Some Great Tax Tips

This is a great article written by By Tara-Nicholle Nelson Broker in San Francisco, CA

Ask a roomful of homeowners what's so great about owning versus renting, and you'll hear them holler in unison: "the tax deductions!" And it's true – homeowners who itemize their taxes are able to deduct 100% of their mortgage interest and property taxes from their income tax returns.That means that if you're in a 28% tax bracket, Uncle Sam effectively subsidizes about a third of your borrowing costs or more, making your home more affordable or allowing you to buy a larger home than you could have otherwise. Also, big chunks of your closing costs are tax deductible, and hundreds of thousands of dollars of any profit (or capital gains) that you realize when you sell your home are exempt from income taxes.At tax time, it's critical to know what you're entitled to, so you can claim it. So, here are five essential need-to-knows about home-related income tax tips to help you get the most tax-reducing bang out of your home-owning buck – and to avoid hefty home ownership-related tax traps.

1. You Have to Itemize Your Return - to Claim Your DeductionsDuring the recent debate on Capitol Hill about whether the mortgage interest deduction should be eliminated (it won't be, not anytime soon), it came out that nearly 40% of homeowners lose out on their major tax advantages every year when they fail to itemize their income taxes. If you own a home and otherwise have a fairly simple return, it might be tempting just to take the standard deduction – and if your mortgage, property taxes and income are low enough, the standard deduction might outweigh your homeowners' deductions. But you'll never know if you're losing out on the tax advantages of itemizing unless you try; before you grab a pen and start filling in that 1040-EZ grab those forms from your mortgage company and answer the questions on tax software like TurboTax, which will automatically do the math on whether itemizing or taking the standard deduction will result in the lowest tax bill – or the highest tax refund – for you.

2. Plan Ahead and Be Strategic - When Taking a Home Office DeductionAccording to the Small Business Administration, the average home office deduction is $3,686 – multiply that by your tax bracket – 15%, 20%, 30% or whatever it is, and that's what you'll save on your taxes by writing off your home office. Know, though, that the space you designate as your home office cannot be exempted from capital gains tax when you sell your home later. The $250,000 (single)/ $500,000 (married filing jointly) income tax exemption for capital gains is only good on your personal residence, after all – not including any space in your home you've claimed as your tax-advantaged office. If you foresee selling your home for much more than you bought it in the future, near or far, discuss this with your tax preparer to see if the few hundred bucks you save is worth the capital gains complication later.

3. Tax Relief for Loan Modifications, Short Sales and Foreclosures - Is Only Around Through 2012While the long-term housing outlook is beginning to look up, 2011 is projected to be the peak year for foreclosures during this market cycle. Distressed homeowners who are on the brink of a short sale, loan modification or foreclosure should be aware that normally, any mortgage balance that is wiped out by one of these outcomes is taxed as what the IRS calls Cancellation of Debt Income, or CODI.Under the Mortgage Debt Forgiveness Relief Act of 2007, the IRS is currently not charging income taxes on CODI incurred through a loan mod, short sale or foreclosure on most primary residences through 2012. But right now, banks are taking many months, or even years, to work out mortgages in all of these ways; the average foreclosure in New York state right now occurs only after 22 months of missed mortgage payments. If you foresee any of these outcomes in your future, don't put things off. Do what you can to get to closure on your distressed home and loan, ASAP, while you won't have income taxes to add as the insult on top of your significant housing injury.

4. Project the Income Tax Consequences of a Refinance or Property Tax Appeal Homeowners everywhere are working on applying for a lower property tax bill on the basis of the last few years' decline in their home's value. Those who have equity have flocked en masse to refinance their 7% home loans into the 4% to 5% rates of the last few months. These strategies offer some of the heftiest household savings out there for the corresponding investment in time and money they take. But here's a caveat for savvy homeowners who slash these costs: remember that property taxes and mortgage interest, the very costs you're minimizing, are also the basis for the major tax benefits of being a homeowner. So plan ahead for your income tax deductions to go down along with your taxes and interest.

