How to earn up to $250,000 tax-free every 24 months

Profile of a 'serial home seller'
By: Robert J. Bruss: Inman News
Have you ever met a "serial home seller?" I have. They are fascinating people, usually the "handyperson type." They also enjoy bragging about how much tax-free profit they earn buying and selling fix-up houses.

Perhaps you're getting the picture.

THE SECRET FIVE STEPS FOR EARNING $125,000 TAX-FREE PER YEAR Virtually every homeowner knows about the Internal Revenue Code 121 principal residence sale tax exemption up to $250,000 (up to $500,000 for a qualified married couple filing jointly).

To be eligible for this tax exemption benefit, home sellers must have owned and occupied their principal residence at least 24 of the 60 months before its sale. Millions of home sellers use this tax break each year.

However, few home sellers use this tax exemption to create a repeatable tax-free home sale business every 24 months. Here's how to create your own tax-free home sales business:

(1) Buy a sound, well-located house needing cosmetic fix-up work.

(2) Move in, making it your principal residence for at least 24 months.

(3) Fix up the house, making profitable improvements, which cost less than the market value they add.

(4) Sell the house at a tax-free profit not more than $250,000 ($500,000 for qualified spouses).

(5) Repeat every 24 months.

HOW TO CREATE PROFITABLE HOME IMPROVEMENTS

Years ago, Mark Haroldson wrote the book "Wake Up the Financial Genius in You," which invented the term "forced inflation." The author explained that term means adding more real estate market value than the improvements cost.

Examples of profitable cosmetic improvements include painting (the most profitable home improvement of all, often adding $5 or more of market value for each $1 spent), new light fixtures, fresh landscaping, new carpets and flooring, and adding a second bathroom to a one-bathroom house.

Examples of unprofitable structural improvements (which don't add as much market value as they cost) include new roof, foundation repairs, plumbing replacement, new wiring, siding replacement, and window replacement.

In the classic best-selling real estate book of all-time, the late William Nickerson's "How I Turned $1,000 into $5 Million in Real Estate in My Spare Time" suggested the sound basic formula of spending $1 to add at least $2 in market value by making profitable cosmetic improvements.

However, some improvements are obviously necessary, such as a new roof or new wiring, but they won't add as much market value as they cost. Thankfully, other improvements often add $2 or even $3 in market value for each $1 of expense.

Some home improvements are "break-even." Examples include kitchen remodeling and bathroom upgrades. Before undertaking such expensive renovations, consider their influence on the home's ultimate resale value and the home's marketability. Ask yourself "Is this improvement really necessary?"

THE MAJOR DRAWBACK OF BEING A SERIAL HOME SELLER

Just in case you haven't yet figured out the major drawback of repeatedly buying and selling homes approximately every 24 months, it is living in the house while the fix-up work occurs. Marriages have been known to end in divorce while a home is being renovated, especially if the kitchen isn't useable and the family must suffer dining out every night.

A bit of advance planning can pay off. For example, after you purchase a fix-up house, having the upgrading work completed before moving in will avoid the hassles of having workers around. My neighbors took another approach: they spent the summer in Europe while their home was completely remodeled so they could come back to a virtually new renovated home.

THE BONUS ADVANTAGE OF BEING A SERIAL HOME SELLER

Home market value appreciation is a bonus advantage, on top of "forced inflation," of being a serial home seller.

In the last 10 years, U.S. homes have enjoyed the greatest market value increase in history. Percentage market value increases vary wildly by community, but houses in most towns have benefited from at least 75 percent increased market value during the last decade.

Historically, houses appreciate about 5 percent annually in market value. But some economically depressed areas have lower or even negative appreciation. Of course, you wouldn't want to become a serial home seller in such a community lacking sound economic conditions.

MISTAKES TO AVOID

If the idea of earning up to $250,000 tax-free (up to $500,000 for a qualified married couple) every two years by purchasing and living in a fixer-upper house appeals to you, there are some pitfalls to avoid:

(1) Avoid buying a house in excellent condition (it lacks fix-up profit potential).

(2) Avoid buying a "tear down" or "scraper" house. If you acquire such a property, be sure you don't pay more than its land value alone. Profiting from such run-down houses is extremely difficult.

(3) Avoid condominiums and townhouses. Even if you find a condo or townhouse needing profitable improvements, there is usually little profit opportunity because the market value is held down by recent sales prices of comparable condos and townhouses in the vicinity. You can fix up your unit to look great, but if the surrounding units are run-down, you won't earn much profit.

(4) Avoid buying a house in a bad location, high crime area, or a poor quality school district. As with any house purchase, these three criteria of home buyers will hold down the resale value of a house no matter how nice you fix it up.

HOW TO FIND PROFITABLE FIXER-UPPER HOUSES

The best way to find profitable fixer-upper houses is to work with a savvy buyer's agent who knows the local market.

After explaining your criteria, your agent will alert you when a house meeting your standards hits the market, whether it is listed in the local multiple listing service (MLS) or is a "for sale by owner" (FSBO).

Additional sources of profitable fixer-upper houses include foreclosures, probate and bankruptcy properties, and even vacation or second homes. As always, the key to profit success is spotting houses needing profitable improvements. In other words, look for "the right things wrong" if you want to earn up to $250,000 tax-free every 24 months.

More details are in my new special report, "How to Earn Up to $250,000 (or $500,000) Tax-Free Profits Every 24 months Buying and Selling Houses," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com.
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Home additions that stand the test of time

Tips on blending the old with the new
By: Arrol Gellner: Inman News
It's human nature to crave the fresh, the new and the fashionable - and that goes for remodeling as much as anything else. The quest for the mythical "updated look" of magazine lore has long tempted both owners and architects to graft trendy additions onto older homes just to make them ever-so-briefly fashionable again. Alas, you need only to leaf through a 20-year-old copy of Better Homes and Gardens to see how such "updates" have stood the test of time. Most would elicit groans, if not laughter.

The lesson is simple: Given the ever-shifting sands of architectural taste, the only kind of addition that'll be permanently in fashion is one that respects the original architecture.

But how to do this? It goes without saying that the overall proportions of any new addition -- wall heights, window styles and sizes, and the roof style and finish -- should be in keeping with the original building. Beyond these basics, however, the real trick to making an addition "lock" into the original house is to identify and repeat the designer's signature details. By sussing out these characteristic traits-and incidentally every house, new or old, has a whole raft of them-you can pretty much make any addition look spot-on original. Typical candidates include:

Porch railings and columns: Repeating these often-charismatic details will go a long way toward knitting an addition into the original building. If the original railings don't meet the current building code, find a workaround; don't just use an entirely different design. For example, if the old railing has openings larger than the current 4-inch maximum, install a heavy wire mesh on the inside face of the new railing to make it comply.

Window muntins (the narrow divisions between the glass) and window trim: Every home style has its own characteristic trim and muntin patterns: look for them and repeat them in the addition where possible. Muntins are less common in postwar homes, but if they're present, it's doubly important to echo them in the new work. Avoid using the two-dimensional "sandwich" muntins found in most modern windows unless that's what you find in the original building. You'll pay a premium for true muntins, but they'll make a huge difference.

Roof edges: The strong lines of roof eaves are a central element of any home style, so it's imperative to get them right. It's not enough just to match the width of the overhang-you also need to match the fascia (the board behind the gutter, if any) and the gutter itself. If you can't find the original gutter style, consider replacing all the gutters with a close match to ensure that the new work ties in flawlessly with the old.

Attic vents: With these, look for characteristic shapes: Did the designer use rectangular, pointed, arched or circular louvers, or perhaps round or square clay pipe vents? It's small flourishes like these that visually lock the addition into the existing structure. Again, if the original vent design won't meet current codes, include it for appearance, then provide additional venting elsewhere that is out of sight.

Lastly, if you have trouble coming up with a detail that has no direct precedent on the existing building, ask yourself: What would the original designer have done? Would he have used paired French doors or a sleek aluminum slider? Would he make the chimney skinny, stout or asymmetrical? In short, what would his own signature detail have been? With the original designer guiding you, your addition can't help but fit.
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Is Your Building Going Condo? Here's What You Should Know

As apartments increasingly convert to condominiums, renters face a tough choice: buy their unit or move on. Terri Cullen looks at financial issues potential buyers need to consider.
By: Terri Cullen: The Wall Street Journal Online
After signing a one-year lease in May, Lisa DaFoe started settling into her apartment rental in the Glenn Allen suburb of Richmond, Va. A month later, the legal notice came.

Her apartment building was "going condo" -- Ms. DaFoe would either have to buy her apartment, or move. The notice left her angry and confused, says Ms. DaFoe, a 43-year-old marketing coordinator. "A condo conversion? I didn't think this sort of thing still went on," Ms. DaFoe says. "I finally get around to unpacking everything and now I may have to pack it right back up again."

I know what you're thinking: Condo conversions are so 1980s. But the boom is back, fueled by the torrid residential housing market. Low mortgage rates and creative financing have turned thousands of would-be renters into homeowners, and a growing number of building owners have decided to cash in on the trend by converting apartment units to condos. The boom started heating up in 2003 as the broader real-estate market experienced a home-buying frenzy.

And, as has been the case in other areas of the real estate market, lenders are doing their share to feed the beast. "As conversions became more profitable, banks have become more readily willing to loan money," says Dan Fasulo, director of Real Capital Analytics, a research and consulting firm in New York that tracks condo conversions.

