Pacific Real Estate

A Fully Licensed Broker / Realtor Serving All of San Diego County

WHEN CONSIDERING VACATION SAN DIEGO HOMES, COURT A RESORT BEFORE YOU MARRY ONE

Most developers of planned resorts have a generous plan for people who want to “get engaged” to a resort, to test it out. These developers rent cottages, apartment units, town homes or even hotel suites to potential buyers at a discount. In some cases, they give stays free of charge, with one tiny string Attached – you might have to listen to a brief sales pitch and take home an offering brochure. Others might offer you a “refundable” discounted stay, with the money you pay plus the cost of your airline tickets deductible from the purchase price of a property, should you decide to buy. About 95 percent of resort developers will give you some form of a deal, if you request it. Travel agents are good sources for the names of developers, as are vacation properties advertising sections of newspapers and magazines. How can you be sure the developer is not a fast-buck artist with three San Diego homes on a swamp that he swears will be a golf course by next April, when you arrive for your “vacation”? First, ask to see the offering statement filed with the state and federal governments. Then, ask those offices if the developer has posted a cash bond guaranteeing construction of amenities. What a fabulous way to plan your next vacation! Instead of returning to the same old place, shop for a developer eager for a trial run. For the next year, or two, or five, you can take vacations in different places, at a lower price than you would pay for a straight package deal.

THE WEEKEND GETAWAY HOME
One quandary that many second-home buyers face is whether to shop for a weekend retreat, which they could use often, in season and out of season, or a place farther away, where they could go less often but for longer periods and where they would perhaps eventually retire. To resolve the problem, you have to be realistic about how much time you have. If you are worn out after long hours Monday through Friday, you may prefer the weekend getaway. If you are self-employed, you can make appointments with yourself to go near or far, often or rarely. If you work on weekends, or if your company may transfer you to another part of the country or world, you need to take that into consideration. Because “paradise” is a very subjective judgment, even those of you who hope to find the perfect weekend house within a few hours’ drive of home should try places on a rental basis before committing yourself to ownership of vacation San Diego homes.

Tax exempt San Diego real estate

There are some properties that are partially or totally tax exempt. All real property that is owned by the federal, state, county or city government is automatically tax exempt.

Property of non-profit organizations used for religious, charitable, medical or educational purposes is tax exempt.

Property tax appeals

Over-assessments can be taken to the appeals board.

People who feel that the assessment of their real estate is not correct may appeal the assessment. Appeals would be directed to the Board of Equalization (the property tax assessment appeals board) between July 2nd and August 26th. After it considers the case, the Board may reduce an assessment, or it may increase it, or it may issue a new assessment if the San Diego real estate has not been assessed before.

Supplemental property tax bills for San Diego, California real estate

The law (SB 813) requires value reassessment of property immediately when they change ownership or when new construction is completed. While the amount of the supplemental assessment is still determined in accordance with Proposition 13 (see above), the actual effect is to “speed up” reassessment of property. In fact, prior to the change in the law, property was generally not reappraised until January 1st.

The Office of Assessor enters the new property value onto the assessment roll as of the first of the month following the month in which the property changes ownership or new construction is completed.

Depending upon the date you purchase San Diego, California real estate, or the date construction is completed, you will receive one or more supplemental tax bills in addition to your regular tax bill. Taxes on the supplemental tax roll become a lien against the real property on the date of change in ownership or the date new construction is completed.

WHAT ABOUT AN APARTMENT OR TOWN HOME?

By the year 2000 half the American population lived in common- wall dwellings: apartments or town homes. There are doomsayers out there who believe condominium living is fading as a lifestyle; they are wrong. The cost of San Diego real estate is soaring so high that in many areas we will no longer be able to live in single-family detached residences. Right now there are more people moving from single-family homes to condominiums than vice versa.

For people looking at buying apartment or town home condos or co-ops, the Financial and Geographical Comfort Zones are the same as they are for single-family San Diego homes. The difference lies in the esthetics of living in a common-wall dwelling. A condominium suits a person who does not want to be bothered by lawns, driveways, roofs or basements. Many of us are becoming accustomed to an easy-care apartment where we can lock the door and leave for a month. You need to judge how comfortable you are not just with the facade but with the hallways, the entrance, the lobby, the elevator. Also, think about how you react to other people. Those of you who have lived in apartments or town homes before know whether you enjoy the closeness of other families. If you have been living in a single-family detached residence all your life, you need to gauge whether common walls will make you feel restricted or inconvenienced. Have you ever heard footsteps on the ceiling or music seeping up from the floor? You would do well to lease before you buy, to see what your comfort level is in a shared situation.

CAN TIME SHARING SAN DIEGO HOMES BE A TERRIFIC VACATION INVESTMENT INSTEAD OF A RIP-OFF?

With a time share, you can visit both your own resort and hundreds of others around the world, from Hawaii to Nepal, from the Caribbean to the Alps. For me, the exchange pro- gram connected with time sharing is the number-one reason for buying.

WHAT IS A TIME SHARE?
Time-sharing is real estate or vacation San Diego homes. A time-share, contractually, is a long-term vacation purchase. It gives you the right to use a vacation home, be it a condo apartment, town home or resort unit, with all the goodies attached, for a specified period of time each year for the rest of your life. You can pass it on to your family. Sometimes time sharing is called “interval ownership.” The most common form of time-sharing is fee simple – a deed to property. You buy the property and you own it. Other ownership plans include right-to-use plans, in which you buy the exclusive right to use a unit of a resort for a number of years, after which ownership reverts back to the developer. The right-to-use plan is similar to leasing a car.

A TIME SHARE SAVES YOU MONEY
There is a wide range of costs, but the price tag for a week of time sharing can be as low as $3,000, and hardly ever more than $15,000. You pay in installments, much as you would an auto loan, so your initial outlay is small. A logical question is, “Why not just rent the same place every year if you can’t afford full-share vacation San Diego homes?” The answer: time sharing saves you money by locking in current vacation prices and locking out inflation. Furthermore, when a time share is paid for, it becomes a usable, sellable asset. For example, if you bought a time-share unit near Disney World, you might pay $5,000 for a unit, thus locking in the $1,000-a-week price for five years. After that, you could use it free, except for the cost of your yearly maintenance fee. In addition, you are making an investment in fun. You receive tangible pleasures from it. Did you ever try to take a vacation with a stock certificate? It does not work. Some resorts, rather than sell one unit to 52 different people, sell it to 15 or 16 people who buy two or three weeks each. Is this a good deal? That depends on how much time you want to use a place. Theoretically, multi-week sales cut down on a developer’s marketing costs, which can run as high as 50 percent. Theoretically, the developer passes the savings along to you, the buyer, in terms of reduced prices. It is typical to offer one week in high season, one in low season, one in the “shoulder” or in-between season.