5. Don't Forget Those Closing Costs - If you bought or refinanced your home in 2010, you may be so focused on your mortgage interest and property tax deductions that you forget all about your closing costs. Any origination fees or discount points that were paid to your mortgage lender at closing are tax deductible on your 2010 return, get this – even if the seller paid your closing costs. If you can't figure out exactly what you paid, look for your HUD-1 settlement statement, that legal sized paper full of line item credits and debits that you should have received from your escrow provider or title attorney at, or just after, closing. Can't find it? Drop your real estate agent or mortgage broker an email; they can usually get a copy to you quickly.

Contact me if you have any other questions or need further clarification. I will either do some research or put you in contact with a good CPA.

My name is David Ohara and I am very Bullish on Sacramento Real Estate

@dwo34

dwo34@aol.com

Help for Homeowners who are struggling

I came across the article. I think this may have some teeth. I will do some further investigation and report back to you.

$2 billion in aid open to struggling homeowners

By Lily Leung

Monday, February 14, 2011 at 6 a.m.

Howard Lipin / Union-Tribune staff

More financial help is on its way to those fighting to remain in their homes throughout the state, including the San Diego region.

Eligibility requirements

Applicants must:

• Own and occupy their homes as their primary residence.
• Not exceed $729,750 in current unpaid principal balances on first mortgages.
• Meet low- and moderate- income limits
• Complete and sign a hardship affidavit to document reasons for hardships.
• Have mortgage loans that are delinquent or "in imminent default."
• Have enough income to pay modified mortgage payments according to guidelines from servicers participating in the programs.

Source: keepyourhomecalifornia.com

To apply

To apply, call 888-954-KEEP (5337) or your mortgage servicer - the company to which you send you monthly mortgage payments.

Each program requires the participation of the company or agency that holds the mortgage.

For more, visit KeepYourHomeCalifornia.org.

Four new mortgage-aid programs costing $2 billion might help 100,000 households avoid foreclosure, California Housing Finance Agency officials say.

The state program, "Keep Your Home California," is available to eligible homeowners throughout the state, including in San Diego County.

The four components would:

• Offer up to $3,000 a month for unemployed homeowners, up to six months of benefits.
• Help those who have fallen behind on payments due to temporary change in housing circumstance with payments of up to $15,000 per household.
• Give relocation assistance to homeowners are have finished short sales or deed-in-lieu of foreclosure transactions.
• Provide capital to cut the outstanding principal balances of struggling borrowers who owe significantly more than their homes are worth.

Each program requires the participation of the company or agency servicing the mortgage. As of last week, GMAC, Guild Mortgage, the California Housing Finance Agency and California Department of Veterans Affairs are all taking part in all four programs.

Others, including Bank of America, JPMorgan Chase, CitiMortgage and Wells Fargo, are currently in some of the programs. Housing agency officials are expecting that list to grow in the coming weeks. (See a chart of servicers and their programs.)

"We're excited to offer this program," said Housing Finance Agency spokeswoman Evan Gerberding. "It's not only going to help individual families, it's also going to help to stabilize entire communities."

Funding comes from the U.S. Treasury Department’s Hardest Hit fund, money intended to help homeowners stave off foreclosures.

After receiving the $2 billion, officials from the California Housing Finance Agency - which has helped renters and first-time homebuyers with financing and programs for 35 years - spoke to community stakeholders throughout the state to create the four new programs.

“No one program will solve the foreclosure crisis affecting our state, but together we hope to make a difference for as many families as possible," said Assemblymember Norma Torres, Chair of Assembly Committee on Housing and Community Development, in a media statement. Torres is Democrat representing part of San Bernardino County.

The programs are intended for Californians who own and occupy their homes as primary residences. They must meet certain income and financial-hardship requirements.

News of the efforts comes about a week after the state Attorney General's Office announced a new statewide foreclosure fund fueled by a $6.5 million settlement of a case against two former Countrywide executives accused of predatory-lending practices. (Read "$6.5M Countrywide settlement could help homebuyers".)

Lily Leung: (619)293-1719; lily.leung@uniontrib.com; Twitter @LilyShumLeung

My name is David Ohara and I am bullish on Sacramento!

dwo34@aol.com

@dwo34

Some Great Homes Coming on the Market Soon

Hello Friends:

First I apologize for being remiss and not posting more. I will do my best to maintain a page that is updated on a regular basis. I hope everyone had a great Thanksgiving and are preparing for a festive Christmas!

