What Exactly Does "Green Building" Mean?

LEED certification is a great marketing tool, but what does it mean?

“Green building” is the growing buzzword in construction and real estate these days. The concept of green building has gained favor with the general public, who perceive value in a building’s longevity and reduced maintenance costs.

As more and more homes and commercial buildings tout their “green building” status, few consumers actually understand what this means. In its most general sense, green building refers to a method of building that protects the heath of its occupants, efficiently uses water and energy and reduces the building’s impact to the environment.

Green building standards have been established by the U.S. Green Building Council’s Leadership in Energy and Environmental Design. The LEED rating system has emerged as a powerful tool to rate the design, construction and maintenance of a green building.

LEED ratings give points, or credits, for the presence or absence of several factors. At the lowest end of the ratings scale, a green building can be LEED Certified. The more credits a building is awarded, the greater chance of it being awarded the prestigious LEED Silver, Gold, or Platinum status.

LEED credits are awarded according to six factors:

SUSTAINABLE SITES
Where a developer chooses to build is a crucial first step. A green building will address density (for example, a mixed-use residential/commercial project) and access to the surrounding community. Alternative transportation is also considered. Does the building give its occupants easy access to public transportation? Incorporate bicycle storage? Address parking capacity and ride-sharing?

Other factors in sustainable sites include redeveloping a brownfield, restoring or protecting a habitat, and maximizing open spaces. A truly green building will also reduce the thermal difference between the building and surrounding environment. This is done with solar panels or light-reflecting roofs, as well as by planting trees and other vegetation around the site.

WATER EFFICIENCY
Landscaping is an important consideration in this step. In recent years, there has been a push to incorporate indigenous plants into the landscape of a potentially green building. This also means utilizing drought-tolerant or drought-resistant vegetation, as well as alternative watering methods.

Rainwater collection, drip irrigation, and graywater reuse are becoming popular in green buildings. Higher water efficiency is also established through the use of low-flow fixtures, such as energy and water-efficient toilets, shower heads, washing machines and dishwashers.

ENERGY AND ATMOSPHERE
A green building must have energy systems that are properly installed and calibrated. When operating, these systems must meet minimum standards of energy efficiency. A green building will further reduce ozone depletion by not using chlorofluorocarbon (CFC) refrigerants, not only in its heating and cooling, but in its fire suppression

Additionally, a green building will ideally reduce the demand for energy, perhaps by harvesting free energy or recovering wasted energy. Some green buildings also incorporate advanced monitoring systems that will easily point to problems within each system. Of course, green power is ideal, including the use of renewable energy sources such as solar, hydro and wind power.

MATERIALS AND RESOURCES
In order to be a green building, a close examination of the building’s construction is necessary. The program gives credits to building remodels where a significant portion of existing walls, floors and roof are reused. In the green building’s construction phase, waste management is taken into account.

Building materials that are recycled, created locally, or farmed from rapidly renewable materials are also highly desirable in a green building. These items may be found in flooring, insulation, architectural salvage, and myriad other methods. It should be noted that a green building must also have an on-site area for collecting recyclable materials.

INDOOR ENVIRONMENTAL QUALITY
Under this category, a green building must provide a healthful environment for its occupants. This is not only achieved through proper ventilation. In order to achieve this, builders must control or eliminate building materials that may emit hazardous contaminants, such as paints, sealants, finishes, stains and carpets.

A green building’s environmental quality is also measured by individuals’ ability to control temperature and lighting. By increasing the number of individual light switches and thermostats, occupants in a green building are more comfortable use less energy. And by designing primary living and working spaces around the perimeter, lighting costs are reduced, as well as increasing quality of life within the building.

INNOVATION IN DESIGN
Many consumers think that this category refers to the unique appearance of a green building. But innovation in design actually means that a building exceeds standards designated under the green building program. This can be achieved through design, technology, education and equipment.

Building owners can achieve innovation in design by utilizing Energy Star appliances, following green housekeeping procedures, saving water, and using natural pesticides in landscaping. Some green buildings earn these extra credits by tremendously exceeding the requirements other categories.

