Today's Interest Rates

Heres a snapshot of today's interest rates below (thanks to Gabe Bodner of RPM Mortgage):

The Future of Sunnyvale Sustainable Office Space: Proposed 777,000 sq. ft. Office Space on 18-acre Campus near Central & Wolfe

Silicon Valley Reimagined.

Landbank is redeveloping an 18-acre site at Central Expressway and Wolfe Road in Sunnyvale into a a creative and innovative campus for leading Silicon Valley leading-edge tech companies. Led by world class architects HOK Architects, this project is reimagining what a technology campus can be.

Some of the interesting facts about this proposed development:

• LEED Platinum campus
• Majority of water to be reclaimed water
• Possible to reach net-zero energy standard
• Surface parking eliminated through use of under-building podium parking therefore preserving 53% of land's open space
• optional 208,000 sf rooftop garden with over a mile of walking trails
• central quad with 500+ person amphitheater
• 1.4 miles from downtown Sunnyvale and two CalTrain stations

Information Open House

Thursday April 17, 2016

9am - 10:30am; 6pm - 7:30pm

Central & Wolfe 222 N. Wolfe Road, Sunnyvale, California

Download an information brochure here. Any other questions about this development, contact me.

Economic Update from Steve Papapietro of Opes Advisors, Palo Alto

Our view on rates this week is that the most widely followed indicators are sending different signals, but short term rates are likely to be steady with upward pressure on long-term rates. Increased  volatility is likely as the markets adjust to the new qualitative guidance from the Fed.  

Here is what we are watching:

Back to the Future

The U.S. added 192,000 jobs in March with the unemployment rate holding steady at 6.7%. Total private payrolls reached 116.1 million, finally surpassing pre-recession highs.  Employment numbers were also nudged higher for January and February.
 
In sum:  Moderate improvement in the labor market means that the Fed  will continue to gradually reduce stimulus while keeping interest rates low.
 
It’s the Weather
 
U.S. exports fell 1.1% in February to hit a five month low causing the trade deficit to widen. This shift surprised most economists who were expecting the deficit to narrow.  There were some hints that transport delays related to severe weather were to blame. Oils imports hit a 14-year low – good news for U.S. manufacturers now less dependent on more costly and volatile foreign supplies.
 
Manufacturing and non-manufacturing economic activity picked up in March, continuing an upward swing.  The Institute for Supply Management (ISM) reported growth in new orders, employment and production.  Both the overall economy and the manufacturing sector are growing and the rate of change is increasing.
 
In sum:  Economists are racing to reduce Q1 GDP estimates due to lower exports, yet the data show favorable demand and good business conditions. Combined, this is neutral to slight support for higher interest rates.
 
They Will Definitely Probably Think About It
 
The European Central Bank (ECB) kept rates steady at .25% and said it was ready to turn on its money-printing machine to avoid deflation. This is significant change and signals their thinking on the strength of economic activity in the Euro Zone.  The strong Euro is keeping prices down and too low inflation makes it harder to deal with debt burdens and slow economic growth.  The U.S. is tied to the European economy through interest rates, trade, and exchange rates.  Any shift can cause the Fed to change its stance.  Be skeptical; the ECB has perfected the art of saying one thing and doing nothing.
 
In sum: Expect no reaction from the Fed to the ECB announcement. If anything, continued weakness in Europe supports lower interest rates.
 
The Week Ahead
 
Wednesday, April 9th:   The Federal Open Market Committee (FOMC) releases detailed minutes from their last meeting.  The markets will look for signs the Fed is keeping rates low following confusion sparked by the Dot Plot  and Janet Yellen’s post-meeting remarks.
 
Thursday, April 10th:  Jobless Claims data. This has a big impact on financial markets because it measures emerging unemployment and gauges the strength of the job market. This provides insights into the direction of economic activity.
 
Friday, April 11th:  the Producer Price Index (PPI) This provides markets with insights into the direction of inflation.
 
