Buyers Guide

Pine Mountain Lake in the fall

Starting your search for property in Pine Mountain Lake?

A RE/MAX Yosemite Gold Guide to finding Real Estate

What are the current prices and Pine Mountain Lake homeowner dues?

Contact one of our Realtors to provide you a current list of ALL houses or lots for sale in our Multiple Listing Service. It takes them just a couple of minutes to print or e-mail a list in your price range. The list can show the # of bedrooms, baths, and levels; house, lot and garage sizes; whether it is on the lake, golf course, or greenbelt; and just about any other feature of the house. They can give you a 19 inch by 24 inch Pine Mountain Lake map showing all the streets, units and lot numbers, and locations of amenities. The current monthly PML Homeowners Association dues are $149. We can (and will!) show you any property listed by other brokers, including discount brokers and For Sale by Owners (with their permission). You can also see our house ads in the Pine Mountain Lake News monthly newspaper. Or online go to our MLS Search  for current listings. If you’re curious about what is selling, see this updated list of recent Groveland sales.

A Vacation Home With Lake Frontage and Dock

Where else on the WEB can I look up properties? has all of our area’s listings for sale, as well as most of the country’s real estate. Just enter our zip code, 95321, and a there they are, along with photos of every house. The next best place is This site shows up to 30 photos of each house or parcel.

Remax Yosemite Gold

Can we just drive around and look at the outside of homes for sale?

Once you have a list and a map you can explore different neighborhoods and see the houses on your own, as long as you do not bother the occupants. The exception is if there is an Open House sign out front, which are allowed on weekends. There are 52 miles of roads in PML, and lots of wonderful hidden courts and side streets. There may be a fabulous view from a house up on a hill hidden in the trees. Some pictures just don’t do a house justice, and of course others frame the nice part and don’t show the 3-story house looming next door. So it is useful to get out and look if you are not ready to go with a Realtor yet.

What are all these numbers for each property?

Each lot in PML is located in one of 15 UNITS, shown on the PML map by thick black dividing lines. Each LOT has its own number, from numeral 1 to 598. The unit and lot are commonly shown as “13/260″ for example, and must be on a sign at every lot or house. In addition, the County requires the address number to be on every house to aid firemen and police in finding it. The address number is a 5-digit number. Each property listed for sale also has an 8-digit MLS number that shows up on web searches.

Why are there no FOR SALE signs on properties?

Since 1996 almost all of the real estate brokers agree not to have company signs anywhere on the property. We agree with the Homeowner’s Association that it looks much nicer that way, and protects vacant homes from mischief. In exchange for our voluntary cooperation to eliminate signs, PML puts our company signs at the main entrance gate and puts a link to each of our websites on Individual sellers who choose not to use an agent can put up a 12 X 18 inch standard PML FOR SALE by owner sign.

How can we tell where the property lines are?

Since fences are not allowed on the lot lines in PML and each lot is a different size, it can be hard to see the boundaries. Look for water meters and power poles. These are placed near the street close to the side lines dividing each lot. Concrete Christy boxes holding water meters are placed on every other lot line, and each serves the two lots on either side of it. The latest 19 X 24 inch PML maps show which of the 500+ lots have been merged together with another to create one lot. If the owner of lot 201 bought 202 and combined them into one lot, the lower number is used to identify it, or lot 201. (PML was developed in 1969 with 4,181 lots, but the number is closer to 3600 now, after all the mergers). The front boundary of each property is usually set back from the street curb or asphalt between 5 and 25 feet. The paved streets are only 22 feet wide, but the PML-owned rights-of-way are 50+ feet wide. Where there are cut embankments above the road, or dirt fill banks below the road, PML owns and maintains that property, too. So the front lines of the private lots usually start at the top of the cut banks or the toe of the fill banks. Where direct driveway access from the street is impossible because of the terrain, there are hundreds of driveway easements providing access across the front 20 feet of neighboring lots. The property corners are marked by ¾” diameter re-bar iron posts that extend 2 feet into the ground but may only show above the ground a few inches (or may be buried by leaves and silt).

A Nice Big Redwood Deck To Relax On

What utilities are available?

All lots have public water from Groveland Community Services District (GCSD) and fire hydrants every 300 feet. About one-third of the lots have public sewer hookups, and the rest use individual septic systems. Electricity is from Pacific Gas & Electric and phone service from AT&T. Cable television is available to all lots. Individual propane tanks on each lot are used because piped natural gas is not available. Moore Brothers Scavenger Service provides several levels of garbage pick-up, or some people take their own loads to the dump on Wednesdays and Saturdays. Fire protection is provided by a full-time department, run by State CalFire with a contract with GCSD.

Are there townhouses, condominiums, manufactured homes or apartments?

Country Club Village is a complex of 32 multi-story townhouses near the pool, tennis courts, and Country Club restaurant and Pro Shop. Four condominium complexes are located nearby on Dyer and Salvador Courts. The age, condition, sizes, and amount of homeowner’s association dues are all different. The big advantages are no yard maintenance and great location. Manufactured homes on permanent foundations are allowed in PML if they meet certain design guidelines regulating roof pitch and length of eaves. Mobilehomes that aren’t on foundations are NOT allowed. No apartments are in PML, and there is one duplex and two triplexes.