Foreclosure Roundup

There were a number of submissions to the Foreclosure Central roundup. I can only assume that most people were tied up with taxes, as very few of the submissions had anything at all to do with foreclosure.

The most insightful blog author regarding foreclosure was Andrea Dickson at Wise Bread. In her article "How to Avoid Foreclosure" she gives homeowners who might be facing foreclosure some real tools and steps to follow.

I also like that Andrea touches on the community impact of foreclosures, stating "At least 4 properties (all rentals, all owned by the same person) on my street alone are being auctioned off within the next month, and that kind of activity is going to affect my property values..." Scary stuff.

Each state's foreclosure process is somewhat different. To see an overview of each state's foreclosure process, go to Foreclosure Basics - By State.

Meanwhile, as more investors shift from residential to the more stable commercial side, Craig S. Higdon at Investment Property Insider explains some basics with Commercial Real Estate Credit, and urges potential investors to "Weigh your risks carefully"

Subprime mortgages and foreclosure statistics continue to dominate real estate-related news stories.

Nationwide, CNN Money shows that foreclosures are up 7% from March to February of 2007, a whopping 47% increase from last year at this time.

For the third straight month, Nevada leads the nation in foreclosures. Las Vegas has the second-highest foreclosure rate among cities monitored by RealtyTrac. The article reports that "Nevada reported 4,738 foreclosure filings, more than triple the number in March 2006. Its foreclosure rate showed 1 filing for every 183 households, more than four times the national rate of 1 per 775 households"

More bad news for Florida. RealtyTrac says that Florida ranks second in the nation for foreclosures with an increase of 33% from February to March of 2007.

The San Francisco Chronicle reports Foreclosures, default notices hit 10-year high. "The number of California homeowners who defaulted on their mortgage payments jumped to its highest level in almost 10 years, exacerbated by slowing home sales and adjustable-mortgage resets."

But Washington State's real estate market remains strong. The Seattle Times shows Foreclosures in state fall, bucking national trend, while the Atlanta Business Chronicle points to a bounce in that state's foreclosure rates as well.

Financial Services Chariman Barney Frank is calling for a quick pass of legislation that would set national protections for all mortgage borrowers and clearer disclosure statements.

Thankfully, not everyone is jumping on the bandwagon for a legislative bailout. The Cincinnati Enquirer reports Go slow on foreclosures, Congress told. "Federal regulators and mortgage lenders this morning warned congressional lawmakers against moving too aggressively to regulate the mortgage industry in response to a soaring number of home foreclosures."

Senator Chris Dodd was one of the earliest and most vocal proponents of legislating the nation out of the subprime debacle. Today it seems he has made a quick about-face. He is quoted as saying "I'm not overly anxious to legislate," he said. "We think there may be enough laws on the books."

Fannie Mae and Freddie Mac are developing new types of loans to help distressed borrowers with high-risk mortgages, including a possible 40-year mortgage.

Lowest Common Denominator LawsAnd the Subprime Lending Market

In the United States, laws are typically written for and around the very small percentage of the population who, for some reason, need to be told very basic things. It’s truly unfortunate that some in our society do need laws and penalties to prevent or punish them for things the rest of us would simply never think of doing. And I truly think that the majority should not accept this any longer.

In the small California town where I grew up, the Fourth of July parade used to be a thing of wonder for children. Not for the parade itself, but because all of the families in town used to pitch tents in the wide grassy medians that separated the north and south-bound lanes of the town’s main road.

Everyone would bring their picnic baskets, sundries, and toys. Children ran around playing tag during this town-wide slumber party, and adults would discreetly sip wine or beer from plastic cups. These July 3rd evenings were so uneventful that there was rarely even any good gossip to talk about the next day.

As time went on, folks from other towns started crossing over into the community to participate. They too brought their tents and sleeping bags, but their foreign presence changed the environment. The first evidence of this was that ‘stranger danger’ at the campout meant that parents felt the need to always have their kids in sight.

The newcomer adults inevitably took the lax police enforcement of open containers to mean that this was more Mardi Gras than town social. For the first time, there were fights and arrests for disorderly conduct. I’m sure you can figure out what happened next. Alcohol was quickly banned, a decision that the town of course supported. Within a few years, camping on the median was also a thing of the past.

