Know your 10 second commercial:  Mine is “we screen for credit, criminal, eviction, employment, and landlord verification.  The screening fee is $40.00 per adult over the age of 18.  All parties that will be on the agreement apply.”

 After you have given your commercial you can explore the caller’s reaction.  “Do you have credit, criminal, eviction, employment, or landlord issues you would like to make us aware of prior to renting?  Will any of these screening areas be a problem for you?”  Have a conversation.  Be aware that tenants will tell a story.  The screening facts matter. 

 Don’t try to define your criteria or establish if a caller can pass it.  Offer to provide it in writing and invite all callers to apply.  Treat all parties the same.  “We provide screening criteria and lead based paint disclosure and photos prior to booking an appointment to show.  Do you have email?”

 “Have you driven by the property yet?”  Explore if they are familiar with the area.

 Next you can move on to your property rules.  Questions such as the following are helpful.

 “Do you have pets of any sort? – reiterate your pet policy.  Ours is “we do not accept any aggressive breeds.  Pet visit at your home may be required prior to approval of a pet.”

 “What date are you interested in moving?” – reiterate your move in policy.  Ours is “we do not hold homes more than seven days once an applicant is approved.  Upon approval you will have 48 hours to pay an execution deposit and sign an execution agreement.  These are certified funds.”

 “Do you have any “musts” for a property that we should know about before showing you the house?”

 “This house has __________________ heat.”  “The tenant pays for all utilities except ___________________.”

 “This house is (small) or (duplex) or has a (garage) that is used primarily for storage.”

 “We are showing the property at ___________________________.  Would you like to be present at that appointment?  What is a good cell # for you? _______________________”

 We require a confirmation phone call prior to our dispatching to the appointment.  Please call to confirm when you are on your way to the home or cancel at ________________.  We don’t go to the house without a confirmation call.

If you would like help buying or selling a home in Oregon and Washington please give me a call!

Kathryn King 503-997-9035, kathryn@kjkproperties.com

The Portland Housing Bureau is preparing its budget, and wants to know what YOU think its priorities should be for the next fiscal year. Please take 5 minutes to complete our survey at fmrsurvey.com/DHM/BHC2/BHC2logn.htm. Feel free to forward this email to other interested parties, and please excuse any duplicate distributions! Thank you!

For more on the Portland Housing Bureau’s FY 2010-11 budget process, please visit portlandonline.com/phb/budget

Homebuyer Alert…

For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts for two reasons.

The first of these, the coming expiration of huge tax incentives, may be a bit more obvious to most borrowers. April 30, 2010 is the last day to enter into a home purchase contract and still potentially qualify for a federal income tax credit of up to $8,000 for first-time homebuyers and up to $6,500 for repeat homebuyers. The credit can be claimed only on contracts that close by June 30, 2010.

Secondly, beyond the waning benefit of the Federal income tax incentive, another form of stimulus will soon disappear, as the Federal Reserve winds down a program that has been keeping home loan rates artificially low.

Rate Alert…

The lowest rates of 2009 were driven down to their attractive levels because of the Fed’s Mortgage Backed Securities (MBS) purchase program. Home loan rates have an inverse relationship with the value of MBS. When these securities trade higher on the market, rates move lower and vice-versa. So when the Fed originally agreed to be a big buyer, it helped provide a market for MBS, which helped keep prices high and, as a result, helped push home loan rates low.

And while the Fed continues that program through the end of March 2010, the reality is that the Fed‘s “extension” was really more of a rationing intended to prevent home loan rates from spiking as the program is phased out. It’s sort of like weaning the market off of its life-saving treatment instead of forcing it to go cold turkey.

Already, some in the media have mistakenly reported the extension of the program through March as good news, telling consumers that rates will continue to decline, and remain low into the spring. This gives a false sense of security that homebuyers and refinancers simply cannot afford.

The problem is…

Those reports do not accurately report what’s going on or where rates are really headed. That can have a very costly impact on consumers who may miss out on historically low rates if they listen to these media outlets.

Here’s what’s really going on…

In May 2009, the Federal Reserve’s purchases of MBS peaked at an average of $25 Billion per week. As of November, the average weekly purchases dropped down to $14 Billion. At the end of November, the Fed had already used over 80% of the allocated funds for MBS, meaning less than 20% remained to be used over four months.

