Energy Efficient Tip of the Month: Window Coverings

Looking for an affordable way to help keep your home more comfortable and reduce energy use all year long? Consider insulated window coverings.

Installing new energy-efficient windows throughout your house is expensive. Insulated window coverings offer a lower-cost alternative that can help reduce energy use. They are available in a variety of different styles including curtains and shades, and you can find them in designs and colors to match almost any décor.

In the summer, insulated window coverings help your air conditioning work more efficiently by blocking the sun. In the winter, they help your home retain heat so your furnace doesn’t cycle on as frequently.

They’re easier to install than new windows, help reduce drafts from leaky windows and can help lower your energy bill every month.

American Home Shield is providing the information for general guidance only. Due to the general nature of the property maintenance and improvement advice in this material, neither American Home Shield Corporation, nor its licensed subsidiaries assumes any responsibility for any loss or damage which may be suffered by the use of this information.

-from AHS August Newsletter Inside & Out

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13 Things to Do Before and During a Heat Wave – From Home Advisor Newsletter

1.  Schedule A/C service before the temps spike to ensure your A/C is working properly.
2.  Figure out a game plan on where you’re going to spend your time if your A/C goes out.
3.  Assemble a first aid kit and prepare for power outages by stocking up on candles, matches,
flashlights, and batteries.
4.  Stay tuned to weather forecasts.
5.  Learn how to recognize and treat heat-related injuries such as heat exhaustion and heat stroke.
6.  Ensure your cell phone is fully charged.
7.  Make sure your pets have adequate shade

During the Heat Wave

8.  Stay hydrated. Drink water even if you’re not thirsty.
9.  Remain indoors during the hottest part of the day. If you must go outdoors be sure to take
frequent breaks.
10.  Avoid turning your A/C down to its lowest temperatures.
11.  Adjust your watering schedule to ensure you’re adequately watering your landscaping.
12.  Check on any neighbors that are elderly, overweight, or ill.
13.  Contact an A/C service provider if you suspect your A/C isn’t functioning properly, but don’t be
surprised if they’re booked out a few weeks at this point.

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Score A Touchdown With These Home Tailgating Tips

If you love to watch football, but would rather view the big game from the comfort of your home, you’re not alone. Here are some tips to transform your home into your own football stadium— no tickets required.

Simple Sides.Simple foods like chips, fruit, baked beans or deviled eggs can make for delicious and easy additions to meat that’s fresh off the grill. Grab a few bags of chips for an out-of-the-bag snack or chop up some carrots and celery for a healthy alternative. Use a cupcake pan to house condiments, dips or small candies.

Decorations. Make your home your team’s home base with fun decorations that amplify the spirit of the game. Get the rivalry going by wearing your team’s shirt and serving food on paper plates stamped with team logos.

Games. Simple games like horseshoes or beanbag toss are great for taking a break from watching the game, and they’re also fun for kids! Create a beanbag toss by cutting holes in plywood, and a horseshoes game by placing stakes in the yard.

Clean up. Don’t wait until after the game is over to clean up! Ensure that dirty plates find their way into the trash by hanging multiple trash bags around your home and handing out napkins when necessary. Providing easy ways for your guests to clean up after themselves will allow you to avoid a pile-up of garbage when the game is over.

Use these simple tips to get the home field advantage when it comes to tailgating. Enjoy the game and its festivities, without ever leaving your home!

from American Home Shield September Newsletter Inside & Out

American Home Shield is providing the information for general guidance only. Due to the general nature of the property maintenance and improvement advice in this material, neither American Home Shield Corporation, nor its licensed subsidiaries assumes any responsibility for any loss or damage which may be suffered by the use of this information.

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De-Cluttering 101

If you’ve dug through your supply closet for more than five minutes in search of one item, it might be time to re-organize and clear out the clutter. Try these simple tips for getting rid of the clutter and making more room for yourself!

