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Rob Levy's Portland Real Estate Blog

Rob Levy

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Distressed Homeowners may Face Extra Tax Burden in 2014

by Rob Levy

Lending institutions frequently offer struggling mortgage holders the opportunity to sell their home at an amount lower than the outstanding mortgage balance and write off the loss. That gap amount is actually income for the homeowner, and as such, is taxable. That means that if a homeowner with a mortgage of $120,000 short sells the home for $100,000, he must show $20,000 on his income tax return as income. This liability extends beyond short sales to include loan modifications in which the lender agrees to reduce the principle to an amount closer to the home value. Even the homeowner who loses his home to foreclosure is subject to this enormous tax burden. In the case of a foreclosure in which the balance of the mortgage is $100,000, the owner in a 25 percent tax bracket would find himself owing an additional $25,000 in taxes.

In 2007, Congress passed the Mortgage Forgiveness Debt Relief Act to exempt the reduced amount from tax liability. Congress extended the exemption twice in legislation over the next few years. Unfortunately, the exemption expired at the end of 2013, with over six million homes still underwater. In 2013, the exemption equated to $1.3 billion in total.

Lawmakers are arguing over three different bills calling for an extension of the tax exemption. All three do enjoy some bipartisan support. Unfortunately, there is no way of knowing what issues Congress will determine are the top priority as members debate the debt limits and government spending. The Making Home Affordable program, which offers relief to homeowners through short sales does not expire until December 31, 2015, however, the tax exemption is not a part of the program. When Congress allowed the government shutdown in October of 2013, members agreed to extend the debt limits until February 7, 2014. Extension of the Mortgage Forgiveness Debt Relief Act is a part of the new debate.

If the taxpayer can prove insolvency, meaning that he has more outstanding debt than assets, he may be able to avoid the burden of the additional tax related to the short sale or home loss. However, additional properties such as undeveloped land could easily negate that option. In short, the expiration of the Mortgage Forgiveness Debt Relief Act will not just affect the struggling homeowner; it could also have a serious impact on our struggling economy. Even a delayed decision will influence homeowners considering their options.

What to Expect When Buying a Home in 2014

by Rob Levy

If you are considering buying a home this year, you have probably heard about some of the changes to mortgage regulations and changes in the marketplace. At this point, you may not be sure what to expect. Here is a general rundown of what you will likely see with respect to home buying, particularly in Oregon, in 2014:

  • The number of available homes for sale is dwindling, meaning that the competition for particular homes may increase. Buyers may find it necessary to submit multiple offers before acceptance, especially in the Portland area.
  • Interest rates are rising, and while they are still significantly lower than in the past, buyers may feel pressure to act before rate hikes take place. A one percent increase in interest equals an 11 percent decrease in the maximum amount of the loan.
  • New mortgage regulations may make it more difficult to qualify for a mortgage loan. Regulations created to protect consumers mean they will be required to prove their ability to maintain mortgage payments. Their debt to income ratio cannot exceed 43 percent in most cases. Self-employed buyers will need to prove they meet this level with two years’ worth of tax returns proving sufficient income in the same business. This can be a challenge since they generally use as many deductions as possible to avoid tax liability.
  • Lower FHA loan limits mean that buyers who need to finance properties costing more than $362,250 will be required to seek jumbo loans without FHA assistance and make a 20 percent down payment.
  • As interest rates rise, the refinancing market dwindles, which may force lenders to loosen some of their lending standards, however, the new regulations will limit their ability to do this or offer some of the creative financing they have in the past. Lenders are now required to make reasonable determinations as to the ability of the buyer to repay the loan in order to be safe from legal challenges in cases of default.
  • As the year progresses, regulations and economic change will probably result in a slowing for price increases.

Your partner in this process is your licensed real estate agent. It is his job to stay on top of all of these changes and help you navigate the process of buying a home.

