A taxpayer purchased a vacation home as an investment with the hope it would appreciate in value and be sold at a profit. The taxpayer then sold the vacation home and purchased another vacation home as an investment property with the proceeds of the sale.

The properties were never rented or put up for sale and no mortgage interest, maintenance, or other expenses were listed as deductions on their income tax return.

The taxpayer reported the profit on the sale of the first vacation home as tax exempt under §1031 due to the sale and acquisition of like-kind properties.

The IRS claimed the sale and purchase did not qualify as a §1031 transaction since neither the vacation home sold or the one acquired were investment properties as they were never held out for rent or for resale, or treated as investment property on the taxpayer's tax returns.

The taxpayer claimed the sale and acquisition did qualify as a §1031 transaction since the intent was to hold the properties for investment purposes, waiting for their value to appreciate before selling.

A United States tax court held the sale and acquisition did not qualify as a §1031 transaction since the properties were not investment properties as they never were held out for rent or for resale, expenses taken, or depreciation or investment interest deductions claimed, and the mere intent to hold the properties until they appreciate and can be sold at a profit does not establish an investment intent when used solely as a vacation home. [Moore v. Commissioner (May 30, 2007) TC Memo 2007-134]

I have a deal going on a bank owned property with two escrow companies involved. One is Pickford Escrow and one is The Escrow Firm. I believe they are both in Laguna Niguel, California and they are supposed to be affiliated.

My buyer made an offer that was accepted but was unable to get the loan due to a change in circumstance. We informed the listing agent and cancelled our offer within a few days.

The escrow companies did not provide the HOA cc&r's but will not refund the cost of the cc&r's to the buyer.

They are trying to charge the buyer for the cc&r's and a cancellation fee while providing no cc&r's.

The escrow companies say they have to pay www.hoacerts.com up front and there is no refunds so the buyer has to pay whether the cc&r's are delivered or not.

As well, the escrow companies say they are not willing to use the cc&r's for the next deal on the property.

You need to be aware of what these guys are doing out there so that you can protect your buyers.

We have given the escrow companies an ultimatum, refund the deposit or we will report them to the dre for attempting to deduct fees for services not provided.

We will see what happens

Barney Frank has been pushing to keep FHA seller assisted financing alive.

The House Financial Services Committee adopted H.R. 6694, legislation designed to reauthorize and reform down payment assistance programs that the Bush Administration banned in July.

In a final effort to head off the Oct. 1 ban on the use of seller-funded down-payment assistance with FHA-backed loans, H.R. 6694 is picking up steam as an alternative bill that would mend rather than end the practice of down payment assistance.

HR 6694 would allow qualified borrowers with credit scores of 680 or above to use seller-funded down-payment assistance on FHA-backed loans. Borrowers with scores between 620-680 will be subject to risk-based pricing and higher insurance premium fees.

This bill still needs to be approved by Congress and the President.

The committee vote was a positive step toward keeping a down payment assistance program, but it's not over. Members of Congress need to know that we are watching their vote on H.R. 6694.

Everybody who wants to see seller assisted down payment assistance preserved needs to call their representatives in the House and the U.S. Senate. They need to be told that a vote for H.R. 6694 is a vote for the next generation of homeowners.

The first ever Huntington Beach Green Expo happens this Sunday September 20, 2008 from 10 am to 4 pm at the Huntington Beach library at 7111 Talbert Ave, Huntington Beach CA 92648.

The expo will be held in the parking lot between the library and the sports fields.

Those attending will be able to get information on how to live and work in a more environmentally sensitive manner.

The expo is completely sold out and we invite all in Southern California to attend.

This expo is sponsored by the Huntington Beach Chamber of Commerce and the City of Huntington Beach Economic Development Department.

Tenants in Common is a way to hold title, to own property, by two or more individuals. Sometimes it is referred to as Tenancy in Common. There is no limit to the number of individuals who can hold title to one piece of real estate. A property held by tenants in common can be owned by two owners or 100+ owners.