Investors and developers have also jumped on the conversion bandwagon, buying buildings from owners and immediately flipping them as condo conversions, he says. The number of rental units sold to be converted to condominiums nationwide reached 131,762 as of Nov. 1 this year, compared with 75,385 for all of 2004, Mr. Fasulo says.

This week, as part of our Chasing Condos series, I'll look at a number of financial issues renters need to consider when mulling the purchase of an apartment in a condo conversion.

A Condo-Conversion Craze

The price of the condo is the first of many expenses that renters should consider when determining whether to buy the apartment or take a pass. In addition to the down payment, mortgage and annual maintenance fees, buyers should consider the cost of insurance, the possibility of special one-time assessments, and any legal expenses that may arise when sharing ownership of a property with other people. On the other hand, renters who decide against buying may face moving costs and higher rents elsewhere.

When an apartment building converts to condos, a buyer purchases the walls and interior of the apartment, as well as a percentage of the building's common areas. The building is typically managed by a condo association, made up of condo owners.

A condo conversion can end up being a boon for some renters. When a building goes condo, renters may be given "right of first refusal," or the opportunity to buy their apartments before any other offers are considered, depending on their state's regulations governing condo conversions. It's also not uncommon for building owners to offer price concessions for a limited time to make a quick sale.

The promise of an upfront discount can be attractive at a time when condo prices have surpassed those of single-family homes. The median price for an existing condo in the U.S. reached $213,600 in September, up 9% from the same period a year earlier, according to the National Association of Realtors in Chicago. The median price for a single-family home was slightly lower, at $212,200 in September, up 14% from a year earlier.

Kuazine King and his wife Mimiko jumped at the chance to buy their two-bedroom apartment when their landlord offered a discount on the space, and $1,000 in temporary relocation costs while their building was being renovated prior to the conversion. The couple paid $369,000 for their San Diego apartment, while similar units in the building offered to the public were priced from $379,000 to $389,000, according to Mr. King.

Mr. King, a real estate agent, said the discount allowed his young family to find affordable housing in a good neighborhood. "If we were looking to buy a condo in this neighborhood that wasn't a conversion, it would definitely cost a lot more than what we paid," he says.

But for some, buying an apartment may prove too costly, even with a discount. The owner of Ms. DaFoe's building gave her the opportunity to buy her one-bedroom apartment at a $12,000 discount to its $142,000 asking price for 60 days. But she didn't bite, because she remains skeptical the space is worth the price. "With the $300 a month condo-maintenance fee and mortgage, that pushes the monthly outlay to over $1,000," she says. "If I'm going to pay that much, I'd probably look to buy something a little bigger." Her monthly rental on the apartment was $800.

A Condo Glut?

One wildcard for renters may be what some in the industry say is a looming condo glut. About 78,000 newly-built condos and townhomes will be ready for occupancy this year and another 118,000 will be available in 2006, according to Property & Portfolio Research Inc., a Boston company that tracks 54 markets.

"Over the past three years we've seen a rampant uptick in condo construction and conversions," says Robert LaQuaglia, real estate economist at Property & Portfolio Research. Prior to 2003, condo conversions have been relatively rare since the conversion boom in the '80s, he says.

In many regions, older units that are being converted are now competing with spanking new condos and even luxury hotels that are converting to condos.

With so many buildings converting and new units hitting the market during what certainly seems to be a mature real-estate market cycle, there's a greater possibility that condo-conversion owners may find themselves with buildings that are only partly sold. For renters, this scenario could play out in one of two ways: the owners might reduce the asking price to convince renters to buy, or owners might hold on to unsold condos and continue to rent them out.

Ms. DaFoe hopes a real-estate investor will buy her apartment and allow her to continue renting out her apartment. "I'm hoping I can stay here and continue to rent, no matter who the owner is," she says. "Right now, I'm just going to stay put and see what happens."

Doubling Down on Insurance

Another financial consideration when switching from renting to buying is insurance. Typically, the condo association pays the premiums to insure the shared space within the building and the grounds with association maintenance fees, as governed by the articles of the association and state laws. When theft or damage strikes inside your unit, however, it's generally your problem.

Condo owners will need to purchase a separate personal home insurance policy (called type HO-6), which is designed for condos. Premiums vary depending on location: In suburban Chicago, you may pay $150 a year for $38,000 in property protection on a one-bedroom condo, which also provides $25,000 for building protection and $300,000 in liability protection, according to Allstate Corp. in Northbrook, Ill. Condo owners in urban areas typically will pay $100 more each year than suburban homeowners for the same coverage.

If you decide to buy, you'll need to get a look at your condo association's master policy to determine what is and isn't covered, and then sit down with an agent to ensure you get the proper level of personal coverage. Because condo association rules can vary, condo buyers may misunderstand what they're responsible for under their own policy.

Email your comments to rjeditor@dowjones.com.
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Will refinance lessen homeowner's real estate tax deduction?

Benefits of lower interest rate, no mortgage insurance go undetected
By: Robert J. Bruss: Inman News
DEAR BOB: I own a townhouse condo that I bought in 1993 with a 6.5 percent interest rate, 30-year FHA mortgage. My monthly FHA mortgage insurance fee is $47. My purchase price was $130,000. Today, the condo is worth around $380,000. I have never seriously considered refinancing, although my lender periodically sends me advertisements about no-closing-cost refinances for 15 or 30 years. The interest rate would be slightly lower than my current interest rate for 15 years with a slightly higher monthly payment, but I would avoid that unnecessary $47 FHA fee. One of the reasons I am holding back is because I would be paying less interest, thus having less to deduct on my income tax. However, I would be taking about five years off the mortgage. Is such a refinance a good idea? - Susan P.

DEAR SUSAN: Let me get this straight. You have not refinanced to save interest and shorten the life of your mortgage by about five years because you enjoy paying higher interest, that non-deductible $47 FHA fee, and deducting the interest on your tax returns.

It makes no financial sense to pay higher mortgage interest just to get the itemized homeowner's interest tax deduction.

To illustrate, if you are in the 28 percent federal income tax bracket, plus state taxes, for every $100 mortgage interest you pay, you get a $28 income tax saving. Wouldn't it be better to slightly reduce your interest rate, get rid of that $47 non-deductible FHA insurance fee, and shorten the mortgage term? I think you know the answer.

HOW MUCH LIABILITY INSURANCE IS ENOUGH?

DEAR BOB: You recently suggested homeowners carry $300,000 liability coverage, plus a $2 or $3 million umbrella liability insurance policy. This seems very high to me. My homeowner's insurance policy currently has $100,000 liability coverage and I don't have any umbrella liability insurance policy. Do you think I need more liability coverage? -Martha W.

DEAR MARTHA: The answer depends on your assets, your home equity, and your potential liability risk. Accidents happen no matter how careful you might be. I won't bore you with all the possible negligence liability that might cause injury to others around your home.

If someone is severely injured, and if you are liable, your current $100,000 liability isn't much coverage if you get sued. Adding an extra $100,000 or $200,000 liability coverage on your homeowner's insurance policy shouldn't cost very much.

More important, if you are wealthy and have substantial assets, a $2 or $3 million umbrella insurance policy is very cheap protection. It also offers additional insurance coverage, such as for your negligence in an auto accident. Please consult your insurance agent for details.

WHY IT IS USUALLY BETTER TO INHERIT THAN RECEIVE REALTY GIFT DEED

DEAR BOB: Several years ago, upon the advice of our attorney, we added our four children to the title to our home and adjoining land. But after reading your frequent advice that it is usually best to inherit real estate via a living trust to get the stepped-up basis on the date of death, we're wondering if we did the right thing. The attorney has since died. Why do you say it is better to inherit real estate than to receive it as a gift before death? - Betty and Ernie G.

DEAR BETTY AND ERNIE: I hate to disagree with a fellow attorney, but depending on how title is held with your four children there might not be any stepped-up basis benefits.

Also, holding title with six people on the title is almost certain to lead to eventual problems if you want to sell but one of the co-owners refuses to sell. Or what will you do if one of the co-owners becomes incapacitated, such as with a severe stroke or Alzheimer's disease?

Holding title to your property in your living trust would have been so much easier and your heirs would get the stepped-up basis benefits. A living trust lets you maintain control. By gifting part of your title to your children, you gave up full control.

I suggest you consult a new attorney about possible title changes.

More details are in my special report, "24 Key Questions: Living Trusts Reveal How to Avoid Probate Costs and Delays," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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Doors make a good first impression

Tips on how to sand, re-stain your home's front portal
By: Bill & Kevin Burnett: Inman News
Q: I have an oak front door that has been stained a reddish color. It is covered with shellac that has been peeling. I removed most of the shellac with a razor and discovered scratches on the door. Most of these scratches are not deep and would probably disappear with sanding. What grade sandpaper should I use, and will it alter the stain color? Also, what should I use to protect the door after sanding?

A: The front door is the gateway to your home. A well-maintained one leaves a first and lasting impression of either "wow" or "yuck."

To do the job right, strip the entire door. But please put away your razor blade. Use a chemical stripper instead to remove the remainder of the finish.

We don't think the finish is shellac. Shellac is an alcohol-based resin used to finish interior woodwork and furniture. More likely, your front door is finished with either varnish or polyurethane. Shellac is much softer than either varnish or polyurethane and does not tolerate water very well. Polyurethane and varnish are harder and stand up better to the weather and the wear and tear a front door gets.

