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  • Poway, CA 92064
  • P: 858.530.2374
  • F: 858.876.1701
  • E: info (at)
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Market Boredom, My Daughters, and the Medicare Tax (in that order)

Question: What’s your excuse this time for not blogging for nearly a month, blogging being a medium whose success depends almost entirely on delivering consistent daily, if not weekly, fresh and compelling content?

Answer: Look! A butterfly!

OK, we’ll just call it distraction. Mixed with a little apathy borne out of sameness.

We are in the throes of a novel real estate market that lacks any of the necessary elements of a “good read” – excitement, intrigue, plot twists, a butler. What we have is a market bouncing around the bottom. It is showing signs of improvement, sure, but with no inventory to speak of, there just hasn’t been much to see here.

(For those who like stats, chew on this. We have a whopping 42 detached and 14 attached active listings in Scripps Ranch this morning – those out of approximately 8,000 and 4,000 homes standing respectively.)

Enter the distraction. My two daughters, the ones I relied on for years for my best material, have long flown the coop. And now that they are no longer resident at Chez Berg (except for the occasion trip home to visit my charge card), I have to work a little harder to keep up with their exciting lives. Stalking and creeping my way through their Facebook and Twitter and Instagram accounts takes a lot of time, let me tell you. It’s plain exhausting!

And it is easy to get distracted. While Daughter #1, the Capitol Hill Reporter, posts pictures of the Speaker of the House, Hillary Clinton, the cast of the Daily Show at the Reblican National Convention CNN Grill, and this guy….

my own photo journal looks something like this….

Meanwhile, for reasons I only later discovered, Daughter #2 who spent the summer working in custom content marketing on the NBC Studios backlot, is posting pictures like this one.


Apparently he’s is a famous monkey.

And as I spend time trolling the social media sites trying to find my offspring, I can’t help but notice the trending topics. I am reminded that (1) the Packers should have won Monday against Seattle and (2) we are in a political election cycle.

Which brings me to today’s topic: Affordable health care. Specifically, today’s topic is about the part of the Affordable Health Care Act involving a Medicare Tax on certain real estate transactions.

Much has admittedly been written about this. Yet Steve and I still are getting questions from neighbors, clients and at least one family member who, thanks to blast emails of misinformation warning us all to head for the nearest underground bunker, find themselves fuzzy on the specifics.

(First, the disclaimer. I am not an attorney, nor am I a CPA. Consult your tax advisor and so on and so forth because, if you find yourself being audited, “’cause Kris said so” will likely not be considered a valid defense.)

Keep in mind that I am only going to be talking about primary residences. For investment properties, it’s a bit more complicated. Having said that, here are the basic facts.

  1. Effective January 1, 2013, there will be a new 3.8% tax assessed when a property is sold.
  2. The 3.8% tax will only apply to “high income” taxpayers, defined as single filers with an Adjusted Gross Income of more than $200,000 or married couples filing jointly with an Adjusted Gross Income (AGI) of more than $250,000.
  3. The existing primary home exclusions will remain ($250,000/$500,000 for single and married filing jointly respectively). The new 3.8% tax will apply only to gains that exceed these numbers.
  4. For the squeakers, those close to the AGI limits, there is this. The tax is NOT imposed on the total AGI, nor is it imposed solely on the investment income. The tax will be determined based on the LESSER of (1) net gain (over the current exclusions) OR (2) the excess of AGI over the $200,000/$250,000 AGI thresholds.

Clear as mud? Let’s try some examples. For ease, let’s assume the taxpayer in our examples is married and filing jointly.

