2 bed 2 bath unit, overlooking Cove Park where the surfers and paddler love to congregate. Easy walk to the beach as well as to stores and restaurants. Complex has a pool. hot tub and BBQ area. Unit is heavily booked for vacation rentals.

lesson:  People who share a common direction and sense of community can get where they are going quicker and easier because they are traveling on the thrust of each other.

2.When a goose falls out of formation, it suddenly feels the drag and resistance of flying alone.  It quickly moves back into formation to take advantage of the lifting power of the bird immediately in front of it.

lesson: If we have as much sense as a goose, we stay in formation with those headed in the direction we want to go. We are willing to accept their help and give our help to others.

C E L E B R A T E

Vets give up a lot of family life and other things we all take for granted.   Let me know if any vets are out there that would like to attend a free seminar on VA financing here on Maui in April

Beyond your personal situation, local market conditions, financing costs,   future expectations must also be evaluated.

The following list of quetions can help you decide if you are ready to move forward with a property purchase.  It will be my pleasure to assist you sort through these issues and prove essential local market perspectives.

PURCHASING CONSIDERATIONS

• If you purchase a home or investment property, how long do you expect to live there or own there
• What can you afford to pay each month for housing related ?

What are the total costs of home ownership?  These may include:

• Mortgage payments (based on various interest rate and term assumptions)
• Property taxes
• Homeowner's insurance
• Utilities
• Maintenance costs
• Any other special fees

Do you expect these housing related expenses to increase or decrease? (changes in interest rates may be a bigger factor than others)

What additional expenses are required to complete a purchase? (closing costs, moving expenses, etc)

How much will your home ownership costs decline after adjusting for interest expense deductions and property taxes (if applicable)?

Do you qualify for any special purchasing assistance programs?

What are your long term personal and financial goals with regard to housing and or investments?

A sales tax is a tax imposed on consumers who purchase goods at retail. Sellers are required to charge and collect sales taxes from consumers, usually a percentage of the retail sales price of an item, and pay the sales tax collected to the state or locality imposing the tax on behalf of the consumer. If a seller fails to collect the sales tax from the buyer, then that seller must pay the tax out of his or her own pocket. The bottom line, however, is that a sales tax is a tax which is imposed on customers, and which retailers are required to collect for the state or locality.

The general excise tax, on the other hand, is a tax levied on gross income (i.e., total business income before any business expenses are deducted) derived from business activity in Hawaii. It is different from sales taxes in two major ways.

First, the general excise tax is imposed on the business instead of on the customer. Rather than merely acting as tax collectors, businesses are themselves taxed on their income. The general excise tax, therefore, is considered to be an expense which businesses incur in the normal course of doing business in Hawaii, along with other expenses such as labor costs, utility bills, supplies, cost of inventory, and the like.

Second, the general excise tax is levied on gross income from almost all types of business activities. These include sales of tangible personal property at both wholesale and retail, services, contracting, commissions, interest, lease or rental activities, and more. The general excise tax rate varies depending on the business activity; it is 0.15% on insurance commissions, 0.5% on certain activities such as wholesaling, and 4% on most activities at the consumer level. The 0.5% and 4% rates are the same rates imposed by the Hawaii use tax. As discussed in Tax Facts No. 95-1,
the use tax is levied on the landed value of tangible personal property imported into Hawaii, and complements the general excise tax by requiring persons importing goods from outside Hawaii to pay the same rate of tax that an in-State seller would have paid in general excise tax had those goods been purchased in Hawaii.

Quaint home on modest lot in Wailuku.  Close to amenities.  Reminds you of tutu's home - closets in bedrooms are movable.

2 bed one bath home.  Laundry is in a separate room and storage underneath the house.

In a 1031 exchange, the taxpayer must acquire all replacement property by the earlier of the date that is 180 days from the date the relinquished property closes, or the date the taxpayer’s federal income tax return is due, including extensions.  This means that for exchanges where the relinquished property closes late in the year, the calendar-year taxpayer may need to get an extension of the tax filing deadline in order to benefit from the full 180-day exchange period.

