Investment Property Exchange Pit-Falls

Don’t make these mistakes:  Common errors that create problems with 1031 exchanges.

Most real estate investors know that one of the very best tools for delaying capital gains taxes is to utilize a tax provision called a 1031 exchange.  The 1031 comes from the section of IRS Tax code that is applicable and the “exchange” part comes from the process by which the investor trades-up into the next property without incurring immediate tax consequences (in other words the income and capital gains tax consequences are deferred to a later date).

The rules are stringent and must followed exactly for the exchange to work.  Best intentions are not acceptable to the IRS and your state tax board.

I recently learned that 1o31 Exchanges are identified by the California Francise Tax Board as one of the top audit topics and the four top issues (as provided by IPX1031) are:

“1. Failure to make a proper identification or comply with other technical requirements of Section 1031;

2. That the relinquished and/or replacement property are not held for a qualifying purpose (held for investment or productive use in a trade or business). For example, the property is used for personal purposes or it is held primarily for sale;

3. The taxpayer who sells the relinquished property is different from the taxpayer who acquires the replacement property; and

4. The taxpayer receives non qualifying property in the exchange (boot), but fails to report it on their tax return.”

I understand that only relates to audits conducted by the State of California, but the issues that are found in California will not be that much different than those found in Oregon.  Taxing authorities are looking for areas to make up for lost revenue.  You don’t want it to be the mistakes you make in your real estate purchase or sale.

It also emphasizes the importance of having a 1031 exchange facilitated by a Qualified Intermediary that knows and complies with the requirements contained in the 1031 statute and regulations.

If you are interested in finding out more about investing in real estate, 10310 Exchanges, buying or selling real estate in Corvallis, Philomath, Albany or Lebanon, I’d be happy to help!  Contact Dava

related links:

History of 1031 “Starker” Exchange (did you know it originated in Oregon?)

IPX1031 (user friendly, detailed information about exchanging property)

In the News… Economic Tid-Bits

I picked up a couple of interesting bits of news this week about the economy. Thought I would share:

Last week’s Pending Home Sales index from the National Association of REALTORS® (nar) went up 7.3% in November, the highest level since April of 2010.  The 2010 numbers were pumped up because of buyers that were in the market to take advantage of home buyer tax credits available then, that are not available now.

NAR chief economist, Lawrence Yun (and one of Inman’s 100 most influential)  said,  “Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines,  but contract failures have been running unusually high. Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage”.

I think that some some contract failures are preventable, especially when both the buyer and seller want to see the transaction through — having the right team in place, real estate professional, lender and title/escrow in place, can make a huge difference on an individual basis. Local markets and individual circumstances drive the reasons for contract failures.

According to NAR, It should be noted that “Pending home sales are not affected by the recently published rebenchmarking of existing-home sales because the index uses a different methodology based directly on contract signings, and is adjusted for seasonality.

and

According to USA Today, news sources and the Bureau of Labor Statistics, the, U.S. unemployment numbers are the lowest in 3 years.  “The U.S. job market strengthened in the second half of 2011 and added 200,000 jobs in December while the unemployment rate fell to 8.5% from a revised 8.7% a month earlier.”

Bright spots.  I’m looking forward to serving your Real Estate needs to 2012.  If you have questions about Corvallis, Albany, Philomath or other mid-Willamette Real Estate feel free to get in touch.

Contact Dava

 

New Price! 830 NW 11th Street, Corvallis, Oregon 97330

Home for Sale, 830 NW 11th Street, Corvallis, Oregon 97330 $299,000

Home for sale in Corvallis, Oregon. Near Oregon State University (OSU) and Downtown Corvallis. Wonderful Craftsman style home with many vintage features preserved.  6 bedrooms (2 on the main level); 2 full baths (one on the main); approx. 2188 sq. ft. not including partially finished basement.

Broker Tour | Knowing the Real Estate Market

Broker tour

Q. What is Broker Tour?

A. Broker Tour is a time when sellers make it easy for Brokers to see properties that are on the market.  The “tour” is a process by which brokers can look at properties without making prior arrangements.  In the Corvallis, Albany and Philomath areas the agents let themselves into homes that are pre-set; in some areas, like Lebanon or Sweet Home there is a “caravan” type tour that is rigorously scheduled and the agents group together and all go in a few cars at once.

Q. How does this process work? 

A. The listing agent sets the tour time up in the MLS system. In Corvallis, Philomath and Albany brokers “tour” on Wednesdays. The time of the tour is flexible, but most commonly around 9:00 am until early afternoon.  One of the nice features about the way we tour here is that we can flex a little and work around our client’s schedules and needs. Other areas have different methods, for instance in Lebanon the tour is more of a “caravan” with a list of pre-scheduled properties.  Additionally, some offices have an established “office tour” which may or may not be established as part of their office meeting agenda.

