Some tips on winterizing your California Home

Let’s face it, we live in sunny California and our winters are relatively mild compared to the rest of the country. But it does cool down with occasional wind and rain storms, so it is worth your time to take care of these items in preparation for winter.

• Clean rain gutters and make sure brackets are secure
• Clean or replace furnace filter. A dirty filter strains the heater and may even be responsible for higher gas bills.  Tip: Put a sticker on the filter with the date you cleaned it.
• Clean your air vents and ducts. Remove the vent covers with a screwdriver. Use the extension hose of your vacuum to remove the dust.
• Clean and vacuum around the furnace and check that the registers that bring warm air from the furnace aren’t blocked by furniture.
• Change batteries in smoke and carbon detectors.
• Check for air leaks in your home on a cold, windy day by turning off the furnace and closing all doors and windows. Light an incense stick and hold it around windows and doors. If the smoke is moving horizontally, chances are you have a leak and will need to caulk or install weather stripping.
• Reverse ceiling fans. In the winter, the blades should rotate clockwise, which will push warm air down and circulate it throughout the room.

Photo by Umit Aslan on Unsplash

8 Great Propositions and/or Reasons You May Want to Sell NOW

If you’ve weathered the storm through the great recession and managed to hang on to your home, here are 8 great propositions and/or reasons why you might want to consider selling now:

1)   Home values have appreciated to close to pre-recession rates.

2)   Your kids have moved out and your house is too big, or the stairs are too much, and you are considering downsizing but don’t want to give up your low property tax base. Do you know about PROP 60 & PROP 90 that allows homeowners 55 and older to transfer their property tax base to a purchase of equal or lesser value in participating counties?

3)   Your house is too big, so you want to sell it to your kids. Do you know about PROP 58 that allows you to transfer your property tax base to your children?

4)   You own an investment property but want to begin a new depreciation schedule by selling it and purchasing a new property, but don’t want to pay capital gains taxes.  Do you know about 1031 Exchanges? An exchange allows you to sell your investment and purchase a new ‘like’ property of equal or greater value and defer your capital gains taxes.

5)   You are married and ready to retire and want to move out of state. Do you know that married couples can exclude $500,000 from taxation on the sale of real estate? ($250,000 per individual).

6)   Statistics show that there is currently less than 6 months of housing inventory available in Orange County, technically making it a ‘seller’s’ market, and homes are taking between 30 and 60 days to sell if they are priced right in the beach areas.

7)   The selling season in Orange County begins the weekend after Superbowl Sunday and typically stays strong until the kids go back to school in September.

8)   Interest Rates remain low, so there is a good pool of buyers out there.

If you’ve been a ‘dormant’ seller – one who wants to sell, but has been waiting for the right time, really consider the 8 reasons above.

CAPITAL GAINS CONSEQUENCES UPON DEATH DEPENDING ON HOW YOU HOLD TITLE TO YOUR HOME

There are many ways to hold title to a property; Community Property, Community Property with Right of Survivorship, Joint Tenancy, Tenancy in Common, Partnership, Trust, but the two most common ways title is being held for married couples on their single family residence in California is: Joint Tenancy and Community Property with Right of Survivorship. The difference poses the potential for very important  LONG TERM CAPITAL GAIN EXPOSURE if/when one of the spouses pass away.

Here is an example of what can happen in both scenarios for holding title currently in California:

COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP

Married couple purchase a home for $100,000 and own it for 10 years. The home appreciates to $1,000,000, and the husband passes away. The wife gets to step up her cost basis to the $1,000,000 value that the home is worth upon the spouses death, and will only incur Capital Gains taxes if she sells her home for more than $1,250,000 ($1,000,000 value upon spouses death, plus her $250,000 Capital Gains Tax exemption).

JOINT TENANCY

Same scenario, married couple purchase a home for $100,000 and own it for 10 years.  The home appreciates to $1,000,000, and the husband passes away. $500,000 will be attributed to the deceased spouse’s estate (one half of the property value), and the wife would have to pay approximately 15-20 percent in estate taxes on the $200,000 Capital Gain – (her $450,000 half of the gain, minus her $250,000 exemption) which would cost her between $30,000 and $40,000!

