Frank Hanson’s Blog

While, Arizona currently does not have a real estate transfer tax, there is nothing that prevents a tax from being enacted at any time.  With our current slow economy and budget crisis, it won’t be long before cities, counties, and the state start looking for new sources of revenue.  Enacting a real estate transfer tax is gaining momentum in Arizona. Just last year a bill was introduced in the state legislature proposing such a tax. Countless citizens’ commissions and county reports mention a transfer tax as a possible source of revenue for the state.

 Sellers of real property in Arizona are already under pressure to accept less for their homes.  They don’t need additional expenses in the form of real estate transfer taxes.  Proposition 100 is a constitutional protection that will stop real estate transfer taxes in Arizona.  Vote “Yes” on November 4, 2008 to eliminate real estate transfer taxes in Arizona.  

For more information on Proposition 100 visit my web site at www.phoenix-relocation.com , scroll to the bottom of the home page, and click on the “Yes on 100″ logo.

In the past when homeowners sold their primary residence they could exclude up to $250,000 (or up to $500,000 for married couples filing jointly) in capital gains from their taxes as long as they occupied the property as their primary residence two out of the last 5 years prior to the sale.  The Housing Assistance Tax Act of 2008 changes the rules of that exclusion.  The amount of profits from the sale of a house that can be excluded is now based on the percentage of time when the house was used as a primary residence.  The amount of time the property was not used as a primary residence by either the homeowner or the homeowner’s spouse would be considered Non-Qualifying use.  The Non-Qualifying use test is applied for the time period beginning January 1, 2009, until the property is sold. 

So, let’s say Tom and Sally buy a condominium in 2009.  They already own a house which they use as their primary residence.  They allow their daughter to live there for the first two years they own the property.  Sally moves into the condo in 2011 and makes it her primary residence for three years and then they sell the condo.  Of the 5 years that Tom and Sally owned the condo 2 years were non-qualifying use.  The ratio of non-qualifying use is 2/5, or 40%.  Forty percent of the gain will be taxable capital gains, and the remaining 60% can be excluded from capital gains, up to the exclusion limit of $250,000 for a single individual or $500,000 for married couples filing a joint return.

This is not intended to be tax advice.  Rather it is just a warning that, if you own a second home, vacation home, or rental property, please talk to your tax professional soon to plan your strategy for disposing of that property and to get the most tax benefit available to you.

Wow!  That didn’t take long.  Last week the President signed the new Housing Stimulus Package that eliminates the down payment assistance program.  That’s the program where the seller of a property can pay the buyer’s down payment.  That program is scheduled to end October 1st.  Well, the House has introduced House bill HR6694 which would reinstate the program if passed.  Apparently the program was eliminated because the rate of foreclosures is much higher in instances where the buyer of a property has no money invested in the home.  However down payment assistance has been a viable method of obtaining financing for buyers who need help in coming up with money to purchase a home.  REALTORS I’ve spoken with would like to see the program continue.  Stay tuned…..  

The new housing stimulus bill that was recently signed in to law by President Bush eliminates the down payment assistance program on FHA loans beginning October 1, 2008.  Currently the seller of a property can pay 3% as a down payment for the buyer plus the seller can pay the buyer’s loan costs.  That enables the buyer to purchase with nothing down.,  Starting October 1st sellers will no longer be able to do that.  If you are thinking of purchasing contact your REALTOR to begin looking right away to take advantage of the program before it ends.   

THE MYSTERY CASTLE - PHOENIX, ARIZONA

If you’re driving around the area just south of Central and Baseline, at the foot of South Mountain in Phoenix, AZ and you come upon a strange looking structure, you may have stumbled across Bruce Luther Gulley’s Mystery Castle.  Diagnosed with tuberculosis in 1930, Mr. Gulley left his wife and daughter in Seattle and moved to Phoenix to live.  He purchased a piece of land and began constructing a “castle” for his daughter, the “little princes” he had left behind.  Because the land was right by the town dump he constructed the home out of all sorts of discarded and handmade items.  He formed windows from wheels, made bricks by hand that are held together with a mortar made of sand, cement, calcium and goat’s milk.  He used an upside-down bathtub as the exhaust vent over the kitchen stove.   Mr. Gulley died shortly after finishing the house.  His daughter, Mary Lou, and her mother were notified that the “castle” had been left to them and so they moved to Phoenix.  Mary Lou continues to live in her castle and give tours to the curious.  The Mystery Castle is on the Phoenix Historic Property Register, ensuring that it will be preserved even after Mary Lou is no longer there to maintain it.   The Mystery Castle is open for tours Thursdays, Fridays, Saturdays and Sundays, 11 am to 4 pm from October 1st thru May 31.   For more information on the Mystery Castle call 602-268-1581.

While everyone seems to be talking about the real estate market being sluggish we seem to be forgetting about the demand that is building.  Many people would buy a home today if their house was sold or if financing would ease a little.  There are also those who are “waiting for the market to bottom out”. 

Personally I have 8 to 10 clients who are waiting for their properties to sell in another state so they can buy here in Arizona.  I also have 3 or 4 clients who are trying to sell their property locally that will purchase another home once their property sells.  I have spoken with several real estate professionals who are experiencing the same scenario. 