What if we want just lake frontage or golf course properties? These websites don’t allow that kind of search choice

If you are only interested in specific features, such as parking for a 32 foot long RV, a fireplace in the living room, or airport access, or at least half an acre, or full Southern exposure, you should call us to help you. We’ve usually seen all the houses for sale, and we also have access to much more detailed SEARCH functions through the MLS. If you come in the office we can show you all the interior pictures of each house, and if it is our listing, sometimes dozens of photos of the property. Our job is to weed out the unsuitable houses and save you time. We can also send you emails of interesting properties, or set you up with an automatic email feed of new listings or reduced prices.

If I buy a vacant lot, what are the costs to build a new house?

The Tuolumne County building permit fee is based on the size of the house. The fee for a 2000 square foot house costs $975. For this fee you get a check of your plans for building code compliance and five inspections. But the County won’t check your plans until you pay the biggest fee: the SCHOOL MITIGATION. Started in 1986, this fee is also based on square footage and varies with each school district. Our Groveland-Big Oak Flat District charges the maximum allowed, $2.05 per square foot. So on a 2000 sq ft house, that is $4,100. It goes directly to the County Schools Office.
The next largest fee is to maintain our County roads. The Traffic Mitigation fee is divided into two single-family residential categories:
2+ acre parcels pay $3,080 and < 2 acre parcels pay $2,279, which is the amount you would pay for a PML house.
The next fee is for every other County service and makes up for the lost property tax increases that Proposition 13 took away in 1978. It is called the County Service Impact Mitigation Fee. If you are in the GCSD fire protection district, as PML is, you pay $1,463. Both the Traffic Mitigation and the Service Impact Mitigation fees are due prior to issuance of a building permit.
To get water from GCSD you will pay $1,700, which includes the application, meter, and “participation” fees. A standard sewer connection is $7,000. If the sewer main has to be extended to “add” your lot on to the existing system, you will pay for the engineering and extensions costs, several thousand dollars more. Be very sure when offering on a vacant lot whether it is already served by a sewer line in the ground, or is an “add-on” lot.
Two-thirds of PML lots are served by individual septic systems with their own holding tank and leach lines. For a standard septic installation, County fees are $450. The septic system itself may cost between $5,000 and $7,000 to install. If it requires an engineered design, it could cost $8,000 to $20,000 to install. Pacific Gas & Electric has a minimum charge of $250 for electricity hookup, but they can charge up to $14 per linear foot of distance to the nearest power pole.
Pine Mountain Lake has another layer of fees, plan checks, and inspections, and that is the Environmental Control Committee, or ECC. The fee for a new home is a bargain at $295, and the turnaround time on your plans is fast, usually one week. They also collect $1,000 to ensure your compliance, but that is refundable when the house is completed.
The total for all the dollar amounts above in bold? About $18,000.
You actually get direct value from portions of these fees, and that is for the inspections of the building project. A new house gets inspected about 12 times by the County Departments and Pine Mountain Lake Association. Before it is complete, your lender, the title company, an appraiser, PG&E, GCSD and the insurance agent will look at it, too.
What can you expect to pay a contractor for a 2000 square foot custom home? Some are keeping it around $120 for the livable square footage. At this low cost it will be very basic quality. For higher quality or more difficult building sites, expect to pay $150 to $200 per square foot. This usually includes everything but the lot: permits, site prep, utility connections, garage, light fixtures, etc
When a builder quotes you a figure for “permit costs”, ask what he is including. The utility connections for sewer and water and PG&E are not “permit fees”. Site preparation costs for the septic system, driveway, or tree removal aren’t either. If he pays the fees for you, be sure to get the receipts.
The total for the 2,000 square foot house at $150 price PSF is $300,000 + $18,000 (utility connections, PML fee, County fees) + the cost of the lot. Do the math based on the price of your lot and the anticipated quality of the house.
If you want a new house, but don’t want to hassle with the lender, contractor, and selecting everything, buy a “spec” house. It is built “on speculation” by the contractor, or an investor who hires a contractor.

What are the RE/MAX Yosemite Gold sales office hours?

Our office at 18688 Highway 120 is open every day, 7 days a week from 9 am to 5 pm, and often later in the summer. Call 962-4080 to make an appointment to see property with one of our Realtors.

Why should we choose your company to help us buy a home?

