Traffic tie-ups into O.C. worry city's neighbors
By MICHAEL MILLERStaff Writer, (609) 463-6712
Press of Atlantic City
Published: Tuesday, January 31, 2006
Updated: Tuesday, January 31, 2006

— When the state closes a bridge, it opens a detour. That's what motorists are hoping the state Department of Transportation will keep in mind this summer now that two lanes of the Route 52 causeway have been closed permanently.

Local officials are coming to grips with the new traffic reality surrounding Ocean City. Its busiest road will be bottlenecked indefinitely until the state builds a new causeway — slated to open in 2011 or later.

In the meantime, they have asked the state to look outside Ocean City for ways to ease what is sure to be a traffic snarl for many summers to come.

And officials are not just talking about the four roads leading into Ocean City, but the dozens of arteries leading to and from Atlantic and Cape May counties.

Even Woodbine expects to see an increase in gridlock this summer as motorists use alternate shore routes such as Route 550, Mayor William Pikolycky said.

Cape May County has scheduled a transportation conference for Feb. 28. The focus of that meeting will be on projects in northern Cape May County.

County Engineer Dale Foster said the county has not prioritized its wish list. But if it did, the first issue would be better signs directing weary motorists to alternate shorebound routes such as Ocean Drive.

The second priority would be building a southbound exit at mile marker 20 of the Garden State Parkway in Seaville. Now, there is only a northbound exit and southbound onramp. Adding this ramp would take much of the local pressure off Roosevelt Boulevard and Exit 25, Foster said.

Local officials gave the state a smorgasbord of suggestions.

Cape May County freeholders Friday called on Gov. Jon Corzine to address the region's ailing transportation network.

“Our neighboring coastal states have made substantial improvement in providing better access to their resort communities, whereas New Jersey has only allowed theirs to fall in a state of disrepair,” Freeholder Director Dan Beyel wrote in a letter to the governor.

Freeholders passed a resolution calling on the state to conduct a traffic-management analysis outlining the impact the Route 52 lane closures will have on the region.

The county also wants to make use of the unused middle lane of the causeway. New lights would be installed allowing two lane entry or exit depending on need. This is similar to traffic patterns over the Walt Whitman Bridge.

“We believe it would be fairly inexpensive to do,” Foster said.

Utility lines are in place. The state would have to restripe the road — again — and add lane lights that police could change at will during the day.

Foster said the city could change the lanes easily to accommodate the rush of traffic leaving the beach after a thunderstorm or a special event such as Night in Venice.

The state intends to lengthen the southbound offramp at Exit 25 by Memorial Day to prevent exiting traffic from backing up dangerously onto the highway. This is a nightly occurrence now.

While Ocean City Mayor Bud Knight is resistant to the idea, Foster said he would like to open Gardens Parkway to truck traffic, even if it is limited to certain hours of the day. Gardens Parkway is a county road but the city banned truck traffic off the Ocean City-Longport Bridge to honor Gardens residents' concerns about damage to their homes from truck vibration.

Foster said the new road bed reduced or eliminated vibration from heavy trucks. Pile-driving cranes and other oversized vehicles are banned from the Garden State Parkway. Those on Absecon Island must make an arduous detour through Mays Landing and down Route 50 to get into Ocean City instead of just hopping over the Ocean City-Longport Bridge.

Higher mortgage rates
Source: Smart Real Estate Investing

Long-term mortgage rates rose slightly last week in anticipation of another interest rate hike from the Federal Reserve.

The average rate for 30-year fixed-rate mortgages crept up to 6.12 percent from 6.10 percent in the prior week.

In the year-ago period, the 30-year mortgage averaged 5.66 percent.

The average rate on 15-year fixed-rate mortgages rose to 5.70 percent from last week's average of 5.67 percent. A year ago, the loan averaged 5.02 percent.

Five-year adjustable-rate mortgages averaged 5.75 percent, unchanged from the previous week. In the year-ago period, the five-year averaged 5.02 percent.

One-year adjustable-rate mortgages averaged 5.20 percent, compared to 5.18 percent from the week before. At this time last year, the one-year loan averaged 4.18 percent.

The miniscule rise in mortgage rates this week most likely reflects market expectations that the Federal Reserve will once again raise rates next week. Last week, mortgage applications for home purchases were stronger than last December's average."

Beach homes become prey with owners away

By COURTNEY McCANNStaff Writer, (609) 272-7219
Press of Atlantic City
Published: Monday, January 30, 2006
Updated: Monday, January 30, 2006

Summer has long since ended. Rows of beach houses in resort towns up and down the shore are dark and desolate as their owners have moved inland with no plans to return until warmer weather prevails.

Unfortunately for unsuspecting homeowners, their abandoned beach houses are now perfect targets for burglars who take advantage of the off-season to ply their trade.

Lt. Bill Wilent has been a detective in Ocean City for 25 years and is familiar with the crimes that can occur when resort towns are abandoned for the winter.

“We see the same pattern every offseason,” Wilent said. “We have blocks on end that are unoccupied and the potential for somebody to commit a burglary and not be seen or discovered for some time is much higher than in the summer.”

Year-round residents are little help in notifying police, he said, as they rarely know whether a house is supposed to be empty.

“At the shore we have a high turnover rate on a weekly basis,” Wilent said. “People don't know who their neighbors are and therefore don't know if there's a problem with the house next door.”

Rhonda Daniels lives in Margate and owns property in Ventnor. She has never had a problem with burglaries but has heard reports of them happening occasionally in the area.

“People don't check up on their houses,” Daniels said. “If (potential burglars) see that the mail isn't being collected or that advertisements from restaurants are piling up on the door, then they catch on that there's no one home and they take advantage of that.”

Not all resort towns appear to have winter break-in problems, at least by the numbers. Wildwood police reports indicate that there were only six robberies reported in January 2005 and only five reported in December. But those numbers can be deceiving.

“You can't really rely on the numbers with these burglaries,” Wilent said. “Many times we get a heavy month in spring just because that's when people showed up to check on their properties and discovered a problem.”

Garden-variety robberies aren't the only things that can happen when no one is home. Some shore property owners have to worry about unwanted winter guests taking a vacation of their own.

“We've had cases where people discover that someone has been using their house,” Wilent said. “They'll receive an electric bill that's higher than normal or increased phone usage and that tips them off that something's wrong.”

This is not to say that resort towns are hotbeds for crime from December to March. Some can experience more or less crime from year to year based on other factors.

Sometimes, according to Wilent, the economy is to blame.

“When the economy goes south, people are more desperate for money,” Wilent said. “We sometimes see a slight increase in crime when more people are out of work.”

Other times, the level of crime depends on the town's location.

Scott McKay, a year-round Brigantine resident, is usually surrounded by seven empty houses in January. But the most excitement he's seen lately is a false 911 call.

“The thing about Brigantine is that there's only one way in and one way out,” McKay said while tending bar Sunday at the Rod & Reel. “The police would just have to wait by the bridge.”

Local police departments have taken action to keep empty beach houses safe during the off-season.

“Most of our officers spend 40-plus hours per week out on patrol,” Wildwood Lt. Harry Roach said. “They learn their neighborhoods pretty quickly and know which houses are supposed to be vacant and which are supposed to be occupied.”

Some towns ask homeowners to notify the police before they leave town so that their house can be watched.

“Our department has a vacation list that residents can sign up on,” said Chief William Collins of the Surf City Police Department said. “Officers will go out and check on their house a couple times during the week.”

But the patrols can only do so much.

“We have officers making routine patrols but there are so many unoccupied houses that we can't check each one,” Wilent said. “We can't make ourselves personally responsible for everyone's private property.”

Daniels said property owners need to take responsibility to make sure their homes are safe.

“If you own shore property within a 100 miles of your home and you don't check on it during the winter, then shame on you,” Daniels said. “If someone breaks it in, it's your own fault.”

Jan 30, 2006 8:24 am US/Eastern

‘Home Sweet Home’: Hidden NJ Gems
Good Deals Can Be Found If You Know Where To Look

(CBS) RIVER EDGE Everyone wants a great deal. So CBS 2 went out in search of New Jersey's "Hidden Gem" communities. You may be surprised what’s out there.

Buying a house isn’t cheap. According to the National Association of Realtors, the average home purchase price in New Jersey is $388,300. New Jersey prices are up 48 percent in the past four years.

Prices average $454,000 in northern Jersey; $389,300 in central Jersey; and $265,200 in southern Jersey. As a general rule, the closer to New York City one buys the more one will spend.

Bergen County is the most expensive place to live in the state with the average home selling for nearly $550,000.

According to Andrew Schiller of NeighborhoodScout.com, “Many people would think you have to travel 45 minutes, an hour and a half or even two hours from Manhattan to be able to buy into a premium quality community at a price you can afford."

Schiller runs a real estate search engine called NeighborhoodScout.com. CBS 2 asked him to compile a list of premium towns that have less-than-premium prices. Surprisingly, his top choice is in Bergen County.

"River Edge, New Jersey, was our No. 1 best pick for a premium town at a great price within 20 miles of Midtown Manhattan,” Schiller said. “It offers excellent public schools, low crime, college educated neighbors, and many owner-occupied single family homes that are fairly large at a price that can't be beat in the area."

According to River Edge Mayor Margaret F. Watkins, “I always knew we were the best in Bergen County -- well not only Bergen County, in New Jersey. I'm just delighted that someone else recognized it. We're a fantastic town."

Mayor Watkins said that she knows the secret to her town's success. "I don't think it's just the physical makeup of the town. I think it's the people that make this town so great," she said.