I wanted to share this example because, as you can see, when the town had to shift their standard operating procedure for July 3rd and 4th, it wasn’t a reflection of the town itself. It became necessary because of the small percentage of folks who came into town and couldn’t or wouldn’t behave within the established codes.

I like to call these kinds of shifts “Lowest-Common Denominator Laws.” They’re created in response to the small but powerful number of folks who throw a wrench into the works. And by extension, the rest of us get locked into this new norm, even when we can and always have handled the extra burden of responsibility like good citizens and intelligent adults.

The L.A. Times this week points out that the same trend is happening with mortgages. The article points out that the more relaxed lending standards are responsible for allowing a record number of Americans the opportunity to own their homes.

As the “Lowest Common Denominator” rule goes, not everyone is living up to the responsibility. And now Congressmen and Presidential candidates alike want to legislate their way out of the problem.

I’ve got several problems with that. The first is that private industries gauged their risk tolerance and (one would think) moved forward with due diligence. It is worth noting that not all subprime lenders are in the same boat. Obviously, some managed their risks better than others. But because some firms jumped in head-first, this is another instance of “Lowest Common Denominator” thinking.

My second problem with legislating our way out of the subprime mortgage downtick is that fully NINE out of TEN subprime borrowers are paying their notes.
So why should it be acceptable that the 10% who either cannot or will not meet their obligations now become the standard for lending?

Future borrowers will no doubt be held to a standard that is designed to protect against 10% of the population. The 90% of marginal borrowers who own their homes are not even factored into the equation. And thanks to this, 100% of future borrowers will be disallowed the opportunity that 90% of previous borrowers have lived up to, but 10% have ruined for everyone.

FBI Issues Mortgage Fraud Warning

Last week, the FBI issued a strong statement regarding mortgage fraud. The announcement confirmed that the agency is working with the Mortgage Bankers Association to prevent and prosecute mortgage fraud.

The action is reminiscent of the early whistleblower channels that were established in order to more effectively prosecute corporate misdeeds. It also sounds like the warning shot to offenders that mortgage fraud will be the high-priority, high-profile topic for 2007.

And with 2008 being an election year, I expect this will become at least a minor topic on the campaign circuit. A Congressional action similar to Sarbanes-Oxley cannot be too far behind.


FBI ISSUES MORTGAGE FRAUD NOTICE IN CONJUNCTION WITH MORTGAGE BANKERS ASSOCIATION

Washington, D.C. – Today the FBI and the Mortgage Bankers Association (MBA) entered into an agreement to combat Mortgage Fraud. The FBI and the MBA will make available a Mortgage Fraud Warning Notice as a proactive means of educating consumers and mortgage-lending professionals of the penalties and consequences of this criminal activity.

“Mortgage Fraud is clearly becoming a problem that requires the unified efforts of law enforcement, regulators, and industry,” said Karen Spangenberg, Section Chief of the Financial Crimes Section, Criminal Investigative Division, who signed on behalf of the FBI. “The FBI is pleased to have worked with the Mortgage Bankers Association in the development and distribution of this advisory as we continue to strengthen our relationship with such key organizations to combat Mortgage Fraud.”

Mortgage Fraud Suspicious Activity Reports (SARs) referred to law enforcement by financial institutions increased from 17,127 SARs in Fiscal Year 2004 to 35,617 SARs in Fiscal Year 2006, reflecting estimated losses of $946 million. FBI Mortgage Fraud investigations have focused on large-scale frauds perpetrated by organized crime and industry insiders, including attorneys, brokers, appraisers, and realtors. Since September 2002, the number and types of investigations have increased from 436 to 1,036. Of these current cases, 51% involve expected losses in excess of $1 million, and 57% involve our federally insured financial institutions as victims.

Combatting significant fraud in this area is a priority, because mortgage lending and the housing market have a significant overall effect on the nation’s economy. The FBI works closely with national associations such as the MBA, as well as with individual lenders, in a continual effort to define and combat the growing Mortgage Fraud problem. The newly developed Mortgage Fraud Warning Notice enhances the FBI’s endeavors to do so by putting potential perpetrators on notice in an effort to stop potential crime before it is committed.