You can buy a chemical stripper anywhere paint is sold. It is available in two consistencies, liquid and semi-paste. We recommend the semi-paste because it tends to stay where you brush it and you should not have to take the door off its hinges and lay it flat to do the job.

Apply the stripper with a paintbrush you don't mind throwing away. Wear rubber gloves and eye protection. Use drop cloths to cover the floor and anything near the work area in case some of the stripper misses the door.

Once the door is stripped and dried, do a careful inspection. You may find that the scratches you thought were there are gone. If so, they weren't in the door but in the finish.

If the scratches are still there, however, it's time to sand. Go gently. Hand sand only--no power sanders allowed. Sand only enough to remove the scratches. Too much sanding will remove too much of the stain.

Start with No. 150-grit aluminum oxide paper. Finish the job with No. 220-grit sandpaper to remove marks left by the 150-grit paper. To double-check if the scratches are gone, wet your finger and rub the area. The moisture will highlight any defects that are left.

When the sanding is done, the stain will probably vary in color. The easiest way to restore a uniform color is to re-stain the door. For an exact match, take the door to a paint dealer for a computer match. If you don't want to go through this bother--and we wouldn't--use color chips and a sample can or two to get as close as possible to the existing color. Stain is available in 4-ounce cans for a few bucks. Two or three cans won't break you and will ensure a close, if not perfect, match.

Apply the stain with a rag in a light, even coat. Let it dry for a few minutes and then wipe it off. If the sanded areas are a little lighter, apply another coat there, blending it into the surrounding area. After the stain is dry, apply the finish.

We recommend polyurethane as a clear finish on a door exposed to weather. Polyurethane is available in a variety of sheens from matte to gloss. Two coats will do on a front door.

With a clean, dry paintbrush, working from the top of the door to the bottom, apply the first coat and let it dry for at least four hours. Sand the surface with No. 220-grit sandpaper. Wipe the surface with a tack rag to remove the dust. Apply a second coat of polyurethane and you're done.

Follow these steps and you'll have an entry to be proud of for many years to come.
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How does FICO score impact real estate refinance?

Keeping on top of your credit is more important than you think
By: Tom Kelly: Inman News
Are you still steaming because an inaccurate credit report has sent your FICO score spiraling downward, causing major problems with your efforts to refinance your home?

Join the club.

A few months ago, we became victims of credit-card fraud. Some clown got access to our account and charged thousands of dollars of computer equipment on our card, via telephone, at a popular outlet in the San Francisco Bay area. We discovered the bogus charges after we had returned from a short vacation and quickly informed the bank that issued our card. We also stipulated that we would not pay the charges that we did not make.

By the time the mess was sorted out, we were judged to have been late on our credit-card payment for the month that we refused to pay the phony charges. That blemish, coupled with another late charge when my bill-paying bride was out of town in 2003, sent our FICO score lower.

FICO scores (generated by Fair Isaac Corp.) typically range from a high of 850 to a low of 300. These numbers are compiled by the three national credit agencies. Most of the time, consumers who grade out above 760 get the best mortgage rates, those between 760 and 700 are in the middle, and those under 630 usually pay the highest rates, if they can get financing.

To compound the problem, I chose to apply for a new credit card late last summer when my preferred airline carrier had a bad stretch of service. I wanted to shift my frequent-flier miles to another carrier, so I received another card supporting a different airline.

Really bad timing. When you apply for credit, or have lenders/creditors/companies inquire about your credit, your FICO score tends to go down. The lender for our proposed line of credit basically said, "what have you guys been doing?" after our application had been filed and the new FICO score had arrived.

The good news is that many states, including Washington, have specific timelines in which creditors and reporting agencies must act on credit challenges. For example, a credit agency has 30 business days to reinvestigate any contested blemish on your credit report and then contact you with the findings. If the credit bureau cannot verify the delinquency in question, the delinquency must be removed.

The Washington law passed in 1994 in an attempt to get creditors and reporting agencies to clean up their files and speed up processing. It also requires that the credit-reporting agency contact the creditor within five days to verify the debt.

We had been down this road before, prior to 1994, and spent months getting the challenge squared away. Several years ago, we had applied for a mortgage. We quickly received a credit report showing two delinquent payments to department stores. The "30-day lates" had occurred nearly seven years before then--about the time we were moving into a new home. I wrote the stores, explained what happened, and both companies removed the delinquent notices.

However, the letter from one store did not get to the credit bureau. The same delinquent notice showed up on my report the next time I considered a refinance. I dug out the original letter, called the credit agency, and demanded an explanation. Needless to say, I also called the department store chain and spoke to a credit agent. I read her my letter over the phone and explained someone had dropped the ball. What added fuel to my fire were the long-distance call (no "800 number") and the time it took away from work.

Credit reports are powerful vehicles. Jobs, homes, reputations and future credit often depend on them. If an incorrect item appears on a credit report, it's up to the consumer to see that it is corrected. For example, I once had two mortgages with the same lender. Both payments were once credited to one account, and I got a delinquency notice on the other. It took two letters and numerous phone calls to get the 30-day delinquency removed from my credit report.

Merely telling the agency is not enough. You should submit the explanation or proof in writing. People often don't understand that a credit agency cannot remove something from a credit report without the authorization of the company filing the delinquency. Delinquencies include tax liens, judgments and repossessions.

For a copy of your own credit report, contact the reporting agencies: Experian, (888) 397-3742, experian.com; Equifax, (800) 685-1111, equifax.com; and TransUnion, (312) 408-1077 transunion.com. The Fair Credit Reporting Act (FCRA) requires each of the companies to provide you with a free copy of your credit report, at your request, once every 12 months.

If you have additional problems regarding your credit report, contact the Consumer Protection Division of the state attorney general's office. The telephone numbers are (800) 551-4636 and (206) 464-6684.

Tom Kelly's new book "The New Reverse Mortgage Formula" (John Wiley & Sons) is now available in local libraries and bookstores. Tom can be reached at news@tomkelly.com
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Happy Thanksgiving!

Celebrating the season, appreciating friends and family...

Wishing you a Thanksgiving graced with good and simple things.

Best wishes at Thanksgiving!
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Real estate excluded from living trust causes trouble

Trustee seeking sale encounters legal roadblock
By: Robert J. Bruss: Inman News
DEAR BOB: I enjoy your articles, but now I need your help. My brother passed away, leaving both a living trust and a will. His trust named me trustee of his estate and assets. No probate was needed to distribute the living-trust property. However, the living trust did not say he owned 10 acres of vacant land near San Bernardino, Calif. My attorney advises not to try selling it because probate court expenses will be high. Being the only living family member (age 88), my brother's will names me to receive any remaining assets, such as the land. Can I sell the 10 acres without probate? I sure could use the money from the sale - Felix McC.

DEAR FELIX: Now you understand why I constantly advise real estate owners to include all their real estate in their living trusts to avoid probate. Your brother apparently forgot to deed his land into his living trust, thus causing you needless costs and delays.

Although there is apparently only the land asset that is subject to your brother's will, a probate proceeding must be opened so the will can be presented to the court and the land title transferred to you according to the terms of the will. Just because you are the only heir doesn't entitle you to transfer title without probate court approval.

However, in many jurisdictions, there are informal probate procedures where the asset value subject to the will is small. I suggest you hire a probate attorney in the county where the land is located.

HOW UNMARRIED HOMEOWNERS CAN CLAIM $500,000 TAX BREAK

DEAR BOB: We are not married, but we are building a house as our primary residence where we will be living together for two years or more. Is it necessary to be married to qualify for the $500,000 home sale tax exemption, or could we form a partnership? -Joseph K.

DEAR JOSEPH: When two (or more) unmarried individuals share the same primary residence, Internal Revenue Code 121 allows each co-owner up to $250,000 tax-free capital gains upon sale. For each of you to qualify, both names must be on the title and you must each own and occupy the principal residence at least 24 of the 60 months before its sale. For full details, please consult your tax adviser.

SELLER FINANCING IS IDEAL FOR STUDIO CONDO SALE

DEAR BOB: I currently rent a studio condo from an owner who owns several units in my building. I would like to buy the condo where I reside, but financing might be difficult. Would it be possible to have the seller finance my purchase? If so, how do I go about setting this up for our mutual advantage? - Patrick R.

DEAR PATRICK: If your seller owns the studio condo free and clear with no mortgage, a seller-financed mortgage, called an "installment sale," would be a "good deal" for both you and the seller.

You and the seller should sign a written sales contract, specifying the sales price, your cash down payment, and the amount and terms of the mortgage the seller will carry back for you. The buyer usually includes in the purchase offer the mortgage amount, interest rate, monthly payment, and term. If that's not acceptable to the seller, then the seller can counter offer.

The seller's security is a recorded mortgage or deed of trust against your condo title. Sellers get to spread out their capital gains tax over the years they receive payments from you. But the tax-deductible interest you pay is taxable as ordinary income to the seller.

Older sellers especially enjoy seller financing because it gives them steady retirement income without worry about "tenants and toilets." If you default, the seller can foreclose and either gets paid in full at the foreclosure sale or gets the title back to resell for a second profit. A local real estate attorney can handle the documentation.