"The key to hot New Jersey real estate is finding a bargain as hard as that is to believe you actually can find bargains," said Dave Chmiel of New Jersey Monthly Magazine.

Chmiel said that his top pick for a hidden gem is Newark, specifically the area known as "Society Hill."

"One of the exciting things that's happening here in Newark is that there's finally starting to be a face on it,” Chmiel said.

He added, “Shaqille O’Neill was born in Newark, and Queen Latifah shares her New Jersey roots a lot in her projects. They've been able to invest in the community and put a face on the development, and what's happened is that people are taking more pride in Newark."

More Hidden Gems In New Jersey
1. River Edge
2. Scotch Plains
3. Fanwood
4. Emerson
5. Livingston
6. Edison
7. New Milford
8. Hillsdale
9. West Orange
10. Caldwell

(© MMVI, CBS Broadcasting Inc. All Rights Reserved.)

Home Selling Exclusions: A Great Benefit for Homeowners
by Benny L. Kass
Realty Times

If you have recently sold your house at a significant profit, and if you have not been keeping up with the tax laws, you will be pleasantly surprised. If you are married, if you meet the legal requirements described below, you can exclude up to $500,000 of the profit you have made. If you are not married, or file a separate tax return, the exclusion is reduced down to $250,000 of profit.

For many years, there were two tax concepts which helped save homeowners from paying a lot of capital gains tax: the "roll-over" and the "once in a lifetime." However, the Taxpayer Relief Act of 1997, signed by President Clinton on August 5, 1997, abolished both of these concepts. The roll-over and the once-in-a-lifetime exemption for homeowners over 55 years of age are real estate and tax history.

Although there are no restrictions on the number of times this exclusion can be used (as compared to the old "once-in-a-lifetime" approach) the law does contain two important conditions:


You must have owned and used the home as your principal residence for two out of five years before the house is sold. If you are married, so long as either spouse meets this requirement, the exclusion of gain applies. Marital status is determined on the date the house is sold. In the event of a divorce where one spouse is given ownership pursuant to a divorce decree or separation agreement, the use requirements will include any time that the former spouse actually owned the property before the transfer to the other spouse.

The exclusion is generally applicable once every two years. However, if you are unable to meet the two year ownership (and use) requirements because of a change in employment, health reasons or unforeseen circumstances (which have been defined by regulations promulgated by the IRS), then your exclusion is pro-rated. These pro-rations are complex, and have caused considerable confusion among lawyers, taxpayers and even the IRS.
The new regulations were finally implemented by the IRS in 2004. They provide what the IRS calls "safe harbors" -- i.e. if you fall into a safe harbor category, you are entitled to take the partial exclusion. If, on the other hand, you are not within the safe harbor, then according to the Regulations, "The taxpayer may be eligible to claim a reduced maximum exclusion if the taxpayer establishes, based on the facts and circumstances, that the taxpayer''s primary reason for the sale ... is a change in place of employment, health or unforeseen circumstances."

In other words, if you are not within a safe harbor, you will have to convince the IRS that you nevertheless qualify for the partial exemption.

Let's look at these items separately:


Change in employment: If you have to travel at least 50 miles farther from the house you sold because of a job transfer, or even to take a new job, and the primary purpose of selling your house was because of employment reasons, you will be eligible for the partial exclusion.
The 50 mile distance is the IRS "safe harbor," provided that the change in place of employment occurred during the time that the taxpayer owned and used the home. However, even if you cannot meet the safe harbor, you still may be able to convince the IRS to allow the partial exemption based on "facts and circumstances." The Regulations include an example of a doctor who sold her condominium and moved only 46 miles away from the previous residence. Because the primary reason for the sale was to allow the doctor quicker access to the hospital for emergency purposes, the IRS would allow the partial exemption based on the facts of this case.


Reasons of Health: Once again, we see the concept of "primary purpose." To qualify for the partial exemption, the primary purpose of selling the house must be based on health.
The safe harbor here is easy. If the taxpayer's physician recommends a change of residence for reasons of health, the taxpayer will automatically qualify for the partial exclusion. And health is rather broadly defined to include "the diagnosis, cure, mitigation or treatment of disease, illness or injury."

But the IRS issues a precautionary note: A sale "that is merely beneficial to the general health or well-being of an individual is not a sale ... by reason of health."


Unforseen circumstances: Obviously, this is the more difficult category on which to enact regulations. Each of us -- at one point in time -- will face conditions which could not be anticipated or even imagined before it happened, which significantly impact on our lives -- and on our financial situation.
Nevertheless, it would be manifestly unfair to be faced with a crisis -- have to sell your house before the two years are up -- and have to pay full tax on the profit you have made. Accordingly, Congress authorized the IRS to issue regulations governing this area.

According to the new Regulations, a sale "is by reason of unforeseen circumstances if the primary reason for the sale ... is the occurrence of an event that the taxpayer could not reasonably have anticipated before purchasing and occupying the residence."

The IRS then lists several safe harbors:


involuntary conversion of the residence -- for example, it was condemned by a governmental agency;

natural or man-made disasters or acts or war or terrorism resulting in a casualty to the residence. Clearly, the victims of Hurricane Katrina who lost their house would fall squarely in this category;

death of one of the owners of the property;

the cessation of employment as a result of which the taxpayer is eligible for unemployment compensation;

a change in employment or self-employment status that results in the taxpayer''s inability to pay housing costs and reasonable basic living expenses;

divorce or legal separation under a Court decree, or

multiple births resulting from the same pregnancy.
These are safe harbors. If you fall within one of these areas -- and have owned and used your house during the time since it was purchased -- you will be entitled to take the partial exclusion of gain.

But, once again, even if you cannot claim a safe harbor, you still may be able to convince the IRS that there are facts and circumstances which forced you to sell your house before the two years were up. The burden will be on you, and as we all know, dealing with the IRS is not easy.

If you are eligible for the partial exclusion -- either because you meet the safe harbor tests or the facts and circumstances test -- this exclusion is equal to the number of days of use times the quotient of $500,000 divided by 730 days. Note that 730 days is 2 full years. If you are single -- or do not file a joint tax return -- change the $500,000 to $250,000.

The law applies to all principal residences: single family homes, cooperative apartments, and condominium units. If your boat or your mobile home is your principal residence, the exclusion can also be taken. In order to qualify as such, three things are required: sleeping quarters, a toilet, and cooking facilities.

While the new $250/500,000 exclusions sound too good to be true, there is one important fact to remember when calculating the profit you have made, and the tax you may have to pay. Real estate in the Washington metropolitan area has appreciated dramatically over the past half century. Many homeowners realized the "great American dream" over the years, and continued to sell and "buy up." The profit that was made on each sale was deferred under the old roll-over concept. Now, when you sell your last house, and you are married, you can exclude up to $500,000 of profit, but what exactly is your "profit"?

Let us take this example. In 1968, you purchased your first house for $40,000. In 1975, you sold it for $150,000, and purchased a new house for $210,000. For this example, we will ignore such items as home improvements and real estate commissions, although these are expenses which can -- and should -- be taken into consideration in determining your actual profit. Because you deferred $110,000 of profit ($150,000 - $40,000), the basis in your new home is now $100,000. You determine your basis by subtracting the profit from the purchase price (i.e. $210,000 - 110,000).

In 1989, at the peak of the then real-estate market, you sold your home for $400,000 and purchased a new house for $500,000. Because the roll-over was still the law, you had deferred profit of $300,000 ($400,000 - 100,000). The tax basis of your new $500,000 home is only $200,000. Keep in mind that under the old "roll over" rules, every new home you purchased had to take into account the deferred gain which you had made on the sale of your previous home.

Here is where the tax bite may occur. If, for example, you plan to sell your house in the near future, you must calculate and be aware of your basis. If you are married and file a joint tax return (and have lived in the house for at least two out of the past five years), you will not have to pay any capital gains tax unless you sell your house for more than $700,000. But, if your spouse has died, and you can no longer file a joint tax return, you can only shelter up to $250,000 of profit. You or your accountant should make sure that you include the "stepped up" basis of the house in your calculations. This means that half of the value of the house on the date your spouse dies is added to your basis.

This is obviously complicated, and you have to have professional assistance before you sell your house.

It is absolutely critical that you keep all of your records and all of your settlement sheets. Such expenses as home improvements, real estate commissions, fix-up costs, legal and title costs, will reduce your profit -- and thus reduce your tax. If you are ever audited by the IRS, you will be required to produce proof of these expenses.

Read next week's column by Benny L. Kass, entitled, "The Starker (Like Kind) Exchange."

Published: January 30, 2006

Your money
Should I partner with several family members to buy a vacation home?
(NOTE:This post is from Indiana but it holds true for all vacation homes)

It's tempting to share the cost of a vacation home with others. But there are pitfalls. Let members of the Financial Planning Association of Greater Indiana show you the way.

