Buyers
NEW IMPORTANT DEVELOPMENT:
Special offer to all Home Buyers.
I will now reimburse a Home Buyer for their main home inspection cost when in escrow. See for yourself that this is just another added benefit for a win-win home purchase transaction with Raphael.
‘As much of a home that the money will bring you’ is what my clients all want.
You are now about to embark on one of life´s most exciting and potentially rewarding experiences – buying a home.
Here are some suggestions to help reduce confusion.
1. Make a comprehensive checklist of things you like about the homes as we tour them. Make your list while the memories are still fresh.
2. Starting with the exterior of the home, note the condition of the roof, gutters and downspouts. Also note the state of the exterior finish and foundation. All these are good basic indicators of the level of maintenance the home has experienced. At this stage, you are gaining impressions and forming opinions. Your cursory inspection is not meant to take the place of a professional inspection, only to help you “short-list” the homes you are considering. Don´t necessarily overrule a property that needs some work; if you are up to the challenge and the price is right, it could be a good choice for you.
3. Inside, the general condition of the decorating and furnishings may give you more indication of whether the home has been well cared for or neglected.
4. Kitchens and bathrooms are high on the list of priorities and you are advised to make a careful examination here. Examine the condition of the appliances (assuming they are included in the sale), consider the cabinetry and storage space, check for leaks around the plumbing.
5. Living rooms, dining rooms and bedrooms should be viewed in terms of your family´s lifestyle and furniture requirements. Bring measurements of your primary furniture pieces and a tape measure along for your home viewing tour.
6. With many people now working from home or using computers, is there a quiet space for these activities? What about hobby space? Parking facilities?
7. The condition of the renovations, repairs and the status of the electrical and plumbing systems are all vital parts of the checklist. Observe and make enquiries about insulation (power usage bills can be helpful, if they are available) and note soundproofing quality in the shared walls of duplexes, apartments, and town homes.
8. Ask for a TDS, Property Condition Disclosure Statement and if one is available, review it carefully.
9. Obtain the services of a qualified property inspection service, particularly where the home is of advanced age or in the case where your own observations suggest there may be issues to address. Be careful. In most jurisdictions, home inspection is still an unregulated industry. Ask for references.
Two Most Common Defects in Homes
Poor Drainage
This is the most common problem found by home inspectors. To improve drainage, you may have to install a new system of roof gutters and downspouts or have the lot re-graded to better channel water away from the house.
Faulty Wiring
An insufficient or out-of-date electrical system is a common problem, especially in older homes. This is a potentially hazardous defect and not to be taken lightly. You may have to replace the entire electrical system, or at least part of it, to bring this home up to code or to make it safe.
Costs;
A BUYER can generally be expected to pay:
· ½ of Escrow Fee
· Title insurance premium (Lenders Policy)
· Document preparation fee (if applicable)
· Notary Fees
· Recording charges for all documents in buyers name
· Termite inspections (according to contract)
· Termite work (according to contract)
· Home Warranty (according to contract)
· Homeowners Association Transfer fee (according to contract)
· All new loan charges expect those negotiated for the seller to pay
· Interest on new loan from date of funding to bring loan payment current
· Assumption/Change of record fees for taking over an existing loan
· Beneficiary statement fee for assumption of existing loan
· Inspection fees (home inspection, roof, geological, etc.)
· Fire Insurance premium for first year
Owning a Home
Mortgage interest is tax-deductible
Each mortgage payment goes into building a nest egg for your family
Equity in your home can be used to pay for your kids to go to college
Your payments stay the same with a fixed rate loan
Your children get to play in your yard
You do laundry whenever you feel like it
You enjoy greater privacy
Pride of ownership
Seeking a loan
- Select a direct lender to obtain your prequalification document which must be submitted with any offer on a property.
You will be required to show;
- all your past residences for the past few years.
- All bank statements and financial accounts.
- Any other property that is owned.
Should you need a direct lender to speak with please contact me for I have two excellent choices you can work with and decide on. Never an obligation.
JOINT OWNERSHIP***
Friends and relatives often join forces to bring that perfect home within reach in today´s challenging market. Many mortgage brokers report a growing number of persons asking about joint purchases with friends, family and co-workers as a constructive way to deal with today´s lenders requirements. Buyers seeking to follow this path need to take into account legal issues, as well as financial questions and reach agreement concerning the sharing and allocation of maintenance and other costs at the beginning of the joint ownership arrangement. A written agreement prior to the purchase is highly recommended as it is a common factor to obtaining that home with the extras that are desirable at an increased price or even in purchasing that first home.
A written agreement helps put things into perspective. There is much more at risk when family and friends join financial forces to obtain a home. The legal agreement should address such basic concerns as the upkeep of the property and what happens if certain predictable problems arise (disability, divorce, unemployment, as well as disagreements concerning the length of time to hold the property). As currently stated in the form, California Purchase Agreement, the use of mediation and arbitration may be a means of settling disputes when situations take a turn for the worse. Another issue to consider is what happens when one party wants to sell and the others don´t, and how and when will common areas be used. Why seek mediation or arbitration when a written agreement up-front can easily stipulate what and how issues will be handled.
When couples buy a home while unmarried, a number of issues arise that both parties need to consider. It can be more difficult to dissolve co-ownership of real property than it is to get a divorce! Many issues that are taken for granted by married couples need to be addressed in more detail for domestic partners. A few things to consider include, detailing ownership interests in the home depends on each individual´s contribution to the mortgage payments, maintenance and general upkeep costs. The thought of a relationship coming to an end and the opportunity for one person to buy out the other should also be discussed and addressed in a written co-ownership agreement. Often, a party sets the ‘price´ without knowing whether he or she will be the buyer or the seller at that ‘price.´ Such an arrangement keeps the parties more realistic in their assessment of current market value.
