Deducting a loss on a real estate sale

Deducting a loss on a real estate sale

Due to the weak real estate market, many homeowners are forced to sell at a loss, if they are able to sell at all. But can a homeowner deduct a loss from income taxes?

Unfortunately, the answer is NO, as a loss incurred on the sale of a personal asset such as a personal residence is NOT deductible.

But there is a way to deduct a loss on the sale of a home: You can convert it to a rental before you sell your home.
This requires you to rent out the home to someone who is not related to you for a reasonable market rent. Moreover, you'll have to report the rental income you receive to the Internal Revenue Service, but you may have little or no taxable rental profits due to depreciation and other deductions for rental expenses.

When you convert your residence into a rental, you convert it from a personal asset to an investment asset. Losses on the sale of investment assets are tax-deductible.
However, when you convert a residence into a rental home you will not be able to deduct its entire decline in value since you purchased the home.

Rather, your deductible loss upon the home's later sale is limited to the decline in value after the conversion to a rental. The reason for this is the way in which the home's adjusted tax basis (value for tax purposes) is calculated.

When you change property you held for personal use to rental use, your adjusted basis is the lesser of the following values:

• The property's fair market value at the time of the conversion; or
• Its adjusted basis at the time of the conversion.

Your adjusted basis is generally the cost of the property plus improvements you had done after the purchase. Fair market value is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
Example: Joe purchased a home for $500,000 in 2002. In 2010, he decides to rent out the home. Due to the decline in the real estate market, its fair market value at the time of the conversion to a rental is $300,000.

Joe's adjusted basis in the home, therefore, is $300,000 since this is less than its original $500,000 basis. In 2011, Jack sells the home for $275,000. This leaves him with a $25,000 tax-deductible loss (a $275,000 sales price minus the $300,000 adjusted basis equals a $25,000 loss).

Any homeowner who is seriously thinking about converting his or her home to a rental should obtain an appraisal of its value from a qualified real estate appraiser. This will establish its fair market value at the time of the conversion.

2 Men Face Charges on Duping Home Owners

Once again I cannot stress enough how important it is for anyone  facing trouble with making his/her mortgage payment to contact their lender immediately to find a solution. Lenders are working hard to making it possible for anyone to make their payments on time. It is best for a lender to find an arrangement as opposed to going through foreclosure process as it costs a lot of money for a lender to foreclose a property.

Two men in San Bernardino, Calif., face charges of scamming at least 25 home owners on the verge of foreclosure into fake refinancing agreements, affecting more than $17 million in home loans, prosecutors say.
Stephen Andrew Easterly, 47, and Emanuel Percival, 36, face 45 criminal counts and were arraigned on Monday.

Prosecutors say the men told home owners’ facing foreclosure that they could refinance their loans and lower their monthly payments. The victims allegedly paid the men between $3,500 and $7,000 to participate in their program, according to the San Bernardino County District Attorney's Office.
However, the home owners say instead of getting their loans restructured, they ended up with two outstanding home loans, and their homes ultimately went into foreclosure.

Prosecutors say that the men allegedly signed documents as "authorized representatives" of several banks, and that one of the men also is accused of creating fictitious checks and mailing them to banks.

Why The housing Bubble and How To Avoid it

The housing bubble of 2006 burst in large part due to lax lending practices that led up to the housing recession. Let's not forget that lending was not the only issue that let to the housing downturn and one of the worst crisis in American history. Houses were unaffordable in most market and shoukd have never been sold to people. From 2002 to 2006 real estate in Los Angeles was appreciating 15% per year.

As a great real estate agent one should have never sold those inflated home as it was obvious that this was going to lead to being a terrible investment.

If you want to buy and sell real estate correctly in Los Angeles, call 1-877-APPLYFREE

Foreclosed Homeowners Take Out Revenge and Destroy Properties

Some foreclosed angry homeowners are taking out their anger on the homes they are forced to leave behind, smashing holes in the walls, scribbling graffiti everywhere, leaving piles of trash, and ripping out kitchen appliances. More lenders,  facing a growing problem from trashed foreclosures, are choosing to offer homes at big discounts rather than fix the big repairs, which can send surrounding home values (such as yours) in the neighborhood spiraling down.