Finally, Industrial production data are expected from a variety of big European countries. This will be an indication on the need for ECB to take action (see above).
 
In sum:   All provide insight on economic momentum and indicate the direction of interest rates. Increased jobless claims and a favorable PPI indicate a continued low rate environment. Labor market and price pressure and lack of clarity from the FOMC support higher rates.
 
While Opes Advisors, Inc. uses all reasonable efforts to ensure that the information contained on in this email is current, accurate and complete at the date of publication, no representations or warranties are made (express or implied) as to the reliability, accurate or completeness of such information. Opes Advisors, Inc., therefore, cannot be held liable for any loss arising directly or indirectly from the use of, or any action taken in reliance on, any information appearing in this email.
 
This economic update was brought to you by Steve Papapietro, Mortgage Advisor at Opes Advisors in Palo Alto. For any additional questions about this information or about your mortgage questions, please call him at 650.319.1642.

Thinking About Becoming a Real Estate Agent? Read This First...

A great post from Greg Nino, Houston real estate agent, titled, "An Open Letter to Anyone Wanting to Get Their Real Estate License". Don't get me wrong, I love my job. But like any industry, it has it's challenges. If I had a dollar for every time I heard, "I like people and love looking a homes. I would like to be a real estate agent." Nino's well-written 42-point letter below plus my commentary:

1. Passing the exam is easy. Creating a business with real income is a different story.

So true, the barrier to entry is low. Creating a business with real income is a different story.

2. Now that you have your license, be prepared to lose friends and get your feelings hurt. Most, if not all, of your friends and family will avoid using you the first year or two that you’re licensed. Simply put, you don’t know what the hell you’re doing. Earn your battle scars. Even after you’ve gained experience, you’ll have friends and family who will not work with you because you’re a friend or because you are family. It happens every day to Realtors across the country.

Credibility. It’s not bought or you are born with it. It’s earned.

3. If you don’t spend money, you won’t make money. You need to spend THOUSANDS of dollars to create a business. Most of what you are thinking is a cute and new idea has already been tried a thousand times. You will do what every new agent does: Spend money (A LOT OF IT) on the wrong things. Over and over again. There’s a famous saying in this business: “If you want to get rich in real estate, sell stuff to Realtors.”

Truth: There’s no silver bullet. Takes hard work to build a real estate business. In the meantime, spend money wisely on long term impact and not on gimmicks. Vet technology opportunities too. If the technology doesn’t have an established track record or presence, then don’t waste your time.

4. You and your smartphone will become inseparable. You will have to get up from eating, watching a movie and sleeping to take calls, return emails and respond to text messages. Of course, you don’t have to do this, but you also don’t have to make any real money in this business. You’ll get out of it what you put into it. Ignoring a call could be a $20,000 mistake. Or more.

I’m OK with not picking up the phone when I’m busy. That said, I have lost business because I wasn’t quick enough on picking up the phone, but I’m OK with that.

5. Be prepared to be second-guessed, doubted, questioned, accused and lied to repeatedly. Buyers and sellers have the propensity to lie just like you and the guy next to you at the grocery store. People have perceptions about lawyers, mechanics and police officers. They have them about us, too. Even after years of experience there will be clients who will second-guess your every move. This will never go away.

Buying or selling a home is a big step. And with that there are a lot of emotions involved. Earning clients’ trust is not always easy.

6. You will show thousands of houses. Showing a house isn’t just about unlocking a door. Sometimes you get rained on while showing. Sometimes the house says active on the market when it’s already under contract with another buyer. Sometimes you are late to the appointment because of traffic. Maybe your buyer will be late. The number of things that can go wrong are practically endless.

Just when I think I’ve seen it all, there’s more… I couldn’t make some of the stuff up that I experience even if I wanted to.

7. Almost nobody will respect your time. Almost everyone thinks you are overpaid.

Sadly, this is quite true.

8. Expect people to ask for kickbacks both legally and illegally. Buyers and sellers will often want to haggle with your commission.