“We wish to thank the FBI for working with us to provide mortgage lenders another item in the toolbox to help combat fraud against lenders,” said John M. Robbins, CMB, Chairman of the Mortgage Bankers Association. “Fraud against lenders costs the mortgage industry billions of dollars each year, affecting everyone in the mortgage process, including consumers and the communities we are trying to help build.”

The Media's Mishandling of the Casey Serin Story

If you missed our previous primer on Casey and Galina Serin, I would encourage you to go back and read "Mortgage Fraud: Why Lenders Need to Know Casey Serin." My friend Aspeth and I are trading off blog posts on this story, and she picked up today's meme. I've cleaned up the content a tad, as Aspeth has been known to make sailors blush. For this portion of the thread, Aspeth wanted to focus on how the so-called "Old Media" has covered this debacle.


Traditional media's handling of the Casey Serin story has been grim, and it certainly lends credence to folks getting their information from alternative sources. At the very least, the Old Media folks should have cross-referenced their stories by speaking to law enforcement officials to give readers a full picture of the scope and potential punishment of Casey and Galina Serin's crimes.

It's lazy journalism, plain and simple. Anyone who has spent a brief amount of time actaully reading and researching Casey Serin's story is immediately struck by the extenxive chain of fraud that occurred. But print and glossy media has persisted in portraying Casey Serin (and by extension, his wife Galina Serin) as poor victims of the real estate bubble, predatory lending, or any other real estate buzzword of the day.

I find this particularly offensive. Casey and Galina Serin are not innocent victims of the real estate industry. They are the perpetrators of multiple crimes against various banks, lenders, and creditors!!!!

Bloggers have gone out of their way to alert government agencies and creditors alike to Casey Serin's illegal activities. This includes tracking the complicity of his wife Galina Serin and other 'known associates'.

The rage in these posts, and in the comments, is palpable. But it's easy to understand why. People who have followed Casey Serin's story for any length of time are not just content to see him arrested. Nothing short of a ridiculously long prison term and FULL REPAYMENT of "every dirty penny" will suffice.

Whether writing about the complexity of mortgage fraud, deconstructing Casey's attempts to dodge responsibility, or pointing out Galina's complicity, the blogosphere is just the beginning of the impending public response to Casey Serin.

So CHEERS to the bloggers. And a big "Boo! Hiss!" to the Old Guard. Here's our list of media sources that totally dropped the ball in fully informing the public about Casey Serin. In chronological order, here is the Casey Serin Media Hall of Shame:

San Francisco Chronicle
On October 6, 2006, the SF Gate posts a laughably optimistic story about Casey Serin's role in the real estate bubble. His ill intent is glossed over; instead, he is held up as some sort of poster-boy for failing markets and dodgy lenders.

"But by offering himself up as a penitent whipping boy of real estate, Serin has unwittingly offered us a glimpse into the fast-approaching future in which those high-flying real estate trade secrets come home to roost."

Wow. We surely cannot be referencing the same Casey Serin. Casey Serin is anything but "penitent."


USA Today
This is the one that brought Casey Serin into the national spotlight. In the October 22, 2006 edition, Noelle Knox writes If there's a poster child for everything that went wrong in the real estate boom, it just might be Casey Serin.

Rather than paying attention to Casey Serin's extensive mortgage fraud, much less say what else might lie beneath the surface, Noelle Knox writes basically that 'a lot of things can go wrong in real estate.' For a nationally syndicated newspaper, this certainly falls short of breaking the story wide open.


Inman News
Matt Carter writes that Casey Serin bought eight homes in six states using 100 percent stated income loans, getting $15,000 to $50,000 cash back on every loan. First, this is the only time I've seen mention of six states. Judging from the depth of fraud committed, that could very well be true.

But since it has not come up anywhere else in print or online media, I question the voracity. Secondly, I would expect that the highbrow, real estate-only news bureau Inman would delve much more deeply into the casually typed phrase "15,000 to $50,000 cash back on every loan."


New York Magazine
As recently as February 12, 2007, Emily Nussbaum had evidently done enough research into Casey Serin to include him in her piece on twentysomethings revealing their lives on the internet. But she paints a plucky portrait of young Casey, merely writing a few paragraphs about his online confessional.

That he is confessing to multiple felonies doesn't seem to faze Ms. Nussbaum. In fact, that element is never mentioned. Perhaps she never got past the title of Casey Serin's blog to actually read one of the numerous instances where he details his crimes. That's quite a shame, because she, too, missed the story entirely.


CBS 5 San Francisco
The most recent incident of a no-research fluff piece on Casey Serin occurred on March 7, 2007. John Lobertini presented yet another piece of Casey-Serin-as-victim-of-big-real-estate. Lobertini's piece is similar to the other 'Casery Serin-lite' pieces, where journalists follow right down the path that Casey leads them.


And while this is far from 'old media', it is worth noting that mortgage broker Niles Swaby has put out several press releases, positing himself as the authoritative source on Casey Serin. Niles Swaby chose the self-important headline Aspiring Web Journalist Lands Real Estate Story of the Year.

Well, that's really stretching it, isn't it? As you can tell from the timeline above, two major news outlets had already "landed" the story when he issued this press release on Halloween of 2006. (And regarding the timing, it's just too easy...I'm leaving that one alone.)


One last thing....I stumbled across an old blog of Casey Serin's. It was interesting in that was supposedly written on his 25th birthday. This was news, in a sense, since everyone thinks he's 24. But what really struck me was this:



Wait a minute....am I reading that correctly?!?!

Casey Serin was born on SEPTEMBER 11 ?!?!?!?

Talk about your 'day that will live in infamy'......

Mortgage Fraud Why Lenders Need to Know the Name"Casey Serin"

Real estate practitioners are often slow in adapting to new technologies. I understand why--most successful real estate professionals spend very little time in an office, much less say in front of a computer.

But this is a compelling reason why you should keep up to date with basic technologies: SAFETY. Real estate practitioners have often been encouraged to follow safety guidelines when dealing with a potential client, such as making a copy of their drivers' licenses before driving them around.

Allow me to offer another step. GOOGLE ANY POTENTIAL CLIENT.

This is certainly something that Casey Serin's lenders, realtors, and other lien-holders should have done. Because some of them may have just been 'doing their jobs', but that will be a hard row to hoe when the authorities sort the difference between them and the co-conspirators.

I am loath to give this guy any more publicity. But suffice to say that we at The RE Forum have joined the list of folks who have contacted law enforcement agencies about this con artist. We have forwarded information to the U.S. Attorney's Office, FBI, the District Attorney and Police Departments of each relevant property. We know that others have already contacted the IRS.

Unfortunately, if you're a real estate professional and haven't heard of Casey Serin, you're doing yourself a great disservice.

In short, Casey's story goes like this: In 2006, at the age of 24, Casey Serin acquired at least 8 (known) properties in 4 states. He committed mortgage fraud to obtain the loans by lying about owner-occupancy, lying about his income (he had quit his job), inflating the value of the properties, and getting cash back at close. By his own admission, the banks were not aware of his cash-back schemes, where he received anywhere from $15,000-$50,000 per closing.

The properties that Casey Serin has admitted to owning (there may be more) are:
??? Calla Way, Sacramento, CA SOLD
6842 Burdett Way, Sacramento, CA 95823 FACING FORECLOSURE
6021 Guadalajara Dr NE, Rio Rancho, NM 87144 FACING FORECLOSURE
??? Sonora Ave, Albuquerque, NM SOLD
1910 Muncy Drive, Modesto, CA 95350 FACING FORECLOSURE
6656 W 10250 N, Highland, UT 84003 MULTIPLE ATTEMPTS TO WRAP
6500 Larchmont Dr, North Highlands, CA 95660 FORECLOSED
9524 Angleridge Rd, Dallas TX 75238 FORECLOSED

Those "cash back" monies were used in a classic pyramid scheme. Each closing brought more money to keep loans current on his existing properties. They also allowed Casey Serin and his wife Galina Serin to live an extravagant lifestyle. Casey and Galina Serin blew through the money quickly, and within months he was facing foreclosure on all 8 properties.