THE DRAWBACKS OF SAN DIEGO CONDOS

Certain pitfalls in condo living cannot be taken lightly.

LESS PRIVACY
If you are looking for wide open spaces and seclusion from neighbors, a condo clearly is not the place for you. Perhaps you like to have neighbors close by. You enjoy living in an environment tilled with people to talk to and have fun with. Nevertheless, an obnoxious neighbor might temporarily spoil that community feeling. You might be forced to complain to the condominium association and have to go through unpleasant procedures – including calling the police-to make your home more peaceful.

HIGHER UPKEEP COSTS
When it comes to maintenance inside San Diego condos or town homes, a condo is not like living in a rented residence. A developer offers you a paint job in the beginning, but after you own the place, you pay for internal jobs. The same rule holds true for a leaky faucet in your kitchen. As the owner, it is your responsibility to fix it unless the leak is coming from a common area pipe in the wall. The general rule is that if it is happening within your walls, it is your problem. For example, if a main line breaks and causes damage to your carpet, the association must repair the pipes and the plaster ruined because workmen had to go through your wall to fix it. But the association is not responsible for replacing the wallpaper or the carpet in your home. Your homeowner’s insurance policy should include a contingency clause for redecorating and replacing items ruined by a leak or a break from the common area. The very benefits that make some condos so attractive can also become pitfalls.

HOW TO CHOOSE A MANAGEMENT COMPANY FOR YOUR SAN DIEGO REAL ESTATE

Naturally, you want your second home kept neat and orderly. Minor repairs should be done by the management firm. Advance deposits and rents should be collected promptly and you should receive a monthly statement.

A good management operation makes sure tenants do not walk off with your coffee pot – or your coffee table. Some firms will ask owners each year whether or not they are willing to have their places rented by such tenants as college students, discount tour group members or people with pets. If your recreational San Diego real estate is a single-family home, it can be rented independently of others handled by the same firm. However, if it is part of a condo development or multiunit resort, income might go into a rental pool. In every case, the management firm takes a percentage of the rental as its management fee. Under the rental pool arrangement, all money is shared by all owners. For example, if 80 out of 100 units are rented, the rental from the 80 is distributed among the 100 units. This may work for you in a popular resort where rentals are much in demand. But it may hurt you if rentals are sporadic, or if the resort has a poor year. Under an alternative plan, resort units are rated according to how attractively they are furnished. The best units are rented first. Rents are not pooled, but allocated to owners according to the actual rentals of each unit. The drawback is that if there are many gorgeous units in your resort, you must spend money to upgrade your own, or risk losing rentals to the higher-rated ones. Yet another option: manage the place yourself. This is feasible when your second home is close enough to your primary residence, so you can visit it regularly. Do you want to be a landlord? Do not take on the management tasks unless you can answer with an enthusiastic yes.

PROFILING YOUR COMFORT ZONE BEFORE THE SALE OF SAN DIEGO, CA REAL ESTATE

Once you think the time has come to sell your home, you should examine your Comfort Zone every bit as much as you would if you were buying. What is the price you should set? Are you willing to compromise? Should you sell with or without a real estate broker? How long are you willing to wait for the right deal? Do you want to spruce up your home or sell “as is”? No matter how lovely your house is, you can improve its marketability before you put it on public display. I will advise you on how to “package” your house for a sale: putting vanilla to boil on the stove, curb appeal, and all the other little things that make San Diego, CA real estate more salable.

Do you need to make a sale fast? How quickly you sell is in part a function of how you price the house, as well as of the marketplace. If you price a house too low, it may sell too fast. If you price it too high, it will sell slowly or not at all. You will need to assemble a major-league team for this effort, including a top-notch broker (unless you are selling without one), your certified public accountant, an appraiser and your friendly banker or mortgage broker. bring you a winning sale. But the first question to ask yourself is, should I sell at all?

WHY YOU SHOULD NOT SELL YOUR HOUSE
The biggest mistake people make is selling a house when they do not need to. Your reasons for selling should be very clear to you. “Wait a minute!” you protest. “I’m being transferred out of town. I don’t have a choice.” Yes, you do have a choice. Even if you are moving to another market, consider the option of not selling. I know this may sound like heresy, but hear me out. First, answer these three questions:

1. Is your home located right now in a hot marketplace?
2. Is there a lack of residential properties for sale nearby?
3. Do you have a large equity in your home?
If you answered yes to all three, you would be much better of not selling. Instead, you can put yourself in an enviable financial position. You could keep your current home, lease (rent) it to others, and use the equity in it to buy your new home in your new location. In this fashion, you would start to build a San Diego, CA real estate portfolio for later in life, since homes in certain parts of the county are increasing in value at a rate of 10 percent or more a year.

You also should analyze the tax advantages and disadvantages of selling your house. If you are moving into a house that is more expensive, you can benefit from the 1034 rollover provision in the Internal Revenue Code. It lets you defer paying taxes on the house that you just sold, in order to buy the new house. However, if you are under the age of fifty-five and buy a less expensive house, you are subject to taxes on the profit of the sale of your previous home. (If you are over fifty-five, you are allowed a one-time exemption from this tax.) If you think you should put your house on the market because homes are selling well in your area and you will make a lot of money, that is not a good reason to sell, since taxes will eat into your profit. Perhaps you are about to sell because your home is not large enough for you or your growing family.

Why not investigate what it would cost to add rooms or enlarge your space by remodeling? You do need to make sure in the process that you would not be not overbuilding for your area. (This happens when yours becomes the most expensive house in the neighborhood.) But remodeling or enlarging is cheaper and less disruptive than moving. Or perhaps you are an empty-nester or older American, and you have decided to sell because your family suggests it. “What do you need that big house for?” grown children often ask. Your answer almost always should be, “Peace of mind.” Unfortunately, some older homeowners are persuaded to sell. To my way of thinking, this is one of the saddest misjudgments they can make.