  • Your AGI is $5. The gain on the sale of your home is $500,000.  No 3.8% tax.
  • Your AGI is $5,000,000,000. The gain on the sale of your home is $500,000. No 3.8% tax for you.
  • Your AGI is $251,000. The gain on the sale of your home is $600,000, which is $100,000 above the $500,000 exclusion. (Note that I took lots of math in college.) You will be taxed 3.8% of $100,000 (the net gain over the $500,000 exclusion), or $3,800.
  • Your AGI is $Mitt Romney. The gain on the sale of your home is $600,000, which is $100,000 above the $500,000 exclusion. You will be taxed 3.8% of $100,000 (the net gain over the $500,000 exclusion), or $3,800. (And, may I suggest, this is the kind of problem you like to have.)

Now, here is where it gets tricky, and this applies to the folks hovering near the AGI limits.

  • Your AGI is $5. The gain on the sale of your home is $600,000, which is $100,000 above the $500,000 exclusion. The 3.8% tax will be calculated base on the lesser of the $100,000 gain OR the excess over the AGI limit. In this case, the new AGI is $5 plus $100,000, or $100,005, which is less than the $250,000 limit. Oh, happy day!  No 3.8% tax for you.
  • Your AGI is $240,000. The gain on the sale of your home is $550,000, which is $50,000 above the $500,000 exclusion. In this case, the new AGI is $240,000 plus $50,000, or $290,000, which makes the excess equal to $40,000. You will be taxed 3.8% of $40,000 (because $40,000 is less than $50,000, duh), or $1,520.
  • Your AGI is $0. The gain on the sale of your home is $1,000,000, which is $500,000 above the $500,000 exclusion. In this case, the new AGI is $500,000, which makes the excess equal to $250,000. You will be taxed 3.8% of $250,000, or $9,500.

To summarize, the Medicare tax will apply only to high income earners and only after the current primary home exemptions. And, keep in mind that the gain on your home is calculated by subtracting your cost basis from your sale price. The cost basis is not what you paid for it but the adjusted cost after taking into account the escrow, title, and other real estate fees you paid when you bought and sold, not to mention the cost of the new water heater you had installed in 1993.

It's quite possible I made a mistake here somewhere, so check my math carefully. There will be a test later.


A Bold Prediction – The San Diego-Imperial County Sunrise Powerlink Project will be completed last June.

Standard & Poors/Case-Shiller® Home Price Indices for June came out yesterday. But you didn’t have to wait until yesterday. Zillow saved you the trouble and predicted last week what Case-Shiller would report yesterday happened in June.

“But we know what happened in June!” you might refute. And I suppose that is true. Heck, I – and the National Association of Realtors® — even know what happened in July. We’re that good!

Reporting on the past is something real estate agents like to do. And in that spirit, I bring you our latest installment of Boring Stuff About Contracts. Here, I am going to make the following brave prediction:

The Sunrise Powerlink transmission line project linking San Diego and Imperial County will be completed and put into service in mid-June, 2012.

Yes, I know this is a bold statement. I might as well predict a housing bubble in 2005! Come to think of it, we should have a disclosure for that.

But here is the problem with real estate disclosures. We seem to constantly add new ones to our arsenal, yet we never can quite relinquish the old ones that are no longer needed.

Three times in the last week I have received the following “disclosure” from a cooperating agent in a transaction. Each time, they requested my client’s signature because the form is “required for their files.”

Now, I understand the spirit of this disclosure. If an agent is aware of anything that might change the decision to buy or not buy, they are obligated to disclose. Ok, fine. And since a portion of the Sunrise Powerlink will run through Scripps Ranch when it is completed (last June), a future Scripps Ranch homeowner might be interested in the specifics (specifically, will the power lines be running through my guest room when they are constructed  — last June?).

But, somebody has to go out on a limb here, so it might as well be me. THE PROJECT HAS BEEN COMPLETED! You do not need to use this form anymore. It is finished, kaput, over and done with. There was a ribbon cutting ceremony, even. If a homebuyer is to be affected by the project, they will be able to come to such a conclusion all by themselves, by looking around for the telltale signs – like transmission towers, high-voltage wires, neighbors glowing in the dark and stuff.

