Jupiter Florida Real Estate Broker

A tax break for distressed homeowners who mortgages were written down expired on Dec. 31.The 2007 measure exempted borrowers from federal taxes they normally would owe on assistance received from banks, primarily in the form of a seller’s forgiven home loan debt in a short sale.If a lender approves a short sale that’s $10,000 less than the seller owes on the home, for example, the lender absorbs the $10,000 loss. However, the IRS considers that $10,000 money that the seller made on the deal since he no longer owes as much to the bank. As a result, the IRS expects the seller to report that $10,000 as income – even if he never saw the money – unless Congress extends the tax break.Although the residential property market is in recovery, housing advocates contend that the market still needs this tax break that was put in place after the crash. More than 6 million homeowners in this country still owe more on their mortgages than the underlying properties are worth, they say, and failure to renew the tax break would only increase their financial burden. A report by the Congressional Research Service calculates that a middle-income homeowner who is granted a $20,000 reduction in mortgage debt could expect to owe $5,600 in federal taxes under the new reality.“It makes absolutely no sense,” says Sen. Debbie Stabenow D-Mich.. “This is not just about fairness for homeowners. This is about keeping the housing recovery alive.”Many of her colleagues agree, given the broad bipartisan support for an extension of the law. While Congress went on holiday break without taking action, it could revisit the issue as soon as next week, possibly passing a retroactive extension.However, an extension is not guaranteed. Owners considering a short sale currently should seek advice from a professional tax consultant or attorney

The US Federal Reserve took its first step away from its historic third round of asset purchases monthly buying from $85bn to $75bn.

Starting in January, the Fed will taper its Treasury purchases by $5bn to $40bn a month, and its mortgage-backed securities purchases by $5bn to $35bn a month.

A majority of 9-1 voted for the decision.  Eric Rosengren, president of the Boston Fed, dissented saying that the taper was premature until the data showed that stronger growth will be sustained.

“The Committee sees the improvement in economic activity and labour market conditions?.?.?.?as consistent with growing underlying strength in the broader economy,” says the Fed statement. If the data stays strong it will “likely reduce the pace of asset purchases in further measured steps at future meetings”.

The 10-year Treasury yield rose to 2.92 per cent, and the benchmark yield retreated to 2.87 per cent, up four basis points on the day. The dollar rose on a trade-weighted basis, while gold trimmed early gains.

The taper comes 15 months after the Fed began its unprecedented third round of asset purchases in September 2012. Unlike previous programes, there was no limit on its size, with the Fed pledging to buy until it achieved a “substantial improvement” in the outlook for the labor market.

Since then it has bought more than $1tn in Treasuries and MBS. Even with a taper, its total balance sheet will soon exceed $4tn.

The goal of the purchases is to drive down long-term interest rates and stimulate the economy now that short-term rates are already stuck at zero. The Fed regards QE3 as booster to increase the economy’s momentum and always intended to slow and stop the purchases once that was achieved.

Florida Supreme Court issues HOA ruling

A Florida Supreme Court ruling applies to developers of home communities. The core issue focused on the responsibility a developer has down the road if problems arise in “essential services,” such as roads or sewer systems.

The Lakeview Homeowners Association in Central Florida alleged construction defects in the development’s subdivision against Maronda Homes after the homeowners association (HOA) assumed control. It alleged a “breach of the implied warranties of fitness and merchantability in the residential construction context.” The specific complaint: bad stormwater drainage that flooded driveways along with other problems.

The HOA filed a lawsuit claiming the problems were latent and could not easily be discovered by homebuyers.

Maronda argued that “common law implied warranties of fitness and merchantability” don’t include a community’s infrastructure – items beyond the home itself. If so, the builder said, it wasn’t responsible for things like retention ponds, private roads, underground pipes, etc.

A trial court agreed with Maronda; an appeal court did not. That took the case to the Florida Supreme Court.

The key issue before the Supreme Court was whether it should extend buyer protections beyond a home itself via an implied warranty. In the end, the Florida Supreme Court upheld the appeal court decision that Maronda did have some responsibility for community infrastructure.