YOUR SAN DIEGO REAL ESTATE LOT OR THEIRS?

There are two ways to make an actual purchase of a modular house. You can buy from a developer who has already built a modular home on a lot. Numerous builders develop modular home communities, where the houses are assembled within a subdivision. The second method is to buy a modular home for a lot you already have chosen. Wherever you are, the cost of the lot is the same for a modular as for a stick-built home. The difference is how the home is then constructed on the lot.

Some companies offer you their own warranty, financing, home insurance, site selection counseling and other services. In general, you finance a new modular home the same way you would finance stick-built San Diego real estate. Property taxes? You pay the same rates your neighbor in a custom home pays.

YOU WILL APPRECIATE THIS FINAL POINT
There is one further argument in favor of buying modular San Diego real estate. It appreciates more quickly in the beginning than a stick-built home on the same site. Few people realize this. Even though it is a little-known fact, the appreciation potential is a big plus for modular construction, and it stands to reason. Let us say you place a $100,000 modular home in a community where custom homes with the same square footage are selling for $130,000. As soon as you move in, your home increases in value to $130,000, provided you have bought from a first-rate company and opted for the same amenities as neighboring residences.

GOING MODULAR – TODAY’S BEST-MADE, LOWEST-COST QUALITY SAN DIEGO HOMES

Did you know that new technology has transformed what used to be called the prefab home? That term has a bad connotation and it is outmoded. Drop it from your vocabulary. Instead, learn the new term “modular housing”-the biggest new force in single-family residences in the country today. A modular home, once it is in place, is exactly like a custom-built, or stick-built home, except that when bought from a reliable company it is sturdier and cheaper. Modular San Diego homes are built on an assembly line like high-tech cars. They are more solid than conventional homes because the engineering is better.

As the words suggest, a modular home is constructed room by room in a factory, then transported to your site and assembled in an amazingly short time. Consider this: a custom home, built piece by piece by carpenters, e1cetricians and roofing people, is a home “manufactured” on the site. The raw materials are delivered directly to the home site. A modular home is built room by room by the same (or by more skilled) carpenters, electricians and roofing people, with the exception that they are inside a factory, in a climate-controlled, quality-controlled environment, using exactly the same (or better) raw materials. There is no such thing in a modular home as a door being a sixteenth of an inch too narrow to close properly. I have inspected modular homes that are so insulated, so energy-efficient, that when you close a door your ears pop! The true test of a modular home is that you can walk up to one and not be able to distinguish it from a far more costly, conventional sticker built home.

FROM MODEST TO DELUXE
Modular San Diego homes have made personal single-family residences affordable but they are not the only ones. The coming of age of modular homes now gives even the purchaser of a high-priced home the chance to get more bang for a buck – more house for less money. I have seen modular homes two stories high, with swimming pools and cathedral ceilings. You can have amenities in a modular home that are as good as those in any luxury home. Modular is not synonymous with “cookie cutter” or “four walls and a roof’- just the opposite. Modular homes come, in some cases, with more features included in the basic price than stick-built tract homes have. Moreover, these homes can be customized at the factory, complete with wallpaper and carpeting. The quality-controlled assembly line and quantity purchases of raw materials bring down the cost of those extras, and usually they are part of the basic package. In the moderate price range, for instance, one leading manufacturer offers its top-of-the-line 1,176-square-foot, two-bedroom, two-bath home at prices beginning at $77,450 (not including land). This home comes equipped with first-rate insulation; heat and air- conditioning; carpeting in the living room, dining room and bedrooms; a kitchen sink, range and garbage disposal; and bathrooms with toilet, tub and sink, all included in the basic price. Also included in that price is site preparation: a 28-inch concrete block foundation, back fill foundation and fine-grade, and even a six-by-six-foot front stoop. Here is an example of modular living on a grander scale.

THE CLOSING OF SAN DIEGO HOMES – HOW TO AVOID NASTY SURPRISES

The home is almost yours. The negotiations are done, the terms agreed on, the mortgage arranged for. The last major hurdle buyers face before moving into their new San Diego homes is the closing.

Technically, closing is the word for exchanging papers that make you the official owner and for clearing up other details. However, if you ask friends what the closing on a residence is, four out of five will reply, with a pained look, “the moment when suddenly you have to write a big fat check in order to really buy the place.” But closing costs should not be the nasty surprises they often are. The closing is simply a meeting, involving buyer, seller, their respective lawyers, real estate agents and lender. The approximate date is decided by you and the seller when you sign the contract to buy a California home.

In today’s world a typical closing should not take place any more than 45 days from the time you sign a contract, unless you cannot obtain a mortgage commitment. Then you both agree to extend the time period. If this is the case, there should be a provision in the San Diego homes purchase contract that if that period does run longer you can extend the date without paying a penalty. The definite date is when funding occurs. To make the closing as palatable as possible, why not think of it in terms of a big dinner party? I will give you the list of guests, and the menu is fairly standard for a residence. It is up to you to get the ingredients and cook the meal. What makes things easier is that you can prepare some of the “dishes” in advance-as early as the day after you receive a mortgage commitment from a lender. What’s more, you can clear up many nagging details ahead of time with a few phone calls.

The federal government offers you a hand, believe it or not. Since 1974, everything at closing is governed by RESPA-the Real Estate Settlement and Procedures Act. The lenders must let you know prior to the closing exactly what costs are going to be paid by each party.

NEW SAN DIEGO REAL ESTATE CONSTRUCTION – THE INS AND OUTS OF DEALING WITH A BUILDER OR DEVELOPER

Buying a new custom-built or off-the-rack (“tract”) home is a little like buying a new car. The sticker price on a car is really for a stripped-down model, and you pay extra for “frills” like a radio and power steering. The initial price of San Diego real estate can mislead you, unless you look beyond the base price.

What precisely is “new construction”? Usually it is what builders refer to as a “stick-built” residence constructed at the site on which it sits. It could be a model home, or one that has been built within the last couple of years, or a home that has never been lived in. Also in this category are custom-built homes, which you design and have built for yourself.