PAYING OFF A HOME MORTGAGE ISN'T VERY COMPLICATED

DEAR BOB: I have two payments left on my mortgage, but I am very scared. I have an impounded loan with the homeowner's insurance and property taxes all included in my monthly payments. I need to know how I can protect myself when I receive official ownership of my home. When I phoned the lender, I was told they will let me know the exact final payment amount and I will receive a "paid-in-full" letter within 15 days after my last payment, but it will take 90 days for a new deed to arrive. After my mortgage is paid off, how will I pay the insurance and property taxes? - Rosalie B.

DEAR ROSALIE: Congratulations on reaching the final payments on your home mortgage. There's nothing to be scared about.

Just continue making your two last on-time payments. As you were told, your final payment may be slightly different to adjust for the fees of paying off the mortgage.

Be sure to ask your lender to promptly mail you a check for the balance in your escrow impound account for the homeowner's insurance and property taxes. That's your money. After your mortgage is paid off, you will get to pay those bills directly to your insurance company and the local property tax collector.

Although mortgage lenders are supposed to promptly clear a paid-off mortgage or deed of trust from your home's title, some lenders are very slow to do this. After 90 days, be sure to follow up and be certain you received evidence the lender recorded either a deed of reconveyance or a mortgage satisfaction. You will then own your home free and clear.

NO STEPPED-UP BASIS UNLESS YOU INHERIT PROPERTY

DEAR BOB: When my husband was diagnosed with Alzheimer's disease I sought estate planning. The lawyer changed our house title from joint tenancy with a quit claim deeding the house to my name alone to avoid possible problems if my husband had to go to a nursing home. Although he became severely disabled, he stayed at home with me until he died in July 2003. A friend told me I should have something done because I will not get a stepped-up basis if I decide to sell the house. We paid $59,000 in 1976 and today the house is worth about $600,000. Did we make a big mistake? Can the title transfer be undone? - Irene D.

DEAR IRENE: Unfortunately, you didn't receive a stepped-up basis when your husband died because you didn't receive any property interest from him at that time. Lifetime marital transfers between spouses, although tax-free, do not create stepped-up basis.

I am not aware how the recorded title transfer to you several years ago can be "undone" so you could receive your late husband's share of the house by inheritance to get a new stepped-up basis to market value as of the date he died.

If you decide to sell the house, your adjusted cost basis will be the $59,000 purchase price, plus capital improvements added during ownership. Of course, you will have the $250,000 single tax exemption allowed by Internal Revenue Code 121, presuming you own and occupy your principal residence 24 of the 60 months before its sale. For full details, please consult your tax adviser.

A WILL HAS NO EFFECT ON JOINT TENANCY PROPERTY

DEAR BOB: My elderly friend and I are on the deed to her house as joint tenants with right of survivorship. Her will says I am her personal representative. The will leaves all her real property, including the house and contents, to be divided equally between myself and two other people. She is a widow and her only son is deceased. Is this sufficient? -Pat S.

DEAR PAT: No. Your friend's will has no effect on the house, which is titled in joint- tenancy with right of survivorship. If your friend dies before you do, you will receive the full title to the house as the surviving joint tenant but not under the will. If you die first, then your friend owns the house by survivorship.

The two other people named in your friend's will won't receive any interest in that house. For full details, she should consult her attorney.

REVERSE MORTGAGES ARE NOT MOVEABLE

DEAR BOB: If we get a senior citizen reverse mortgage on our home, and decide to move in a few years, can we move the reverse mortgage to our new home? I am 73 and my wife is 69, both in good health. Who do you recommend we contact for local reverse mortgage information? - Donald S.

DEAR DONALD: Senior citizen reverse mortgages are not moveable. Because of the substantial up-front costs, I suggest you don't obtain a reverse mortgage unless you plan to stay in your current home at least five years.

When you decide to sell your home, its reverse mortgage must be paid off from the sales proceeds. Then you could get another reverse mortgage on your next house or condo.

The best place to find local reverse mortgage representatives is on the Internet at www.reversemortgage.org where you will find local state-by-state reverse mortgage agent listings. More details are in my special report, "The Whole Truth About Reverse Mortgages for Senior Citizen Homeowners," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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Building permits pay off for sellers

Guard yourself against additional work and expenses
By: Dian Hymer: Inman News
Curing deferred maintenance before selling usually improves a home's overall appeal, which can attract more buyers for a quicker sale at a higher price.

Sellers typically do pre-sale fix-up as quickly and inexpensively as possible. This can lead to cost-cutting measures, some of which trigger unwelcome consequences.

For example, one way to keep costs down and shorten the time it takes to get work done is to bypass the permit process. Some contractors charge less if they don't have to apply for permits, pay the permit fees and wait for building inspectors to sign off on the work when it's done.

But, consider the downside. A homeowner in the Oakland Hills in Oakland, Calif., expanded his home to increase its market value. He used a licensed contactor but did not take out the required building permits.

The house sold for a good price. But when the appraiser evaluated the property for the buyer's lender, he reduced the valuation on the addition because it hadn't been done with permits. Because of this, the house did not appraise for the price the buyer offered.

To save the deal, the seller applied for permits after the fact. He not only had to pay the permit fees he'd hoped to avoid, he also had to pay penalties. In addition, walls had to be opened so that the inspector could confirm that the plumbing and electrical were properly installed. It might have taken a little more time to do the job right the first time, but it definitely would have cost less.

Other issues come into play when sellers sidestep the permit process. Some municipalities won't issue a final approval for work done with permit if there is a building code violation.

For instance, an Oakland homeowner obtained a permit to replace and relocate a gas furnace. When the city building inspector visited the property to inspect the furnace installation, he noticed electrical wiring near the furnace that didn't meet code. A contractor from Hayward, Calif., who didn't apply for a permit, had done the wiring years before and obviously wasn't well informed on Oakland code requirements. The homeowner had to have the electrical wiring corrected before the city inspector would issue a final clearance for the furnace installation.

HOUSE HUNTING TIP: If you buy a home where work was done without required permits and you take out a permit to do additional work, you could find yourself paying to correct the past owner's misdeeds. To guard against this, visit the local planning or building department and ask to see a copy of the permit history on the property. Make sure that you do this before you remove your inspection contingency from the purchase contract so that you'll have an opportunity to negotiate a satisfactory resolution if there's a problem.

Another issue is that - depending on where you live - you might not be granted a new permit if there is an outstanding permit that has not received final approval. Recently, the buyer of a Piedmont, Calif., home discovered that the seller had taken out a permit to replace the roof, but the job was never done. The roof either had to replaced and approved or the roofing permit had to be voided by the city building inspector before a new permit would be granted.

In California, home sellers are required to disclose if they are aware of work that was done without required building permits. If you're buying in a state that doesn't require this disclosure, it's even more important to check the permit history before you buy. Be aware that sellers often think that permits were obtained when they weren't.

THE CLOSING: To find out if a project requires a permit, consult with your local building or planning department.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers," and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
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Overpricing can be risky for real estate sale

Why an accurate value is so important
By: Dian Hymer: Inman News
Before the torrid real estate market of recent years, a common pricing strategy was to list your home for between 2.5 to 5 percent more than the expected sale price. This way, you would have room to negotiate with the buyer.

If you used this approach today, you'd be lucky to receive any offers. Recently, listings that were priced at or under market value received offer-sometimes multiple offers. Over-priced listings sat on the market unsold.

One risk of pricing too high for the market is that you won't receive offers. Sellers often find this hard to believe. Why won't buyers just make an offer if they think a listing is priced too high?

The answer is two-fold. First of all, if a listing is priced too high in a market where well-priced listings are selling, this may indicate that the seller has unrealistic expectations. Making an offer involves a big emotional commitment and it takes a lot of time. Most buyers don't want to waste their time offering on a listing that's over-priced for the market, particularly when there are other listings to choose from.

Secondly, even though buyers might prefer to buy without competition, the fact that a listing is popular is a stamp of approval. A property that is in high-demand is one that is likely to have good resale value.

Another risk of over-pricing is that you could end up in downward price spiral. Here’s how this can happen: You bring your home on the market listed at a price that you're sure is right. After all, your home is better--in your estimation--than anything else on the market. Your agent cautions against this, but you're intent on getting your price. After a month or two, you aren't even getting a nibble from an interested buyer. Even so, other listings similar to yours are coming on the market and selling. In fact, buyer's agents are using your over-priced listing to help them sell the well-priced listings that come on the market.

The longer your home stays on the market unsold, the bigger the risk that it will develop a negative stigma. Your home becomes the white elephant on the market. Buyers wonder if there's something wrong with the property. In most cases, the only thing wrong is the price.

So, you reluctantly agree to lower the price. Your efforts could be fruitless if you reduce too little, too late. Meanwhile, more well-priced listings come on the market and sell.

If the market softens, as it has in many areas around the country, you might have to make further price reductions. Buyers tend to gravitate to the newer listings, not the ones that have been on the market for months. You'll have to offer a cut-rate price to be competitive.

HOME SELLER TIP: It's difficult for sellers to be objective about the value of their home. Although most sellers estimate high, some sellers, who can't believe how much their home has appreciated, underestimate the value. For best results, rely on a real estate professional for a realistic price assessment. The dynamic is changing in many real estate markets around the country. Sellers, in many cases, are no longer in the driver's seat. Keep this in mind when you select a list price for your home.

Comparable sales from a few months ago may be out of date for the current market. Even though your neighbor's home sold for an exceptional price, it may have been the only game in town at the time.