Home Buying in the Winter Months

by Rob Levy

Many people avoid buying a home during the winter, but there are a number of excellent reasons to start the process before spring. Cold weather means a buyer's market. What you miss in curb appeal you will find at a warm hearth. Here are some important considerations for smart house hunting:

  • There are fewer people shopping for homes on the market. The bustle of the holidays and traveling at year-end mean that a lot of people put off the process. This means that when you find a home and submit an offer, it is less likely for the seller to receive a higher bid.
  • While inventories may be a bit lower during the holiday season, sellers tend to be very motivated. Homeowners with children do not like to uproot them in the middle of the school year, so if they are selling mid-winter, it is likely due to a job transfer or other compelling reason. Some homes have been on the market for a while and the seller wants to move the sale along. Others want to close the deal for tax purposes. Still others want to complete the sale process so they can start the year without loose ends.
  • Because the brokers and lenders have fewer clients, buyers can enjoy more attention and focus on their needs. Lenders sometimes waive fees during traditionally slow periods to encourage buyers to use their services.
  • During winter, the systems that serve the house are in full operation. You can tell if the heater is functioning properly, the plumbing is free of leaks and the roof and gutters are doing their jobs. This can prevent a lot of unhappy surprises you might not have discovered until long after purchase. You can tell a lot about the insulation and general comfort of the home when the weather is cold.
  • Few investors are searching for homes to flip during the winter months, so you there is less concern of one outbidding you on the home you want. The closer you get to spring, the more this becomes a concern.
  • Movers sometimes lower their rates in winter since business is slow. Even small discounts can save you money.

No matter what the season, your real estate agent will be your mentor throughout the process. You can count on his expertise to answer your questions and help you find and purchase the house that will become your new home.

More People Moving into Oregon

by Rob Levy

America has long been a very mobile nation, with many people living in more than one state during their lifetime. According to Money Magazine, the top destination in 2013 was Oregon. Based on an annual study conducted by United Van Lines, 61 percent of Oregon’s interstate moves were incoming. South Carolina came in at 60 percent, North Carolina at 58 percent and Nevada at 56 percent. These figures tie closely to the annual report from CNNMoney of the Best Places to Live. Sherwood, Oregon ranks number five. Portland State University conducted a study that indicated that Oregon experienced the largest migration growth in the last five years with an increase of 35,290 in 2013.

The most commonly cited reasons for moving to Oregon are business incentives, industrial growth and lower cost of living. Many young professionals are attracted to the lifestyle in Oregon, such as the beautiful natural surroundings, efficient public transportation systems and local arts and entertainment. Add the fact that housing costs are significantly lower than in California and you can easily understand the lure of the Pacific Northwest. A home in Portland cost roughly 40 percent less than a comparable home in Los Angeles, and almost two-thirds less than a home in San Francisco.

Another report from the national Bureau of Labor Statistics states that in 2013, Oregon posted a 2.4 percent increase in jobs. This is the third-highest growth in the country for last year.

If you are one of the many people who have migrated to Oregon from another state in the last few years, you may be ready to make the commitment to buy a home. Certainly, the availability of homes has decreased due to population growth, but it is still a viable marketplace. If you are ready to look, contact a licensed real estate agent to help you with the process.

Market Fluctuations

by Rob Levy

Along with death and taxes, the only thing you can count on in life is change. Perhaps nowhere else in the financial world is this more evident than in the real estate market. Regardless of where you are trying to buy or sell a home, you should prepare yourself for frequent, often unpredictable fluctuations in the market.

For those of us who are not real estate professionals or market, it's important to just remember that when the market slows down, home prices typically drop. Conversely, when the market activity is high, home prices tend to rise.

Remember, every real estate market is different, with different highs and lows, and different reasons for both. As always, your best resource for up-to-date real estate market information is your real estate agent.

Slow Market

Selling a home can be just as stressful and frustrating as buying one, especially when the real estate market refuses to stabilize. Here are some things to help you weather the storm.

When the market begins to slow down, it is tempting as a home seller to lower the asking price of your home. Sometimes this is necessary; however this may not always the best course of action. Even though homes may not be selling as quickly in a slower market, homes that are in good condition still command top dollar. Home buyers entering a slow market have more time to shop, but will still know the value of a well-priced home in good condition.

