California REALTORS® applaud the bill to raise capital gains exclusion and free up housing inventory...
 
 The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today issued the following statement in response to the “More Homes on the Market Act,” reintroduced today by House Representatives Jimmy Panetta (D-CA) and Mike Kelly (R-PA). The bipartisan bill increases the capital gain exclusion amounts on the sale of a principal residence to $500,000 for single filers and $1 million for joint filers and indexes the exclusion for inflation. 
 
“California REALTORS® thank Congressman Panetta for reintroducing the ‘More Homes on the Market Act.’ This bill will provide necessary tax relief for California homeowners, particularly senior citizens, who have been unable to move because of the tax burden that could result if they were to sell,” said C.A.R. President Jennifer Branchini, a Bay Area REALTOR®.
 
“For working Californians, a home is their biggest and most important investment. However, because the capital gains exclusion was passed 25 years ago with no indexing for inflation, fewer and fewer families have been able to downsize and access the equity built up in their homes. This has resulted in fewer homes being available for younger and first-time homebuyers to move into, which has driven up demand and home prices even more.” 
 
The National Association of REALTORS® estimates that in California, as many as 95 percent of single homeowners and 68 percent of married homeowners who purchased their homes before 2000 could face capital gains tax if they sold their home this year. 
 ​

Here are the top 10 things to know to optimize your investment real estate portfolio
 
As we start off the New Year, this is a great time to provide a list of things to consider that might help your real estate investments be more profitable and your life less stressful.  

#1 - Set Up a Trust
The main advantages of setting up a Trust is to avoid probate and keep your estate private. What is probate? Probate is a court supervised legal process that includes determining the validity of your will, gathering your assets, paying your debts (and taxes) and distributing the remaining assets to your heirs. Probate is part of the public record and probate fees are set by law (and are not cheap).   Spending a bit of time now setting up a Trust will certainly pay dividends later.  Some people mistakenly think that setting up a trust will help eliminate taxes. It will not (although there are some tax benefits to a Charitable Remainder Trust).

#2 - Adding Family to Title
Don’t add your son/daughter/niece/nephew/etc. to the title of your property unless absolutely necessary. Adding someone to title may be as simple as filing a quit claim deed, but it may have unintended tax consequences. When you add a person to title, the IRS views that as a gift. If a son is now a 50% owner of a $1MM property, he just received a $500K gift. The gift giver (you, the owner) may now be responsible for a gift tax.  A more cost-effective solution may be to simply set up a Trust and name the son as the beneficiary of the Trust. Once you pass away, the son will receive the property (and at a step up in your cost basis – more of which is discussed below).

#3 - Don’t Ever Sell
‘Buy and hold’ can be a good strategy for building wealth and also keeping it. Real estate investors who own property until they die will pass the property to their heirs at a "stepped up cost basis". Under Section 1014(a) of the IRC, an heir’s basis in a property will equal the fair market value of the property at the time the descendant dies, which can effectively eliminate all capital gains and depreciation recapture taxes saving the heirs a capital gain income tax bill.

#4 - Defer, Defer, Die
Conducting a 1031 Exchange will allow for the deferral of capital gains taxes.  Doing another 1031 Exchange will allow for tax deferment again. An investor who cashes out, after doing a series of 1031 Exchanges, will pay taxes on all past transactions. Smart investors, however, take advantage of the step up in basis discussed early and defer, defer and then die. Having never cashed out of real estate all capital gains taxes will be eliminate for the heirs.

#5 - Utilize Equity Lines Strategically
In many instances, accessing an equity line may be a smarter decision for raising cash than selling real estate.  Cash from an equity line is non-taxable whereas the sale of real estate may trigger capital gains taxes. Obviously, the investor needs to be cautious of the extra debt burden on the property, but access to tax free cash via an equity line may be a very smart move.     

#6 - Make Strategic Acquisitions
The next 1031 Exchange replacement property you acquire may have a pool, an ocean view and a large yard where the grandkids can play. Those amenities may be nice for your tenants, but even better for you after you boot the tenants out and move in. Acquiring a future primary residence via a 1031 Exchange is not illegal, but needs to be done with caution. It is possible however and making a strategic acquisition of that sort can be a nice way to purchase your dream home.

