Category Archives: California

Is there Mortgage Relief for Homeowners During COVID-19?

The year 2020 has challenged the world with a health pandemic that has changed the dynamics of our everyday lives. As we adjust, many homeowners are wondering “are there options to protect my home while experiencing a reduction of income?” The answer is Yes! To be proactive in providing relief to Americans during the Coronavirus pandemic, Congress passed the CARES act in March 2020. The act protects renters and property owners for a minimum of 60 days from eviction or foreclosure and provides 60 day freezes on mortgages.

The sad reality is, many residents have lost their employment or have a job currently at risk. Families who relied on dual incomes to be paycheck to paycheck, are now down to only one spouse working, maybe with reduced hours. Residence are stressed wondering how they will keep up with obligations. With the US unemployment rate hitting 4.4% in March 2020 and “Bank of America economists predict employers will cut between 16 million and 20 million jobs, with the unemployment rate peaking at 15.6% between now and June 2020“, this relief package will be one avenue of optimism for citizens.

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Minimum 60 Day Freeze on Mortgages

The first effect of the CARE Act is creating a concurrent agreement to the 60 day freeze for homeowners with federally backed mortgages. The Freeze means the Federal Housing Administration (FHA) will: “Halt all new foreclosure actions and suspend all foreclosure actions currently in process; and Cease all evictions of persons from FHA-insured single-family properties.”foreclosure and eviction moratorium

The agencies who will participate are The Federal Housing Finance Agency (FHFA), Housing and Urban Development (HUD), United States Department of Agriculture (USDA), Fannie Mae and Freddie Mac. Some providing additional alternative disaster relief options depending on the service provider.

This assistance is not automatic. Consumers must contact their loan servicer to express hardship and request assistance. Those with mortgages owned by private lenders may not be included in this relief. However, most states and banks have established a relief plan for those homeowners as well. Here in California, Governor Gavin Newsom in reached a deal with a number of big banks to provide affected homeowners with a 90-day grace period for all mortgage payments and suspend foreclosures. 

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Forbearance Option

For longer term assistance, the second option provided to homeowners under the CARE Act is Forbearance. This gives homeowners who are experiencing financial hardships as a result of COVID-19, the option to request up to 180 days of forbearance on their mortgage. The forbearance allows them to pause or reduce mortgage payments, but it’s not loan forgiveness. If after six months, you’re still experiencing financial difficulties, the homeowner can request up to another 180 days of forbearance. At this time, all foreclosure and other legal proceedings will be suspended.

Will a Forbearance or Freeze Affect my Credit?

No. There will be no negative reporting to the credit bureaus for customers enrolled in temporary assistance, therefore a Freeze or Forbearances will not affect your credit. In addition, all foreclosures and evictions have been paused. It is important to understand, Forbearance is not forgiveness and banks will renegotiate repayment terms at the end of the agreement. Once regular work is sustained, you can make arrangements to to make incremental repayment portions to your regular payment. Another option maybe to add the missed payments to the rear of the loan. If you have trouble catching up at the end of this temporary relief period and still need assistance, you can work with your provider for additional options to keep your home. It is my assumptions more programs will become available as more are affected.

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How do I get Help as a Homeowner Affected by COVID-19

Contact your mortgage company (who you send your monthly mortgage payments to) as soon as possible. Let them know about your current circumstances. Below we have provided a list of major loan providers with the programs they are offering. Many of them have easy online applications that take less than 10 minutes. The contact information of your mortgage service provider should also be listed on your monthly mortgage statement. Many of my clients have successfully applied and been approved for programs already. They are able to get through this situation more comfortably knowing more resources are available food and necessities.

Link for some Mortgage Providers Offering COVID-19 Assistance

Bianca C. Wittenberg

California Real Estate Broker & Realtor Since 2010

  • California Investment & Residential Property Specialist
  • Sacramento Real Estate Broker and Realtor Since 2010
  • Sacramento State MBA Entrepreneurship & Global Business
  • Experienced with first time buyers, veterans, sellers, FHA homes, VA, REO & beyond.