It’s unfortunate, but with the Redfins and Zip Realty agents out there, many buyers and sellers try to commoditize real estate agents. Not all agents are the same.

9. You will pay taxes. A lot of taxes. Expect to pay for the gizmo you use to unlock doors. You will pay for this yearly along with dues to three different associations. You’ll pay for signs, lockboxes, tools, equipment, cameras, advertising for both you and your listings, leads, websites, and on and on and on.

Endless fees. And not to mention that there’s only one Multiple Listing Services (MLS) that monopolizes... I mean... covers our area. With no competition, no incentive to innovate = real estate tools that suck.

10. You will pay for your own health and life insurance. There is no 401(k) matching in real estate. You are an independent contractor. In fact, YOU will pay to be at your local real estate office! The broker will take money from you. You will also pay for an office if you want one. Your phone is your cost. Your Internet is also your cost. So are your paper, pens and everything else imaginable. You’re running a small business. It’s ALL your costs. You’ll also pay for errors and omissions insurance. The list is really long. Yay!

A ton of insurance policies to choose from but none or close to what we had when my wife was working a nine-to-five job. 

11. You will get screwed in this business. It’s not for the naive, lighthearted, ignorant or thin-skinned. You will work your rear end off and sometimes not make a dime.

But you will earn a valuable experience and hopefully not get screwed again. How does the saying go? "Fool me once, shame on you; fool me twice, shame on me"
   
12. You will deal with a certain number of psychopaths each year.

Psycho-meter definitely improves over time...

13. You will meet criminals, convicts and felons, especially if you work in the leasing industry.

I remember representing a seller and the buyer’s agent when I looked up the buyer’s agent real estate license number, he had a slew of felonies on his record including ‘assault with a deadly weapon’. Needless to say, I never met the agent in person, but since he was the only buyer, I had to work with him to help my seller sell their house.

14. Strange men and women will ask you to meet them at houses RIGHT NOW.

Some people think that I’m just waiting at home for them to call me.

15. You might get a gun pointed at you while showing a house or two. Sometimes rabid pit bulls will chase you down.

There have been times in which I’ve been concerned with having some of my agents show properties in certain areas. You can never be too careful.

16. Expect to get towed at least once.

Haven’t been towed but have had dozens of parking tickets.

17. Eventually you’ll get in a wreck while showing. You better hope your clients aren’t with you. Is your auto insurance updated correctly?

While on broker tour viewing new listings, got in an accident… with another Realtor on tour viewing homes. What are the chances?

18. There is no disability insurance. So, if you break a leg while playing softball, you’re screwed. It’s going to hurt your business.

Disability insurance is a must.

19. You might get sued even when you aren’t at fault.

Having good legal support is extremely important especially in these cases.

20. When you become successful, your competitors might file complaints on you because they are jealous. You won’t like this.

File complaints, talk badly about you to prospective clients, or write fake negative reviews on Yelp.

21. As you show houses you’ll be in questionable neighborhoods from time to time. You need to learn self-defense, and carry a gun or a can of mace. Everyone should be concerned about their safety.

Letting a co-worker or significant other know where you are is a good rule of thumb.

22. Be prepared to leave a social event early to run and show a house or to get yelled at by one of your clients for something you did not do. It doesn’t matter, you are the chew toy sometimes.

Thick skin. I’ve grown thicker skin.

23. It’s likely you’ll get audited by the IRS. You have too many write-offs and, once again, you make too much money.

Happens all the time.

24. Lawyers are annoyed by Realtors.

And vice versa?

25. Expect to list homes and never sell them. No agent sells every home they list. You will waste time, money, energy and resources.

Nothing is guaranteed.

26. Your signs will be stolen, spray-painted and eventually played with by the local kids.

Graffiti. Or even better… disappearing signs. Now you see it, now you don’t.

27. Your flier box will always be empty because kids, passersby and neighbors will take too many. Sometimes they’ll take all of them in one day. Then you’ll be chastised for not having fliers in the flier box.

Need to have a system to keep the box full.