#7 - Make Strategic Moves
Moving into a rental property, converting it into a primary residence and then selling it will allow you to reap the benefits of the Homeowner’s exemption. If you are married up to $500K of gain will be tax free. Time of residence and ownership rules may apply, but the strategy has been used effectively by our clients throughout the years.  

#8 - Diversify
Wall Street has been advocating the benefits of diversification for decades. A diversified portfolio allows you to reduce the volatility of your portfolio and either increase return for a given risk or decrease risk for a given return.  Often it isn’t prudent to have all of your eggs in one basket.  With real estate you can diversify either by geography, by asset class or both.  It may be time to start thinking like Wall Street.

#9 - Enjoy Your Investments
Your investments should work for you. If, at some point, they become too burdensome on your life, it may be time to rethink your strategy. This doesn’t necessarily mean cashing in all of your chips (and paying taxes) but it may mean transitioning out of difficult to manage properties and into easier to manage ones.

#10 - Build a Solid Team
Building a solid team is going to pay dividends over the long term. We have over 38 years of real estate expertise and resources for 1031 tax deferred exchange intermediaries. We would love to be part of your team.

If you'd like to discuss a 1031 Exchange please feel free to contact us…

Pete Sabine - call or Text 925.787.2548.
Leslie Whitney – call or text 510.388.5794
Visit OurFiveStarTeam.com
Compass. DRE 300889760; 01950037 

The average 30-year home loan interest rate jumped from 3.22% in January, 2022 to a high of 7.08% at the end of October 2022. As a result, most home buyers have suffered a 30 percent decrease in their home purchasing power and the overall real estate market trend has substantially tempered over the past year.
 
Learn how to qualify for a below-market home loan interest rate to lower your monthly payment plus save thousands of dollars on mortgage interest expenses.
 
If you have a home to sell in today's challenging real estate market, you will learn how to attract home buyer competition to get the highest possible sales price.
 
Discover creative financing strategies for buying your next home before selling your current home.
 
Here are some of the valuable pro tips you will learn:
Mortgage Interest Rate Buydown (discount) options

• Temporary rate buydown versus permanent rate buydown
• How to increase your purchasing power

Purchase Offer Negotiations

• Lower purchase price versus an interest rate buydown credit
• How to win a multiple offer buyer competition with an interest rate buydown
• How to reduce seller capital gain exposure with an interest rate buydown credit
• How to increase buyer income tax deduction with an interest rate buydown

Create buyer competition when selling your home

• How to create buyer competition marketing your home with an interest rate buydown credit

Creative financing options to buy your next home before selling your current home

• Home Equity Line of Credit (Heloc) loans
• Cross collateralization loans
• Private (Hard) Money loans

Local Real Estate Market Trend Forecast - 2023

• Home loan interest rates
• Supply of available homes for sale
  
  

Seating is limited - register now while tickets are still available!
​Click on this link for tickets
 
RSVP today to get this valuable information!
Tickets are $20 each - includes a copy of the book
"How to Get the Best Deal When Buying or Selling Your Home"
 
Share this with anyone you know who is planning to buy their next home.
 
Saturday, January 14, 2023 - 9:30 am to 11:30 am 
Wednesday, January 18, 2023 - 3:30 pm to 5:30 pm

Heather Farm Community Center - 301 North San Carlos Drive, Walnut Creek

Presented by
Bill Freeborn, Vice President of Mortgage Lending - OriginPoint
NMLS 1953091
Pete Sabine, Real Estate Consultant - Compass
DRE #00889760
Leslie Whitney, Real Estate Consultant - Compass
DRE #01950037

​You could save a substantial amount of money if anything covered under a home warranty policy is in need of repair or replacement during the coverage period. 
 
Here are the top 10 frequently asked questions about home warranty policies:
 
1. What is a home warranty?
A home warranty is typically a one-year service contract designed to protect the family budget from unexpected, costly repairs on home systems and appliances.
 
2. What is covered in the plans?
There are several plans and options to choose from to best suit the home’s specific requirements. Basic plans typically include coverage for: kitchen appliances, water heaters, plumbing, plumbing stoppages, electrical, heating system, ducts, instant hot water dispenser, whirlpool bath motor and pump assemblies and more.

