HCH March 2, 2007 Issue - Chattanooga Bar Association

12 Friday, March 2, 2007 HAMILTON COUNTY HERALD
Real estate buck stretches furthest in Indianapolis
Inman News
City tops nation’s most-affordable
list in fourth quarter
Indianapolis maintained its
standing as the most affordable
major U.S. housing market for a
sixth consecutive quarter in the
fourth quarter of 2006, according
to the National Association of
Home Builders/Wells Fargo
Housing Opportunity Index
(HOI), released this week.
Some 89 percent of
Indianapolis homes sold in the
fourth quarter were affordable to
families earning the area’s median
household income of
$65,100, and the median sales
price of all homes sold in
Indianapolis during that time
was $113,000, down from the
$122,000 median sales price in
the previous quarter.
Nationwide, housing affordability
edged slightly upward due
to a noticeable decline in the
average mortgage rate and a marginal
downshift in the median
price of all homes sold.
“Today’s HOI reading indicates
that 41.6 percent of new
and existing homes that were
sold during the fourth quarter of
2006 were affordable to families
earning the national median
income of $59,600,” said NAHB
President Brian Catalde, a home
builder from Playa del Rey, Calif.
“This is slightly better than the
40.4 percent of homes that were
affordable to median-income
earners in the third quarter and
mostly due to more favorable
mortgage rates near the end of
the year.”
The HOI indicates that the
national weighted interest rate
on fixed- and adjustable-rate
mortgages — a key component
in calculating the HOI — was
6.52 percent in the fourth quarter,
compared with 6.77 percent
in the third quarter.
Also near the top of the list
for affordable major metros this
time around were Youngstown-
Warren-Boardman, Ohio-Pa.;
Detroit-Livonia-Dearborn,
Mich.; Toledo, Ohio; and
Buffalo-Niagara Falls, N.Y., in
that order.
Four smaller metro markets
outranked all others in terms of
housing affordability during the
fourth quarter: Springfield,
Ohio, was followed by
Davenport-Moline-Rock Island,
Iowa-Ill.; Bay City, Mich.; and
Mansfield, Ohio, respectively.
Also, the small housing market
of Canton-Massillon, Ohio, tied
with Indianapolis on the affordability
scale.
As for the nation’s leastaffordable
major housing market,
Los Angeles-Long Beach-
Glendale, Calif., captured that
title for a ninth consecutive
quarter. There, just 2 percent of
new and existing homes sold
during the fourth quarter were
affordable to those earning the
Realtors welcome the president’s focus on health care
Debate over what to do
about the over 46 million
Americans living without health
insurance continues to intensify
across the country.
The issue took center stage
in Chattanooga last week with a
visit from President George W.
Bush. Access to affordable
health insurance has consistently
been a key issue for Realtors
across the country.
Like other self-employed
individuals and those who work
for small businesses, Realtors
make up a group forced into the
individual insurance market and
are unable to negotiate with
Can homeowner association bar worship at its clubhouse?
By Robert J. Bruss
Inman News
Religious group alleges fairhousing
violation
Until 2004, the Savanna
Club Worship Service Inc. conducted
its worship services
in the Savanna Homeowners
Association clubhouse or common
areas. But the homeowner
association received numerous
complaints from its members
regarding use of the common
areas for religious services.
One of the reasons for the
complaints was such usage was
contrary to the stated purpose of
making the common areas available
for use and enjoyment of
the members of the association.
insurers for fair health care rates.
For years, Realtors have
worked with lawmakers in
Washington to find solutions
that will help meet the needs of
working Americans and are
encouraged by President Bush’s
efforts to adopt reforms.
Discussing his plan, the
president said, “We need to
make sure that we put good policies
in place to make sure private
medicine is the norm, quality
care is given to as many
Americans as possible.”
He also called for “innovative
ways of providing insurance”
while also helping
After receiving numerous
complaints, the association conducted
an informal vote of its
members. They voted 714 to 434
to prohibit religious services in
their common areas.
As a result, the association
adopted a rule that “No portion
of the common areas of Savanna
Club may be used for any religious
service.”
Following enactment of the
rule, the worship club continued
holding its services. But the
homeowner association filed a
court petition for mediation.
Following mediation, the club
stopped holding its religious
services in the common areas.
Americans save money.
The main part of the president’s
proposal looks to reform
the tax code and allow for a standard
deduction for health insurance,
up to $15,000 for families
and $7,500 for individuals.
Another key part that
Realtors have been working to
see implemented is the
allowance of association health
plans.
Association health plans
would allow small businesses to
join together through trade and
professional associations to purchase
health coverage, giving
them the same advantages and
The worship club then
brought this lawsuit against the
Savanna Club Homeowners
Association, alleging the rule
barring religious services violates
the federal Fair Housing Act.
If you were the judge, would
you rule the homeowner association
rule barring religious services
in the common areas violates
the Fair Housing Act?
The judge said no!
The evidence shows the
homeowner association rule has
been applied evenly, and no religious
group has been allowed to
use the common areas for its religious
services, the judge began.
Although the worship club
has standing to sue, it failed to
Gifting real estate not recommended
By Robert J. Bruss
Inman News
Mother’s good deed does inheritor
a disservice
DEAR BOB: About a year
ago, my elderly mother deeded
to me her home and two rental
properties I manage for her. Her
attorney handled the quitclaim
deeds and the recordings.
Mother died in October 2006.