Start Small, Think Big Pick one space like a countertop or a messy drawer to tackle first and set aside just ten minutes to work. When you choose an area with strict parameters, you won’t feel quite so overwhelmed by the clutter and you’ll accomplish a lot more in the long run.

Let it Go Are you keeping anything because you might need it someday? Chances are, some of these items may never be used enough to warrant taking up space. As you clean up around your home, start a “might use” pile for anything you don’t often use and dedicate time to deciding if you really need each one—then toss or donate what you don’t want.

Invest in Organization There are lots of great products that make storage a snap. For a messy closet, consider a vertical shelf unit. A fabric model will hang from your closet rod, is inexpensive and can exponentially increase your storage space. Too many shoes? Try an under-the-bed bag with dividers for each pair or an over-the-door unit for easy access and visibility, plus you’ll never need to dig for that second shoe again.

Put Your Items to Good Use Once you’ve cleared out your clutter, don’t just toss it—donate it! If old items like clothes, unused appliances or office supplies are in good condition, take them to your local donation drop-off or consignment shop. Many of these stores will be happy to take your donations or compensate you for your goods. Best of all, donating items not only helps local organizations, it could help you earn tax deductions next year!

When you set aside a little time and a few dollars to the cause, you can start clearing out your home for a fresher look and a cleaner feel, just in time for spring!

from American Home Shield July Inside & Out Newsletter

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Interest Rates Hover at Record Lows

Concerns about the strength of the economy have recently taken Treasury yields to new lows. This, in turn, is causing fixed-rate mortgages to remain low.

Homeowners are taking advantage of the low interest rates. The refinance index recently reached a three-year high. Also, the Federal Housing Administration (FHA) projects to receive 630,000 refinance applications for fiscal year 2012, a 23% increase from the previous 12 months.

The vast majority of refinancing is going into fixed-rate mortgages. The adjustable-rate share of mortgage activity recently fell to 4.1% of all mortgage applications.

At the same time, home prices are increasing. Zillow reported a second-quarter increase nationwide for the first time since 2007. Standard & Poor’s/Case-Shiller housing price index is also reporting monthly price increases.

When thinking about refinancing, there are some important things to consider. For instance, if refinancing to a lower rate will save $125 a month, you, or your client, should then factor in the tax rate. If the Federal tax rate is in the 25% tax bracket, the actual savings will be $94 a month.*

Another consideration is how long it will take to recover the refinancing costs. If the costs are $4,000, it will take 43 months ($4,000 divided by $94) to recoup those costs. Then, refinancing is a good option even for those who might move in five years. If, however, the refinancing costs are $6,000, it will take 64 months ($6,000 divided by $94) to recover the costs, which, if planning to move in five years, would not be a good option.

* For example, a typical FHA loan of $300,000 has 360 monthly payments of $1,432.25; 4.000% interest rate, 4.117% APR. The monthly payment does not include taxes and insurance premiums.

from Prospect Mortgage Industry Insider

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Can I Exchange My Vacation Home?

Rising gas prices have caused many vacation property owners to reevaluate their “get away” options. They still want a cottage on a lake, but the lake needs to be closer to home. With proper planning, a tax-deferred exchange may help them realize that goal.

How much personal use is allowed?

To qualify for tax-deferred treatment under §1031, both the relinquished and replacement properties must be held for investment purposes or for use in the taxpayer’s trade or business. Property held for personal use does not qualify.

So what about vacation homes? Personal use is usually why they were acquired, but how much personal use is too much? Hopefully the properties will appreciate in value. Is that sufficient to demonstrate the necessary investment intent? Or does the property have to be rented out to be considered an investment?

Appreciation ≠ Investment

The Taxpayers in one case faced this exact dilemma.1 They had lake property that was used 2 or 3 weekends in the summer, with maintenance visits in the off season. They exchanged for property closer to home and used it even more often. The Court disallowed the exchange, finding that the property was held primarily for personal use, not for investment.