  • RE/MAX is the top real estate franchise in the world. It leads the industry in technology, innovation, and quality of its 100,000 agents in 63+ countries. We here in Groveland have access to an incredible array of tools from RE/MAX International and our region, RE/MAX of California and Hawaii.
  • RE/MAX agents work harder and smarter because we get 100% of the commission after paying a fixed office fee. This system attracts more independent agents who are committed to their careers.
  • We respond quickly on offers, follow up diligently on the paperwork, and solve problems creatively.
  • We are NOT beginners, part-timers, or semi-retired! To serve you better, we never stop learning.
  • Our rental department has the most vacation and full-time rentals. If you want to put your new home on our vacation or monthly programs, we can help you maximize your income.
  • Our goal is to give you all the information to make the best decision for you. Our reputation for integrity is our greatest asset. We hope that when you are ready to sell your property, whether in two years or twenty years, you’ll come back to us. In the meantime we will welcome you to the town we love.

FHA Loans Surge in Popularity

By Lauree Borup, January 2009

During the boom home buying years of 2002 to 2006, when you could finance 100% with no money down, FHA insured loans were the dowdy cousins nobody wanted. But last year the number of new FHA loans tripled over 2007. The subprime players were broke and hung over; first-time buyers needed a steady hand up, and FHA is very forgiving of higher debt-to-income ratios and weak credit scores.

And HUD’s FHA loans are not just for first-timers. About 40% of the loans were refinances in 2008, and you can use the program even if it is your 10th house. It can’t be a rental, though. The current down payment requirement is 3.5% of the purchase price. In Tuolumne County the maximum loan is $331,200. If you are hoping to refinance at the current low rates, and may not qualify for a conventional loan because of reduced equity or credit issues, check out FHA.

FHA Advantages Over Conventional

The loans are fully assumable by the person who buys your home. This could be a tremendous benefit if you get a 5% interest rate in 2009, and sell your home in 2015 when rates could be, who knows, 9%? You aren’t just selling your house then, you are selling a great loan with it.

The entire down payment amount can be a gift from a family member, employer, charity, or local government program.

FHA mortgage programs enable all ranges of credit scores with compensating factors. Compare this to conventional loans that currently require credit scores of 720 for a 5% down, and 680 for 10% down.

Non-traditional credit is acceptable, like utility bills and rent.

Non-occupant, co-borrower is permitted.

The “upfront” mortgage insurance and some closing costs can be financed with the loan.

The only prepayment penalty is a few days worth of interest, and only if you don’t close at the end of a month.

HUD really helps FHA borrowers who run into hard times. Anyone lately who has tried to get “ABC” Bank to re-structure their loan or allow a short sale before they miss several payments and have already ruined their credit knows how precious that mercy would be.

Manufactured and mobile homes with an FHA-certified foundation qualify. With a conventional loan your down payment on a manufactured would be 20% (with some rare 10% downs still available), but with FHA it is still 3.5%.

Their 245 Graduated Payment Mortgage, or GPM, is for low to moderate income borrowers who expect their incomes to rise, but don’t qualify under conventional underwriting guidelines. The payments start out low, and are primarily interest, then go up each year for 5 or 10 years.

Basic FHA Requirements

Loans can only be originated from a FHA-approved mortgage lender.

You must have a two-year employment record, however allowances are made for seasonal employment and time in school or the military.

The new monthly FHA mortgage payment must be less than 31% of your income, and total debt-to-income ratio is usually less than 43% of your income.

The borrower cannot pay more than a 1% loan origination fee. That’s a good thing!

FHA is known for sellers having to pay the buyer’s closing costs, onerous mortgage insurance premiums and higher fees, and stricter home condition requirements. But how much is this still true?

Who Pays Closing Costs?

Before 2006 it’s true that sellers were forced to pay a laundry list of buyer’s closing costs. This put FHA buyers at a disadvantage in competing for homes in a hot seller’s market. Not anymore. Now the seller can ELECT to pay up to 6% of the purchase price towards the closing costs (to get the house sold). If they want that cash outlay compensated by a higher price, they need to build that into the contract and the house must appraise at the “higher” price.

Mortgage Insurance

Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages, primarily with less than 20% down. The mortgage insurance premium is cheaper for an FHA loan verses a conventional loan with 3.5% down. FHA charges an upfront mortgage insurance premium of about 1.75 %. In addition, mortgage insurance is charged to the homeowner each month at the rate of .55% per year of the total loan amount, about $1,100 on a $200,000 loan.

Home Condition

Before a property can be approved for an FHA guarantee, an FHA-approved (and also state-certified) appraiser must make a comprehensive survey of the property’s physical condition. FHA does not require a pest report unless it is on the contract or when the appraiser does their inspection they call for it. Rarely does this happen. So houses with deteriorated decks and siding can still qualify.

If water stains are visible, a roof certification will most likely be called for. The roof has to be water-tight and have at least 3 years of remaining life.

If the main heating source is wood, there must be a backup heater such as baseboard or propane.

Home must be on the electrical power grid.

Appliance and fixtures must be in the home and in working order.

The crawlspace must be accessible with at least 18″ of clearance from the ground, and not be too wet.

The attic must be accessible and ventilated.

The main electrical service must be at least 100 amps, with a single shut-off breaker (this will eliminate most pre-1960 homes that have not had an electrical upgrade).

Other minimum standards apply to water heaters, septic tank pumping, water well certification, and minimum clearance for “escape” windows. Most homes in PML and Groveland would easily meet these standards.