I wanted to give you all a "heads up" on some homes I that I will be putting on the market shortly. These four homes are located in great locations of Sacramento. I will be listing homes in the Elk Grove, Roseville, North Natomas and Bridgeway Island (West Sacramento) areas. The homes will be priced:

North Natomas: $179,900 for a 3 bedroom, 2 bath home with 1500 sf! This home is in show room condition and is located on a quiet street. This home has an open floor plan. Recent comps show that the home should be valued at $192,000.

Roseville: $340,000 for a 5 bedroom, 3 bath home. Located close to shopping, schools, parks and transportation. If you act now, you can pick the color of paint and carpeting. Great floor plan with a bedroom and bath downstairs. Big open kitchen. Recent appraisal done at $370,000!

West Sacramento: $269,000. This large 4 bedroom home is located in the Bridgeway Island area. New development! Open and spacious. This is an exceptional buy! Some homes in this area have sold for more than $300,000.

Elk Grove: $224,900. 4 bedrooms and 3 baths with a pool! This home is loaded with upgrades! Chance to get a great buy before it hits the market! Open floor plan with lots of natural light.

Call me for more information. Once again, these homes will be hitting the market soon. I hope you are all enjoying your day!

I am very Bullish on Sacramento.

David Ohara

Prudential Dunnigan

dwo34@aol.com

@dwo34

916-600-9495

What is HAFA?

Hello Friends:

I have been getting some emails and calls from friends and clients regarding a program called HAFA. They all asked the same thing "David, what is HAFA, and can this program help us?" I wanted to get the specific details directly from the Housing and Urban Development. Here is what they have to say about HAFA.

In early 2009, the National Association of REALTORS® (NAR) urged the U.S. Treasury Department, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac to improve the short sales process.

NAR’s concerns were first addressed on May 14, 2009, when the Obama Administration announced the outline of a program to provide incentives and uniform procedures for short sales and deeds-in-lieu of foreclosure (DIL) under the Making Home Affordable Program.

The Obama Administration released guidelines and uniform forms for its Home Affordable Foreclosure Alternatives Program (HAFA) on November 30, 2009 and released an updated version on March 26, 2010. April 5, 2010 was the effective date for the program.

Modified HAFA rules for loans owned or guaranteed by Fannie Mae or Freddie Mac were still being developed as of April 28, 2010 (check www.realtor.org/shortsales for updates). HAFA does not apply to FHA or VA loans.

About HAFA

HAFA is a program primarily designed for homeowners who are unable to stay in their home even with a loan modification under the Home Affordable Modification Program (HAMP). Under HAFA, homeowners may be able to avoid a foreclosure by selling the home as a “short sale” (where the value of the home is less than the remaining amount of the mortgage) or by transferring title to the lender through a process called a “deed-in-lieu of foreclosure.”

HAFA: Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

Uses borrower financial and hardship information already collected under HAMP.

Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds and acceptable closing costs).

Requires borrowers to be fully released from future liability for the first mortgage debt and, if the subordinate lien holders receive an incentive under HAFA, those debts as well (no cash contribution, promissory note, or deficiency judgment is allowed).

Uses a standard process, uniform documents, and deadlines.

Provides financial incentives: $3,000 for borrower relocation assistance; $1,500 for mortgage servicers to cover administrative and processing costs; and up to a $2,000 match for mortgage investors for allowing a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders (up to 6 percent of the remaining balance of each junior lien).

Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

The program sunsets on December 31, 2012.

TIMELINE

Determination of Eligibility and Notification

Servicers must consider HAMP-eligible borrowers for HAFA within 30 calendar days after the borrower does at least one of the following: Does not qualify for a HAMP trial period plan Does not successfully complete a HAMP trial period plan Is delinquent on a HAMP modification (misses at least 2 consecutive payments) Requests a short sale or DIL

If the servicer determines a borrower is eligible based on its written policy and has not already discussed a short sale or DIL with the borrower, it must notify the borrower in writing of these options and give the borrower 14 calendar days to respond, orally or in writing. If the borrower does not respond, that ends the servicer’s duty to give a HAFA offer. If the borrower asks for consideration but a short sale or DIL is not available, the servicer must inform the borrower with an explanation and provide a toll-free number.

