Housing Shortage at California

Photo by Amir Zee | Long Beach, CA

On the final day of the 2017 legislative session, the California legislature approved, and Governor Brown signed fifteen separate bills aimed at starting to address some of the driving factors of the shortage, such as requiring cities to allow developments that meet their zoning and general plans and allowing micro apartments as small as 150 sq. Ft.

It is evident due to the housing shortage, housing prices increasing this year. Interest rate still low between 4% - 5%.

According to California Association of Realtors, affordability for a single family residence is 31% and the median price of $538640. Condominium affordability is 39% with the median price of $449720. 

If you have any questions or comment, please contact me, I will be glad to help. Be sure to subscribe for future upcoming real estate issues. 

photo by Amir Zee | May 24, 2018, Long Beach

I am writing this post because few of you ask about the benefit of family trust last week. My answer is to talk to your attorney Before you do anything. Each person situation is different, and an expert attorney in family trust planning will tailor the best plan for you.
Trust may provide legal and tax advantages. Mostly it includes estate planning advantages. Here are some possible considerations you may want to explore with your legal/tax/lender/escrow professionals:

1) If you are getting a loan when you purchase, most banks will not allow you to buy in trust as they require a person (not an entity) to hold responsible for the loan. Some folks who desire to put their home in a trust will file a quit claim deed after closing to transfer Title to their Trust.

2) If your home is in a Trust, it may provide a faster way to transfer rights of ownership where you decide who gets your ownership rights. Possibly avoiding probate and any laws which would default dictate who would get the rights upon your death.

3) If your home is in a trust, it may provide some protection if you are sued personally.

Let us look at two type of trust which are more common in real estate:

A REVOCABLE LIVING TRUST

May be used if a property owner wishes to make provisions for the transfer of property upon death but is not currently ready to make an actual transfer of ownership. For a trust to be revocable, the “trustor” must reserve the right to terminate the trust and retain all trust property. When property is placed in a revocable living trust, there is no “change in ownership,” and thus, no reassessment to the current values.
Upon the death of the trustor, the revocable living trust becomes irrevocable. In preparing a revocable living trust, there should be planning to qualify the real property for the parent-child or another exclusion to avoid a “change in ownership,” and thus reassessment, upon the death of the trustor.

AN IRREVOCABLE TRUST

Is used when a property is transferred during the lifetime —or upon the death—of the property owner, or when the beneficiary of such a trust is changed. These events will (for property tax purposes) generally trigger a reassessment. However, if the parent-child exception applies, and with proper planning, it is possible to leave property to a child in trust and be relieved of the burden of high property taxes. With an Irrevocable Trust, a property owner can maintain ownership of the property for the duration of the owner’s life.

When property is left to more than one child, one of these children may want the property, and the other may seek money or assets of equal value. If the trust provides only the property to each child equally (each getting a one-half interest), it will be necessary for one child to transfer their interest to the other in exchange for an equalizing payment. This would no longer be a parent-child transfer, but would be a sibling-to-sibling transfer, which is not excluded from reassessment—thus, a change in ownership will have occurred, and the property will be reassessed. In either case, consult with a real estate or estate planning expert for advice before claiming any exclusions.
NOTE: This information is not intended as a complete guide regarding property tax laws. Again, please talk to your attorney. Your questions and comments are welcome as always. Be sure to subscribe for future conversations. 

What is Capital Gains Tax Law "When Selling Your Home"

photo by Amir Zee | May 20th, 2018 Long Beach 

Simply put, you may exclude up to $250,000 of your capital gain from tax. For married couples filing jointly, the exclusion is $500,000. Also, unmarried people who together own home and separately meet the tests described below can each exclude up to $250,000.

The law applies to sales after May 6, 1997. To claim the home as your principal residence an aggregate of at least two of the five years before the sale (this is called the ownership and use test). You can claim the exclusion once every two years. Even if you haven't lived in your home a total of two years out of the last five, you're still eligible for a partial exclusion of capital gains if you sold because of a change in your employment, or because your doctor recommended the move for your health, or if you're selling it during a divorce or due to other unforeseen circumstances such as a death in the family or multiple births.

Your gain is actually your home's selling price, minus deductible closing costs, selling costs, and your tax basis in the property. (Your basis is the original purchase price, plus purchase expenses, plus the cost of capital improvements, minus any depreciation and minus any casualty losses or insurance payments.)

Deductible closing costs include points or prepaid interest on your mortgage and your share of the prorated property taxes. Examples of selling costs include real estate broker's commissions, title insurance, legal fees, advertising costs, administrative costs, escrow fees, and inspection fees.

So, for example, if you and your spouse bought a house for $100,000 and sold for $650,000, but you'd added $20,000 in home improvements, spent $5,000 fixing the place up for sale, and paid the real estate brokers at least $25,000, the exclusion plus those costs would mean you'd owe no capital gains tax at all.

There are other situations as Nursing Home Stays, Home Offices and Marriage, and Divorce which I am not explaining it here as they not as common. But, if you have any questions, please call me, I will be glad to answer any questions.

Your comments are welcome. Be sure subscribe to blog for future real estate related issues.  

How to Apply for $7000 Homeowner’s Exemption in LA county

Photo by Amir Zee | Lafayette bldg. exterior 2017

Homeowners Exemption applies to homes that serve as a principal place of residence and amounts to a $7000 deduction from the home's assessed value, saving taxpayers approximately $70 per year.
The Assessor's Office estimates that nearly 400,000 homeowners are still eligible but fail to take advantage of these savings. This exemption can be especially beneficial to low-income homeowners and people on fixed incomes.

While $70 may seem inconsequential to some, over a 10-year period, it amounts to $700 – roughly the price of a new water heater. The Assessor also warns residents against fraudsters who offer to file an exemption for a fee. There is no filing fee, and no need to re-apply once qualified and Assessor's office is happy to help homeowners with the process. For additional information,
please visit the LA Assessor’s website If you own a home and it is your principal place of residence on January 1, you may apply for an exemption of $7,000 from your assessed value. New property owners will automatically receive a Claim For Homeowners' Property Tax Exemption. Homeowners’ Exemptions may also apply to a supplemental assessment if the prior owner did not claim the exemption. Further instructions are included with the claim form. Call 213.974-3211 or 1.888.807.2111 for forms and additional information.

This information is not intended as a complete guide regarding property tax laws. The information here has been derived in part from written and oral opinions from the California State Board of Equalization.

I appreciate your comment and questions. Feel free to post them, and I will be glad to answer them. Be sure to subscribe to blog for future informative posts.

How to Calculate the Fair Market Value of a Home?

Photo by Amir Zee / iPhone 6s / May 2nd, 2018

Utilizing the services of a professional home appraiser is the most accurate way of calculating the fair market value of a home. However, it is possible to crunch the numbers without hiring an appraisal service by analyzing the sale prices of similar homes that have sold in the prior 6 months in the same neighborhood.

The fair market value of the residential property can be calculated by comparing the recent sale prices of similar homes in the neighborhood.

Valuing a home is not an exact science, but professional home appraisers take some critical features into consideration when determining a home's fair market value. These include the property's age, lot size, internal square footage, the number of bedrooms and bathrooms, type of heating system, amenities and overall condition. Location is critical. Homes in a neighborhood with low crime rates and better transportation links tend to have a higher value than homes in which lack these features. The first step is to look at the property with an appraiser's eye and write down its principal features. I provide free Comparable Market Analysis " CMA" of your property. Or you can use What's My Home Worth? To receive your report in few minutes. As always please call me with any real estate questions.

Lastly, your comment and suggestions are welcome. So, drop a line to tell me if like this article.