Ralph Gorgoglione

When representing a buyer on REO properties, always make sure you read the bank addendum that is generated with an offer acceptance AT LEAST 3 TIMES.

There are terms and conditions in there that can be very costly to your buyers if you overlook them.

Most common are per diem charges, which are basically late charges averaging about $100 per day that your buyer will pay for each day the escrow closes late. The funny thing is the delays can actually be on the listing side, so you need to stay on top of things and GET IT IN WRITING that the buyer will not pay per diem charges if the delays are caused by the seller.

Also look for what things the bank will or will not pay for such as termite inspection, retrofitting, geological reports, etc. Each bank varies from one to the next in the approach they take to the sale, so double check this also.

A WORD OF ADVICE - no matter how bumpy the escrow gets and how much you feel the listing agent is slacking, remember to be EVERYONE'S BEST FRIEND during the transaction. You never know what other properties the listing agent has available, and you always was to be on good terms.

Tax Credit for New Home Purchase

In addition to the updated items identified on this page, we have updated Form 3528-A and the instructions for line 6 and Part III. If you have already faxed a completed application, you DO NOT need to resubmit a new application.

This tax credit is available for qualified buyers who on or after March 1, 2009, and before March 1, 2010, purchase a qualified principal residence that has never been occupied. The buyer must reside in the new home for a minimum of two years immediately following the purchase date.

Tax credit amounts

California allocated $100,000,000 for this tax credit. Buyers must apply for credit allocation from us. Applications will be reviewed and credit allocations will be made on a first-come, first-served basis. Once $100,000,000 has been allocated, the tax credit will no longer be available.

California allows qualified new home buyers a total tax credit amount equal to either five percent of the purchase price or $10,000, whichever is less. Taxpayers must apply the total tax credit in equal amounts over three successive taxable years (maximum of $3,333 per year) beginning with the taxable year (2009 or 2010) in which the new home is purchased.

How to apply

• Within one week (seven calendar days) after the close of escrow:
  • The seller must complete Part I of Form 3528-A, Application for New Home Credit, certifying that the home has never been occupied, and provide a copy to the buyer or escrow person.
  • The buyer will complete Parts II & III of Form 3528-A.
  • The escrow person on behalf of the seller and buyer will fax the completed Form 3528-A to FTB at 916.845.9754, and provide a copy to the buyer.
• Fax is the only delivery method that will be accepted and considered for credit allocation by FTB, as the date and time stamp on the fax will determine the order in which credits are allocated.
• Fax only one completed application per residence with all qualified buyers listed. Do not include information on nonqualified buyers. An incomplete application may delay or prevent credit allocation.
• Do not fax the application to FTB before escrow closes.
• Do not fax the application to FTB more than once. We will process the applications in the order received as quickly as possible.
• Escrow companies should only send one application per fax transmission.
• The buyer keeps a copy of the completed Form 3528-A for their records.
• The Form 3528-A is now available online as a fillable form. Simply fill in all required information, print the form, and sign. If you fill out the form by hand, please print numbers as clearly and neatly as possible using CAPITAL LETTERS and staying between the lines. The faxes can be very hard to read.

Application processing

• The buyer will receive notification of credit allocation from us.
• An allocation of credit will not be issued if:
  • The home has been previously occupied.
  • The application is not received within one week after the close of escrow.
  • The application is received after the total credits available ($100,000,000) have been allocated.

Requirements of the credit

• The home must be a "qualified principal residence" as defined under California Revenue and Taxation Code Section 17059(b)(1). The home must:
  • Be a single-family residence, whether detached or attached.
  • Never have been previously occupied.
  • Be occupied by the taxpayer for a minimum of two years.
  • Be eligible for the property tax homeowner's exemption under California Revenue and Taxation Code Section 218.
• For over three successive taxable years, the total credit allocated among owners that occupy the home must not exceed $10,000. (Multiple qualified buyers that occupy the home will be allocated credit based on the amount paid and their percentage of ownership.)
• Any credit that reduced tax on a tax return must be repaid if the buyer does not occupy the home for at least two years immediately following the purchase date.
• FTB may request documentation to ensure buyers have complied with the requirements of the credit.