THE CLOSING: Today, you're much more likely to find competition from other sellers who want to cash in on the recent extraordinary home price appreciation.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers," and "Starting Out, The Complete Home Buyer’s Guide," Chronicle Books.
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Mortgage shopping: what you should know before you begin

Taking the time to learn the facts
By: Jack Guttentag: Inman News
(This is part 1 of a seven-part series.)

Most consumers, before they start shopping for an automobile, decide on the brand, model and options they want. They realize that they can't shop effectively unless they know exactly what they are shopping for.

When they enter the mortgage market, in contrast, where their financial commitment may be 10 times larger, many consumers don't have a clue as to what they want. They look to the loan provider to guide them through the maze. This dependency is one major reason they often end up with a mortgage that is over-priced and, even worse, does not meet their needs.

This article poses eight questions that prospective borrowers should ask themselves before entering the market. Subsequent articles provide guidelines on how to answer them.

What type of mortgage should I select?

The major decision is between fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs). ARMs have lower payments in the early years than FRMs but expose borrowers to the risk of higher payments in later years. ARMs with the lowest early-year payments have the greatest risk of future rate and payment increases.

Which mortgage options should I select?

The major options are to waive the obligation to maintain an escrow account for taxes and insurance payments, which will cost you a little; an interest-only payment option, which also costs little; and a prepayment penalty, in exchange for which the lender will usually pay you.

How long of a term should I take?

The term of a mortgage is the period used to calculate the mortgage payment. The longer the term, the lower the mortgage payment but the slower you pay down the balance. Term selection is an issue primarily on FRMs, which are available at terms ranging from 10 years to 40 years. While 15-year and 40-year ARMs exist, most lenders offer only 30-year ARMs.

How many points should I pay?

Points are fees you pay the lender at the time the loan is closed, expressed as a percent of the loan. On a $100,000 loan, two points means a payment of $2,000. The more points you pay, the lower the interest rate. Hence, points should be viewed as an investment on which the return is higher the longer you have the mortgage.

How large a down payment should I make?

The down payment is the difference between the loan amount and the lower of the sale price or appraised value. If you have discretion over how much to put down, the down payment, like points, is best viewed as an investment. Investment in a larger down payment can yield a high return if it flips the loan into a lower mortgage insurance or interest rate category.

If I put less than 20 percent down, what type of mortgage insurance should I select?

Borrowers who put down less than 20 percent are charged for the risk they impose on lenders. However, borrowers often can choose how to pay. One option is to pay a premium to a private mortgage insurance company (PMI) selected by the lender. A second option is to pay the lender a higher interest rate, which is called lender-provided mortgage insurance (LPMI). In this case, the lender purchases insurance from a PMI, though not always. The third option is a "piggyback" arrangement, where the borrower takes out a first mortgage for 80 percent of property value, and a higher-rate second mortgage for the balance of the funds needed.

How long a lock period do I need and when should I lock?

The lock period is the period during which the lender guarantees the rate and points: the longer the lock period, the higher the price. Borrowers must choose when to lock and for how long.

What documentation requirements should I seek?

A lender's "documentation requirements" stipulate the information about the borrower's finances that must be provided and how this information will be verified, and then used by the lender. Lenders offer choices ranging from "full documentation" to "no-docs." Because the risk to the lender rises as documentation requirements become less stringent, the price of the mortgage rises correspondingly. Borrowers may or may not have any leeway, depending on what documentation they can provide.

Next week: How should borrowers decide the type of mortgage that best meets their needs?

The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at http://www.mtgprofessor.com.
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Condos Go Cabanas: Developers Sell Poolside Huts as Upgrades

Cabanas are the latest hot extra at condominium projects.
By: Cheryl Lu-Lien Tan: The Wall Street Journal Online
Ranging in space from about 140 to 500 square feet, they may come equipped with bathrooms or even a tiny kitchen and can cost as much as $500,000.

When Bruce Tucker moves into his new $400,000 digs at the Ocean Marine Yacht Club in Hallandale Beach, Fla., the draw won't be the high-end appliances, the marble baths or even the balconies with ocean views.

Instead, the 33-year-old software developer plans to spend a lot of time inside his own private cabana next to the complex's pool, where he and his buddies will gather around a 50-inch plasma television set and toss back beers. The cabana's price: $43,000 - or nearly 11% of the cost of his two-bedroom apartment - and that doesn't include the dark wood floors, cushy sofa and bar that he plans to have his decorator install.

Cabanas, prime real estate for the hip set in boutique hotels such as the Delano in Miami and the W in Los Angeles, are the latest hot extra at condominium projects. While the hotel versions are rented out for a few hours or a day, and tend to be made of flimsy fabric or wood, the new condo varieties are deeded to owners like the condo apartments themselves and usually constructed of sturdy materials like concrete. Ranging in space from about 140 to 500 square feet, they may come equipped with bathrooms or even a tiny kitchen. Some cost as much as $500,000, and those with better views or more prominent locations command the highest prices.

"It's sort of like having a prime parking space," says Steven Zelman, president of Home of Fine Decorators, a Hallandale Beach interior-design company that just completed a $200,000 renovation of a Miami condo cabana. "It's about convenience and stature - the guy who has that spot right in front, he wants everyone to see his car."

High Markups

In addition to providing a new selling point, cabanas offer developers another plus: added profit. The poolside units typically occupy space that would have been filled by such nonrevenue-generators as deck chairs or shrubbery. Because the cabanas often are basic shells described as "decorator ready" - blank slates without flooring, cabinetry or appliances - they don't cost much to build. Lee Hodges, project manager for Related Group of Florida, estimates it cost his company a bit more than $16,000 to erect each of the 26 beachfront cabanas at the Beach Club in Hallandale Beach yet it sold them for $100,000 apiece - a far higher markup than that of most condos.

The move to build pricey cabanas comes amid early signs of a slowdown in the booming real-estate market. In the last 10 years, condo sales have taken off as more baby boomers have downsized, purchased second homes or sought out apartments as investments. Last year, about 820,000 condos changed hands in the U.S., accounting for 12% of all residential real-estate transactions, according to the National Association of Realtors. That's up from 8.8% of the market in 1994, when 342,000 condos were sold. Some real-estate experts question whether the pace can keep up.

So far, condo buyers have been snapping up cabanas. Turnberry Associates' Ocean Colony in Miami sold 16 of its 19 beachside cabanas almost immediately when they first went on sale in January 2003 - at $500,000 a pop. (Ocean Colony condos themselves go for about $1.8 million to $5.5 million.) Only one cabana remains - and it's being reserved for the buyer of the largest apartment in the development. Jim Cohen, Turnberry's vice president of sales, says he has 37 residents on a waiting list, should any of the cabanas come back on the market or the remaining one go unsold.

"They're paying half a million for 250 square feet," Mr. Cohen says. "Do the math - I should have done the whole project in cabanas."

Eric and Helena Fordin say they didn't think twice about buying a cabana when they bought a $368,000 apartment at the Beach Club. "It was absolutely worth every penny," says Ms. Fordin, an events coordinator. "The blinds open up to have a full view of the ocean, so even when it's rainy we'll sit on the couch and watch a movie - and we're still on the beach."

Cabana Envy

Demand is so robust that another Beach Club resident tried to buy the Fordins' cabana for several times the $100,000 the couple had just paid. "Right when I moved in, someone who was closing on their unit offered me $200,000," says Mr. Fordin, a real estate developer. "I said, 'No, thank you,' and then they said, 'Would you take $300,000? We can do an all-cash deal tomorrow.'" The couple turned down that offer as well.

Realtor Silvia Jokalova says she's been envious of cabana people since she moved to the Beach Club six weeks ago. "I can see myself having barbecues down there, throwing parties for friends and family," she says. She has put her name on a waiting list and even is considering announcing her desire to buy one at an upcoming condo board meeting.

Yet cabana ownership comes with restrictions. Many condo associations have strict rules, such as forbidding people from staying in them overnight. "We didn't want people buying them for their maids or having their mother come live there," says Turnberry's Mr. Cohen. Owners who sell their apartments typically are required to sell their cabanas, too. Ocean Colony also lists guidelines on cabana neatness: Pathways leading up to cabana entrances have to be clutter-free and spaces that can be seen from the outside should be kept tidy, too. Condo associations can issue a fine or reprimand if a cabana owner flouts the rules.

Developers say they are confident their cabanas will continue to sell because of the strong demand for waterside amenities, particularly in Florida. "A big part of why you're buying here is the pool or the beach," says James Helman, executive vice president of Tarragon's Southern Division, which is building 15 cabanas at its Las Olas River House project in Fort Lauderdale. The 250- to 300-square-foot cabanas are priced from $175,000 to $200,000, and the five the company has put on the market so far sold right away.

Fifield Realty hasn't even begun selling the 28 cabanas at its Allure Las Vegas project, but it says it already has at least 50 apartment owners on the waiting list for the $30,000-to-$50,000 poolside structures. "A lot of it is image," says Rick Cavenaugh, Fifield's president. "If you're going to live your life down by the pool, you want to be there, you want people to see you there."
Email your comments to rjeditor@dowjones.com.
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Pros and cons of 'flipping' real estate

Process not as easy as many think
By: Robert J. Bruss: Inman News
Every property is a "flipper" or a "keeper." If you are not familiar with those real estate terms, a "flipper" is a property that is bought for a quick resale profit, usually in less than six months. But a "keeper" is a property held for at least a year, often for many years.

