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FROM
THE DESK OF
HAROLD CHU...
Can you imagine three months of the New Year have already gone by!
The harsh reality of how fleeting time can be sinks in as we work
on completing our tax returns by the April 15,
2002 deadline.
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Present
interest rates for mortgages are relatively low and there is no
guaranty that mortgage rates will continue to remain at these low
levels. There are some attractive refinancing available, but you
should comparison shop and be mindful of the latest scam as described
elsewhere in this newsletter.
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The
legislature is still in session. In the next issue, we will be reporting
on some of the newly enacted laws. We are cautiously optimistic
and hope that the new laws will be beneficial to real estate owners.
As Alexander Pope said, AHope springs eternal in the human breast.@
The
City and County of Honolulu is discussing equalizing the real property
tax rate between condominium owners and home owners. There are also
discussions about increasing the sewer fees for condominium owners.
In the next newsletter, we hope to provide you with more detailed
information.
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Have
a pleasant spring! Remember the words of Emily Dickinson, AA little
madness in the spring is wholesome even for the King.@
SELLER
DISCLOSURES
Under
Hawaii law, sellers are required to make mandatory disclosures.
Recent amendments to this law include the following:
a)
Absentee owners are no longer exempt from the disclosure law. Previously,
an absentee owner was not required to make the disclosure if they
had not lived in the residential real property for at least 180
continuous days prior to receiving the contract to purchase.
b)
The definition of the Amaterial facts@ which must be disclosed was
revised to include only facts, defects or conditions which a reasonable
person would expect to measurably affect the value of the property.
NOTE: What a reasonable person would expect is not definite or clear.
Thus, when in doubt, it is usually best to disclose.
c)
The seller=s obligation to disclose information that the seller
discovers after the seller has made the disclosures, and the buyer=s
right to rescind upon being advised that a seller=s disclosure was
inaccurate or incomplete, have been limited to apply only where
the newly-discovered, incorrect or omitted information Adirectly,
substantially, and adversely@ affects the value of the property.
NOTE: Again, if there is any doubt, it is best to disclose.
d)
The buyer=s right to rescind a purchase when the seller discloses
new information after the initial disclosures has been limited.
It now applies only if the purchase has not yet been recorded.
e)
The seller=s obligation to disclose material information contained
in public records has been limited to information regarding flood
zones, aircraft noise, and tsunami inundation that is contained
in the public records that are specifically identified in Section
15 of Act 224.
f)
Sellers are no longer required to disclose material information
contained in documents recorded in the Bureau of Conveyances. NOTE:
If the seller is aware of such information, it would be prudent
for the seller to disclose.
MORTGAGE
NEWS
There is good news for those who qualify for VA home loans. On December
27, 2001, President Bush signed the Veterans Education and Benefits
Expansion Act of 2001. One of the provisions in this new law increased
the guaranty on VA home loans from $50,750.00 to $60,000.00.
The
impact of this is that many lenders will make VA no down payment
loans for four times the maximum guaranty amount. Thus, a qualified
veteran can now purchase a home costing as much as $240,000 without
a down payment under the Veterans Affairs Home Loan program.
On
a limited note, the new act also increased specialty-housing grants
from $43,000 to $48,000 for severely disabled veterans who need
homes built to accommodate wheelchairs. This grant provides for
such things as wider hallways, lowered kitchen appliances and counter
tops and bigger bathrooms.The new law also increased the amount
available to less seriously disabled veterans from $8,250 to $9,250.
This is for blinded veterans and amputees, who need extra help.
MANDATORY
MEDIATION OF CONDOMINIUM DISPUTES
As
part of the growing trend towards resolving disputes without having
to go to court, a new law was enacted last year. There is already
an existing law requiring arbitration of disputes involving one
or more apartment owners and association of apartment owners, its
board of directors and managing agents related to the interpretation
or enforcement of a condominium=s declaration, bylaws, house rules,
and certain disputes involving apartment owners. You must now first
submit such disputes to mediation. If that mediation is unsuccessful,
you must then go through arbitration. If a party fails to participate
in mediation, a party=s refusal to do so will be taken into consideration
in deciding whether to award attorney=s fees and costs in connection
with the dispute.
If
you ignore mediation or arbitration, any court action that you file
may be subject to dismissal for failure to first pursue those alternatives.