How Are Tenants in Common and Joint Tenants Similar?

They aren't, really. Tenants in common hold one unity or requirement that is similar to joint tenancy. That unity is the right of possession.

•·         Tenants in common can be between two or more persons who are related or who are unrelated. Husbands and wives can hold title as tenants in common. Joe Williams, Mary Phelan and Amir Shaik can hold title together as tenants in common.

•·         Ownership can be held in equal shares or unequal shares. For example, Joe could hold 50% ownership, Mary 25% and Amir 25%.

•·         Co-tenants have the right to possess the property by one tenant or by all the tenants. Amir can live in the property by himself or share the property with Joe and Mary. Neither tenant can exclude the other.

•·         Upon death, the interest of the deceased co-tenant will pass to the co-tenant's heirs. If Amir died, Joe would still hold 50%, Mary would own 25%, but Amir's 25% would pass to whomever she designated in her will.

How Can Joint Tenants Become Tenants in Common?

Joint tenancy requires four unities. Unlike tenants in common, joint tenancy involves right of survivorship, meaning the interest held by each tenant will pass to the other upon death. The four unities necessary to create joint tenancy are:

•·         Time. Each owner must receive title at the same time.

•·         Title. Each owner must receive title on the same deed or document evidencing title.

•·         Interest. Each owner receives the same proportionate and equal share of ownership.

•·         Possession. Each owner has the identical right of possession.

If one of the joint tenants sells or conveys the interest created in a joint tenancy to another person, the joint tenancy is broken, and a tenancy in common is created. Joint tenants cannot stop another tenant from breaking the joint tenancy.

Dissolving Tenants in Common

•·         To dissolve the tenancy in common, one or more co-tenants can always buy out the others.

•·         The property can be sold and the proceeds distributed equitably among the owners.

•·         A partition action can filed. This involves going to court and asking to sell the property under court order and distribute the proceeds among the owners. When a co-tenant dies, you may see a partition action filed when an heir may want to sell and the other co-tenants do not.

According to Experian's National Score Index for credit score stats, the average American credit score was 678 (as of 4/2008).

If your score is below 620, then you might have a tougher time getting a loan.

The following ratings explain the impact of the different score ranges:

* 720-850 - Excellent - This represents the best score range and best financing terms.

* 700-719 - Very Good - Qualifies a person for favorable financing.

* 675-699 - Average - A score in this range will usually qualify for most loans.

* 620-674 - Sub-prime - May still qualify, but will pay higher interest.

* 560-619 - Risky - Will have trouble obtaining a loan.

* 500-559 - Very Risky - Need to work on improving your rating.

Hard money (private money) fills a niche in mortgage lending and provides alternate funding for your clients who have specialized needs or too many credit problems for conventional financing.

Many brokers have clients who would pay higher rates to gain access to capital, including non-traditional funding, and who have the amount of equity available to guarantee payment.

Who Benefits from the Use of Hard Money?

Here are a few mainstream examples of broker clients who benefit from the use of hard money:

• Borrowers that need quick funding for time sensitive loans
   
• Borrowers who want to use equity for a real estate investment
   
• Borrowers who want short term loans
   
• Borrowers who have lost bank loans because of previous declines
   
• Borrowers who want to avoid the hassle of institutional loan processing
   
• Borrowers who want a loan that has more flexible terms and conditions
   
• Borrowers who cannot qualify for bank assistance, due to:
   
  • Poor credit
  • Tax liens
  • Other liens
  • Bankruptcy
  • Foreclosure
  • Divorce
  • Medical emergencies

What Benefits Do Hard Money Loans Provide?

When speed is very necessary to complete a profitable transaction, it can make sense to pay for short-term private money rather than walk away from the deal.

Owners of expensive properties benefit when they want to cash out large amounts of their equity via refinance loans, equity loans, equity lines of credit or debt consolidation loans.