The mere hope or expectation of appreciation was not sufficient to establish investment intent. The Taxpayers never attempted to rent either property, never claimed deductions for maintenance or depreciation and deducted the interest as home mortgage interest. Also, their failure to properly maintain the relinquished property was inconsistent with an investment intent.

The IRS Safe Harbor: Revenue Procedure 2008-16

In 2007 the Treasury Inspector General for Tax Administration issued a report recommending additional oversight of like-kind exchanges, specifically stating that: “…the IRS regulations for like-kind exchanges of second and vacation homes are complex and may be unclear to taxpayers…and little exists with respect to a published position by the IRS on like-kind exchanges involving such properties.”2

In response the IRS issued Revenue Procedure 2008-16, which provides a safe harbor. If the procedures are followed, the IRS will not challenge whether a property qualifies as being held for productive use in a trade or business or for investment. An exchange may fall outside the safe harbor and still qualify, but expect more scrutiny from the IRS.

Qualifying Properties

Both the Relinquished and Replacement Properties must have been owned by the Taxpayer for at least 24 months immediately before and after the exchange. In each of the two 12-month periods immediately before and after the exchange the Properties must be rented at a fair market value for 14 days or more. The Taxpayer’s personal use cannot exceed the greater of 14 days or 10% of the days during each 12-month period that the property was rented at a fair market value.

Personal Use

“Personal Use” is not limited just to use by the Taxpayer. It also includes use by:

• the Taxpayer’s family members;
• any other person with an interest in the unit, or their families;
• anyone using the unit under an arrangement which enables the Taxpayer to use some other dwelling unit (even if no rent is charged); or
• anyone, if the property is rented for less than fair market value rent.

Meeting the Safe Harbor

First, you must meet the ownership requirements mentioned above. You should also limit personal use of the property to the greater of 14 days per year or 10% of the rental period. If you use the property any additional days for repairs and maintenance, be ready to show proof of the actual work done

The property should be rented to an unrelated party for at least 14 days per year. However, there is no need to rent the property for more than 14 days. You may also rent the property to a related party if they use it as their principal residence and pay fair market value rent.

It is also important to treat the property as an investment. Make sure that the property is properly maintained. Deduct expenses for maintenance, utilities, insurance and depreciation. If you have a mortgage on the property make sure that it is structured as an investment loan, not as a loan for a primary residence.

Vacation Homes Outside the United States

What if you own a vacation property located outside the United States? In some cases you can still benefit from a 1031 exchange. Real estate located outside the United States is not like-kind to real estate in the 50 states, even if it is located in an affiliated commonwealth or territory, such as Puerto Rico.3 However, you can exchange “foreign for foreign”, (e.g. Belize for Bermuda) as long as the other requirements are met.

A tax-deferred exchange is one of the few wealth building tools available to virtually any investor. Taxpayers should consider the benefits of a tax-deferred exchange whenever they plan to sell property that is not their principal residence.

from First American Exchange Company –

The Exchange Update

A Newsletter For 1031 Tax-Deferred Exchanges

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Tax Freedom Day Arrives on April 17th, 2012

Tax Freedom Day® 2012 arrives on April 17 this year, four days later than last year due to higher federal income and corporate tax collections. That means Americans will work 107 days into the year, from January 1 to April 17, to earn enough money to pay this year’s combined 29.2% federal, state, and local tax bill.

If the federal government raised taxes enough to close the budget deficit—an additional $1.014 trillion—Tax Freedom Day would come on May 14 instead of April 17. That’s an additional 27 days of government spending paid for by borrowing. This year’s federal budget deficit remains high, though it has declined slightly over the past two years.

As the economic recovery continues, the growth in individual incomes and corporate profits will increase tax revenues and push Tax Freedom Day ever later in the year. The latest ever Tax Freedom Day was May 1, 2000—meaning Americans paid 33.0% of their total income in taxes. A century earlier, in 1900, Americans paid only 5.9% of their income in taxes, meaning Tax Freedom Day came on January 22.