Brent Walker, RJP Investment Advisors

As the "housing bubble" continues to make homes more expensive, particularly in vacation hot spots, fractional ownership of vacation homes has increased in popularity.
Couple that with the fact that most people only use a vacation home a few weeks a year, and the idea of partnering with others makes sense.
But before you partner with anyone on a purchase this large, especially with family, there are a number of factors to consider.
First, everyone must agree on who gets to use the property and when. If not, it sets the stage for arguments down the road. Second, you need to decide if you want to rent out the property when it's not in use.
Third, determine who is going to do the maintenance, upkeep and cleaning. As part of this, it should be determined how all income (if applicable) and expenses will be allocated to the partners. And fourth, if you want to sell your interest in the property, there needs to be a process for doing that and determining the value.
The key to making things work and avoiding hard feelings down the road is to hire an attorney to draft a written ownership agreement before purchasing a property. All of the above items, plus any other issues, should be contained in this document. This requires more work and discussions up front, but can help avoid family squabbles in the future. Remember, there is a reason that people often say never do business with family.
Alice Bryan, North Star Financial Consulting

Buying a second home is further complicated when the wants and needs of several individuals are involved. Step back and consider the following issues:
Your own financial capabilities. How much are you willing to put down, and how much of a monthly mortgage can you carry? Don't be tempted to buy a bigger house just because you're pooling your money. Work within your own comfort level.
Are you comfortable with the financial stability of the other family members, and will they be honest and cooperative in any decision-making process? When money is in the equation, many issues become much more emotionally charged.
You will all have to work out the same vision and goals for the property. What about renting to strangers, and what about usage requirements?
What legal structure makes the most sense -- co-ownership, small corporation? Whatever agreement you reach, you must spell out the ground rules about finances, occupancy and sell-outs, which is a major worry. A qualified lawyer will be a must.
There are numerous additional expenses to consider: maintenance, furnishings, improvements, management. Who will be responsible for the necessary yearly budget?
Buying property together is a close long-term relationship, so make sure you know all the issues, risks and work up front. If all are benefiting in this venture, then it's time to move forward and enjoy your new vacation home.
Christopher A. McCauley, Langdon Shaw Associates

Maybe. Owning a vacation home can be a wonderful experience -- you can build family relationships and build wealth at the same time.
Having said this, you should be cautious before investing money or taking out a mortgage loan with family members. Careful thought should be given to ensure that all family members are on the same page regarding the investment and use of the property. Some questions to consider:
Do we have the time to use the home?
Can we afford the additional costs?
How will we schedule the use of the home?
Who will determine the priority of repairs or improvements?
Who will handle the maintenance and payments to contractors?
How will the owners' liability be protected, through insurance or ownership structure?
What form of ownership will the family members use?
If one family member wants to sell his or her interest, how will it be handled?
Will the home be rented to outside parties? If yes, who will handle the renting? How will the rental income be divided?
A vacation home can be a place for treasured memories and experiences. Take some time to think about it and make a good decision.
And for good measure, formalize your arrangements to avoid future problems.
Happy vacationing.

Copyright 2006 IndyStar.com. All rights reserved

REAL ESTATE MAILBAG
The Washington Post; 1/28/2006 Byline: Robert J. Bruss
Edition: FINAL


QDEAR BOB: My mother died last year and her will left all her assets to my dad. Their major asset was their home, now worth about $450,000. Title to the house was held in my dad's name alone and he owned the house before their marriage 47 years ago. I think he paid about $20,000 for it, but he never added mom's name to the title. Does my dad get a new stepped-up basis to market value as of the date of my mother's death? -- Cynthia H.

ADEAR CYNTHIA: No. Your father didn't inherit your mother's interest in the house because she didn't hold a partial title to it. Therefore, the stepped-up basis rules for inherited property don't apply. If your dad had sold the house in 2005, presuming he and your late mother lived there at least 24 of the 60 months before its sale as their principal residence, he could have claimed up to $500,000 tax-free profits under Internal Revenue Code 121.

Because he didn't sell the house in 2005, if he decides to sell the home in 2006, he will be entitled only to a $250,000 individual tax exemption. Your dad should consult a tax adviser.

DEAR BOB: My home mortgage will be paid off in eight months. After my final payment, what should I expect to receive from the bank? Is there anything my wife and I should do with our wills or anything else?
-- Al C.

DEAR AL: Congratulations on making your final mortgage payment soon. However, don't burn your mortgage papers. Hold a symbolic mortgage-burning party, if you wish, but burn only photocopies and keep the originals just in case.


After you make your final mortgage payment, your lender should send proof the title was cleared of the mortgage or deed of trust. Exact procedures vary by state. Some lenders send a mortgage satisfaction or deed of reconveyance for you to record at the local recorder of deeds. Other lenders handle the recording but ask you to pay the recording fees.

Unfortunately, many lenders are slow to provide these documents because they have no financial incentive to do so promptly. For example, where I live, lenders are supposed to clear the title within 21 days after receiving the final payment. I feel lucky if they do so within 60 to 90 days.

Be sure to follow up if you don't receive documentation within 60 days. This is important because if the mortgage or deed of trust isn't cleared from your title now, then when you later sell or refinance, it could be difficult to get your lender to promptly clear your title.

DEAR BOB: I own a house with a friend. Both names are on the deed, but he no longer lives in the house. The entire mortgage payment is automatically deducted from my bank account. Can I claim the entire mortgage payment when I itemize my tax deductions? My friend doesn't care -- Tim L.

DEAR TIM: Yes, you can deduct your mortgage interest and property taxes that you paid in 2005. Of course, the small principal portion of each mortgage payment is not deductible.

Your friend still owns a share of the house, but he isn't entitled to any mortgage interest or property tax deduction that he didn't pay. However, a problem could arise if your friend wants to sell the house but you don't want to sell. Legally, he can force a property sale in a partition lawsuit. You might want to buy him out on a friendly basis as soon as possible.

DEAR BOB: My fiance and I bought a home together. The title is in my name because I paid the 10 percent down payment. He agreed to make the mortgage payments. We decided to create a revocable living trust with an amendment outlining our financial responsibilities. Is the mortgage lender considered our trustee, or how do we factor in the bank's ownership into our living trust? -- Michelle S.

DEAR MICHELLE: The bank does not own your home, you do. However, because a lender holds a mortgage or deed of trust on your home, the lender is entitled to receive a copy of your revocable living trust. Most borrowers don't bother to inform their mortgage lender when they transfer title into their living trust. There is no harm in doing so. Frankly, the lender doesn't really care.

The lender is not the trustee of your living trust. You and your spouse are the original living trust trustors, beneficiaries and trustees, presuming you add him to the title. However, the living trust document should name one or more successor trustees, such as a trusted relative, friend or bank trust department. The successor trustee takes over if you and your spouse become incapacitated or die at the same time, such as in a plane crash.

DEAR BOB: I rent a cottage behind my landlord's house for $500 per month. The landlord died last month. My friend, who was his girlfriend, moved in with him three months before he died. My friend and the landlord were discussing marriage before his death, but he did not change any legal documents to include her name. She is staying in the house, but his siblings have told her not to touch anything. They reimbursed her for last month's mortgage payment and household expenses. No will can be found. His name and that of his deceased mother are on the mortgage statement. He never married and has no children. He was 58 when he died. Does this situation require court probate? Can my friend make any claim to the property? Can his siblings
throw me out or raise my rent? I continued paying my rent and giving it to my friend so she can pay the mortgage. But the siblings told her not to cash my check. Do I need legal advice? -- Mary Ann V.

DEAR MARY ANN: Because your landlord died without a written will, his assets must be distributed by the probate court according to the state law of intestate succession. Presumably, his siblings will receive the assets if they are his closest living relatives. The live-in girlfriend has no legal rights because she is not a relative and no will was found entitling her to any assets. She has no legal claim to any of his assets unless she can prove the deceased owed her money.

As for your tenancy, the siblings cannot evict you until they receive title from the probate court after the deceased's debts are paid. This can take six to 12 months in most jurisdictions.

I would make my rent checks payable to the estate of the deceased and deliver them to the siblings or the attorney for the estate if one has been hired.


DEAR BOB: I am president of our homeowners association. Our covenants, conditions and restrictions state the monthly dues can be raised 20 percent per year and be cumulative. We recently had to raise them from $275 to $425 because we made our swim club part of the common area. We have a small group that disapproved and they want to decrease the maximum annual percentage of dues increase to 10 percent and make it noncumulative. We require a 75 percent vote to change the covenants. Do you think this is a good idea? -- Terry H.

DEAR TERRY: If I were in your situation, as president of the homeowners association, I would remain neutral on this issue. Let the vocal minority try to change the covenants, conditions and restrictions. They will find out how difficult it is to get 75 percent approval. Personally, I think the 20 percent maximum dues increase is a bit high.

DEAR BOB: My two daughters and their husbands are buying a vacation home with all costs split between the two families. They intend to take advantage of the tax write-offs for mortgage interest and property taxes. What is the best way for them to take title and to document how costs are to be split? What should the exit be if one wants to sell? They are borrowing the funds from us, secured by a recorded mortgage. Would a living trust be advantageous? -- Alan D.

DEAR ALAN: To determine the best way to hold title, you and they should consult a local real estate lawyer in the state where the vacation home is located. There are many potential problems for the joint purchase you describe, especially if one of the couples divorces or files for bankruptcy. As the mortgage lender, you are wise to think of these possible problems before the purchase.

Holding title in a partnership can provide for the issues you mention, such as dividing expenses and providing for a buy-out if one couple wants to sell but the other doesn't. Each couple can hold their half of the property in their separate living trust to avoid probate if a spouse dies or becomes incapacitated.

DEAR BOB: A couple of college buddies and I are just beginning our lives as professional businessmen and we want to partner up in some real estate investing. None of us intend to make real estate investing a full-time job. We just want to take on a project or two when opportunity exists. What is the best way to go about this? We all trust each other 100 percent. Should we form a corporation, a general partnership, or limited liability company? -- Rav D.

DEAR RAV: You probably thought your question was simple, but it's not. Because your personal resources, goals, and situations might vary, especially after a partner marries and the spouse acquires possible marital interest in the investment property, a partnership agreement or limited liability company is often the best way to hold title.

