Real Estate

1031 Exchanges. Your Path to Trading Real Estate TAX FREE!

Because of its favorable tax treatment, investing in real estate can be extremely advantageous.

If you are considering selling an investment property and intend to purchase another “like-kind” property with the proceeds, a 1031 exchange should be considered. A 1031 exchange is a legal provision that allows a seller to sell one property, purchase another property, and defer capital gains taxes. (Section 1031 exchange does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, ETC.) This is strictly for real estate. How does it work?

  • Both properties involved must be investment properties and of “like-kind”;
  • You cannot experience any gain from the sale;
  • The purchase price on the new property must be equal to or more than the net proceeds from the sale of the old property;
  • You cannot act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator. Everything must pass through a qualified intermediary (QI);
  • The tax on the gain is deferred, not forgiven. When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

For more information on Like-Kind Exchanges Under IRC Code Section 1031, please visit irs.gov or consult with your attorney.

 

Real Estate, Uncategorized

It’s Time to Tell Your Landlord, “Hey, Hey, Hey Goodbye…Nah, Nah, Nah, Nah”….

Is buying a home a wiser choice than renting? I get this question ALL THE TIME, especially from twenty-somethings. At this moment in time, buying is the smartest decision.  Please consider the following before your throw one more cent away on that home that you will NEVER own:

While comparing monthly mortgage payments to rent is a good starting point, you need to consider this, part of your mortgage payment is being applied to principal. This is forced savings! For example”e, if you purchase a $200k home with a 30 year mortgage at 4.25%, your monthly payment will be $993 with $285 of that amount going to the principal.

Low mortgage rates have kept homeownership from becoming more expensive than renting. If you are considering purchasing now, be mindful that real estate forecasters are predicting a significant increase in 2015.

As a renter, you have ZERO control over your housing destiny. The landlord is in total control. If S/he decides to sell or are foreclosed on , you will be out of a home. They can also raise your rent at the end of your lease or choose not to rent to you at all. Owning a home will give you a sense of security that you cannot find in renting.

You also have the option of doing whatever it is you want to do with your own home. Paint the walls garnet or orange? Go right ahead! It’s yours! Perhaps you want to add a deck or hardwoods? More often than not, these types of improvements add to the value of your home.

Owning a home will reduce your federal and state tax obligations because of the deductibility of interest payments on your mortgage. When you rent, you end up with 12 cancelled rent checks at the end of the year. However, as a homeowner, you end up with 12 cancelled mortgage checks that are nearly fully tax deductible in most cases.

Yes, owning a home comes with repair expenses down the road, but anyone who thinks that you do not need to worry about a leaking roof or shotty heating & air in a rental home has not met my new buyer client’s former landlord.

In short, the answer to the question of whether you should buy or rent is so obvious that it is hardly worth stating. Property prices and interest rates are going up. Owning a house is a wise move.

If you are considering investing in your future and telling the landlord, “goodbye”, call me today! (803).944.9544. Serving Lexington, Richland, & Newberry Counties.

Real Estate

Title Insurance. What it is and why you NEED it.

As the attorney was going over the settlement charges with the buyer in one of today’s closings, he came across the line item for title insurance. I asked him if he ever had anyone turn down the option for this coverage and the answer was yes. Can you say, “MISTAKE”?

Title insurance protects you against financial loss due to defects in title.

Unlike life, auto, health, or homeowners insurance; title insurance coverage ends on the day of issuance and extends backwards.

More than likely your property underwent many changes in ownership prior to you contracting to purchase. Title insurance ensures that should a dispute ever arise, your equity is protected. (e.g.: forged deeds, inadequate legal descriptions, improperly recorded legal documents, defective acknowledgements, ECT.)

Although your closing attorney will search your title before closing, (typically the search is 40 years for residential and 60 years for commercial) disputes can still arise. No search is altogether dependable. This is why lenders require a lender’s policy. They want their interest protected!

While the lender will require a policy to protect their interest, this does not protect your interest. You will need an owner’s policy to accomplish this.

Once you purchase your owner’s title insurance policy, your interest is protected indefinitely. There are no further premiums. If you decide to refinance at a later date, the lender will require a new lender’s policy be purchased. This is because their policy terminates once you pay off the old mortgage. The owner’s policy remains in place.

Title insurance is relatively inexpensive. Purchasing an owner’s title insurance policy is a wise decision and one that you will surely never regret. It is amazing how a few hundred dollars can save you hundreds of thousands.

Don’t risk financial loss. PROTECT YOURSELF!

 

 

Real Estate

Rollback Taxes?

Reason #5,683 why you need an EXPERIENCED buyer’s agent!!!

When purchasing land that you will use as a residence from a larger tract of land and where the seller has been taking the agricultural tax break, the land being purchased will be subject to what is known as rollback taxes. This amount is up to five years of the difference between what the taxes would have been at the non agricultural rate and the amount of the agricultural rate. As you can imagine, this amount can be HUGE! Just like anything else in a real estate contract, this CAN be negotiated… that is, IF you know it exists. The land you thought was a such a good deal may not be once you are hit with the rollback taxes.

 

 

 

 

 

 

 

 

 

 

 

Real Estate

How About We Put The Horse Before The Cart?

