San Diego Real Estate Blog

Hate the mess your home has deteriorated into but you don’t have the time or means to do a comprehensive redecorating job? Or maybe it’s time to sell your place, but you don’t know how to show it off to best effect?

You might want to read a new book by Jill Vegas called “Speed Decorating,” who focuses on redecorating at a minimum cost and warp speed. Ideally, she makes the most of what you have, showing you how to arrange it, what colors to paint, where to hang your artwork — and what flourishes to add.

“It’s about having a home you love right away,” she said. “Speed decorating is not about calling in contractors; it’s about looking at a room and thinking about what you can do in a couple of hours, a week, to make it better.”

Vegas said she believes people can improve their living spaces following seven simple principles.

Create a sense of calm. Clear out clutter and organize what’s left.

Shape up your rooms. Homes get out of condition. Getting them back in trim first requires a good cleaning during which you can note what needs to be repaired, replaced or repainted.

Incorporate personal style. Try to make rooms reflect you, whether that means warm tones and plush upholstery or stark lines and spare features.

Work out arrangements. Define the functions of different parts of the room. Once you know that, it’s easy to figure out where your furniture and accessories belong.

Work with light. Kitchens and baths want bright “task” lighting, while in bedrooms and dining areas need softer, more romantic lighting.

Embrace color and texture. Look to nature for inspiration. Think of some of the colors you liked on recent vacations and reproduce them.

Find the devil in the details. The heart of speed decorating is using art and accessories to give your home uniqueness and attraction.

Is the drama is nearly over? After a decade of extremes — the ebullient highs of the real estate boom, then the devastating lows of the bust — it appears calmer forces are beginning to prevail in the housing market.

The big fall-off in home values, which has taken the median price of a house down almost 30% since 2006, looks to be in its final stages in most places: Three-quarters of the nation’s 384 metropolitan areas will see prices down less than 5% a year from now, according to projections from Fiserv and Moody’s Economy.com; 10% seem poised for modest increases. Meanwhile, Uncle Sam is lending a steadying hand with programs designed to prop up the market — at least for a while yet.

In this quieter environment lie new challenges and opportunities for homebuyers, sellers, owners, and investors. For the first time in years you aren’t completely at the mercy of market forces: You can really affect how much you make (or lose).

To come out on top, though, you need to understand the key trends shaping the shifting market like – distressed properties will keep prices under pressure, big homes are lagging small ones in the recovery, mortgage rates will rise as Uncle Sam exits the market, financing for condos, second homes, and jumbo loans are especially tough to get, buyers, rushing to beat the tax-credit deadline, will set off a flurry of spring deals, going green this year can save you more money.

Your Realtor should be able to answer any questions about the above. Now more than ever, a strong informed Realtor is needed.

Tips for getting that condo door looking great for showings:

Pay attention to the details, such as removing cobwebs from the front door light fixture. If the door has a window, don’t forget to wash it inside and out. Curb appeal does not stop at the front door. If the condo/townhome has a garage, make sure that door is clean and in good, working condition.

Consider the plethora of front door looks you can create by upgrading exterior door hardware, paint/stain color, exterior light fixtures, and unit numbers (if allowed by the HOA), stoop accessories can create a virtual endless combination of eye catching details to your condo front door.

Don’t forget to address scuff marks from furniture moving and usual wear,

exterior stains are designed to absorb into the wood and allow the natural beauty of the wood to show. Condos and townhomes with outdoor-facing entrances need to be protected from the elements and need added protection from scratching and every day wear and tear.

If a “furniture-like” finish that shows off the grain (e.g. an oak door) is desired, applying an interior stain followed by an exterior durable varnish. But if you’re looking to repaint the front door white or another solid color, an exterior solid color stain would work as well as an exterior paint, like the Olympic Wood Protector Solid Color Stain (available at Lowe’s in more than 140 colors). For a rustic finish, one thin coat of a semi-transparent exterior stain, which also good for decks, fences and siding.

I read a really interesting article this weekend. These are the things that make me cautious about what I say to clients when discussing a short sale or foreclosure because it seems to change all the time.

According to the article, if you lost your home to foreclosure this year or  your lender forgave some of your mortgage debt because you sold it for less than it was worth, you could be facing a big tax hit.

It is IRS policy to tax forgiven debt you are personally responsible for as if it is income. Say, for example, your credit card company settled a $10,000 debt for 50 cents on the dollar. You’d have a debt forgiveness of $5,000, which the IRS would count as income, just like your wages.