Claiming the credit

• The buyer must receive an allocation of credit from us to claim the credit. The credit allocation letter will state the amount they can claim listed by tax year.
• The buyer should refer to Publication 3528 (available by 12/2009) for instructions on claiming the credit.
• The buyer must claim the credit on an original timely filed return, including returns filed on an extension.
• Special rules apply to married/RDP (Registered Domestic Partners) taxpayers filing separately, in which case each spouse is entitled to one-half of the credit, even if their ownership percentages are not equal. For two or more taxpayers who are not married/RDP, the credit amount will have already been allocated to each taxpayer occupying the residence on their respective credit allocation letter.
• If the available credit exceeds the current year net tax, the unused credit may not be carried over to the following year.
• The credit is not refundable.

Definitions

Purchase date:
The date escrow closes.

Qualified buyer:
A taxpayer who purchases a single-family residence, whether detached or attached, that has never been occupied, that is purchased to be the principal residence of the taxpayer for a minimum of two years, and that is eligible for the homeowner's exemption under California Revenue and Taxation Code Section 218.

Qualified Principal Residence/New Home:
A qualified principal residence means a single-family residence, whether detached or attached, that has never been occupied and is purchased to be the principal residence of the taxpayer for a minimum of two years and is eligible for the property tax homeowner's exemption.

• Types of residence: Any of the following can qualify if it is your principal residence and is subject to property tax, whether real or personal property: a single family residence, a condominium, a unit in a cooperative project, a houseboat, a manufactured home, or a mobile home.
• Owner-built property: A home constructed by an owner -taxpayer is not eligible for the New Home Credit because the home has not been "purchased."

Energy-Efficient Windows

Technology Snapshot & Benefits:
Significant economic savings can come from modern windows. Unless recently upgraded, your windows are likely a major source of heat loss. In cold climates, windows transfer heating energy out of the building through both conduction and radiation. Additionally, depending upon how weather-tight the frame and seals, windows may transfer energy by convection as well. This situation is reversed in hot climates, with windows allowing heat into a building and forcing expensive cooling systems to work overtime.

Typical walls in homes are insulated to a level of R-11 to R-19, yet a single pane of standard glass has an insulating value of about R-1. In other words, heat can leak out of, or into, a building about 11 to 19 times more easily through glass than through the wall. This is why your grandparents insisted on installing "storm" windows for the winter in northern climates - to boost window-insulating value to R-2, or perhaps R-2.5 with a good seal and tightly trapped air between the panes.

Modern windows using specially developed E-glass are much more effective at keeping heat and cold where you want them. Most progressive window manufacturers offer several lines of energy efficient glass with "R" values in excess of R-4. New designs still in laboratory development promise R-values of 10 or more.

Since glass is a fixed part of the building envelope, it performs 24 hours each and every day. With energy efficient glass, less fuel is required for a given level of comfort with corresponding cost savings and pollution savings.

Estimated Cost Savings:
Assuming the same or greater level of comfort that you are used to, you can save a lot of energy and money by eliminating heat loss or gain through windows. It is common in Northern climates to save 30-40% of annual heating costs with super-efficient windows. With a monthly heating bill of $200 dollars, this equates to an estimated savings of $60-80 per month. Some large homes cost as much as $600 per month to heat, and the savings for these homes could approach $240 per month.

The value of new windows depends upon how much glass area you have in your home and upon local climate. The National Climatic Data Center (NCDC) provides an historical record of departures of average daily temperatures from a reference temperature of 65 degrees F. This information is available as "Heating Degree-Days per Year" and provides a very useful estimate of how much energy can leak through windows.

Issues:
For new homes, getting efficient glass is simply a matter of working with a builder or architect to specify performance glass. With older homes, the choice of retrofit is a little more problematic. It is unlikely that the glass in your house will suddenly "conk out" or reach the end of its useful life like a failed furnace or hot water heater. Therefore, you will be faced with the prospect of switching out older intact glass panels for newer glass panels. Nonetheless, this can improve comfort and lower operating expenses. Capital costs can be $5,000 to $10,000 or more, and still make sound economic sense when combined with a program of debt consolidation and/or refinancing.

Regional Issues:
Selection of glass may depend on local climates. Windows can be "tuned" by the manufacturer for southern or northern exposures and for different climates. Be sure that you get the right glass for you.

Installation (Getting It Done):
In addition to considering new windows throughout, also consider supplementary performance windows that can be treated as storm windows, in addition to your existing glass. Particularly if your house has period architecture, this option allows you to retain the original glazing and sash while enjoying economic savings and the enhanced comfort of performance windows. Be sure to get bids from two or three (or more) window manufacturers, installers and/or glazing contractors to gain immediate perspective on the true costs of windows and installation in your area.