A partnership agreement can provide for many possibilities, especially a buy-out agreement if one partner wants to sell but the others don't. Before you acquire a property, I suggest you and your pals buy an hour of time from an experienced local real estate lawyer. Write down your questions in advance so you don't waste your time or money.

DEAR BOB: Our family trust owns our home. After either my wife or I die, will the survivor benefit from a stepped-up market value basis for our home? -- Morton S.

DEAR MORTON: If title to your home is held in the name of your revocable living trust, the answer is "yes," the surviving co-owner trustor will receive a stepped-up basis. The living trust is just a title-holding method that has nothing to do with the tax consequences.

However, if you hold title to your home or other real estate in another type of trust, such as an irrevocable trust, then you should check with your tax adviser to see if the survivor will be entitled to the stepped-up basis benefits.

DEAR BOB: Your recent article about seller financing of a home purchase makes sense from the buyer's perspective. However, what about the home seller? If the seller has a large profit, , what's the use of that gain if they can't take advantage of other investment opportunities? Do they receive any tax benefit for carrying back the mortgage for their home buyer? They still have to pay income tax on the interest income, don't they? -- Karen M.

DEAR KAREN: Yes, interest income is always taxed as ordinary income. But the big advantage for home sellers who carry back a mortgage for their buyers is the tax-free home sales proceeds (up to $500,000 for a qualified married couple; up to $250,000 for a single home seller) earn a high yield. Also, easy financing usually results in a quick, easy home sale for top dollar.

In today's investment market, where can a home seller invest home sales proceeds to earn at least a 6 percent annual return with the safety of a mortgage or deed of trust on the home just sold? If the home buyer defaults, the seller can foreclose and either get paid in full by a bidder at the foreclosure sale or, better yet, get the house back to sell again for a second profit. Seller financing benefits both home seller and home buyer.

DEAR BOB: About three years ago, when I thought I was dying of cancer, I deeded my home and acreage to my only son to save him from probate after I died. After chemotherapy treatments I am in remission. I'm still living in my home and my son farms the acreage. Now I want to move to a better climate, perhaps Arizona or Florida, but I don't have any money because I gave away my property. My son doesn't want to give it back to me or sell it and give me the sales proceeds. What can I do?
-- Natalie R.

DEAR NATALIE: Once you give away real estate, there is no way to get it back unless there was fraud, mistake or duress involved. Your situation is a strong lesson to every reader not to give away real estate before death.

DEAR BOB: I buy land in my limited liability company, develop it into lots for residential neighborhoods and sell the lots to builders. Is there any way I can minimize my tax liability to receive long-term capital gain tax rates? I am in the highest tax bracket and, after taxes, it almost isn't worth the work.
-- Chris W.

DEAR CHRIS: You are taxed as a real estate "dealer," not as a long-term investor. That means your profits are taxed as ordinary income rather than at the much lower maximum 15 percent federal income tax rate for long-term capital gains. However, you can buy and designate some properties for long-term investment and others for short-term "flipper" dealer resale profits taxed as ordinary income. Consult a tax adviser for details.

DEAR BOB: When title to a home is held in a living trust, is it important for the mortgage to also be in the name of the living trust? -- James
C.

DEAR JAMES: No. Only a few enlightened mortgage lenders allow the living trust trustee (the property owner) to sign the mortgage papers as trustee of the living trust. Instead, most mortgage lenders insist the borrower momentarily take the title out of his or her living trust and put it back into the borrower's name, so the mortgage or deed of trust can be signed by the homeowner and then recorded. This results in unnecessary recording fees, but many mortgage lenders still refuse to allow living trust trustees to sign the mortgage documents as a trustee.

DEAR BOB: My husband and I lived in our home for three years before moving to our current residence. We rent out our old house, but we plan to sell it in a year or two to our adult daughter. She is willing to pay us market value. As we wish to claim that $500,000 principal residence sale tax exemption of Internal Revenue Code 121, is it legal to sell to our child and does the IRS impose any extra tax? -- Lall R.

DEAR LALL: There are no special tax complications for selling a property to a relative. No law requires you to pay any extra tax for doing so. However, I am concerned about your time schedule.

To qualify for the principal residence sale tax exemption up to $500,000 for a qualified married couple filing a joint tax return (up to $250,000 for a single home seller), Internal Revenue Code 121 requires you or your spouse to have owned the home at least 24 of the 60 months before its sale, and both of you to have occupied it as your principal residence for the same time period. If you mess up, you lose this generous tax break. Consult a tax adviser for details.

DEAR BOB: I own a loft in a live/work building of 12 units that is six years old. Because of water leaks, the homeowners association authorized a special assessment to find the cause, fix it and seek legal remedies against the builder. Can part of this assessment be deducted on my income tax returns? -- Peter S.

DEAR PETER: From your description, it appears part of that special assessment qualifies as an "ordinary and necessary business expense" for the portion of your unit which applies to the business area of your work-live loft. To illustrate, if you use 50 percent of your space for your business, and 50 percent for your personal living area, then you can justify deducting as a business expense 50 percent of the special assessment.

Readers with questions should write Robert J. Bruss at 251 Park Road, Burlingame,
Calif. 94010, or contact him via his Web page, www.bobbruss.com.

© 2006, Inman News Service
Copyright 2006, The Washington Post. All Rights Reserved.

Homes ready for market - Staging Your Home

By Karen Dandurant
kdandurant@seacoastonline.com
Complete Business Index

HAMPTON - Selling a home can be time-consuming and stressful.
Sue Argue has launched Staged First Impressions, a home-staging business she says is common on the West Coast and is finding its way East.

Argue said there are 640 accredited home stagers in California and just six in New Hampshire. Of the six, she said only two - herself included - are not Realtors, making them available to all clients, no matter who handles the property.

In essence, a home stager removes a home’s clutter, simplifying it and doing whatever necessary to make the home more attractive to potential homebuyers.

Argue said staging is a marketing tool that can result in a home selling faster and maybe even drawing a higher sales price.

"The way a person lives in their house and the way it needs to look to sell are two entirely different things. ... Moving is a big transition," she said.

Sometimes a move is precipitated by a death or illness in the family or even a financial crisis. Having someone take care of a home’s preparation can relieve stress.

And the home-staging concept is simple - less is more."

Argue said she started the business because she wanted to do something creative. She thought about interior design, but after learning about home staging, she decided it was for her.

"Having a background in nursing is an asset," Argue said. "I am good at working with people in a crisis mode."

One of Argue’s current clients is Paula Klane, owner of Rock Ledge Manor, located in Rye. The stately Seacoast home includes a main house, a bed and breakfast, and a carriage/guest house. The 2.12 acre-property is currently on the market for an asking price of $2.2 million.

Klane had nothing but praise for Argue’s work. She said she read about the business and discovered Argue.

"It’s worth the investment," Klane said. "I needed a catalyst to do more than I was doing. When people come to see the house now, it offers a welcoming feeling. If you’re not innately creative, it’s hard to visualize ..."

Klane does her part by baking every day, something she said she does anyway because of the bed and breakfast.

"It’s another welcoming thing," she said. "Sometimes, people are looking at houses all day and they might cut it short at a showing because they’re hungry - they need to get something to eat."

Rock Ledge Manor in Rye is part of the original historic Ocean Wave Hotel. The prime lot offers spectacular ocean views from most locations of the three parts of the property.

"It’s easier for people to visualize their own things in the home if the (presentation) is simpler," Argue said. "It’s an ‘I can live here’ feel. The best feature of this home is location, the ocean views, so I try to maximize the enjoyment."

Klane’s Realtor Barbara Dunkle, of Carey and Giampa Realtors, said she believes the simpler environment makes it easier to sell a home because it offers a more relaxed, "clean-mind" atmosphere.

"A cluttered space is like a cluttered mind," Dunkle said. "The same goes for a home."

Here's how to better tell if the time is right to buy a home
Ellen James Martin / Smart moves

On any given day of stock market trading, price fluctuations are easy to track. When demand goes up, so goes the price. But changes in housing markets are normally much more subtle. It can take a trained eye to spot them.

A smart buyer will collect every scrap of information possible on market trends in a neighborhood before crafting an offer on a property there, says Sid Davis, author of "A Survival Guide for Buying a Home."

"In a cooling market you could make a bid under asking price that you wouldn't consider making in a heating-up market, where competition for houses is fierce," Davis says.

Moreover, a neighborhood that's transitioning from a "sellers' market" to a "buyers' market" could be a place where knowledgeable purchasers can obtain concessions from sellers, such as help paying closing costs.

The key, Davis says, is for the buyer to spot market trends early and act accordingly.

Here are pointers for savvy home shoppers:

Look for tell-tale signs of seller motivation. Joan McLellan Tayler, the longtime owner of a realty firm, says a spate of recent price cuts in a neighborhood is the surest sign that the housing market is shifting in favor of buyers. Sometimes the words "price reduction" or "seller motivated" will even show up on For Sale signs in front yards.

Wise buyers should also take careful note of the wording in home-sale listings. Some homeowners will telegraph their eagerness to unload a place with offers of seller financing, or help with closing costs.

Also, a neighborhood where open houses are becoming more prevalent could signal seller anxiety. Worried owners will often ask their listing agents to stage an open house more than once, Tayler says.

Obtain hard statistics on the area where you're house hunting. Davis, a veteran real estate broker, relies heavily on data when evaluating a neighborhood market for his clients. He urges prospective buyers to obtain key statistics on trends in the area from their agents.