I recently sold a house for $155,000 to a first time buyer using an FHA loan. The down payment was a gift from a relative, and they used their limited cash for some of the closing costs. The seller agreed to pay the bulk of the closing costs out of their sale proceeds. At only 22 years old, the buyer did not have much credit history, but it was enough for FHA.

Congress and HUD are regularly tinkering with FHA guidelines. I found a lot of outdated information on the internet, so don’t rely on it. Talk to a knowledgeable FHA approved lender for the latest. By Lauree Borup, Broker, CRS, CRB, GRI, SRES, E-Pro. January 2009

Good Acreage is Hard to Find

By Lauree Borup, December 2003

At Pine Mountain Lake we are surrounded by thousands of acres of undeveloped land. It is forest, river canyon, brush and pasture. So when someone decides they want more personal space and freedom to build a new home, they might think that acreage parcels are easy to find. However, if you were looking right now, in December 2003, you’d have nine parcels to choose from those listed with the Hetch Hetchy Multiple Listing Service (MLS). The area I am referring to is east of Highway 49 to Yosemite, and bordered by the Tuolumne River to the north, and the Mariposa County line to the South. The other criteria for these parcels are: at least one acre, and zoned for residential or agriculture, but not commercial or industrial. In 2001, twelve such acreage parcels sold. In 2002, it increased to seventeen parcels sold. In 2003, with our robust real estate market, 30 parcels sold. Some of these were difficult pieces of property that finally had some demand for them.

A River Rock Fireplace in a House in Pine Mountain Lake

A frequent question I hear is “How much per acre does it usually cost?” The answer ranges from $842 an acre paid this year for 19 acres (with no legal access), to $29,000 an acre for a 2-acre parcel (with a well and septic system already in). Another low per acre price paid was $914 for 41 acres (with a steep dirt road and the 17,000-volt transmission line through it). The second highest was $25,000 an acre for 5 acres with well, fencing, and paved road. So you can see prices are “all over the map”.

The main reason there aren’t lots of acreage parcels to buy is the Federal government. Stanislaus National Forest and the Bureau of Land Management probably own about 90% of the land in this area (not even including Yosemite!). In addition to USA holdings, several large historic cattle ranches are in low-tax agricultural preserves, and the families aren’t selling. The notable exception to this was back in 1980 when the 1200-acre Graham Ranch was divided into 40 and 80-acre parcels. It is located on the ridge above the Tuolumne River canyon north of PML, and all of the parcels still have favorable tax treatment as agricultural preserves. Of these 21 parcels, 13 have residences on them.

Another subdivision created in the late 1970’s is Yosemite Acres, consisting of 57 five-acre parcels. Of the 57, 40 already have dwelling units on them. These parcels just southeast of PML have the advantages of power lines and paved roads. You may have one or the other, or neither, when you get acreage in remoter areas like Sawmill Mountain, Second Garrotte Ridge, Hells Hollow, Boneyard, Punchbowl, Jackass Creek, and Priest-Coulterville Road. The cost of extending power lines has gone up tremendously in the last twenty years. In the 1980’s, when we built on 10 acres, we had to bring in power lines 1600 feet to two new houses. PG & E gave free footage based on the number of electric heaters and appliances in new houses, so we ended up paying only a pittance of around $100 total. I think we got 200 feet free just for an electric dryer. Not anymore! A friend had to bring in power lines 1800 feet to his new home and paid $18,000 for the installation. His $10 per foot was pretty reasonable compared to PG & E’s usual estimated cost of $14 per foot. And that’s for overhead lines and poles. Underground power is much more expensive and is required for any new subdivision lots less than 3 acres in size.

Even more expensive now is the cost of building roads. Until the mid-70’s you could divide up land and sell it without putting in a road at all. County ordinances changed. Now most land divisions require the owner to build 20-foot wide gravel or paved roads before they can record the map and sell the first parcel. So don’t be shocked that a 3-acre parcel in the proposed Long Gulch subdivision may cost $100,000. After paying today’s costs for roads, power, water, traffic lights, environmental impact reports, archaeology studies, etc., the developers will have a lot invested.

A unique consolidation of land on North Boitano Road has removed 1070 acres from future development. It is all being put in a wildlife preserve, which requires a contract with the County and actions by the property owner to enhance wildlife habitat. After buying the first 102 acres, the owner added fourteen more adjacent parcels, including one 200-acre parcel that had approval for subdivision into 5-acre lots. That subdivision (it was just North of PML Unit 12) won’t happen now.

So if the number of new parcels being created has slowed to a trickle, how many acreage home sites are available for building now? Using County assessor data and tax codes for property types, we come up with a very rough number of 378. This number does not include parcels less than one acre in size, or zoned commercial or industrial, or government-owned. It does include situations where one legal home site has two assessor parcel numbers and may look like two home sites. And it includes those 15 parcels in the wildlife preserve under one ownership. It also includes properties a long way from power lines or with no roads to them.

