May 2011

Real Estate Gifts to Family Members? Notify IRS

Be sure to remind your customers who are buying real
estate as a gift to a family member that they need to report such real estate
gifts to the Internal Revenue Service. The IRS is increasingly scrutinizing
these gifts using state land-transfer records to prove the omissions, The Wall
Street Journal reports.

gift–including property–to a person that is valued at more than $13,000
requires the giver to let the IRS know by filing a gift-tax return (Form 709),
even if the transfer falls within the $5 million lifetime exemption

In a court document from December,
the agency said that in the last two years 323 taxpayers had been examined for
failing to report possible real estate gifts, another 217 were being examined,
and 250 were being considered for review, The Wall Street Journal reports.

The states that have handed over
information on gift-like transactions are Florida, Connecticut, New Hampshire,
Hawaii, Nebraska, Tennessee, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Texas, Virginia, Washington, and Wisconsin, according to court
documents. Through its investigation, the IRS so far has uncovered a high
“failure-to-report rate” in these states–with noncompliance rates reaching even
100 percent in Ohio based on case reviews as well as 90 percent in Florida and
Virginia, 80 percent in Washington, 60 percent in Connecticut and Nebraska, and
50 percent in Wisconsin.

“IRS Scrutinizes Gifts of Real
The Wall Street Journal (May
26, 2011)

How Much Home Insurance Is Enough?

Home Owner’s insurance policies are often an
after-thought–that is, until disaster strikes.

Home owners in Joplin, Mo., Tuscaloosa, Ala., and other cities
recently flattened by tornados are now finding that out too late as they
discover that their insurance policies likely will not entirely cover the costs
to rebuild.

While most home owner’s
insurance policies will cover tornado damage, many home insurance policies are
undervalued. In fact, one study from 2008 by Marshall & Swift finds that 64
percent of homes are undervalued for insurance purposes.

Home Owner’s insurance coverage typically comes in three

  • Replacement cost: It covers the cost of replacing or repairing a home, based on
    a certain dollar limit. However, some home owners with this type of insurance
    find that their insurance does not reflect increases in the cost of construction
    since they originally took out the policy.
  • Extended replacement
    The insurance company will pay a
    certain percentage above the replacement cost to account for inflation. However,
    home owners still may face inadequate coverage with this too, particularly if
    they haven’t updated their insurance coverage in awhile.
  • Guaranteed replacement
    Regardless of how much prices have
    increased since first taking out the policy, this coverage will pay the total
    cost of replacing your home. This coverage can be expensive and also difficult
    to even get.

Most standard home insurance
policies also include an “inflation guard” provision, which automatically
adjusts the coverage limit when a policy is renewed, but some coverage may
charge extra for this.

Many policies also
will cover lost or damaged possessions at about 50 percent to 70 percent of the
amount of insurance on the home. (The USA Today cites an example: If your policy
provides $250,000 to rebuild a home, you may stand to also get $125,000 extra to
replace your damaged belongings.)

Source: “If Disaster Strikes, Will Your Insurance
Come Through?”
Gannett News Services
(May 31, 2011)

Agents Say Appraisals Continue to Hamper Deals

Low appraisals that come in below the purchase price
are still delaying closings or killing some sales contracts, real estate
professionals say in a survey from April.

One out of 10 real estate professionals–or 11 percent–say that low
appraisals are causing home sales contracts to fall through. An additional 10
percent say low appraisals are delaying closings, according to an April survey
by the National Association of REALTORS®. About the same number of real estate
professionals reported the problems with low appraisals in a March

About 14 percent of real estate
professionals reported that appraisals below the purchase price are requiring
extra negotiating in order to get the deal closed.

“Short sales and foreclosures are still priced too high by the
lenders, who do not believe the agents information concerning actual market
conditions,” said one real estate professional in the survey comments.

Source: “Appraisals Still Kill Home Sales,” (May 25, 2011)

‘Double-Dip’ Housing Plunge Threatens Economy

Tuesday, 31 May 2011 12:21 PM

By Newsmax Wires

Home prices in 20 U.S. cities dropped in March to the
lowest level since 2003, showing housing remains mired in a slump and is
threatening to hurt the nation’s economic recovery.The
S&P/Case-Shiller index of property values in 20 cities fell 3.6 percent from
March 2010, the biggest year-over-year decline since November 2009, the group
said today in New York. In the first quarter, housing prices dropped 4.2
percent, a new low that is likely to threaten the economic recovery.

of this data comes days after two disappointing economic reports. Last week,
worsening gross domestic product and initial unemployment claims numbers topped
what economists had expected. And the slumping housing data arrives just days
before the Labor Department releases its monthly report on jobs.

bleak data is increasingly worrisome for analysts, who say economic growth
should have picked up more by now. Higher food and commodity prices are cutting
into economic output by dampening consumer spending.

More and more
forecasters, meanwhile, are slashing their second-quarter growth predictions,
The Wall Street Journal reports.

JPMorgan Chase & Co. economists cut
their growth estimate to 2.5 percent from 3 percent, while Bank of America
Merrill Lynch economists cut theirs to 2 percent from 2.8 percent and Deutsche
Bank went to 3.2 percent from 3.7 percent.