When I talked to my mother’s
tax accountant he said, “It’s
too bad your mother deeded the
titles to you. If you had inherited
those properties, you would have
a new stepped-up basis of market
value and you would owe practically
zero tax when you sell them
shortly after her death.” Is it true
that I don’t get a new stepped-up
basis? —Ellen H.
DEAR ELLEN: Yes.
Unfortunately, you didn’t inherit
those properties. You received
the titles as pre-death gifts. As
the donee, you took over your
donor mother’s probably very
low adjusted cost basis for the
properties.
That means, when you sell
them, you will owe a large capital
gains tax. Unfortunately, your
tax accountant is correct.
This situation shows why it
is often best, especially when a
parent anticipates dying soon,
not to deed real estate to a
potential heir. The obvious reason
is then the prospective heir
won’t receive a new stepped-up
basis to market value on the date
of death.
NO GUARANTEE A
VACANT LAND BUYER
CAN GET BUILDING PER-
MIT
DEAR BOB: I am considering
buying a vacant lot on which
I want to build a home. What
assurances can I receive before
the purchase that the building
permits and site plans will be
approved by the local authorities?
I do not want to be stuck
with a lot on which I cannot
build. —Pat E.
DEAR PAT: A buyer of
vacant land has no assurances a
building permit will be issued,
even when the proposed plans
exactly meet the zoning and
other land-use rules. Depending
on the city or county, I’ve seen
frustrated developers and
landowners stalled for years
when neighbors object or variances
are required.
For this reason, savvy rawland
buyers can often pay a modest
price, typically 1 percent to 3
percent of the purchase price, for
a 12-month option to buy the
land at a fixed price. That ties up
the property and gives the buyer
time to apply for the necessary
permits. If they can’t be
obtained, all it cost the potential
buyer was the forfeited option
money.
negotiating clout enjoyed by
larger companies and labor
unions. Members of an association,
regardless of where they
work and live, could pool their
risks and be offered a uniform
health care plan that could help
offset the rising premiums and
costs that are pricing individuals
out of the market.
Nationwide, the percentage
of Realtors without health insurance
has nearly doubled over the
past 10 years. Given that the
average Realtor household
includes 2.6 people, the number
of uninsured is even greater.
present any evidence of violation
of the Fair Housing Act or
any other law, he continued.
Savanna Club is a unique
planned community, the judge
explained. Its common areas are
open to all its members, and
there is no evidence of any religious
or other discrimination
involving purchase or use of residences
within the community,
he noted.
The worship club has not
presented any evidence of discrimination,
the judge emphasized,
because all religious groups
are prohibited from holding
services in the common areas.
“The right to religious freedom
must encompass the right
HOW TO MAKE A TAX-
DEFERRED TRADE FOR
DREAM HOME AND PAY NO
TAX
DEAR BOB: I own two
rental properties. Let’s call them
A and B. I have never lived in
either one. Nor do I intend to.
Let’s say I sell A and B on the
same day and do an Internal
Revenue Code 1031 taxdeferred
Starker exchange by
identifying and purchasing property
C. Assume I rent property C
for three years and then move in
to make it my principal residence
for two years. Then I sell
property C. If the total capital
gains on A, B and C are less than
$500,000 (I am married and my
wife would live with me in property
C for at least two years), can
I sell property C without owing
any tax? —Tim McW.
DEAR TIM: Yes. But you
must hold title to property C at
area’s median family income of
$56,200. The median sales price
of all homes sold in the area during
the period was $525,000.
Other major metros at the
bottom of the housing affordability
chart included Santa
Ana-Anaheim-Irvine, Calif.;
San Diego-Carlsbad-San
Marcos, Calif.; New York-White
Plains-Wayne, N.Y.-N.J.; and
Modesto, Calif., in that order.
Among metro areas smaller
than 500,000 people, every entry
at the bottom of the affordability
chart was located in California,
starting with Salinas as the least
affordable and followed by Napa,
Merced, Santa Cruz-Watsonville
and Santa Barbara-Santa Maria,
Calif., respectively. ❖
“The president is offering
some encouraging words on an
important issue we’ve supported
for many years,” said Jason
Farmer, president of the
Chattanooga Association of
Realtors.
“Allowing for association
health plans is a good idea and
can make an immediate impact
in improving the lives of millions.
We hope that our elected
officials can come together in a
bipartisan manner to work out a
solution that makes health
insurance affordable and accessible
for more Americans,” added
Farmer. ❖
to be free from religion,” he
added.
The Fair Housing Act
imposes no “reasonable accommodation”
requirement in the
context of religious discrimination,
the judge ruled. Because
the challenged rule of the homeowner
association has been
applied equally to all religions,
there is no Fair Housing Act violation,
and the worship club is
not entitled to use the common
areas, the judge concluded.
Based on the U.S. District
Court decision in Savanna Club
Worship Service Inc. v. Savanna
Club Homeowners Association
Inc., 456 Fed.Supp.2d 1223. ❖
least 60 months because it was
acquired in a tax-deferred IRC
1031 exchange. It does not
become eligible for the IRC 121
$500,000 principal-residencesale
exemption until you have
owned it at least five years, of
which at least 24 months it was
your principal residence.
At the time of its acquisition,
of course, it must be a “like
kind” rental property, and the
trade must qualify as a taxdeferred
IRC 1031 trade up.
Of course, be sure your sales
of properties A and B comply
with the IRC 1031(a)(3) Starker
tax-deferred exchange rules.
That means the sales proceeds
must be held by a qualified thirdparty
intermediary so you never
have “constructive receipt” of
the sales proceeds. For details,
please consult a tax adviser who
is familiar with Starker taxdeferred
exchanges. ❖