Short Sale Agreement

If the borrower is interested in a short sale, the servicer fills out the Short Sale Agreement (SSA) and sends it to the borrower. The borrower has 14 calendar days from the date of the SSA to sign and return it to the servicer. The real estate broker also must sign the SSA. The SSA must give the borrower an initial period of 120 calendar days to sell the house (servicers may extend up to a total of 12 months, if agreed to by the borrower).

Sale Contract

Within 3 business days of receiving an executed sale contract, the borrower (or real estate agent) must submit a completed Request for Approval of Short Sale (RASS) to the servicer, including a copy of the sale contract and all addenda buyer documentation of funds or pre-approval/commitment letter from a lender all information on the status of subordinate liens and/or negotiations with subordinate lien holders.

Servicer Approval

Within 10 business days after the servicer receives the RASS and all required attachments, the servicer must approve or deny the request and advise the borrower (with a statement of the reasons in the case of disapproval).

Closing and Lien Release

The servicer may require the closing to take place within a reasonable period after it approves the RASS, but not sooner than 45 calendar days from the date of the sales contract unless the borrower agrees.

The servicer must follow local or state laws to time the release of its first mortgage lien. If local or state law does not govern, the servicer must release its first mortgage lien within 30 business days. Investors must waive rights to seek deficiency judgments and may not require

a promissory note for any deficiency. These rules also apply to junior lien holders receiving incentives.

NAR FAQs

HAFA is a complex program with nearly 50 pages of guidelines and forms. To help you better understand the process, NAR has prepared some frequently asked questions that address the basics. For more information on HAFA and more detailed NAR FAQs, please visit www.realtor.org/shortsales

Who is eligible for HAFA?

The borrower must meet the basic eligibility criteria for HAMP: Principal residence (including certain vacant properties for borrowers who recently moved at least 100 miles for employment and meet program requirements) First lien originated before 2009 Mortgage delinquent or default is reasonably foreseeable Unpaid principal balance no more than $729,750 (higher limits for two- to four-unit dwellings) Borrower’s total monthly payment exceeds 31% of gross income

How is the program being implemented?

Supplemental Directive 09-09 (revised March 26, 2010) gives servicers guidance for carrying out the program. Check www.realtor.org/shortsales for future updates.

A short sale agreement (SSA) will be sent by the servicer to the borrower after determining the borrower is interested in, and eligible for, a short sale and the property qualifies. It informs the borrower how the program works and the conditions that apply.

After the borrower contracts to sell the property, the borrower submits a “Request for Approval of Short Sale” (RASS) to the servicer within 3 business days for approval. If the borrower already has an executed sales contract and asks the servicer to approve it before an SSA is executed, the Alternative RASS is used instead. The servicer must still consider the borrower for a loan modification.

What are the steps for evaluating a loan to see if it is a candidate for HAFA?

1. Borrower solicitation and response

2. Assess expected recovery through foreclosure and disposition compared to a HAFA short sale or deed in lieu of foreclosure (DIL)

3. Use of borrower financial information from HAMP

4. Property valuation

5. Review of title

6. Borrower notice if short sale or DIL not available (to borrowers that have expressed interest in HAFA).

What are the HAFA rules regarding real estate commissions? The servicer specifies the amount of commission in the Short Sale Agreement (SSA) as a “reasonable and customary” closing cost. The borrower and the prospective real estate broker may negotiate with the servicer on the terms of the SSA, including the commission. There is a different rule if the borrower submits an executed sales contract to the servicer for approval before a SSA is executed. In that case, the sales contract is submitted to the servicer with an Alternative Request for Approval of Short Sale. The amount of the commission in that case is the amount negotiated in the listing agreement, not to exceed 6 percent. Neither buyers not sellers may earn a commission in connection with the short sale, even if they are licensed real estate brokers or agents. They may not have any side deals to receive a commission indirectly.