Most houses and condos are keepers. Their owners plan to own them for many years.

But some properties are ideal for fast resale profits. For example, if you buy a foreclosure property at a bargain price, it can often be "flipped" (meaning sold) to another buyer for a handsome profit within a few days or weeks.

Flippers are especially attractive to beginner real estate investors who want to quickly build up their "cash stash" from profits of buying low and reselling higher. There's nothing wrong, illegal or unethical by earning fast resale profits.

However, sometimes a property that looks like a quick easy resale at a large profit turns out otherwise.

To illustrate, I have an investor friend who bought a house from an elderly seller who wanted an easy cash sale without paying a real estate sales commission. Her asking price was about $40,000 below market value. My friend had access to cash and he closed the purchase within a few weeks. Only then did he discover the good looking house was riddled with extensive termite damage which would cost about $25,000 to repair.

That house also needed a new roof. Rather than being a quick "flipper" the house turned out to be a long term "keeper" until its market value appreciated to make the resale profitable after about three years. Meanwhile, he rented the house to tenants who eventually bought it.

But my friend enjoyed several advantages of holding that house for several years: (1) instead of earning a quick $40,000 resale profit he netted well over $100,000, and (2) by holding title over 12 months his resale profit would be taxed as a long term capital gain at a 15 percent tax rate rather than as ordinary income

THE KING OF FLIPPERS. In his recent book, "How to Be a Quick Turn Real Estate Millionaire," Ron LeGrand explains how his student Marco Kozlowski paid $100 for an option to buy an Orlando, Fla., house for $4,000,000 from a wealthy seller. The house had previously been listed for sale with a Realtor at $8.6 million, but it didn't sell.

Kozlowski, a 30-year-old, new realty investor, hired a professional auction company, which, 43 days later, auctioned that house for $5.6 million cash. The result was a "flipper" gross profit of $1.6 million. LeGrand reports Kozlowski acquired 119 deeds on flipper houses in the Orlando area within his first year of investing. Today, he teaches others how to profitably flip properties.

SECRETS OF PROFITABLE PROPERTY FLIPPING. Lest you think flipping properties is easy and simple, it isn't. But there are several secrets for finding these properties:

(1) Find a motivated seller who wants to sell but doesn't insist on receiving top dollar and will sell at least 25 percent below market value. Strong seller motivations include out-of-town job transfers, unemployment, divorce, financial problems, illness, death in the family, and health problems.

Longtime homeowners often have large home equities and are willing to sell below market value for a quick easy sale.

(2) Look for properties in need of inexpensive cosmetic fix-up rather than properties needing major structural repairs. "El dumpo" properties often just need fresh paint (the most profitable improvement of all), new light fixtures, cleaning and repairs, new carpets and flooring, and fresh landscaping.

Unprofitable repairs to avoid include structural changes, new roof and foundation repairs, which are very expensive but add little or no market value.

(3) Sources of "fast flip" properties include local real estate agents, newspaper classified ads, foreclosure sales, probate sales, bankruptcies, recently expired MLS (multiple listing service) listings, vacant rental houses, absentee out-of-town owner lists, and properties with unpaid property taxes.

(4) Another great way to find potential flippers is to drive around neighborhoods looking for houses that appear to be vacant, run-down, or abandoned. By jotting down the address, taking a photo to remember the house, and then checking the owner's mailing address at the tax collector's office will often uncover an owner who would be willing to sell.

Even the best neighborhoods have houses meeting these criteria. If you discover the house has been owned for many years, often with a small or no mortgage and a large equity, the seller might be extremely eager to sell at a bargain price.

POSSIBLE DISADVANTAGES OF FLIPPERS. As with any profitable enterprise, there are potential disadvantages of flipping properties:

(1) Profits from the sale of investment property held less than 12 months are taxed at ordinary income tax rates. However, if you hold title over one year, then the capital gains are currently taxed at a low 15 percent rate, plus any applicable state tax.

However, if you own and occupy the property as your principal residence for at least 24 of the 60 months before its sale, then your profit up to $250,000 (up to $500,000 for a married couple filing a joint tax return) is completely tax-free under Internal Revenue Code 121.

(2) Fix-up work is a disadvantage for some investors who don't like to upgrade properties. By hiring fix-up workers, the cosmetic improvements can usually be accomplished within 30 days to increase the property's market value. A goal of most experienced "flippers" is to add at least $2 of market value for each $1 spent on fix-up.

(3) A quick profitable resale forfeits the potential for future profits from the property's long-term appreciation in market value. With median U.S. home prices currently appreciating around 10 percent annually, many investors adopt a strategy of keeping some properties and flipping others.

SUMMARY: Flipping properties for quick resale profits can be a great way to get started investing in real estate. But the potential disadvantages include paying ordinary income tax rates, rather than the lower long term capital gain tax rates. More details are in my special report, "Pros and Cons of Flipping Houses and Investment Properties for Fast Cash Flow Profits," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com.
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Fast real estate profits require elbow grease

Part 3: How to start investing in real estate
By: Robert J. Bruss: Inman News
There are many methods to become very wealthy, or just modestly wealthy, with your real estate investments. Although I have personally done "pretty good" investing in real estate, many of my friends, college real estate students and subscribers have done much better. I'm extremely happy for them! This four-part series will explore the question: Why do I want to invest in real estate? (See Part 1: First-timers find a place to call home and Part 2: Single-family homes best spot to sink money.)

3 – I want to earn quick real estate profits. Real estate investing is not a get-rich-quick overnight technique. Yes, I know real estate investors who buy run-down fixer-upper houses, apartment buildings, shopping centers, hotels, warehouses and office buildings who have earned "fast" profits in less than 12 months by either selling after fix-up or refinancing to take out tax-free refinance cash. But such fix-up profits usually involve a dirty little four-letter word, W-O-R-K, which many investors dislike.

Occasionally, in the stock market it is possible to earn fast profits by purchasing an undervalued stock you anticipate will increase substantially in value during the next few weeks. But that is a rare event. Because of stock-market volatility and losses, many common stock-market investors have switched to real estate investment properties, especially rental houses, which don't plummet in value overnight.

Some investors think buying REIT (real estate investment trust) stock is a great way to earn big real estate profits without work. Although many REITs have done very well, especially because REITs are required by law to pay out 90 percent of earnings in dividends to their stockholders, REIT investors are at the mercy of the REIT managers. Such REIT purchases are really not real estate investments, primarily due to the individual investor's lack of control. Rather, they are stock-market investments that have most of their assets in real estate.

It is possible to earn quick real estate profits. The technique is called "flipping." That means you acquire a property at a bargain-basement below-market value purchase price, perhaps fix it up a little, and then quickly sell it at a profit. It has been and can be done. The problem is once the investor stops buying and flipping properties, the profit income also stops. Equally important, those resale profits are taxable at ordinary income tax rates if the property is held less than 12 months.

A recent book I recommend on this topic is "How to Be a Quick Turn Real Estate Millionaire" by Ron LeGrand. Be sure to order and listen to his excellent free CDs, especially the one on land trusts, which come with the book purchase. But be aware his relentless telemarketers will then try to sell you more products and seminars. I also have a special report, "Pros and Cons of Flipping Houses and Investment Properties for Fast Cash Flow Profits," which might interest you.
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Ten Fall Maintenance Tips

Pillar To Post, North America's largest home inspection service, recommends Ten Fall Maintenance Tips to better prepare a home for the winter.
Realty Times
Because homes react to seasonal changes in temperature and moisture levels, it's important that maintenance is done in order to avoid higher energy bills, or worse, damage to the home.

"It's important for people to know that Fall maintenance will not only make their homes more energy efficient during the winter months, but will safeguard their homes against potential seasonal 'disasters' such as leaking roofs or home fires due to neglected chimneys," says Dan Steward, Pillar To Post president.

These 10 steps can help homeowners be prepared and safe this winter:

    1. Check the heating system. Check the filter, pilot light and burners in a
       system fueled by gas or oil. Fireplaces, boilers, water heaters, space
       heaters and wood burning stoves should also be serviced every year.

    2. Clean ducts in the heating system. Clean and vacuum dust from vents,
       baseboard heaters and cold air returns. Dust build-up in ducts is a major
       cause of indoor pollutants. In a home that is shut tight for the winter, dust
       increases the possibility of illness. Ducts should be professionally cleaned
       about every three years.

    3. Test fire and smoke alarms as well as carbon monoxide detectors. Often alarms
       and detectors go unattended. Batteries should be checked every six months to
       ensure that they're working.

    4. Remove excess leaves and damaged branches surrounding the house. Now that
       leaves have fallen off of trees, it's a good time to remove any dead
       branches. Dead branches have the potential to break and fall, ruining roofs
       or decks.

    5. Maintain gutters. Remove all debris that can slow or impede the ability of
       the water to drain effectively from the roof. Trapped water can freeze then
       thaw, an action which could be destructive not only to the gutters themselves
       but to the adjoining roof as well.

    6. Inspect the roof. Look for damaged or loose shingles, gaps in the flashing at
       joints with siding, vents and flues, as well as damaged mortar around the
       chimney. Proactive maintenance can prevent emergencies and expensive repairs.

    7. Inspect exterior walls and window sills. Check walls and window sills for
       damage such as cracks, gaps, loose or crumbling mortar, along with splitting
       and decaying wood. Wood trim and siding can suffer from deterioration or
       loose paint. Caulk exterior joints around windows and doors, which helps keep
       the home weather tight and helps to lower heating bills .