“It’s very hard to generate a
rapid recovery when rapid recoveries are historically driven by housing and the
consumer,” says Nigel Gault, an economist at IHS Global Insight, tells the

Annualized, inflation-adjusted growth won’t break 3 percent in
the coming quarters, Gault predicts, which means it will be too slow to make a
meaningful dent in unemployment.

Foreclosures Depress

A backlog of foreclosures, along with the fact that more are
on the way, means home prices may stay depressed, dissuading builders from
taking on new-home construction projects. Unemployment at 9 percent and stricter
lending conditions are signs that any recovery in housing may take

“With the foreclosure pipeline still full to bursting, it’s hard
to see this downward pressure on prices abating,” said Paul Dales, a senior U.S.
economist at Capital Economics Ltd. in Toronto. “I wouldn’t be surprised to see
prices continue to fall this year and maybe into next year.”

uptick in 2009 and 2010 can be attributed to the first-time homebuyer tax
credit, economists say. Without it, there is no apparent housing market
stabilization of home prices. And that could propel the country into a tougher
economic recovery.

Economists surveyed by Bloomberg had forecast a 3.4
percent decline in housing from a year earlier, according to the median forecast
of 27 economists surveyed. Estimates ranged from declines of 4.9 percent to 2.8

Nationally, prices decreased 5.1 percent in the first quarter
from the same time in 2010, and were down 4.2 percent from the previous three
months, the biggest one-quarter decrease since the first three months of 2009.
At 125.41, the index was the lowest since the second quarter of

“This month’s report is marked by the confirmation of a double dip
in home prices across much of the nation,” said David Blitzer, chairman of the
Case-Shiller index committee at S&P.

Further declines in home prices
are likely to constrain the consumer spending that makes up 70 percent of the
economy, as homeowners feel less wealthy and have little home equity to borrow

Previous reports this month showed that the housing market
remains depressed as the broader economy slows.

Pending sales of
previously owned homes plunged 12 percent in April from the prior month, the
National Association of Realtors said last week. The gauge measures contract
signings, which typically lead closings by one to two months, a sign existing
purchases will slow.

Stock Futures Hold

Stock-index futures held earlier gains after the report amid
speculation the European Union will pledge further aid to Greece. The contract
on the Standard & Poor’s 500 Index maturing in June rose 0.9 percent to
1,342 at 9:18 a.m. in New York.

Home prices in the 20 cities fell 0.2
percent in March from the previous month after adjusting for seasonal
variations, a ninth consecutive decrease. Thirteen of the 20 areas posted price
declines in March from the previous month, led by Charlotte, North Carolina, and

The year-over-year gauge provides better indications of
trends in prices, the group has said. The panel comprises Karl Case and Robert
Shiller, the economists who created the index.

Nineteen of the 20 cities
in the index showed a year-over-year decline, led by a 10 percent slump in
Minneapolis. The exception was Washington, where values climbed 4.3 percent.
Prices in 12 markets dropped to fresh lows in March from their 2006 and 2007

Sales of previously owned homes, based on closings, fell 0.8
percent in April to a 5.05 million rate, with demand for distressed properties
accounting for 37 percent of the total, NAR said last May 19.

overhang of unsold housing inventory will probably remain an issue for builders
and buyers alike. CoreLogic Inc. in March estimated about 1.8 million homes were
more than 90 days delinquent, in foreclosure or bank-owned, a so-called “shadow
inventory” set to add to the unsold supply of 3.87 million previously owned
homes on the market at the end of April.

Builders are gloomy and project
demand will remain depressed into next year, Bill Wheat, chief financial officer
of D.R. Horton Inc., told a housing conference in New York on May 11.

still see housing demand at very weak levels,” Wheat said. “It could still be a
struggle in 2012.”


A common question home buyers have today is: How long must I wait before obtaining financing after bankruptcy, foreclosure or short sale?

Below is an overview by loan type of this important information.



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Banks to Pay $22 Mil for Military Foreclosure

Bank of America and Morgan Stanley
have agreed to pay more than $22 million combined to settle federal civil
charges on improperly foreclosing on military personnel, The Associated Press

Between 2006 and 2009, the
mortgage lenders foreclosed on 178 military members in 22 states without getting
court approval. The military members affected will each receive $125,562, on
average. The banks will also continue to investigate whether improper
foreclosures occurred in 2009 through 2010.

The settlement is “easily the largest amount recovered” in a case of
improper military foreclosures, Thomas E. Perez, an assistant attorney general,
told The Associated Press.

Servicemembers’ Civil Relief Act offers protections to military personnel to
prevent foreclosures. It bans evictions or creditors trying to repossess their
property while on active duty.

Chase earlier this year admitted to overcharging about 4,000 military personnel
on mortgages and wrongly foreclosing on 14. It paid $2 million in settlement
charges originally and last month paid more than $60 million to settle a
class-action lawsuit regarding the overcharges.

Source: “2 Firms to Pay for Improper Military
Associated Press (May
26, 2011)

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