Real estate investors use private money loans because there are no lengthy timelines or restrictions required by bank loans.

Borrowers facing foreclosure also benefit. When the foreclosure process starts, the borrower may be so far behind that conventional lenders  hesitate to refinance the loan. A private money lender may be willing to give your client a new loan. Your client can use the funds to pay off the original loan and secure enough time to sell the property and find a new place to live.

Borrowers who have temporary problems, such as a job loss, can use a private money loan to rebuild their credit. By making payments on time for a year or two, they create the opportunity for a future refinance at a more favorable rate.

Borrowers who own properties that do not meet institutional guidelines also benefit from the use of private money.  Frequently the condition of a property disallows for the initial financing with conventional money; or, the structure of the deal may also be a factor.  Unconventional property characteristics or deal structure might include:

• Needs Improvement
• Needs funds to provide occupancy of income property
• Not eligible for sale in the secondary market
• Does not meet requirements for conventional underwriting
• Held in probate, trust, partnership, LLC or corporation

A 'hard money' loan, also known as a 'private money' loan, 'equity-based' loan, or 'asset- based' loan is based primarily on real estate collateral.

Private lenders fund the loans rather than institutions such as banks. Since the collateral is sufficient to recover the original investment if the borrower defaults, other borrower qualifications are minimized.

Credit history and credit scores are not as important.

Borrower income is still a factor in many situations, but not as important as conventional lending.

The Federal Open Market Committee cut the fed funds target rate by 25 basis points to 2%. This is the lowest the target rate has been since late 2004. The press statement cited weakness throughout the economy and stress in financial markets. It noted higher inflation, but also said that inflation should moderate in the near term. The statement made no reference to upside or downside risks to growth. Two members voted against the rate cut, favoring no action. The Fed also reduced the discount rate 25 basis points to 2.25%.

Prime rates at the major banks have moved down to 5%.

Here are some upcoming networking events in Huntington Beach for the next few weeks: 

April 22^nd 7:15am

Netwalkers meet at Central Library

  April 23 Extended Stay Evening Networking Event

5pm-7pm Afternoon Luau (a lot of fun please join us) 

5050 Skylab Circle West, Huntington Beach 

Extended Stay will provide Appetizers and drinks

Please bring plenty of business cards

May 6 Surf City Lunch Bunch

Flight Bistro & Social Lounge

8082 Adams Avenue, Huntington Beach

11:30

Cost $15 for members

20 for prospective members

Includes lunch 20 second introduction, and members get to place information out.

Attendance 60+

May 7^th

Ambassador Meeting

4:30 Chamber Office

 May 7^th

New Member Reception 5:15-6:30pm

Location: Chamber Office, 19891 Beach Blvd #140 Huntington Beach

Come by and have sandwiches, cookies, drinks and find out how to get the most out of your membership.

 May 9^th

Winner Circle Breakfast

7:15am-9am

Seacliff Country 6501 Palm Avenue Huntington Beach

Networking Breakfast

Cost $22 in advance wed prior to breakfast, Cost 27 after wed prior to breakfast.

Cost Prospective Members 30

 May 15 Joint Mixer HB Chamber & Westminster Chamber of Commerce

Best Western 5755 Westminster Blvd.

5:30-7:30pm 

May 6  Surf City Lunch Bunch

Flight Bistro & Social Lounge, 8082 Adams Avenue, Huntington Beach, CA

11:30

Cost $15 for members

20 for prospective members

Includes lunch 20 second introduction, and members get to place information out.

Attendance 60+

May 20 Dental Oasis of Orange County   Ribbon Cutting

7777 Edinger Ave., Suite #232 (Bella Terra), Huntington Beach, CA

5:30pm              

May 21 Surf City Connection (Business Exposition)

4-6:30pm

Hilton Waterfront Beach Resort     21100 Pacific Coast Hwy, Huntington Beach

Attendance 350-400

Free to attend