    8. Maintain steps and handrails. Repair broken steps and secure loose banisters.
       Broken steps are easily hidden beneath snow, which could cause a dangerous
       fall. Similarly, a person slipping on ice will grab a handrail for support.

    9. Prepare storm windows for installation. Check all weather stripping and all
       fasteners. Well-maintained and properly fitted storm windows will help to
       save on energy costs during the winter months.

    10.Pools, sprinkler systems and outside faucets should be shut down. Homeowners
       can shut down outside faucets, while the other tasks are best performed by
       industry professionals to prevent cracked pipes and pool bottoms.

One extra bonus tip for those people who are planning to do some winter projects inside the house, such as painting or carpet renewing: Paint interior walls before it gets too cold to leave the windows open for ventilation from the smell or the fumes. The same goes for carpet cleaning or floor refinishing.

Planning ahead in order to complete these Ten Maintenance Tips is important for many reasons. If these maintenance tips are done over the next few weeks, people can then sit back and enjoy the winter, the holidays, lower energy bills and their own peace of mind.

Pillar To Post is the leading provider of home inspection services to home buyers and real estate professionals in North America. Operating more than 400 franchises in the U.S. and Canada, Pillar To Post offers the most consistently accurate and comprehensive inspection program available to residential buyers and sellers. Founded more than a decade ago, Pillar To Post is today ranked #1 in the Home Inspections category by Entrepreneur Magazine. The company's home inspections services ensure that Pillar To Post supports home buyers, sellers and real estate professionals to provide peace of mind and informed decisions. For more information visit pillartopost.com.
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Holidays Coming? So Are the Most Serious Homebuyers

A lot of sellers and real estate agents think no one is buying between Thanksgiving and the Super Bowl. They're wrong.
By: Al Heavens: RealtyTimes
Not only are real estate sales slowing a bit in many areas; the market is heading into what typically is a holiday slowdown.

A lot of real estate agents just give up and go turkey stuffing or Christmas shopping. This is a bad idea, because the holidays are usually filled with serious buyers who often are willing to act quickly to get in to a house before the first of the year.

Winter, too, usually finds a lot of agents getting ready for the spring market instead of focusing on the here and now.

I'll acknowledge that a lot of houses don't look their best with icicles hanging from the gutters and several feet of snow shoveled on either side of the walk, but serious buyers usually don't care.

In fact, with winter conditions typically the harshest of the entire year, these buyers can see how well the house holds up to the elements. If there isn't water dripping down the walls from ice dams on the roofs, and if the interior is toasty without the furnace thermostat cranked up to 90, a lot of buyers will take out their checkbooks.

You don't get snow in Southern California or Houston? You do get rain and wind, so check those roofs and cut the tree branches away from the house.

The holidays offer sellers a perfect opportunity to dress up the house for prospective buyers. There are some buyers out there who like tall, live Christmas trees and will look favorably on a spacious family room with nine or 10-foot ceilings to accommodate one.

Don't overdo your decorations. You may like your house bathed in enough flashing lights to guide planes to the nearest airport, but your tastes and the buyers' rarely mesh. The majority of buyers still prefer the Currier & Ives engraving to the stage lighting for a Metallica concert.

If they do like gaudy, let them decide that after settlement.

Be willing to accommodate open houses and evening appointments. Because holiday-time buyers tend to be more serious, there won't be many of either. Go shopping or to others' holiday parties while the house is being shown.

Now, seller, you are probably asking, "Won't this disrupt my holidays?" Of course, but just this year. You want to sell the house, right? Focus on next Christmas.

Settlement is typically 90 days after the agreement of sale is signed, so moving on Christmas Day or the day after isn't going to be necessary. In addition, home inspectors, insurance agents, and brokerage staff aren't as busy at this time of the year as in the spring, for example, so the responses to your phone calls (unless you try to contact them at 6 p.m. Christmas Eve) will be quicker.

So what about the dead of winter? Here's the thinking, as wrong-headed as it may sound: The market takes a hiatus from Thanksgiving to the day after the Superbowl.

Nonsense. This assumes everyone watches football. A lot of people do, but even the diehards might be willing to take a quick look at some houses during half-time or on a weekday evening.

A caveat: Don't base your decision on a house you've only seen by street lighting. Although light is at a premium in the winter, you'll need to find some time in the day to do it.

Showing a house in winter is somewhat of a challenge, but again you are dealing with motivated buyers. If you are concerned that the snow and cold might be turn-off, a well-placed series of photos showing the house in other times of the year might help.

Keep the sidewalks clear and ice-free. Use warm, sunny days to repair winter damage, especially before the house is shown. Try to bring as much available light into the house as you can, keeping the curtains, blinds and shades open and introducing additional lighting -- a lamp -- in darker rooms.

With growing concern over energy costs, the agent might focus on what you have done to keep those expenses under control. Is the crawlspace insulated? What about the attic? What are utility bills like in a typical winter?

Try to bring the green inside. You can buy trees and exotic plants at the grocery store for a few bucks. Just make sure you keep them watered.

And growing things out of doors in the winter is possible. Window boxes can hold hardy pansies, which seem to thrive in many colder areas in December and January. There are all sorts of evergreens that do their best in the winter months.

Since most markets are beginning to experience increases in inventory, you'll probably be better off selling now than waiting till the spring, when you have to compete with the rest of the world.
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The Weekend Guide! November 17 - November 20, 2005

The Weekend Guide for November 17 - November 20, 2005.
Full Article:
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State Existing-Home Sales Hit Another Record in 3Q

NAR: REALTOR® Magazine Online
Total state existing-home sales set a record in the third quarter, with 44 states and the District of Columbia showing higher sales than a year ago, according to the NATIONAL ASSOCIATION OF REALTORS®.

NAR’s quarterly report on total existing-home sales, which include single-family and condos, shows that the national seasonally adjusted annual rate was 7.24 million units in the third quarter, up 6.5 percent from 6.80 million in the third quarter of 2004. The previous record was 7.22 million units in the second quarter of this year.

The strongest increase was in Arkansas, where the third-quarter sales activity rose 32.1 percent compared with the third quarter of 2004. Utah existing-home sales increased 26.6 percent from a year earlier, and Washington state was up by 20.0 percent. Fourteen other states recorded double-digit sales gains. Four states experienced declines, while complete data for two states was not available.

David Lereah, NAR’s chief economist, says third-quarter home sales mark a peak for the current housing cycle. “We’re fairly confident that third-quarter home sales will prove to be the high point of the five-year housing boom,” he says. “Favorable housing affordability conditions complemented a strong fundamental demand, but we expect a modest easing from higher mortgage interest rates and home sales will hold at a more sustainable pace.” He expects overall home sales next year to be the second highest on record.

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 5.76 percent in the third quarter, up from 5.72 percent in the second quarter; the rate it was 5.89 percent in the third quarter of 2004.

NAR President Thomas M. Stevens from Vienna, Va., says the transitioning housing market will continue to see positive market fundamentals. “Although mortgage interest rates are expected to gradually rise, they will remain historically low; the labor market is firming and the economy is growing,” said Stevens, senior vice president of NRT Inc. “Our growing population has a fundamental need for housing, so these conditions mean home sales should stay at levels that help to support the overall economy.”

Regionally, the South recorded the strongest annual increase with an existing-home sales pace of 2.77 million units in the third quarter, up 8.2 percent from a year earlier. After Arkansas, the strongest increase in the region was in South Carolina, up 18.1 percent from the third quarter of 2004, followed by Georgia, where existing-home sales rose 14.4 percent, and Texas, which increased 13.9 percent.

The Northeast saw a third quarter existing-home sales rate of 1.20 million units, up 6.9 percent from the third quarter of 2004. Massachusetts experienced the strongest increase in the region with sales activity 11.2 percent above a year ago, followed by Connecticut, up 8.3 percent, and New York, which increased 7.0 percent.

In the Midwest, total existing-home sales in the third quarter increased 5.0 percent to a 1.63 million-unit annual pace compared to a year ago. North Dakota led the region, up 19.3 percent from the third quarter of last year, followed by Indiana, with a 12.3 percent rise, and South Dakota, up 10.5 percent.

In the West, existing-home sales rose 4.1 percent to a pace of 1.64 million units in the third quarter from the same period in 2004. After Utah and Washington, the strongest increase was in Oregon, where total existing-home sales rose 15.5 percent compared to a year ago; Idaho rose 12.3 percent while Alaska increased 11.7 percent.
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NAR: Home Appreciation Still Hot in Most Areas

NAR: REALTOR® Magazine Online
Strong annual increases in median existing-home prices were common in most metropolitan areas during the third quarter, according to the latest report by the NATIONAL ASSOCIATION OF REALTORS®.

The association’s third-quarter median existing single-family home price survey, covering changes in 147 metropolitan statistical areas, shows 69 areas with double-digit annual price increases. Six metros had small price declines.

The national median existing single-family home price was $215,900 in the third quarter, up 14.7 percent from the third quarter of 2004 when the median price was $188,200. The median is a typical market price where half of the homes sold for more and half sold for less. Ninety-seven metros—two-thirds of the total—experienced increases greater than the U.S. historic average of 6.4 percent.

