Distressed homeowners walked away from their property and let it foreclose or sold it for a loss because of declining property values. Many were relieved to complete a short sale, which occurs when the lender accepts market value as the loan payoff and forgives the remainder of the debt. However, the feeling of relief didn’t last long; many of these former homeowners soon received an IRS Form 1099-C Cancellation of Debt from the lender informing them that the IRS considers forgiven and canceled debt as personal income. Once the shock wore off, people started pleading for the government to help. If they had lost their home through a foreclosure because they couldn’t make the mortgage payments, how could they afford to pay tax on a canceled loan balance that could be hundreds of thousands of dollars?

Congress listened and passed the Mortgage Forgiveness Debt Relief Act in December 2007. The act relieves individuals from tax liability for canceled debt on their primary home including foreclosures, mortgage modifications and short sales. The maximum amount of exempt indebtedness is $2 million or $1 million for married couples filing separately. The tax exemption doesn’t apply to investment property and second homes.

Lenders continue to send Form 1099-C for any debt exceeding $600 stating the amount of the forgiven debt in a short sale or canceled amount of debt in a loan modification or foreclosure. Individuals claiming an exemption need to fill out IRS Form 982 and submit it and Form 1099-C when they file their annual income tax return.

The law was supposed to terminate after 2012, but Congress voted to extend it through 2013. If the economy and housing markets haven’t recovered by the end of 2013, start lobbying your congressional representatives to extend it for an additional year. We can’t afford to lose this lifeline.

Although the courts may have to recognize electronic records as a substitute for paper documents, there is no law that states all documents must be available electronically. For example, most lenders require that borrowers sign mortgage documents in blue ink. That is why at a real estate closing the closing agent places multiple stacks of identical loan documents in front of the borrower to sign; all the involved parties receive signed original documents and copied or faxed documents aren’t distributed.

Electronic signing of real estate documents is becoming more popular as consumers and real estate professionals become comfortable with the technology. If you own property in California, be aware that state law does not permit landlord-tenant forms, the seller-financing addendum to real estate purchase contracts and home-equity loan documents to be signed electronically.

The companies that market signing software to real estate agents and brokers stress the fact that documents requiring signatures are sent in a secure environment. Typically, the selling agent completes the purchase contract and attachments on behalf of the buyer. The software may even allow the agent to create signature templates for the buyer and seller. The agent then emails the non-editable offer to the buyer for signing with login information including a username and password. The buyer then either types his name on the marked line or clicks on a marker that places his agent-created signature on the line. In some systems, the signed offer is then immediately emailed to the listing agent with a marker embedded in the document indicating where the seller should sign. The listing agent reviews the offer online, probably discusses it over the phone with the seller and emails the document to the seller for signing. The parties can complete the entire transaction without the need to print any documents.

In addition to requiring login credentials, additional security measures may be incorporated. The software may send the listing agent an email every time the document is opened and another email when it is signed. The popular real estate software packages also include a mechanism that invalidates the signatures if the content of the document is altered once it is signed. Because of this feature, agents using this type of software may choose to delay asking the seller to sign until everyone has agreed on the terms. Once the parties reach a consensus, the buyer electronically signs a new document that reflects the agreed-on changes, and the agent emails this contract to the seller for signing.

That’s all there is to it. Don’t be afraid to use technology to save our trees. Electronic signatures are here to stay.

State law determines if the property disclosures must be in writing, but smart real estate agents insist on having a printed copy in order to protect themselves. At least that way, they have some basis for denying knowledge of any problems that appear after the closing.

The laws apply to latent defects that aren’t immediately visible when an individual walks through a home. Roofing, plumbing, electrical and foundation problems are some of the most likely candidates for a cover-up because they can be expensive to fix. Once the owner or agent is aware of such a defect, it must be disclosed to a pending buyer. If a home inspection uncovers serious problems that cause one buyer to cancel a contract, the owner has to fix those problems or disclose them to future buyers. The disclosure laws apply even when an as-is purchase contract is used.

Besides the physical condition of the property, the seller may be required to disclose the presence of any liens on the property and any assessments that may be coming due after the change in ownership. Some states require the disclosure of any recent murders or suicides on the property and unusual levels of neighborhood noise or unpleasant odors. Orange County California sellers must disclose if their property is located in a designated flood, fire or earthquake zone.

The penalties for disclosure failures and the allowable time in which to file a lawsuit differ among states. Minimally, the seller may be required to pay three times the cost of repairs. If the jury determines that fraud is involved, the guilty parties may end up serving time in jail.

If you have any questions regarding the need to disclose, consult a Orange County real estate attorney. Otherwise, the best policy is to err on the side of disclosing too much rather than not enough.

