Tuesday, March 29, 2011

A B Trust rules are changing for 2011

The new laws signed in December, 2010 for tax relief and job creation contain many tid-bits for estate planning. Now each individual has a $5 million combined exemption for estate and gifts. There is also a new tax rate of 35% which applies to both. A married couple is allowed "portability" or the chance to share their $5 million each for a possible total exemption of $10 million. Whew - my head is spinning already! So glad I have a great estate tax attorney who can help me understand all these changes. Need a referral? Contact me and I would be happy to provide. Judy Clarke The Clarke Team Bay Area Real Estate 650-489-5399 sold@clarketeam.com

Friday, March 18, 2011

Understanding the tax treatment of cancelled mortgage debt

I read an excellent article today on the tax treatment of cancelled mortgage debt by an excellent Real Estate writer, Kenneth R. Harney.

In a nutshell, if debt is forgiven due to a short sale, foreclosure or loan modification, the lender sends the borrower a 1099C at the end of the year. If the debt was forgiven on your principal residence and you have only used the funds to purchase, build or improve your home, it's probably not taxable income. It would be taxable if you refinanced and pulled out money to buy a Tesla. Check out IRS Form 982 and Publication 4681 for more technical details.

The link to this great article is: http://articles.latimes.com/2011/mar/13/business/la-fi-harney-20110313

Enjoy! I have a great real estate attorney and C.P.A. to refer if you need more help. Just let me know.

Judy Clarke
The Clarke Team
Bay Area Real Estate
650-489-5399
sold@clarketeam.com

Tuesday, March 15, 2011

Clarification on Carbon Monoxide Detector Requirements

The Carbon Monoxide Poisoning Preventation Act of 2010 (Cal. Health & Safety Code Section 13260 et seq.) was signed into law in 2010. Existing single family dwellings are required to install carbon monoxide detectors on or before July 1, 2011. All other dwellings are required to install on or before January 1, 2013. Landlords must install these detectors for existing leased properties as well!

The detectors must be on the approved list of the State Fire Marshall. http://osfm.fire.ca.gov/licensinglistings/licenselisting_bml_searchcotest.php
Select 5276 Carbon Monoxide Alarms from the Category drop down box.

The detailed requirements are very complex - please see question and answers provided by the California Association of Realtors below.

California Association of Realtors
Carbon Monoxide Detectors
Dec. 1, 2010

Q 1. What is carbon monoxide?
A Carbon monoxide is a gas produced whenever any fuel, such as gas, oil, kerosene, wood, or charcoal, is burned. A person cannot see or smell carbon monoxide. However, at high levels carbon monoxide can kill a person in minutes.
In addition, there are well-documented chronic health effects of acute carbon monoxide poisoning from exposure to carbon monoxide, such as lethargy, headaches, concentration problems, amnesia, psychosis, Parkinson’s disease, memory impairment, and personality alterations. (Cal. Health & Safety Code § 13261.)

Q 2. Is there a new California law dealing with the issue of carbon monoxide poisoning?
A Yes. The Carbon Monoxide Poisoning Prevention Act of 2010 (Cal. Health & Safety Code §§ 13260 et seq.) was signed into law this year. It requires carbon monoxide detectors to be installed in every “dwelling unit intended for human occupancy.” The California legislature also modified both the TDS (for residential one-to-four unit real property) and MHTDS (for manufactured homes and mobile homes) to include a reference to carbon monoxide detector devices. See below for more details.

Q 3. What is a carbon monoxide detector?
A It is a relatively inexpensive device similar to a smoke detector that signals detection of carbon monoxide in the air. Under the law, a carbon monoxide device is “designed to detect carbon monoxide and produce a distinct audible alarm.” It can be battery powered, a plug-in device with battery backup, or a device installed as recommended by Standard 720 of the National Fire Protection Association that is either wired into the alternating current power line of the dwelling unit with a secondary battery backup or connected to a system via a panel. If the carbon monoxide device is combined with a smoke detector, it must emit an alarm or voice warning in a manner that clearly differentiates between a carbon monoxide alarm warning and a smoke detector warning.
The carbon monoxide device must have been tested and certified pursuant to the requirements of the American National standards Institute (ANSI) and Underwriters Laboratories Inc. (UL) as set forth in either ANSI/UL 2034 or ANSI/UL 2075, or successor standards, by a nationally recognized testing laboratory listed in the directory of approved testing laboratories established by the Building Materials Listing Program of the Fire Engineering Division of the Office of the State Fire Marshal of the Department of Forestry and Fire Protection. (Cal. Health & Safety Code § 13262.)