For example, if the taxpayer is an individual who closes the sale of his relinquished property on December 1, 2011 and he does not get an extension, he will only have until April 17, 2012 to acquire all replacement properties.  If he gets an extension, however, he will have until May 30, 2012 to acquire all replacement properties.  For corporations on a calendar-year tax basis that close their sale late in the year and do not apply for an extension, they will only have until March 15, 2012 to complete their exchange.  Even though the granting of the extension is “automatic” remember that you must still file with the IRS to claim it.  (Form 4868 for individuals)

Once a tax return is filed, it cannot be amended to include the exchange or to obtain an extension of time to complete the exchange. If the exchange is incomplete, the sale will need to be reported as a taxable event.

compliments of Anthony Alosi

First American Exchange

compliments of Anthony Alosi of First American.

Demystifying the New 3.8% “Medicare” Tax

On January 1, 2013, a new 3.8% federal tax on some, but not all, investment income will go into effect. The tax is sometimes called a “Medicare Tax” because the proceeds of the tax are earmarked for the Medicare Trust Fund.  This tax has the potential to increase taxes for owners who sell their primary residence and investors who sell investment property, so it is important for all owners of real estate and their advisors to have a basic understanding of how the tax will work.

The new tax is an additional 3.8% tax on “unearned income” which is generally defined as interest, dividends, rents and capital gains.  The tax is only imposed to the extent the taxpayer’s adjusted gross income (AGI) is higher than $200,000 for an individual or $250,000 for a married couple. 

For example, assume that in 2013 you sell investment real estate for $1.2 million and you have a gain (including depreciation recapture and appreciation) of $670,000.  Your wages are $315,000 and your AGI (in this case, your wages plus the gain from the sale of the real estate asset) is $985,000. 

The tax is computed on the lesser of:

1. The total gain from the investment or
2. The excess of your AGI over $200,000 (assuming you are filing as a single person). 

Please note that for purposes of this article, this example is simplified and your situation may be more complicated.  

A. Total gain from the sale of real estate:   $670,000

B.  AGI: 
    

C.  Excess of AGI over $200,000:  $785,000

D.  Taxable amount is lesser of (A) $670,000 or (C) $785,000.

E.  Tax is $25,460, which is computed by multiplying $670,000 by 3.8%.

Please also note that:

• The 3.8% tax is in addition to capital gains tax that may be imposed; 
• Taxpayers with an adjusted gross income lower than the threshold of $200,000 ($250,000 for married couples) will not have to pay the additional tax; and
• Although no regulations have been issued yet, you should be able to defer paying this tax by doing a 1031 exchange.  The tax is imposed on “net investment income” which the statute says includes net gain, to the extent taken into account in computing taxable income.  Since gain deferred in an exchange is not included in taxable income, such gain should not be subject to the 3.8% tax. 

The example used in this article was taken from a recent publication by the National Association of REALTORS® (in slightly modified form).  The full publication including other examples can be found on NAR’s website at www.realtor.org/healthreform.  

Investors and owners of real estate should consult with their advisors to determine whether this tax may affect them.  This article does not cover every instance where the tax may be due and First American Exchange cannot give tax or legal advice. 

If you are selling your property and would like to set up a tax-deferred exchange, please contact First American Exchange Company.  

Some absentee owners may be exempt from HARPTA. Speak to your finance person for full information on this withholding at time of sale.

If the collected amount is too high how do you obtain a refund?  The owner files a form N-288C after closing. Escrow will normally assist Sellers with this.

HARPTA has the buyer responsible for paying the withholding if appropriate documentation is not provided by the seller. Therefore, escrow will automatically withhold 5% of the sales price unless the seller documents that no such withholding is required.