The number of vacant lots in PML keeps shrinking too. Originally there were 4100+ lots. Over 500 were merged with other lots. About 2750 houses are now built. That leaves roughly 850 remaining undeveloped lots. Currently 74 lots are offered for sale, and 23 are in escrow. In 2003, 154 already sold.

Interpreting classified ads for real estate for sale

The jargon of house descriptions sometimes doesn’t exactly match the property when you go to see it. Here’s what that headline might really mean

Old World Charm = Has some woodwork. Needs cleaning
Contemporary Feeling = Has no woodwork. Needs cleaning
Picturesque Setting = Abandoned cars and waist-high weeds on neighboring lots
Wide Open Floor Plan = Previous owner removed supporting walls
Updated Kitchen = Sink no longer overflows
Close to the Lake = Impossible to park near from May to September
Neutral Décor = No murals of nudes or Elvis
Move In Condition = Front door missing
Unique Design = Bizarre looking
Cozy = No room larger than 9 X 6 feet
Mint = Someone spilled mouthwash on the carpet
Motivated Seller = Has been on the market for 3 years

The agents at RE/MAX Yosemite Gold came up with some interpretations for common Pine Mountain Lake ad headlines:

ABOVE THE WORLD = The driveway is so steep, your relatives will never come back
CUTE AS A BUTTON = Tiny kitchen, no closets, only 1 bathroom
ROOM TO ROAM = You will spend most of your time clearing brush, whacking weeds and raking pine needles
LAKE VIEW = See a small patch of blue from an upstairs bedroom balcony
NEEDS UPDATING = Gold shag carpet, avocado sink, dark brown paneling, no insulation
2 MINUTES TO BEACH = If you drive 80 miles an hour down Pine Mountain Drive

Here are some recent headlines that aren’t misleading, but don’t tell a prospective buyer anything

Nice Home, Nice View
Ho Hum
Great Home, Great View
A little greater than nice
You Deserve It
Like a kid deserves a spanking?
Cabin in the Woods
Groveland has a thousand cabins in the woods
One of a Kind
Of what?
Ranch Style Home
At least we know it has only one story
Clean & Comfortable
At least we know it’s clean
A Best Seller
If it was it would already be sold
This One Won’t Last Long
Is it going to fall over soon?

Market Update

By Lauree Borup, December 2008

How do 2008 real estate sales figures compare to years past? The chart below shows you six years of statistics on single family homes in Pine Mountain Lake. The “Average Sold Price” of $323,265 this year is still higher than in 2004. But the price drop from the peak average in 2007 is 22.46%.

REAL ESTATE SALES CHART2003 to 2008 PML HomesSold* Average Days on Market Median Sold Price $ Average Sold Price $ Difference in Average Sold Price from Previous Year
*Townhomes and condominiums NOT included+ Numbers in bold are referred to in the text
2008 59+ 176 299,000 323,265 Minus – 22.46%
2007 86 178 345,500 416,859 Plus +04.03%
2006 102 99 338,250 400,069 Minus-01.20%
2005 155 72 345,000 395,303 Plus +22.42%
2004 202 74 279,900 306,683 Plus +14.41%
2003 172 74 230,000 262,494

The peak year for volume was 2004, when 202 homes sold. This year about 59 homes will close by December’s end. The previous 20-year low volume was in 1995, when 88 PML homes sold.

PML’s “Median Sold Price is close to the California statewide median price of $311,060, but the percentage of our price drop has not been nearly as severe. California’s median plummeted 39.9% during the most recent12-month time period with available figures (from $517,240 in October 2007 to $311,060 in October 2008), and PML’s median dropped roughly 13% (from $345,500 in December 2007 to $299,000 in December 2008).

However, the statewide Days on Market average was way shorter than PML: 45 days compared to 176 days from first listing to final closing in PML.

One of the factors driving down prices is the foreclosures. Of the 59 houses sold in PML, 23 were either lender-owned, or sold on a “short sale”, where the lender agreed to take less than was owed on the mortgage. That’s fully 39%! It is hard for private sellers to compete with the low prices banks are willing to accept.

It was a lakefront foreclosure that actually generated multiple offers and a final sold price $23,000 higher than the asking price!

Four lakefront homes sold in 2008 ranging in price from $610,000 to $967,500.

Four lakefront homes sold in 2007 ranging in price from $710,000 to $1,260,000.

The lower-priced lake fronts are in the coves where the lake depths and views are not as prime.

At the low end of the 2008 market were the 8 homes sold under $200,000. With interest rates hovering around 5.25%, it is a fantastic time for first-time buyers to get into the market.

Only one “multi-family” unit sold: a condo for $130,000.

Currently there are 105 homes listed for sale, with an average Days on Market of 240 days. Vacant lots listed equal 94, with an average Days on Market of 361 days. Only a dismal 6 lots sold in 2008, with 2 more in escrow scheduled to close in December. The highest sold price for a lot was $99,500.

To keep today’s market in perspective it is helpful to remember that in 1996, there were 198 homes for sale and 317 lots for sale. Interest rates that year were 8.5% and the average sales price was $122,000.

