THE SECOND STORY | December 10th, 2019

an Investment Perspective on a Home

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Looking for an investment that will turn $10,000 into $80,000 in seven years? Sound too good to be true? What if I told you that you could live in it every day during that seven years? Would that sound even better?

A $300,000 home purchased today on an FHA loan would have a $10,500 down payment. If it appreciated at 2% annually, which is less than the U.S. average, the future value of the home would be $344,606 in seven years. The unpaid balance on the loan would be $256,350 based on normal amortization which would make the equity in the home $88,256.

The annual compound rate of return on the down payment would be 35%. This number sounds so large, that you might start doubting the credibility of this example.

Looking at some alternative investments, a ten-year Treasury note is currently paying 1.73%. You can earn 2.1% on a ten-year certificate of deposit. If you could handle the volatility of the stock market and pick the right stock, you might earn 7-10%.

There really is no alternative investment that can earn the return that an owner-occupied home can offer while giving you the ability to live and enjoy the home during the holding period.

Even if you could find an investment that paid a good return, when you realize the gain, you’ll be required to pay income tax, either at long-term capital gains rates or ordinary income. However, a person who has lived in a home for at least two of the last five years can exclude up to $250,000 of gain from their income if they are single and up to $500,000 of gain if the owners are married, filing jointly.

A home can certainly be a place of your own to feel safe and secure, to raise your family, share with friends and build memories. A home could be considered an emotional investment and one that pays big dividends. A home is also a financial investment not just for the reasons mentioned above but also because the equity can be accessed by doing a cash-out refinance or a home equity line of credit.

See what your investment might look like by using the Rent vs. Own and giving us a call at (510) 908-9021.

THE SECOND STORY | December 3rd, 2019

Understanding the Mortgage Interest Deduction

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Mortgage interest paid on your principal residence is deductible today as it was in 1913 when 16th amendment allowed personal income tax. The 2017 Tax Cut and Jobs Act reduced the maximum amount of acquisition debt from $1,000,000 to $750,000.

Acquisition debt is the amount of debt used to buy, build or improve a principal residence, up to the maximum amount. A common misunderstanding among taxpayers is that you are entitled to that much debt even if you refinance a home during your ownership years.

Acquisition debt is a dynamic number that changes over time. It decreases with normal amortization as the principal amount of debt is reduced. The only way to increase acquisition debt after a home is purchased is to borrow additional funds that are used for capital improvements.

Assume a person buys a home with a new mortgage and after the home has enjoyed significant appreciation, refinances the home for much more than is currently owed. Let’s also say that the refinance amount is less than $750,000 which might lead the borrower to an erroneous conclusion that all the interest will be deductible.

The current acquisition debt is transferred to the new mortgage. Only the portion of the funds used to pay for new capital improvements can be combined to equal the increased acquisition debt. The interest on that part of the mortgage is deductible as qualified mortgage interest.

The remainder of the refinanced mortgage is attributed to personal debt and the interest paid on that is not deductible.

Lenders are not generally concerned with making a homeowner a fully tax-deductible loan. Lenders are interested in making a loan which will make a profit and be repaid according to the terms. The annual statements that most lenders issue to borrowers indicate how much interest was paid in a calendar year as they are required to do by federal law.

Part of the confusion may be because homeowners believe they can deduct interest on debt up to $750,000 and this annual statement shows the interest paid for the year. It is up to each homeowner to keep track of their acquisition debt and only deduct the qualified mortgage interest.

Your tax professional can be very helpful in determining this amount. It is important to notify them that you have refinanced a home during the tax year for which the taxes are being reported. For more information, see IRS Publication 936 and Homeowners Tax Guide. Home equity debt has not been allowed since the beginning of 2018.

THE SECOND STORY | November 26th, 2019

Title Insurance

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Most people who have car, home and health insurance have probably made claims and wouldn’t consider being without it. However, it might be difficult to find a homeowner who has made a claim on their title insurance which could lead a person to think that it may not be necessary.

Title insurance covers the largest investment most people have and if there was a loss, it could be devastating. Title insurance indemnifies the policy holder from financial loss sustained from defects in the title to the property. The policy holder is determined by their interest in the property.