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The Rules of a 1031 Exchange in California Real Estate

By Bianca C. Wittenberg

California Real Estate Broker Since 2010

The collecting of real estate assets is a rewarding adventure. The ultimate goal is to buy, and keep or upgrade real estate assets to build a larger real estate portfolio. When you no longer have a regular income, with proper planning your asset portfolio can be paid off, providing the ability to retire comfortably. In an effort to help investors achieve this goal, the government offers the right to do a 1031 exchange when selling one “like kind” property for another. The exchange provides certain tax relief benefits and allows property owners more flexibility when trying to upgrade their properties.

What is the purpose of a 1031 exchange?

The purpose of an exchange is being able to upgrade an investment without having to pay capital gains tax on profits immediately during the sale. Instead, one may want to participate in a 1031 exchange, deferring tax liability. This helps investors, who typically will not be acquiring “cash” from the transaction, avoid large tax liabilities.  The capital gains tax only has to be paid if a property, previously involved in an exchange, is sold for profits and is not participating in a further exchange.

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How do I begin a 1031 exchange?

First step is to contact your realtor to get a valuation of your investment, then decide on an exchange plan of action. At that time, hire a third party “qualified intermediary” such as Exeter1031 or Exchange Resources to help facilitate the transaction. Title companies such as Placer Title Company can also help make all arrangements with an exchanger. The seller will need enter into an “exchange agreement” with their intermediary, then prepare to sell their downleg property with their realtor. The qualified intermediary will stay connected to the seller as a neutral third party throughout the process and ensure each transaction is closed and recorded properly for the exchange. Here are some resources provided by Mark Turok at Exeter1031:

How long do you have to complete a 1031 exchange?

A seller has 45 calendar days from when their downleg property closes escrow to identify a new property. Initially, a seller must initiate intent to complete a 1031 exchange when selling the downleg property. The seller cannot receive cash during the transaction like a typical sale or reinvestment to qualify for the benefit, the 1031 must be an exchange.

The seller can choose up to 3 properties as potential upleg properties during the process. These properties are identified by their legal description and address, signed by the purchasers and provided to the third party “qualified intermediary” assisting with the exchange. If the purchaser wishes to choose from more than 3 properties, the total value of all upleg properties must not exceed 200% the value the downleg property, these rules get complicated and it is risky. Consult your real estate professional at the time of transaction and ensure you follow each rule or you may be subject to a taxable “boot” or the full tax amount due immediately. The upleg property must close escrow within 180 days of the downleg property closing escrow.

1031 Real Estate Exchange Process

Is there a limit to how many times one person or entity can exchange properties?

There is no limit to the number of exchanges that can be done. An exchanger can continue transferring properties until they pass and never pay capital gains. They can then can gift the property to the heirs. Their heirs will have to pay estate taxes, however, will not need to pay the income tax on the deferred profits from the 1031 exchange(s).  The heir(s) will be subject to income tax if they sell the property, that tax will be based on the difference in value for the property at time of death and sale. Consult your tax attorney to make the best financial decision on transferring or gifting your property involved with an exchange when planning the transfer. Ensure the proper type of estate trust is set in place for your individual situation.

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What types properties are eligible for a 1031 exchange?

All real property that is used for trade, business or to generate income can be exchanged under Section 1031, as long as it is not a principal residence or property that is personal use property for self or family. If the property is rented to family, it must be at fair market value. One investment property can be exchanged for any other type of investment. Example, an apartment complex can be exchanged for a shopping center or a duplex be exchanged for a commercial building. They do not need to be the same type of investment property, just a property producing income.

The Benefit of Investing in Opportunity Zones

Does the value of the new upleg property need to be higher than the downleg property disposed of?