"The very best numbers tell you how long a typical house in the community goes from listing to sale. Realtors call these 'days-on-market' statistics. They're easy for your agent to get," Davis says.

In a slowing market, the time it takes to sell an average home will lengthen. That's often a strong sign that sellers may be losing some of their pricing power in the neighborhood, he says. Another key indicator of market trends tells you the percentage of list price that local sellers are getting when a deal closes.

"If the typical seller got 102 percent of what he asked a month ago -- but now gets just 88 percent -- you know that prices are softening," Davis says.

To help chart the direction of a market, buyers should ask their agent for 30 to 60 days' worth of "list-to-sell" price statistics, he says.

A third measure of local market strength involves what agents call "inventory," the number of homes currently available for sale. "If there's a surge in listings beyond what you'd expect for that season, you can usually assume that buyers are gaining bargaining power," Davis says.

Realize there could be exceptions to broad market trends. Generalizations don't always apply, even within a relatively small locale, notes Tayler, the author of several real estate books.

Owners who happen to live on a particularly prestigious street, or who have a spectacular setting, can often remain firm on their asking price, even when the overall neighborhood is weakening, according to Tayler.


Investigate carefully a market where prices are plummeting. At first sight, a neighborhood with major price drops can excite house hunters. But before rushing in, find out why property is suddenly less costly, Davis says.

"Will a new freeway soon cut through the community, or is a Wal-Mart slated to go in? Answers to such questions can be very revealing," he says.

Granted, virtually all property goes up over the long-term, Davis notes. But is it realistic for you to wait 10 years or longer for a rebound? Still, true bargains can be found in a community that's enduring a temporary economic setback, Davis says.

Avoid making a ridiculously low initial offer. Maybe you've determined that the market where you're searching is decelerating, making it easier for buyers to bargain. But that doesn't mean sellers will entertain extreme lowball offers. Of course, the owners could always counter a bargain-basement offer. But instead they might simply refuse to deal with you.

Before deciding on your initial price proposal, you should ask your agent to talk to the listing agent about the owners' level of motivation.

"In truth, the listing agent may give out more information than you'd expect about his clients' plans. If they've got to get out of town fast for a job transfer, you can be somewhat more assertive in the price you bid," Davis says.

Smart moves To contact Ellen James Martin, e-mail her at ellenjamesmartin @gmail.com.

Residents protest revals in Upper
By BRIAN IANIERI Staff Writer, (609) 463-6713
Published: Sunday, January 22, 2006
Press of Atlantic City
Updated: Sunday, January 22, 2006

UPPER TOWNSHIP-The winter is usually slow and calm on the sandy, 2-mile-long town of Strathmere.

Few live year-round on this barrier island - part of Upper Township - and you can count the number of schoolchildren on one hand.

But all is not quiet.

On Saturday, trucks were displaced from the two-port volunteer fire department's garage to make room for residents and property owners fuming over the amount at which their homes were valued.

Upper Township is facing its first revaluation in 14 years.

A revaluation adjusts property values to ensure everyone pays a fair percentage in taxes. Those with more expensive homes pay higher taxes.

Earlier this month, Strathmere homeowners received proposed reassessments. To little surprise, their houses are worth much more - barrier island property values have risen much faster than those of mainland properties.

But many have complained the figures assigned to their houses are higher than what the property is actually worth.

The Strathmere Taxpayers Association, which formed less than two weeks ago for this very issue, held Saturday's meeting to inform property owners how to appeal to lower their proposed assessments. About 200 showed up.

"It demonstrated the town as a whole is not willing to accept what was passed on to us at our current reval," Strathmere resident Randy Roash said.

The Cape May County Board of Taxation mandated that other local municipalities, including Middle, Dennis and Lower townships, also revalue properties.

Cherry Hill attorney Joseph Grimes spoke at the standing-room-only meeting. He told property owners to schedule informal reviews this week with the reval company, Tyler Technologies, Inc. When the tax bills are mailed, they can formally appeal them, too.

Further appeals would go to court, he said.

"I think that there's an opportunity for the people in Strathmere to follow through the process," Upper Township Mayor Richard Palombo said. "And beyond that, if appeal is needed, that's the step that needs to be taken. The problem is, this hasn't been done in 14 years."

What makes Strathmere unique is that unlike other barrier islands, many Strathmere homes have been in families for decades, Palombo said.

Mike and Sharon Silcox own a Strathmere house that was built in 1920. Sharon Silcox has been coming to the house since she was 6, and her parents passed it down to her.

Mike Silcox said, "Anything they do might help a little bit. I don't think we're going to change their minds 100 percent."

Upper Township residents not part of Strathmere also were upset with their revaluations.

Revals often spark controversy as residents object to the value assigned to their properties. In North Wildwood, for example, one in five residents are challenging their property values after a reval last year.

Discussions at the Strathmere meeting veered from appeals to possible secession, or breaking from Upper Township to form a new town or join another.

A box of symbolic tea bags was passed. A woman wrote "taxation without representation" in blue ink on a pink piece of paper.

The mere mention of the word "secession" prompted a round of applause.

Previous attempts at secession in Cape May County have failed.

Despite the name, Avalon Manor is not part of Avalon. It is part of Middle Township along the causeway connecting the two municipalities.

In this 150-home community surrounded by salt water, a group of residents sought to leave the township for Avalon, claiming it more resembled their community. Taxes are lower, the police department is closer, and the back bays are dredged regularly, they argued.

But losing Avalon would have cost Middle Township hundreds of thousands of dollars in tax revenue. New Jersey Superior Court's Appellate Division in 2004 upheld the township's decision. After a four-year effort, Avalon Manor lost.

Russ Kenny, an Avalon Manor resident, said the effort cost a lot of time and legal expense.

"It seemed very obvious it was a good move, but the township of course did not agree," Kenny said Friday. "I think that was basically based on a loss of tax dollars. So the end result was a lot of money was spent by both parties."

But if the court would have ruled in favor of Avalon Manor, it would have been worth it, he said.

"Unless they have a very, very good case, they might want to learn from history and not spend all the money that was spent," he said.

Diamond Beach in Lower Township also fought for secession in the early 1990s. Residents protested, toting American flags and teabags and chanting "freedom to the people."

A group of Diamond Beach residents wanted to join Wildwood Crest, at the time claiming that inadequate fire and emergency protection and high taxes sparked their revolution.

Their attempt to split from Lower Township also was unsuccessful.

To e-mail Brian Ianieri at The Press:

BIanieri@pressofac.com

O.C. lifesaving station likely to be moved to beach
By MICHAEL MILLER Staff Writer, (609) 463-6712
Press of Atlantic City
Published: Friday, January 27, 2006
Updated: Friday, January 27, 2006

— A divided City Council plans to let a developer move a historic Fourth Street landmark to the beach to make room for three duplex condominiums.

Under an ordinance council considered Thursday, Pansini Custom Design Associates of Newtown, Pa., would pay the city $300,000 along with all costs to move the former lifesaving station from Fourth Street to the Sixth Street Boardwalk.

Four councilmen — a slim majority of the seven-member body — said the move was in the best interest of city taxpayers and voters who last year rejected a proposal to borrow $3 million to buy this converted four-bedroom home outright.

“Taxpayers 3-to-1 said no to the referendum,” Councilman Frank McCall said. “I don't think we have a willing buyer.”

Instead, council apparently plans to accept Pansini's offer to move the station at its own expense and give the city $300,000 toward renovating this former base for island lifeguards.

Councilman Jody Alessandrine, who expressed the dissenting view on council, likened the gift to a bribe.

“By accepting this gift, we'll be showing favoritism. It is essentially bribery,” he said.

Council President Jack Thomas said the deal was unseemly and gave the impression the council would overlook the city's rules for the right price.

“Do the citizens of Ocean City really want their leaders to go down this path? I surely hope not,” he said.

Council placed two conditions on the deal's acceptance: The city must get coastal permits from the state Department of Environmental Protection to move the station to the skateboard park on the Boardwalk; and the move has to be approved by the city's Historic Preservation Commission.

Councilman Gregory Johnson said some who want to keep the station on Fourth Street have approached his children about the issue and made threats against him. He represented the deciding vote after voting down an earlier resolution to move the station.

“I draw the line when I have to hide my truck to keep it from being scratched,” he said.

According to Alessandrine, the city spent $80,000 in legal fees fighting Pansini's plan to demolish at least part of the building to make room for condominiums. Pansini bought the landmark from Elizabeth Sheehan for about $730,000 in 1999. Her family lived in this home with the distinctive watchtower for years.

It served as a lifesaving station from 1885 to 1910 and remained with the U.S. Coast Guard until it passed to private ownership in 1930. It has been vacant — and visibly deteriorating — since Sheehan's sale. The fate of the lifesaving station has emerged as the first issue in the early mayoral campaign.

Thomas noted that mayoral candidate and lawyer Salvatore Perillo represented Pansini in the lifesaving station's court case. McCall already filed for office. Alessandrine is expected to announce his candidacy today. Mayor Bud Knight is not running for re-election.

Councilman Ronald Denney said the offer by Pansini was the result of the city's hardscrabble negotiation rather than the developer's generosity.

“There's no bribe. There's negotiation,” Denney said. “This gift is a pittance to what he's going to make. He's not giving us anything. He's responding to our negotiations.”

Council will conduct a public hearing in February before taking a final vote. Given the landmark's sustained interest what promises to be a lively mayoral race, no single vote could put to rest the controversy over this two-story building at Fourth and Atlantic.