PUTTING MEAT ON THE BARE BONES
Let me start by cautioning you to assume that nothing comes with a new house except the walls, the windows, the roof, the floors and the front and back doors. This would not be a habitable house until you add appliances and “standard” items. Among many builders, however, every other element in a house could come under the term “loading,” in the same way cars have “optional extras.” Many times you are lured to a location by a beautiful ad in a newspaper. Upon arriving, you discover there is an additional charge of $20,000 for the lot! What about such items as a refrigerator, a stove and all the other things that make living comfortable, that you take for granted? That is where loading comes in. Loading is a selling tactic. For example, a builder will ask, “Would you like a refrigerator? Would you like a lawn?” Those tend to be extras. There is no such thing as a “standard” package. The best approach is to ask the builder or the sales agent, “Are these closet doors included in the actual home that I’m purchasing? Is this bathtub included?” and similar questions. In short, ask if what you see is what you get. I will bet even money that the answer is no. Every deluxe item you see in the furnished model is extra. There you are, strolling through a model in a development of homes advertised at $480,000, for instance. The bare bones that I just enumerated-walls, a ceiling, windows, doors, floors, roof-are considered basic, part of a builder’s sticker price. But the brand-name oversize refrigerator and ice-maker that you see, plus the sophisticated alarm system, the whirlpool bath, the super-plush carpeting, the brass knocker on the front door – all those and anything else are probably extra.

CONDOS – BUYING INTO THE FASTEST-GROWING SEGMENT OF THE RESIDENTIAL SAN DIEGO, CA REAL ESTATE MARKET

Condominiums, whether they are clusters of town homes, apartments, vacation homes or offices, are part of a different San Diego real estate ball game with rules you may not know about. They also constitute the fastest- growing segment of the American residential market.

In the coming years, over half of the residential ownership will be condominiums (common-wall residences), either apartments or town homes. Furthermore, I predict that condos will appreciate at a faster rate than single-family residences, because of the appeal of carefree living, combined with the fact that condos offer more for the money. After all, if you were to purchase a single-family residence and own, for instance, a game room, a park, a swimming pool and tennis courts, you would pay much more than if you purchased a condo and shared those amenities with other people.

WHAT DOES CONDO REALLY MEAN?
The best way to describe a condominium is to imagine your building as a pie in a pie dish. If there are ten condo units in the building, the pie would be cut into ten pieces. Each individual would own a single piece of the pie, and then all of you together own the dish in which the pie sits. When you purchase a condominium, you own a specific portion of a development, whether it is an apartment in a high-rise or low-rise building, a town home, a resort home or a hotel. Common areas – hallways, parks, lobbies, amenities such as golf courses, tennis courts, swimming pools and riding trails – are owned by everyone who lives there. Common areas are paid for and maintained through the condominium association, to which every owner belongs. You pay a monthly fee to the association for the maintenance of the common areas; maintenance includes keeping the hallways clean, the lawn and shrubbery mowed and clipped, and the swimming pools in working order. No one owns a specific portion of the common areas. Everyone owns an undivided share not only of the land the building is on and the facilities, but of the outside walls, the plumbing and wiring, and the parking lots as well. Usually you do not own your patio or your balcony – those areas are called limited common areas. The condo association owns them. However, only the individual owners of one particular unit have the use of a limited common area. Another limited common area can be a garage or parking space. You do not own it, but only you can use it.

You receive an actual deed to a piece of real estate when you buy a condo. In the case of an apartment, the deed would be for the walls that surround the space you are living in, plus an equal share, known as an undivided share, of the common areas. Thus, owning a condo is exactly like owning any other piece of real estate except for the common ownership element. You pay real estate tax on a condo just as you would on a single-family residence or vacant piece of property. You also enjoy all of the tax deductions available to single-family San Diego real estate owners.

Sale of your San Diego real estate

When selling San Diego real estate that is a personal residence, the seller can deduct up to $250,000 ($500,000 if married) of any financial gain (profit) for each spouse. This could be used only once every two years.

If a married couple’s home increases in value (approximately $500,000); all they have to do is simply sell and buy another residence to avoid any income tax liability.

This is a good way for you, as a homeowner, to eliminate income taxes, as long as you keep buying and selling a new residence, making sure not to make more than $250,000 each time if you are single ($500,000 if married and owned together).

The only way to deduct a loss on a personal residence is to turn that property into income producing real estate by renting it. Then any loss based on its sale is deductible because it is income producing property, not a personal residence. (check with your CPA)

TITLE BINDERS ON SAN DIEGO HOMES

As a buyer, I always ask for a title insurance policy binder. The binder answers the following questions on San Diego homes: 1. Are the taxes paid and up to date? 2. Have there been any claims against the property, such as tax liens, lawsuits against the individuals or anything else that would prevent me from obtaining “clear title” to the property? However, a seller should act first. My friend Tim for example, was thrown into a panic just before a closing because of a title problem. His buyer’s attorney said that the title binder, which had been ordered just a week before, stated that Tim owed Sears $4,200 on appliance purchases and that Sears had filed a lien against his property. Tim explained to the buyer that there was a dispute on some defective appliances. The bill was finally paid and Sears advised him over the phone that it had filed a “satisfaction of lien.” The red tape took three weeks for Tim to get Sears to give him this “satisfaction.” When he filed it in the courthouse, it removed the cloud from his title. If Tim had ordered a title binder himself, he could have sidestepped this embarrassing glitch in his sale. As a seller, order a see if anything has happened to your title since you bought your home. If there are some clouds on your title, it is better to know about them and clear them up now, rather than hold up your closing.

ENDORSEMENTS, EXCEPTIONS AND CLOUDS
All the items on a title policy that are listed under “Exceptions” are known as “clouds” on the title. To avoid a thunderstorm in your life, it is essential to deal with such matters in the policy. Go for maximum protection when buying title insurance by having your lawyer request from the title company what are known as specific endorsements. In some cases, an endorsement negates a restriction on the coverage mentioned elsewhere in the policy. Ask your attorney to get an endorsement that invalidates what are known as “Schedule B exceptions,” which involve liens on San Diego homes and similar problems. Another popular endorsement is known as the “inflation endorsement.” It increases your protection as the value of your property goes up and is usually tied to some government cost-of-living index. Ask for it.