Overwhelmingly international buyers pay cash................Indeed, the Senate bill would require buyers to pay cash for the home to qualify for the new "homeowner" VISA. They would also need to pay US taxes and spend at least 180 days a year in the county. they cannot work here or take out home equity loans against the properties.  In return, they would get to live here for at least three years...................................

Interesting concept.

Call me at 808-283-3783for information or email me

• Honesty,Market Knowledge, Integrity, Negotiation Skills, Organizational Skills, Follow through Skills,  Follow up skills, Community Connections

2.Prepare your property for selling

• Access condition and worth of improving:
  • Flooring, paint, windows, window treatments, entry mats, garden/lawn, pet odors
• Put away clutter
• Have future plans in mind before listing.

3. List your property with Lulu

• Study the comparative market analysis
• Determine the "sale time" you need
• Determine List Price
• Sign Listing agreement

4. Showings

• Be flexible with short notice showings
• Allow a lock box
• Keep property tidy and free of clutter
• Use scented candles
• Try to be away during showings; take pets away or outside during showings
• Maintain lawn and garden, including watering

5. Negotiate offers

• 12 page contract, presented by Buyer's Agent
• Addenda, Dual Agency (CBIP)
• Counter offer/s
• Executed Contract

6. Open Escrow

• Open escrow (contract and earnest money deposit check)
• Survey
• Building Inspection
• Title Report
• Seller's Disclosure
• Condominium Docs or CC&R's
• Loan approval
• Termite inspection
• Document signing
• Wiring of funds
• Closing or recordation

C E L E B R A T E

International purchases of American homes are ramping up and a new Senate bill designed to boost the  real-estate market would encourage globe-trotting investors to buy even more.

The bill, cosponsored by Charles Schumer and Mike Lee would grant a US visa to international investors who agree to spend at least $500,000 on residential real estate here.

If passed, the legislation could add to a surge in homebuying by international purchasers over the past year or two that has already given some local US markets a welcome boost.

Foreigners spent $82 billion buying up US homes in the 12 months ended in March, up 24% from a year earlier, according to the National Association of Realtors (NAR). That represents 8% of total US sales

to be continued/..................

1. Prequalification

Interview and select Loan officer who will need :

• Credit report
• Tax returns for 2 years
• Pay stubs and bank statements for 3 months

Determine price range of property

2 .Property Search

• Broker connections
• Multiple Listing Service, Internet
• Open Houses while you scout around Maui (give Lulu's business card to any open house agents you come across)
• Real Estate Publications
• For Sale by Owner - advise Lulu and we can approach them

3. Contract

• Buyer's offer
• Seller's acceptance of offer or counter offer
• Fully executed contract

4. Escrow

• Contract and Buyer's initial deposit to Escrow company
• Escrow Opening Documents
• Title Report
• Building Inspection
• Seller's Real Property Disclosure
• CC&R's or Condominium documents
• Mortgage Loan (appraisal and insurance)
• Termite Inspection
• Final Walk through
• Switch over Utilities
• Signing of all Mortgage and Escrow Documents
• Buyer's Full Down Payment due to Escrow In Cashiers Check or wired and needs to be in escrow's account at least two days prior to closing

5. Recordation or Closing

• All documents sent to be recorded at the Bureau of Conveyances in Honolulu
• All monies dispersed by Escrow
• Keys exchanged

C E L E B R A T E

Ron Schmeadick, CRB Co-Owner and Associate Broker, Realty Executives, Eugene, Oregon.

Can a real estate agent really help me in buying and selling property?
The answer is YES!

When you're ready to think about buying or selling your property, you need to ask yourself the following questions: Do you have the time, energy, sources of information, and contacts to do the job yourself? If you were one of the 'do-it-your-self' people, would the results be as good or better than they would be if you had professional assistance? Would it have gone smoother? Would it have given you more personal time? Would you have purchased for less, or sold for more, if a real estate agent was involved? Read the following information and learn how a real estate agent can help you understand everything you need to know about a real estate transaction.

