This is one insider's unpolished take on the current state of the Cocoa Beach and Cape Canaveral, Florida real estate market. I am a licensed agent and partner with Walker Bagwell Properties. My sometimes blunt opinions here are not welcomed by the real estate mainstream. Whatever. Hopefully my insights will allow you to make better decisions about your participation in this market.
Larry Walker - 321.917.5786 - email@example.com
Thursday, July 31, 2008
Easter Egg in the Housing Bill
Other than the colorful boiled eggs hidden for children at Easter, an easter egg can also be a hidden message in software, DVDs, video games and even books. For instance, to instantly force a win in Windows solitaire, simply press Alt + Shift + 2. Voila, you win. For owners of real estate who sell their primary residence after December 31 this year, the easter egg waiting for them is the new ratio formula for pro-rating the $250,000 per person capital gains exclusion. Until the end of this year, the rule is that one needs to have lived in his home for at least two out of the last five years to qualify for a $250,000 ($500,000 for married couples) capital gains exclusion on the profit in the home.
Four pages from the end of the 694 page, well-intentioned but mainly misguided "Housing and Economic Recovery Act" passed into law this week, the bomb begins with the wording "Subsection (b) of section 121 of the Internal Revenue Code of 1986 (relating to limitations) is amended by adding at the end the following new paragraph:"
What follows, in summary, allows for the amount of tax exclusion to be proportional to the number of days the home was "primary residence" divided by the days the home has been owned. For example, if I've owned a property for the last five years and that property has been my primary residence for the last two years, the impact of the date of sale for me, a married man, will be;
A: sold by Dec. 31, 2008 - up to $500,000 of capital gains will be tax-free
B: sold after Dec. 31, 2008 - up to $200,000 of capital gains will be tax-free
The reality; selling after the last day of this year could cost me up to $45,000 in taxes depending on my total profit from the sale. This is only my interpretation of the wording. I am just a well-read, way-too-involved real estate guy. If you are in a position to be affected by this change, do not trust my take but get thyself to an accountant, tax lawyer or other qualified person and get professional advice. You may profit from notching up your efforts to get your property closed before New Years. The sad reality for most people who have owned for less than five years is that there will likely be no capital gains to protect. Thanks to Dan Green of the Mortgage Reports Blog for bringing the egg to my attention.
July has ended and the sales, as recorded by today, August 2nd, fell behind last July's tepid total. We had a total of 42 closed MLS-listed, residential properties in Cocoa Beach and Cape Canaveral, 11 single-family homes and 31 condos. The bright spot in this otherwise dull month was the view from the buyers' side of the closing table. Someone stole a 4th floor River Bend, 2292 sq.ft. unit for $265,000. A 3250 sq.ft. brand new 5/3.5 canal-front home went for $580,000, less than you could buy the land and build it for. Another older 3/2 canal-front home with dock and boat lift off Minutemen Cswy. sold for $295,000. And, in what will likely go down as the smoking deal of the year, I represented the buyers of a direct-river estate on three quarters of an acre of direct wide open river with over 130' of waterfront with dock, boat lift and massive riverside tiki bar (pictured above) with lush mature landscaping, across the street from the beach. Listed last year for $1.9 million and closed in July for $670,000.
I count 135 condo listings this morning in the Cocoa Beach and Cape Canaveral MLS that have been listed for longer than a year. Add the other listings whose "days on market" number has been manipulated and the newer but severely over-priced ones and we have a lot of sellers who have yet to face the reality of the changed market. I can't say this enough; if your neighbor just sold his identical unit for $100,000 less than you're asking, your unit is not really for sale. His motivations for selling DO affect your property's value whether you share his circumstances or not. Either face that reality and price your property accordingly or pull the For Sale sign out of the yard. The stress of waiting for that rare buyer who is willing to overpay for your place is not worth it.
I would also offer another piece of advice. Choosing to get a renter while waiting for the market recovery has, so far, been an expensive decision. With the exception of a few weekly rental oceanfront condos, almost no property purchased in the last five years can generate enough rent to cover expenses. Add the chances of repairs, assessments, depreciation and lost opportunity and the decision to rent could cost far more than just cutting the price now to a level that will generate a sale. I feel for you if you're in this position but you need to rationally evaluate your choices. The right decision is often the more difficult one.
Until next post, I'm enjoying the glorious sunrises of the last two weeks and the daily afternoon thunderstorms. Cocoa Beach has been exceptionally beautiful this summer and we're approaching my favorite time of year, that magic period between Labor Day and Christmas when the weather has cooled, the fish are biting, the surf is good and the roads and beaches are deserted. If you've never experienced our town during this time, plan a visit. Rentals are discounted and you'll have the run of the place along with a few locals.
Give me things that don't get lost.
Like a coin that won't get tossed.
_______Neil Young's "Old Man"
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