More Information On This Topic:

U.S. Department of Energy's Building Technologies Program: Windows, Doors, and Skylights

National Fenestration Rating Council (NFRC): Window Energy Performance Label

Energy Star® Purchasing Tips

Residential Windows, Doors, and Skylights Key Product Criteria

Bamboo Flooring

Technology Snapshot & Benefits:
Bamboo flooring is a cost-effective and environmentally sensitive choice among traditional hardwood flooring options. An appealing building material, it is very durable, strong and long-lasting. Bamboo, a grass product and not a wood product, is harvested every 5 years without damaging the actual bamboo plant, and does not require pesticides due to its hardiness. It comes in four different types of flooring: natural, carbonized, vertical, and horizontal graining. The United States Green Building Council's LEED program recognizes bamboo flooring as a green building material and permits points for the use of this flooring.

Estimated Cost Savings:
The pricing of bamboo flooring is comparable to the pricing of hardwood flooring.

Issues:
Verify the age of the bamboo. Often bamboo that has not had adequate time to harden (up to six years), will dent more easily. Avoid denting by checking with the manufacturer on the age of the bamboo.

Regional Issues:
Shrinking and the appearance of gaps can appear in extremely dry climates if the bamboo flooring does not have time to acclimatize. Consult your local supplier for regional climate information. There is debate over agricultural and manufacturing issues related to the production of bamboo floors. These issues include deforestation and the use of carcinogenic chemicals.

Installation (Getting It Done):
Bamboo flooring is installed in a similar method to hardwood floors. The flooring will need to be acclimatized to the appropriate conditions before it is installed to avoid any potential damage. The planking can be glued, nailed, or stapled. Work with experienced contractors who specialize in the use of bamboo flooring to ensure beautiful, long lasting floors.

More Information On This Topic:

Building Green - Bamboo Flooring

National Wood Flooring AssociationBamboo Flooring Installation GuideLaminate Flooring Resource

Water Heating - Instantaneous Water Heaters

Technology Snapshot & Benefits:
Easy economic savings can accrue from instantaneous or the "on-demand" type of water heaters. In contrast to the traditional method of keeping 40 to 80 gallons of hot water at-the-ready in an insulated tank, "on-demand" heaters produce hot water only when it is needed. Since hot water is generally required for less than a few hours each day instead of 24, owners and occupants can easily benefit from high efficiency modern designs that provide hot water on demand. Less fuel is required for a given volume and temperature of water, with corresponding cost savings and pollution savings. Some manufacturers claim 50% savings when compared to conventional hot water tanks.

Estimated Cost Savings:
Assuming that you consume the same amount of hot water at the same temperature as before, you can save a lot of energy and money by eliminating the slow leakage of heat from the hot water tank and piping. Actual savings will depend upon how much water you use, how far it must be piped from your existing heater, and the extent to which that piping travels through unheated spaces. It is reasonable to expect improvements in your hot water bill of 20 cents on the dollar. For a monthly water-heating cost of $50 dollars, you may expect savings of $10 per month on your energy bill. If the switch to "on-demand" water heating is made when your old hot water tank conks out, the effective net cost of change will be much lower and your monthly cash-flow will improve immediately.

Issues:
Installation will be required in the immediate vicinity of bathroom, kitchen and/or laundry room. Space may be a concern.

Regional Issues:
If the new units are electric, you may wish to consider the stability of the electrical grid in your part of the country. Additionally, electricity is most often produced by large central-station plants and is delivered to you at an overall efficiency of about 30%. Unless your electricity is produced with renewable energy equipment, natural gas or LP gas are the fuels of choice for hot-water heating (just as with traditional hot water tanks). These fuels provide total system efficiencies of 80-90%.

Installation (Getting It Done):
If the new water heaters are fueled by natural gas or LP gas, there may be some fuel delivery piping and exhaust venting issues to be addressed by the installer. If the new units are electric, expect some minor rewiring and the installation of new circuit breakers.

Be sure to get bids from at least two or three installers and/or plumbing contractors to gain immediate perspective on the true costs of equipment and installation in your area.

More Information On This Topic:

U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy - Demand (Tankless or Instantaneous) Water Heaters