The same policy held true for most mortgage debt until 2007, when Congress passed the Mortgage Forgiveness Debt Act. That ended the liability for many homeowners — but not all.

In general, if you lose your home to foreclosure or short sale, where you sell your home for less than you owe, the IRS won’t add insult to injury by counting the difference as income. At least until 2012.

However, when talking with your client (or potential client), be sure they understand there are four major exceptions to the rule:

1. You did a cash-out refinance and splurged.

Many homeowners took cash out when they refinanced their homes and used the extra dough to pay for new cars, boats or vacations. Say you did that and then got into trouble, losing the house through a foreclosure or short sale. Even if your lender waived the remaining debt, the IRS will treat as income the portion of the forgiven debt that you took out as cash and spent. Only the funds used to actually improve your home won’t be taxed. Yes, even if you spent the money on paying off your student loans or credit cards.

The IRS’ reasoning is that only the money spent on home improvement actually added to your home’s value. And that, presumably, diminished the difference between what you owed on your mortgage and the value of your home when it was foreclosed.

Beware: Some lenders made refinancing offers contingent on homeowners paying off credit card debt, according to Kent Anderson, a Eugene, Ore.-based attorney and tax expert. If you took one of those deals, the refinance money will be reported to the IRS and you will owe taxes on it.

2. You have a home-equity line of credit.

During the boom years, many homeowners tapped soaring home equity to make all sorts of consumer purchases. But the same rules that apply to refinancing also apply to home-equity loans: The IRS will only forgive the tax liability if the loan money was spent improving your home. And, tax experts advise, you’ll need to show receipts to prove you did.

3. You lost your vacation home or investment property.

So the market tanked and you lost your vacation home. Unfortunately, if you didn’t use it as your primary residence for at least two of the previous five years, you’re going to pay the tax man.

More common, however, may be the case of investment properties gone sour. During the housing boom, buying homes for investment purposes soared, accounting for 28% of all sales during 2005, according to the National Association of Realtors. (Vacation homes made up 12%.) And many of these purchases were made with little down payment.

When the bust hit, second home prices cratered. The median price paid for investment properties fell 43% to $105,000 in 2009, from $183,500 in 2005, according to NAR. For vacation homes, the median price paid dropped 17% to $169,000.

If an investor bought a property in 2005 at the median price and sold it in 2009, he could have run up $75,000 or so in forgiven debt. If the investor is in the 25% income tax bracket, that would add nearly $19,000 to their tax liability. Ouch!

4. You owned a multi-million-dollar home.

It may be hard for Americans struggling in this weak economy to sympathize with anyone wealthy enough, at one time, to afford a multi-million-dollar home. But owners losing one could be on the hook for a huge tax bill.

Only the first $2 million in forgiven debt will be voided under the relief act; all the overage is taxable as income.

So, say, for example,  you paid $7 million for your Hollywood Hills villa in 2007. (With a 100% mortgage; this is hypothetical, remember.) But now, you have it on the market for $4.59 million.

Say you can’t unload it and you have to a short sale. If you sell it for $4 million, leaving a $3 million balance, the IRS would forgive the first $2 million. But the remaining million? You better hope you have a good accountant and a lot of deductions.

The good news? Even if you fall under any of these four scenarios, you may have a way out, according to Anderson. “If the taxpayer was insolvent at the time of the foreclosure, the forgiven debt can be excluded for tax purposes,” he said. “It can also be discharged in a bankruptcy and approved by court order.”

And then there is California

Anybody else hear about our states financial woes? While most states follow the IRS lead and don’t tax most forgiven mortgage debt, California still makes you pay. The state legislature hopes to change that before April 15, but right now California taxpayers are legally liable for paying state income taxes on forgiven mortgage debt.

Areas of the state have endured some of the worst price declines and foreclosure rates in the nation, followed the federal lead when it passed the original debt forgiveness bill, but the state only authorized the relief for the 2007 and 2008 tax years. There have been successive legislative efforts to extend relief through 2009, but none have succeeded.

One attempt at passing an omnibus “conformity” bill resulted in a veto by Gov. Schwarzenegger for reasons having nothing to do with mortgage debt forgiveness. The governor objected to a different provision covering erroneous tax reporting by businesses.

Confusion and anxiety is running high, according to Rocky Rushing, chief of staff for democratic state Sen. Ron Calderon, who is spearheading new legislation. His office has fielded many calls from unhappy taxpayers.

“We’ve heard about tax bills in the thousands of dollars,” he said.