April 23, 2008 Newsletter

This is the Seventh issue of the Colony Title Newsletter.

This is the seventh installment of the Colony Title newsletter. We are announcing April 11th we hit the bottom of the market. You heard it here first. Since everyone seems to be waiting for the bottom, why not just establish it and move on? Of course if this proves not to be true then it is just one more expert who got it wrong. So assuming we are right, purchases should be on the upswing for the remainder of the year.

Actually originations in our business have been increasing so it’s not completely tongue in cheek. Interest rates (as of April 23) are still great, remaining around 5.875-6% for 30 year fixed. Adjustable rates are the same. As indicated in the last newsletter there is one lender who has an attractive ARM product for jumbo loans, but otherwise not much movement.

For those of you who are selling an investment property and don’t want to pay the capital gain, remember the 1031 exchange is still available. Basically, you would use the proceeds from the sale to purchase another income producing or investment property, thus deferring the gain. I have had several inquiries recently where the taxpayer is selling a rental and/or vacation home and wants to buy another more expensive vacation home where they want to retire. BE CAREFUL. While the IRS regulations are somewhat vague on the length of time, you at least need to use the replacement property (the property you acquire) as an investment or income producing property. Best estimate is at least two years, and a Kiplinger’s article indicated five years. So if you are selling your condo in Ocean City and buying in Hilton Head with the intent of retiring to the Hilton Head property, you should set the Hilton Head property up as a rental for at least two years. The time is not cast in stone, but you should at least be able to make the argument. Once you have used the property for income production for some period of time, you can make the argument to the IRS that it was a legitimate 1031 exchange and the capital gain is deferred. In our next newsletter we will discuss TICs (tenant in common properties used as replacement properties in 1031s).

The office condo market appears to be steady with businesses confident of their space requirements opting to be their own landlord. Business loan interest rates are almost equivalent to rates for principal residences. Pricing per square foot also seems consistent, depending on the particular market area.

We want to be your source for real estate information, and handle your real estate closing needs. Our law firm can handle your real estate legal needs. If you have a question you want answered, or have a topic to be discussed in a future newsletter, contact me at tee.tillman@colonytitle.com or at 410 884 1160 x 3007. Thanks for reading.