The ECC reports that in 2008 only 4 new home building permits were submitted. The peak volume in this century was 70 new homes in 2005. In the decade before that, the high amount was 176 new homes in 1990.

Community Property with Right of Survivorship

By Lauree Borup, April 2003

TRUE: Community Property ownership of real estate reduces the capital gains tax the surviving spouse would pay if they sold it
FALSE: Joint Tenancy is the best way for surviving spouses to avoid probate.
NEW: Community Property with Right of Survivorship (CPROS) combines the automatic survivorship rights of Joint Tenancy with the tax advantages of Community Property for married couples in California. It may be the “better” way.

Joint tenancy is a popular device for avoiding probate, since upon the death of one joint tenant the decedent’s interest terminates immediately leaving the survivor holding title. The drawback is that only the decedent’s half of the value is stepped-up in basis. Under Community Property ownership, if a couple paid $100,000 for a home, and at the time of death the home is worth $300,000, the tax basis is stepped-up to the fair market value of $300,000. The surviving spouse could sell the property then without paying any capital gains tax.

Alternatively, if the property were held in Joint Tenancy, only the interest of the first spouse to die would be stepped-up and the basis would be $200,000 (Half of the invested $100,000 + half of the $300,000 current market value). The surviving spouse would pay capital gains tax on $100,000, which would be around $24,000 combined for Federal and State.

If this example were a primary residence it would make no tax difference because the surviving spouse can exclude up to $250,000 of capital gain (not $500,000, since there’s no “couple” any more). So the most tax-helpful use of CPROS is on second homes and investment properties, which abound in Pine Mountain Lake.

For example, Joe and Linda buy a second home in PML for $100,000 and enjoy it on weekends with their family for several years. Their kids go to college, and to generate income, they convert it to a rental. They start taking depreciation write-offs which reduce the tax basis to $40,000. The house would now sell for $300,000 (after paying sales commission and closing costs).

Joe becomes terminally ill. Linda needs to make some careful decisions about how to take title and when to sell. Here are three scenarios:

  1. Quick Sale: Linda sells the house before Joe dies. The profit of $260,000 ($300,000 minus $40,000) is fully taxable, so she pays about $75,000 in capital gains tax.
  2. Joint Tenants: The basis in inherited property is stepped-up to market value at the date of death. Linda inherits Joe’s half of the property, so his half is stepped-up in basis from $20,000 (half of $40,000) to $150,000. Linda’s half stays the same, $20,000, for a total basis of $170,000. When she sells after Joe’s death, only $130,000 is taxable. So she pays about $38,000 in capital gains.
  3. Community Property With Right of Survivorship: Linda owns the property immediately and the basis is stepped-up to 100% of market value. When she sells for $300,000, she pays NO tax.

Linda could also hold the property with the stepped-up basis as a rental and enjoy greater annual depreciation.

Be aware that the tax basis is totally separate from the loan amount. If you have refinanced a house up to the hilt, spent the money, and then sell it soon after your “joint tenant” spouse’s death, you may barely have enough money left over after paying the mortgage debt to pay the capital gains tax.

Upon a spouse’s death the survivor records an Affidavit, which memorializes the termination of the decedent’s interest in the CPROS property in the same manner as a Death of Joint Tenant Affidavit. The surviving spouse inherits the property outright regardless of what they say in their wills.

When is CPROS not appropriate?

  • You hold all your real estate in a trust
  • You want to dispose of real estate through a will to people other than your spouse
  • The only real estate you own is your primary residence and you are not even close to exceeding the $250,000 capital gains exclusion.

Couples owning appreciated real estate may want to use the new law. Check with your attorney to ensure that it is consistent with your entire estate plan. A blank form of the grant deed for use with CPROS can be printed from the website You must also file a Preliminary Change of Ownership form with the County after changing to CPROS. These are available from the Recorder’s Office or your title company.

Incredible, affordable Acorn Home Loans

If you didn’t think you could buy a home because of poor credit or shortage of cash or spotty job history, think again. ACORN 100% loans are designed for people just like you. Even if you owned a home in the past, that’s okay. The ACORN loan is the seed that can grow your tree of equity, and is a loan you can keep for 40 years. Principal payments can be made at any time. You can also choose the 30-year term instead of 40 years if you qualify for the initial monthly payment.

Income Maximums in both Tuolumne and Mariposa County are $71,120 per year. However, you can apply for eligibility based on only one spouses’s income if you make “too much”. If the problem is “not enough” income to qualify for the house you want, Acorn allows you to claim up to $1,200 per month of undocumented income. If all your income has been “under the table” you are out of luck: you must provide two years of tax returns. Co-signors are allowed, but the combined income of all borrowers must not exceed $71,120.