NEW
LOW RATES FOR HULA MAE LOANS
The State of Hawaii recently began offering Hula Mae home mortgage
loans with interest rates of 5.76% per annum. This is the lowest
rate offered by the program since its inception in 1979. The Hula
Mae mortgage rates are available for qualified first time home buyers.
The
Hula Mae mortgages are 30-year fixed rate loans and are available
through local bank and other lenders.
To
qualify for a Hula Mae loan, you must not exceed the maximum income
limit. On Oahu, a family of three cannot earn more than $87,640
a year. A family of less than three cannot earn more than $75,120
per year.
There
are also limitations on the price of the homes purchased with Hula
Mae funding. New homes being purchased must not be no greater than
$241,480. An existing home must not cost more than $266,740.
TAX
BREAKS
As you are finishing your tax returns for 2001, you may wish to
consider that there are new tax breaks that may lighten the tax
burden on the U.S. tax returns to be filed in April 15, 2003. These
tax breaks are scheduled to be repealed in the year 2011.
Among
the changes are the following:
The
maximum contribution to 401k and 403 retirement plan shall increase
to $11,000 a year.
gThe
maximum contribution to traditional IRA and ROTH IRA shall increase
by $1,000 to $3,000 annually. If you haven=t been frugal, individuals
older than 50 can make additional catch up contributions to retirement
plan. They can contribute an additional $500 a year for an IRA and
an additional $1,000 a year for a 401k plan. The limit on IRA contribution
will increase to $5,000 by the year 2008.
gThe
amount that you contribute to an educational IRA will increase from
$1,500 to $2,000 annually.
gDistribution
from educational savings account also known as 529 plan will become
tax free.
gThe
estate and gift tax exemption will increase to $1,000,000.00.
The
above are highlights of some of the changes. If a change affects
you, we advise you to consult with your tax advisor.
Knowing
that these tax breaks will be going into effect in the year 2002
offers you an opportunity to do some planning this year to help
minimize your taxes for the year 2002.
BEWARE OF MORTGAGE
SCAM!
The current low interest rates are an enticement to refinance. They
also, unfortunately, offer the opportunity to be conned. In the
March 24, 2002 Honolulu Star Bulletin, there was a report of a current
scam.
The
scam involves offers to refinance and are made over the Internet.
Generally, a large processing fee (example: $5,000) is requested
up-front for processing a loan.
Legitimate
lenders generally do not guarantee credit or a loan prior to the
application.
Legitimate
lenders do not ask for a large deposit for processing a loan application.
Lenders involved in real estate loans do accept or request payment
for a credit report or an appraisal. Such costs do not run into
the thousands of dollars.
Most
refinancing costs and loan fees can be handled through escrow. Thus,
you typically don=t pay the loan costs until the loan has been processed.
When
you get a loan, you are buying the use of money. Do comparison shopping
for your loan. Make sure the bargain is really a bargain.
THOUGHTS
A
day without sunshine is like, night.
I
just got lost in thought. It was unfamiliar territory.
99
percent of lawyers give the rest a bad name.
Remember,
half the people you know are below average.
He
who laughs last thinks slowest.
If
you think nobody cares, try missing a couple of payments.
OK,
so what=s the speed of dark?
HUMOR
There
were two old guys, Roy and Sal, sitting on a park bench feeding
pigeons and talking about baseball, just like they did every day.
Roy turns to Sal and says, "Do you think there's baseball in
heaven?"
Sal
thinks about it for a minute and replies, "I dunno, Roy, but
let's make a deal. If I die first, I will come back and tell you-and
if you die first, you come back and tell me-if there is a baseball
in heaven."
They
shake on it and, sadly, a few months later, Roy passes on. One day
soon afterward, Sal is sitting there feeding the pigeons by himself
when he hears a voice whisper, "Sal... Sal..."
Sal
responds, "Roy! Is that you?"
"Yes,
it is, Sal" whispers the spirit of Roy.
Sal,
still amazed, asks "So it there baseball in heaven?"
"Well,"
says Roy, "I,ve got good news and bad news."
"Gimme
the good news first" says Sal.
Roy
says, "Well.. There is baseball in heaven."
Sal
responds, "That's great! What news is bad enough to ruin that?"
Roy
sighs and whispers, "You're pitching on Friday."
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