There are over 46,000 licensed real estate agents in the Greater Phoenix area.  If, as experts say, 10% of the agents are doing 90% of the business that 10% would be 4,600 agents with 10 or more buyers waiting in the wings to purchase a home.  That translates in to 46,000 sales that could occur quite quickly once the recovery begins.  Could the Buyers’ market turn in to a Sellers’ market?   

Yes, that’s correct, I have three 4 unit apartment buildings and one 3 unit dwelling located in Mesa, AZ listed at $1.00 each.  Unfortunately they will likely not sell for $1.00.  These are units owned by the Maricopa County Housing Authority and they are being offered as a public offering. thus the list price.  Each of the apartments is a 2 bedroom with 1 bath.  Individuals are encouraged to submit offers for the property through their agent or contact me to submit an offer.  These are not distress sales and the County expects to sell them for close to market value.  For more information go to

http://www.phoenix-relocation.com/multifamily.html

The market in the Phoenix Metro area seems to be picking up a bit.  The number of available listings is down about 6% over levels reached in October, 2007.  The number of sales over the last 30 days is up about 5% over the number of sales for October.  The number of residential building permits issued for the 3rd quarter of 2007 were down 16% over the same period for 2006 and down 23% over the previous quarter.  The decrease in the number of available listings coupled with an increase in sales could be indicators that the real estate market is starting to level out.  The decrease in the number of building permits obtained would indicate fewer new homes will be available in the future.  That would help boost the sales of existing homes. 

 In other news, Congress is working on passage of a bill that would reduce the amount of down payment needed on an FHA mortgage from 3% to 1 1/2%.  It would also increase the maximum amount you are able to borrow using an FHA mortgage to $417,000.  A decrease in the amount needed to purchase a home is helpful to everyone, especially first time homebuyers.    

Having been a member of the Real Estate Profession for over 34 years I am pleased to say “This market too will pass”.  Yes, history does repeat itself.  When I was first licensed as a REALTOR in 1973 Buyers had to put 25% down to purchase a home.  During the 1980’s mortgage interest rates hovered around 17%.  I’ve seen times when Sellers homes were worth less than what was owed, prices were declining and the foreclosure rate was very high.  Those markets have come and gone, this one will too. 

The naysayers always seem to react the same way during down markets, they would have you believe that real estate is doomed.  Yet over the course of my career I have seen the median price of a home jump from $28,900 in 1973 to $211,700 in September of 2007.  In fact, the median price of a home has almost doubled every 10 years since 1968.  In my book that makes real estate a great long-term investment.   

Current conditions in the Arizona real estate market make it a perfect time to purchase investment real estate.  Interest rates are at historic lows.  Prices have receded and there is an abundance of inventory from which to choose.  There are approximately 9,000 people moving to the Phoenix area each month. This influx of people should help our housing market remain one of the top 3 or 4 housing markets in the nation over the next decade.  Supply will eventually balance with demand, there will be mortgage money available for those qualified to buy a home, and sales will increase.  As sales increase so will prices.  Appreciation in value is one of the great benefits to owning income producing property.  Those who are looking to build wealth for the future should consider adding to their portfolio of real estate now. 

  ….16,850 Square Feet, 12 bathrooms, 11 fireplaces, large lot with mountain views, multiple upgrades.As a 50th wedding anniversary present to his wife Ada, chewing gum tycoon William Wrigley Jr. built the Wrigley Mansion.  The mansion, one of their smaller homes, was completed in 1931 and was estimated to cost $250,000 - $300,000 to build.  They referred to it as their “Winter Cottage.”  The architect, Earl Heitschmidt, of Los Angeles, used a combination of architectural styles, including Spanish and Mediterranean architecture in designing the residence.  The mansion features balconies, terraces, hand painted gold-leaf ceilings and tiles in art deco colors of black, chartreuse, turquoise and royal blue that were made in the family’s Catalina Island tile factory.     The mansion, which was named “La Colina Solana” - the sunny hill, is situated on a 100– foot knoll of solid rock.  It affords visitors a 360– degree view of Phoenix.  It also overlooks the Biltmore Hotel which the Wrigley family owned for 44 years.  In 1973 Tally Industries purchased the mansion, hotel, adjacent golf course and surrounding land.  In 1979 Western Savings purchased the mansion and the three adjacent lots and renamed it the Mansion Club in 1982.  In July, 1992 George “Geordie” Hormel, one of the heirs to the Hormel meat packing fortune, purchased the mansion, now known as the Wrigley Mansion Club.  His main purpose for purchasing the property was to preserve it as a unique landmark.  The mansion, grounds and gardens have been restored to their 1930’s splendor.  For information on tours of the mansion go to  www.wrigleymansionclub.comDid you know that Mr. Wrigley first started in the soap business and gave baking powder as a gift with each purchase of soap.  The baking powder became more popular than the soap.  He switched to the baking powder business and gave chewing gum as a gift.  It became so popular that he dropped the baking powder and sold the chewing gum.