Existing-Home Sales Down in December, but 2005 Sets a Record

RISMEDIA, Jan. 27 — Existing-home sales declined in December but easily set an annual record, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – were down 5.7% to a seasonally adjusted annual rate1 of 6.60 million units in December from an upwardly revised pace of 7.00 million in November. Sales were 3.1% lower than a 6.81 million-unit level in December 2004.

There were 7,072,000 existing-home sales in all of 2005, up 4.2% from 6,784,000 in 2004. This is the fifth consecutive annual record; NAR began tracking the sales series in 1968.

David Lereah, NAR’s chief economist, expected the monthly sales decline. “This is part of the market adjustment we’ve been discussing, with a soft landing in sight for the housing sector,” he said. “The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead. Overall fundamentals remain solid, driven by population and employment growth as well as favorable affordability conditions in most of the country, so we expect the housing market to remain historically high but lower than last year’s record.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.27% in December, down from 6.33% in November; the rate was 5.75% in December 2004. Last week, Freddie Mac reported the 30-year fixed rate was down to 6.10%.

“Mortgage interest rates have been trending down from a peak in November, and are lower than expected – if lower interest rates are sustained, the housing market could see some unexpected lift,” Lereah said.

The national median existing-home price2 for all housing types was $211,000 in December, up 10.5% from December 2004 when the median was $191,000. The median is a typical market price where half of the homes sold for more and half sold for less.

For all of 2005, the median price was $208,700, up 12.7% from a median of $185,200 in 2004.

NAR President Thomas M. Stevens from Vienna, Va., said it may take a while for home price growth to cool. “We’re coming off of five years of tight supply, and many sellers are accustomed to expecting very strong price gains and exceptional returns on their investment,” said Stevens, senior vice president of NRT Inc. “With the supply of homes improving and buyers having more choices, the rate of price growth should come down to more normal levels this year.”

View Existing Home Sales Data

Total housing inventory levels declined 4.4% at the end of December to 2.80 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace.

Existing condominium and cooperative housing sales increased 1.6% to a seasonally adjusted annual rate of 877,000 units in December from a level of 863,000 in November. Last month’s sales activity was 4.5% higher than the 839,000-unit pace in December 2004. For all of 2005, condo sales jumped 9.3% to 896,000 units, the 10th consecutive annual record.

The median existing condo price3 was $228,100 in December, which was 10.2% above a year ago. In 2005, the median condo price was $218,200, up 12.7% from 2004.

Single-family home sales declined 6.8% to a seasonally adjusted annual rate of 5.72 million in December from 6.14 million in November, and were 4.2% lower than the 5.97 million-unit pace in December 2004. In 2005, single-family sales rose 3.6% to 6.18 million, the fifth straight yearly record.

The median existing single-family home price was $209,300 in December, which was 10.8% above a year ago. For 2005, the median single-family price was $207,300, up 12.6% from 2004.

Regionally, total existing-home sales in the Northeast held even at an annual sales rate of 1.09 million units in December, and were 3.5% lower than December 2004. The median price in the Northeast was $245,000, up 11.4% from a year ago.

In the Midwest, existing-home sales eased by 2.6% to an annual pace of 1.52 million in December, and were 1.9% below a year ago. The median price in the Midwest was $173,000, which was 10.9% higher than December 2004.
Existing-home sales in the South declined 7.2% in December to a level of 2.58 million, but were 1.2% higher than December 2004. The median price in the South was $182,000, up 4.6% from a year earlier.

In the West, existing-home sales fell 11.4% to a pace of 1.40 million in December, and were 11.4% below a year ago. The median existing-home price in the West was $318,000, up 14.0% from December 2004.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Poll: Jerseyans want budget cuts, not tax hikes

Voters in New Jersey are nearly unanimous in the belief that the state faces "serious" budget problems, according to a Quinnipiac University poll released today, and a majority favors balancing the state budget by cutting services rather than raising taxes.

They prefer budget cuts to tax hikes 57 percent to 28 percent, the poll showed. Democrats were evenly divided. Republicans preferred budget cuts by a 75 percent to 13 percent split.

More than two out of three voters also oppose a gas tax increase to pay for road improvements and mass transit projects, the poll showed.

"New Jersey voters know there is a serious budget problem facing the state, but at the same time they are saying high taxes - particularly property taxes - are the most serious problems," assistant poll director Clay Richards said.

The poll also found nearly half of New Jersey's voters say it's too early to have an opinion about the job Gov. Jon Corzine is doing.

Of those who did have an opinion, Corzine was viewed favorably by almost a three-to-one margin, the poll showed.

The poll showed 53 percent of those surveyed doubted Corzine would reduce property taxes and 41 percent said they didn't think he could clean-up corruption in state government.

The telephone survey of 961 registered voters was conducted Jan 18-23. It has a margin of error of 3.2 percentage points.

Contributed by Deborah Howlett
Star Ledger
nj.com

Liniger Offers Predictions for 2006 Existing Home Sales

RISMEDIA, Jan. 26 – RE/MAX chairman, Dave Liniger predicts 2006 will be the second best year the real estate industry has ever experienced. After reviewing 2005 year-end data, released yesterday, Liniger observed that the past year was clearly the best he’d ever seen, but 2006 will likely continue the winning ways.

Liniger stated that 2005 was the culmination of a historical trend, resulting from several economic factors, “2005 was the fifth year in a row that records were set. What’s happened is the economy has been fueled by the real estate market, which has shown continued strength.”

Year-end National Association of Realtors® data revealed that in 2005 existing homes sales were 7,072,000, an increase of 4.2 percent over 2004. The figures show that 2005 also saw a record increase in the median price of an existing home. The national median price rose from $185,200 in 2004 to $208,700 in 2005. Rather than predicting an ominous decline in the housing market, Liniger feels that 2006 will only see a moderate correction.

Liniger commented on the state of real estate and the housing market after NAR released its Existing-Home-Sales data for December, and a preliminary year-end summary. The December data showed a decrease of 5.7 percent to a seasonally adjusted annual rate of 6.60 million units in December from an upwardly revised pace of 7.00 million in November. Sales were 3.1 percent lower than the 6.81 million-unit level in December 2004. But the RE/MAX chairman feels the real estate market is in for another banner year. “I don’t think the last two months are anything worse than a normal cycle of the real estate business. November and December declines were a normal reaction to fluctuating interest rates. This year we would anticipate that resales will probably drop 4 to 5 percent from the record pace that they were last year. “I think we are going to see an outstanding year for the real estate business.”

Prices for existing home sales may retreat more in some parts of the country, but for most regions, Liniger does not expect the dramatic collapse in prices predicted by some observers. “You do certainly have to be a little concerned with properties that have shown double digit appreciation on both coasts.” Liniger feels 2006 will be best described as the-year-of-the-correction, “We’re getting back to a much more normal real estate market. You’re going to see price appreciation, depending upon the region you’re in, somewhere between three and six percent.”

One of the reasons that the housing market has been on a record setting pace is historically low interest rates. Liniger believes that rates may climb somewhat in the upcoming year, but not enough to derail the real estate market. “I think you’re looking at very reasonable rates in the neighborhood of six-point-five percent before the year is over.”

As far as real estate trends in 2006, Liniger says to watch the baby-boomers. They’ll continue to keep the market hot. “They see real estate being a very, solid investment, unlike recent experiences in the stock market. So, I think you’re going to see second home sales continue to be very, very strong.”

Housing Market Will Continue To Lead The Economy In 2006
“Most sellers did extremely well in 2005,” Liniger added, but part of the normalization process will mean the market may shift a little more in favor of the buyer. “There won’t be as many people standing in line to buy, and prices won’t go up dramatically. In 2006 we feel it will be a little easier for the buyers in the marketplace.”

Liniger cautions that each individual market has its own specific economics, and it’s always tricky to make the perfect deal. “You can’t time the real estate market, just like you can’t time the stock market but overall, unemployment and interest rates are still very low which makes conditions ripe for an excellent real estate market. I feel confident that real estate will continue to lead the economy in 2006.”

For more information, please visit www.remax.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Will We Lose First-Time Buyers in 2006?
by Peter G. Miller
Realty Times

The great strategy of the American real estate market works like this: You buy a first house and then as incomes rise and equity grows you move up to something closer to the ideal home.

It doesn't really matter if the "ideal" home is a mansion on the hill or something with four bedrooms rather than three. To make the system work you need first-time purchasers because if you don't have lots and lots of first-timers then you don't have replacement buyers for the folks who want to move up. Seen another way, if you significantly reduce the number of first-time buyers, then real estate demand will flag and home prices will stagnate or fall.

Each year, says the National Association of Realtors, first-time buyers make up 40 percent of the existing home marketplace. Given 7.1 million existing sales in 2005, that means some 2.8 million buyers went into the housing market for the first time last year. The number is even higher when you include new home purchasers.

Whether we will see so many first-time buyers in the future is questionable. NAR reports that first-time buyers in 2005 typically "made a downpayment of 2 percent on a home costing $150,000, but 43 percent purchased with no money down."

These are remarkable figures. They mean that a representative first-time buyer put down just $3,000 plus closing costs to purchase a home.

Compare this number with NAR data from 1995. It shows that a typical first-time buyer back then paid $109,900 for a home -- and put down $12,800 or 11.6 percent.

What these numbers show is that in the past decade we have re-defined the concept of financial risk. It used to be that a lender with any brains wanted a significant downpayment to make very sure that a buyer had much to lose if a house was foreclosed. Not something mystical like a credit rating, but something very tangible -- cash.