Tax Freedom Day is a vivid, calendar-based illustration of government’s cost, and it gives Americans an easy way to gauge the overall tax take. Conceived by Florida businessman Dallas Hostetler in 1948, he deeded the concept to the Tax Foundation upon his retirement in 1971. In 1990 sufficient data became available to calculate a separate Tax Freedom Day for each state.

We assume that the nation starts working on January 1, earning the same amount each day and spending nothing. When the nation has finally earned enough to pay all the taxes that will be due for that year, Tax Freedom Day has arrived. This year, Americans will pay $2.62 trillion in federal taxes and $1.42 trillion in state-local taxes, for a total tax bill of 29.2 percent.

Historical Tax Freedom Day

Tax Freedom Day has not always been this late in the year. World War I tax increases led to a jump in Tax Freedom Day from 1917’s January 24 to 1918’s February 8 to 1921’s February 22. In the 1920s, when Justice Oliver Wendell Holmes described taxes as the price of civilized society, Tax Freedom Day was arriving in February.

The Great Depression and the Hoover/Roosevelt tax increases led not only to a later Tax Freedom Day but a shift in who was collecting. In 1932, Americans spent 10 days paying federal taxes and 46 days paying state and local taxes. By 1940, Americans worked 33 days to pay each. World War II brought increased federal spending and borrowing, with Tax Freedom Day arriving in April for the first time in 1943.

The federal tax burden never returned to pre-war levels. The fifties and sixties also saw a rise in state-local tax burdens and a boost in economic growth following the 1964 Kennedy/Johnson tax cut. Vietnam War-era tax increases and the “stagflation” of the 1970s pushed personal incomes into higher tax brackets, and by 1981, Tax Freedom Day arrived on April 24.

The Reagan tax cut signed into law that year ushered in an economic boom; federal revenues grew but the economy grew even faster. Despite pressure on state and local taxes following taxpayer revolts like Proposition 13 in California, the strong economic growth led to increased tax collections, and in 1989, Tax Freedom Day arrived on April 22. That year, federal income tax revenues as a share of the economy were higher than they had been in nearly all years prior, when the top rate exceeded 90 percent.

A string of record-setting federal tax burdens followed, and the latest ever Tax Freedom Day occurred on May 1, 2000. With federal revenue routinely exceeding even its own forecasts, there was strong popular pressure for a major tax cut.

The new president delivered on his tax cut promises, which, combined with a recession in 2001, caused the tax burden to fall considerably. In 2003, Tax Freedom Day arrived on April 14, more than two weeks earlier than it had in 2000. Since 2007, stimulus tax cuts and a weakening economy have pushed Tax Freedom Day earlier still. In 2009, Tax Freedom Day was on April 10, earlier than any time since Lyndon Johnson was in the White House. Meanwhile, government spending rose, leading to a large gap between revenue and spending. This year marks the fourth year in a row of the federal budget deficit exceeding $1 trillion.

Tax Freedom Day By State

The total tax burden borne by residents of different states varies considerably, not only due to differing state tax policies, but also because of the steep progressivity of the federal tax system. This means higher-income states celebrate Tax Freedom Day later: Connecticut (May 5), New Jersey (May 1), and New York (May 1) residents face a significantly higher total federal tax burden than lower-income states.

Residents of Tennessee will bear the lowest average tax burden in 2012, with Tax Freedom Day arriving for them on March 31. Also early are Louisiana (April 1), Mississippi (April 1), South Carolina (April 3), and South Dakota (April 4).

from First American Exchange Company – The Exchange Update

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Economists don’t agree on real estate recovery

It wasn’t long ago that some economic forecasters anticipated a turnaround in the home-sale market by 2012. When the economic recovery stalled and the housing market showed no sign of turning around quickly, projections for a housing recovery were pushed out two, three and even seven years.

