Transfer Tax

Posted on February 7, 2012 by admin

Questions and misinformation continue regarding the “3.8% federal tax on real estate sales” built into the 2010 Healthcare Reform Bill. Most sales are not subject to the tax. The Health Care legislation did create a new tax that would, starting in 2013, apply to a portion of the gain on the sale of any capital asset (including real estate) and benefit the Medicare fund. That tax will apply ONLY to individuals with more than $200,000 Adjusted Gross Income (AGI) (or $250,000 AGI on a joint return). The tax does not apply to any amount excluded from taxation under the $250,000/$500,000 principal residence rules. The tax is never imposed directly on the full amount of any capital gain.The tax is computed under a multi-step formula that captures only a portion of any gain and will only affect those with total AGI above the amounts noted above.

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Attorney Review Period

Posted on February 7, 2012 by admin

Just what is the attorney review period? NJ is unlike many states in that a written contract typically represents your initial offer versus a verbal or other less formal communication. The advantage of this system is that there are fewer misunderstandings if everything is presented in writing at the beginning. This contract is non-binding however until the conclusion of a 3 business-day attorney review period and either party can back out for any reason. However, attorney review can take longer than 3 days if the attorney for seller or buyer disapproves of the contract as written. Typically both attorneys have minor, if not material, changes to the contract. Lately we have seen building inspections run concurrent with attorney review period and inspection item requests incorporated into the attorney letters. In theory, there is no limit to how long attorney review can be and we have seen it drag on for weeks or more. As attorney review items are negotiated, the buyer has to weigh having their concerns met against having another buyer come along with fewer demands. The seller meanwhile, has to factor in the chance of another offer if they let the current buyer move on. This is where agents’ market knowledge is of utmost value to their buyers or sellers.

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January 2012 Activity

Posted on February 7, 2012 by admin

33 new listings came on the market in January (it seemed like less) which were offset by sales, withdrawns and expirations to reduce the number of active listings to 173 at 1/31//2012, the lowest month-end total since 167 at 1/31/2010. 13 houses went under contract in January implying a 13.3 month supply of houses at 1/31/12 vs. 14.8 at 1/31/11. Our website search function has been busy and the phone is ringing with prospective buyers so the spring market is shaping up pretty well. Interest rates are very low and the consensus is that prices are at their lows, or close to them. The impetus to buy is there, held in check by job security and mortgage qualifications. Now we just need some more homes on the market.

Source: Garden State Multiple Listing Service.  May not represent all transactions.

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Real Income vs. Housing Prices

Posted on January 6, 2012 by admin

 

 

 

 

Housing prices have traditionally followed income levels, but spiked between 200 and 2007 due in large part to relaxed lending standards and consumers willingness to assume more debt/assets, and pure speculation. Price have come more in line with income levels and herein lies the problem- flat income levels over the past few years. For all the hype over employment figures, which fail to capture underemployment, the only stats that matter to housing (or in my opinion the broader economy) is income. Combined flat income and lower household debt make for a weak real estate market. Households are delevering despite low interest rates due to a combination of stricter lending standards, defaults, and financial responsibility. The good news is that savings rates have ticked up in the past few years, which should put more buyers in a position to meet higher downpayment standards in years to come or at least lower their default rates.

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30 year Mortgages Fall Below 4%

Posted on January 6, 2012 by admin

30 year fixed mortgage rates this week were 3.91% (.8 fees/pts) according to Freddie Mac’s Mortgage market Survey, tying the lowest they have been in the history of the survey. There is little pressure for increases as European debt fears boost the attractiveness of US bonds and the fed’s pledge to keep short term rates low for an extended period. Mortgage rates averaged 4.5% over 2011 according to the survey. Mortgage rate predictions for 2012 vary, but generally fall in the 4%-4.75% range. Still very attractive to buyers. I think banks may relax credit standards some in 2012 as “good borrowers” may have missed a payment or two during the weak economy.

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Montclair 2011-2012 Reassessment

Posted on January 6, 2012 by admin

It looks like the net reduction in ratables value was 19%. This means that if your assessment fell by more than 19% you can expect your taxes to decrease and increase if your assessment fell by less than 19%, all other things being equal. Of course your actual tax increase or decrease is a function of the budgetary process, but this is a good measure of how your fared. How much will your taxes increase if you came in under the 19%? If my math is correct, Your New Taxes = old taxes * 1.235 * (1- (old assessment-new assessment)/old assessment). Let’s say your assessment was 100,000 and it’s now 85,000. Your new taxes would be old taxes * 1.235 * .85 = old taxes * 1.05 or 5% higher.

Here are some scenarios- the first if your assessment came down 15% via appeal or reassessment and the second if your assessment came down 25% via appeal or reassessment. In short, if you appealed in the past, 2011 in this case, your taxes are now on par with similarly valued houses (assuming market values are correct), but you got the benefit of lower taxes in prior years.

 

 

 

 

What do you do if you don’t agree with your new assessed value? Follow the instructions on the letter with your new valuation. First and foremost check that they have the basic facts correct.

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2011 Montclair, NJ Real Estate Market News

Posted on January 6, 2012 by admin

2011 was remarkably like 2010 in overall activity. 575 houses came on the market in 2011 with an average list price of $601k, versus 600 at an average list price of $672k in 2010. 312 houses went under contract in 2011 versus 315 in 2010, while average days on market increased to 83 from 75. Houses sold, on average, at 97% of list price in 2011 versus 98% of list in 2010.

Inventory levels came down in December due to sales of existing inventory, fewer new listings and withdrawals. Only 13 houses came on the market in December while 23 went under contract. Months inventory fell to 7.9 months at 12/31/2011 from 10.9 months at 11/30/2011. That should bode well for existing home sellers unless buyers continue to dig in their heels, waiting for the perfect house. Projected flat interest rates and prices aren’t going to motivate them.

 

Source: Garden State Multiple Listing Service.  May not represent all transactions

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