Forest View From Deck in Pine Mountain Lake

Interest Rates are .75% less than other current 30-year rates. The current rate as of January 15 is 5.75%, and loan fees are very reasonable, about $1,000 and zero points. The bank loans you 97% of the purchase price. And for the first ten years you can pay interest ONLY. If you must borrow the remaining 3% the interest rate on the whole loan is .25% higher. Or, the state of California will loan you the other 3% (called the CHDAP, California Housing Down Payment Assistance Program) at a measly 3% interest rate if you don’t exceed a maximum income. The maximum in Tuolumne County is $44,050 for a single person. And the 3% State loan doesn’t have to be repaid until you sell the house! The interest accrues, but for such a small amount at a 3% rate, it’s not much. The other qualification for the 3% CHDAP second loan is that you can’t have been a homeowner in the last three years.

Credit History can be almost nonexistent, as long as you have not abused credit. You can provide cancelled rent checks or a letter from the landlord, or your monthly cell phone bills, car insurance or utility payments. Almost any track record of paying monthly bills on time can be used, if you have the records. So if you have never had a credit card or a car loan, you can still apply. There is no minimum FICO score requirement.

Gifts of Funds are allowed as long as the “donor” signs that the money does not have to be repaid. You do have to have at least $500 of your own money in the bank for closing costs. Closing costs cannot be financed, but in your offer to the Seller you can ask them to pay for some of the usual buyer closing costs. Another advantage of ACORN is they don’t require 2 to 3 months of mortgage payments paid up front, like most “high ratio” loans of 97% to 100%.

Mortgage Insurance. There is none. This keeps your payments down. A conventional loan requires costly premiums for mortgage insurance if they loan you more than 80% of the price. Not under this program.

Loan limit is $500,000, and it must be an owner-occupied primary single family home, townhouse, or condominium. It can’t be used for a construction loan.

Manufactured homes on permanent foundations are allowed under the ACORN program, but it must be pre-existing and meet FHA requirements.

What’s the catch? It’s a small one. You have to make an appointment for an Intake Seminar with an Acorn representative. Offices are in Fresno (559-221-0217) and Sacramento, and they also meet with prospective borrowers in Modesto once a month. They do an “affordability assessment” and provide counseling. Then you take their written referral to a lender for your letter of pre-qualification. The lender still must approve you as a borrower and appraise the house. The majority of ACORN loans in California are underwritten by Bank of America. Another “catch”: you cannot own any other real estate.

What’s ACORN? ACORN is short for Association of Communities for Reform Now. It is a non-profit nationwide organization that has provided counseling and homebuyer seminars since 1987. HUD-certified and Fannie Mae-approved, they have helped over 50,000 families to achieve homeownership. Visit their website at Phone numbers of all the offices are listed there.

Thanks to Duane Marsh of Bank of America (888-612-4360) for information.

New Tax Rules for 1031 and Vacation Homes

By Lauree Borup, November, 2008

Primary home, vacation home, rental home. Each has its tax advantages, and since 1997 owners have moved in and out of the three types to avoid capital gains taxes, and used the tax-deferred 1031 exchange when converting a personal house to a rental worked for them.

This year the IRS clarified how 1031’s will work with vacation homes, and the Housing Assistance Act of 2008, signed by the president this summer, took away some options for “rental-to-primary” conversions.

First, in February the IRS released Revenue Procedure 2008-16, to provide guidelines on when a second home would qualify for a 1031 exchange. Some owners had pushed the interpretation of “investment property” to the limit by claiming that a never-rented home was an “investment” because it was mainly purchased in the expectation of price appreciation, and the use for family fun was a secondary consideration. Here are the first-ever IRS guidelines on allowing you to avoid paying tax on the sale of a vacation dwelling:

For the relinquished, or sold, property:

  • You have owned it at least 24 months before the exchange;
  • In each of the two 12-month periods prior to the exchange the property has been rented at fair market value for 14 days or more;
  • The taxpayer’s personal use of the property during the prior two 12-month periods doesn’t exceed the greater of 14 days, or 10% of the total rented days

As with any 1031 exchange, the replacement property you buy with the tax-free proceeds must also pass the “business or investment” test. The replacement property must be held 24 months after the exchange, and must meet the 14 day/ 10% test for personal use and rental for the two 12-month periods that applied for the relinquished property.

The Revenue Procedure is a guideline for “safe harbor”, meaning if you follow it your exchange will not fall under IRS scrutiny. Your exchange may still qualify if you don’t meet the guideline exactly, but you could be subject to audit.

Another strategy to avoid paying capital gains was to move into your vacation or rental home, live in it at least two years, then sell it and use the Homeowner’s Exemption under Section 121 of the Tax Code. Up to $500,000 of gain for joint filers, and $250,000 for singles, was excluded from taxation. For people with perfect timing, they could have done this:

  • Buy rental for $100,000 in the year 2000
  • Rent the property to others for three years, then move into it as a primary residence
  • In 2005, sell it for $350,000 and avoid paying tax on the entire gain of $250,000

This scenario would still have worked in 2005 when they tightened up the law.

The 2005 legislation—H.R.4520—provided, in pertinent part, as follows:
If a taxpayer acquired property in an exchange to which a §1031 applied, §121(a) shall not apply to the sale or exchange of such property if it occurs during the 5-year period beginning with the date of the acquisition of such property.