Optional covered items can range from pool/spa equipment, washer/dryer, kitchen refrigerator, air conditioning, well pump and more. Plans  and optional covered items vary in geographic areas and are detailed in home warranty contracts.
 
3. What is a service call fee?
This is the fee paid to the service technician at the time of the appointment.
 
4. Is it safe to assume there are no costs other than the service fee when a covered item breaks down?
Unfortunately, no. A home warranty covers only items listed as covered and excludes all others. For instance, costs could arise for the homeowner from modifications or code upgrades when a system or appliance is replaced.
 
5. Who do I contact when covered items fail?
Anytime a covered item fails, contact the home warranty provider to request service. It is important that the home warranty provider is contacted first, as they do not reimburse for services performed outside of their vendor network without prior approval.
 
6. How does the claim process work?
Once the home warranty provider receives the request and coverage is confirmed, a local service technician will call the homeowner to arrange a mutually convenient day and time to go to the home and diagnose the failure.
 
7. How quickly are claims handled?
Once coverage is confirmed, the contractor typically receives the claim dispatch within four hours during regular business hours. Normally, the services will be initiated by the technician within 48 hours after the request is made.

Simple repairs are usually made on the first visit, however, if items must be ordered an additional visit(s) may be needed to complete the repair or replacement.
 
8. What is an emergency repair and how are these claims handled?
Most home warranty providers consider it an emergency when the failure of a covered item renders the home uninhabitable; in these circumstances, the home warranty provider will make all reasonable efforts to expedite emergency service.
 
9. How is it determined if a failure is covered or not?
In general, coverage is limited to failures caused by normal wear and tear and limited to the terms of the contract. For example, cosmetic defects are not covered.
 
10. How are known pre-existing conditions determined versus unknown pre-existing conditions?
Unknown conditions are covered if, at the time coverage begins, the defect or malfunction is not known or could not have been reasonably observed by looking at or operating the system or appliance.

Pete Sabine & Leslie Whitney
Call or text 925.787.2548
Visit our website
Compass
#00889760 #01950037

Pete Sabine & Leslie Whitney
Call or Text 925.787.2548
Pete@PeteSabine.com
Compass

#00889760
#01950037

Even the hottest markets eventually cool.
This does not necessarily imply a large “bubble and crash” (terms much overused).

Over the past 4 decades, a cooling shift has typically meant a gradual decline in sales activity, then either a leveling off in appreciation or price declines of 5% to 10%: More like a slow leak in an over-pressurized tire than a blowout at high speed.

The 2008 subprime crisis – a true bubble & crash – was an extreme event brought about by a massive failure of ethics, underwriting standards and risk management in the loan, banking, investment and ratings industries. 

A correction is not a crash.
The precipitating factor in the 2008 crash – tens of millions of households talked into home loans they couldn’t afford, forcing frantic sales during a recession – does not apply today.

Indeed, mortgage payments as a percentage of income are close to all-time lows (and most homeowners’ mortgages are also at historically low rates). Outside the 2008 crash, market corrections over the last 4 decades typically ran from a simple flattening in appreciation, to price adjustments of 5% to 10% (relatively small compared to the appreciation rates which preceded them). 

This chart below is in the macroeconomic indicators report.
Staggering levels of unaffordable mortgage debt was a huge factor in the 2008 crash, but right now, the current level of mortgage debt as a percentage of disposable income is close to an all-time low. A tsunami of foreclosures and short sales behind the home price crash in 2008-2011 is not imminent:

Here is a quote from the San Francisco Chronicle (July 2022) "The 2008 collapse was an anomaly. The 2005-2007 bubble was fueled by home buying and refinancing with unaffordable amounts of debt on a staggering level, promoted by predatory lending practices, promises of endless appreciation, and an abysmal decline in underwriting standards — and then eagerly facilitated by smug, rapacious, Wall Street flimflam and self-abasing credit ratings agencies, Millions came to own homes they could never afford to pay for and the rot was distributed throughout the financial system.”

We can't predict the future...there are indeed many volatile economic, political, demographic and even environmental factors at play right now. Certainly, the housing market has been going through a significant correction since June of 2022. As long as home loan interest rates continue to rise, this correction is likely to continue into 2023.