Yes! There is no need for a tax advantage on gains made if there is a loss or no profit made. If an investment property is sold and a new investment property with a lower market value is purchased in its place, the transaction is not eligible for an exchange. The equity held in the upleg property must be greater than the equity in the downleg property.

Can I exchange my primary home?

A seller cannot exchange their primary residence. The purpose of the exchange is to reduce the tax liability from “business income” that is not yet realized. A primary residence is not used to produce income. Should a person decide to convert a primary residence to an investment and become eligible for exchange, they must not live in the property for 2 years and claim the investment. If a property purchased as part of a 1031 exchange wants to be converted to a primary residence, it must be owner occupied for 2 years and owned for a minimum of 5 years. Again, these rules get sticky. Consult your real estate professional and tax professional when making these decisions to see what is most advantageous for you.

Can I purchase my upleg property, before the downleg property sells?

Yes, but this turns it into a “reverse purchase” and not a 1031 exchange. A reverse purchase becomes much more complex and it is difficult to obtain the same tax advantage. A reverse purchase also becomes more costly. Consult a tax attorney or qualified intermediary prior to making the decision on your purchase or sale.  

How do I notify the IRS

When the transaction is completed and transfer done, you will file a internal revenue Form 8842 in the next tax year. You should consult with your tax professional and ensure the proper methods are used throughout the process for your individual situation. A 1031 exchange may not always be the most tax advantage option, consult your personal tax consultant prior to conduction your residential sale and purchase plans.

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Definitions:

“Like kind” property – Real estate “income” property for a real estate “income” property. IRS definition

“Downleg” – Property being sold by an investor, during a 1031 exchange, for a new property.

“Upleg” – New property purchased or identified to be purchased, as the replacement property, in a 1031 exchange.

Taxable “boot” – If there is an non-qualifying taxable portion of a transaction involved in a 1031 exchange, that portion will be subject to capital gains tax. This can include purchasing a non-qualifying property in exchange, taking cash out or applying for mortgage assistance.

Qualified Intermediary” – Is a third party qualified to help in conducting a 1031 exchange, can be affiliated with the title and/or escrow company. They must have access to a trust account to deposit funds and must not be related to the transaction. A real estate broker can assist in the exchange, if they are not assisting in the sale or purchase. It is advised to get a contract with your intermediary prior to listing. Your real estate agent professional can help you make arrangements with this person.

Bianca C. Wittenberg

California Real Estate Broker & Realtor Since 2010

  • California Investment & Residential Property Specialist
  • Sacramento Real Estate Broker and Realtor Since 2010
  • Sacramento State MBA Entrepreneurship & Global Business
  • Experienced with first time buyers, veterans, sellers, FHA homes, VA, REO & beyond.

Do you have Real Estate questions??? Ask me!

Home@ReallyOwnIt.com

Own It Real Estate

CalDRE#01527420

www.ReallyOwnIt.com

 Rules of the 1031 from the IRS, tax code 
 “(a)Nonrecognition of gain or loss from exchanges solely in kind
 (1)In general
 No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.
 (2)Exception for real property held for sale
 This subsection shall not apply to any exchange of real property held primarily for sale.
 (3)Requirement that property be identified and that exchange be completed not more than 180 days after transfer of exchanged property For purposes of this subsection, any property received by the taxpayer shall be treated as property which is not like-kind property if—
 (A)
 such property is not identified as property to be received in the exchange on or before the day which is 45 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
 (B)such property is received after the earlier of—
 (i)
 the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
 (ii)
 the due date (determined with regard to extension) for the transferor’s return of the tax imposed by this chapter for the taxable year in which the transfer of the relinquished property occurs.”
 https://www.law.cornell.edu/uscode/text/26/1031 

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2020 California Rent Control Legislation, AB & SB Rules….