The Buying Process
The process of buying a home or investment generally starts with determining your buying power; that is, your financial reserves plus your borrowing capacity. If you give a real estate agent some basic information about your available savings, income and current debt, they can refer you to lenders best qualified to help you. Most lenders -- banks and mortgage companies -- offer limited choices.

Finding
Once you know how much you can and want to invest, the next step is to find the properties that most nearly fit your needs. This is the time to choose a real estate licensee. When picking a real estate agent look for one who is also a REALTOR®. A REALTOR® is a member of the NATIONAL ASSOCIATION OF REALTORS®, a real estate trade association, and all members agree to abide by a 17 article Code of Ethics. A REALTOR® has many resources to assist you in that search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.

Selecting
Your job is to make the final selection of the right property for you. This is when excitement and emotion run high. Your real estate agent can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning. schools, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?

Negotiating
There are a myriad of negotiating factors, including, but not limited to price, financing, terms, date of possession, and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should also provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

Due Diligence
With a negotiated agreement in hand, it is time to complete the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your agent can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your agent, title company or attorney can help you resolve issues that might cause problems at a later date.

Financing
As soon as you are reasonably sure the property is right for you, the process of obtaining financing begins. Your agent can help you in understanding different financing options and in identifying qualified lenders.

Closing or Settlement
Finally, there is the closing, or settlement, as it is known in different parts of the country. Every area has its own unique customs. In some areas, the title or escrow company will handle this process. In other parts of the country, an attorney does it all. Again, your real estate agent can guide you through this process and make sure everything flows together smoothly.

Selling Real Estate

Pricing
This process generally begins with a determination of a reasonable asking price. Your real estate agent can give you up-to-date information on what is happening in the marketplace and the price, financing, terms, and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.

Marketing
The next step is a marketing plan. Often, your agent can recommend repairs or cosmetic work that will significantly enhance the salability of the property. Marketing includes the exposure of your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your agent acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc. The REALTOR® Code of Ethics requires REALTORS® to utilize these cooperative relationships when they benefit their clients.

Advertising is part of marketing. The choice of media and frequency of advertising depends a lot on the property and specific market. For example, in some areas, newspaper advertising generates phone calls to the real estate office but statistically has minimum effectiveness in selling a specific property. Overexposure of a property in any media may give a buyer the impression the property is distressed or the seller is desperate. Your real estate agent will know when, where and how to advertise your property.

There is a misconception that advertising sells real estate. The National Association of REALTORS® studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends and family, and personal contacts.

Security
When the property is marketed with the agent help, you do not have to allow strangers into your home. Agents will generally pre-screen and accompany qualified prospects through your property.

Negotiating
The negotiation process deals with much the same issues for both buyers and sellers, as noted above under the buying process. Your agent can help you objectively evaluate every buyer's proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections, and financing -- a lot of possible pitfalls. Your agent can help you write a legally binding, win-win agreement that will be more likely to make it through the process.

Monitoring, Renegotiating and Closing
Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your agent is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).

How Do Real Estate Agents Get Paid?
Real estate agents or brokers are generally paid through the sales commission paid by the seller when a transaction closes. Agents have expenses and financial obligations just like you, so it will be to your mutual benefit if you choose a real estate agent and stick with that person. The agent will respect your loyalty and respond with a sincere commitment to you.

Why A REALTOR®?
All real estate licensees are not the same. Only real estate licensees who are members of the National Association of REALTORS® are properly called REALTORS®. They proudly display the REALTOR "®" logo on the business card or other marketing ands sales literature. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reports that 84% of home buyers would use the same REALTOR® again.

Using a REALTOR®

You Be the Judge!
Real Estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $100,000. If you had a $100,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $100,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and the large downside risk, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR®!

You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code.  Generally this means you maust keep records that support an item of income or deduction on a return until the period of limitations for that return runs out.

The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax.