Real Estate Articles

New Hampshire Real Estate Transfer Tax

Attorney David M. Beliveau submitted an article to the New Hampshire Bar discussing the real estate transfer tax and the change in the law as it pertains to real estate transfers to revocable trusts and LLCs. Read the entire article below.

Tax Law: Amended Last Year: A NH Real Estate Transfer Tax Primer

By: David Beliveau | New Hampshire Bar

The New Hampshire real estate transfer tax (NH RSA 78-B) – a tax on the transfer of New Hampshire real estate – is $0.75 per $100 of the full price of or consideration for the real estate for the purchaser and the seller (meaning half of the total tax is paid by the purchaser and half by the seller).

The tax, collected by the NH Department of Revenue Administration (DRA), requires filing DRA forms PA-34, Inventory of Property Transfer; CD-57-P, Declaration of Consideration Real Estate Purchaser (Grantee); and CD-57-S, Declaration of Consideration Real Estate Seller (Grantor). The law changed last year in the case of real estate transfers to revocable trusts and LLCs.

During a person’s life, he or she may establish a trust and transfer assets to it. As a result, such assets will avoid probate when the person dies. Real estate may be transferred to the trust.

Prior to last year, a transfer of New Hampshire real estate to a revocable trust was subject to a minimum $40 real estate transfer tax. In such case, the applicable deed language was something like: “This is a non-contractual conveyance for which no consideration is paid. Therefore, the minimum $40 State of New Hampshire real estate transfer tax liability is payable.” All three of the above-referenced DRA forms were required to be prepared and filed. [Read more…]

Bank slapped with fine after failing to modify loan terms

In a move called “unprecedented in its magnitude,” a bankruptcy judge recently opted to levy a $45 million fine against Bank of America Corp. for its treatment of homeowners who had requested lower mortgage payments.

If it stands, the fine would be the largest punitive damages award for violations of the bankruptcy law’s automatic stay rules, which ban lenders from advancing foreclosures and taking other actions.

The case highlights the importance of consulting a lawyer in any situation involving requests for loan modifications or in any case involving a foreclosure. [Read more…]

What you need to know about paid leads on property-search sites

Popular property-search site Streeteasy.com recently rolled out a change to its Premier Agent program for real estate agents that is confusing potential buyers and angering brokers.

Until recently, the site featured the name of a property’s listing agent and company prominently, making the main contact clear and providing a direct “contact agent” button. But now when a potential buyer clicks “contact agent,” the message instead might be sent to a broker who has paid to receive referrals for a specific zip code.

The listing broker can still be reached, but the process is more convoluted. Now users must click on a less prominent button that says “seller’s agent info.” The name of the listing broker and firm are much further down on the page and harder to find. [Read more…]

What to consider before backing out of an offer

Standard real-estate contracts contain inspection and mortgage contingencies that allow buyers a limited amount of time to back out of the contract and receive a refund of their deposit. They also spell out the terms of the deposit and where the money is held in escrow, whether with the buyers’ agent, the title company, an attorney or the developer.

But once all contingencies are satisfied, buyers are locked in and attempts to back out could mean losing earnest money and potentially having to pay brokers’ commissions. That’s because even if the seller lets the buyer off the hook, he or she may still be liable to the broker for the commission. Contracts state that the commission is due when the broker finds a ready, willing and able buyer. Some brokers will work with the seller in this situation, but not all will.

If a buyer truly does want to back out of a deal, even if he can’t do so under the terms of the contract, he can try to negotiate with the seller for the return of at least part of the deposit. [Read more…]

Don’t let the end of a home-equity line of credit sneak up on you

The terms of home-equity lines of credit, or HELOCs, typically come due 10 years in, at a time at which many homeowners are unprepared for the fact that their monthly payments are about to go up significantly and sometimes double.

HELOCs are secured by a mortgage, require only interest payments and can be used to consolidate debt, fund major expenses, etc. But after the initial 10-year period the principal becomes due. At that point, homeowners can choose to pay off the balance, refinance it into a first or second mortgage or make monthly payments of principal and interest, typically for a 20-year term.

Homeowners who are unprepared may wind up defaulting, prompting the bank to take legal action to collect the balance or to begin the foreclosure process. [Read more…]

Reverse mortgages offer cash to homeowners, but it comes at a price

A reverse mortgage allows a homeowner to convert part of the equity in a home to cash without having to sell the property. The cash may be paid in installments or a lump sum, so typically you don’t need to pay anything back as long as you live in your house.