Pete Sabine & Leslie Whitney
Call or Text 925.787.2548
Pete@PeteSabine.com
OurFiveStarTeam.com

Compass
License #00889760 #01950037

​These days everyone is obsessed with data. Facts. Figures. Percentages. Averages. Medians. Most real estate reports report on data on closed sales that often were contractually negotiated many weeks or months prior to a closing. That kind of data is rather stale in fast-changing markets. Most data we hear or read about is not very reflective of current market conditions.

Consumers who rely on media headlines alone are certain to be at a decision-making disadvantage.

In this lies one of the greatest value-adds of a professional real estate advisor who is completely immersed in the markets, actively engaged daily in what is selling/being signed for what, number of attendees at open houses, number of bidders, number of showings, etc.

The “boots-on-the-ground” real-time data points that while maybe not 100% accurate, sorted and prettied up for mass consumption, probably provides a more accurate, clear picture of current market conditions.

This is the kind of data and insight that is non-Google-able. And just another reason why a professional agent is invaluable to the consumer in helping them navigate the complex, nuanced, hyper-localized waters of real estate. 

We have over 37 years of local real estate expertise negotiating over one thousand successful real estate transactions on behalf of our cherished clients.

Pete Sabine & Leslie Whitney
Call or Text 925.787.2548
Compass
License #00889760

 

Some homebuyers are pausing right now, pondering whether this is the right time to buy a home as interest rates spiral upwards and the threat of a recession looms. Maybe better home prices are in the future? Here are some thoughts on this subject…

1.  Homebuyer's circumstances are different and specific to them. It's critical for professional agents to spend the time carefully evaluating ALL the parameters of these specifics clearly and accurately before being in a position to structure a curated strategy forward. 

2.  Stop reading headlines and averages from those spewing 'reports' about non-specific data. The data and insights that are hyper-localized are the only ones that matter. Some properties may be over-valued. Some may be fair value and others may even be UNDER-valued.  Specifics matter more now than ever. Averages are meaningless and unintelligent.

3.  Evaluate all financing options. Not all mortgages - or borrowers - are created equal! Average fixed 30-year mortgages are not for everyone. Rates can vary considerably by location, property type, buyer profile, etc. And rates will probably rise further.

4.  If a recession is indeed coming, usually the FED lowers rates to stimulate growth. With sharply higher rates now, at least the FED has the gunpowder to do so. A year ago, they had virtually none. Refinancing at lower rates in the future is always a possibility.

5.  Inflation is high now but has ALWAYS been around. Even low inflation raises rents. You have to live somewhere usually for around 60 years. And many buyers who are unable to buy due to rising rates or job losses turn to renting, thereby further fueling rent prices and demand.

6.  When times get uncertain, there is always a flight to quality. With the inventory of buying options rising, focusing on the best quality is always smartest. And now you may have more choices. Buying a quality home for a fair price is always smarter than a bargain price for a someone else’s headache.

7.  With fewer buyers, the chances of over-bidding are reduced, although this will vary notably from area to area and also property type/price-point. EVERYTHING will be guided by supply and demand. By not over-bidding those saved dollars in purchase prices may absorb some higher borrowing costs.

8. Often the best properties are withdrawn from the market if markets don't deliver premium pricing. That can reduce inventory options.

9.  Homeowners locked into low interest rates might not sell now, reducing inventory options.

10. Cash buyers have been waiting for this moment. They will feel more empowered now than ever.

11. When calculating monthly costs to own, always factor in the amount of tax deductions. Consult with a professional accountant: A higher interest rate produces a larger dollar amount deduction even with the deduction price limit...that can offset some of the higher borrowing costs.

12.  For those living in high real estate tax environments, the SALT deduction limit poses opportunity. Buyers who buy with all cash and then draw out equity from their homes within a month of the purchase for investment purposes might be able to deduct ALL the interest on that.

13.  Be super-prepared. A higher credit score fueled by cleaned up credit can deliver lower rates and make you more attractive to sellers open to negotiation. We are seeing price reductions in many areas. A $500k home financed at 4% has the same monthly mortgage payment as the home financed at 6% priced at $400k.

14. Job security. In a jobs environment where there are 2 jobs for every unemployed person, the risks for massive job losses are lower than prior corrections. Owning a home prior to a job loss is smart as qualifying for a home loan without a job is very tough-to-nearly impossible.