Principal Residence San Diego, Ca homes

Principal residence San Diego, Ca homes that constitutes a homeowner’s personal residence receives special tax treatment. The term personal residence is generally understood to refer to the taxpayer’s primary personal residence, the dwelling in which a taxpayer lives and which the taxpayer occupies most of the time. A taxpayer may have only one principal residence at a time, and it may be

• single-family San Diego homes
• houseboats
• mobile homes
• motor homes
• trailers
• condominiums
• cooperative housing

If you live in one unit of a multiple dwelling, that unit will be considered your principal residence.Primary or Secondary Residence. The taxpayer’s primary residence is the place occupied more often than any other. All other residences are termed secondary residences. One secondary residence will receive favorable income tax treatment, but unlike a primary residence, a secondary residence does not qualify for universal exclusion treatment.

Land

The term residence includes not only the improvements but also the Land. However, vacant land cannot be considered a personal residence. When a principal residence is located on a large tract of land, the question arises as to just how much of the land is included with the principal residence. There is no clear-cut answer to this question, but the courts have made the determination based on the use and the intent of the taxpayer rather than on the amount of land involved.

Universal Exclusion for Gain on Sale of Principal Residence. A seller of any age who has owned and used the home as a principal residence for at least two of the five years before the sale can exclude from income up to $250,000 of gain ($500,000 for joint filers meeting conditions). In general, the exclusion can only be used once every two years. More specifically, the exclusion does not apply to a home sale if, within the two-year period ending on the sale date, there was another San Diego real estate sale by the taxpayer to which the exclusion applied.

Married couples filing jointly in the year of sale may exclude up to $500,000 of home-sale gain if either spouse owned the home for at least two of the five years before the sale. Both spouses must have used the home as a principal residence for at least two of the five years before the sale.

One spouse’s inability to use the exclusion because of the once-every-two- years rule won’t disqualify the other spouse from claiming the exclusion. However, the other spouse’s exclusion cannot exceed $250,000.

EXAMPLE: Barbara sells her principal residence in December 1999 at a $100,000 gain. She is single at that time, and qualifies for and claims the home sale exclusion. She marries Able in May 2000 and moves into the home that has been his principal residence for the 20 years of his bachelorhood. If Able sells the home the following July, up to $250,000 of his profit is tax-free.

The two-year occupancy need not be continuous. For example, an individual can occupy a property as a principal residence for 6 months and then rent out for a year but later moved back for an 18-month occupancy. If the total occupancy is 24 months during a five-year period, then the occupancy requirement will have been fully met.

HOW DO YOU SHOP FOR MODULAR SAN DIEGO HOMES?

Typically, a company has a display lot showing all the different options. The company also has a planning table, where you can move a miniature model bedroom from one side of the home to the other, or put the garage next to the kitchen, or change anything else. You put the house together with pieces like building blocks. You are playing house, for real. Then the house is built in the factory, brought to your lot, and assembled either on the basement that has been dug or on the pad that has been laid out.

The cost of grading the site and other preparation work may be partially included as part of a package for some modular San Diego homes. For the $77,450 home mentioned earlier, the site is staked out, the company scrapes and cuts the pad, a concrete block foundation is laid, and the home is put together with a walkway, front stoop and steps. The whole place is cleaned up after the installation is finished. The owner does have to pay for sidewalks, driveways and some additional outside work.

All the plumbing is put in modular San Diego homes before they arrive. The bathroom arrives with a sink, bathtub and toilet. The rooms are assembled at the factory with plumbing and electricity. Let us say your lot in a region near a modular home factory has been made ready and graded. Sewer hookups have been installed and electric poles erected. You can be living in your modular home within days after the parts leave the factory, or even less. After all, the “house” has been constructed already. The pieces simply have to be glued or hammered together. Once the modules are installed at your site, the electricity and plumbing are hooked up in a couple days.

Before deciding whether to custom-build a house or buy a modular one, you should look into panelized modular San Diego homes. These are hybrids that cost more than a total modular home but still about 15 percent less than a custom home. A panelized house is delivered in pieces. The walls, roof and floors are delivered to your lot by truck, after being built in the factory. They are then assembled at the site.

DON’T FALL INTO THESE FIXER-DOWNER TRAPS WHEN CONSIDERING SAN DIEGO, CA HOMES

The Infatuation Trap. Do you have doubts about the house? Don’t try to rationalize them out of your mind because the home is so charming you cannot resist it.

The $5,000 Roof Trap. Some people do not mind leaks or sparks coming out of the wall. If you are one who does, you must factor in the cost of these repairs. Perhaps you need to negotiate a lower purchase price.

The Mansion-in-a-Slum Trap. Let me state my warning on costs once again. Will the fixing-up be done by someone else? Prepare yourself with at least three estimates on each job that is going to be done. Add up the cost. Does your total investment after renovation equal more than the market value of similar San Diego, CA homes in the area? If so, you are overbuilding. This is not a good economic decision.

The Step-into-My-Bedroom Trap. One thing people fail to check when they purchase a home with rooms that have been added is the floor plan. When you come into the front door, what is the first thing you see? If you walk straight into your living room, with no hallway or foyer, you may want to consider another house. Some older San Diego, CA homes with rooms added on after the initial construction have poor traffic patterns. Imagine you have a guest arriving at your new abode. The front room is a sleeping porch. Is this what you want your guest to see? How are the bedrooms laid out? Are the children’s bedrooms right next to yours? Do you like this idea? Walk through the house as if it were a typical day. You are cooking dinner, your spouse is coming home, your children are bouncing in from school. Guests are coming. How does the traffic flow work? Will you have to add additional walls inside to change the flow? What will the walls cost?

The Beautiful-Fireplace Trap. Do not be dazzled by gimmicks. Are you buying a house because it has a gorgeous old fireplace and mantel? That is fine, as long as inspectors tell you the major elements-plumbing, heating, wiring, roof, and so on-are sound. But if the charming old wreck’s wiring has been jury-rigged, smoke could be coming out of the wires three months later. At that moment, the fireplace will be of small comfort.

The Investment Property Rule for San Diego, California real estate

In general, no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.

Note: San Diego, California real estate that is a personal residence is not held for productive use in a trade or business or for investment. Therefore, a person cannot have a tax-deferred exchange of his or her personal residence for business or investment property.

Exception -This subsection shall not apply to any exchange of:

1. stock in trade or other property held primarily for sale
2. stocks, bonds, or notes
3. other securities or evidences of indebtedness or interest
4. interests in a partnership
5. certificates of trust or beneficial interests
6. contractual rights

It is clear from subsection 1. that inventory (stock in trade or property held for sale) cannot be exchanged. Therefore, the question is “What is inventory, and what is investment?” This question is a constant bone of contention between taxpayers and the IRS. Taxpayers would like to call all of their property investments. The IRS has a vested interest in classifying property as inventory. In some cases, there is no clear-cut answer. If a person makes a considerable portion of his or her income from buying and selling property, the IRS would likely consider that person a dealer and property exchanged as being inventory.