By Bianca C. Wittenberg

California Real Estate Broker Since 2010

Many of my clients and Real Estate associates have been asking about the new legislation bills passed in January 2020 affecting Realtors, homeowners, investors and renters. Landlord/tenant rights have changed, there is stronger control on rent and more severe restrictions for landlords and agents. Real Estate Agents have secured their position as independent contractors and consumer protection has continued to increase. Here is a breakdown of how each Senate and Assembly Bills affect us.

AB 1482 Limits the amount rent can increased at a time and imposes just cause rules for eviction. Rent increase is capped at 5%, plus the change in the CPI (consumer price index), with a 10% maximum. This rule is retroactively effective March 14, 2019. Additionally, with all termination of tenancies, landlords will need to provide a “just cause” reason within 15 options provided in the AB 1482 bill. For more information visit, AB 1482 www.ReallyOwnIt.com

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AB 1110 Requires landlords to provide 90 days notice for any rent increase over 10% within a 12 month period. The previous minimum was 60 days. For more information visit AB1110

SB 329 Provides rights to Section 8 tenants, prohibiting landlords from refusing to rent to them because they are using a housing voucher. This is considered illegal discrimination based on “source of income”. For more information visit SB 329

SB 222 Veterans vouchers provide rights to veteran tenants, prohibiting landlords from refusing to rent to them because they are using a housing voucher. This is considered illegal discrimination based on “source of income”. For more information visit SB 222

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AB 1188 Tenant has the right to shelter a person at risk of homelessness with the landlord’s approval. If the landlord disapproves, they must provide 7 day eviction notice. For more information visit AB 1188

AB 5 Affirms Realtors can retain their status as independent contractors, business and professions code 10032. The agent must meet 3 conditions to qualify. 1. Hold an active real estate license 2. All income must be directly related to sales and not hours worked 3. All parties have a contract stating agent is an independent contractor, not an employee. For more information visit AB 5B.

AB 68 Produces increased incentives and easier qualifications for the creation of Accessory Dwelling Units (in-law suits). This push has been an effort to help the increasing housing crisis. The bill limits local governments on imposing strict restrictions and lightens the overall approval process. For each property, Ministerial approval is to be provided for Junior ADUs that no more than 500 sq/ft within the single family dwelling unit, that has separate access and is built to code. An additional approval is to be provided for one detached ADU built as new construction, with building approval per parcel. For more information visit AB 68

Real Estate Laws are constantly change and are complex. It is always advise to consult a real estate agent or attorney for best advice on your individual scenario.

Bianca C. Wittenberg

  • California Investment & Residential Property Specialist
  • Sacramento Real Estate Broker Since 2010
  • Sacramento State MBA Entrepreneurship & Global Business

Do you have Real Estate questions??? Ask me!

Home@ReallyOwnIt.com

Own It Real Estate

CalDRE#01527420

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Understanding Contingency Periods

By Bianca C. Wittenberg

California Real Estate Broker Since 2010

The property purchase process is complicated. A typical single-family residence purchase takes 30-45 days, involves over 15 professionals and is generally the largest purchase a consumer will ever make. To protect the consumer, Contingency periods are agreed to between the buyer and seller in paragraph 14 of the Purchase Agreement (CAR form PA). These periods provide the buyer time to complete due diligence inspections of the property, including completing lending requirements. The buyer does have the right to waive any and all contingencies if they choose. It is not advised to waive these rights and a buyer should consult with their real estate professional prior to signing any waivers.

When do Contingency Periods Begin?

The contingency timeline begins the day the seller and buyer come to terms during a Purchase contract negotiation. Typically, an agent or Transaction Coordinator will layout a timeline ensuring all parties stay on task. A buyer may waive their right to certain or all contingencies depending on their purchase motives. It is advised to speak to a Realtor before waiving any contingencies.

During the contingency periods, agents hire the home inspection, roof inspection, pest inspection, hazard reports, appraisal and other special contractors to investigate and value the property. This is all done typically at the cost of the buyer. If the buyer is not satisfied with inspections, they can cancel the purchase contract with a Cancellation of Contract (CAR form CC) and request the return of their deposit since terms were not met.