Q 4. How does a homeowner comply with this law?
A Every owner of a “dwelling unit intended for human occupancy” must install an approved carbon monoxide device in each existing dwelling unit having a fossil fuel burning heater or appliance, fireplace, or an attached garage.
The applicable time periods are as follows:
(1) For all existing single-family dwelling units on or before July 1, 2011.
(2) For all other existing dwelling units on or before Jan. 1, 2013.
(Cal. Health & Safety Code § 17926(a).)

Q 5. How many devices and where do I place them in the home?
A This new law requires the owner “to install the devices in a manner consistent with building standards applicable to new construction for the relevant type of occupancy or with the manufacturer’s instructions, if it is technically feasible to do so” (Cal. Health & Safety Code § 17926 (b)). The following language comes packaged with carbon monoxide (CO) detectors:
For minimum security, a CO Alarm should be centrally located outside of each separate
sleeping area in the immediate vicinity of the bedrooms. The Alarm should be located at least 6 inches (152mm) from all exterior walls and at least 3 feet (0.9 meters) from supply or return vents. Building standards applicable to new construction are as follows (overview summary only):
• Section R315 et seq. of the 2010 edition California Residential Code (CRC) [effective Jan. 1, 2011] (applicable to new one-to-two family dwellings and townhouses not more than 3 stories and also where work requiring a permit for alterations, repairs or additions exceeding one thousand dollars in existing dwellings units):
Installed outside of each separate sleeping area in the immediate vicinity of the bedroom
(s) in dwelling units and on every level including basements within which fuel-fired
appliances are installed and in dwelling units that have attached garages.
• Section 420 et seq of the 2010 edition California Building Code (CBC) [effective Jan. 1, 2011] (applicable to other new dwelling units and also where a permit is required for alterations, repairs or additions exceeding $1,000 in existing dwelling units):
Installed outside of each separate sleeping area in the immediate vicinity of the bedroom
(s) in dwelling units and on every level including basements within which fuel-fired the American National standards Institute (ANSI) and Underwriters Laboratories Inc. (UL) as set forth in either ANSI/UL 2034 or ANSI/UL 2075, or successor standards, by a nationally recognized testing laboratory listed in the directory of approved testing laboratories established by the Building Materials Listing Program of the Fire Engineering Division of the Office of the State Fire Marshal of the Department of Forestry and Fire Protection. (Cal. Health & Safety Code § 13262.)

Q 4. How does a homeowner comply with this law?
A Every owner of a “dwelling unit intended for human occupancy” must install an approved carbon monoxide device in each existing dwelling unit having a fossil fuel burning heater or appliance, fireplace, or an attached garage. The applicable time periods are as follows:
(1) For all existing single-family dwelling units on or before July 1, 2011.
(2) For all other existing dwelling units on or before Jan. 1, 2013. (Cal. Health & Safety Code § 17926(a).)

Q 5. How many devices and where do I place them in the home?
A This new law requires the owner “to install the devices in a manner consistent with building standards applicable to new construction for the relevant type of occupancy or with the manufacturer’s instructions, if it is technically feasible to do so” (Cal. Health & Safety Code § 17926 (b)).

The following language comes packaged with carbon monoxide (CO) detectors:
For minimum security, a CO Alarm should be centrally located outside of each separate
sleeping area in the immediate vicinity of the bedrooms. The Alarm should be located at least 6 inches (152mm) from all exterior walls and at least 3 feet (0.9 meters) from supply or return vents. Building standards applicable to new construction are as follows (overview summary only):

• Section R315 et seq. of the 2010 edition California Residential Code (CRC) [effective Jan. 1, 2011] (applicable to new one-to-two family dwellings and townhouses not more than 3 stories and also where work requiring a permit for alterations, repairs or additions exceeding one thousand dollars in existing dwellings units):
Installed outside of each separate sleeping area in the immediate vicinity of the bedroom
(s) in dwelling units and on every level including basements within which fuel-fired
appliances are installed and in dwelling units that have attached garages.

• Section 420 et seq of the 2010 edition California Building Code (CBC) [effective Jan. 1, 2011] (applicable to other new dwelling units and also where a permit is required for alterations, repairs or additions exceeding $1,000 in existing dwelling units):
Installed outside of each separate sleeping area in the immediate vicinity of the bedroom
(s) in dwelling units and on every level including basements within which fuel-fired appliances are installed and in dwelling units that have attached garages.