28. Did I mention you’ll deal with at least two crazy people each year?

Par for the course.

29. EACH real estate transaction you work means you are likely dealing with at least eight different people. You’re responsible for 15-20 things. Right now I am trying to close 11 contracts. I am a little stressed. Sometimes I wake up in the middle of the night thinking about my paperwork, my clients and my business.

Managing the stress is an art...

30. You will become an unlicensed therapist, divorced lawyer and counselor. You aren’t allowed to give legal advice, and you shouldn’t. You aren’t a doctor, but everyone will unload their personal lives with you. You will sometimes live their life.

Quite often we know when a couple is expecting a baby before their family does. Quite an honor I must say. There are definitely negative aspects as well of being so close to clients lives for such a short and intense period of time. And then when the deal is over, it feels like a divorce. 

31. Your spouse will at times hate what you do for a living.

Prioritizing priorities. :) Easy to say...

32. Your wife or husband will despise the fact that you are always on your phone.

Sometimes I just have to turn the phone off. Business will still be there in the morning.

33. When you’re sick, you still work. There’s no floating holidays.

No one cares if you’re sick. You still got to get the job done...

34. While on vacation, you still work. You can get an agent to cover your business, but NOBODY will care for your business the way you do.

True.

35. Sometimes when you make mistakes it costs people money. You can’t just apologize.

Taking ownership of your mistakes. And learning to not take ownership of mistakes that are not yours. Everyone wants to point the finger at someone.

36. You have to have a nice car. You must wear nice clothes.

Perception is everything? In Silicon Valley, I drive a Tesla Model-S and like to wear Converse All-Stars to view property. Is there a happy medium?

37. When you first get started everyone will know you don’t know what you’re talking about. It’s a fact. This sucks. But if you stick it out, you’ll be OK. Seventy-five percent of the new agents don’t make it.

I hear that it was only a 5% success rate after 2 years...

38. You get to work with agents! Not all of them are put together correctly. A lot of your problems in this business will be because of the other agent. You will get upset, angry, pissed and offended. Egos are here, too.

Ego vs. humility. My constant struggles. Sometimes agents get in the way of the clients too. Need to constantly check myself by asking… what is best for the client?

39. Wait for it:  Friends, neighbors and family will ask you for real estate advice while they are involved in a real estate transaction YOU aren’t.

Quite funny actually. Happens once every other week. Why are you asking me for advice? Why don’t you ask your real estate agent?

40. Other Realtors will give your client advice when they aren’t supposed to. Every buyer and every seller knows an agent somewhere.

Amazing… we have 25,000 real estate agents in our MLS. That’s a lot of licensee giving advice though only a select few are selling most of the real estate in the area.

41. Each market is different. Very different sometimes, but that won’t stop friends and family from influencing your client. Your client will become confused at times.

Confidence and trust. If that’s non-existent, then you’ll be climbing up a very big hill.

42. You have a better chance of meeting E.T. than you do working real estate part time and being successful. It takes time, effort and money to be a part-time Realtor. In fact, being a part-time agent can be even more difficult.

Part-time effort yields part-time results.

So why do agents do this?

You’ll have the amazing opportunity to reap what you sow. You can work when you want. No matter how bad your boss (client) is, you are working for them for only a certain period of time. You get new bosses all the time. You can make a real difference in a lot of people’s lives. You literally help shape dreams. YOU can be the difference in someone’s life as they look to sell and buy a home. And not all clients, buyers and sellers are bad. Most of them get it. It’s awesome when everything works out.

And that’s why I do what I do. Building long term relationships. Helping transforming lives on household at a time.

Classics at Station 361 Available Homes

Update 12/3/12: Classics at Station 361 announced last week that Phase I featuring 29 beautifully-appointed homes is sold out.  With sales starting at the end of June, the sales absorption rate was just under 1.5 homes per week.  Homebuyers started moving into their new homes in September, so Classics at Station 361 is starting to look like a neighborhood with residents enjoying the community amenities.  Look for announcements regarding Phase 2 in the New Year.  The 36 homes in Phase 2 are sure to be as popular with homebuyers as Phase 1.  Be sure not to miss this great opportunity to own a new home close to downtown Mountain View.