Ken Rosen, chairman of the Fisher Center for Real Estate & Urban Economics at the University of California, Berkeley, believes that home prices have bottomed and are increasing in areas powered by strong job growth. However, even in places where prices are rising, they are not rebounding.

Not all economists agree that home prices have hit bottom; many anticipate another 5 percent price decline over the next two years.

Rosen gives a 65 percent probability that the recovery will be choppy. He forecasts a 5 percent chance of a strong recovery and a 30 percent chance of a double-dip recession. Factors holding a recovery back: a general sense of uncertainty that undermines consumer confidence; millions of unsold foreclosure properties; high unemployment; cutbacks in services; and tight credit conditions.

In some urban areas of the country, like Atlanta, Chicago, Miami and Phoenix, it may be more advantageous to buy than to rent. Apartment rents have been rising due to increased demand for rentals from people who have lost their homes in foreclosure, empty nesters trading down, people with jobs who have decided not to buy, and people who would like to buy but who can’t qualify.

The same lenders who gave risky mortgages to buyers who couldn’t afford them in 2005 and 2006 are now making it difficult for qualified buyers to get financing. It used to take a credit score of 620 or more to qualify for a conventional mortgage. In those days, loans to buyers with 5 to 10 percent cash down were readily available.

Today’s buyers need a credit score of 760. Some conventional lenders require a 20 percent cash down payment. If the buyers are self-employed it can be more difficult to qualify. It’s a great time to trade up, but most buyers can’t qualify to buy the new home without first selling their current home.

One of the best things that could happen to the housing market at this point would be an easing of credit-qualifying standards — not to the ridiculously low level of several years ago, but to a level that would enable more creditworthy buyers to take advantage of today’s low interest rates and relatively low home prices.

Good news lately bodes well for the future, but you should anticipate continued volatility. The jobless rate dropped to 8.6 percent nationally in November, the lowest level in 2 1/2 years. The consumer confidence index rose 15 points in November, to 56. Although encouraging, if the economy were on solid ground we would expect a reading of 90.

HOUSE HUNTING TIP: It’s a good time to buy a home in many areas of the country. However, it’s only a good time if you buy for the long term and you have realistic expectations about what buying a home will entail. It will require maintenance, which costs money and takes time.

Your home is unlikely to be the cash cow that most buyers expected — and many achieved — during the bubble years. According to Robert Shiller, Yale University economist, home prices track, on average, with the inflation rate over long periods.

Renters with good incomes and good credit who are tired of moving could benefit from buying a home now. Just be aware that if we go into a double-dip recession, prices could drop another 10 percent in some areas. That’s why you don’t want to buy for the short run.

THE CLOSING: Buyers having trouble amassing 20 percent for a down payment should check with independent banks that have more flexibility in their qualifying criteria.

By Dian Hymer, Monday, January 9, 2012.

Inman News®

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

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By the Numbers: New Year’s Resolutions

– About 45 percent of Americans make New Year’s resolutions

each year. Thirty-eight percent never make resolutions.

– Only eight percent of people are always successful in achieving

their resolutions.

– Over 30 percent of resolutions are related to money and 38

percent are related to weight.

– After the first week, 75 percent of resolutions are still being

kept. After six months, that is down to 46 percent.

– The older you get, the harder it is to keep your resolutions.

About 40 percent of people in their twenties achieve their goals

each year, while less than 15 percent of those over 50 do.

Source: Opinion Corporation

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4 real estate lessons from the 1%

While reading this article about the aggressive — and ostensibly legal — tax reduction strategies of Ronald S. Lauder (son of Estée), I was struck by this quote from University of Colorado law professor Victor Fleischer: “There’s real truth to the idea that the tax code for the 1 percent is different from the tax code for the 99 percent.”

The connotation? The super-rich have not only cash, but also elite access to loopholes and other advantages to which the 99 percent might aspire, but will never attain.

While the Occupy movement is on a mission to illuminate and shatter power imbalances between the 99 percent and the 1 percent, there’s another angle to take on the issue: Let’s call it the “If you can’t beat ’em, learn from ’em” school of thought.