I have seen some home values greatly diminish from foreclosed home owners who have trashed it. For example, one home that would have fetched $250,000 back in 2006 during the housing boom that would now sell for about $75,000 because it was trashed by the former homeowners.  It looks like someone took revenge, which had big holes in the wall, appliances ripped out, and piles of trash.  Some real estate professionals and lenders are even blaming the high number of real estate deals falling apart due to more homes being left in very bad condition by the foreclosed homeowners.

Home buyers are very unlikely to be attracted by these destroyed homes and look at these homes and think that if this is the damage I can see, what else did the home owner do to this place that I can't see?'

Some home owners facing foreclosure place the blame on banks for their woes so they leave behind a mess for the bank. But trashing a home can backfire. Some banks are saying they may even start taking steps to sue home owners for the cost of repairs, and law enforcement officials say home owners can be charged with vandalism as well as theft if they remove items that don’t belong to them from the home.

How to Avoid Writing a Resume That Will Disqualify YOU For a Job

According to the Bureau of Labor Statistics, 13.9 million Americans were unemployed as of last month. And according to the jobs website CareerBuilder, a lot of them are going to stay that way if they keep sending out terrible resumes.

This week, CareerBuilder announced the results of its annual survey of more than 2,600 employers nationwide. Nearly half (45 percent) of the human resource managers they polled said they spend, on average, less than one minute reviewing a resume.

That’s a pretty small window for you to impress a boss. Sometimes it takes less than a minute to dispose of a resume. Here are some actual resume lines that those HR managers said doomed an applicant in mere seconds…

“Candidate said the more you paid him, the harder he worked.”
“Candidate was fired from different jobs, but included each one as a reference.”
“Candidate said he just wanted an opportunity to show off his new tie.”
“Candidate listed her dog as reference.”
“Candidate listed the ability to do the moonwalk as a special skill.”
“Candidates – a husband and wife looking to job share – submitted a co-written poem.”
“Candidate included ‘versatile toes’ as a selling point.”
“Candidate said that he would be a ‘good asset to the company,’ but failed to include the et in the word asset.”
“Candidate’s email address on the resume had shakinmybootie in it.”
“Candidate included that she survived a bite from a deadly aquatic animal.”
“Candidate used first name only.”
“Candidate asked, ‘Would you pass up an opportunity to hire someone like this? I think not.’”
“Candidate insisted that the company pay him to interview with them because his time was valuable.”
“Candidate shipped a lemon with resume, stating “I am not a lemon.’”
“Candidate included that he was arrested for assaulting his previous boss.”

Talk about making an impression to a possible future boss!

So what can you do?

Write a resume, not a biography. You’ve probably led an interesting life, but your next employer only wants to hear about the parts that matter to him. “Only list experience that’s relevant to the job description,”

Summarize. Since you only get a minute of someone’s time. Replace the cliched “objective” with a “professional summary recapping your relevant experience in one or two sentences.” As with everything else on the resume.

“Keep your descriptions to the point and trim out any unnecessary words.”
Read it again and often. Needless to say, if an HR manager sees a spelling mistake in your resume, it’s all over for you. “A lot of hiring managers will toss any resume that contains spelling, grammar or formatting errors, regardless of your past experience.

Foreclosures Sell for Up to 40% Less

Foreclosures made up about one-third of all home sales during the spring quarter (April to June), and sales were about six times the percentage of foreclosures in a healthy housing market, RealtyTrac Inc. reports.
Foreclosure sales likely would have been much higher too if so many banks hadn’t slowed their foreclosure processes while state and federal officials continued to investigate possible faulty practices.

Foreclosure sales, which include homes purchased after they receive a notice of default or that were repossessed by lenders, peaked two years ago at 37.4 percent of sales, compared to 31 percent in the April to June quarter.

During the second quarter, 265,087 homes sold were in some stage of foreclosure or owned by banks, but that’s down 11 percent from the same period a year ago, RealtyTrac reports.

The state with the highest number of foreclosure sales was Nevada, where foreclosure sales accounted for 65 percent of all sales. Arizona followed with  foreclosure sales accounting for 57 percent of all home sales for the quarter.

Foreclosures Continue to Weigh on Home Prices

Foreclosed homes continue to sell for less than other homes. During the spring, bank-owned homes sold for 40% less than the average price of other homes. Sales of homes in the foreclosure process or short sales sold for 21 percent less than the average home sold.

The average sales price of a foreclosed property was $164,217, a drop of less than 1% from the January-March quarter and a nearly 5 percent drop from the April-June quarter in 2010.

