Friday, January 16, 2009

Have You Refinanced Yet?

They say home mortgage interest rates can't go any lower, and yet they keep going lower. This week, rates for a no-point 30 year fixed mortgage were below five percent. This is incredible! Refinancing at these rates is an opportunity to substantially reduce your monthly payment, convert from an adjustable rate to a comparable fixed rate, consolidate first mortgage and home equity debt into one loan, or tap on the equity in your home for additional cash. So what are you waiting for? If you are looking for a recommendation to a reputable mortgage lender with excellent rates and products, give me a call.

1031 (Tax-Free) Exchanges

If you are considering the sale of a highly appreciated investment property and intend to reinvest the proceeds in another investment property, a 1031 Exchange (Tax-Deferred Exchange) is a powerful tool for tax deferral.

A 1031 Exchange allows the taxpayer to sell income, investment or business property and replace it with like-kind replacement property without having to pay federal income taxes on the transaction. Taxes on the sale of the first property will be deferred, and the tax basis of the replacement property will be essentially the purchase price of the replacement property minus the gain which was deferred on the sale of the relinquished property as a result of the exchange. The gain on the sale of the relinquished property will be deferred until the taxpayer cashes out of his investment in the future.

In order to qualify for a 1031 Exchange, certain rules must be followed. The rules are, of course, complicated and must be carefully adhered to, but here is a brief summary of these rules:

1. The property being sold must be “Qualifying Property”, meaning property held for investment purposes or income-producing purposes. A primary residence cannot be used for a 1031 Exchange.

2. The replacement property must be “like-kind”, which in the case of real estate means another piece of real estate. Title must be taken in the same names as the relinquished property was titled.

3. Ideally, the replacement property should be of equal or greater value than the relinquished property. To the extent the replacement property has a lower value than the relinquished property, taxes will be owed.

4. In most cases, the services of a “qualified intermediary” are engaged. A qualified intermediary is a person who is not the taxpayer who enters into a written “exchange agreement” with the taxpayer and acquires the relinquished property from the taxpayer, transfers the relinquished property, acquires the replacement property, and transfers the replacement property to the taxpayer. The qualified intermediary does not actually receive and transfer title, but facilitates the transactions in compliance with IRS regulations.

5. The exchange must be done within a particular time frame. It may be simultaneous, or the replacement property may be acquired before or after the sale of the relinquished property so long as IRS requirements are met.

6. If the relinquished property is sold first, a replacement property must be identified within 45 days from the date of the sold property, and closing must occur within 180 days from the date of sale. The intermediary will hold the proceeds of the sale until the subsequent closing occurs.

7. If the replacement property is acquired before the sale of the relinquished property, the property to be relinquished must be identified within 45 days after the acquisition, and sold within 180 days of the acquisition. The intermediary will hold the replacement property until the relinquished property is sold.

Of course, as with any transaction involving complicated tax regulations, the advice of a qualified professional should be sought. If you are selling an investment property and want to defer any taxes which would be due on the sale, consider a 1031 Exchange as an alternative.

Friday, January 9, 2009

The Power of Networking

For a small business owner, the importance and power of networking cannot be overstated. Networking is an effective and inexpensive way of connecting with people who could become your clients, support systems and referral network.

So what exactly is “networking”? It’s actually pretty simple—it involves talking with others about what you do, and listening to them in return to find out how you can help them. Most people you meet could be a potential client or a valuable contact. Learn to make small talk. Practice being able to articulate what you do in clear, easily understandable, memorable and concise way. Tell people about yourself, and don’t be shy about telling them how they can help you grow your business. In return, be a good listener, and ask how you can help them in the same way.

I have been incredibly fortunate for the last fifteen years to be part of one of the greatest networking groups in our area—the Women's Business Network of the Wellesley Chamber of Commerce (“WBN”). I joined WBN when I first started my suburban solo practice in 1993, worked on committees, chaired the group for three years, and have remained an active member to this day. There has been no better source of direct business, referral business and resources for my needs than WBN. I have made fabulous business connections and incredible friendships, and I can honestly say that WBN has been one of the best and most consistent sources of opportunity for me over the past fifteen years. The group continues to thrive and attract new members, but of course we always hope for more. Thanks to the efforts and talent of Deb Beck at Studio 18 Group (, WBN has produced a wonderful marketing piece profiling several of the active members. I am honored to say I was chosen as one of them, and I proudly share that piece with you here.

If you are a business person and are not doing any networking, now is the time to start. If you are a woman in business in the Metro West area, check out WBN by contacting the Wellesley Chamber of Commerce ( —you can’t go wrong.

Tuesday, January 6, 2009

Short Sales

In today’s economy, it is not so uncommon that a homeowner may have more mortgage debt on his property than the property is worth. If the homeowner is unable to afford the payments and is forced to sell the property, he must negotiate a "short sale" with the mortgage lender. In a "short sale", the lender agrees to accept net proceeds of a sale which are lower than the outstanding loan obligation, and forgive the rest of what is owed on the mortgage. By accepting a short sale, the lender avoids a lengthy and costly foreclosure proceeding, and the homeowner is able to pay off the loan for less than what he owes.

Lenders’ policies differ with respect to accepting "short sales". If you are in a situation where a "short sale" might be an option, before you put your property on the market, you should contact your lender to explore whether they will consider accepting a proposal for a "short sale".

Generally, in order for a lender to agree to a "short sale", the following must pertain:
1. The homeowner must be in or near default under the mortgage.
2. The lender will do an appraisal of the property to verify that the value of the property has fallen below the outstanding loan balance.
3. The lender will request financial information from the owner to support his argument that he cannot afford the payments and does not have sufficient assets to pay off the loan in full. The homeowner must prove that a serious hardship exists, such as loss of employment, illness, death divorce or bankruptcy.
4. If the lender approves the "short sale" based on the appraisal and the homeowner’s financial documentation, the property should be marketed for sale subject to approval of the mortgage lender. The lender must review and approve the terms of the sale and the purchase contract as a condition of closing.
5. As a further condition of approval, the lender will also require the submission of a proposed closing settlement statement. This statement should set out the closing costs to be paid out of sale proceeds and the projected net proceeds which the lender will receive.

"Short sales" are not for the faint of heart. The process can be fraught with peril, beginning with the challenge of even identifying the correct person in the correct department of the lender's operation to whom to submit a request. The paperwork can be substantial, and the lender is likely to move only at its own pace regardless of the time frame to which buyer and seller may have agreed. Nevertheless, for a homeowner in a substantial hardship situation who cannot afford the payments and does not have assets to pay off the loan in full, a "short sale" can be the way out of a very difficult situation.