Factors such as age, the value of the property and how much remains on the mortgage all affect the amount of money a homeowner may borrow through a reverse mortgage.

There are important things to consider. Owners typically must remain in the home for at least 5-10 years to make a reverse mortgage economical. In addition, because they’re deferring repayment of the reverse mortgage, the amount they owe will grow substantially over time. Interest charges are added to the loan each day it’s held, so it’s possible the reverse mortgage could grow to equal the value of the home. [Read more…]

Investing IRAs in real estate often leads to more risk than reward

 There’s nothing simple about investing an IRA in real estate. But people do it because it offers an alternative to traditional retirement accounts that comes with the potential for high reward. Potential investors should be warned, however, that there can be more negatives than positives associated with these types of investments.

Minuses

  1. The IRS requires a qualified trustee or custodian to administer the assets. This person will typically handle transactions and manage paperwork and reports.
  2. The options for a qualified trustee or custodian are limited. So far, only about two dozen companies in the U.S. can act as custodians of self-directed IRAs.
  3. You’ll need to hire a property manager. A third-party property manager will make sure you adhere to any applicable landlord-tenant laws and avoid illegal transactions. Typical commissions are equal to the first month’s rent and 6 to 10 percent of the monthly rent thereafter.
  4. The rules for self-directed IRAs can be tricky to follow. Did you know something as simple as mowing the lawn of a property you own through your IRA could put you on the wrong side of the law? It’s true: IRA owners are forbidden from engaging in certain transactions at their property.
  5. The penalties are high. Running afoul of the law makes IRA owners more susceptible to losing the IRA’s tax-favored status. If that happens, taxes and penalties could be triggered.
  6. It’s cash only. IRS rules require contributions to an IRA to be made in cash, not services.

[Read more…]

Review your condo bylaws before renting out your place on Airbnb

Renting out your condo on Airbnb might seem like a great way to make some extra money. But before you jump on the opportunity, it’s wise to check your condo association bylaws.

In most cases, you’ll find that the bylaws include restrictions on “leasing.” For example, the rules might state that no unit can be rented for less than 6 or 12 months at a time, or they might state that a unit can’t be used as a hotel.

These provisions exist because the Federal Housing Administration, which is the biggest mortgage lender nationwide, places restrictions on the number of renters a condo complex can have. Generally, the rule is that no more than 50 percent of tenants in any complex can be renters, except in particular cases where it’s 35 percent. [Read more…]

Check your bank’s real estate notices twice

When a bank goes through a merger or agrees to buy or sell mortgage loans, certain notices must be provided to borrowers before and after the transaction closes. Federal law states clearly what notices are required and how they must be worded, but sometimes the legal rules conflict with each other.

It’s helpful to have an attorney review any notices you receive to ensure that they are in compliance with federal law and evaluate how they impact the terms of your loan.

Under a federal law called the Real Estate Settlement Procedures Act of 1974 (RESPA), when a bank or loan servicer transfers the servicing of a residential mortgage loan, borrowers must be provided with written notice by both the transferor and the transferee, including: 1) the effective date; 2) the date on which the transferor will stop accepting payments and the date on which the transferee will begin to accept payments; 3) the name and address of the transferor and a collect or toll-free telephone number to call with questions about servicing; 4) an explanation of any impact on the terms and availability of related insurance coverage; and 5) a statement indicating that the transfer only affects terms directly related to the servicing of the loan. [Read more…]

Don’t let surprise costs of your home purchase shock you

If you’re buying a house, the total price you’ll end up paying is more than meets the eye.

Usually, a buyer pays between 2 percent and 5 percent of the home purchase price in closing costs. Lenders often disclose these costs, but they aren’t the only hidden fees you need to consider.

Other fees to keep in mind include payments to appraisers, home inspectors and settlement agents, as well as the cost of title insurance, homeowners’ insurance and property taxes. [Read more…]

If your house burns down, do you still have to pay your mortgage?

At the closing for your home purchase or refinancing, you are required to sign a promissory note that says you’ll make the mortgage payments every month. That agreement remains in effect even if your house burns down. You’re also required to report any loss to the lender and your insurance carrier promptly.

But a reprieve is still possible. For example, a lender might allow a borrower to suspend mortgage payments for a defined period of time or might put a hold on foreclosure activity.

Based on the standard Fannie Mae or Freddie Mac mortgage form, a borrower must repair or restore the property as long as that is financially possible, unless there is a different agreement between the parties. As a result, you can’t simply walk away after a fire. If you do, you risk defaulting on your mortgage. [Read more…]

Credit monitoring: Be aware the credit score you get might be different than lenders receive

Subscribing to a credit monitoring service to keep tabs on your credit score can be a helpful way to manage and protect your credit.

But did you know that the score you purchase isn’t always the same as the one the lender obtains from a credit reporting agency?

That comes as a surprise to many borrowers. But the real questions are why is this the case and what can you do about it? [Read more…]

Realtors survey: First-time home-buying is down

In reviewing 35 years of survey data on home buyers and sellers, the National Association of Realtors (NAR) announced five notable real estate trends.

The organization’s survey, called Profile of Home Buyers and Sellers, dates back to 1981 and is the longest-running series of national housing data evaluating the demographics, preferences, motivations, plans and experiences of home buyers and sellers.

Here are the key takeaways over the past 3 ½ decades: [Read more…]

Financing for energy improvement loans now easier to obtain

Residential properties encumbered with a Property Assessed Clean Energy (PACE) obligation are now eligible for FHA-insured mortgage financing.

The change applies both to new purchases and refinancing, under a guidance issued in September by the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA).

PACE is a popular program that provides an alternative way to finance energy improvements to properties, such as energy efficiency, water conservation and renewable energy upgrades. The financing is provided by private entities in connection with state and local governments. [Read more…]

Clean-up not disclosed; Seller sued for fraud years later

A recent case highlights the importance of disclosing any environmental contamination and clean-up that took place on your property when you sell it, even if you sell it “as is.”

A New Jersey appeals court decided that a seller’s failure to disclose such information could expose him to liability for fraud many years after the sale.

In the case, the seller had owned the property since 1983 and defaulted on the mortgage in 1987. The seller’s mortgage lender took possession of the property and made plans to sell it. The lender had an environmental consultant take soil samples and learned that the property was contaminated with perchloroethylene (“PCE”). [Read more…]

The surprising effect of Airbnb income on mortgage refinancing

Renting out your house when you’re out of town or offering up an extra room while your son or daughter is away at college sounds like a great way to make some extra cash. And services like Airbnb have made the process rather simple.

But it might not be quite so simple when you go to refinance your home. Recently, some big banks are raising an eyebrow because making money off your home can be construed as turning your residence into commercial property.

According to a report in the Wall St. Journal, some banks — including Bank of America Corp. and Wells Fargo & Co. — have been telling borrowers who make income from Airbnb that they’re no longer able to get certain types of loans or that they must pay higher interest rates. [Read more…]

A NH Real Estate Transfer Tax Primer

The following article by Attorney David Beliveau was published by the New Hampshire Bar Association.

Tax Law: Amended Last Year: A NH Real Estate Transfer Tax Primer

By:

The New Hampshire real estate transfer tax (NH RSA 78-B) – a tax on the transfer of New Hampshire real estate – is $0.75 per $100 of the full price of or consideration for the real estate for the purchaser and the seller (meaning half of the total tax is paid by the purchaser and half by the seller).

The tax, collected by the NH Department of Revenue Administration (DRA), requires filing DRA forms PA-34, Inventory of Property Transfer; CD-57-P, Declaration of Consideration Real Estate Purchaser (Grantee); and CD-57-S, Declaration of Consideration Real Estate Seller (Grantor). The law changed last year in the case of real estate transfers to revocable trusts and LLCs. [Read more…]

Package delivery is a headache for landlords, condos

The explosion of online shopping has created a big headache for landlords and condo associations – what should be done about the deluge of packages being delivered to residents?

Staff at large apartment buildings often strain under the effort to accept, sort and deliver hundreds of packages. Smaller landlords and condo associations are striving to figure out the best policy: Should packages be left outside, where they are vulnerable to weather and theft? Is there a better, workable way to get them to tenants and unit owners?

Camden Property Trust, a huge landlord with 59,000 apartment units in 10 states, recently announced that it was banning package deliveries altogether. Camden tenants must now pick up packages at a post office, or else have them shipped to their workplace or to the home of a friend or relative. [Read more…]

If you own real estate, you need a will

Anyone who owns real estate needs to have a will that indicates what should happen to the property if he or she suddenly passes away.

You might assume you know who would inherit the house, but without a written will, the inheritance would be decided by state-law rules that might not be exactly what you’d expect.

Even if the house ultimately goes to the person you want, the lack of a will might mean that ownership of the house remains in legal limbo for an extended period of time. This can create unnecessary complications when it comes to paying property taxes and arranging for continued utilities and insurance coverage. If you have a mortgage, it can create even bigger headaches. [Read more…]

Buyer sues although property was purchased ‘as is’

A buyer who discovered that her new house was contaminated with mold can sue the seller, even though the house was purchased “as is” and the seller specifically said there might be mold in it, according to the Wisconsin Court of Appeals.

Catherine Fricano bought the house from a bank that had acquired it in a foreclosure. The house had sustained serious water damage, and before selling it, the bank twice paid for mold remediation and repair work.

The bank’s contract with Fricano said that the house was being sold “as is,” that it might have had mold in it in the past, that it might currently have mold in it, and that the bank made no guarantees whatsoever about the condition of the building. The bank also said that since it had acquired the home through foreclosure, it had “little or no direct knowledge about the condition of the property.” [Read more…]

Tax break for selling land next to your house

You probably know that if you make a profit when you sell your house, you can usually avoid paying capital gains tax. In most cases, you can avoid the tax on profits of up to $250,000 (or $500,000 for a married couple).

But did you know that if you sell your house in one transaction and a vacant parcel of land next to your house in a separate transaction, you can also get a tax break?

In many cases, you can combine the two sales and treat them as a single sale subject to the $250,000 or $500,000 exclusion.

That’s true if you sell the adjacent parcel within two years before or after you sell your house, and if the parcel was originally part of your residence and wasn’t used for a separate business or rental purpose.

Beware of this ‘trap’ in commercial insurance

Many commercial insurance policies contain what’s called a “protective safeguards endorsement.” This gives the property owner a break on its insurance premiums if the owner protects the property through a fire alarm, automatic sprinkler system, fire safety service contract, or other method of preventing harm.

Sounds like a good idea, right? It can be … but the trick is that these endorsements typically say that the owner must maintain the system in good working order at all times, or notify the insurance company right away if there’s a problem the owner can’t control. Otherwise, the insurance company won’t pay for any losses.

That means the owner must be extremely careful about maintaining its systems. Also, the owner must be extremely careful about not letting a tenant do anything to compromise the systems. If a tenant is allowed to make minor alterations without the owner’s approval, for instance, how will the owner know if the tenant does something that unintentionally affects a sprinkler system?

These endorsements can be a money-saver, but property owners need to think long and hard about the potential negative consequences.

More parents buy condos for their children in college

A growing trend is for parents to buy a condo for their college-age children to live in, instead of a dormitory. This gives the child more luxurious accommodations (and encourages an environment conducive to studying instead of all-night partying), while creating the possibility that the parents can sell the property at a profit in four years.

There are other financial benefits, too. For instance, suppose that instead of paying the college for room and board, you give the money to your child. You can give your child up to $14,000 a year without paying gift tax, and a married couple can give up to $28,000. Your child can then use the money to pay you rent for the condo. Voilà! You’ve created a rental business that provides tax breaks.

As long as you’re charging your child full market rent, you can deduct your mortgage interest payments as a business expense. You can also deduct other operating expenses, such as insurance, utilities, condo fees, cleaning costs, maintenance and repairs. You may also be able to take a deduction for depreciation. [Read more…]

How to understand your APR

Many mortgage shoppers are confused about the difference between a loan’s interest rate and its APR, or annual percentage rate. Understanding APR can be extremely valuable, because it can allow you to compare different loans more effectively and figure out which one is truly best for you.

But you’ll also want to understand the limits of APR, and why a loan with a better APR might not necessarily be a better loan given your specific circumstances.

Interest rates are simple – they’re the cost of borrowing money. All other things being equal, a loan with a 4% interest rate is better than a loan with a 5% interest rate.

But the problem with mortgages is that all other things are seldom equal, because different lenders charge different amounts for closing costs and other expenses. That’s where APR comes in. APR is designed to compare the true cost of a loan when these other expenses are taken into account. [Read more…]

Multi-generational families are facing zoning problems

A growing number of families want to live in a home along with elderly parents or “boomerang” grown children – but they may run into problems with the local zoning board.

Some 18% of Americans now live in a home with more than one adult generation, and that figure is growing. In many cases, what families want is a home with an “in-law” apartment – one that has a separate entrance, separate kitchen, and separate utilities. The idea is that the family can live together, but the elderly parents or grown children can nevertheless have a measure of independence.

Home builders say there is strong demand for this type of arrangement. The problem is that such structures are often banned by zoning laws in residential neighborhoods. [Read more…]

Congress extends homeowner credits for energy improvements

Congress has extended a number of tax credits for homeowners who make energy-efficient improvements to their home, as long as the equipment they install is certified by the manufacturer as qualifying for the programs. The credits fall into two categories:

(1) Traditional improvements

You can get a credit for 100% of your expenses for central air conditioners, electric heat pumps, and a variety of water heaters (up to $300); natural gas, propane, and oil furnaces and hot water boilers (up to $150); and furnace air circulating fans (up to $50). [Read more…]

New rules if you buy real estate from a foreign owner

Did you know that if you buy real estate in the U.S. from a foreign owner, you may have to withhold a big chunk of the sale price and send it to the IRS?

This is required by a law called FIRPTA (the Foreign Investment in Real Property Tax Act), which is designed to make sure that foreigners who sell U.S. property don’t skip off without paying taxes.

In the past, a buyer generally had to withhold 10% of the sale price and send it to the IRS. Effective February 15, 2016, the withholding rate has gone up to 15%. [Read more…]

‘Underwater’ homeowners may get mortgage principal reduced

Some 33,000 homeowners across the country will be eligible to have the amount of their mortgage principal reduced under a plan recently unveiled by the Federal Housing Finance Agency.

This is a different plan from the government’s better-known HAMP and HARP programs. HAMP (the “Home Affordable Modification Program”) focuses mainly on reducing monthly payments rather than forgiving principal, while HARP (the “Home Affordable Refinance Program”) is designed to help underwater homeowners refinance their loans. [Read more…]

Can landlords refuse to rent to tenants with a criminal record?

Benigno Herrera, a 70-year-old man in Austin, Texas, was turned down when he tried to rent an apartment recently. The reason? He had a drunk driving conviction on his record – from 36 years ago.

Cases like Herrera’s are coming up much more frequently, and raising legal questions about how far landlords can go in using criminal background checks to screen potential tenants.

The issue is reaching a boiling point for two reasons. One is that it has simply become much easier for landlords to perform these checks. In the past, landlords had to hire an investigator or go through local court records, but today, they can often just perform a simple computer search. [Read more…]

Average apartment rent was up 4.6% last year

The average rent in the U.S. was $1,180 a month at the beginning of 2016, up 4.6% from a year earlier, according to a company called Reis, Inc. that tracks such trends.

Rents dipped in 2009, following the recession, but they have been growing steadily ever since.

Demand for apartments is high, since the rate of homeownership in the U.S. is about as low as it’s been at any time in the last 30 years. [Read more…]

Be careful if you buy the furniture along with the house

A surprising number of home buyers make an offer for a house that includes some items of the seller’s personal property – they want to keep certain furniture, pieces of artwork, a pool table, a boat at the dock, etc.

There’s nothing wrong with this, but it does create some complexities that you should be aware of.

For instance, lenders typically won’t include the value of the “extras” in a mortgage loan – it’s simply too much trouble to foreclose on a sofa. So if you’re paying $300,000 for a house, and the price includes furniture that the lender thinks is worth $15,000, you’ll only get a mortgage for $285,000 – you’ll have to pay the rest out-of-pocket. [Read more…]

FHA mortgage loans may be easier to get

A new Federal Housing Administration initiative will make it easier to qualify for a mortgage loan through the FHA. This is good news for borrowers with lower incomes or an imperfect credit history, since FHA loans are often available to people with credit scores as low as 580 and down payments as low as 3.5 percent.

Here’s the background: As part of its crackdown after the housing bust, the federal government adopted rules saying that if Fannie Mae or Freddie Mac bought a loan that went into foreclosure, and it turned out that the lender had made some error in the initial paperwork years ago – even a fairly minor or technical one – Fannie or Freddie could force the lender to take the bad loan back. [Read more…]

New, easier forms help mortgage shoppers

One reason many potential homebuyers have always found mortgages to be intimidating is that lenders send them lengthy, complex “disclosure” forms that are confusing and hard to understand. This can make it more difficult to figure out exactly what you’re getting into, and whether one mortgage product is really better than another.

Starting a few months ago, though, the federal government has been requiring new, simplified forms to make shopping for a mortgage easier. The new forms make it much less complicated to understand your costs and obligations, and to engage in comparison shopping.

In the past, mortgage applicants received two separate forms after applying for a loan – an early Truth in Lending Statement and a Good Faith Estimate. At closing, they got two more forms – a final Truth in Lending Statement and a HUD-1 Settlement Statement. [Read more…]

Sometimes, it makes sense for only one spouse’s name to be on the mortgage

Most married couples who buy a home take out a mortgage together. Frequently, they need both spouses’ income in order to qualify. But in a surprising number of cases, it can make sense for the couple to own the home jointly, but for only one spouse to obtain the mortgage.

Here are some advantages to this arrangement: [Read more…]

New tax break for rich unmarried homeowners

You can deduct your mortgage interest on your income taxes, but there’s a limit – you can only deduct the interest on up to $1 million of mortgage debt used to buy the property, plus $100,000 in home equity loans.

In a recent California case, a wealthy unmarried couple jointly owned a home that had a $2 million mortgage. They got into a dispute with the IRS over whether the $1 million limit applied to them jointly or individually.

The U.S. Tax Court initially sided with the IRS, and said the $1 million limit applied per home. But a federal appeals court in San Francisco overruled that decision. It said the $1 million limit applied per taxpayer, at least where the two taxpayers weren’t married. Therefore, the couple could deduct the interest on the entire $2 million mortgage. [Read more…]

Be careful with ‘expense clauses’ in commercial leases

It’s common in commercial leases for the tenant to pay a portion of the landlord’s property taxes and other expenses incurred in maintaining the property. Typically, the tenant’s portion is calculated as a pro-rata share, based on how much space in the building the tenant occupies.

But be careful: This pro-rata share can be calculated in two ways – as a percentage of the leased space in the building, or as a percentage of the leasable space in the building.

The “leasable space” method is better for the tenant. If a building has 100,000 square feet, and the tenant occupies 5,000 square feet, the tenant will pay 5% of the total expenses, no matter how much of the rest of the building is vacant. [Read more…]

Extended family may help with a mortgage

People who live with members of their extended family – or have boarders living with them – may have an easier time getting a mortgage, under new rules from Fannie Mae.

Previously, if you applied for a mortgage, only your own income could be counted to see if you qualified, even if you had family members or others living with you who contributed to your housing payments on a regular basis.

Now, however, under Fannie Mae’s “HomeReady” program, the income of extended family members who live with you can be considered on your mortgage application – even if the family members don’t sign the loan and aren’t legally responsible for the payments. [Read more…]

More homes are being sold ‘rent-to-own’

A growing number of homes are being sold on a “rent-to-own” basis.

Here’s how it works: The potential buyer agrees to lease the home for a period of time, usually two years. The buyer also puts down a deposit (often called an “option consideration”), which is typically two to three percent of the home’s market value. At the end of the lease term, if the buyer decides to purchase the property, the deposit is credited toward the purchase price. If the buyer changes his or her mind, the seller keeps the deposit.

A typical agreement doesn’t set out the future purchase price in stone, but instead says that the current market value will be adjusted according to some measure that reflects the general trend of real estate prices in the area. [Read more…]

Deducting your home office can affect you when you sell

If you work at home, the home office deduction can be a great way to turn part of your house into a tax break. But you should be aware that it can also trigger a tax bill when you sell the property.

Here’s some background on how the deduction works, and how it affects home sales:

The deduction is available if you have a space in your home that you use regularly and exclusively for work. If you use a room for work only occasionally, or if you use it regularly for work but your children also do homework there in the evening, you probably don’t quality. You also wouldn’t qualify if you use the room to manage your investments but not to operate a business. [Read more…]

If you’re thinking of buying a home in another country…

Some well-off people are thinking of buying a vacation or retirement home abroad, now that the dollar is strong and the real estate market has become depressed in many parts of Europe and elsewhere.

If you’re considering such a move, be aware that the rules of real estate can be very different in other parts of the world. [Read more…]

IRS explains mortgage interest deduction for multiple owners

As a general rule, you can deduct home mortgage interest on your federal income taxes, as long as you itemize deductions. This sounds simple enough, but it can get complicated if a home is owned by more than one person. Recently, the IRS provided an explanation of how this works.

According to the IRS, the key question is how much interest each owner actually paid in a given year – not what percentage of the home each owner owns. That means, for example, that if you own a home jointly with a child – so you each own 50% – but you paid 100% of the mortgage interest, you can deduct 100% of the interest payments on your taxes.

Of course, that also means that your child can’t deduct any of the interest on his or her own taxes. [Read more…]

Co-signing a student loan can hurt your credit score

Many parents who co-sign a private student loan for a child don’t realize that it can affect their own credit score if they later apply for a mortgage.

Having parents co-sign loans has become more popular lately, because it can make it easier to get a loan approved or to get a lower interest rate. Some 94% of private student loans were co-signed in the last academic year, up from only 77% six years ago. [Read more…]

Condos lag in housing upturn

The recovery in the housing market has produced higher prices for single-family homes along with all-time record-high apartment rents. But condominiums have been late to the party.

The median sale price for an existing single-family home in the U.S. is now back up to what it was in 2005-2006, before the housing crisis. But the median sale price for an existing condo is still more than $15,000 below its earlier peak. [Read more…]

Do I really need title insurance?

A home is the largest purchase most families ever make. The vast majority of people wouldn’t hesitate to buy homeowner’s insurance to protect their investment against fire, theft, tornadoes, and so on. Title insurance protects people against losing their home in a different way – through discovering that they don’t actually have all the ownership rights they thought they did.

How could such a thing happen? There are a number of ways.

For instance, it might turn out that the person who sold the property didn’t have the complete ability to sell it, because someone else had a legal interest it. An example would be if the seller were divorced, and hadn’t realized that his or her ex-spouse had to sign off on the sale for it to be valid. Even though you bought the house in good faith (and even if the seller acted in good faith), someone else would still have a legal claim to the property. [Read more…]

People without credit scores could soon qualify for a mortgage

The company behind the FICO credit score – which is used in about 90% of consumer lending decisions – has introduced a pilot program to give “alternative” credit scores to millions of people who don’t currently have one.

This could ultimately allow these people to qualify for mortgages that they can’t get today.

Some 53 million Americans currently don’t have credit scores. Sometimes this is the result of a negative event such as a bankruptcy or foreclosure, but often it’s simply because the person doesn’t have a history of relying on credit. [Read more…]

Be careful when negotiating via text message or e-mail

If you agree to buy or sell a property in a text message, instant message, or tweet, is that a binding contract?

Not in California, which just enacted a law saying these types of “ephemeral” messages can’t amount to a contract for a real estate sale unless the parties sign a written agreement afterward. [Read more…]

How to tell if you’ll owe capital gains tax when you sell your home

Most people who sell their home don’t have to pay capital gains tax, even if the value of the home increased substantially while they owned it. But some people do owe tax, so if you’re thinking of selling, it’s important to know whether you can escape the IRS.

Here are the rules:

As a single person, you can generally exclude up to $250,000 in gain from a home sale. If you’re married and file jointly, you can generally exclude up to $500,000 in gain. [Read more…]

What do women want? In real estate, maybe not what you think

A recent survey by the National Association of Realtors is challenging stereotypical notions of what’s important to men and women when it comes to buying a home.

The survey asked single men, single women and married couples what house features were “very important” in their decisions about what to buy. [Read more…]

Short-term rentals (such as Airbnb) can create tax issues

If you lease your home to someone for a week or two through Airbnb, HomeAway, FlipKey, or some other short-term rental service, do you have to report the income on your taxes?

Maybe! The answer can be complicated.

In general, the key question is whether you lease your home in this way for more than 14 days a year. If you do, then you have to report all of your rental income on your federal income taxes.

That’s true even if you lease the home for less than 14 days at a time – so if you lease it for a week in February, a week in June, and a week in September, you will have to report all the income. [Read more…]

Should divorcing couples sell their house?

Aside from child custody, the most emotionally charged issue in a divorce is usually who gets to keep the house. For most couples, a house is their most valuable asset, and it has an enormous symbolic value as well.

But while couples often fight over who gets the house, keeping the house isn’t always the smartest plan. In some cases, the better route is to jointly sell the property, split the proceeds, and then buy or rent a smaller home. Most people going through a divorce would be wise to at least consider this option.

As an example, let’s say Jason and Elaine are getting divorced and deciding what to do about their house. [Read more…]