An owner’s title policy protects the owner of the property from title issues that may arise other than the mortgages that are being placed on the property at the time of purchase. The title of the property goes back in time to check that clear title (no unsatisfied liens or levies and poses no question to legal ownership) was passed from owner to owner up to the current seller.

A mortgagee’s or lender’s policy protects the lender by guaranteeing they have an enforceable lien on the property and legal claims from parties asserting they have a claim against the property. Lender’s generally require the borrower to provide this coverage.

The title search is an examination to determine and confirm legal ownership and if there are clouds on the title so the seller can pass a clear title. A cloud is defined as any document, claim, unreleased lien or encumbrance that might invalidate or impair the title to real property.

If a person passes title to a buyer that has unsatisfied liens on the property, the new buyer could become responsible for the money owed and it could affect their ability to sell the property in the future.

Unlike most insurance that has a specific term and periodic premiums, title insurance covers the insured for a single premium. An owner’s policy lasts for as long as they or their heirs have an interest in the property. It guarantees the title up to the date and time that the property was deeded to you and recorded in the public records.

The majority of homes purchased in America have title policies insuring the new owner. You could live in the home for five, ten or twenty years without an incident. Then, when you’re ready to sell the home, a title claim could happen. The title policy would still protect you at that point. It is a peace of mind coverage that is part of the investment in your home.

THE SECOND STORY | November 21st, 2019

No cookie-cutter condo here.

 

I didn’t plant any veggies this year…but some tomato candy still grew in my pots!

Gosh, it feels like winter…so dark so early.

My Sellers received 4 offers this week on their condo unit @ 1404 Sherman (4 units total make up the HOA). All were over the asking price of 749K.

I had mentioned to my clients that because the photos (including the drone video, and the Matterport virtual tour) looked so great, it might draw today’s buyers, into their unit.

Those buyers want something more than what other condos offer: easy garage parking (2 spaces), storage (300sf for this unit), and maybe less 40 steps to from the garage to each unit. Schlepping groceries and kids doesn’t have to be a huge hassle.

What’s the real trade-off here? You must participate in a small Homeowners Association. And these owners have done a magnificent job of managing the building these past 2-3 years.

Real Estate this Week

Definitions:

MLS=Multiple Listing Service 

AC= active contingent=the buyer needs to sell something before s(he) can complete the transaction. In this instance, another buyer might write a back-up offer. If the primary buyer can’t meet the contract deadlines, it’s bye-bye to the first buyer. And the back-up offer moves into the primary position. Be sure your agent explains all of this to you! You do NOT want to lose your deposit to the Seller.

BOM=back on the market (could be that the buyer had some conditions in the contract that s(he) couldn’t meet in a timely manner.)

PCH= price change (seller either raised or dropped the price)

PSB=pending sale (seller & agent wants backup offers)

Market Stats this week for sold listings

Days on market = 36 high

Days on market = no lows this week

Average Days on market = 16

Median Days on market = 13

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Broker Tour Tues 5

Active listings 38 incl 2 AC & 1 BOM 

Pending listings 12 including 2 PSB

Sold listings 4

I hope you have a lovely Thanksgiving next Thursday. To me it’s the best holiday of the year: no gifts are expected and gratitude is what it’s about, no matter what you do…it’s all based on gratitude.

And I am so grateful for the friends that I’ve made while in real estate and for those who refer me to their friends, and for the texts, emails, and calls that I get asking for vendor referrals. And for those vendors that you refer to me! Each of you is important, in God’s eyes. And I cherish these friendships that I’ve made for more years than I can count on my fingers and toes.

I’ll probably post one more blog this year…and then I’ll be like Ms. Claus …getting a good, winter night’s rest. And then I’ll catch up in January!

best, marilyn

 

Take a look at my ‘for fun’ blog –

  Boomer-Chick-Musings.com

THE SECOND STORY | November 19th, 2019

7 Reasons to Buy a Home

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Some people don’t need a reason to buy a home, they just want it. That can be enough justification by itself. Other people need some solid logic before they’re ready to make the commitment. The following reasons might help you to make a decision.