Q 6. Are there any penalties for noncompliance with this law regarding installation of carbon monoxide detector devices?
A Yes. A violation is an infraction punishable by a maximum fine of $200 for each offense. However, a property owner must receive a 30-day notice to correct first. If an owner who receives such a notice fails to correct the problem within the 30-day period, then the owner may be assessed the fine. (Cal. Health & Safety Code § 17926(c).)

Q 7. Can a buyer of a “dwelling unit intended for human occupancy” rescind the sale if the dwelling doesn’t have the necessary carbon monoxide detectors?
A No. However, the buyer may be entitled to an award of actual damages not to exceed $100 plus court costs and attorney’s fees. (Cal. Health & Safety Code § 17926(d).) Note the following language in the TDS and MHTDS:
Installation of a listed appliance, device, or amenity is not a precondition of sale or transfer of the dwelling. The carbon monoxide device, garage door opener, or child-resistant pool barrier may not be in compliance with the safety standards relating to, respectively, carbon monoxide device standards of Chapter 8 (commencing with Section 13260) of Part 2 of Division 12 of, automatic reversing device standards of Chapter 12.5 (commencing with Section 19890) of Part 3 of Division 13 of, or the pool safety standards of Article 2.5 (commencing with Section 115920) of Chapter 5 of Part 10 of Division 104 of, the Health and Safety Code. Window security bars may not have quick-release mechanisms in compliance with the 1995 edition of the California Building Standards Code.

Q 8. Does a seller have any special carbon monoxide disclosure obligations?
A No. The only disclosure obligations are satisfied when providing a buyer with the TDS or the MHTDS. If the seller is exempt from giving a TDS, the law doesn’t require any specific disclosures regarding carbon monoxide detector devices. (See Cal. Civ. Code §§ 1102.6, 1102.6d.) The Homeowners’ Guide to Environmental Hazards also will include information regarding carbon monoxide.

Q 9. May local municipalities require more stringent standards for carbon monoxide detectors?
A Yes (Cal. Health & Safety Code § 17926(e)).

Q 10. Do landlords have any special obligations regarding carbon monoxide detectors?
A Yes. All landlords of dwelling units must install carbon monoxide detectors as indicated in Question 4. The law gives a landlord authority to enter the dwelling unit for the purpose of installing, repairing, testing, and maintaining carbon monoxide devices “pursuant to the authority and requirements of Section 1954 of the Civil Code [entry by landlord].” The carbon monoxide device must be operable at the time that a tenant takes possession. However, the tenant has the responsibility of notifying the owner or owner’s agent if the tenant becomes aware of an inoperable or deficient carbon monoxide device. The landlord is not in violation of the law for a deficient or inoperable carbon monoxide device if he or she has not received notice of the problem from the tenant.
(Cal. Health & Safety Code § 17926.1.)

Q 11. If the California Building Standards Commission adopts or updates building standards relating to carbon monoxide devices in the future, is the owner required to install the newer device?
A It depends. Yes, when the owner makes an application for a permit for alterations, repairs, or additions to that dwelling unit with the cost exceeding $1,000. (Cal. Health & Safety Code § 17926.2 (b).)

California Association of REALTORS®
Member Legal Services
525 South Virgil Ave.
Los Angeles, CA 90020
The information contained herein is believed accurate as of Dec. 1, 2010. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney. Written by Sonia M. Younglove, Esq. Copyright© 2010 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). Permission is granted to C.A.R. members only to reprint and use this material for non-commercial purposes provided credit is given to the C.A.R.Legal Department. Other reproduction or use is strictly prohibited without the express written permission of the C.A.R. Legal Department. All rights reserved.
Terms and Conditions Privacy Policy Permission to Reprint Site Map Copyright © 2011 CALIFORNIA ASSOCIATION OF REALTORS®

Judy Clarke
The Clarke Team
Bay Area Real Estate
650-489-5399
sold@clarketeam.com

Monday, March 14, 2011

Five signs that say “buy”

From The Wall Street Journal Weekend Investor, February 26, 2011

Home buyers sitting on the fence wondering if now is the right time to buy should consider five factors when making this decision: Jobs, recent sales activity, construction, mortgage availability, and anecdotal evidence. Each of these issues can help consumers make the best choice for their situation and financial circumstance.

Jobs: Although many areas of the country were deeply impacted by the recession, some areas were less affected by job loss. If employment stability is a concern, prospective buyers should review job-growth data from the U.S. Bureau of Labor Statistics at http://www2.realtoractioncenter.com/site/R?i=OY4Sr8R-aTMAv3xZ7tqPOw... The data provided by the Bureau is approximately one month old and shows the direction of the local economy.