Q. Which properties are on tour? 

A. Tour is often comprised of the “new” listings for the week. Sometimes a “new” property  has been on the market for a while (days or even weeks) before it is scheduled for tour.  Sometimes homes that have already been on tour once are re-set for additional tours. Generally, those homes have had a “change” like in price or décor.  Occasionally, the first tour had a poor turn-out, so it’s re-set to give the brokers another chance to see the property.  It’s never a bad thing to let brokers have easy access to preview a property.  Broker tour is a little like “open house” just for agents.

Q. Why is it beneficial for brokers to tour?  

A. This is a chance to see the property and be familiar enough to discuss it with clients.  Sometimes, brokers tour with a specific client in mind, other times not. It is also a way to become familiar with the market, understand the various homes that are for sale and associate a price point with them.  This is also a social opportunity, brokers on tour often cross paths and has a chance to talk with colleagues, exchanging ideas and needs.

Q. Why didn’t more agents tour my home?

A. There could be any number of reasons why some agents didn’t tour. Often it’s because they have conflicts in their work schedule. It’s possible that they’ve seen the house (either on tour previously or even when it was on the market in the past).  Sometimes the time that is set is not practical or long enough to allow them to see every property.  Rural properties are often under-toured due to drive times etc.  There may have been a number of properties on tour and the volume made it impossible to see them all. Some brokers only tour if they have a client that may match a property, some never tour at all.

Q. What about a luncheon or give-away?

A.  A lot of brokers offer luncheons or give-a-ways with the idea in mind that more brokers will tour the home.  It’s my opinion that the brokers that need to see a specific home, make a point to visit with or without incentives. 

Halloween Events in Corvallis, Oregon 2011

Corvallis events for Halloween in 2011 brought to you by Corvallis Tourism (click on the link  for the list)

Included venues:
Magestic Theater
Whiteside
OSU (Ballroom Dance Club Event–but there are many other events as well) 
and other OSU Halloween events
Downtown Trick or Treat

Plus you might be interested in the Arts Center’s Event for Day of the Dead

Corvallis High School | In the News

Just a quick bit about Corvallis High School and great SAT test scores–what an achivement.  Just another reason to love living in Corvallis, Oregon.

Link to KEZI news report

 

 

A New Resource for First Time Homebuyers

A New Resource for First Time Homebuyers

Coldwell Banker Corporation has just added a new resource for First Time Homebuyers to its web site ColdwellBanker.com.  The First-Time Home Buyer Resource Center includes videos, articles and tools to answer questions and guide new home buyers through the real estate search process.  If you’re thinking about buying a home for the first time in Corvallis, Albany, Philomath or for that matter, anywhere in Oregon or the U.S., this site would be worth a visit.

If you want to ask questions or need help buying your first home, Contact Dava.

What is Escrow?

My clients that are buying and selling homes in the Corvallis and Albany areas frequently, ask  ”What is escrow?

In general, “escrow” is the neutral third party that holds instruments (deeds or other documents that convey ownership); funds (or other items of value); or evidence of title for real or personal property.  In Oregon, the escrow agent is typcially a Title Insurance Company (but this does not always have to be the case).

In a real estate transaction, “escrow” is the neutral third party that holds the deeds, collects and disburses the funds and follows instructions on behalf of the parties to the transaction.

It is the function of escrow in a real estate purchase transaction to make sure that all the instructions (which are really the terms of the sales agreement and the lend, er instructions) are followed; that all bills are paid (through the instruction of the buyer, the seller or the lender) and that funds are disbursed (lender loan proceeds, seller’s proceeds and any excess monies deposited by the buyer to the buyer).

Escrow follows the instructions of the parties to the transaction to determine how proration of taxes and other re-occuring charges such as homeowner association fees are handled. Escrow also makes sure that appropriate parties such as taxing authorities, homeowners associations, water districts and so forth are notified when there is a change of ownership. Escrow does not typically notifiy public utilites of changes of ownership.  An owner that is selling should notify their hazard/homeowners insurance of the sale (but not until the sale is completed and the sellers proceeds are disbursed.)

Escrow is also responsible by law for the collecting of information and reporting of sales information to the state and federal government in the event of a possible income tax liability on the part of the seller of real estate.  It’s important that sellers and buyers understand the tax ramifications of their transactions prior to closing.  Escrow will send out questionnaires to be completed early in the process to help alleviate problems that can arise from tax consequences of a sale (such as FIRPTA and State and Federal witholding requirements), if for some reason you do not receive paperwork from the escrow company early in your transaction, you will want to check on it.

Escrow is not allowed to act independently.  In general, once a buyer’s earnest money deposit is “in escrow” escrow cannot release those funds without express instructions from all parties.  Escrow is not allowed to proceed with finalizing or cancelling a transaction without instructions from all parties.  If there is a dispute that arises from disagreements from any of the parties to the transaction, escrow must wait for instructions between the parties that are consistent before they act upon them.

It’s important the that escrow agent: be finanacially responsible (and have financial strength); have expertise in handing complex transactions; act in a manner to assure that payment of liens and other encumbrances is accomplished; provide single point of contact for coordination of flow of documents and funds; remains an impartial third party.