Buying with little or nothing down, or buying with loans which do not begin to amortize for five or ten years, has not been a major risk for lenders to this point for two reasons:

First, the bulk of risky loans have yet to mature to the point where monthly payments rise substantially.

Second, in most cases buyers in trouble during the past decade could simply sell their homes, usually at a profit. In many communities home values have doubled over the last ten years -- NAR figures show that nationwide a typical existing house was priced at $110,500 in 1995, a median value which rose to $230,000 in 2005.
But what if home values do not rise spectacularly in the future? What if they simply remain stable or even decline? What if large numbers of homeowners begin to face sharply-higher monthly costs and feel forced to sell?

Some portion of the current real estate market exists in large measure because lender requirements in the past decade have been greatly liberalized. The result is that more first-time buyers have been able to enter the marketplace than would otherwise be the case. Some portion of all first-time buyers will plainly evaporate if financing standards become tighter.

The issue is not that there are suddenly negative amortization loans, stated income financing, option or flexible mortgages and loans that are larger than a home's appraised value. These products, in one form or another, have been around for a long time. Instead the issue is that such high-risk loans are no longer reserved for a limited number of well-qualified borrowers.

"Too many consumers," says John C. Dugan, Comptroller of the Currency, "have been attracted to products by the seductive prospect of low minimum payments that delay the day of reckoning, but often make ultimate repayment of growing principal far more difficult. At the same time, too many lenders have been attracted to the product by the prospect of booking immediate revenue without receiving cash in hand, a process that often masks underlying credit problems that could ultimately produce substantial losses."

Since last February the Office of the Comptroller of the Currency has been warning national lenders and their subsidiaries that mortgage lending practices must be tightened. The effect of such guidelines and cautions is that inevitably there will be fewer high-risk loans, a smaller number of first-time buyers and thus less demand pushing home prices higher.

For more articles by Peter G. Miller, please press here.

Published: January 24, 2006
Realty Times

Ten Ways To Get Your House In Order
by Broderick Perkins
Realty Times

At the stroke of midnight, Jan. 1, 2006, you were absolutely resolute about organizing your home.

Perhaps it was the champagne. Maybe those small animals nesting in your garage prompted you to action. And then there's the cat. You've heard the meows, but you haven't seen him since Christmas.

Unfortunately, whatever motivated you to get your house in order wound up in the pile you planned to clear.

You just need is a little timely hand-holding and a few bright ideas. Coming up with the courage is still your job. So hold out your hand and consider these ideas from organizational extroverts who want to help get the orderly you out of the closet -- so you can clean it and the rest of your home.


Optimize Your Timing To Organize. It's a good time to organize now. You are rained in, snowed in or just plain fed up with winter's mush, slush and freeze and you've pretty much had it with guests trudging through your home. After spending most of the month clearing holiday litter, you've already got a head start. It's not surprising organizing is a top New Year's resolution.
It's also no coincidence that the National Association of Professional Organizers designated January as Get Organized Month.

That's makes it a good time to easily find organizational help, hints, tips and lists as organizers market their services and the media gives you the scoop.


Realize Your Limitations. Your home wasn't cluttered in a day. Understand cleaning, removing the clutter from and organizing a 1,500 square foot storage bin is going to take more time than it took you to come up with a promise to clean house.

De-emphasize Excuses. The popular refrain, "I might need it someday," is little more than an excuse to put off until tomorrow getting rid of something you won't use today or anytime soon, especially if you haven't used it in six months or more. Likewise, "It was expensive and I can't stand to see it go to waste," is nothing but denial. The item is already being wasted if you aren't using it. "It was a gift." So, re-gift it. The gift giver may have already done that to you.

Miniaturize Tasks. Start small. Real small. Sign up with "FlyLady" Marla Cilley and let her tell you what to do. Daily Missions assign you to a small task each day in one of a half dozen "Home Zones."
"These missions will take you to places you may have never been before," she says.

The not-so-bold missions are also posted online on the Flight Plan page where small Home Zone tasks are tackled individually to prevent you from becoming overwhelmed by the greater task at hand. Last week, for example, your mission was to grab an old toothbrush and scrub away the gunk that gathers around the bathroom faucets -- a five-minute chore.


Systemize Tasks. Instead of a hodgepodge, willy-nilly system of bins and baskets and shelves and racks that don't mesh, consider one sane, organized, built-in or matching storage system. Do-it-yourself or hire out. The once-and-for-all proposition can be used to organize everything in a given room (say, garage or office), closet, nook or cranny.
"At first it might seem like you're fighting a losing battle, trying to get your garage organized, but by following some simple suggestions and using some of today's best storage tools, you can transform a garage from a disorganized storage shed into a fully functioning room in a matter of days," says the guy who wrote the book on garage-guilt, Bill West, author of "Your Garagenous Zone: The Complete Garage Organizer Guide" and a partner website, Garagez.com.


Deputize Your Family. Delegate. Send the kids to their room and Pop to the garage as you take on the kitchen. Give specific instructions to your troops. Tell the kids to pick up their clothes and put them in the hamper or make their beds. Tell Pop to hang the tools and sort the trash from the recyclables. You get to choose your own kitchen job.

Optimize Your Efforts. During hard-core efforts to organize, take a few minutes every hour to reward yourself while taking stock of the task at hand. Over a cup of joe, make a list of what's yet to be done, prioritize it, spend a few minutes on breathing exercises, hug the babies, kiss your wife and get back to work with renewed spirit, says Cilley. The exercise prevents headless-chicken behavior by keeping a plan at hand.

Capitalize On Your Efforts. Teaching is one of the best ways to remember what you've learned. Consider becoming a professional organizer. Online Organizing offers a host of learning tools that can help you determine your organizing "personality" and if you have what it takes to be a pro. It'll also give you a lot of insight on your organizational pluses and minuses and what you'll need to know to make a living telling others how to clean up their act. Even if you don't find a career, you will find a job -- or three -- around your home.

Capitalize On Your Junk. Among the growing number of eBay Trading Assistants (TAs), there's probably one who can take at least some of that stuff off your hands and give you some cash for doing so. TAs are sort of like online consignment shops -- inlets instead of outlets. They will help you overcome your fears of selling online or the dread of garage sales and sell that stuff you don't want to "waste." Plug in your ZIP code, find TAs in your neighborhood, call for a pick up or drop off your unwanted treasures. You may have to pay the TA a commission as high as 50 percent of the sales price, but whatever cash you net is more than you are getting for storing stuff you don't need. Cash in hand also takes up a whole lot less space. Don't expect to unload junk on TAs. They've been around the trading block a few times and they know what will sell and what won't.

Hire An Organizer. Bite the bullet, accept that you'll never get the job done on your own and get some help. Visit the National Association of Professional Organizers for help from a service industry developed to help home owners and others organize. The association swears by the habit because, it says, organization breeds efficiency. Efficiency gives you more control over your surroundings and your life. Control allows you to get more done in less time. As you know, time is money.
It's a theory worth considering.

Published: January 24, 2006
Realty Times

Ocean City bridges reopen with fewer lanes, greater worries
By BRIAN IANIERI Staff Writer, (609) 463-6713
Press of Atlantic city
Published: Saturday, January 21, 2006
Updated: Saturday, January 21, 2006

The Route 52 causeway reopened Friday morning after repairs shut down the Ocean City-to-Somers Point span for a week.

But concerns over the bridges on the causeway and ensuing traffic issues are still going strong.

Last Saturday, the state Department of Transportation temporarily closed the causeway —also known as the Ninth Street causeway.

The state also announced that the four-lane causeway would be reduced to two traffic lanes in an effort to limit weight on two of the causeway's bridges, which are to be replaced eventually.

The closing of two lanes will likely lead to heavy traffic congestion in the summer.

In Somers Point, the traffic circle leading into Ocean City can become a nightmare for motorists.

“In the summer, it's going to be brutal,” said Patrice Warley, a server at the Point Diner, just off the circle in Somers Point. “It's not going to be pretty.”

Elected officials and business owners will meet with DOT representatives Monday about their concerns.

“When you estimate the (number of) individuals in the summer months who go in and out of Ocean City, you have some real traffic hazards as well as some safety concerns,” said Assemblyman Jeff Van Drew, D-Cape May, Atlantic, Cumberland.

“We could have some serious consequences if you don't deal with this properly, both from a business standpoint and a safety standpoint”

The state is trying to prolong the lifespan of two dilapidated bridges on the Route 52 causeway.

DOT Spokesman Brendan Gill said the state is not planning to close the causeway again for additional work unless an emergency situation should arise.

Earlier this week, the state painted new road stripes on the bridges over Elbow Thorofare and Rainbow Channel to limit the travel lanes.

The weight of trucks traveling the causeway is now limited to 4 tons, and road signs detour truck drivers with big rigs.

NJ Transit buses will be exempt from the weight restrictions, a state spokesperson has said.

The state intends to build new bridges at the site, but efforts were recently delayed.

In December, the state rejected bids for the first-phase of a two-part project. Although $150 million was budgeted, the bids received came in almost $100 million more than expected.

The high bids will delay construction for at least six months.

The project as designed included two 2.5-mile bridges over the Great Egg Harbor Bay. The two-phase plan also includes a walkway, fishing pier, boat ramp, parking lot, a new Ocean City Welcome Center and the removal of the Somers Point traffic circle, among other things.

Builder Sentiment Stabilizes in January

RISMEDIA, Jan. 20 — A drop in mortgage rates and a rise in consumer confidence helped to stabilize the confidence and market expectations of single-family home builders, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

The index held steady at 57 for the second month in a row following a six-month slide from peak levels in mid-2005. The January level, comfortably above the midpoint, indicates that the majority of builders still see conditions as positive in their markets.