For homebuyers, this means an “implied warranty of fitness and merchantability” now extends beyond their new home in some cases to the surrounding roads, sewer systems, and other infrastructure built by the community developer.

Mortgage buyer Freddie Mac said Thursday the average rate on the 30-year loan jumped to 4.46 percent from 4.29 percent last week. The average on the 15-year fixed loan increased to 3.47 percent from 3.30 percent.

Rates have risen a full percentage point since May after the Federal Reserve signaled it might slow its bond purchases by year’s end. Rates peaked at 4.6 percent in August.

Mortgage rates have stabilized since September, when the Fed surprised markets by taking no action. And rates remain low by historical standards. The Fed meets later this month and could slow the bond purchases if the economy shows further improvement.

The bond purchases are designed to keep long-term rates low.

The increase in mortgage rates has contributed to a slowdown in home sales over the past two months. But the government reported Wednesday that purchases of new homes ramped up in October after three months of soft sales, evidence that the housing market is improving fitfully.

Sales of new homes increased 25.4 percent to a seasonally adjusted annual rate of 444,000 in October, the largest monthly percentage increase since May 1980.

And in another sign of potential economic strength, the Commerce Department said Thursday the economy grew at a 3.6 percent annual rate from July through September, the fastest since early 2012. But nearly half the growth came from a buildup in business stockpiles, a trend that could reverse in the current quarter and hold back growth.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage fell to 0.5 point from 0.7 point. The fee for a 15-year loan dropped to 0.4 point from 0.7 point.

The average rate on a one-year adjustable-rate mortgage ticked down to 2.59 percent from 2.60 percent last week. The fee was unchanged at 0.4 point.

The average rate on a five-year adjustable mortgage jumped to 2.99 percent from 2.94 percent last week. The fee declined to 0.4 point from 0.5 point.

Several federal tax breaks important to the real estate industry expire at the end of the year, and it remains to be seen when or if Congress will extend them.

These include the:

• PMI – a tax deduction for premiums for mortgage insurance provided by the Department of Veterans Affairs (VA), the Federal Housing Administration (FHA), the Rural Housing Service and private mortgage insurance

• Short sale principal forgiveness – the exclusion from taxable income of up to $2 million of debt a lender forgives on a principal residence sold through a short sale, mortgage restructuring or foreclosure

• Residential energy improvements – the maximum lifetime tax credit of $500 for energy efficiency improvements in a principal residence

• Accelerated property deductions – The Section 179 expensing deduction, which allows small business owners to deduct business property costs in a single year rather than over several years

• Bonus depreciation rules – a tax benefit that allows businesses to deduct 50 percent of the cost of qualifying business property in a single year

• Energy-efficient commercial buildings deduction

• New home energy improvements – a $1,000 or $2,000 credit for constructing or manufacturing qualified energy-efficient homes also are slated to expire this year.

If forgiven debt is taxed this will severely slow down short sales.  Let’s say you owe your lender 500k on your primary residence house.  You do a short sale and after all is said and done you give them 400k.  There is a 100k deficiency that you still owe them.  Typically what happens is they declare this to be non recoverable which allows it to be taken a deduction on their taxes.  In order to do this they must send you a 1099 for 100k.  Up until the end of this year the tax man forgave the tax due on this income to you under certain circumstances.  Well, It looks like that will change and the 100k of forgiven debt would be taxed as regular income.

According to the 2013 NAR Survey of Home Buyers and Sellers:

‘When buyers were asked where they first learned about the home they purchased, 43 percent said the Internet; 33 percent from a real estate agent; 9 percent a yard sign or open house; 6 percent from a friend, neighbor or relative; 5 percent from home builders; 2 percent directly from the seller; 1 percent a print or newspaper ad; and less than 1 percent from other sources.’

This is the big question posed as for Buyers, Sellers and us as Realtors it affects where we allocate our advertising resources.

Note that by placing the property in the MLS for Realtors (33%) which is then used to populate the vast majority of internet sites (43%) though the internet data exchange (IDX) systems and placing a sing in the yard (9%) we have 85% market coverage.

By: Chris Ryder