Wealthy homeowners brace for 'fiscal cliff'

Real-estate experts say that as more of the wealthy sell out of fear of a tax increase, they could drive up inventory and lower prices in the top of the real estate market. Realtors to the rich have started getting a strange new kind of phone call. Wealthy homeowners with properties for sale are suddenly demanding that the brokers get them a deal in the next five months. The reason, they say, is the fiscal cliff. If the Bush tax cuts expire and capital-gains tax rates go up on Jan. 1, sellers in the high-end real-estate market could owe millions more in taxes on their sales. As a result, many wealthy sellers are racing to close before 2013. Others who were thinking of putting their homes on the market next year or later are listing them this summer. Call it “The Mansion Cliff.” Real-estate experts say that as more of the wealthy sell out of fear of a tax increase, they could drive up inventory and lower prices in the top of the real estate market, which has been one of the few bright spots in the economy. Any softening at the high end, or a spike in inventory, could ripple through the housing market and add new pressure to prices, although it could also increase sales volume. “This has become a key issue for sellers,” said Stephen Games of Pacific Sotheby’s Realty in San Diego. “Sellers want to get a deal done before the election. They want to avoid the uncertainty.” Games said that one of his clients recently sold a $13 million ocean-view property in La Jolla, Calif. for less than the original asking price – in large part to avoid the possible increase in taxes next year. The tax savings from the deal was more than $600,000 compared to the potentially higher bill next year. One of the top luxury brokers in Miami, recently sold a mansion in the posh enclave of Indian Creek for $38 million. He said the owner accepted a price below his original goal for fear of the tax cliff. “It was certainly a factor in his decision,” Realtor said. “When you’re talking about $38 million, that’s a big difference in tax savings. The tax issue was definitely a motivator in his decision to take a little less than he wanted.” One New York broker said she got two new listings in the past week that were driven in part by tax fears. “The sellers were on the fence on whether to sell, but when they considered the cliff, they decided to list,” the broker said. “They want to do this quickly. The message to me is, 'Get this done now.'” Granted, the tax fears of the mansion-set may prove to be unfounded. Capital-gains rates could remain unchanged if a deal gets done in Washington. And the selling deliberations of the wealthy are a minor problem compared to the broader headwinds in the economy. What's more, the rich (especially foreigners) continue to buy real estate as an investment as stocks and other financial investments weaken. Yet the million-plus real-estate market experienced a similar spasm in 2010, when many of the wealthy feared Congress would raise capital-gains rates. Inventory popped up and prices slumped. Jonathan Miller, of Miller Samuel, the New York appraisal and consulting firm, said that in the fourth quarter of 2010, the supply of homes priced at $1 million or more increased in the New York area. In the affluent Hamptons, inventory increased 5 percent in the fourth quarter, a much greater increase than the same period a year earlier. Miller said a similar or even larger increase is likely this year. “I’m confident we’ll see just as much or more this time because of the fiscal cliff,” he said. “People are going to be pressing to close earlier than they might have.” The math of the mansion cliff is compelling. If the Bush tax cuts are allowed to expire, the current capital-gains tax of 15 percent will rise to 20 percent. Alan Kufeld, a principal with accounting firm Rothstein Kass and an advisor to wealthy families, explains that families who sell a second home that they’ve owned for more than a year pay capital-gains taxes on the difference between the sale price and their original purchase price (minus certain fees, improvements and other deductions). A $38 million home purchased for $8 million with $2 million in improvements could show a gain of about $28 million. The current federal tax bill on that gain would be around $4 million. If taxes go up next year, the tax would be $5.5 million – a difference of $1.5 million. The new federal health-care tax of 3.8 percent also kicks in next year for couples who make $250,000 or more. But for the $28 million gain described above, the tax could add another $1 million, bringing the total tax difference to $2.5 million. On primary residences, where owners have lived for more than two out of five years, there is a $500,000 exlusion. But brokers say that when a home is priced at $10 million or $20 million, the exemption is less of a factor. In addition to the federal tax, there will also be state and local taxes applied to the gains. Some of those tax rates are also expected to go up in some states next year. Kufeld aid his clients aren’t making long-term real estate decisions based on short-term tax issues. And the deals have to fit into a family's broader planning. But he said that since the potential tax savings are significant, “families are certainly having discussions about it. And they should.” ** Info from The Institute For Luxury Home Marketing website. (NBC News _ Business)

