on a replacement home, that seller will want evidence that your home is at least on the market, if not yet in contract with a buyer already.

Ok, so now you have found the replacement home of your dreams! You write your offer and be sure to check the box in Paragraph 13B. It reads "The attached addendum (C.A.R. Form COP) regarding the contingency for the sale of property owned by Buyer is incorporated into this Agreement. For COP is known as "Contingency for Sale or Purchase of Another Property." Here in this document, which must accompany your purchase offer, you describe the details of your listing, if it is on the market, if it is in contract, when it is expected to close escrow, etc. The buyer and seller negotiate the offer just like any other. Once you have mutual acceptance of price and terms, you start your inspections, get the appraisal ordered and loan underwriting underway...part of the negotiation of this contingency involves whether the seller can cancel your purchase agreement if the seller receives another offer that trumps yours. Generally speaking, the seller can retains the right to continue marketing the property regardless of which option you agree to. 

I'll just point out, that while this scenario is just peachy keen for the buyer making a contingent offer, this is a pretty risky sale for the seller of the home. Often times, the buyer in a contingent offer situation will not have as much negotiation power for either price, repairs, or both. The seller in this scenario does not have any assurance that the sale will go through, AND it often times takes a lot longer than your typical transaction where no contingency of this nature is involved. This opportunity comes at a cost.

Also if the seller receives another offer before the sale of your current home is complete, all hell could break lose. You'll have to remove your contingency early, even if your home hasn't sold -- or walk away from the transaction with nothing. If that seller gets another offer, the seller must give you 72 hours to remove your contingency. This does not mean you need to close your other home asap, but your agreement would no longer be contingent on the sale -- so if something fell through with your sale, you might be stuck between a rock and a hard place. Removing your contingency means you would need to find the funds to close elsewhere such as by obtaining a bridge loan or liquidating other assets if your house didn't sell.

If the seller doesn't receive another offer, then once your current home has sold, you can send your downpayment and closing funds to that escrow, and if your loan officer and Realtor are on top of things, you should be queued up to close escrow on your replacement home concurrently or within a couple days of the sale of your other home. You may need to arrange to rent-back your current home for a week or so just to move out.

Contingent sale/purchases can be great if all falls into place easily and smoothly...but it can also be a huge risk and a roller coaster for a seller/buyer involved in one of these transactions. I don't suggest these for folks who are risk averse or looking for a screaming deal on your next purchase. These require good timing, a little luck, a skilled agent and loan officer, and high tolerance of dealing with lots of unknown timelines and variables.

Stumbled across the Oroville Association of Realtors on my way home from Chico!

Ok -- so I did a 200km bike ride yesterday that started in Chico, and we had to go back there this morning to get the car to drive it home to Sacramento. We literally passed right by the Oroville Association of Realtors on the way back from having lunch. I like their colorful logo! The rest of the foliage you see is actually a reflection on the glass door. So I can cross off yet another Realtor association outside of the Sacramento area.

Quoted in a Bloomberg Article about the shifting dynamics of the real estate market...

If you read Business Week or Bloomberg News, or follow me on Facebook or Twitter, then you may have noticed that one of my clients and I were quoted extensively in an article about the real estate market. Our real estate market here in Sacramento is interesting and has changed a lot over the last 12 months. 

Right now, we have just over 2 months of listing inventory, but that's more than double what we had on the market here in the spring -- for example, as you can see in the chart above in March 2013 - May 2013 there was 1 month of inventory in Sacramento County. Two months of inventory is still wildly low inventory, but that's a lot more than we have been used to for the last year. Inventory, in real estate terms, is basically the number of homes available on the market will be absorbed by buyers in a given month. If 5,700 homes are active on the market in a given month, and 1,500 homes sold in that given month, then that month would reflect an inventory of 3.8 months. In real estate, a market with about 6 months of inventory is said to have equilibrium between buyers and sellers. 

The increase in inventory in Sacramento, combined with the big cash investors slowing their purchasing here as prices have increased, has shifted the dynamics of the market to one that's a bit more friendly to "normal" buyers just looking for a home. It's a nice change.

New Listing - 4765 Heatherbrae Circle, Sacramento, CA 95842

Adorable, well maintained and nicely updated 3 bedroom, 2 bathroom, 1,532sf home on .15ac lot near Antelope in Sacramento! You will love the spacious floorplan with vaulted ceilings. Great kitchen with lots of cabinet space, tile counters, and eating nook, separate formal dining area, huge custom painted living room with cozy fireplace, large bedrooms, ceiling fans, dual pane windows, composition roof and more! Backyard is a serene retreat with lovely landscape and newer fencing. Don't wait! Offered at $199,900. For more photos and detail, visit 4765HeatherbraeCir.com.

New Legislation: Assembly Bill 92 will affect investors doing 1031 Exchanges and purchasing property in other states...

Are you an investor looking to do a tax deferred 1031 Exchange for a property in the state of CA for a property outside of the state of CA? Read on...

Thanks to California Assembly Bill 92, starting January 1, 2014 if a taxpayer who sells an investment property in California and purchases via a 1031 Exchange a "like-kind" investment property located outside of California, that taxpayer must file an "information return" with the CA Franchise Tax Board (FTB) for that taxable year and every year thereafter in which the gain or less from the exchange has not been recognized. If a taxpayer fails to file such information return and tax returns, the FTB may propose to assess the amount of tax, interest and penalties due by estimating net income from any available information, including the amount of gain.

Essentially what the state of California is trying to do is be sure to collect any tax owed in the future. If an investor does a 1031 Exchange, tax on any gain from the sale of the property is merely deferred. Tax will still be owed at some point in the future, and the state wants to make sure it is in a position to collect it.

So, you should ALWAYS consult a CPA or qualified tax professional before engaging in something like a 1031 Exchange, and if you are considering purchasing a replacement property outside of California, you will need to be sure to comply with this new law. I wonder if the burden of doing this year after year will be worth the tax deferment for state tax?