Oh, and while we are on the subject of disclosures that you can safely retire now (there are too many to address here), let me share with you my favorite. Please, for the love of all that is good and decent, stop sending me a separate Megan’s Law disclosure!

Megan’s law is addressed:

In the Purchase Agreement –

In the Statewide Buyer and Seller Advisory –

In the Natural Hazard Disclosure report –

We don’t need a separate disclosure. I think it is safe to say that we pretty much have this one covered.

If someone is going to sue you over Megan’s law, having disclosed it four times versus three is not going to make a difference.

Phew. I feel better.



National Housing Stats and Lost in Translation


Photo credit: By chokola

The National Association of Realtors® (NAR) released their home sales statistics for July. This data is for all property types and reflects homes sales nationally. And According to NAR, the national median existing home price was up 9.4% July over July, while the number of existing home sales was up 2.3%.

As my local news ticker (I call him “Steve”) was reporting NAR’s numbers, real time, as they were reported to him by a perky morning news anchor, I was reminded that national statistics are just that – national. They are relatively meaningless to the couple three blocks away that is trying to sell their house, and they are meaningless to the buyer in my backseat trying to pin a value on the home they just visited.

So, just for giggles, I ran the July numbers for a few San Diego I-15 Corridor Zip codes to see how we stacked up. (Information is from the Sandicor Multiple Listing Service, all property types, July 2012 versus July 2011. Data is deemed reliable but not guaranteed, blah, blah, blah.)

Zip Code Homes Sold Change Median Price Change %Detached Sales 2012 %Detached Sales 2011
92131 (Scripps Ranch) +14% +1.2% 68% 67%
92128 (Rancho Bernardo) +57% +28% 58% 48%
92127 (4S Ranch) +13% +28% 80% 73%
92126 (Mira Mesa) +15% -6% 60% 71%

You can see that the overarching, “Everything is just ducky, thanks,” message from NAR generally holds true in these San Diego communities, with Scripps Ranch most closely tracking NAR’s national numbers. But, the numbers do vary widely.

The increases in numbers of homes sold are no surprise to those of us in the trenches. We’ve had quite the summer rally. What surprised me was the magnitude of the price changes in Rancho Bernardo and 4S Ranch. But this is where you have to consider the dangers of lumping property types.

The one thing that stands out is that we are comparing apples and bananas in 92128 and 92127. A higher mix of single-family sales in these areas, of course, resulted in a higher median sale price. In Scripps Ranch, where the percentage of detached versus attached sales remained relatively unchanged, so also did the median sale price. And in Mira Mesa where attached homes represented a bigger piece of the pie in 2012, the median price dropped.

The point then, assuming you are still awake, is that broad-brush statistics are fun and great, and can give us a feel for what’s going on. But, statistics alone lack soul. In order to know how your market is doing, you can’t rely on NAR, on Case Shiller, or even on my little MLS exercise without human intervention. Housing numbers require interpretation, and only a real human being entrenched in your local real estate market can provide the context.

Which brings me to the Zestimate, Zillow’s now-infamous “estimated market value.”

Last week, Steve and I represented three clients in closed transactions. Next week, we have four more closing. And while a discussion of Zestimates slapped onto the end of a discussion of NAR’s housing data may seem only loosely tangential, this was a good time for me to compare Zestimate accuracies – before they pick up the tax recordings and the Zestimates reset to sale price. And the comparison is relevant because it underscores the dangers in relying on data without soul, without human intervention to provide context. (Yes, real estate agents are, generally speaking, human.)

For our three closings last week, Zillow hasn’t picked up the recordations yet. I should also note that two of these were our listings, and we no longer gift our listings to Zillow. Similarly, in the case of the one buyer side, that listing agent does not syndicate to them. In other words, Zillow does not reflect these homes as for sale or having been listed, but they do provide a Zestimate for each.