A relatively slow real estate market can look a lot like a buyer's market; however, it is more often a leveling of buying and selling activity.

Once again, your most reliable source on the actual health of your local real estate market is your real estate agent. Furthermore, an agent will have tools to compare the most recently sold properties to those that are still active on the market.

Active Market

Even if you're in a seller's market, a market with high buying and selling activity, an overpriced home will be recognized as such and remain unsold. Savvy home buyers learn to spot the differences defining a competitive real estate market and an unreasonably priced house. It is in a seller’s best interest to communicate with a real estate agent and ensure their home is well-priced.

Sellers in a developing neighborhood with a lot of new construction taking place should be aware that their home is likely in competition with home builder incentives, such as free appliances or paying buyers' closing costs.

The simplest, easiest and most productive way for buyers to find the best deals in their area is to consult with a real estate agent. It's their job to not only stay on top of the frequent fluctuations in the real estate market, but also to clearly relay that information to clients.

Also, a real estate agent will help you put together a plan, based on what you've said you're looking for, so that you are able to quickly act when you find your best match in a home.

Top Kitchen Remodel Projects

by Rob Levy

The kitchen is the hub of your home. It's where you entertain, eat and, of course, cook. In today's marketplace, top kitchen remodeling projects include adding an island, stainless steel appliances, farmhouse sinks, as well as customizable countertops and kitchen cabinets.

Before you try to hone in on specific items to remodel or replace in your kitchen, it might be best to take a step back and look at the big picture. From this perspective, consider how you want your kitchen to look by envisioning its overall layout, total amount of storage space and finally the types of materials you want to use.

Layout

Space is perhaps the most important factor to consider when planning your kitchen revamp. If you're working with a small space, one of your best options is a galley-style layout. This allows you to make the most of your relatively limited horizontal space by stacking shelves and counters vertically, utilizing innovative and double-duty containers.

If you're working with a large kitchen space, you might want to give a U-shape or an L-shape design, incorporating a centralized peninsula or island.

The bottom line with your kitchen's layout is to mold and shape it into a space that best fits how you and your family use the room.

Storage

Dishes, pots, pans, utensils and small appliances need to have viable and easy-to-get-to resting places. The more you use it, the closer at-hand you will want to store it.

Space-saving items, such as spice racks, stackable cookware and islands with a lot of drawers and cabinets, can be your best friends when revamping your kitchen. Designate a spot for your most frequently used items on the countertop. Conversely, you can free up some extra space by storing your rarely used kitchen accessories in a storage closet or your basement.

Materials

One of the best ways to avoid a cookie cutter kitchen design is to use vibrant, colorful and high-quality materials.

This is where you can really let your personality shine. As opposed to your relatively standard and limited options with storage and layout, the more interesting and eclectic your materials are, the more interesting and eclectic your new kitchen will be. Consider limestone, stainless steel or concrete for your countertops, mosaic tile for your backsplash, or frosted cabinets to give your kitchen some extra sparkle and shine.

Undergoing a kitchen remodel project can be a big task, but can also have great benefits and increase the value of your home.

Mortgage Changes to Know in 2014

by Rob Levy

The mortgage industry is ringing in the New Year with some significant changes, some of which include the following:

Ability-to-Repay Mandate

The CFPB (Consumer Financial Protection Bureau) created the Ability-to-Repay Mandate in order to establish the "gold-standard" for lenders to make sure borrowers are actually qualified to be a borrower.

Lenders will use a specific set of required income, assets and obligation guidelines to determine if potential loan borrowers qualify before ruling them eligible. These new guidelines create the defining standard for what the government considers a “Qualified Mortgage.”

Decrease in FHA Loan Limit

In 2014, the Federal Housing Administration (FHA) has deemed that a mortgage cannot exceed $625,000, down from $729,750 in 2013, which is a decrease of $104,750. Potential home buyers who want to secure a loan larger than $625,000 need to specify "jumbo loan" on their application. Of course, this type of loan will almost certainly require a larger down payment.