Do you know how you are holding title?! Since I am forbidden from giving tax or legal advice, you should consult with your attorney or tax advisor to learn more about the ins and outs of each option.

WHAT IS A CLUE REPORT AND WHO NEEDS ONE?

WHAT IS A CLUE REPORT & WHO NEEDS ONE?

CLUE stands for Comprehensive Loss Underwriting Exchange. In the insurance world, this is an important document that reports history on a home and any dates of insurance claims, insurance company(ies) involved, the type of policy, whether loss was related to a named catastrophe (hurricane, etc.), location of the loss (on or off property), the amount paid and cause of the loss.The CLUE Report is reviewed by insurers when a buyer goes to set up their Homeowner’s Insurance, which is a requirement by the lender, plus highly recommended for any cash buyers as well.

WHO CAN ORDER THE REPORT?

Only the homeowner or an insurer can order the report. The report costs about $20.00, and if you are a SELLER, I recommend you order one, even if there have been no claims on your property in the past 5 years, as it is something that will give buyers the confidence to proceed with a transaction, when they see a clean bill of insurance health on your home.

If you are a BUYER, I recommend that you request this report from your own insurance carrier, or ask the listing agent for the seller to provide you one, BEFORE your contingency period is up. If, for example, a claim was filed for water damage or mold, you would seriously want to consider this, AND discuss with your insurance provider to make sure the claim would not make obtaining insurance difficult or more expensive on the home you are purchasing.

 

 

Are You Claiming Your Homeowner’s Tax Exemption?

With tax season upon us, I like to ask my clients if they are taking advantage of the Homeowner’s Tax Exemption.  What is it, you ask? It is a way to reduce the taxable value of your home by $7000, if you own and occupy it. If you qualify, your property taxes would be calculated on the taxable value of your home less the amount of the exemption which is currently $7,000.00. This saves most homeowners approximately $70.00 per year, but the actual tax savings varies depending on the tax rate for your area.

You may check to see if you are already receiving the exemption by looking at your annual value notice or your property tax bill. The exemption appears as a reduction of $7,000.00 on both of these documents.

How do I apply for the exemption? You may qualify for this property tax exemption if:

• You own your property
• It was your principal residence on January 1st
• You do not already have a Homeowners’ Exemption
• You submit a completed application to the county assessor’s office

A Homeowner’s Exemption application is usually mailed to new property owners within 90 days of recording the deed. The deadline for filing is February 15th. A partial exemption is available if the application is filed between February 16th and December 10th.

Once you have filed for the exemption and you continue to own and occupy the residence, you will automatically continue to receive the exemption. You may be required to re-apply if you change the way in which title to your property is held.

For additional information, contact the assessor’s office for the county in which your property is located:

Qualified Mortgage; What Is It? How Will It Affect Borrowers?

As of January 10, 2014, there is a new federal rule defining a “qualified mortgage” (a loan underwritten to standards safe for consumers). A Qualified Mortgage (QM) is part of the Ability-to-Repay rule established by the Consumer Finance Protection Bureau (CFPB).

The most important thing a buyer will want to know about QM is the debt-to-income ratio (DTI). This calculation, is how much debt you carry broken down into minimum monthly payments, including a new home, divided by your pre-tax income. The new QM definition says that to be considered a QM, this ratio has to be 43 percent or less. Loans with a ratio exceeding 43 percent but qualified for purchase by Fannie Mae or Freddie Mac, or for a Federal Housing Administration guarantee, will still fall under the Q.M. umbrella because of a temporary exemption expected to last at least a few years.

Lenders that meet the Q.M. conditions and underwriting standards are promised protection from legal challenges for those loans.