The answer to what is investment and what is inventory is determined by the taxpayer’s intent and actions. For example, collecting rents and taking depreciation on San Diego real estate over two to three years show the intent and actions of investing. On the other hand, if a taxpayer built a fourplex and the day after it was finished he exchanged the fourplex, the IRS and the courts would consider it inventory. An asset built is considered inventory when it has not been held for two to three years to show the intent of investing.

EXAMPLE: Ms. Able and Mr. Flake have buildings that are held for investment. Mr. Flake knows that Mr. Bucks would like to acquire Ms. Able’s property. So, Mr. Flake and Ms. Able exchange, and Mr. Flake then sells Ms. Able’s property to Mr. Bucks. The results: Ms. Able’s exchange is valid; Mr. Flake’s exchange does not qualify, because his intent and actions clearly show that the property was not an investment but was purchased for resale (inventory).

Note in the example above that one person in a transaction can have a qualified exchange and the other person be disallowed the exchange.

STRATEGIES FOR NEGOTIATING SAN DIEGO HOMES FOR SALE IN A SOFT MARKET

How long the bargaining continues depends on the market. In a normal market, the bargaining can last anywhere from a week to three weeks. A soft market presents a challenge. The buyer has more time for bargaining. You, of course, want to shorten the time because there are too many other San Diego homes for sale. However, you also must be flexible. It does not make sense to kill a deal because of a delay in the closing. If a buyer needs 90 days rather than 30 to close, check to see how fast San Diego homes have been selling. Why should it make a difference to wait an extra 60 days, when you have an actual purchaser in an area where houses are languishing, unsold, for 5 to 7 months?

There are two creative negotiating techniques that will sell your house even in the worst market imaginable. Number 1 is the lease-with-option-to-purchase offer. If you must unload a residence in a bad market, and you do not have the time or the inclination to lease it until the market bounces back, propose a lease with option to purchase to prospects. It is one of the best “win-win” situations that all too few people employ. Place an ad in the paper seeking a young couple with great potential who cannot afford a down payment. You lease your house to them for a rental fee slightly higher than normal, over a 36-month (3-year) period. For instance, if your home is in a $1000-a-month rental district, charge them an extra $100. The extra $100 over 3 years equals $3,600. That money goes toward the down payment. If the down payment is $10,000, that means the young couple owes only $6,400 at the end of the 3 years to make your house their own. Meanwhile, you have gotten the house off the market, and you have put people into it who will take much better care of it than normal tenants. They start out with the pride of ownership. Number 2 is equity participation, or shared appreciation, as it is sometimes called. In this scenario, you place a classified ad stating, “House for Sale. I will make your down payment, if you pick up the monthly payments.” In essence, your buyers take over the mortgage. They sign a note over to you for the down payment. No cash comes out of your pocket. When the house is sold, in 3 to 5 years, you split the profits with your equity participation “partners.” This gives you real gains on the sale. Once again, the people caring for your residence have pride of ownership. Incidentally, if you have taken the trouble to make sure your “partners” have a good credit standing, you can use the note they signed at a bank as security on a loan from another bank, for a home you want to buy, or for cash you need to start a business.

CONSUMER-PROTECTED PURCHASES OF SAN DIEGO CONDOS

Consumer protection laws are stronger for buyers of San Diego condos than they are for single-family residents. Most states have very strict laws governing the sale of condos. A full statement must be presented to you, the buyer, before the closing. It lists rules and regulations and describes the common areas. If you have questions about the financial stability of a condo community, it is not difficult to conduct your own investigation. All documents must be filed with the state government. These documents give you the name of the financial institutions involved in the condo. A few telephone calls will tell you whether or not the condo is in good fiscal health.

In particular, look in condo documents for a contingency fund for emergency expenses and a reserve fund for future improvements. A portion of your maintenance fee should be contributing to these funds. When you read the financial statement and when you interview the various owners, ask if there have been any recent special assessments and what they have been. You may also want to ask the board and the management company if any major repairs are being considered, and how much they will cost. Is there money being held in reserve for them? How much will they assess each owner for this new expense?

Some San Diego condos have been used as tax shelters, as investment opportunities for wealthy foreigners or as corporate alternatives to hotel suites. Before buying in a new condo building, find out how many units are being purchased by investors. Why? Owners are the best neighbors. If the building has more than 50 percent investor ownership, that means half your neighbors will not be owners. Investors are not as caring as owners. Finally, make sure before closing, if you are buying a pre-owned condo, that you are not assuming a seller’s unpaid assessment. That is like renting a hotel room and inheriting the previous occupant’s towels.

Community property for San Diego, California real estate

COMMUNITY PROPERTY refers to all the property acquired by a husband and wife during their marriage. California is a community property state, which means that any property acquired during a marriage is shared equally. This practice is derived from Spanish law and became incorporated into our legal system when California was a part of Mexico. Both husband and wife must sign all transfer documents to convey community real property. If only one spouse signs a transfer document, the “injured” spouse could void the sale within a one-year period. Salespeople must make certain that both husband and wife sign all real estate documents such as listings, deposit receipts and escrow instructions if the property being transferred is community property.

The right to manage the San Diego, California real estate is shared by both the husband and wife. Each can will his or her respective half to whomever they wish. If there is no will, the half belonging to the deceased would go to the surviving spouse. If willed to an heir, the heir and the remaining spouse would then be tenants in common.

Community property (husband and wife) vesting has equal interest.

Debts can become a liability if they are incurred after marriage. Debts incurred by either spouse before marriage cannot be converted to the debts of the community property. The law also allows some community property to be transferred without going through probate. Questions about debts or probate should be directed to an attorney, as this issue is quite complex.

Any property obtained by either the husband or wife before marriage may remain as separate property. Both may inherit or receive gifts of property, which can remain as separate property. However, any proceeds from the property held separately, such as rents or profit, cannot be commingled with community property, as this would cause them to become community property.