Don Frommeyer, President of the Association of Mortgage Professionals, said that while this change shouldn't have a significant impact on most of the country, borrowers seeking homes in areas that have a relatively high average selling price might be scared away from the 20 percent down payment inherent to jumbo loans, compared to the approximately 3.5 percent down payment on a traditional loan.

Caps on Loan Origination Fees

The fees and points associated with a Qualified Mortgage will be capped at 3 percent, starting on Friday, Jan. 10th, 2014.

Tighter Regulations for Self-Employed

The aforementioned changes to the Qualified Mortgage process will also make it more difficult for self-employed folks, who typically don't have to mess with a W-2, to qualify for loans. This is primarily due to the fact that without a W-2, self-employed people face an uphill battle trying to accurately prove their income-to-debt ratio.

For more information, you may visit the National Association of Mortgage Brokers website at: www.namb.org.

Portland to Host World Track Championships in 2016

by Rob Levy

The World Indoor Track and Field Championships are coming to Portland's Oregon Convention Center in March of 2016. The event, which is expected to draw more than 600 athletes and more than 8,000 spectators, is sponsored by Nike and the International Association of Athletics Federations. The three-day meet typically features athletes from more than 200 countries, from Austria to Zambia. The event is also expected to draw a worldwide television audience of more than 1.3 million viewers. This will be just the second time the event has been held in the United States. The first World Track Championships were held in Indianapolis in 1987.

About the World Track Championships

Begun in 1987, the World Indoor Track and Field Championships are held every two years and feature 13 events for male athletes and 13 events for female athletes. Similar to the Olympic Games, the first, second and third-place finishers are awarded medals. 

The 2016 event will include more than contests over three days, such as a fan festivals, concerts and other off-track events.

About the Oregon Convention Center

Opened in 1990, the Oregon Convention Center is located along the Willamette River in the heart of Portland. A new 200 meter IAAF-certified track is being built at the center, which will be used for 13 events.

Oregon, the corporate headquarters for Nike, is already the training home for many of the world's best track and field athletes. Organizers are excited to be hosting the event in 2016, just a few months before the 2016 Summer Olympics in Rio de Janiero, Brazil.

New Year's Eve Events in Portland, Oregon

by Rob Levy

Now that Santa is back at his chalet in the North Pole, it's time to decide how you are going to ring in the New Year. There are so many New Year’s Eve events happening here in Portland, Oregon that you’re sure to have a good time!

Below is a list of some of the festivities available. You can check out more at PDX Pipeline.

Have a great New Year's and be sure to play it safe when considering driving!

Tips on Budgeting a Home Renovation

by Rob Levy

Fixing up your home is a great way to improve your property's resale value as well as make it just the way you and your family want it. However, home renovation projects can quickly get out of hand and cost more than expected if you're not careful. Below are a few ideas to keep your home remodeling efforts from breaking the family budget.

1. Add 20 percent for contingencies. "This Old House" magazine advises homeowners to budget an extra 20 percent over and what they think their remodeling project will cost. This allows for contractors underestimating the time or supplies needed, additional renovation needed that wasn't anticipated before you started, and price increases on supplies, just to name a few items that could happen on a remodeling project.

2. Be realistic about what you can do yourself. Doing a lot of the labor yourself can save you a considerable amount of money, but it's important to be realistic. If you've never put down tile or hung cabinets, you don't want to learn on your own home project. You'll have to live with the results for years. Plus, no matter how skilled you are at DIY projects, it's wise to hire licensed professionals for wiring, plumbing and HVAC work. How does this save money? You don't want to have to hire a professional to redo your work when you realize you're in over your head.

3. Don't discount salvage stores. If you own a Victorian or other distinctive period home, make sure to scour the salvage stores for unique and affordable building items like doors, woodwork, moldings and more. You'll save money, you'll be keeping these items from America's landfills and, best of all, you'll be adding a vintage piece of American craftsmanship in your home.

4. Do your own delivery. You can save quite a bit of money on delivery charges plus make sure that your building materials are where you need them when you need them by picking them up yourself.

Home remodeling projects can be fun and exciting. With a little careful planning, they can also stay within the budget.

Displaying blog entries 1-10 of 250