With deflating markets in many of the areas where Casey Serin bought homes, he has been unable to "flip" them as he intended and is now $2.2 million in debt. Serin hopes to file for bankruptcy to avoid paying his debts, but has been advised that the fraudulent manner in which they were acquired means that he will almost certainly be prosecuted for felony fraud.

While this is all interesting, this is why you should be very aware of this story. Casey Serin is today still trying to make real estate deals. As he is a multi-state offender, Casey Serin may appear in your office in some form.

Casey Serin repeatedly makes reference in his blog to making offers on other homes, and is reportedly even shopping for an apartment complex. So he may be contacting residential and commercial brokerages.

Watchful observers have pointed out that Casey Serin has used several aliases and known associates. Some of these may be straw buyers; others may be simply a front to hide his own identity. He and his wife have also registered two known DBA's.

It is also known that Casey used the name Alesky Serin in 1997 to run his first pyramid scheme--at the ripe old age of 14!!!

Per Casey Serin's own admissions through his blog, here are some other names you should know:

KNOWN ALIASES, POTENTIAL CO-CONSPIRATORS, POTENTIAL STRAW BUYERS:
Casey Konstantin Serin, Casey Serin's full name.
Galina Serin, Casey's wife, maiden name Suprun.
Finch Properties, Owned by Casey Serin and Galina Serin
Able Buyer, Owned by Casey Serin and Galina Serin
Alesky Serin (Casey's father. Casey has reportedly bought and/or transferred properties to this name) Sacramento, CA. Other known cities: Fair Oaks CA, Rancho Cordova CA
Anna Serin (Casey's monther. Casey has reportedly bought and/or transferred properties to this name) Sacramento, CA. Other known cities: Fair Oaks CA, Rancho Cordova CA

KNOWN ASSOCIATES:
Nigel Swaby, Mortgage Broker, Integrity First Financial, Salt Lake City, UT. Other known cities: Sandy UT, Salem OR, Portland OR, Beaverton OR
Duane LeGate, President, House Buyer Network, Atlanta, GA. Other known cities: Marietta GA, Midland GA, Columbus GA, Orange Park FL, Cedar Grove WV
Paul Prestwich, Secure Tomorrow - Asset Protection, Sacramento, CA

One of these associates has said that Casey Serin has recently partnered with a California "investor" referred to as simply "G". They traveled to Salt Lake City together, and it is unclear if the duo were reconciling Casey's existing properties or searching for new ones.

Casey Serin typically used smaller, independent lenders. No doubt he thought that his approach might be caught by larger, nationwide lenders. If you have had any real estate dealings with Casey Serin, we encourage you to contact authorities immediately.

As con artist Casey Serin continues to weave a web of deceipt and leave a trail of debt in his wake, you will not only be saving other potentailly defrauded lenders. At this point, a proactive call to police will also help authorities separate those who unknowingly assisted Casey from his willing co-conspirators.

The 2006 Real Estate Year in Review

The 2006 numbers have been tallied, and it turns out that it was a bit of a cool year. Overall, real estate prices continued to trend upward, but at a much slower rate than in previous years.

What will 2007 hold? Of course, real estate agents and brokers are nervous. They and the folks in the mortgage industry will be watching Fed rates closely in the coming year. The days of easy refinances and quick sales seem to be gone for now. But those professionals who evolve with this current market, rather than clinging to the 'good old days' of just a couple of years ago will continue to do just fine.

In trying to predict the 2007 real estate market, those in the real estate industry are doing some interesting dances. The National Association of Home Builders reverses themselves in two back-to-back articles. On January 15, 2007, they write the optimistic article "Eye On the Economy: Home Sales May Be Firming Up." Just a week later, they draft an article titled "Recent Reports to Fed Show More Cooling in Housing Markets."

The National Association of Realtors is covering itself in a similar fashion. On January 25, 2007, they lead with the article "Existing-Home Sales Ease, Supplies Tighten." On February 1, they write "Pending Home Sales Index Rises." One can't help but wonder if these conflicting reports are drafted with the idea that one set goes to home sellers and the other to home buyers, as the broker or agent sees fit.