EQUITY LOANS FOR VACATION SAN DIEGO HOMES

An equity loan, as the name implies, is a loan for which you use the equity in your home as collateral. You can make excellent use of your money by taking out an equity loan to purchase a California vacation home. You will get the same rates on an equity loan as you will on a fresh mortgage, or even lower rates. An equity loan, however, is a much quicker loan.

Beware, though, of equity loans with adjustable rates. In some cases, a bank gets the right to adjust the rate quarterly. You could wind up paying 11 percent very quickly on a loan that you believed carried a 6 percent rate. Go to your own bank first, then compare its rates with those of other lenders.

CREATIVE FINANCING
There are other ways to finance San Diego homes that probably have never entered your mind. When you want a personally tailored suit or dress, you might start at a department store, then discover you have better luck at a specialized clothing boutique. The same holds true for money. In recent years, there has been a revolution in the finance industry. Experts have developed creative financing for individual clients. Now, when you cannot find a mortgage tailored to your needs at a bank, you go to a reputable mortgage broker. And equity participation is yet another kind of creative financing that involves neither banks nor mortgage brokers.

TASKS DONE THE DAY BEFORE CLOSING ON SAN DIEGO HOMES

If you request it, one business day before settlement, the person conducting the settlement must allow you the opportunity to see the HUD- designed Uniform Settlement Statement. This tells you precisely how much each closing charge will cost.

The day before the closing: verify the provisions of your contract by checking one final time that all “subject to” issues have been cleared up and that such things as surveys have been done. (Your earlier phone calls should have taken care of these things.)

Have you ever planned a party and then realized the day before that you forgot to open your freezer to make sure the steaks are there? The most common closing item people forget is to inspect for one last time the home they are buying. Your last-minute inspection of the property should cover its condition and any personal property you were led to believe you were getting with the San Diego, California home. Your contract should have stated that the home is to be turned over to you broom-clean. The debris of moving, like trash and paper, is not to be left inside. Cleaning could cost you time and money. Besides, you do not want to bring your clean things into a dirty place. The bathroom, the kitchen, the oven, the refrigerator and other appliances should all be clean, and that fact should be stated in the contract. Did you check the model numbers on the appliances in your newly purchased home, to make sure they are the ones you thought you were getting, rather than smaller or older ones substituted in the final hours before you moved in? If the carpet is to be removed, make sure the floors have no cracks or major problems. Try all light switches. If it is winter, turn off the heat and turn on the air-conditioning. Summer? Vice versa. If personal property is included, you should either have the lock changed once you get the key at the closing or make a list, to be signed by the seller, of items remaining, to be certain no one moves anything out.

QUESTIONS ON BUYING SECOND SAN DIEGO, CALIFORNIA HOMES

• How much did you spend last year for recreation lodging?
• Have you multiplied this amount by 4 percent inflation over 10 years to define your 10-year vacation home kitty?
• Have you calculated how much you can afford to pay for a mortgage on a second home?
• Are you buying a vacation property for enjoyment, not for investment?
• Have you “test-driven” your vacation locale by renting San Diego, California homes there before buying?
• Have you asked if the developer of a resort you like is offering an inexpensive “try-out” vacation to prospective buyers?
• Would you like to retire to this place eventually?
• Have you inspected your vacation home choice as carefully as you would inspect a primary residence?
• Are you shopping in the off season to find better deals?
• Have you asked at least five owners in the same resort area if they are happy with their choice?
• Have you given yourself a “cooling-or’ period after hearing a sales pitch, before you sign any papers?
• Did you get all the details about renting out your second home when you are not using it?
• Have you checked the developer’s credentials with the local resort association, Better Business Bureau and Association of Resort and Residential Developers?
• Would it make better sense to buy a time share rather than a vacation home?

QUESTIONS FOR RESORT MANAGEMENT COMPANIES

• Can you provide references from at least three current clients before I sign a contract for you to manage my vacation home?
• How do you find customers for your rental units?
• Can I see the rental records for the past 3 years for the unit I expect to purchase?
• May I have the names and phone numbers of clients who have used your service for the past 3 years?
• What is your annual management fee?
• What dollar amount or percentage of each rental fee do you take in each season?
• Does this cover daily, semiweekly or weekly linen changes and maid service? If so, which?
• If the answer to the above question is no, what is the charge for these services?
• How much of a reduction in the fee do I get if I refer a rental customer to you?
• Is rental income distributed to owners via a pool or unit-by-unit?
• How do you decide which unit to rent first?
• Will I get a preferred place in the rental pool if I add such items as new furniture or new kitchen appliances to my property?
• If you rent units on the basis of a rating system, who does the rating?
• If there is such a rating system, how high a position would my unit hold right now?
• Can I have a list of your charges for minor maintenance, such as fixing leaky faucets and changing light bulbs?

NEW VERSUS RESALE VACATION SAN DIEGO HOMES

In vacation areas, the rules of purchasing brand-new San Diego homes versus re-sales are about the same as for primary residences. However, if the market is soft in a vacation area, you will find better bargains in re-sales than you might in a residential home area. Train yourself to notice “For Sale” signs. Look for abandoned places. You will be amazed at the bargains on homes in the 5 to 10 year age group. This was certainly true in the Southwest in 1986. When the oil industry dropped, prices for vacation properties fell 20 to 50 percent.

If a developer in a planned resort is having problems, or a bank has taken over a resort, you might be in a strong position to buy a newly built home or condo at a reduced price. In this scenario, do business directly with the developer or the bank. Banks do not want San Diego homes so they are very motivated sellers. Even in a foreclosure or distress sale, you should be in love with the place as a vacation home, not as an investment.

Vacation home shoppers run into trouble when they start believing the honey-coated promises made by salespeople for planned resorts not yet built or still under construction. The typical horror story usually takes place in an out-of-the-way location, one that is not near major destination resort areas. A developer buys the land very cheaply, intending to create a self-contained resort. Hungry sales agents assure you that the location soon will rival other popular locations. Slick brochures show the place in full flower, with fifty-year-old trees, a hubbub of activity around the swimming pool, homes full of luxurious interiors. A handful of people buy, on the basis of these sales pitches, but they are not enough to keep the developer from going bankrupt. The bank that ends up with the half-finished resort does not know how to run it, but does know how to collect monthly mortgage payments. The unlucky buyers end up with San Diego homes in the middle of nowhere, with nothing to do. Unless you know the developer, and it is a major company like Westin Hotels or Marriott, be very cautious. It is always better to buy a resale. If you are dealing with a major developer backed by a huge corporation and a long track record, you could end up getting a slightly better deal buying at predevelopment prices.