Update 10/4/12: Of the 65 29 phase 1 homes that were made available at Classics at Station 361 only four properties are remaining on market as of October 4, 2012. You can view our Station 361 review on 1SiliconValley.com. Keep reading to learn more about each of the available remaining homes:

Single Family Home # 19 – Plan A Model Home - $50,000+ in Upgrades 2 Bedrooms + Den / 2 Bathrooms (view the floor plan) Approx. 1,074 sq. ft. Price: $910,900

Single Family Home # 23 – Plan B 4 Bedrooms / 3.5 Bathrooms (view the floor plan) Approx. 1,764 sq. ft. Price: $1,099,900

Single Family Home # 12 – Plan D Model Home - $60,000+ in Upgrades 3 Bedrooms / 3.5 Bathrooms (view the floor plan) Approx. 1,748 sq. ft. Price: $1,200,900

Single Family Home # 17 – Plan C Wrap-around balcony and parkside location 4 Bedrooms / 4 Bathrooms (view the floor plan) Approx. 1,744 sq. ft. Price: $1,249,900

Contact Alex H. Wang if you'd like more information and/or to set-up and showing.

Listing Your Home for Sale: How Buyers View the Things You Do and Don’t Do

When interviewing for a new job, how do you prepare yourself? You get a haircut and ensure your hands are well-manicured. You put on your best suit, pick tasteful jewelry, and shine your shoes. In short, you ensure that you present a polished, professional image so that the interviewing company will hire you for a nice sum of money. Because everyone knows, ‘you only have one chance to make a first impression.’ Now take this same lesson - you only have one chance to make a first impression – and apply it to a home for sale. I ran across the perfect scenario to illustrate my point while showing properties recently.

The first thing we noticed upon arrival at House #1 was that the lawn needed to be edged, watered and mowed. The rest of the landscaping continued with this unkempt look. The home’s exterior was in good shape with the exception of some peeling paint on the front door. Clutter, personal photos, Victorian decorating, and the leftover onion smell from last night’s dinner greeted us once we entered the home. Moving through the living areas to the bedrooms, we noticed that yesterday’s clothes hadn’t made their way completely into the hamper.

A neatly manicured green lawn greeted us as we arrived at House #2. The landscaping shrubs and plants were well-trimmed, and the flower beds were freshly weeded. The rest of the home’s exterior was in good shape and the front door had been recently painted. The interior of the home was light and refreshing. Soft music was playing in the background, and there was no perceptible odor in the home. There were no clutter or personal photos anywhere – you could barely tell that anyone lived in the home.

Based on their first impressions, my buyers decided to purchase House #2 even though it had a higher asking price. When asked why, the buyers cited that House #2 felt more comfortable whereas House #1 simply felt like a lot of work. In other words, they could envision themselves living in House #2 in its current state whereas they would need to update House #1 to make it feel like theirs.

What does this all mean to you – the home seller? First, it means that you need to get your home into top shape by painting, cleaning, and repairing or replacing things that are broken. Make sure your landscaping is neat and there are colorful flowers growing. Beautiful landscaping enhances the home’s curb appeal and entices people to see the home’s interior. ‘Curb appeal’ may seem cliché in concept but it is as real now as it’s ever been.

Secondly, you need to realize that once your home goes on the market, it is as if the home is no longer yours. Homebuyers are trying to envision themselves in various homes and a more neutral home will allow them to do this easier. There are several ways to make your home neutral – paint color and decorating style being the easiest. Another item that focuses the home buyer’s attention on the home itself is the removal of personal photos. The buyers will spend more time looking at your home’s features rather than curiously viewing the photos.