Address Zestimate Sale Price Difference Days on Market
10555 Arbor Park Place, 92131 $582,989 $651,000 +12% 5
7696 Andasol Street, 92126 $429,472 $457,000 +6% 4
10528 Stony Ridge Court, 92131 $627,500 $689,000 +10% 3

You can see that the reality of our market was just a little off the opinion of the Zestimate algorithim.

As for the homes closing next week, all our listings, here is what the differences will look like.

Property Zestimate Sale Price Difference Days on Market
#1 $275,884 $300,000 +9% 4
#2 $669,258 $735,000 +9% 3
#3 $908,023 $960,000 +6% 11
#4 $369,421 $352,000 -5% 5

With the exception of one little condo, the Zestimates were all significantly lower than the buyers’ opinions of value, and it is only the latter that counts. You may think that 9% sounds close enough, but $25,000 – or $65,000 – sounds like a lot of money to me. And it is a lot of money to our clients.

Finally, and as a preemptive strike to those who might claim that our selling clients are being somehow being wronged by not having their listing data outsourced to third party syndicators like Zillow, I threw in the bonus market times. And in the case of all seven homes, I should point out that there were multiple offers – on every single one.

NAR is right, at least where our San Diego market is concerned. We do seem to be turning a corner. Our shortage of inventory coupled with continuing favorable interest rates is not an insignificant factor. We’ll have to wait and see how rising interest rates, a Presidential election, a fiscal cliff, or other external factors might affect us moving forward. But if you want the real skinny as it relates to you – your neighborhood and your home – look not to national stats or a mysterious home valuation program. Talk to somebody in your hood. Your mileage may vary.



Hitting Bottom, Barstow, and Scripps Ranch Market Times


According to the Wall Street Journal, the “housing bust is over.” Phew! That’s a relief.

This article ran last week so, technically, the housing bust was over on July 11. I suppose I was just too busy writing multiple counter offers to notice.

Those of us in the trenches have been seeing all of the signs of a recovery. Or maybe what we have been seeing is summer. It could go either way. But the funny thing about tops and bottoms, peaks and valleys, is that you can’t really know you are there when you are there.

Take those brave pioneers who, for whatever reason, decided it was a good idea to head across the California Mojave desert on foot. They, too, probably thought they had hit bottom when they got to Death Valley. And then they stumbled upon Barstow.

Death Valley, Barstow. Whatever. It’s close enough. I actually tend to agree that, while we may be trudging through the tumbleweed for a while yet, we’re pretty much there.

Our most recent listings have all gone with multiple offers. Last week, I entered a listing in our MLS at 6:00 am. At 5:00 that evening, I got a call from an agent. “How may offers do you have?” she asked. My answer: Five.

Which brings us to this installment of Stats Man.

Today Stats Man looks at market times and, since we long ago established that Stats Man is lazy, it will come as no surprise that this information is for the Scripps Ranch, 92131 Zip code. (Disclaimer: Information is from the Sandicor Multiple Listing Service. Information is deemed reliable but not guaranteed. Dry clean only, do not use this data while operating heavy machinery, for external use only, void where prohibited.)

I took a quick look back at detached homes sold in Scripps Ranch over the past thirty days. Note that I eliminated the short sales, because their market time continues to rack up while they are relegated to the purgatory of “contingent” status waiting for lender approval. I also eliminate the couple of homes that were new construction, builder offerings. That being said, here is what the market times looked like:

Average Days on Market: 32

Average Price per Square Foot: $268

That was fun. But what is more fun is to look at what happens when you eliminate the homes that were overpriced. How do I know which homes were overpriced? Those would be the ones that had to go through one or more price reductions before they found a taker. Duh.

Average Days on Market: 13

Average Price per Square Foot: $287

Now, as a preemptive strike for all of you naysayers, the price spectrum in each sample was roughly the same. In other words, you can’t say that more expensive homes generally have longer market times. They don’t. At least, they didn’t over the past 30 days.