A Q.M. loan must also be fully amortizing with a term no longer than 30 years, and the points and fees paid by the borrower cannot exceed 3 percent of the total loan amount. This cap on points and fees could make it harder for lower-income borrowers, and those with less-than-perfect credit and higher debt-to-income ratios, because they often wind up in loans with substantial points and fees that could exceed the 3 percent cap. This could cause these consumers to look to a nonqualified mortgage, which could be more expensive.

This rule could also affect the availability of jumbo loans, which, because they don’t conform with the Fannie and Freddie loan limits, would not be considered qualified mortgages if the borrower’s debt-to-income ratio exceeded 43 percent.

With any real estate purchase, especially in a hot market, the first step in the process is to to meet with a lender to discuss your options. They will take the new QM rule into consideration and apply it to your situation to let you know how much you can afford.

What You Should Know About PROBATE

If you are like me, you avoid all things related to death or dying.  But I recently received my Certified Probate Real Estate Specialist (CPRES) designation, and I urge you to read this article, if you or your loved ones own anything of value – especially real estate.

The definition of Probate is: the legal process for the transfer of assets – houses, cars, stocks, bonds – from a deceased person’s name to his or her estate, so they can be sold or distributed to their heirs.

In California, if the decedent was married and their spouse is the beneficiary, things for the most part, will roll over to the spouse. But if both spouses die at once, or if there is only one owner of an estate, a few things can happen:

1. If their estate is set up in a Revocable Living Trust, the estate is distributed based on the Will (unless an heir contests the Will, which is another story).
2. If there is a Will, but no Living Trust, the Will needs to be reviewed by the court in the county of the decedent’s residence, and the Executor is assigned duties and (sometimes limitations) to settle the estate.  This is called Testate.
3. If there is no Will, the court will appoint an Administrator, or an heir can step forward and request to be the Administrator, but the court determines how the estate will be distributed.  This is called Intestate.

Settling an estate is cumbersome and most Executors and Administrators hire an attorney. The entire process can also be very expensive. You can estimate the following expenses:

Attorney Fees

Also called “statutory” fees – these are based on the fair market value of the assets in the estate. The fee doesn’t take liabilities into account! The probate code establishes a sliding scale:

▪                4% of the first $100,000

▪                3% of the next $100,000

▪                2% of the next $800,000

▪                1% on the next $9,000,000

▪                0.5% on the next $15,000,000

A reasonable fee thereafter

Example

Say the only asset in an estate is an $800,000 house, and there is a $400,000 mortgage on it. Based on the full $800,000 value (not the equity of $400,000) the fee would be as follows:

▪                4% of the first $100k = $4,000

▪                + 3% of the next $100k = $3,000

▪                + 2% of the remaining $600,000 = $12,000

Total: $19,000!

Fees paid to the Court

▪                There is a fee of approximately $395 payable to the court for each petition you have to file. In simple probate cases you only have to file two petitions: the initial “Petition to Probate” the estate and a “Petition for Final Distribution”.

▪                For more complex cases, you may have to file additional petitions.

You’ll also have to file a Notice of Probate in a newspaper. You are required to use only certain newspapers, and their charges will vary. Expect the notice to cost anywhere from $100 to $450.

Fees paid to the Executor

Did you know that the Executor is entitled to charge the same fee as the probate lawyer charges?! Often the Executor is a family member who starts out saying he/she will waive the fee.  But in many cases, once they find out all that is involved in the process, they change their minds.

Appraisal fees

All of the assets that the decedent owned need to be “inventoried” and “appraised”. The Court appoints the appraiser, whose fees are 0.1% of the value of the appraised assets (so in a $800,000 estate the appraisal fee would be $800).

Example of Total Costs (not including creditors)

Here’s how the fees would add up on a simple $800,000 probate case.

▪                $395 fee to file “Petition to Probate”

▪                $100 publication fee

▪                $800 appraisal fee

▪                $395 fee to file “Petition for Final Distribution”

▪                $19,000 attorney’s statutory fee (see above example under “statutory fee”)

▪                Possibly a 
$19,000 Executor’s statutory fee

Total: $20,690 to $39,690! This is not including property taxes, creditor fees, funeral costs, etc.