David Lereah, NAR’s chief economist, says the pace of price appreciation in the third quarter is far from being normal over time. “These historically high home price gains are the simple result of more buyers than sellers in the market,” he says. “The good news is that inventory levels are improving, and housing supply will come close to buyer demand in 2006. In other words, we expect a healthy and more balanced market next year.”

Since 1968, home prices generally have risen between 1 and 2 percentage points faster than the overall rate of inflation; the historic average price gain appears high relative to inflation because there was a period of rapid inflation in the U.S. during the 1970s and early 1980s.

NAR President Thomas M. Stevens explains what buyers and sellers generally can expect in the coming year. “Improvements in inventory in most areas should take pressure off of home buyers to make snap decisions, or find themselves in a competitive bidding situation,” says Stevens, senior vice president of NRT Inc. in Vienna, Va. “This calmer real estate market will create a more level environment for buyers in weighing options to invest in the American dream of homeownership. Sellers will enjoy very healthy gains on the value of their home, but should expect annual increases to be much closer to historic levels going forward.”

The strongest price increase in the nation was in the Phoenix-Mesa-Scottsdale area of Arizona, where the third quarter price of $268,000 rose 55.2 percent from a year earlier. Next was Orlando, Fla., at $261,300, up 44.8 percent from the third quarter of 2004. Cape Coral-Fort Meyers, Fla., with a third quarter median price of $277,600, was up 42.5 percent in the last year.

The areas experiencing price declines were lower-priced markets, with one or both of the conditions necessary for price softness—local economic weakness, primarily in jobs, or a large supply of homes for sale in the local area.

Median third-quarter metro area prices ranged from $72,800 in Danville, Ill., to nearly 10 times that amount in the San Francisco-Oakland-Fremont area of California where the median price was $721,900. The second most expensive area in the United States was Anaheim-Santa Ana (Orange County, Calif.) at $710,700, followed by the Honolulu area and San Diego-Carlsbad-San Marcos area of California, tied at $615,000.

Other low-cost markets include, Elmira, N.Y., the second least-costly metro, at $77,100, and Decatur, Ill., with a third-quarter typical resale home price of $85,500.

Regionally, the strongest increase was in the West, where the median existing single-family home price rose 18.8 percent over the last year to $322,000 during the third quarter. After Phoenix-Mesa-Scottsdale, the strongest increase in the West was in the Tucson area, where the median price of $242,300 rose 34.7 percent from a year earlier, followed by Honolulu, up 31.1 percent, and Eugene-Springfield, Ore., at $208,900, up 25.9 percent from the third quarter of 2004.

In the Northeast, the median resale home price during the third quarter was $249,300, up 13.2 percent from a year earlier. The strongest increase in the region was in the Glenn Falls, N.Y., area, at $160,000, up 25.4 percent from the third quarter of 2004, followed by Kingston, N.Y., with a median price of $259,300, up 19.8 percent, and the Philadelphia-Camden-Wilmington area of Pennsylvania, New Jersey, Delaware, and Maryland, at $230,600, up 19.0 percent.

In the Midwest, the third-quarter median existing-home price of $173,300 rose 13.1 percent from the same period in 2004. The strongest increase in the Midwest was in the Waterloo-Cedar Falls area of Iowa, where the median price of $111,000 was 14.8 percent higher than the third quarter of 2004. Next was Bloomington-Normal, Ill., at $170,900, up 14.5 percent, and Rockford, Ill., at $120,400, up 13.7 percent in the last year.

In the South, the typical existing-home price was $183,500 in the third quarter, up 7.7 percent from a year earlier. After the Orlando and Cape Coral-Fort Meyers areas of Florida, the strongest increase in the South was in the Deltona-Daytona Beach-Ormond Beach, Fla., area, at $208,200, up 33.8 percent from the third quarter of 2004. Next was Palm Bay-Melbourne-Titusville, Fla., where the third quarter median price of $212,800 was 33.6 percent higher than a year ago, and Ocala, Fla., at $151,500, up 31.9 percent.
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Why traditional real estate brokerage is alive and well

Guest perspective: Full-service brokers offer expertise, assume risk
By: Kelly Sweeney: Inman News
Editor's note: Kelly Sweeney is president of Weir Manuel Realtors in Birmingham, Mich. He wrote the following guest perspective on the state of traditional real estate brokerage services.

We all witnessed the dot-com impact on the stock market a few years ago. There was a serious rise and subsequent decline in Americans' net worth as stock market valuations eroded when new Internet business models failed to deliver on their promises. Some have asked, "How could so many smart people have been so gullible?"

There can be no question that technology and the Internet have changed our lives. The way we communicate and the way in which goods and services are marketed and sold have been permanently altered.

As a result of this new technology, new business models have emerged in almost every sector. The real estate brokerage and mortgage banking industries are no exception. New "low-cost" alternatives promising thousands in savings to the consumer are popping up everywhere, just as the dot-coms did before. Their new value proposition is "get your home sold for much less."

But does this new approach really maximize the seller's value and minimize the seller's liability? To answer that question let's examine the components of the traditional real estate broker's value proposition. The traditional full service real estate broker contributes many services and considerable expertise to the real estate transaction.

One of the more obvious services provided by the traditional broker is a marketing and promotion plan of which one small component is marketing the property through the multiple listing service. Properly staging the property, advertising and promoting the property, answering inquiries, handling showing appointments, hosting open houses, preparing legal documents and presenting offers are all part of the service provided by the traditional broker.

In addition, consumers rely on the broker's experience and knowledge in the areas of pricing, negotiating, market knowledge and contract law.

This type of advocacy and the many of the services listed above are typically not provided by the emerging low-cost brokerage models. Their marketing effort is typically limited to entering the property into one of the multiple listing services and in some instances providing a yard sign. The remainder of the effort necessary to actually sell and close the property is left unattended to or falls squarely on the shoulders of the seller himself.

In cases where the seller has the time and the expertise to perform these functions on his or her own, an opportunity truly exists for the seller to save significantly on real estate commissions. In the vast majority of cases, however, the seller does not have the time or is not capable of performing one or more essential elements of the selling process and the property lingers on the market and remains unsold. In still other cases, the limited nature of the services offered by the "low cost" broker is not made clear to the seller and sellers' expectations are not met. In either case, the fees paid to the "low cost" broker, although modest, are typically lost with no value having been rendered to the seller in return.

But the real difference that is frequently missed in the ongoing philosophical debate about limited-service versus full-service real estate brokers is this: "Which party assumes the risk of getting the property sold?"

The full-service brokerage model, which has evolved over the last 100 years or so, under which full commissions are charged, is based on the broker assuming all of the risk of sale. That is to say, the broker agrees to take a listing, expend significant time, effort and money on getting the property sold and is only compensated if and when the property transaction actually closes and the seller receives his proceeds from sale. Included in the commissions charged under this model is a significant component for risk assumed by the broker. There will always be a certain number of listings taken that do not sell or do not close, but for which the broker still had to expend significant resources.

The limited-service or low-cost model, on the other hand, is based upon the seller assuming all the risk of sale. The seller pays the broker a flat fee up front or even a series of fees based on the level of service actually provided by the broker. While these fees are typically less than those charged by the full service traditional broker, they are paid regardless of results. If the property does not sell, the seller experiences the loss, not the broker. Under this model, the broker has no financial incentive to make sure that the property actually sells.

In all but the hottest sellers markets in the country, using a low-cost alternative will many times prove to be "penny wise and pound foolish." Truly motivated sellers who understand the true nature of both business models will almost always be better served and save in the long run by using a proven traditional full service real estate broker.
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SoCal real estate sales climb for third month

But San Diego region takes a hit
Inman News
Southern California home sales increased slightly for the third straight month in October, led by strong sales in the Inland Empire and increased regional inventory levels, according to DataQuick Information Systems, a real estate information company. Price appreciation rates remained in the mid-teens.

A total of 28,489 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 10.2 percent from 31,470 in September, but up 1.1 percent from 28,189 for October last year, DataQuick reported.

While sales declined on a year-over-year basis during the first half of this year, they have increased since August. So far this year 299,109 homes have been sold, down 0.1 percent from 299,421 for the same 10 months last year.

Home sales slumped 12.7 percent in San Diego County and 2.8 percent in Ventura County from October 2004 to October 2005, but increased in the five other Southern California counties tracked by DataQuick.

"The big question is still whether or not the real estate market will end this cycle with a crash, or with a soft landing. Right now the latter scenario is still the most likely. Home values have doubled in the past four years and almost all, if not all, of those gains are here to stay," said Marshall Prentice, DataQuick president.

The median price paid for a Southern California home was $473,000 last month. That was down 0.4 percent from $475,000 in September, but up 15.1 percent from $410,000 for October 2004. The peak was in August at $476,000.

Year-over-year changes in the median have been in the mid-teens since April, DataQuick reported. The year-over-year change in the median price ranged last month from 4.9 percent in San Diego County to 33.1 percent in San Bernardino County. The median in both counties hit a new peak.

The typical monthly mortgage payment that Southern California home buyers committed themselves to paying was $2,169 last month, up from $2,092 for the previous month, and up from $1,811 for October a year ago. Adjusted for inflation, current payments are about 5 percent below their peak in the spring of 1989.

"Indicators of market distress are still largely absent," DataQuick announced. "Foreclosure activity is edging up from its bottom, but is still low. Down payment sizes are stable, as are flipping rates and non-owner occupied buying activity."

DataQuick monitors national real estate activity and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.
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