Here's Your Roundup Of Recent Major News Affecting California Real Estate, Housing, And Mortgages.
Extension Granted for IRC 1031 Exchanges: A Lifeline for Investors
CALIFORNIA - In a significant development for real estate investors, the Internal Revenue Service (IRS) has announced extensions for eligible individuals who initiated an IRC 1031 exchange between July 12, 2022, and January 8, 2023.
This extension grants a reprieve, allowing these investors to extend the customary 180-day exchange period. Now, they can choose the later date of October 16, 2023, or 120 days after the original 180-day deadline to complete their exchange transactions.
This news comes as a boon for those navigating complex real estate transactions amidst evolving market conditions. Do you think this about to light some gas on the California market?
REAL ESTATE - Fresno's property tax dispute: implications for homebuyers and builders. Fresno, a city in California, is currently embroiled in a property tax dispute that has far-reaching consequences for homeowners, renters, and builders.
Twenty years after the initial agreement between the city and county on property tax allocation, the city contends that the current arrangement falls short of covering essential services like police and fire protection. As negotiations for a new deal stall, the city has implemented a special property tax assessment, impacting future homebuyers and apartment renters in newly developed areas of Fresno.
The Tax Sharing Agreement:
The 2002 tax-sharing agreement allotted the city 38% of property taxes generated within its boundaries, with the remaining 62% going to the county. However, this agreement expired in late 2020, leading to a contentious debate over future property tax revenues. The city now demands an even 50/50 split with the county, a proposition met with resistance.
New Tax Assessments:
In response to the impasse, Fresno officials have initiated a special property tax assessment, levying an additional $164 annually on homes built in areas annexed after 2002. This revenue is earmarked exclusively for the city. Additionally, apartment builders are required to pay $112 more per unit in taxes, an expense likely to be passed on to tenants.
Challenges and Controversies:
The assessments are administered through Community Facilities District (CFD) taxing structures, specifically CFD 18. This mechanism, also known as Mello-Roos districts, allows property owners to vote on taxing themselves for local services and infrastructure. However, in planned developments where homes have not yet been constructed, only developers have a say.
The controversy surrounding CFD 18 has sparked debate within the local homebuilding industry, challenging the city's assessment methodology.
Builders argue that the additional taxes will generate surplus revenue beyond the city's claimed need. They assert that these levies further inflate the already high cost of housing in the state.
Notably, existing residential properties are exempt from the tax, applying solely to housing projects initiated in specific areas of the city moving forward. The city maintains that a 50/50 tax sharing agreement would obviate the need for the public safety CFD in new growth areas.
MORTGAGE - The resurgence of assumable mortgages. Government backed loans processed by the Federal Housing Administration and the US Department of Veterans Affairs, are assumable and Raunaq Singh, CEO of Roam has launched a platform that connects sellers who locked in those low rates with prospective buyers.
In a real estate market where mortgage rates are stubbornly above 7%, the quest for innovative financing options has become imperative. Roam, a forward-thinking real estate startup, is spearheading a potentially game-changing solution by offering listings of homes for sale with assumable mortgages. This type of mortgage allows buyers to assume the seller's existing interest rate, offering a lifeline to those seeking more favorable terms in the current lending climate.
The Assumable Mortgage Advantage:
Raunaq Singh, CEO of Roam, explains that assumable mortgages provide a unique opportunity for buyers to secure a home loan with interest rates as low as 2%. This represents a dramatic reduction in monthly payments, often by more than half, when compared to prevailing rates in today's market. This breakthrough not only alleviates financial strain for buyers but also opens doors for a wider pool of potential homeowners.
The benefits extend beyond the buyers; sellers also stand to gain significantly from this innovative approach. By including an assumable mortgage with their listing, sellers increase their chances of attracting a larger pool of prospective buyers. In neighborhoods where Roam operates, a home with an assumable mortgage becomes a distinct and sought-after proposition.
A Win-Win Proposition:
Roam's approach is a testament to the company's commitment to reimagining real estate transactions. By reintroducing assumable mortgages to the market, they are not only providing buyers with a lifeline in a challenging lending environment but also creating a new avenue for sellers to find motivated purchasers.