  1. Pride of ownership … among the most popular reasons given by homebuyers is that they want a place they can call their own and decorate and improve it the way they want. It is a place to feel safe and secure and a place for their family. They can share it with their friends and enjoy living in it.
  2. Good investment … Homeowners have a 80 times greater net worth than renters. By investing in a home that appreciates over time, it contributes to an increasing equity. The high loan to value mortgages that are available combined with the low mortgage rates also contribute to the investment through leverage which has been described as “using other people’s money” to control an investment.
  3. Interest and property tax deductibility … Homeowners can deduct their qualified mortgage interest and up to a maximum of $10,000 of their property taxes as itemized deductions on their federal income tax return. In some instances, the standard deduction may benefit them more, but they can elect to choose either method each year, whichever helps them the most.
  4. Capital gain exclusion … A single homeowner can exclude up to $250,000 of capital gain and if married filing jointly, can exclude up to $500,000 of gain on their principal residence. The need to have owned and occupied it as their home for two of the last five years.
  5. Cash out refinance … Generally speaking, a lender will allow an owner with good credit and income to borrow the difference in their current unpaid balance and 80% of the fair market value. This money can be used for any purpose and is not a taxable event.
  6. Equity buildup …The difference in the value of the home and the unpaid mortgage balance is called equity and it increases with each payment made. It is like automatic savings.
  7. No landlords … Instead of dealing with landlords who may impose restrictions on things like painting, improvements and pets. Owners are not concerned about rent increases and will have a fixed principal and interest payment for as long as they have a mortgage.

A bonus reason to buy a home now are the low mortgage rates available. The lowest rate recorded by Freddie Mac is 3.35% in December 2012. Today’s rates are 3.75% on a 30-year fixed rate mortgage and 3.21% on a 15-year fixed rate mortgage. So, they are certainly very close to all-time lows.

The highest rate on a 30-year fixed rate mortgage was 18.45% in October 1981. When you put today’s rates in perspective, they are an incredible bargain. Many industry experts expect that they will not remain as low as they are now. Locking in a low rate can keep your housing costs low.

A $275,000 mortgage at 3.75% for 30 years has a principal and interest payment of $1,273.57. If the rate goes up by 1%, the payment would increase to $1,434.53 or $160.96 per month for the 30-year term. Check the Rent vs. Own to see how the numbers look in your situation.

THE SECOND STORY | November 14th, 2019

Big difference between Alameda and Modesto!

Loads of locals were watching the sunset.

I rode my bike to a listing at Crown Harbor, on Tuesday. The agent was from Modesto…and she does biz pretty much… everywhere!  She was lovely and we talked a lot about local real estate, her kids, her family. Her gig was that she worked for folks that wanted her to work for them…because they had great experiences, either buying and/or selling property…most anywhere! 

I let her know that there are ‘other’ disclosures in Alameda County and Alameda City. And the fact that rent control is stiffer in Alameda, rather than the law that was passed in the state, this year.

These days, I include that Alameda rent control ordinance (3249) in all of my disclosures, even if the sellers/buyers don’t expect to rent their place out. But life happens and the sellers/buyers may find it worth looking at because it’s a whole new world out there.

I know a lot of Sellers who are thinking about moving out of Alameda (actually out of CA)….too expensive, too crowded, too much traffic, etc. In the past year I’ve had clients who moved to Idaho, to Boston, to Oregon.

I think about moving myself…but where? Not so sure. But it’s good and reasonable to think it through. And I do really like Alameda. It’s got a small-town feel, surrounded by huge cities. And it’s a flat and a nice place to ride a bike.

Alameda Real Estate this Week

Definitions:

MLS=Multiple Listing Service 

AC= active contingent=the buyer needs to sell something before s(he) can complete the transaction. In this instance, another buyer might write a back-up offer. If the primary buyer can’t meet the contract deadlines, it’s bye-bye to the first buyer. And the back-up offer moves into the primary position. Be sure your agent explains all of this to you! You do NOT want to lose your deposit to the Seller.

BOM=back on the market (could be that the buyer had some conditions in the contract that s(he) couldn’t meet in a timely manner.)

PCH= price change (seller either raised or dropped the price)

PSB=pending sale (seller & agent wants backup offers)

Market Stats this week for sold listings

Days on market = 137 high

Days on market = 0 low (1 was an off-market listing)

Average Days on market = 31

Median Days on market = 10

____________________________

Broker  Tour Tues 5

Active listings 42, including 2 price changes

Pending listings 41, including 5 pending sales, want backups

Sold 20

I’ll be having the last open house this Sunday @ 1404 Sherman St., 2-4pm and the Sellers will entertain offers, if any, on Tuesday. Come on by…most of the looky-loos/buyers loved the place because this condo really felt like a house!

Questions? Let me know!

best, marilyn

 

THE SECOND STORY | November 12th, 2019

What’s the Difference in Pre-Qualification and Pre-Approval?

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Before looking for a home, you need to know how much you can afford. While you may have a number in your head, the lender has the final say. Securing a pre-approval from a lender helps make the home buying process easier and helps to avoid delays.

Many buyers confuse the terms pre-qualification and pre-approval. They mean two different things. In simple terms, a pre-qualification is an estimate of what you can afford. A pre-approval is a conditional approval based on the proof you provide.

The pre-qualification is a preliminary step some borrowers take to get a feel for what price home they can afford. Based on your income, assets, and estimated credit score, lenders can estimate what you can afford.

It’s important to know, there’s nothing binding about a pre-qualification. It’s simply a starting point. When you are serious about buying a home, though, you want a pre-approval.

Before you shop for a home, meet with a recommended lender to get a pre-approval letter. Sellers and/or Realtors value this letter because it shows you are likely to secure the necessary financing and serious about buying a home.

Lenders meet with you in person to create the pre-approval. You’ll provide the lender with all the following:

  • Permission to order your credit report
  • Paystubs, W-2s and/or tax returns to prove your income
  • Asset statements, investment statements or any other proof of assets
  • Proof of employment
  • Any other miscellaneous documentation required by lender

Lenders evaluate the documents and determine your conditional approval. The letter will state the mortgage amount you qualify for, the loan’s terms, and any conditions the approval is contingent upon.

Normally, final approval is contingent on a fully executed sales contract of the property to be purchased, a satisfactory appraisal and clear title on the property.

Once a purchase contract is signed, the lender completes the underwriting on your loan. They will confirm that the property meets the necessary requirements. The lender will also re-confirm your income, assets, employment, and credit information before closing on the loan.

Securing a pre-approval prior to beginning the home buying process will give you confidence and can help your negotiations with the seller. Your REALTOR® can provide you more information in an Buyers Guide and recommendations of trusted lenders.

THE SECOND STORY | November 7th, 2019

Autumn…. and real estate….and daylight savings…

Autumn is definitely here.

In the autumn…there’s not so much competition and there are ‘for real buyers’ out there and there are ‘for real sellers’ out there.

Many folks think they need to sell when it’s spring or summer (kids are out of school, it’s a good time to make new friends, it’s vacation time).

These days…maybe not so much. There are year-round schools and vacations are divided up into smaller chunks of time (not 3 months: more like a 1 week here, 2 weeks there, a month somewhere else).

My mom thought canned goods were great. I get it…it made life simpler AND she had 4 squirrelly kids. I look at what I’ve got in my kitchen cabinets/drawers…not too much-canned stuff.

I may be on the older side…but we didn’t live on farms and we certainly didn’t harvest any crops. But I certainly appreciate those who harvest our food.

We also didn’t have any local Farmer’s Markets. But now we do! Food is fresher. And the fruits and veggies reflect the actual season that we’re in! Plus, most folks that I know do grow some types of veggies/fruit – especially if they grow food as part of a co-op.

I was remiss this past year. However, I took advantage of my lemon tree/bush (which is mostly year-round) and I shared those Meyer delights with others.

And a couple of years ago I needed to have Sal, my gardener, chop down our apple tree. It was undermining the carriage house concrete floor. And that carriage house was Carl’s domain, with all of his shop/tools/toys turning nothing into something beautiful.

And daylight savings? Um,  I think I like to be in one time zone all year long. None of this changing- clocks around.

Alameda Real Estate this Week

Definitions:

MLS=Multiple Listing Service 

AC= active contingent=the buyer needs to sell something before s(he) can complete the transaction. In this instance, another buyer might write a back-up offer. If the primary buyer can’t meet the contract deadlines, it’s bye-bye to the first buyer. And the back-up offer moves into the primary position. Be sure your agent explains all of this to you! You do NOT want to lose your deposit to the Seller.