Recent Sales Activity: Housing inventory and sales volume should be taken into consideration while house hunting. A large inventory of homes with few actual transactions can be a negative indicator. On the other hand, if inventory is falling and transactions are rising, that is a good sign. In January, the CALIFORNIA ASSOCIATION OF REALTORS®’ Unsold Inventory Index stood at 6.7 months, up from 5 months in December 2010, but down from 5.7 months in January 2010. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Construction: Staying up-to-date on the number of building permits issued for local builders is useful for gauging builder sentiment and the future of housing activity. The California Building Industry Association recently announced that California homebuilders pulled 2,920 total housing permits in January, registering a 5-percent decline compared with a year ago and a 56-percent decline compared with December. However, the Construction Industry Research Board is projecting 62,000 total permits will be pulled in 2011, an increase of 38 percent compared with 2010’s total of 44,893 permits.

Mortgage Availability: Home buyers hoping to be approved for a mortgage should monitor local lending patterns. Following the financial crisis, most national banks tightened lending standards; however, some local banks haven’t been impacted as much as large lenders and are more willing to lend, even for higher-priced homes.

Anecdotal Evidence: Although buyers can access home listings online, one of the best ways to monitor the local housing market is to work with a REALTOR® and gather intelligence using their expertise and guidance.

Home buyers sitting on the fence wondering if now is the right time to buy should consider five factors when making this decision: Jobs, recent sales activity, construction, mortgage availability, and anecdotal evidence. Each of these issues can help consumers make the best choice for their situation and financial circumstance.

Jobs: Although many areas of the country were deeply impacted by the recession, some areas were less affected by job loss. If employment stability is a concern, prospective buyers should review job-growth data from the U.S. Bureau of Labor Statistics at http://www2.realtoractioncenter.com/site/R?i=OY4Sr8R-aTMAv3xZ7tqPOw... The data provided by the Bureau is approximately one month old and shows the direction of the local economy.

Recent Sales Activity: Housing inventory and sales volume should be taken into consideration while house hunting. A large inventory of homes with few actual transactions can be a negative indicator. On the other hand, if inventory is falling and transactions are rising, that is a good sign. In January, the CALIFORNIA ASSOCIATION OF REALTORS®’ Unsold Inventory Index stood at 6.7 months, up from 5 months in December 2010, but down from 5.7 months in January 2010. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Construction: Staying up-to-date on the number of building permits issued for local builders is useful for gauging builder sentiment and the future of housing activity. The California Building Industry Association recently announced that California homebuilders pulled 2,920 total housing permits in January, registering a 5-percent decline compared with a year ago and a 56-percent decline compared with December. However, the Construction Industry Research Board is projecting 62,000 total permits will be pulled in 2011, an increase of 38 percent compared with 2010’s total of 44,893 permits.

Mortgage Availability: Home buyers hoping to be approved for a mortgage should monitor local lending patterns. Following the financial crisis, most national banks tightened lending standards; however, some local banks haven’t been impacted as much as large lenders and are more willing to lend, even for higher-priced homes.

Anecdotal Evidence: Although buyers can access home listings online, one of the best ways to monitor the local housing market is to work with a REALTOR® and gather intelligence using their expertise and guidance.

Judy Clarke
The Clarke Team
650-489-5399
sold@clarketeam.com

Wednesday, March 2, 2011

Experian will report on rental payments

This is great news for renters - especially those renters trying to rebuild their credit history after losing a home to foreclosure! Experian recently purchased Rent Bureau, hence the change. Ask your landlord to report your rent payments to help get your credit score back to where it should be. Don't give up - you can purchase a home again with time and patience.

From the Experian Website:

Dear Experian,

Can an apartment put your rent on your credit report as an installment payment like they do with a car payment?
- YES

Dear YES, You can’t report your own rent payments, but that doesn’t mean your rent payments can’t help you build a credit history.

Experian recently acquired Rent Bureau, one of that nation’s largest rent payment reporting companies and has begun including rent payment in Experian consumer credit reports.

In the past, only negative rent payment history would appear in your credit report, for example evictions or civil judgments for unpaid rent. That meant poor rent payment history could hurt your credit report, but positive rent payment couldn’t help.

Adding positive rent payment history enables you to build a new or stronger credit history simply by paying your rent or lease on time. Experian believes that consumers who have little or no credit history, or who are trying to recover from a difficult financial situation, will benefit greatly.

It can be difficult for people with no credit history to qualify for traditional credit lines. Incorporating rent payments in the credit report will give lenders additional information upon which to base a decision, opening the door to credit for many who would otherwise be unable to qualify without a cosigner.

Thanks for asking.
- The "Ask Experian" team