2. Supply is low – just not enough homes to go around. Homes are garnering Multiple Offers, and that’s a good thing!

3. New construction is just getting under way. Your home has a head start in the fact that “it’s ready to go now”. A resale home in competition with a shiny, bright, brand new home, will frequently lose out. List now, sell while that “New Home” competition is still low.

4. Interest rates – Does anything else have to be said about 3.5% ?? It won’t last forever. The higher interest rates go, the more buyers are priced out of your homes price range – that will translate into less competition and fewer multiple offer situations – which could mean less $$$ in your pocket from your home sale.

5. Timelines are shorter – the pipeline is not as full this time of year. Shorter escrows mean less time for things to go wrong. And that’s a good thing.

The Orange County Real Estate market has begun 2013 with Record Low Inventory in homes for sale, summer will likely bring a change to current market conditions – bringing more homes for sale. If you have any intention of selling in the foreseeable future – right now the Orange County Real Estate Market conditions deserve some consideration.

The inventory – or number of homes currently on the market – is a measure of demand. A low inventory usually means greater competition and less choice for buyers.

Housing inventory is measured as a seasonally adjusted number of homes that are available for purchase at month end. The “months of inventory” figure (sometimes called “months of supply”) is based on how long it would take to sell all available properties at the current rate of sales activity.

If you’re looking for a certain home type in Orange County, low inventory in this category may be a problem.

Give me a call and I can explain more about inventory and suggest ways to broaden your search or change your parameters to enhance your chances of finding the perfect home.

Wendy Rawley | Prudential California Realty | (714) 746-6355 | wendy@go2wendy.com

Many homeowners prefer newer construction because they feel that these homes are more tightly sealed and less drafty than older properties. While that may be true, problems can still arise when the gas enters a home through gaps around pipes and construction joints. If you never open the windows, the gas is trapped inside the house. In high-risk areas, builders can construct homes using EPA-recommended radon resistant techniques. Otherwise, you can purchase an inexpensive radon-testing kit or hire a professional to test for you. It’s not a seller’s obligation to test for the presence of the gas. If buyers want to test prior to closings, they do it at their own expense. The same guidelines hold true for commercial buildings.

If you want to test the air yourself, you can purchase a kit that requires you to have a monitor in place for 2 – 90 days. Close all the windows and doors a few hours before you start the test; this gives the gas time to start accumulating. Place the monitor 20 inches above the floor in the living area of the lowest level of the home; exclude the kitchen and bathroom, and basement if it’s not regularly used. When the test is over, mail the monitor to the specified laboratory. If the results indicate a high level, you may want to repeat the test. The EPA doesn’t specify a safe level of exposure, so you may decide to take remedial action if you discover any elevated levels. Seal any cracks in the walls or foundation and test again. If you still obtain positive results, hire a contractor in Yorba Linda CA who specializes in radon mitigation.

You can go to the courthouse yourself and search for irregularities in the public records, or you can let a title company perform the investigation. If you obtain title insurance, the title company performs the search. Title insurance protects a homeowner and lender against financial loss arising from past defects in title including outstanding liens, forged documents, undiscovered heirs and fraud. For example, suppose you discover after the closing that the seller didn’t pay part of their required state real estate tax. In this case, the title company will pay what’s owed if you have the insurance. If you aren’t insured, the money to pay the debt and satisfy the lien is coming out of your wallet.

There are two types of title insurance policies; one is an optional homeowner’s policy, and the other is a mandatory lender’s policy. The homeowner is protected for the full purchase price, and the lender’s protection is for the amount of the mortgage loan. The lender requires the lender’s policy but doesn’t pay the premium. Either the buyer or seller pays the premiums; the responsible party defaults to regional customary practices although anything is negotiable. The seller customarily pays in Southern California, and the buyer typically pays in Northern California. The normal price for the title insurance is about one percent of the purchase price.

The payer may be able to save a considerable amount of money if the title company can reissue the seller’s policy. Talk to one of the knowledgeable Yorba Linda Realtors or call local title companies yourself. The title companies probably won’t volunteer to reissue, and you may not see it mentioned on their websites; you’ll have to request it. The same discounted rate may be available if you’re refinancing your mortgage loan. Be sure to ask.

Closing costs are charges that the seller and buyer pay in addition to the purchase price and loan payoff. When a prospective buyer for one of the Yorba Linda homes applies for a mortgage loan, their estimated closing costs appear on the Good Faith Estimate disclosure form; these charges should be very close to the actual charges incurred at closing time. Look at the form and ask your loan officer or your Yorba Linda Realtor to explain anything you don’t understand. All of these charges are shown as debits on the HUD-1 Settlement Statement.