BOM=back on the market (could be that the buyer had some conditions in the contract that s(he) couldn’t meet in a timely manner.)

PCH= price change (seller either raised or dropped the price)

PSB=pending sale (seller & agent wants backup offers)

Market Stats this week for sold listings

Days on market = 18 high

Days on market = 0 low (2 were off-market listings

Average Days on market = 8

Median Day on market = 8

Buh bye! Maybe see you on Sunday?

best, marilyn

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Broker Tour Tues 10

43 Active (including 1 incl 1 BOM and 1 PCH)

48 Pending (including 6 PSB)

11 Sold 

I’ll be at 1404 Sherman St. (corner of Central and Sherman), this Sunday, holding an open house, 2-4pm! It’s bigger than most houses (1569 sf), and 3 bedrooms and 2.5 baths, with an in-unit laundry room, a lovely garden/patio, and a 2 car underground parking garage with a 300 sf (per the Seller) storage space! Yep! This is a 4 unit condo project built in 1980! Anderson windows throughout keep it quiet and not hot and not cold, and it has that ‘open concept’ kitchen, dining area, living area. And …Come by and check it out!

best, marilyn

THE SECOND STORY | November 5th, 2019

Buy Your Retirement Home Now

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Maybe you’re not ready to move into it but that doesn’t mean that you shouldn’t take advantage of the present opportunities to acquire the home you want to live in during retirement. The combination of the low mortgage rates, high rental rates, positive cash flows and tax advantages can help you get it paid for by the time you’re ready to move into it.

Your tenant could literally buy your retirement home for you. One idea would be to finance it with a 15-year loan that will have a lower rate than a 30-year loan and it will obviously be paid for in half the time. With every monthly rental check from your tenant, you make the payment on the mortgage which includes a portion that reduces debt and builds equity. Even if you don’t have the home paid for by the time you retire, your equity will be larger.

Consider you sell your current home which could be paid for by then when you are ready to move into this retirement home . Taxpayers can exclude up to $500,000 of tax-free gain for a married couple. That profit could be used to fund your retirement.

Even if you don’t retire to this home, it could be a placeholder to control the costs of the home you do move into. For example, you could buy a home in a destination location now, rent it out and build equity in it until you’re ready to use it as your principal residence. That home would have kept pace with other homes in the area so that you would not be priced out of the market you want to retire to.

With home prices and mortgage rates certain to rise, this may be one of the best decisions you can make. We want to be your personal source of real estate information and we’re committed to helping from purchase to sale and all the years in between.

Contact us if you’d like to talk about the idea or if you need a recommendation of real estate professional in another city.

THE SECOND STORY | October 31st, 2019

Halloween

Here are 3 Winners of the Week for Halloween costumes


This kid was a dinosaur.

This kid came as an outhouse. Genius.

 

This kid was a robot, complete with lights.

 

When the big kids come begging for candy, I always say ‘I’ll give you a trick, and then if you complete it, you’ll get a treat!” I usually say, “I want 5 high-kicking legs” for the girls. And I’ll say to the guys…”I want 10-15 jumping jacks.” It surely makes them work for the treats.

Alameda Real Estate this Week

Definitions:

MLS=Multiple Listing Service 

AC= active contingent=the buyer needs to sell something before s(he) can complete the transaction. In this instance, another buyer might write a back-up offer. If the primary buyer can’t meet the contract deadlines, it’s bye-bye to the first buyer. And the back-up offer moves into the primary position. Be sure your agent explains all of this to you! You do NOT want to lose your deposit to the Seller.

BOM=back on the market (could be that the buyer had some conditions in the contract that s(he) couldn’t meet in a timely manner.)

PCH= price change (seller either raised or dropped the price)

PSB=pending sale (seller & agent wants backup offers)

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Broker Tour Tues 8

Active 44   incl 4 PCH

Pending  49 incl 6 PSB

Sold 9

Stats for Sold data this week:

Average Days on Market 14

Highest days on market 27

Lowest days on market 3

Median days on market 13

Alrighty…this says it all! I loved that kid who showed up as an outhouse. 

Questions? Answers? I may not know the answer, but I may have a clue….

best, marilyn

Check out my ‘for fun’ blog

Boomer-Chick-Musings.com