A 1031 Exchange can be a great way to invest in real estate and defer taxes

A 1031 Exchange is the process of buying and selling investment real estate, enabling a deferment of taxes at the same time.  A 1031 exchange involves the selling of a qualified property and the buying of a qualified property yet the transactions are seen as an exchange instead of a traditional sale and purchase. What makes the 1031 exchange different, and often complicated, is that in order for properties to qualify they both need to be “Like Kind”.  They need to be business or investment properties and the new property must be equal or greater than the property being exchanged in terms of debt. The process of selling and buying property during a 1031 exchange has requirements.  When a property is being sold the owner has a 45 day period to identify a new property.  The 45 day period cannot be extended and often more than one property is identified. The next time period is the “Exchange” time period.  After the closing of the selling property the exchanger has 180 days to close on the new property.  Again, according to IRS rules, the time period is firm and cannot be extended. The 1031 exchange can provide a great way for real estate investors to sell property and buy new property without having to immediately pay taxes on their capital gains.  For more information on the rules of a 1031 exchange contact one of our Four Seasons agents for an attorney referral and to find your next property.

The government is putting pressure to decrease foreclosures

With unemployment figures on the rise, the number of foreclosures is expected to keep rising over the coming months and the federal government is trying to do something about it.  President Obama created legislation in February that was expected to help those facing foreclosure, yet the programs set in place are reported to have been enforced sluggishly by many of the lending institutions.  The pressure is starting this week. The Federal Government is saying “Help these people out!” to the 71 financing companies that are participating in the program.  Teams of three people are being sent  to monitor the eight largest companies, and these teams will be requested to submit reports twice a day on their progress. Another part of the problem has been incomplete paperwork on behalf of the borrowers.  Those that qualify for assistance need to complete their paperwork to move forward on getting assistance.  Under the mortgage assistance plan borrowers who qualify can get 2% rates for up to five years, quite a healthy boost for homeowners facing foreclosure.  Borrowers will be  communicated with to help them complete their part. We've seen a decrease in the number of foreclosures coming to the marketplace here in Sevier County and Gatlinburg which is creating a stabilization of pricing. If this trend continues, we have not reason to doubt it will, with foreclosures trickling on the market and not flooding it, prices may start to increase as early as Spring 2010. For more information on the government’s plan to enforce help for those facing foreclosure, click here.

Be careful what you spend these days when you are thinking about remodeling your house.  Home values are down and so are the recovered costs of remodeling.  In 2005, at the peak of the real estate market, approximately 87% of the cost of a remodel would be recouped in the sale of a home.  Today’s real estate market is recovering approximately 64% of the remodel costs.  Everybody is watching their wallets, so if you are considering a remodel think carefully. While remodel costs are down it is important to remember that home values are down too.  Unless you want to stay in your home for a long time you cannot count on recovering costs of a major remodel. The most cost effective remodel items today are: Roofing, siding, windows, and doors.  Similarly, redoing a basement or attic is recommended instead of adding an addition.  These items are recommended because a seller will recoup a greater percentage of the cost when they sell their home. For more information on current cost versus value have one our of Four Seasons agents view your home.

Foreclosures are expected to subside in the coming year

The latest data released by UFA L.L.C., a firm located in Ann Arbor Michigan that researches mortgage activity, states that foreclosures are expected to decrease in the next year.  After four years on the rise there is no doubt that it will be nice to see foreclosures start to subside. Improvements in the foreclosure arena are seen linked to tighter lending practices, home prices stabilizing, and an improving economy.  The one element working against foreclosures is the increasing unemployment which will leave some without the ability to make their mortgage payments. The onslaught of no-doc loans and inflated home prices led to four years of increasing foreclosures.  The decline of real estate values is largely attributed to an elevated rate of foreclosures.  A decrease in foreclosures will be a welcome sign for a real estate market that has seen better times. To view all the properties listed for sale in the Great Smokies click here.

The rent-to-own scenario can work out for both the buyer and the seller

The real estate market has led to some creative financing techniques, one of which is a rent to own scenario.  I've noticed that here in Sevier county we're seeing more retn-to-own scenarios proposed to sellers and to buyers who may have trouble getting a loan in todays' tough lender marekt. While rent-to-own has been around for a long time, today it is helping many nervous sellers get a deal done.  In essence the rent-to-own scenario is seller financing.  It is important to work the specifics out in a rent-to-own situation.  Items that need to be addressed are:

• The percentage of the rent that goes toward the down payment
• Which party pays for major repairs to the home
• Which party takes care of the basic upkeep of the property
• What happens to the down payment money if the buyer changes his mind

A typical rent-to-own scenario takes a portion of each months rent to put toward a down payment on the home.  As soon as the down payment money is collected and reached its goal then the potential buyer can qualify for a mortgage.  The seller has to cover his bases so that he is not out if the buyer changes his mind while at the same time a buyer has to look out for his best interest as well.  If planned accurately and followed through diligently the rent-to-own scenario can work out well for everyone.

The first wildflower hike I took this year was about 3 weeks ago on Porter’s Creek Trail

. At the time, the ground was covered in what appeared to be a carpet of tiny white flowers and so many trilliums that it was impossible to count. It was still a bit cool then and not many leaves had formed yet.

This past weekend I decided to hike Porter’s Creek Trail again to see if anything new had grown since my last trek. To my delight several different plants, including a few spectacular orchids, were in bloom.

I can’t wait until the second week of May so I can head out and try to find a pink Ladyslipper. Wish me luck

I was asked a question from a customer recently that I had not considered, ‘can I still get a loan?’ I say I had not considered it because I had taken it for granted that everyone knew that loans were still readily available to customers who have good credit and a downpayment (around 5% for these folks).

These are rational people who have heard about a credit crunch and believed, as I now think many do, that home loans are difficult to acquire. After our conversation they promptly bought a house with no lender issues what-so-ever.

Reminds me of the old saying about assuming (haha).

Early Sunday morning we had our first snow in Gatlinburg. It started out more like a rain/snow mix but then later became that cold white stuff that we look forward to. Sunday morning I woke to find Mt. LeConte covered in beautiful white snow with the mountains below still showing remnants of Fall color (we had an amazing Fall this year, with brilliant color). My deck and the trees surrounding it were white too. A frosty reminder that winter in the Great Smoky Mountains is almost here.

It’s an amazing time to be in the real estate business. I know everyone bemoans the fact that sales are down but I just can’t help but be in awe of the deals some of our investors are getting. One, who shall remain nameless, says ‘It’s like a garage sale for the wealthy.’ It may sound callous but that attitude is pervasive with many of our cash buyers right now and even though they’re getting deals they are also helping distressed sellers and our local economy.

With the coming and going of Shades of the Past and the Grand Rod Run you always know it’s Fall around here. I have to admit I do like seeing all of those old cars and trucks driving around. I also really like the new trend (new to me anyway) of replacing the old engines and suspensions with modern systems. It’s like having a modern car underneath all that cool design.

The weather has finally reached that state of perfection. With upper 70′s during the day, upper 50′s to low 60′s at night and super low humidity you just can’t help but to go hiking or bike riding. We now have the perfect days to view property too. No wonder so many people come to the Great Smoky Mountains in the Fall. The Gatlinburg real estate market owes practically all it’s success to the mountains and climate that surround it.

So, if you’re planning to come to Gatlinburg, Pigeon Forge or just visiting the Great Smoky Mountains this Fall make sure you take a minute to pay homage to the reason this area is so popular; great temperate weather, beautiful scenery, and friendly people. Have a great Fall season.