The final key to presenting your home well is ensuring its tidiness on a daily basis. Put away the clean dishes and load the dirty dishes into the dishwasher. Make sure the beds are made and the dirty clothes are in the hamper. Remove all bathroom items from the shower and countertop, and hang new, clean towels on the towel bars. Clean up and put away the kids’ toys. I won’t argue that doing all this every morning while trying to race out the door is a real pain. I will argue that it is a must since you never know when someone is going to look at your home. Remember, while selling your home, you are working on the buyers’ schedules not yours.

In the end, if you take the time and do these extra chores, your home will most likely sell faster, and depending on the market, at or above listing price (sometimes substantially). And that is the ultimate goal.

New Construction Review: The Estates at Sunnyvale by Toll Brothers [updated 12/13/2012]

[Updated 12/13/2012] The Estates at Sunnyvale by Toll Brothers has opened its Sales Center and model homes. Located at 700 Timberpine Avenue in Sunnyvale, the Sales Center is open Thursday through Monday from 11am to 6pm.  Model photographs are now up on the Toll Brothers website if you would like to preview them from the comfort of your home. Homes are priced from the $1.3 million.

Sunnyvale has long been known to offer homebuyers the best value for their money in the Bay Area. It is now seeing a renewal by way of several new home communities under construction. The Estates atSunnyvale by Toll Brothers will join this renaissance when the new home community opens its doors soon.

Located at the intersection of Lily and Timberpine avenues just west of Lawrence Expressway, The Estates at Sunnyvale is located in the Ponderosa Park area of Sunnyvale. This part of Sunnyvale is conveniently located near Lawrence Expressway, and highways 101 and 237. Additionally, the population of the Ponderosa Park neighborhood is largely Asian which explains why Toll Brothers interestingly offers a community brochure in Chinese.

The Estates at Sunnyvale will offer homebuyers 51 elegantly-appointed new homes ranging in size from approximately 3,071 to 3,102 square feet on homesites averaging approximately 6, 000 square feet. All three home designs feature four bedrooms and 2.5 baths plus an option to add an additional downstairs bedroom and bathroom perfect for guests and multi-generational families. Prices are anticipated to start from the low $1,000,000s.

We will be updating this post as The Estates of Sunnyvale opens its doors and starts selling. Check back soon for more information.

New Construction Review: Classics at Station 361, Mountain View

Classics at Station 361 is the latest new home community in Mountain View. With models open for only two months and 13 of its 65 homes sold in just three sales releases, Classics at Station 361 has become an instant hit with homebuyers.

Classics at Station 361 has the three L’s going for it – location, location, location. Station 361 is centrally-located in Mountain View which, according to BusinessInsider.com, is one of The 15 Hottest American Cities of the Future – Mountain View will continue to lead as a tech city. Home to such big tech names as Google and Microsoft, Mountain View is sure to stay on the cutting edge of technology for years to come.

Access to the rest of the Bay Area and beyond is a cinch with the Mountain View Transit Center conveniently located just across the street. The Mountain View Transit Center offers residents quick, easy access to anywhere in the Bay Area via the Tasman Corridor Light Rail line, CalTrain, VTA buses, and paratransit in a pedestrian-friendly atmosphere. If you prefer to drive your car, Station 361 offers easy access to highways 101, 85, Central Expressway, and El Camino Real.

Within walking distance of Station 361 is Castro Street in downtown Mountain View. Castro Street is a gathering spot for locals because of its many restaurants, pubs, and shops. The Mountain View Performing Arts Center can also be found on Castro Street. Located in the Caltrain station parking lot every Sunday, residents of Station 361 can walk to one of the Bay Area’s largest year-round farmer’s markets. There are also many outdoor recreation areas within walking distance including Pioneer Park, Mercy-Bush Park, and the Stevens Creek Trail & Bike Path.

There is no doubt that Station 361 has a smashing location; now let’s talk about the community and its beautiful homes. This community will offer 65 homes – 45 detached homes and 20 townhomes. The 20 townhomes are arranged in four, three-story buildings that front W. Evelyn Avenue, while the 45 detached homes form the community’s interior that is bounded by Del Real Avenue, Villa Street, and Calderon Avenue. Also located in the middle of the community is common open space which includes shade trees, seating, a barbecue area and a children’s tot lot.