In summary, what we have here is two messages. First, I will beat my favorite drum. It you price it tight to true market value — if you price it right — you will sell faster and for more. Period.  

OK. So we knew that. The other message is a reminder that there are buyers out there – a whole bunch of them. And the activity we began to see in early spring is continuing, even escalating, as we head into the dog days of summer.

Are we in Death Valley or Barstow? Beats me, but we’re close enough.

Editor's Note: The opinions expressed in this post about Barstow do not necessarily reflect the opinons of San Diego Castles Realty. It is a fine town. Really, it is. (Not to mention, it is halfway to Vegas.) They have a Bob's Big Boy. I highly recommend the Brawny Beef combo.


Give us your listings and no one gets hurt.

I remember an old joke from years ago, although I have probably butchered it over time as the old brain cells have moved well beyond their half-lives. It's a joke about picking your argument.

A man faces his accuser in court, the victim of an attack by a big, black dog. “It couldn’t have been my dog, because I don’t have a dog. Besides, my dog doesn’t bite. And he’s white.”

Just give us the damn listings, already, and no one gets hurt.

As reported by Inman News, that’s the appeal that Zillow sent this week to Multiple Listing Services (MLS’s) across the country.

Back in May, I wrote about the real elephant in the listing syndication room – content. So this appeal by Zillow for free content comes as no surprise. Except for the part about having the huevos to lay their cards out in such a matter-of-fact, cut-to-the-chase manner.

Just give us the listings, already.

Maybe the whole coercion angle wasn’t working quite as well or as swiftly as they had hoped. Just last month, the former friends-of-the-agent I applauded in those more innocent, salad days, were insisting they didn’t have a dog in this fight. “The home buying and selling public demands that your listings be gift wrapped and shipped directly to Zillow. You owe it to your clients. Do it for the People!”

Except it’s not about the People at all. It is about the “agent wallet,” that big pot of gold that catapulted the company into IPO stardom. It’s about shareholders, profitability, and future earnings.

All the fancy algorithms and questionable Zestimates and whimsical blogs about celebrity houses in the world will not keep the agent wallet in the house without the listings. Because, it is the listings that buyers and sellers want to see. And it is the buyers and sellers looking for those listings that the agents are after.

Apparently, the argument du jour is that by simply going to the source — the MLS’s — Zillow’s pesky problems with data integrity can be readily solved. And so they could. My own future earnings could also be greatly enhanced if Nordstrom simply shipped me their entire fall line so that I might set up my own little marketplace on eBay. But, I am smart enough to know that they wouldn’t just send me their stuff for free. Nordstrom would probably want something in return.  It’s crazy, I know.

It’s the content, stupid. And Zillow has a bit of a mess on its hands right now. Some feeds come from brokers; others come from individual agents. Much of the listing data they do have is out of date, incorrect, misattributed or otherwise misrepresented. And, with more agents and brokers opting out of the whole thing, the data set is incomplete.

The real estate agent community is a tough one to corral. There are too many of them and, as any broker will tell you, it’s a revolving door. There is the constant need to recruit, train, rinse and repeat. Where populating a site is concerned, better to just cut out the middle man, that little guy, the agent community that you once ferociously courted in order to gain the necessary traction to publish that prospectus.

In May, I quoted my daughter, the journalist. “It’s stupid to give away your content for free.”


The MLS’s are the department stores of real estate. They run the showrooms that display the wares of all of the individual designers – the agents. It is stupid to give away your content for free; it is even dumber to give it away only to have to repurchase the rights to what was yours to begin with.

And I am certain that, if not the agents, the MLS’s across the country get this.

They do, right?

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Office Location

  • San Diego Castles Realty
  • 12265 Scripps Poway Parkway, Suite 115
  • Poway, CA 92064
  • P: 858.530.2374
  • F: 858.876.1701
  • E: info (at)
  • CA BRE# 01853496

Broker Information

  • Kris Berg, Broker
  • CA BRE #01241572