If you need more information or have specific questions I can answer, please get in touch. Contact Dava

SOLD! HOME FOR SALE– 1185 NW Country Hills Drive, Corvallis, Oregon

SOLD!

HOME FOR SALE–1185 NW Country Hills Drive, Corvallis, Oregon

 

Spacious single level home in private 1.1 acre woodland setting. Located in the Country Hills Estates subdivsion with easy access to downtown Corvallis and NW Corvallis. Living areas are incredibly large and open with plenty of space to entertain or relax. Formal dining room features charming french doors to separate kitchen and family room. Bonus area off dining room and living room creates a wonderful reading or office area. Kitchen has new granite counter-tops, sink and faucet. Huge master features a wall of closets, attached bath and a bonus room that works well for many uses. Very large garage provides plenty of space for cars and storage. 3 Bedrooms, 2 baths and approx. 2724 sq. ft.

Search for more homes for sale in Corvallis here.

NEW PRICE! HOME FOR SALE — 2075 Dawnwood Drive, Philomath, Oregon $565,000

Home for Sale — 2075 Dawnwood Drive, Philomath, Oregon

Great Design and High Style exemplify the qualities of this newer home. Located on just over two acres, it’s quiet and peaceful here, easy care, beautiful and efficient. Custom built, thoughtfully designed and beautifully finished with a high level of attention to detail. Conveniently located on the eastern edge of Philomath, with easy access to Oregon State University, Corvallis and Philomath. Nearby recreation opportunities including nature trails at the Bald Hill Natural area and local bike paths.

3 bedrooms, 2.5 baths, Great room style living, Beautiful views, Gas forced air and central A/C.  Approx. 2749 sq. ft., 2.15 acres, Year built 2007, Philomath Schools

Great-Room Living and Dining Room:
Beautiful maple floors, vaulted ceilings, skylights and ceiling fan, Craftsman style fir entry door with stained glass inset and matching sidelights.  Double French door with full size side lights provides access to decks. Beautiful built-in entertainment center, bookcase , and tiled wood-stove alcove with wood storage area houses zero clearance woodstove with automatic blowers, designed to heat the whole house, and generous amounts of indirect lighting.

Kitchen:
Beech kitchen cabinets some with glass front display doors, high-end KitchenAid appliances, gas cook-top with hood, microwave and wall oven (with convection), Maple floors, antiqued granite counter-tops, raised breakfast bar with pendant lighting, adjacent to dining area and features a large walk-in pantry.  There is a granite topped desk-kitchen planning area with adjacent built-in cabinet/bookshelf unit

Powder Bath:
Located just off the great room is spacious and features a pedestal sink and tile flooring that continues about a foot up the wall made of iridescent Italian glass tile that shimmers like gems and resembles the surface of water

Master Suite:
Spacious and light, provides a true luxury spa-like experience. Maple flooring in the bedroom, indirect lighting, huge walk-in closet (one might consider adding a small office/desk space in this area). There is French door access to deck from bedroom. The master bath has tile flooring, an oversize tile shower with marble shower floor, a double sink vanity with antiqued granite top,  jetted tub and an alcove over the tub with glass shelving and French door access to deck

Additional Bedrooms:
Secondary/Guest bedrooms are served by a shared by a “Jack-n-Jill” bath arrangement. Both bedrooms are spacious and provide generous amounts of closet space. One bedroom features a built-in shelf unit and the other features access via French doors to the deck
area. The adjacent bath features a tub/shower combination; a large vanity with antiqued granite counter-top and tile flooring

Laundry:
Large laundry room provides generous amount of cabinet space, a utility sink, tile floor and access through mud-room to the garage

Mud Room:
The ideal place to unload gear, slip off shoes and transition into peaceful living. There is access to this room directly from the garage or from outside.  It features a craftsman style fir door with stained glass insert and stained concrete flooring

Back Deck:
Spacious (estimated at 1300sf)  is accessed from both master suite and great room and one secondary bedroom, most of the deck is covered by deep eaves allowing for all season enjoyment, wire rails allow better views when seated.  The deck overlooks and provides access to backyard

Yard areas:
Grassy/natural area off back deck, wooded area to the side and back of the property, seasonal creek.  Driveway is paved with generous amounts of parking/turn around area. The front porch and walk-way adjacent to the house is stamped, stained concrete.

Misc.:

• Timber deferred taxes
• 8’ interior doors (all except pantry)
• Wired with cat 5e network from multi-media panel
• cabling to all rooms
• Wired and plumbed for future solar hot water if desired
• 2 car attached finished garage with openers
• Wired with cat 5e network from a multi-media panel cabling to all rooms
• Fiber optic (3 pairs) computer network (to 2081 Dawnwood) with 100 megabit adapters (expandable to 10 gigabit and higher) plus 4 pair of copper for telephone/intercom and 2 coax for video. The fiber is encased in a metal sheath with 2 redundant pairs of fiber stands
• Process for antiquing granite: Granite is acid-etched to replicate river stone, then hand-polished & sealed
• Gas forced air heat and central a/c

MLS #641105

 
Search for more homes for sale in Corvallis here.

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