The townhomes feature two floorplans, each offering 3 bedrooms and 3.5 baths with approximately 1,700 square feet. Both floorplans feature a first-floor bedroom with en suite bathroom perfect for extended family or a home office. Five floorplans are offered for the detached homes. They range in size from approximately 1,074 to 2,439 square feet, and feature 2-4 bedrooms and 2-4 bathrooms plus flex space such as a den or loft (per plan) in two- and three-stories.

When it comes to in-home amenities, the homes at Station 361 are designed with you in mind. The homes feature private outdoor living space, fine hardwood cabinetry, and interior laundry rooms or closets (per plan). The kitchens feature granite countertops, hardwood flooring, gas range/oven, and double stainless-steel sink with garbage disposal standard. The latest in energy-efficiency and media wiring can be found in the homes as well. As is fitting for homes located in a city that offers free city-wide Wi-Fi, all building systems have the ability to be controlled via iPad.

1031 Exchange Offers Tax-Deferment of Capital Gains

If you are considering selling your investment property, remember that the IRS will tax your capital gains at 15% and then California will take an additional 9.3% for a grand total of 24.3% in taxes on your hard-earned equity. If you would like to defer that painful tax bill, you may want to consider doing a 1031 Exchange. What is a 1031 Exchange you may ask? A 1031 Exchange allows investors to ‘exchange’ ‘like-kind’ properties rather than sell them through the use of a Qualified Intermediary who holds the sale proceeds from the first property until a replacement property(ies) can be purchased within a very specific, non-extendable time period. Let us walk through the salient points of this description one-by-one so that we can get a better understanding of the 1031 Exchange requirements.

A transaction is considered an exchange rather than a simple sale when the seller expects to acquire a replacement ‘like kind’ property. That means that if you are selling an investment property, you must state that you plan to acquire replacement investment property(ies) within a specific time frame. A special note, acquiring investment property outside of the United States in exchange for investment property within the United States is not considered ‘like-kind.’

When you acquire the replacement property(ies), you must roll all the net proceeds from the first property into the replacement property(ies) or you will be taxed on the unused proceeds. Additionally, the value, equity, and debt on the replacement property(ies) must be equal to or greater than the value, equity, and debt on the relinquished property.

You may choose one or more replacement properties to replace your relinquished property though you do need to satisfy one of the following requirements:

1. Three-Property Rule - Up to three potential replacement properties may be identified regardless of their value.
2. The 200% Rule – Any number of properties may be identified as replacement properties as long as their value does not exceed twice the value (200%) of the relinquished property.
3. The 95% Rule – The taxpayer may identify any number of properties for exchange but you must acquire 95% of the aggregate Fair Market Value (FMV) of all identified properties by the end of the exchange period. Put another way, in order for the exchange to be valid, 95% (or all) of the identified properties must be purchased.

The timeline (wiki link) for a 1031 Exchange is very specific and does not afford anyone room for error. Firstly, you must identify the property for exchange in writing, signed by you , and delivered to an independent party, i.e. a Qualified Intermediary, prior to the closing of said property. After closing, the countdown begins. First, you enter the Identification Period in which you have 45 days to identify the replacement property(ies). Secondly, you must acquire the replacement property(ies) within 180 days of closing commonly referred to as the Replacement Period. One must note that the Identification Period and Replacement Period overlap and both begin with the closing of the relinquished property. These two time periods must be strictly adhered to and are not extendable even if the 45th or 180th day falls on a weekend or holiday.

To facilitate the exchange transaction (wiki link), a Qualified Intermediary (QI) must be used. Your relationship with the QI generally begins when you identify the property for exchange. Of course, there are several rules by which you must abide when choosing a QI. The QI may not be related to you or have had a financial relationship during the two years preceding the property exchange. In other words, your current attorney, CPA or real estate agent may not act as your QI.

