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The Santa Fe Life Blog will is a place to keep informed of the comings and goings of all things Santa Fe.

A Commonly Missed Tax Break

Did you know that if you reside in a condominium or cooperative that upgrades to the common areas can affect the amount of tax you pay when the home is sold?

If the property is your principal residence and you have lived in it for two of the previous five years before the sale, you probably already know that a big chunk of the profit is already exempt from federal tax ($250,000 for a single person and $500,000 for a married couple.

If your gain has grown above that number, you will owe taxes on any profit beyond that. If the property is not your primary residence, you will owe taxes on the whole amount (Unless it's a income property and you perform a 1031 Exchange).

For those who reside in a condominium or cooperative, a proportional share of the amounts spent by the condo or cooperative association on improvements to the property (not maintenance) can be added back into the the basis price of the property. The basis is subtracted from the sales price to determine any taxable profit, so the higher the basis, the lower your potential tax.

As always, consult your tax adviser, as everyone has different scenarios.

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Home-Value Web Sites Miss the Mark

Online home-value sites offer some useful tools, but their estimates are often wrong.

"The percentage of error on these estimates is still very large," says Delores Conway, director of the Casden Forecast at the University of Southern California Lusk Center for Real Estate. If there are not many comparable sales in one area, for example, she says, "the estimates will have huge errors in them." and rely on computer-generated automated models to estimate values. The models help compensate for the fact that many neighborhoods don’t have enough sales to generate accurate values based on experience.

But these computer models don’t reflect home condition, improvements and may not even accurately convey property descriptions.

Marty Frame, general manager of, says the data on the site is best used as a way to form an overall impression of a neighborhood.

"Our goal is to provide you all this information and let you cherry-pick the things that are most interesting to you," Frame says. "You're going to look at an estimate and say, "that makes sense' or 'that doesn't make any sense."'

From my observation, the error in valuations seems to be especially high in New Mexico and particularly Santa Fe. I attribute this to two factors. First, New Mexico is a non-disclosure state. This means that the sales price of a property does not become a matter of public record. Secondly, in Santa Fe, the idea of a tract home is very rare. Most homes in Santa Fe are custom or semi-custom making a generalized appraisal by a computer subject to a high degree of error. If you would like an estimate of the value of your home, please feel free to call me at 505-670-5604. I'd be happy to provide this information to you free of charge.

The Associated Press (06/23/2008), contributed to this post.

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Santa Fe Transfer Tax

On June 25, 2008, the Santa Fe City Council will vote on a proposal called the "Workforce Housing Initiative" that will levy a 1% tax when residential property over $650,000 is transferred. Proponents say that the new transfer tax will help fund the city's housing plan. However, there is no certainty that such a tax will remain at this threshold, at the tax rate proposed, or whether the first $650,000 of value will be exempted. It is also unclear if the money will be dedicated for any new housing initiatives.

The hearing scheduled for 7:00 p.m. on June 25th at City Hall in City Council Chambers will allow members of the public to voice their opposition to the new transfer tax. If you have an opinion about the transfer tax, please consider attending the meeting to hear more about the proposal and speak your mind. My opinion is that the proposed tax will not meet the housing needs of the city, is inequitable, will increase the cost of homes and will capture more homes over time as homes increase in value. In these uncertain economic times with gas and food prices rising, Santa Fe can't afford another tax.


Going Beyond the Credit Score

Fair Isaac Corp. and the credit bureaus have rolled out numerous products to provide lenders and investors with alternatives to the FICO score in assessing borrowers' default risk.

The Credit Capacity Index from Fair Isaac gauges how well borrowers manage incremental debt, while Trend Data from TransUnion gauges the performance of loan portfolios when specific variables and regional economic indicators are factored in.

Steps also are being taken to improve the tools available to mortgage lenders to assess default risk, with industry experts pointing out that FICO scores were inadequate on their own because credit bureaus receive mortgage data without knowing the type of loan and are not given access to copious amounts of data on the performance of loans held in lenders' portfolios.

National Bank of Kansas, for instance, is going beyond the FICO score, also using a fraud score, risk profile, appraisal review and an expanded team of risk managers and underwriters to reduce default risk.

Source: American Banker, Kate Berry (06/18/08)


Update on Rates

Rates are pulled back by about 1/8 of a percent from last week, and the bond market seems to be settling down a bit with less volatility. The Federal Reserve meets Tuesday and Wednesday. The futures markets are indicating that the FED is not expected to raise short-term (Prime) rates. Although most analysts agree that they are collectively addressing inflation fears. My personal feeling is that rates might move slightly lower after the Fed meeting.

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New Price: Commercial Bldg - 425 Sandoval:

We've just lowered the price on 425 Sandoval. The new price of $685,000 makes this historic double adobe building the best value in downtown Santa Fe. The building is located just a half a block from the new Santa Fe County Courthouse. The area does not have much office space available and as soon as the courthouse is complete, this building will be in huge demand!

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Just Sold: Abiquiu Cabin

I'm happy to report that a cabin that I was listing in Abiquiu New Mexico has just sold. The cabin was a great property. New, never lived in, log construction on two of the most scenic acres in Georgia O'Keeffe country. The list price was $199,000 and was marketed extensively on

Thanks to all!

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Just Sold: 4445 Dancing Ground

I've just sold a great home in the Nava Ade subdivision of Santa Fe. Many thanks to Larry Valadez of American Building Inspections and Andrea Garcia at 1st American Title for making this another smooth transaction.

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Steve Hardy
Cell: 505.670.5604
Direct Fax: 866.466.4019
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