A "Blonde" cure for a barking dog

A young woman, a blonde in fact,
and her husband are lying in bed attempting to sleep all the while listening to the next door neighbor's dog barking incessantly for hours.
Finally, the blonde jumps up out of bed and says,
"I've had about enough of this!"
as she angrily goes downstairs and out the back door.
Finally she comes back up to bed and her husband asks,
"What did you do, the dog is still barking?"
The blonde says,
"I moved the dog over to our backyard.
Now, Let's see how THEY like it!"

__________________
 

IRS to Expand Examinations for Forgiven Mortgage Debt

With the expanding recession that we are not officially having according to the White House but is now being questioned by such luminaries as Congresswoman Maxine Waters and what the media and other government agencies claim we are not having officially either, the Internal Revenue Service has found another area that they will expand audit examinations to potentially increase revenues to the U.S. Treasury. 
In a study by the GAO (Government Accounting Office) it has been determined that substantial tax revenues are not being correctly reported by those that have had mortgage debt forgiven based upon a new study provided by the GAO.
Preliminary IRS investigation of this arena of the failing economy suggests that in depth examinations, or audits could provide substantial new assessments and therefore potential cashflow for the government treasury on the backs of those already destitute.

IRS statistics indicate after reviewing available data an approximate $25 billion of forgiven debt was excluded from taxable income for those reporting forgiven debt just in 2008. The IRS estimates further suggest taxpayers excluded somewhere between $6.4 billion to $11.8 billion revenue to the U.S. Treasury.
IRS officials reported that it may be difficult to collect additional taxes on forgiven debts particularly when taxpayers are already insolvent and defaulting on debts, and that this and other considerations, such as the IRS's return on investment, would affect the IRS's decisions about allocating resources for enforcing this provision.

The GAO said there is evidence that some taxpayers have the ability to pay additional tax if owed, and certain housing market data show that the potential for significant noncompliance with the exclusion of forgiven mortgage debt exists.

Banks Agree to More Short Sales

Banks are agreeing to more short sale transactions, and short sales are taking less time to sell, which is helping to clear large inventories of distressed properties more efficiently, says James J. Saccacio, RealtyTrac CEO, in releasing new housing data this week.

“This is a glimmer of hope that lenders are getting more realistic,” Rick Sharga, senior vice president of RealtyTrac, told Bloomberg News. “It’s a win for borrowers who avoid foreclosure, buyers who get a house in better condition and banks that lose less money, which is also a win for taxpayers.”

During the second quarter, the number of homes nearing foreclosure accounted for 12 percent of total home sales, with banks agreeing to more transactions at prices below the outstanding mortgage balance, RealtyTrac reported in releasing its second quarter data this week.

What’s more, pre-foreclosure homes took an average of 245 days to sell after receiving the initial foreclosure notice--that’s down from 256 days in the first quarter, RealtyTrac reports.

Sales of homes in the foreclosure process or short sales sold on average for a 21 percent discount--or an average sales price of $192,129--compared to the sales price of non-distressed homes.

Studies show that less than 16% of homeowners return to their previous agents

Studies show that less than 16% of homeowners return to their previous agents; that stat demonstrates the client isn't overwhelmingly thrilled with most agents' service. It also speaks to agents' after sale service. Most consumers are merely satisfied with our service as agents. In a survey by NAR, 69% of the people surveyed said they were satisfied with their real estate agent.
 
Satisfied to me would probably be a C grade level. It's hard to create loyalty to an agent or brand with customers and clients being merely satisfied with our service.
 
"Do you, Mr. Seller, want to take the risk of extra stress and frustration in this transaction from an ordinary agent? An agent who, based on the stats, will lead you to do with business with them again less than 16% of the time?"

Well I think that you just have to look atthe real estate and financial mess we're in right now and yuo can make your own conclusion.

If you want to buy or sell real estate correctly, you need to call me at 1-877-APPLYFREE.

Housing Affordability at Highest in 20 Years

Housing affordability continued to be near record highs in the second quarter, hovering near its highest level in the 20-plus years it has been recorded, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index.

About 72 percent of all new and existing-homes sold in the second quarter of the year were affordable to families earning the national median income of $64,200, according to the index. The record high remains 74.6 percent, which was reached last quarter.

"At a time when home ownership is within reach of more households than it has been for more than two decades and interest rates are at historically low levels, the sluggish economy and the extremely tight credit conditions confronting home buyers and builders remain significant obstacles to many potential home sales," says Bob Nielsen, chairman of the National Association of Home Builders. "That said, however, some housing markets across the country have stabilized and are beginning to show signs of a budding recovery."