15. Apply “balance-sheet” thinking and evaluate ALL the aspects of the move. In a 'down' market, upgrading is smart. Selling a $500k home at a 10% discount delivers a $50k 'loss'...then buying your next home for $1m at a 10% discount delivers a $100k 'gain'...leaving you with a net $50k gain. And often the lower priced homes have smaller discounts.
​
16. Focus on the LONG TERM. The best investors are not day-traders. They don't aim to time markets 'perfectly'. They seek long term returns, benefits and growth. All markets recover. The US is still grotesquely UNDER-built... and this might not improve for decades, possibly slowed now as builders face higher borrowing costs....which could also fuel home price inflation.
 
Pete Sabine & Leslie Whitney
Visit OurFiveStarTeam.com
Compass
#01527235

With the recent significant spike in home loan interest rates along with the highly probable additional home loan interest rate increases through the remainder of 2022, it's important to understand the impact of higher borrowing costs affecting the real estate market velocity and market values. 

* When interest rates rise, some people will simply not be able to afford to buy many homes at their current prices. When a seller considers a price reduction to help 'match' the monthly mortgage payments of lower rates, this is how to adjust:  
- A 6% mortgage rate monthly payment is equal to a mortgage payment with a 5% rate when the asking price is reduced by roughly 8.25%.  
- A 6% mortgage rate monthly payment is equal to a mortgage payment with a 4% rate when the asking price is reduced by roughly 16.25%.

* Many buyers who for the past months approached a listing almost certain they would have to bid over the asking price, may now not encounter as much competition (and/or a seller/agent with a less aggressive asking price)....combined, these two factors may offset what might have been a higher selling price to offset higher borrowing costs. 

Remember, if a home price has risen 20% in the past year, a 10% price reduction erodes 12% of that 20% gain.

DISCOVER THE BENEFITS OF BUYING DOWN A HOME LOAN INTEREST RATE TO SELL YOUR HOME FOR TOP DOLLAR...

One effective option is to offer a Seller credit to the buyer to "buy down" the home loan interest rate by applying this credit to pay loan fee points.

This option is mutually beneficial to both parties as illustrated by this example chart:

Benefits of discounting the loan interest rate:

SELLER
 $27,000 credit saves $23,000 compared to a $50,000 price discount
 Competitive advantage to attract purchase offers

BUYER
 Monthly payment approximately $557 less than payment @ 5.625% interest rate
 Monthly payment approximately $265 less than payment $1,500,000 price
 Save approximately $8,560 for 4.875% interest paid over 10 years compared to 5.625% interest rate

Discover more real estate tips and strategies...Visit OurFiveStarTeam.com

Pete Sabine & Leslie Whitney
Compass
DRE #01527235

​From the Desk of Pete Sabine & Leslie Whitney 
​- Real Estate Market insights and expertise

A Housing Correction May Be Coming,
Not a Crash…
Almost everyone is wondering if a housing crash is on the horizon. However, most experts think the real estate market is headed for a softer landing. It's true that the market has slowed over the last few weeks. In fact, 12% of homes for sale had a price drop in the four weeks ending April 3 based on recent data.

That's up from 9% as compared to 2021. Rising mortgage rates are also putting some would-be homebuyers' plans on the backburner. But as the real estate market cools, its foundation of record-high home equity and housing prices is probably going to keep the market relatively healthy.

After a survey of a wide number of Bay Area Realtors, it is clear that the Bay Area real estate market has begun its shift cooler, not surprising with interest rates up a shocking 69% in 2022, the volatility of stock markets, and the increase in media coverage of negative economic/market issues.

Though not every Bay Area region has seen the same trends, and the trends are preliminary and not universal, these reports were repeated over and over: less traffic at many open houses, fewer offers on many new listings, some buyers dropping out or becoming much more selective, and some sellers moving their listing dates earlier.

The San Francisco Bay Area Real Estate Trend Report reveals the incredibly heated market sales statistics through April, 2022. The preliminary shifts in market psychology and dynamics that are generally not yet reflected in the closed-sales statistics. 

Pete Sabine & Leslie Whitney
Call or Text 925.787.2548
Pete@PeteSabine.com
OurFiveStarTeam.com

Compass #01527235