“Housing markets across the country have cooled, as predicted, and builders are aware that some slowing in demand is inevitable following the record breaking sales for the past three years,” said NAHB President David Pressly, a small market builder and developer from Statesville, N.C. “While the recent decline in mortgage rates helped buoy builders’ confidence, they are adjusting to the changes they are seeing and hearing in their sales offices.”

“Single-family housing affordability has been eroded by the accumulation of large house price increases in recent years, but some softening of long-term interest rates since the early-December survey helped to buoy builder attitudes,” said NAHB Chief Economist David Seiders. “This has been bolstered by the fact that consumer confidence has rebounded nicely from post-Hurricane Katrina lows.”

Derived from a monthly survey that NAHB has been conducting for approximately 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as either “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

Two of the HMI’s component indexes were unchanged for the month. The third component, the index gauging current sales, edged down two points to 62. The index gauging sales expectations for the next six months held at 65, and the index gauging traffic of prospective buyers remained at 40. All three components are down 15 points from their June 2005 highs.

Builder confidence was down across three regions of the country, with the West slipping from an exceptionally high level on the confidence scale to one more on par with the South. In the West, the HMI fell from 75 in December to a still-impressive 65 in January, while in the South, the HMI ticked down a point to 66. In the Northeast, the gauge slipped three points to 56, while a slight uptick in the Midwest increased that region’s HMI from 34 to 36.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

On the House | New rules posted for lead-paint removal
By Al Heavens Philadelphia Inquirer Columnist
January 15, 2006

The Environmental Protection Agency has proposed some new rules for lead-based-paint removal that will affect remodeling contractors and others working in houses built before 1978.

The changes, announced Dec. 29, would require anyone being paid for renovation work to be trained and certified in lead-removal practices, including painters and other specialty trades and maintenance workers in multifamily housing.

EPA Administrator Stephen L. Johnson said the changes were intended to further reduce the risk of exposure to lead for children 6 years old and younger.

He said EPA's studies show that "renovation, repair and painting projects in housing that is likely to contain lead-based paint affect more than 1.1 million children under the age of 6 annually."

Lead was used in paint from the mid-19th century until the 1970s as a surface-bonding aid. Once the health risks from lead became evident, the federal government banned the manufacture of lead-based paint in 1978.

It was not until 14 years after the ban that the government recognized that contaminated dust from lead-based paint was the primary cause of lead poisoning in children.

Even low-level exposure affects the central nervous system, especially in developmental stages, and can alter intelligence, motor control, hearing and emotional development of a child under 6, according to the U.S. Department of Health and Human Services.

The Residential Lead-Based Paint Reduction Act, which became law in 1992, established standards and programs to rid housing of lead-based contaminants. As a result:

There are 26 million fewer homes with lead-based paint than when the legislation was enacted, according to the Department of Housing and Urban Development.
Federal funding for lead-hazard control in private housing is being used in 250 areas nationwide.

The Centers for Disease Control and Prevention report that the average amount of lead in children's blood declined by 25 percent between 1996 and 1999.
In 1978, 3 million to 4 million children in the United States had elevated levels of lead in their blood. In the 1990s, that number had dropped to 890,000, and it continues to decline, EPA says.

Federal law requires that every purchaser of residential property on which a dwelling was built before 1978 receive and sign off on a seller disclosure of potential lead-based paint or lead-based paint hazards.

The pamphlet "Protect Your Family From Lead in the Home," produced by the EPA, is part of the legal deal.

Sales contracts must include a disclosure form about lead-based paint. Buyers have up to 10 days to check for lead hazards.

Landlords, too, have to disclose known information on lead-based paint and its hazards before leases take effect. Leases must include a disclosure form.
There is evidence that remodeling activities are linkable to lead poisoning in children.

The National Safety Council says that, "next to deferred maintenance and unchecked paint deterioration, renovation and remodeling activities are the biggest trigger of lead-contaminated dust and thus a significant contributor to the number of childhood lead-poisoning cases nationwide."

The EPA's proposed new rules did not surprise the National Association of the Remodeling Industry, which represents thousands of remodelers nationwide, association spokeswoman Gwen Biasi said.

"NARI members are educated about and consistently conduct lead-safe practices," she said.

The National Association of Home Builders did not react as calmly.

"The new rule will add delays to renovation projects and cost homeowners more," president Dave Wilson said. "There is no scientific evidence that remodeling causes lead poisoning in children. The EPA is headed in the wrong direction with this rule."

The EPA will accept public comment on the proposals for 90 days.

For more information, go to www.epa.gov/lead/pubs/renovation.htm.
On the House | ONLINE EXTRA

Alan J. Heavens answers questions about real estate and home improvement in an online forum at http://go.philly.com/askheavens. Join him for a live discussion at 2 p.m. Fridays on the PhillyTalk link at philly.com

How to maximize tax savings on second home

Realty Tax Tips-Part 2: Personal use plays key role
Inman News Features
Friday, January 20, 2006

If you or someone you know is among the millions of taxpayers who own a secondary residence, you can maximize tax savings from your vacation or second home. Depending on your personal use time, a bit of advance tax planning can result in saving hundreds or even thousands of tax dollars.

FOUR TAX CATEGORIES FOR SECOND HOMES. Although your second-home mortgage interest and property taxes are always tax deductible if you itemize deductions, the amount of your personal use time determines additional income tax deduction savings:

Purchase Bob Bruss reports online.

1.) LESS THAN 14 DAYS OF ANNUAL RENTAL. Personally, my second home falls into this category. The tax result is that I can deduct only my mortgage interest, property taxes, and any uninsured casualty loss cost. But other expenses such as insurance and repairs are not deductible.

If I rent my second home up to 14 days per year, I don't have to report that rental income to Uncle Sam. However, if I rent to tenants for greater than 14 days annually, then my second home will fall into one of the following categories.

2.) ANNUAL PERSONAL USE EXCEEDING 14 DAYS OR 10 PERCENT OF THE RENTAL DAYS (IF RENTED OVER 14 DAYS IN 2005). In this category of heavy personal use and modest rental time, second-home owners must report their rental income on Schedule E of their tax returns, along with applicable expenses.

But in this category any resulting tax loss when rental expenses exceed rent collected cannot be deducted against ordinary income from other sources, such as job salary. However, unused losses are "suspended" for future tax deduction benefits so it pays to keep track of such losses.

The correct order for deducting second or vacation home expenses in this category is mortgage interest, property taxes, uninsured casualty loss expenses, operating expenses such as insurance and repairs, and depreciation for the rental period. However, when the mortgage interest, property taxes, and uninsured casualty loss expenses exceed the rental income, they become itemized deductions on Schedule A.

3.) ANNUAL PERSONAL USE BELOW 15 DAYS OR 10 PERCENT OF THE RENTAL DAYS. This is the most desirable tax category for a second home. The reason is there is no limit to your tax loss deductions against your ordinary taxable income, (except for the $25,000 annual passive loss limit explained below). Rental income and deductible expenses are reported on Schedule E of your tax returns.

Let's suppose you personally occupied your second home for 10 days in 2005 and you rented it for four months. Because your personal use time is below 15 days per year and under 10 percent of the rental days, you can deduct up to $25,000 of qualifying expense losses, including depreciation, against your ordinary income. However, Internal Revenue Code 183 says you must show a rental activity at least three of every five years in this category.

4.) NO PERSONAL USE TIME. If you didn't personally use your second home during 2005, other than a few days while making repairs, and it was rented or available for rent the entire year, then your second home falls into this rental property category.

The tax result is that all your income and expenses, including depreciation, are reported on Schedule E of your tax returns. Virtually every applicable expense is deductible on Schedule E, such as mortgage interest, property taxes, insurance, homeowner association fees, utilities you paid, repairs, and depreciation.

In addition, you can deduct reasonable "ordinary and necessary" travel expenses to inspect (but not occupy) your rental property, even if it is in Hawaii, Puerto Rico, or the U.S. Virgin Islands.

In this category, you are very likely to have a "tax loss," primarily due to the non-cash rental depreciation deduction. However, even if you select the tenants and collect the rents, rentals are a considered "passive activity" taxwise.

That means if your 2005 adjusted gross income is $100,000 or less, you can deduct up to $25,000 tax loss from your rental passive activity. But any rental tax loss exceeding $25,000 must be "suspended" for use in a future year, or when you sell the property to offset capital gains.

However, if you qualify as a "real estate professional," such as a full-time sales agent, then the $25,000 passive activity loss limit does not apply.

To deduct "passive activity" rental property losses against your ordinary income, subject to the limits explained above, you must have "materially participated" in managing your second home. This means you must own at least a 10 percent interest in the property and others cannot manage it in a "rental pool."

Without material participation, your rental tax loss is not deductible from ordinary taxable income and it must be "suspended" or saved for use in a future tax year.

SUMMARY: Although second or vacation homes are not great tax shelters, they can save tax dollars while usually appreciating in market value for future resale profits. An additional possible future benefit, when you get ready to sell, is to move into your second home to make it your full-time principal residence for at least 24 of the 60 months before its sale. Then up to $250,000 principal residence sale capital gains will be tax-free (up to $500,000 for a married couple filing joint tax returns). For full details, please consult your tax adviser.

Next Week: How To Maximize Casualty Loss Tax Deductions.

(For more information on Bob Bruss publications, visit his
Real Estate Center).