I’ve posted about this before, but here we go again (because it is needed)… I’ve had two calls this week from potential home buyers wanting to see houses without being preapproved for a mortgage. One was extremely nasty to me and hung up when I would not meet her at a house that she wanted to see after she flat out refused to speak to a loan officer. A few things, 1.) I do not know you. You are just a voice on the other end of the line. You could be ANYONE with ANY INTENTION. ((This isn’t the Andy Griffith Show and we aren’t in Mayberry. Have you watched the news in the last couple of decades?)) 2.) Even if I did know you, I do not know your finances. WHY IN THE WORLD would you be shopping for a home without knowing: a.) If you can even borrow the money and b.) If you are able to afford the price of the home? I will never be able to wrap my head around this phenomenon because IT MAKES NO SENSE. This is putting the cart before the horse. It’s always the same old song and dance too. “I’m waiting to get prequalified because I do not want to have my credit ran until I find the home I want”. Maybe you’ve gone online and used some type of credit analyzer or mortgage calculator? Doing that should not convince you that you qualify for a mortgage and it surely won’t convince me or my Seller client that you qualify (and you kind of want to convince us). I have seen people driving Mercedes with horrible credit scores and no chance of qualifying anytime soon and people driving 30 year old daily beaters with perfect credit. I’ve seen 800 credit scores not qualify due to DTI issues among other things. I’ve been surprised with low credit scores on older, more established people and by high ones on 19 & 20 years olds. The bottom line is that you only prequalify when the loan officer shows me the money… err… the prequalification letter. I make no apologies… I refuse to put my seller client through the trouble of making sure the house is show ready, packing up their kids, interrupting quality time with the spouse, getting their hopes up, etc., only to find out later that you can’t even buy the house OR you qualify for much less than list price. Even IF the home is vacant, have I mentioned that I DO NOT KNOW YOU? Further, the time I would have spent with you is time I could have spent with a buyer who is READY, WILLING, AND ABLE to purchase or time I could have spent marketing my Seller’s home or with my own family. It is a waste of everyone’s time, including yours. Sure, there are real estate agents out there who WILL show you homes without making sure you are able to purchase. I’m not “that” agent and I don’t know about you, but it make me a little nervous to think that my representation would ALSO put the cart before the horse. You should know that when “that” agent shows you my listing, my Seller’s home WILL NOT BE COMING OFF OF THE MARKET without providing proof of funds. Sure you can view the home with “that” agent, then contact the loan officer, and submit your offer later, but you better hope another READY, WILLING, and ABLE buyer doesn’t come along in the meantime with an acceptable offer and I assure you all the while you are operating on hope and a prayer, I’m working diligently to bring that serious buyer into my client’s home and SELL IT. Reputable agents do not waste their time or gasoline on a hope and a prayer when it comes to knowing whether or not our buyers qualify. If you see a buyer with me, rest assured; THEY ARE ROCK SOLID! Do yourself a favor and get prequalified. Otherwise, no one is going to take you seriously and that is the last thing you need to be viewed as when you’re about to negotiate the biggest purchase of your life. I am willing to work with you to get you prequalified, walk you through the crazy maze of buying a home, and take you straight to the closing table…if you let me. You want to buy a home? Well, I want to sell a home. Let’s make it happen! (803)-944-9544. hope.dorn@era.com. In contrast, if you just want to view homes, we are looking for salesmen all the time! I can help you with that too!

Real Estate

A few weeks ago while showing houses on Lake Murray, and after the last scheduled showing, my buyers informed me of a house they saw that was For Sale By Owner just around the corner. I offered to follow them (and did) so that I could jot the phone number down to call the owner later, but was pleasantly surprised to see him standing in the yard.

I asked him (through my car window) basic questions about the home and he was accommodating, so I asked if he would mind if we peeked inside. He obliged.

He rattled on about the home’s history and I couldn’t get a word in edgewise, so I just listened. Just before he cracked the door open, he said, “Yeah. I’m selling it myself. I don’t need no realtor. I’m not using no realtor and I ain’t paying no realtor”. I thought it only appropriate that if I wasn’t able to speak, that I at least hand him a business card, so I did. He looked me square in the eyes and said, “I can sell titties to a cow”!!! I thought I’d die! If that wasn’t funny enough, my buyer nudged me and said, “Hope, you should have that placed on your business cards”! She was kidding of course.

I didn’t expect the comical older gentleman to “sell titties to a cow”, just his home to my clients. Overpriced and out of touch. I put forth a very strong offer the following day in which he, (being the “tittie seller” that he is), rejected. His home remains on the market and my clients are scheduled to close on their Lake Murray home in just a few short weeks. We found the home they contracted on in the Multiple Listing Service. It was priced appropriately and show ready.

I could write a book on why you shouldn’t attempt selling your property without a Realtor, but I will simply close with this, the longer you sit on it, the more money you lose. Be nice to Real Estate Sales Professionals. Even if you choose to sell your property yourself, it highly likely that your buyer will bring their own Realtor to the table. Price it right. No one is going to pay more than a property is worth, and by all means DO NOT tell your potential buyer that you can “sell titties to a cow”! 😀

If you are in the market to buy or sell residential property or buy, sell, or lease commercial property in the Midlands of South Carolina, please give me a call at:          (803)-944-9544 or contact me by email at: hope.dorn@era.com. I would love the opportunity to handle your real estate needs. -Hope

He Said He Can Sell “Titties to A Cow”