One last thing to note; many people with Revocable Living Trusts, neglect to update them after refinancing their mortgage or after a number of years pass and their financial situation changes. Any items that are ‘outside’ of the trust will also need to go through probate.

So to sum it up, most of these costs can be avoided by setting up (and keeping up!) a Revocable Living Trust, yet statistics show that 95% of all people don’t have one. Now, don’t you think it’s time to start looking into it?

Prop 60 and 90 Transfer Your Property Tax in Orange County CA

Prop 60 & 90 Transfer Your Property Tax in Orange County CA

Many of my clients that have lived in their homes for 20 plus years are interested in downsizing. Their reasons vary – the kids have moved out, they have 2 story homes and their hips and/or knees aren’t what they used to be, or they just simply have too much square footage to maintain.

Something a lot of people don’t know about is Prop 60 and Prop 90. These two propositions were enacted in California in 1986 and 1988 respectively, and enable homeowners ages 55 and older to purchase a new property and transfer their property tax base assessment from their original property. Prop 60 enabled the transfer within the same county and Prop 90 opened up the possibility of the transfer within 2 different (participating) counties.

The Guidelines for these propositions are as follows:
– At least one owner must be 55 years or older on the day of transfer
– The subsequent principal residence must be transferred within 2 years of the transfer date of the 1st principal place of residence
– The purchase price of the subsequent principal place of residence must not exceed the sales price of the original property except: A 5% inflation allowance is allowed if the subsequent purchase is less than one year. A 10% inflation allowance is allowed if subsequent purchase is at least one year and one day less than 2 years of the original property.
– The following counties have approved Prop 90: Alameda, Orange, Los Angeles, San Diego, San Mateo, Santa Clara, Ventura

As a California Realtor, I am restricted from giving tax advice, so always consult your CPA or Accountant before selling or purchasing a new home, BUT if you are thinking of downsizing and are 55 years or older, I am happy to go over your options with you.

In a later article, I will go over how you can sell your home to your children and gift your property tax base to them!

Selling Your Home: What to Repair BEFORE the Home Inspection

In my experience as a real estate agent, the rockiest part of a residential purchase transaction is the HOME INSPECTION. I’ve been to a ton of inspections and the same items come up over and over again. Unfortunately, because it states in the California Residential Purchase Agreement (RPA) on Page 4, Number 9. that the “CONDITION OF PROPERTY: Unless otherwise agreed: (i) the Property is sold (a) in its PRESENT physical (“as-is”) condition as of the date of Acceptance,” buyers don’t often realize this, and once they learn of the condition of the home, they ask for everything to be fixed. This causes feelings to get hurt, deals to crumble and many times by the end of the escrow period, the buyer and seller hating eachother.

The best advice I can give is this: SELLERS: Take the time to fix the obvious things BEFORE you put your home on the market. Repairing visible leaks, rust and damaged pipes is such an easy thing to do, but can become such a difficult thing to do once it’s noted in an inspection. A little time and money taking care of the things I mention below will go a LONG WAY.  BUYERS, take a good, hard look at the home you are purchasing and know what you are getting into. You agree in your purchase contract to purchase the home “as-is”, so don’t be unrealistic in your request for repairs. – especially in a ‘seller’s market’.

ELECTRICAL:

1. Install GFCI outlets near areas with water – bathrooms, garage & laundry (the home may have been built before this code was enforced, but it’s a cheap fix and worth the money)

2. Plugs & switches properly grounded and in working order, no broken cover plates

3. All bulbs working

4. No visible chords on permanent fixtures (i.e. kitchen hood, ceiling fans, etc.)

5. Electrical panel labeled, properly grounded & all empty slots fitted with panel knockouts

GARAGE:

1. Door from house to garage needs to be solid wood, fire-rated with a self-closing hinge

2. Automatic garage door opener should trip when obstructed, run quiet & smooth and have no extension chords in place of junction box

