No Tax Penalties
Perhaps you’ve already heard the news—that California homeowners will not face tax penalties when selling their homes in short sale, despite the fact that the benefits of the Mortgage Debt Relief Act of 2007 will end on January 1, 2014.
What Is the Mortgage Debt Relief Act?
Initiated by President Bush, this IRS Act was a tax break that saves struggling homeowners from paying thousands of dollars to the IRS. As it stands right now and continuing through the end of 2013, distressed borrowers in certain situations are not be responsible for paying taxes on any of the forgiven debt associated with a short sale, a foreclosure, or a deed-in-lieu of foreclosure. (Note that the amount of debt forgiven is reported on the 1099-C, and sent to all borrowers. It is the borrower that would be responsible for addressing the debt forgiveness when completing a tax filing.)
Prior to the enactment of the Mortgage Debt Relief Act of 2007, if the short sale lender forgave $50,000 in debt, borrowers were responsible for paying the income tax (on the $50k) at their current tax rate.
Why Are the Rules Different in California?
Throughout the year, California short sale sellers have been awaiting news on whether or not the state tax board would follow the federal tax guidelines with respect to debt forgiveness. In fact, when the tax Act was extended, Californians were told that any forthcoming decision at the state level would be retroactive. In an attempt to clarify state tax policy on debt forgiveness, politicians created Senate Bill 30, but it has not yet passed. As such, any Californians who participated in a short sale or deed-in-lieu of foreclosure in 2013 still did not know about their own state tax liability—until recently.
Thanks to a letter from Senator Barbara Boxer to the IRS, Californians now have that clarification. In November, Senator Boxer received a response from this IRS clarifying that California families who have lost their homes in a short sale will not be subjected to a tax penalty for debt forgiven after the federal law prohibiting such penalties expires at the end of this year, and the Franchise Tax Board has agreed with those clarifications.
Enacted in July of 2011, California has an anti-deficiency law that protects homeowners from lenders attempting to collect additional assets in the case of a closed short sale transaction. But until Senator Boxer wrote her letter, the IRS had not clarified how this might play out in California. Like many Californians, Senator Boxer noted that with the end of the Mortgage Debt Relief Act of 2007 just around the corner, “…distressed borrowers may face the unfortunate incentive to go to foreclosure rather than seek a short sale in order to avoid a large tax bill.”
The IRS reply included excellent news for California homeowners, clarifying that these families will not face burdensome tax penalties as a result of participating in a short sale—specifically because of the state anti-deficiency statutes. With approximately 55,000 anticipated short sales in 2014 in the state of California, this is good news for those distressed borrowers still on the fence about selling as a short sale.
In a recent article, Peter Reilly points out that all Californians might not want to do jump for joy just yet. Reilly states, “there are situations where this rule might work against the taxpayer, particularly those who borrowed against property after it appreciated.” He goes on to outline a few of those situations and points out that some of the various exceptions to recognizing debt discharge (including insolvency) will no longer be available remedies.
What About the Other 49 States?
Since the argument put forth in the IRS letter specifically relates to California’s anti-deficiency law, it stands to reason that if you live in another state that has an anti-deficiency law, you might be okay. But, don’t take my word for it, and please look into it further. Why not contact your local Congressman and have him or her make an inquiry on your behalf?
Austin tops the list of best places to buy a home
When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?
Looking at the bigger picture
(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).
That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).
They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.
“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”
Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?
The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.
Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
2. Two major media brands emerge
Business News4 days ago
Leadership versus management: What’s the difference?
Business Marketing2 weeks ago
How many hours of the work week are actually efficient?
Business Marketing2 weeks ago
Jack of all trades vs. specialized expert – which are you?
Opinion Editorials6 days ago
Art meets business: Entrepreneurship tips for creative people
Tech News2 weeks ago
4 ways startups prove their investment in upcoming technology trends
Business News1 week ago
Unify your remote team with these important conversations
Business Marketing2 weeks ago
3 considerations when marketing in an era of uncertainty
Tech News1 week ago
Glowbom: Create a website, using just your voice