To find out if you can afford a home, to Buy or Sell the right way call 1-877-APPLYFREE

Joke of The Week

The Parrot Died!

At dawn the telephone rings . .    .

"Hello, Senor Rod?" 

     This is Ernesto, the caretaker at your lake house in Bella Vista."

"Yes, Ernesto. 

Is there a    problem?"

"Um, I am just calling to advise you,

Senor Rod, that your parrot - he is dead."

"My parrot? Dead? 

The one that won the international competition?"

"Si, Senor, that's the one."

“I spent a small fortune on that bird. 

What happened?"

"From eating the rotten meat, Senor Rod.”

"Rotten meat? 

Who the hell fed him rotten meat?"

"Nobody, Senor. 

He ate the meat of the dead horse."

"Dead horse? 

 What dead horse?" 

"The thoroughbred, Senor"

"My prize thoroughbred is dead?"

"Yes, Senor Rod,

he died from all that work pulling the water cart."

"Are you insane?? 

What water cart?"

"The one we used to put out the fire, Senor."

"Good Lord!! 

What fire are you talking about?"

"The one that destroyed your house, Senor! 

A candle fell and the curtains caught on fire."

"What??”

  “my house is destroyed because of a candle??!!"

"Yes, Senor Rod."

"But there's electricity at the house!!”

   “What was the candle for?"

"For the funeral, Senor Rod."

"WHAT BLOODY FUNERAL??!!"

"Your wife's, Senor Rod.    

“She showed up very late one night

 and I thought she was a thief,

so I hit her

 with your new

Taylor Made Super Quad 460 golf club."

SILENCE........... LONG    SILENCE.........

"Ernesto, if you broke that driver, you're in deep trouble!

BofA Weighs Reducing Some Troubled Owners’ Loans

Bank of America, the country’s largest bank, has faced a flood of borrowers defaulting on loans and lawsuits over some of its foreclosures since it purchased Countrywide Financial Corp. in 2008. Now, reportedly, the bank is in talks with state and federal officials to write down the principal owed on some struggling borrowers’ loans in exchange for a release from the mounting legal disputes against it, according to The Wall Street Journal.

The talks are part of an ongoing settlement between banks and state and federal officials over bad reviews and paperwork processing problems with foreclosures that surfaced last fall. Bank of America reportedly has approached officials in one-on-one talks about the mortgage writedown proposal.

The principal reductions would apply to the bank’s own mortgages as well as those it services from private investors, The Wall Street Journal reports. Borrowers would have to prove financial distress to qualify. The principal amount would also have to be $1 million or less in certain areas.

In return for the writedowns, Bank of America reportedly has told state and federal officials that it wants to be protected from future litigation in regards to its mortgage servicing.

The Wall Street Journal says it’s unknown whether other banks are putting forth similar proposals.
Source: “BofA Proposes Loan-Forgiveness Deal,” The Wall Street Journal (Aug. 2, 2011)
Read more:
5 to Watch: Banks, States Near Deal on Foreclosure Fund

BEER, FISHING, SEX & GOLF

A man was walking down the street when he was accosted by a
 particularly dirty and shabby-looking homeless man who asked him for a couple of
 dollars for dinner.

 The man took out his wallet, extracted ten dollars and asked,

"If I give you this money, will you buy some beer with
 it instead of dinner?"

 "No, I had to stop drinking years ago,"

the homeless man replied.

 "Will you use it to go fishing instead of buying food?"

the man asked.

 "No, I don't waste time fishing,"

the homeless man said. "I need to spend
 all my time trying to stay alive."

 "Will you spend this on greens fees at a golf course instead of food?"
 the man asked.

 "Are you NUTS!"

replied the homeless man.
"I haven't played golf in 20 years!"

 "Will you spend the money on a woman instead of food?"

the man asked.

 "What would I get for ten lousy bucks?"

exclaimed the homeless man.

 "Well," said the man,

"I'm not going to give you the money.

Instead, I'm going to take you home

for a terrific dinner cooked by my wife."

 The homeless man was astounded.

"Won't your wife be furious with you for doing that?

I know I'm dirty, and I probably smell pretty disgusting."
 The man replied,

"That's okay. It's important for her to see what a man
looks like after he has given up beer, fishing, golf, and sex."