Single Family (RE1) LUXURY in _ PALM BEACH COUNTY / Actives and Closed

Market Analysis Report Property Type: Single Family (RE1) Status: Closed Sale Number of Properties: 9 _ PALM BEACH COUNTY #Beds #FBaths SF/FF List Price LP$/SqFt Sale Price SP$/SqFt SP$/LP$ Days on Market High 6 4 3,906 $7,250,000 $930 $6,000,000 $770 100 72 Low 3 4 3,906 $549,900 $139 $539,000 $134 82.8 6 Average 4.44 4 3,906 $1,860,406 $364 $1,663,039 $333 94.36 42.56 Median 4 4 3,906 $1,000,000 $289 $1,000,000 $289 95.4 39 *Search Criteria Status CS County PALMBCH List Price between 500,000 - SqFt Liv Area between 2,500 - #Beds between 3 - Entry Date between 1/1/2013 - Year Built between 2,011 - Market Analysis Report Property Type: Single Family (RE1) Status: Active-Available Number of Properties: 53 _ PALM BEACH COUNTY #Beds #FBaths SF/FF List Price LP$/SqFt Sale Price SP$/SqFt SP$/LP$ Days on Market High 7 6 5,123 $9,995,000 $2,107 $0 $0 0 135 Low 3 3 2,958 $549,000 $141 $0 $0 0 1 Average 4.53 4.33 3,993 $2,855,320 $510 $0 $0 0 29.16 Median 5 4 3,898 $2,395,000 $431 $0 $0 0 13 *Search Criteria Status A County PALMBCH List Price between 500,000 - SqFt Liv Area between 2,500 - #Beds between 3 - Entry Date between 1/1/2013 - Year Built between 2,011 -

BROWARD NEW (2011 +) LUXURY Single Family Houses _ Active & Closed

Market Analysis Report Property Type: Single Family (RE1) Status: Active-Available Number of Properties: 38 _ Broward County #Beds #FBaths SF/FF List Price LP$/SqFt Sale Price SP$/SqFt SP$/LP$ Days on Market High 7 8 10,000 $4,495,000 $1,022 $0 $0 0 0 Low 3 2 2,500 $524,900 $111 $0 $0 0 0 Average 4.92 4.42 4,359.79 $1,448,576 $336 $0 $0 0 0 Median 5 4 4,217 $1,125,000 $248 $0 $0 0 0 *Search Criteria Status Active County BROWARD List Price between 500,000 - SqFt Liv Area between 2,500 - #Beds between 3 - Entry Date between 1/1/2013 - Year Built between 2,011 - Market Analysis Report Property Type: Single Family (RE1) Status: Closed Sale Number of Properties: 8 _ Broward County #Beds #FBaths SF/FF List Price LP$/SqFt Sale Price SP$/SqFt SP$/LP$ Days on Market High 5 5 6,050 $3,600,000 $595 $3,550,000 $587 99.04 53 Low 3 3 2,634 $520,000 $173 $515,000 $172 86.5 3 Average 4.25 3.57 3,504.57 $1,082,963 $272 $1,030,188 $257 94.49 23.25 Median 4 3 3,000 $649,900 $216 $604,500 $199 94.87 19.5 *Search Criteria Status CS County BROWARD List Price between 500,000 - SqFt Liv Area between 2,500 - #Beds between 3 - Entry Date between 1/1/2013 - Year Built between 2,011 - ** Data from MLX

NEW (2011 +) LUXURY Single Family Houses CLOSED & ACTIVE till Today / Miami Dade County

Market Analysis Report _ NEW (2011 +)LUXURY SINGLE FAMILY HOUSES CLOSED TILL TODAY in Miami Dade County Property Type: Single Family (RE1) Status: Closed Sale Number of Properties: 12 #Beds #FBaths SF/FF List Price LP$/SqFt Sale Price SP$/SqFt SP$/LP$ Days on Market High 10 10 13,746 $8,150,000 $991 $7,500,000 $923 107.16 533 Low 3 3 2,764 $579,000 $140 $564,500 $150 86.36 1 Average 5.25 5.08 5,342.42 $2,848,158 $484 $2,620,494 $448 94.54 120.92 Median 4.5 4 3,857 $1,737,500 $451 $1,606,000 $416 93.08 48.5 SqFt Liv Area between 2,500 - #Beds between 3 - Year Built between 2,011 - Status CLOSED List Price between 500,000 - Closing Date between 1/1/2013 - SqFt Liv Area between 2,500 - #Beds between 3 - Year Built between 2,011 - Market Analysis Report _ NEW (2011 +) ACTIVE LUXURY SINGLE FAMILY HOUSES TILL TODAY in Miami Dade County Property Type: Single Family (RE1) Status: Active-Available Number of Properties: 47 #Beds #FBaths SF/FF List Price LP$/SqFt Sale Price SP$/SqFt SP$/LP$ Days on Market High 10 11 16,700 $16,900,000 $1,514 $0 $0 0 0 Low 3 3 2,773 $519,000 $149 $0 $0 0 0 Average 5.77 5.74 6,613.36 $3,735,221 $496 $0 $0 0 0 Median 6 5 5,349 $2,689,000 $431 $0 $0 0 0 Search Criteria Status ACTIVE County DADE List Price between 500,000 - SqFt Liv Area between 2,500 - #Beds between 3 - Entry Date between 1/1/2013 - Today Year Built between 2,011 - Today ** Info from MLX