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17 Days for Buyer to Complete all Investigations & Review Disclosures

The buyer typically has 17 days to complete all inspections of the property with contractors of their choice. At the same time, they are to review all seller disclosures required to be provided within 7 days of coming to terms. The buyer must have at minimum 5 days to review all seller produced reports.  The buyer and seller can agree to a shorter number of days for contingencies or extend this period of time, depending on circumstance.

When the buyer is not satisfied with reports about the property within the contingency period, they have the right to submit a “Request for Repairs” or another addendum request to the seller and sellers’ agents. If the seller does not or cannot comply, the buyer has the right to cancel.

Once the buyer is satisfied with inspections and reports provided or has come to terms with repairs done by the seller after inspections, they sign “Contingency Removal #1” (CAR form CR#1). This means they have accepted the condition of the property and waive their right to cancelling due to property condition.

17 Days Appraisal Contingency and Removal

Buyers who are obtaining financing for the purchase of their property will need an appraisal of value as required by their lender. Typical contract terms will allow 17 days for appraisal valuation & sign off. Lenders will order the appraisal within 2-3 days of the purchase agreement date. The average turn around time for obtaining an appraisal report back is 8-10 days. VA & FHA loans will be more complex and average a 10-12 day turn around. A rush appraisal can be ordered if a buyer would like to reduce the number of days in the purchase contract. Speak to your lending professional about these options.

If the appraisal value comes in at or above contract price, the buyer will remove the loan contingency with “Contingency Removal #2” (CAR form CR#2).

If the appraisal comes in low, the buyer has the option to:

  1. Request sellers to reduce purchase price. If they come to terms, then buyer signs the contingency removal.
  2. Come up with cash for the difference between appraised value and agreed purchase price and sign contingency removal.
  3. Cancel the purchase agreement without signing a removal of contingencies.

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21 Days Loan Contingency and Removal

If the buyers is financing the purchase of their property, the lending process will take time. The loan contingency is set in place with 21 days in the purchase contract to protect the buyer if they cannot obtain financing. Typically, once the value is verified with appraisal, the loan will go through final underwriting. If the buyer’s lender advises all terms are clear with underwriting, the buyers real estate agent can advise the buyer to sign off on the final loan contingency removal. At this point the buyer signs “Contingency Removal #3” (CAR CR#3), Removing all contingencies and agreeing to complete the property purchase.

If the buyer is unable to qualify for their loan due to circumstances out of their control and within contract terms, they may submit a Cancellation of Contract (CAR form CC). The lender will need to provide the reason for the buyer not qualifying and escrow will be instructed to return the deposit.

Less Common Contingencies

If the buyers is purchasing a distressed, Real Estate Owned (REO) or Short Sale, Contingency timelines may be set in place until 3rd party approval is received. These terms can be anywhere from 45-120 days. Consult a Real Estate professional to guide you properly through the process.

What if the Buyer is not Ready Sign Off on Contingencies

The buyer is not obligated to remove contingencies if they are not satisfied with purchase terms. At that time, they can send an “Extension of Time” (CAR for ETA) to the seller or wait for the seller to produce a “Notice to Perform” (CAR for NBP). If the buyer does not perform within 2 days, the seller may cancel. The purchase of Real Estate is a very large transaction, there are many moving parts, many people and complications occur. It important to be prepared to handle each situation as it presents itself. Speak with your Real Estate professional and decided when and if it is the right time to remove contingencies.

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Bianca C. Wittenberg

-California Investment & Residential Property Specialist
-Sacramento Real Estate Broker Since 2010
-MBA Entrepreneurship & Global Business

Do you have Real Estate questions???

Ask me!
Home@ReallyOwnIt.com

Own It Real Estate

www.ReallyOwnIt.com CalDRE#01527420


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