What else should I know? The deal must be “arms length.” Borrowers can’t list the property or sell it to a relative or anyone else with whom they have a close personal or business relationship. The amount of debt forgiven might be treated as income for tax purposes. Under a law expiring at the end of 2012, however, forgiven debt will not be taxed if the amount does not exceed the debt that was used for acquisition, construction, or rehabilitation of a principal residence. Check with a tax advisor or the IRS. The servicer will report to the credit reporting agencies that the mortgage was settled for less than full payment, which may hurt credit scores. Buyers may not reconvey the property for 90 days (no “flipping”).

If there any additional questions please let me know. I am here to help and provide as much information as possible.

It is May 26, 2010, and I am BULLISH on Sacramento!

David Ohara

@dwo34

dwo34@aol.com

More Photos of Kraze Apparel

More great designs by Peter Tsuru at Kraze Apparel!

Remember to visit his

website at:

krazeapparel.com

Kraze Apparel - The Ultimate in Island Designs!

Good Monday Morning Everyone!

I hope you all had a great weekend! I want to introduce you to my good friend Peter Tsuru and his company Kraze Apparel (pronounced CRAZE.) I met Peter through Twitter and quickly formed a great friendship. Peter embodies the term "Aloha Spirit" and I am proud to call him a great friend. Peter has some of the nicest designs I have seen. I have been to Hawaii on several different occasions and am very fond of "Island" designs. Some of my favorite designs are from Local Motion, Hawaiian Island Creations, Matsumoto's Shaved Ice, TC, and Quicksilver. Peter's designs rank up there with all the "bigger" companies. I recently interviewed Peter for this blog.

@dwo34: Peter, tell me how you came up with the name Kraze Apparel?

@PT: We wanted a name that represented our apparel line with a trendy feel to it. We found the word Kraze which is a play on words from "craze" meaning fashion or trend.

@dwo34: Peter, what inspires your designs?

@PT: Our daily surroundings in Hawaii inspire our designs. The blend of cultures, music, art and lifestyle reflects in all our work. Every visual object to me can be interpreted into a design.

@dwo34: Having been to Hawaii several times, I can see the island influence in your designs and like I have always told you "Your designs are top notch" my friend!

@PT: Mahalo brother!

@dwo34: Peter, how long has your company been in existence?

@PT: Kraze Apparel has been in business for 3 years.

@dwo34: What has been your greatest moment in business?

@PT: The greatest moment in business has been customers coming back to us because they love our designs.

@dwo34: Tell us some of your goals with Kraze Apparel

@PT: We would like to see Kraze Apparel expand to more retail stores, the outer islands of Hawaii and to the west and east coasts on the US mainland. We will be venturing into toddler to youth clothing, board shorts, caps and accessories. With everyone going green, we would also like to start heading in that direction. As we mature as a business, we are going to create a foundation to give back to the community.

@dwo34: Right on Peter! I have a great feeling that your brand will do very well in the mainland and there is a serious need for some "fresh" designs!

@PT: Thank you for your ongoing support David, it means a lot to us here at Kraze Apparel.

@dwo34: Peter, let everyone know where can people order your shirts?

@PT: People can order our shirts online at http://www.krazeapparel.com.

@dwo34: Also people can see you at Twitter @KrazeApparel on on Facebook (Kraze Apparel or Peter Tsuru).

@dwo34: Peter, tell me which is your favorite design and why.

@PT: I really don’t have just one favorite design. I enjoy all the designs because each design has its own personality.

@dwo34: I agree with you Peter. As you know, I have about 10 Kraze Apparel shirts and I get complimented where ever I go. I wish you and Kraze Apparel the best of luck!

@PT: Mahalo and aloha to you David.

Peter is such a nice guy. I am proud to call him my friend. Please visit his site, I am sure you will love his designs and want to place an order. Tell him David Ohara sent you! Have a great week my friends!

It's April 12, 2010 and I am very Bullish on Kraze Apparel!

David Ohara

@dwo34

dwo34@aol.com

FHA 203 "Fixer Upper" Loans

Good Thursday Everyone!

I am ran into this informative article on FHA 203 financing. The program is designed to assist in the borrower in "fix up" costs associated with a property he/she is purchasing. This is good reading.

RISMEDIA, March 27, 2010—(MCT)—The word “as-is” can indeed be one scary phrase. Especially when buying a home in today’s market where foreclosures and short sales that need fix-up work are plentiful.