One of the largest closing costs for the seller is the real estate brokers’ sales commissions. Additional fees generally charged to a seller may include attorney costs, deed documentary tax and recording fee for the deed.

Buyers pay the bulk of the closing costs with the largest component generally being the mortgage down payment. Other charges related to a mortgage loan may include application fee, points, appraisal, mortgage insurance, origination fees, taxes and recording fees for the mortgage and note, and pro-rated mortgage interest. The lender requires the buyer to have a hazard insurance policy with the first year’s premium paid in advance; the closing agent may also collect an additional two months of premium payments at closing. Fees for an attorney and home inspector may be assessed although the inspector is usually paid prior to the service being performed.

Title insurance payments are a matter of negotiation between the buyer and seller, and settlement costs are usually assessed to both parties. If annual property taxes aren’t due until after the closing, the seller credits the buyer a pro-rated share for the number of days the seller lived in the property during the year. This is necessary because the county sends the tax bill to the buyer, and it’s not fair if they have to pay for the taxes accrued prior to the transfer of ownership. Similarly, if the seller paid association fees in advance, the buyer credits the seller for the payments.

There is a concept known as seller concessions that you should discuss with your Yorba Linda Realtor before you make an offer on a property. Seller concessions occur when the seller agrees to pay a certain percentage of the closing costs that buyers typically pay. Lenders may limit the amount that sellers can contribute so check with the loan officer for the maximum allowable percentage for your type of loan. In a slow real estate market, sellers are more apt to agree to concessions than in a red-hot market when the listing agent receives 20 offers the first week.

Hazard insurance is the one type of policy that lenders always require unless you are purchasing a condominium in which the common areas are insured through your condominium association. State law or association bylaws may require that you obtain hazard insurance for the interior of your unit, but that regulation is not a lender’s requirement. Your general homeowner’s policy may include coverage for hazards like fire and wind, or you may have to purchase additional separate coverage if your property is located in a high-risk area. For example, if you live in a coastal area that is likely to incur damage from strong hurricane winds, you may need a separate wind policy that your friends living 20 miles inland aren’t required to purchase.

Severe weather can cause torrential amounts of rainwater to fall within a short period of time. Whether or not your home is covered for flooding depends on your policy. If you live in a federally designated flood-prone area, you may need to purchase a separate flood policy. In 1968, Congress passed the National Flood Insurance Act that established the National Insurance Program. The purpose of the program is to identify high-risk flood zones and subsidize the cost of flood insurance for residents living in those areas. The policy was expanded a year later to include mudslides. If you live in a designated floodplain, the federal government requires lenders to ensure that homeowners obtain coverage as a condition for loan approval.

Standard homeowner’s policies don’t provide earthquake insurance although the homeowner can purchase a separate policy. Covered damage typically includes broken pipes and cracked walls caused by the shaking; more expensive policies offer coverage for damage to contents. Fires and flooding associated with the earthquake damage is covered under other policies. Less than 20 percent of California homeowners purchase earthquake insurance. If you have any questions, discuss your options with your Yorba Linda Realtor and local insurance agent.

Authored by Wendy Rawley | Realtor specializing in Orange County Real Estate and Orange County Property

All applicants must provide a Certificate of Eligibility that you can usually obtain online on the VA website. If it’s not available, you have to send a written request. You won’t be approved for the loan without it. Dishonorably discharged veterans won’t qualify for a loan.

VA loans are attractive to borrowers for a number of reasons. The primary benefit of a VA loan is the fact that these products allow 100 percent financing; the borrower isn’t required to make any down payment. Interest rates on these loans are competitive and set by the lenders and not by the VA. Unlike FHA and many conventional loans, there is no mortgage insurance payment added to your monthly mortgage. That saves you a considerable amount of money each month.

If a lender approves you for a VA loan, you will incur an extra charge at closing. This funding fee is a one-time closing cost; the 2012 charge was set at 2.15 percent of the loan amount. The VA adds this money to the pool of reserves used to fund the guaranty that refunds lenders who lose money on a VA transaction. While this fee may seem high to you, the VA guidelines limit the total amount of closing costs charged to you.

Only owner-occupied residences qualify for a VA loan, but that could include a duplex, triplex or fourplex if you live in one of the units. If you’re interested in having tenants, this is a terrific strategy for owning property. The rental income pays your mortgage; repair expenses are deductible, and you sit back and watch property values appreciate. You are essentially living in your home for free.

Military personnel travel the world as they are posted from one tour of duty to another, and thousands of them who prefer the sunny weather and relaxed California lifestyle decide to retire in Orange County. If you’re one of these veterans interested in purchasing real estate, contact a Orange County Real Estate Agent today and see what the good life has to offer.

Authored by Wendy Rawley | Realtor specializing in Orange County Real Estate and Orange County Property