3. Remove/replace all other extension chords with junction boxes

4. Clear away obstructions to vents and repair screens

WATER HEATER:

1. Strap water heater to the wall and fill space between wall and heater with a wooden block

2. Install drip pan underneath the unit

3. Run a safety valve from top of heater to a safe location outside

4. Clean all pipes going into the unit and remove rust and patina. If you suspect a leak, have it looked at

FURNACE:

1. Replace filter, clean/vacuum entire area, if there are water stains on walls around the unit, fix any leaks and paint over stains

2. Pipe into the furnace should be hard wire, not flexible

3. If exhaust duct is wrapped in asbestos, make sure it is in tact, and if not, have it looked at by a professional and possibly removed

WATER AREAS: 

1. Check all areas of interior for leak stains – especially on ceilings and in closets and garage. If you find any, repair the leaks and paint over the stains (be sure to disclose the repaired leaks in your disclosures!)

2. Clean/bleach/dry out any moldy areas, repair any cabinets damaged from water

3. Replace faulty/old angle stops with quarter turn ball valves

4. Make sure water pressure is strong and sinks drain quickly

5. Tubs & shower pans should be spot-free and all caulking in-tact

6. Shower doors should open & close smoothly with all hardware in-tact

7. Toilets should be tight to the ground with newer, working angle-stops (quarter turn ball valve), anti-siphon valve at all hose bibs

8. Replace cracked & worn water hose at washing machine hookups

9. Install shut-off valves on exterior water pipes

ATTIC: 

1. Remove asbestos from any ducting if it has ever been moved or altered

2. Clear all vents to the exterior and repair damaged screens

3. Check that exhaust fans, pipes and vents don’t terminate in the attic, but exit through the roof and are in tact and properly sealed

SMOKE & CARBON MONOXIDE DETECTORS:

1. Homes built prior to Aug. 14, 1992 require a smoke detector be installed in a central location outside of bedroom areas on each floor of dwelling. Homes built or remodeled after Aug. 14, 1992 also require smoke detectors in each bedroom. Make sure batteries are new and test detectors to make sure they are in working order.

2. Carbon monoxide detectors must be installed near sleeping areas

FIREPLACE:

1. Clean & install a fireplace spacer clamp (a few bucks at your local hardware store, but always come up in inspections)

2. Seal cracks on the exterior of the fireplace and install a spark arrestor

WINDOWS & DOORS:

1. Clean and make sure windows are not cracked and that they open, close & lock properly

2. Replace worn out screens

3. Make sure all door locks work and that you have all the keys

EXTERIOR:

1. Rain gutters should be free from debris and in-tact or removed completely,

2. Sprinklers & drains should be working

3. Make sure gates open and close with easy access to yard

It’s a lot cheaper to pay a handyman or tradesman to fix the problem items in your home, rather than gambling that a finicky buyer will request you to hire a licensed professional to complete the work at a much higher cost. Some inspectors offer a “pre-inspection” at a discounted rate that might be worth checking into. But word of warning; don’t file a homeowner’s claim against your insurance to take care of any of the work on your home, as you are only supposed to file 2 claims in the past 3 years in order for the new buyer to be able to get insurance on your home for their loan!

 

Authentic English Pies in Los Alamitos

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Try a UK classic just down the road.  Meat pies are a traditional working man’s lunch in the UK.  Hearty, packed with flavor and very transportable, the pie sustained generations of men as they went off to work for most of the 20th century. Nestled right here in our own backyard, this completely authentic meat pie shop could be found on an old cobblestone road in England. Each pie is hand-made by the pie maker right in front of you. He rolls out the dough, scoops on the fillng, seals them up and pops them in the oven while you wait.

The pies come in 3 varieties: beef, chicken or veggie, and 2 sizes: small and large, gravy is offered at .35 cents for 4 ounces, and if you still have room, you can pick up a peach or cherry fruit pie for under 3 dollars. Cash or checks only, but no item is over $5.00. 

3641 Katella, just east of Los Alamitos Blvd. at the corner of Reagan. (562)431-9747