But a little-known Federal Housing Administration (FHA) loan program that’s been around since 1978 can help take the sting out of “as-is.” Only 219 borrowers took advantage of the FHA’s 203k program in 2009. Not that many lending and real estate professionals are aware of the program, say observers.

Last year, Tom Meyer found a classic Oakland, Calif., home built in 1925 near Mills College he liked a lot. As a short sale it was priced right and about half the original asking price. Trouble was, the place needed some fix-up work—foundation improvements, dry rot work, a new roof over the garage and other improvements.

With the help of the FHA’s 203k renovation financing loan program, Meyer folded about $100,000 worth of repairs and improvements into his $422,000 mortgage. He had bought the home for $320,000. “I would not be able to pay a contractor $100,000 and buy a house at the same time,” said Meyer, who works in corporate media at Shaklee’s Pleasanton headquarters. “It had been essentially allowed to start falling apart over the last 20 years.”

He had rented in San Francisco for 25 years before moving into his new digs last September with his girlfriend, Cathy Keating. “We like old houses, and a great benefit of this program is that it helped us keep a beautiful but deteriorating house from deteriorating further. With the work we did, we expect it to still be standing and beautiful 80 years from now,” he said.

Renovation financing through the 203k program allows the costs of needed repairs and improvements to be included in the FHA federally-insured loan amount instead of having the buyer come up with cash or a separate loan to do the work.

“This is a perfect loan for an as-is situation,” said Kristine Marr, a loan officer with Prospect Mortgage in Lafayette, Calif. “It’s not a new loan program, although I think it’s going to have a lot more use today because we have so many foreclosures and bank-owned properties. You go into lots of homes and see people have yanked out stoves and ovens and fixtures and sinks.”

The work has to be done within six months after escrow closes. Borrowers have the option of putting up to six months of mortgage payments on the end of the loan if they don’t want to live in the house while the work is being done.

“Renovation financing is a program that allows you to not only finance the purchase of a home but finance any repairs and/or improvements. It provides buyers with a responsible way to purchase a fixer-upper property,” said Luis C. Munoz, who helped Meyer with the loan and is a renovation loan specialist with the Oakland branch of Mason-McDuffie Mortgage Corp. Munoz also gives presentations about the program at monthly home ownership workshops sponsored by the Unity Council, an Oakland-based nonprofit.

At a time when equity loans are hard to get, the program can also be used as a refinancing vehicle for borrowers who want to do repairs and improvements, provided the value of the home is greater than the value of the loan. “At the same time as you refinance, you pop in the extra dollars you need for whatever you want to do,” Marr said.

FHA home loans require certain health and safety standards be met and that needed repairs identified during the inspection process be completed before escrow closes. However, minor repairs and improvements costing between $5,000 and $15,000 can be done after escrow closes for borrowers who opt for a streamlined repair program.

A 203k loan can help buyers finance both minor and major repairs and improvements. It can also help buyers compete with investors when bidding for short sales and foreclosures, said Sheri Powers, director of the Homeownership Center at Unity Council.

The loans can also be used to pay for improvements such as new appliances, second-story additions, remodeled kitchens and bathrooms, and skylights, just to name a few examples. “Property repairs cost money and they want to make sure people using their loan program are going to be in the home in long run and not just the short run,” Powers said.

The loans have become more popular since home prices started falling and FHA lending limits were raised a couple years ago but are still a tiny sliver of overall FHA loan volume. Last year, 203k loans accounted for 219 mortgages in the Bay Area, compared to 35 in 2008, one in 2007 and none in 2005 and 2006, according to Department of Housing and Urban Development statistics. “It’s making a comeback,” said Powers.

Marr said that 203k financing is not for everyone. A buyer will have to work with contractors and may have to wait several months before moving in, she said. And there is no guarantee they won’t be outbid by an investor for the property. “A lot of listing agents are preferring the investors, because the investors tend to be all cash or 50% cash. That’s always hard to compete with,” she said.

Eve Mitchell

(c) 2010, Contra Costa Times (Walnut Creek, Calif.).

It is Thursday, April 1, 2010 and I am Very Bullish on Sacramento!

David Ohara

@dwo34

dwo34@aol.com