An unfortunate part of the vacation property business is the hard sell. This is true of good resorts as well as “horror stories.” You become so caught up in the promotional selling procedure that you forget why you are there. Once you have heard a sales pitch, walk away. Do not make a decision until you sleep on it for at least four or five nights. My friends in the industry will be upset with that advice, but it is the only way to prevent poor decisions. Just as the detached single-family San Diego homes is the first choice for a primary residence, detached single-family cottages are number one on the vacation home hit parade. However, condos and town homes are coming on strong.

Attachments for San Diego, Ca real estate (court-seized property)

ATTACHMENT (LIEN) is a process of the law that creates a lien. It gives custody of property to the courts to assure payment of a pending lawsuit. This is to assure that there will be enough property to satisfy the judgment should the plaintiff prevail. The PLAINTIFF is the person filing a court action to obtain an attachment lien. The DEFENDANT is the person who is being sued. During an unlawful detainer action for collection of past due rents, for instance, it may be advantageous for a plaintiff to obtain an attachment against the defendant. This type of lien is good for three years, and is extended only if the plaintiff wins the court case. The important thing to remember about an attachment is that it does exist, and can be a lien on San Diego, Ca homes.

Lis pendens “lawsuit pending”

LIS PENDENS is the recording of a notice that a lawsuit is pending concerning a particular property. Attorneys often file a lis pendens before a court date is set in order to stop the transfer of the property. A lis pendens places a cloud on the title, so this type of action should not be taken lightly. The property is not marketable until the lis pendens is removed.

A lis pendens is notice of a pending lawsuit that affects title (clouds title) and remains on the public record until judgment is rendered or suit is dismissed.

“HOT” PROSPECTS, “COLD” BUYERS OF SAN DIEGO HOMES

Listen to the buyer. At some point, you will hear a phrase that signals that your buyer is ready to stand firm. The phrase is: “We can’t afford any more than that.” Now you know that the buyer has put pride aside and is at his limit. At that point, instead of saying, “Well, if you can’t afford my house, you’d better buy one for less money,” thus insulting the buyer even further, the best thing to say is, “Let’s see if we can work out a deal that will make this house affordable for you.” Then it is time to talk about down payments, seller financing, notes and additional inducements that make San Diego homes more affordable.

Angela, a friend with a problem along these lines said – “I have a buyer for my home. The price of the house is $465,000. There is a $50,000 mortgage on the house and the buyer has $50,000 to give me toward the down payment, leaving him $365,000 short. The buyer finally said he could not afford the house,” she said. “What do I do next?” After determining that Angela did not need the full $415,000 right away, I suggested that she offer to accept the $50,000 toward the down payment. Then, after the buyer received financing, she could have him sign a note for the balance, either payable on a monthly basis or due within 3 to 5 years, with interest rates charged at the current level. Angela proposed this deal. The buyer was so grateful to her for letting him move into the house for $50,000 down that he agreed to pay her an extra $5,000 over a 10-year period. It turned out he had a trust-fund inheritance coming to him in 7 years.

On another deal, however, you may hear key phrases that indicate your prospect has become a cold buyer. The potential buyer may say, “Now that we have thought this over, this house will not work for us. We don’t like it because it does not have enough room. We don’t like the neighborhood. We don’t like the layout,” and so on. Clearly, this buyer no longer has an emotional feeling for your California home. Say thank you and good-bye.

LIMITS ON REMODELING SAN DIEGO CONDOS

Let us say you purchase a lovely two-story, three-bedroom town home. Since you do not need the extra bedroom on the first floor, you want to knock out the wall separating it from the living room, creating a marvelously spacious layout. That is okay, as long as you play by the rules. All San Diego condos have restrictive covenants that regulate how much you can do. Universally, you need permission to move any supporting walls. Non-supporting walls in a condo can usually be changed. What about turning the master bedroom windows and door into one sweeping floor-to-ceiling sliding glass door leading to the balcony? Check first with the association. You cannot change windows unless you receive permission. What if you want to enclose the balcony in Plexi-glass or screen it into a porch? Almost everywhere, you must obtain approval for changes in those “limited common areas.” Most places will not let you cut down trees without permission.

Each condo development might have additional restrictions. They are based on the lifestyle that the developer initially perceives is best for that particular market. I know of one cluster of town homes where no campers, trailers or buses are allowed in owner driveways. In another, you cannot put in a pool. Elsewhere, only in-ground pools may be permitted in backyards, or you may have to use only certain materials in above-ground pools. Some fancy condo developments require you to put your garbage out for collection only in a certain location. One condo association forced a homeowner to remove a satellite-dish antenna on the grounds that it did not harmonize with the landscaping.

My favorite condo covenant tale involves a suburban development where the town house exteriors could not be anything but wood, stone or brick. An owner preferred vinyl siding, but his request was denied. Guess what the owner did in protest? He painted the entire wooden exterior of the house a deep, eye-catching purple! No condo owner wants to get embroiled in such disputes, so read those covenants carefully before you buy, should you have remodeling or flag-waving in mind for the future.

SAN DIEGO CONDOS THAT HAVE BEEN CONVERTED: EQUITY AT A DISCOUNT

In some areas San Diego condos and co-op c buildings exist side by side. Many erstwhile rental buildings have in recent years been converted to condos, as well as to co-ops.

A developer converts a rental building to condo status by improving the facilities and then applying to state and local authorities for the right to sell the apartments. The application papers include a legal description of each unit. These units are then sold after an extensive, and expensive, registration process designed to protect you, the buyer. The procedure requires the developer to have financial depth and responsibility. A developer must post certain performance bonds as insurance that the company will follow through on its plans. In addition, a converter usually gives the current renters the right of first refusal. They can choose to purchase the unit in which they live, at a price that is less than an outsider would pay; this is known as an insider discount.

Some San Diego condos were converted under a non-eviction plan. Those who prefer not to buy continue paying rent. However, it is considered a bit risky for an outsider to buy an apartment in a building converted under a non-eviction plan. Remaining renters are likely to battle to keep rents low, voting against improvements that will add to the building’s worth. Typically, there are conversions in which tenants not covered by rent control can be evicted if they do not want to buy their apartments.