Along those lines, here are four real estate lessons all of us can take from the 1 percent:

1. Take advantage of government programs/assistance. When the big banks — whose execs certainly belong to the 1 percent — began to experience the fallout of the subprime mortgage meltdown, they threw up their hands, pleaded their case, enrolled governmental advocates and got the bailouts we now know as the $700 billion Troubled Assets Relief Program, or TARP.

Yet many an individual American, whose personal finances have too much at stake to fail — at least as far as their household and local communities are concerned — struggle silently to make their monthly mortgage payment.

More than 20 million American households are upside down on their mortgages. The Obama administration‘s foreclosure avoidance program, Home Affordable Refinance Program (HARP), was designed to help 5 million homeowners refinance into lower interest rates and payments.

At last count, earlier this fall, HARP had actually helped only 62,500 seriously underwater homeowners, and fewer than 900,000 homeowners total — a number so low Congressional Republicans sought to wind the program down. The Obama administration revised the program in hopes of helping more homeowners. (In 2009, the administration projected 4 million HARP refinances by fall 2011.)

The Main Street bailout is here and, whether you think it’s sufficient or not, it seems indisputable that it is vastly underutilized.

In an effort to get more help to the homeowners who need it, the Obama administration loosened up qualifying criteria; the revised guidelines just kicked in on Dec. 1, 2011. The 1 percent looks to the government when they are down on their luck; so should you.

2. Take full advantage of the tax code. Many members of the 99 percent have decried the complexity of the tax code and its loopholes that favor the rich. Lauder’s son, for example, has reportedly deferred or avoided tens of millions in federal taxes by donating art to his own foundations, deducting of property taxes on an extensive real estate portfolio, making massive charitable donations, and derivative stock transfers — deductions accessible only to those rich enough to own such assets in the first place!

Besides the better-known federal mortgage interest and property tax write-offs, there are numerous, less well-known deductions of which “99 percent-ers” should take full advantage.

Some areas allow renters to take a property tax credit. Similarly, homeowners who switch to solar or installing a tankless water heater can get the federal government to help pay via tax credits, some of which expire soon, others of which will be longer lived. It won’t line your pocket with millions, but every little bit helps.

3. Pay for professional advice when it counts. You’d be amazed at the number of buyers, sellers and homeowners I’ve heard reference real estate advice they received from their parents, their mechanic and the other moms at day care — and that doesn’t even begin to count the folks who try to distill insights just from a headline in the national nightly news or from a story they overheard at the hairdresser about the amazing deal they were able to negotiate (and, by the by, everyone exaggerates at the hairdresser!).

I assure you, Mr. Lauder pays a virtual army of attorneys and accountants a pretty penny for his tax advice. And the rest of us should make the appropriate investment in obtaining experienced, local, professional advice when it comes to making potentially life-changing real estate, mortgage and tax decisions.

4. Don’t let emotion cloud your decisions. Members of the 99 percent often stay emotionally committed to a home or a list price despite the fact that it is absolutely a losing battle, the data completely contradicts our commitment, or that the living situation no longer works for the people who live in the household.

The 1 percent, on the other hand, will divest of a home or slash even millions of dollars off the list price of their home in a New York minute, if it makes business sense.

Obviously, it’s a bit easier to be detached from an asset when it’s not the only asset you have. As well, sometimes the 1 percent is a little too hasty to detach from all sorts of relationships that most of us in the 99 percent hold dear — from homeownership to marriage and beyond.

But we 99 percent-ers might do well to take a page from the 1 percent playbook when it comes to holding onto assets that have become toxic. Sometimes, it makes sense to short-sell the house, divest of it via a deed-in-lieu of foreclosure, or simply slash the list price, in the service of the household’s greater, long-term financial good.

By Tara-Nicholle Nelson, Tuesday, December 20, 2011.

Inman News®

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Ask her a real estate question online or visit her website,

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