thinking of refinancing ?....its a great time to Cash Out & Purchase Investment Properties

If you've been thinking of refinancing, mortgage experts say now is the time to take action. Improving economic conditions, potential rate increases, and expected changes to government programs means you may soon find it more difficult and expensive to refinance your mortgage. "People who are still waiting to refinance will realize that rates might never be this low again in our lifetime," says David Lazowski, branch manager at Fairway Independent Mortgage in Boston, MA. Still not convinced? Read on to learn why mortgage experts say you should refinance before spring arrives. Reason 1 - Changes to Mortgage Insurance Premiums (MIP) Is your mortgage more than 80 percent of your home's value? If so, upcoming changes by the U.S. Department of Housing and Urban Development could increase your refinancing costs if you wait to refinance. In fact, effective April 1, 2013, the Federal Housing Authority's (FHA) mortgage insurance premiums are set to increase. Currently, lenders require mortgages greater than 80 percent of the home value to be covered by mortgage insurance, and the homeowner pays the premium cost. Richard Booth, a certified mortgage banker, explains how the increased premiums affect homeowners: Borrowers with less than 20 percent equity will pay more, he says, impacting their budgets and ability to borrow funds. "The result will be higher monthly costs and thus borrowers will have their borrowing capacity reduced," Booth adds. But that's not all: "Included in the many changes is the removal of the provision which permitted borrowers to drop their MIP once they reached a 78 percent Loan-to-Value (LTV), and the five year threshold," says Booth. This means that "many will be required to carry MIP for the life of the loan." [Think refinancing is right for you? Click to compare rates from multiple lenders now.] Reason 2 - Home Affordable Refinance Program (HARP) May Be Ending If you qualify for a HARP refinance but haven't taken advantage of it yet, you may soon be out of luck. Our experts believe the HARP programs may be discontinued. "The Home Affordable Refinance Program, designed to help homeowners who have lost value in their homes refinance into lower rates, has been rumored to be coming to an end," advises Booth. Wade Lovell, a California mortgage broker, agrees that if you feel you are a candidate for a HARP refinance, don't wait to give it a shot. HARP 2.0 and other programs make it possible to refinance even if you are underwater by as much as 25 percent and some lenders will go even higher," Lovell says. "Without these programs, homeowners whose houses are now worth less than they owe would be unable to refinance their primary residences. These programs may be short term. Take advantage of them now." Reason 3 - Benefits to Refinancing During Tax Season This may come as a bit of surprise, but yes, there are some perks to refinancing during the tax season. "One benefit of refinancing during tax season is that you will need many of the same documents needed to file your taxes," says Lazowski. "So while in the mind set of doing taxes, it makes good sense to get into the mind set of refinancing." If you wait until after tax season to refinance, however, you may be in some trouble. For example, if you have a rate lock or guaranteed mortgage rate for a specified period of time, you may have to wait longer for the verification of your paid income tax, which is often required in a mortgage refinance application. "After April 15th it will take you longer to get an IRS verification of your taxes being filed through a third party because of everyone filing their taxes on the due date," explains Lazowski. As a result, "This backs up the process and can take four to six additional weeks, causing rate locks to be tested." [Ready to refinance your mortgage? Click to compare rates from multiple lenders now.] Reason 4 - Impending Rate Increase How would you feel if you discovered your decision to delay refinancing cost your family thousands of dollars in interest? If rates rise, you could face just that situation. And unfortunately, you could be facing this dilemma sooner rather than later. In fact, according to Freddie Mac's "Weekly Primary Mortgage Market Survey," the interest rate for a 30-year fixed rate mortgage is already on the rise from 3.34 percent on January 3 to 3.56 percent on February 21. It is data like this that is leading experts to anticipate a continued rate increase. "Rates have started to move off of all time lows," Lazowski says. "With the economy improving it will come as no surprise that rates will move a bit higher. With that being said, rates moving a bit higher will help to spur both purchase and continued refinance activity." ** Information from Yahoo Homes _ Zillow Real Estate Network

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