The Qualified Intermediary preforms three functions during the exchange. They acquire the relinquished property and transfer ownership to the buyer. The QI then holds the sale proceeds , thereby preventing you from having actually realized any funds from the sale of the relinquished property. The QI then acquires the replacement property(ies) and transfers it to you within the time limits to complete the exchange.

Interestingly enough, there are some situations where you can combine the 1031 Exchange with the Internal Revenue Code Section 121, which allows a married couple to exclude up to $500,000 of gain on the sale of their personal residence. In order to use both the 1031 Exchange and Section 121 in tandem, you must comply with all the rules in both sections, with Section 121 regulations applied to gain before applying the 1031 Exchange regulations. Revenue Procedure 2005-14 explains how the two statutes may be combined for one property.

As with any tax legislation, there are numerous rules and regulations that you must follow – more than I can possibly cover well in this article. I strongly recommend that you consult a tax attorney or CPA before deciding to embark upon a 1031 Exchange or a Section121/1031 Exchange combination. For more information on 1031 Exchange, please visit www.1031.org.

Bidding Wars: How to Become a Desirable Homebuyer

High demand in a low housing supply market can be caused by any number of things. The end result though is always the same – a bidding war. I know what you’re thinking, “Home sellers have the advantage in a bidding war.” Yes, home sellers currently own the home on which the potential homebuyers are trying to outbid each other. But, it isn’t always the highest bid that gets the home. I cannot count the number of home purchases in which I have been involved where a lower bid is awarded the contract because of other favorable contract conditions. Being a well-prepared homebuyer is the key to positioning yourself in the best light when it comes to a bidding war.

Back in 2008, I wrote an article entitled ‘Winning the Bidding War’ in which I explained two of my winning strategies to help buyers win the bidding war - be the last presenter and bring the clients to the bid presentation. Those two strategies have helped me produce many winning bids for my clients over the years, but they focus solely on what happens at the presentation table. The choices and preparation that proceed the bid presentation are just as important, if not, more important.

Being a well-prepared homebuyer starts when you begin your home search and you choose a real estate agent to represent you – commonly known as a buyer’s agent. When you start looking at home listings on any internet site, such as Redfin, Zillow, or MLS Listings, you will notice that the same agent names keep showing up over and over again. These are the top producing local agents for the area, and you should choose one of them.

Again, I know what you’re thinking, “My relative/friend is a good real estate agent. I’ve used Bob Agent before. They’ll represent me better than any local agent.” I’m sure these agents are good agents in their market. But unless they are a good agent in the market where you are now conducting your home search, you will be better off choosing a good local agent that has intimate knowledge of the local market.

There are several reasons why a good local agent may help you win the bidding war. Local agents will bring in-depth knowledge of the local market, and all its nuances and expectations. I have seen contracts not be considered for many reasons, some as trivial as the wrong boxes being checked. Secondly, a good local agent has a reputation in their local market and that reputation may put the seller’s agent at ease. In a high demand market, home sales happen quickly, and the seller’s agent will want to know that this transaction will be completed efficiently and on time.

Once you have chosen a good local agent and found a home on which to bid, the second step to becoming a well-prepared homebuyer is to know everything you can know about the property condition. A good local agent should help you complete this due diligence ( they might even have represented a previous buyer or seller on this exact property). A good local agent will get all the disclosure packages and inspection reports from the seller’s agent for you to review ahead of time. They should also research the permit history of the home in the County records. And, they should complete comparable (comp) reports – Homes for Sale, Homes Pending, and Homes Sold - to review together so an educated decision can be made regarding offer price.

All this up-front research will lead to good terms on the offer with little or no contingencies. This is a win-win for everyone. The buyers know the condition of the property as much as possible and the sellers have a pending sale that will not cancel.

Remember, in bidding wars, it usually comes down to the little details that make or break the sale. Stack the odds in your favor by doing everything you can to make yourself a desirable homebuyer.

Related: ‘Winning the Bidding War’