	EXISTING HOME PRICES	PERCENT CHANGE	AVERAGE PRICE
2002	$166,200	7.6	$208,400
2003	$180,200	8.4	$225,000
2004	$195,200	8.3	$245,800
2005	$219,000	12.2	$267,400
2006	$222,000	1.4	$269,600

The Changing Face of Homeowners Insurance

Two states to watch in 2007 will certainly be Mississippi and Florida. The real estate markets in these two states have traditionally withstood natural disasters such as hurricaines. But insurers are fleeing the disaster-prone areas, leaving homeowners, and states, with no safety net.

State Farm made a huge round of news stories when it announced that it would not write any new policies in Mississippi. At the heart of the issue is whether hurricane damage was caused by wind or water damage, as homeowners' policies do not cover against water damage.

Insurers in Florida are in the process of scaling back their wind policies. Now Florida's legislators are trying to keep both insurers and property owners in the state. "At the root of the trouble is that insuring against a major storm in much of South Florida has been deemed simply too risky to be affordable."

Mississippi's response has been to threaten to mandate insurance companies into writing policies in that state, which has drawn widespread criticism from homeowners in other states. Florida's plan, meanwhile, has been to promise billions of dollars of bailout monies for both parties.

Certainly, every state has its own unique propensity for natural disaster. From tornado damage in the Midwest to California's ubiquitous earthquakes, the nation is poised to watch the developments in Florida and Mississippi very closely.

Homestead Exemptions

Many homeowners have never heard the term "Homestead Exemption." There are three possible reasons for this. First, you live in a state that does not require an Exemption Declaration, such as Texas, meaning that your Homestead Exemption is automatic. Second, you might live in one of the small number of states that do not offer their residents the protection of a Homestead Exemption. Third, your real estate agent never told you to file one after you bought your home.

So what's the big deal?

In its broadest sense, a Homestead Exemption allows a homeowner to retain all or part of their home's value or acreage in the following circumstances:
Preventing the forced sale of a home to meet the demands of creditors;
Providing a surviving spouse with shelter;
Providing an exemption from property taxes.

The Homestead Exemption will NOT protect your home from a forced sale to cover mortgage debt or a mechanic's lien.

The terms of the Homestead Exemption, of course, vary widely from state to state. Florida and Texas are considered to have the most liberal Homestead Exemptions. Florida protects an unlimited value of a home, but limits that protection to a half-acre within a municipality. Rural properties in Florida are allowed much greater acreage. Texas also places no cap on value, and allows for a generous 10 acres within a municipality, 100 acres in a rural area, and 200 hundred acres for a family in a rural area.

Most states don't allow for such a broad application of Homestead Exemption. In those cases, if your home goes into a forced sale, a certain number of dollars or percentage of value will have to go to the homeowner, even if that reduces the amount of debt than can be paid back through the home sale. You are generally only allowed to have an exemption on one property, and it must be your primary residence.

Some states, counties, and even cities give their elderly, low-income, and disabled homeowners a property tax break via the Homestead Exemption. This can cap the dollar amount of property taxes, or allow for a certain dollar value (i.e. up to $75,000) to be non-taxable. This is especially helpful for those on a fixed income who may be living in an area undergoing tremendous growth or increase in property values.


Now for the necessary disclaimers: I am not a lawyer and do not work in real estate. This is the extent of what I know on this topic, from personal knowledge and culled from reference materials. Like all things in life, if you need a professional (such as a lawyer), by all means hire one and do not rely on this discussion forum for legal advice!!! I sincerely hope that readers will comment, expand, and expound on this topic.

More information on Homestead Exemptions can be found in the excellent Nolo Law series.

Hot Real Estate News, Feb. 15, 2007

Hot Real Estate News

February 15, 2007

The Wall Street Journal reports that 100% loans are losing favor with lenders. Typically referred to as an 80-20 loan, the second mortgage rounds out the loan amount to a full 100% for buyers without a down payment. Lenders are having a difficult time reselling these loans on the secondary market, and are wary of upcoming foreclosure rates from the already creative lending practices of the past several years.