Making the problem worse is that the Fed now has less money available to purchase MBS while at the same time, the supply of these securities has increased as a result of refinance and purchase activity that was triggered by lower rates.

Why is that important?

As the Fed now has fewer funds to last through the remaining months of the program, its ability to keep rates low will wane.
As the Fed’s program winds down and ends, we’ll likely see two things happen.

First, we will probably see higher levels of volatility—with rates sometimes shifting dramatically in the middle of the day. That means it is more important than ever for buyers to work with a knowledgeable mortgage professional who has a finger on the pulse of the market at all times and can provide trusted, proven advice.

Second, since MBS will have less support from the Fed, rates are likely to rise over time.

In short, while rates are still very good, they may not be for long.

What should you do to protect yourself?

First and foremost, work with a knowledgeable mortgage originator who studies and monitors the market.

Second, don’t be fooled by media stories that only report the headlines and don’t understand the underlying implications of the Fed’s actions. If you ever hear something in the news but aren’t sure what it means to your situation, feel free to call or email me for in-depth answers and advice.

Finally, if you haven’t yet explored how the current rate environment might benefit you or someone you know, let’s arrange a time to sit down and discuss your unique situation as well as your short- and long-term goals. Remember, rates are still very good, but they may not be for long.

**Reprinted courtesy of Cecelia Kern of Mortgage Trust.  For more information contact me at kathryn@kjkproperties.com.

Unless Congress acts quickly, the estate tax will be eliminated from January, 2010 until Dec 31, 2010.  The failure of Congress to pass an extension of the current estate tax law is unfortunate for taxpayers.   With elimination of the estate tax comes elimination of the “stepped up basis” which currently permits taxpayers who inherit property to use the decedent’s date of death valuation as the taxpayer’s new basis.  This means that taxpayers who are selling inherited property will now pay more capital gains taxes.  However, utilizing a §1031 Exchange may be helpful in minimizing this increased tax bite.

Example 1 (2009 rules): Decedent purchased property in 1970 for $35,000.  Decedent died on Dec 1, 2009 when property was worth $500,000.  Taxpayer who inherited the property has a “stepped up” basis of $500,000 (its fair market value on the decedent’s date of death). Therefore, if the Taxpayer sells the property for $500,000 there will be no gain on the sale and no capital gains taxes due.

Example 2 (2010 rules):  Decedent purchased property in 1970 for $35,000.  Decedent died on Jan 1, 2010 when property was worth $500,000.  Taxpayer who inherited the property assumes the taxpayer’s “carry over” basis of $35,000 and inherits property with a built-in taxable gain of $465,000.   If the Taxpayer sells the property for $500,000 capital gains taxes will be due on $465,000 of gain realized by Taxpayer.

Previously, as in Example 1, taxpayers selling property they recently inherited had a 100% basis and no gain, so no need for a §1031 tax deferred exchange.  Now these inheriting taxpayers will have significant gains to shelter when they sell these inherited properties.  A §1031 exchange may be a viable solution for taxpayers who want to sell the property they have inherited and exchange, 100% tax deferred, into a property that better fits their investment objectives.   Of course, the Taxpayer must be able to demonstrate that the inherited property was held by the Taxpayer for investment or business use prior to sale in order to qualify for §1031 tax-deferral treatment.  

There has been much talk about the possibility of Congress enacting a new law in 2010 and making that law retroactive to Jan 1.  However, if the law is not retroactively remedied, the tax ramifications will be as set forth above in Example 2.  If Congress does not extend or otherwise enact a new law, the estate tax will return as of Jan 1, 2011 with a 55% estate tax rate and a return of the stepped up basis.

This information was provided courtesy of Tojia Beutler at IPX Exchange.  For more information contact me at kathryn@kjkproperties.com.

EXCHANGE COMPANY REGULATION

TAKES AFFECT IN OREGON

Beginning January 1, 2010 Oregon requires exchange companies to: 

·         Maintain a fidelity bond of $1.0m or, in lieu of a bond, hold the funds in a qualified escrow or trust.

·         Maintain errors and omissions coverage of $250,000.

·         Invest funds in accordance with the prudent investor standard.

·         Prohibits the exchange company from loaning funds to any related entities.

·         Prohibits commingling exchange funds with operating accounts.