This prevented people from buying a house with proceeds from a 1031 exchange, renting it out for just one year, then living in the house for two years, selling, and taking advantage of IRC 121

“Primary home” tax exemptions.

In 2009, this changes again. To help pay for the big housing bill passed in the summer of 2008, Congress changed the rules so that some of your gain will be taxable in the future. For example, let’s say you buy the rental in 2009 (when prices will hit bottom and start to go up, we all hope), rent it for three years, move in yourself, then sell it in 2015 with a gain of $250,000. The three years that you rented (or vacationed in) the property will be considered “nonqualified use”, that is 3/5th of the gain is not eligible for the Homeowner’s tax exclusion. So $150,000 is taxable, and $100,000 is not. Ouch! This will not be an ouch if you plan to move in your vacation home and stay there for five years or more. But it highlights the danger of making long range plans based on the current tax code!

If you hurry up and move in by January 1, 2009, you could slide under these new rules. if your house is rented or a second home for the last three years, and you move in by January 1, 2009, then you could sell it in two years and get the full tax exclusion of up to $500,000.

Contact your tax consultant for details, or go to WWW.IRS.GOV.

A valid 1031 exchange must use a “qualified intermediary”, also called an accommodator, who holds your equity money and then puts it in your next escrow. Some well-known companies in California that provide this service are:

  • Old Republic Exchange ( (800) 738-1031
  • Asset Preservation ( (800) 282-1031
  • Starker Services ( (800) 332-1031

Questions To Ask When Looking For Land

To enjoy the beauty, the privacy, and the satisfaction of owning your own acreage, you should first get answers to these questions:

Borup Yard

  • How much does it cost to drill a well?
  • Where do you get well drilling permits?
  • How many gallons per minute will your family need? What’s the best filtration system?
  • Where can you borrow the money for a land loan?
  • Why is the interest rate higher on a land loan than on a house?
  • Can you build your house before the land is paid off?
  • Are some parcels zoned so that mobile homes aren’t allowed?
  • What are the loan interest rates on “stick built” homes versus manufactured houses?
  • What are the County rules for placing septic tanks?
  • Should you have the soil tested for septic capability?
  • What is the County zoning and what uses are allowed? What uses require a use permit? How hard is it to change the zoning?
  • What is the General Plan designation?
  • What is the best way to clear brush to prevent the spread of fire and prevent soil erosion?
  • Do you need permits for grading or road building or timber harvesting? Will a “road encroachment permit” be required to connect to the County maintained road?
  • Who maintains the road?
  • Will the road need to be snow plowed in winter?
  • Are there any road or utility or drainage easements crossing the property that you can’t build inside of?
  • Can you put a gate across the road? Can you put a lock on it?
  • How does a neighbor obtain a prescriptive right to drive over your land?
  • If the parcel is covered with brush and trees, how can you use a topography map to determine where to build?
  • Is power available to your proposed home site? If not, how much will a rural line extension cost and what utility easements are needed?
  • If it is too costly to bring in PG&E, are solar electricity or generators and propane options?
  • Do you need a survey?
  • Can you split the property later?
  • Can you build two houses on the land?
  • What kinds of home occupations are allowed?
  • What is the response time from the nearest fire station?
  • Will your homeowner’s insurance be too high if you’re too remote?
  • Can your dog roam free?
  • Should you worry about mountain lions and bears?
  • What other pests are there? Mosquitoes, rattlesnakes, gophers, bats, skunks, deer?
  • What’s the most dangerous time to go hiking?
  • What are the best drought and deer resistant mountain plants to grow?
  • When can you burn debris?
  • Where can you still get garbage pickup service?
  • Can you get cable TV? Can you dam a creek?
  • What are you prohibited from doing on adjoining federal land?
  • How can you place decks, windows, and garages for maximum energy efficiency and fire safety in this climate?Pine Tree

I am the basis of all wealth, the heritage of the wise, the thrifty and prudent.
I am the poor person’s joy and comfort, the rich person’s prize, the right hand of capital, the silent partner of thousands of successful people.
I am the solace of the widow, the comfort of old age, the cornerstone of security against misfortune and want. I am handed down through generations, as a possession of great value.
I am the choicest fruit of labor, the safest collateral and yet I am humble. I stand before every person bidding them to know me for what I am and asking them to possess me.
I am quietly growing in value through countless days. Though I might seem dormant, my worth increases, never falling, never ceasing. Time is my aid and the ever increasing population adds to my gain. I defy fire and the elements, for they cannot destroy me.
My possessors learn to believe in me and invariably they become envied by those that have passed me by. While all other things wither and decay, I alone survive. The centuries find me younger, always increasing in strength. All oil and minerals come from me. I am the producer of food, building materials and the home to every living thing. I serve as the foundation for homes, factories, banks and stores.
I have not been produced for millions of years yet, I am so common that thousands, unthinking and unknowingly, pass me by.
Who Am I? – I Am Land