'Across the board, everybody is ratcheting up'" the minimum credit score at which they will make particular loans" cites the Journal, further stating that "Borrowers have been rapidly falling behind on loans made in the past year or so."

What happens when you marry the concepts of hiring actors for open houses and providing virtual tours on YouTube? The Chicago Tribune has found it: Webisodes...a video soap opera of sorts where developers hope that home buyers will, literally, buy into the lifestyle they present:

Dougal and Anya are fictional characters. Their onscreen story is "Sex and the City" meets "Will & Grace." But there's another character in the mix, and it is the building.

The building is the Donovan, a soon-to-be-real high-rise in the hip Yaletown neighborhood in Vancouver. It's a major player in "Donovan Life," a professionally produced sitcom introduced online Wednesday.

Forbes pinpoints the "Best and Worst Housing Markets" in America, noting that incredibly expensive real estate markets such as Boston and San Diego have cooled slightly. Their prediction for the Gulf Coast looks brighter, as homes appreciated from 7-15% in post-Katrina cities.

According to Forbes, the strongest real estate markets in America right now are Seattle, El Paso, and Houston, reflecting the relocation trends that Americans have created in search of jobs and an affordable cost of living. Detriot, Miami, and Indianapolis are the loss-leaders at the moment.

Meanwhile, MSNBC reminds American home buyers that the grass is still greener on this side of the pond. Their article "77 sq. feet for $335,000? Welcome to London" describes an unfurnished basement closet with no heating or electricity on the market for an astonishing $4,340 a square foot.

Real estate appreciation in London's poshest districts has been incredible, with an average increase of over 22% in the past year. In places such as Kensington and Chelsea, homeowners have averaged a whopping 60% appreciation.

Ultra high-end property prices in London are the most expensive in the world, with some recent sales hitting $6,000 per square foot....Similar properties in New York can go for about $5,000 per square foot, while those in Hong Kong sell at around $4,000 per square foot.

Refuting "Facts" at RealtyTimes.com

It looks like we get to kick things off with a piece that proves the need for our website's very existence.

The well respected site Realtytimes.com posted an interesting article on its homepage today. Interesting, because if you try to follow the advice within, you'll wind up committing tax fraud.

Today, Diane Kennedy writes about the generous $250,000/$500,000 capital gains exclusion that homeowners can take on the sale of their homes. But in her second paragraph, she makes this assertion:

"The IRS allows you to have temporary absences from your home each year that can be up to 11.5 months! You can literally buy a home, live in it for 2-3 weeks per year for two years and take the entire tax-free gain exclusion."

My first reaction to reading this was "That's just wrong!" But, always one to admit that things change, and I could indeed be incorrect, I decided to research the facts before sharing them. I went to the IRS website, which helpfully reinforced what I thought I already knew.

Just to clarify, yes, you are entitled to take a $250,000 capital gains exclusion ($500,000 on joint returns) on the sale of your home. But, like everything else in life, it's not quite as simple as that. Straight from the IRS, here are the requirements you'll need to meet in order to keep from paying taxes on the first $250,000/$500,000 profit on your home's sale:

"To be eligible for an exclusion, your home must have been owned by you and used as your main home for a period of at least two years out of the five years prior to its sale or exchange. The required two years of ownership and use during the five–year period ending on the date of sale do not have to be continuous. You can meet the ownership and the use tests during different two year periods. However, both tests must be met during the five–year period ending on the date of the sale or exchange."

In other words, yes, the IRS does take into account that you may have more than one residence and is, for once, lenient in its application of "primary residence." But you must have lived in the home for a total of two years out of the previous five. Applying Ms. Kennedy's advice, that you could live in a home for a couple of weeks and take the exclusion after two years, will almost certainly get you audited.

There are exceptions to this two-out-of-five rule. "Unforseen circumstances" such as a health crisis, change of employment, or military duty. To explore those exceptions further, read the IRS's publication "Topic 523" for more information.

In the meantime, we've alerted Realty Times to their error, and will wait to see a correction posted.