Ilyce Glink

Q: I refinanced my California home in 2006, rented it out, and bought a home in Arizona. Now the mortgage balance on my California home is higher than what my house is worth and my renter is leaving.

I simply can’t afford the payments, which seem to increase each year. Is my Arizona home in jeopardy if I walk away from the California home?

A: You’re in a tough spot, one shared by hundreds of thousands of other homeowners.

The good news is that in many states, lenders can’t go after you for the deficiency - that is, the difference between what the bank gets from the sale of your home and what you owe on the debt.

There are just so many homes going through foreclosure and short sale that lenders are eating their losses and in most cases have not opted to chase borrowers for the deficiency.

But the truth is, lenders today get much more money when the borrower goes through the short sale process than through foreclosure. In some cases lenders only get 30 to 40 cents on the dollar in a foreclosure but will get 60 to 80 cents on the dollar with a successful short sale.

Most lenders are finding that a short sale is much better for the lender than having to take the property over and sell the home through foreclosure. While a lender may have the legal right to go after your assets, including your home in Arizona, for practical purposes the lender probably will not. Also, California is one of those states where lenders are limited in their ability to obtain deficiency judgments.

Read the full article at ThinkGlink.com for my full answer, including how a foreclosure or short sale could affect the homeowner's credit score.

One way for you to sell your real estate if the buyer can’t get conventional financing is to offer the buyer seller financing or sell the home on an installment basis. By using an installment sale you would qualify for the benefits of the tax exclusion but you would take the risk of being your buyer’s lender – something that might not be comfortable.

You should also consider how much money is involved. As a result of recent housing price declines, your profit (capital gains) on the sale of your real estate might be less than you think.

You should sit down and compute what your profit will be if you sold while you would still qualify for the home sale tax exclusion. Then you should determine what your taxes would be if you sold the home and you did not qualify for the home sale tax exclusion.

If the home is no longer eligible for the home sale exclusion and you were planning on using the money to invest in an investment property, you might benefit from a 1031 tax deferred exchange of real estate. In a 1031 exchange, you would sell the home and buy a like-kind real estate property.

The 1031 exchange, also called a tax deferred exchange or Starker trust, would allow you to defer paying all taxes, including recapture taxes on any depreciation you took, until the replacement property is sold and you would also not have to pay any taxes on the capital gains. In some cases, you might not have to pay taxes at all (federal or state).

But you’ll need to be careful. The 1031 exchange rules are rather specific and can be complicated.

We have a number of videos relating to 1031 exchanges for you to view including the following:

What is Cost Basis for Purposes of a 1031 Exchange? Video

What to Ask a 1031 Exchange Company? Video

It’s Cash for Clunkers - but for home buyers.

That’s how Sen. Johnny Isakson (R-Ga.) described his $15,000 home buyer tax credit proposal.

The proposed legislation would have given a $15,000 tax credit to any home buyer who bought a home, regardless of income. Sen. Isakson’s proposal would have also extended the date of the proposal for a full year from the date of enactment, making home buyers eligible for the tax credit well into 2010.

The proposed $15,000 home buyer tax credit was supported by the National Association of Realtors (NAR), the National Association of Home Builders (NAHB) and the Mortgage Bankers Association of America (MBA) - three of the strongest lobbying organization in Washingon, D.C.

(FYI: The Realtors are said to be the top lobbyists.)

At one point, even Shaun Donovan, Secretary of the Dept. of Housing and Urban Development (HUD) was considering it.

But last week, the Senate voted 47 to 50 against lumping Sen. Isakson’s proposed tax credit in with the $2 billion infusion destined for Cash for Clunkers. Isakson then voted against spending an extra $2 billion on Cash for Clunkers. Tit for tat: It’s the Washington way.

Proponents of the bill said it could mean an extra 500,000 homes sold over the year the tax credit is available, or about 9 percent of the total number of homes sold in 2008.

Follow this link for more details on the bill and my take on how it will affect the economy if it's passed.

The results of today’s University of Michigan Consumer Sentiment Survey only reflect what I’ve been hearing on my radio show and in emails from my readers: Wall Street may be generating huge profits and paying out even bigger bonuses, but life is tough on Main Street:

- Sales and existing homes are up slightly, but down from a year ago - and way down from the peak of the housing boom in 2005.

- Home prices are down.

- More than 27 percent of Americans are underwater with their mortgages.

- Credit is being sliced and biced.

- True unemployment is very high.

- Unemployment benefits are running out, causing near panic for some families.

- If you have a job, you're happy to have it - although odds are you've taken a pay cut.

- Loan modifications are frustratingly hard to get.

If you look at Wall Street, where the stock market has gone up 50 percent since March 9, you’d think everything was coming up roses.

Life on Main Street, where the American Consumer accounts for 70 percent of the economic engine, just doesn’t smell that good.

Read my full article, and elaborations on the bulleted points above at my CBS MoneyWatch blog. CLICK HERE TO READ IT.

Renovation costs have soared out of control - even in the current recession. You'd think that renovation costs would be less because fewer home improvement contractors are employed. But that doesn't seem to be the case.

Consumers, mindful of renovation costs are staging their home improvement projects. Doing home improvement projects in phases lowers renovation costs.

You'd think that renovation costs would be less because home improvement contractors aren't that busy working on other home improvement projects, and there are plenty of raw materials like drywall, lumber, and concrete.

But there are several reasons renovation costs have stayed relatively high:

• Many home improvement contractors have gone out of business. While quality contractors have stayed busy, many of contractors and sub-contractors have had to leave the business to find other work. That means less competition, which is why prices for home improvement jobs haven't come down as much.
• Homeowners' incomes have fallen.Millions of jobs have been lost since 2007 and many of those who have jobs have been asked to take significant paycuts.
• Access to credit is far more limited. Banks have taken a bath on home equity lines of credit (HELOCs) and home equity loans. According to report from Deutsche Bank, homeowners tapped 25 to 30 percent of every dollar of equity they gained during the boom years. With property prices falling, banks have capped or closed millions of home equity lines of credit, as well as lowering credit card lines of credit. That has limited homeowners' ability to borrow cash to pay for renovation costs.

With limited income and limited access to credit, homeowners have had to either cancel home improvement projects, or manage their renovation costs by doing their project in phases. According to a recent Consumer Reports poll, 36 percent of homeowners plan to do a remodel in several phases to hold down renovation costs.

MY TIPS:

Manage Renovation Costs with Serial Remodeling

Manage Your Landscape Renovation Costs by Phasing In Outdoors Projects

Read the full article and get extra tips here!