Finally, the manner in which title will be held should be discussed and reviewed by each party´s accountant and attorney. Title can be held in various ways such as tenants in common, joint tenants with rights of survivorship, as general or limited partners, and even through a limited liability company. The mutual agreement of the parties needs to be realistic, detailed and in writing.
Marriage comes with financial benefits — a fact sometimes best recognized by couples who don’t or can’t get married.
Marriage allows couples tax-free transfers of property and gifts, as well as some inheritance rights without a will. Same-sex couples or heterosexual couples who are unwilling to, need to put extra protections into place when buying or sharing property as a safeguard against the unknown that the future may hold.
California is now one of the latest states to propose that same-sex partners receive the same state rights as married couples and are afforded all of the same state rights. Colorado, Vermont, Connecticut, New Jersey, Maine and Hawaii provide all state spousal rights to same-sex couples, such as the right to inherit when a partner dies without a will, according to Human Rights Campaign, a gay rights advocacy group in Washington. What people really need to realize is that “real estate is governed by state law, not federal law,” says Brian Chase, an attorney with the western regional office of Lambda Legal, a gay rights advocacy group. “So what’s best will vary dramatically based on what state you are in.”
But even if you’re permitted to form a domestic partnership or other union recognized by your state, remember that many of these laws are new, nor are they recognized by the federal government, which makes joint ownership and financial planning more complicated. That’s why it’s best to work through these issues with an attorney and a financial professional.
Unmarried couples need to decide how to title their home, or how to structure ownership, because different structures have different consequences.
Many unmarried couples choose the “joint tenants with rights of survivorship” structure, which allows for an automatic and probate-free transfer to a surviving partner. Still, for couples with taxable estates, it can trigger an additional tax bill. Since married couples can transfer assets to each other tax-free, estate taxes aren’t owed until the second spouse dies.
But unmarried people risk being taxed on a property twice: A surviving partner may pay estate taxes on the portion of a property he or she already owned since the Internal Revenue Service may consider the first partner to die the sole owner, and the full value of the property would be taxed again upon the second partner’s death.
Both partners “need to have records to prove their contribution to the purchase and upkeep of the property, or else the IRS will presume the first person [to die] owned everything,” says Rick Kraft, an estate-planning attorney in Boston who focuses on same-sex couples.
Tenancy-in-common — when coupled with a revocable living trust — is a more flexible way to title one’s home, attorneys say. This structure allows partners to own unequal interests in the property, but there’s no automatic transfer after one dies unless it’s designated by the living trust.
A properly funded trust, in which assets are titled to the trust, is a hassle-free way to leave property to a partner because you avoid probate. And, if you’re afraid a family member will contest a will, a revocable trust can be more difficult to challenge, some lawyers say. The trust also can be structured so that after one partner dies, the survivor can live in the home until he or she dies. The first partner’s share can ultimately go to someone else — perhaps a niece or nephew, Mr. Kraft adds.
Feeling generous? Be careful. If you already own property and want to transfer a portion to a partner, it’s considered a gift, explains Kathleen Sherby, a partner with Bryan Cave LLP in St. Louis. And “you’d have to file a gift tax return,” she adds. (Gifts worth less than $12,000 can go unreported; anything above that amount will begin to eat into your $1 million lifetime gift-tax exemption.)
Although many view prenuptial agreements as unromantic, similar agreements are critical for unmarried, property-owning couples. The agreements — often called living-together, property, or domestic-partner agreements — set out in detail how assets should be divided in the event of a break-up or death. In states with laws posing restrictions on same-sex couples, extra care must be taken; these agreements should be clearly structured as an investment or business arrangement.
You will also need to keep track of how much each party contributes to the mortgage. Since unmarried couples can’t file joint federal tax returns, they’ll have to divvy up deductions on mortgage interest and property taxes. A partner who pays 60% of the mortgage is entitled to 60% of the deductions, says Debra Neiman, a financial planner in Arlington, Mass., who co-founded PridePlanners, a national association of planners who service the gay, lesbian and nontraditional community.
LOVE AND MARRIAGE, LOVE AND MARRIAGE, GO TOGETHER LIKE…Well, you know the song. But more than 50% of marriages end in divorce, and the lyrics quickly change from “love and marriage” to “alimony and child support.” Most people know their alimony payments are tax deductible and most also know alimony received is taxable income. But some innocent and seemingly harmless changes in the way alimony is paid can wipe out the deduction and make receipt of it tax free. And in an already emotional environment, more misunderstandings and legal battles are less than welcome.
According to the IRS, alimony can be claimed as a deduction in the year paid if the payment is made in cash. That’s the key point – it has to be paid in cash or by check. If it is used as part of a buyout or trade for personal items, furnishings or home equity, the deduction is disallowed. This can be a major issue, especially where home equity buyouts are concerned.
Picture a divorce situation where, after a legal battle, it is determined one spouse is obligated to pay the other alimony. And because the legal settlement took some time to reach, there is back alimony owed by Spouse A to Spouse B of $20,000. Additionally, Spouse A is leaving the marital home but has the right to half the equity in the home, which comes to $20,000 for their share of the home equity.
So…in the interest of keeping things simple and not having to take out loans or sell the marital home, the parties agree to trade the $20,000 owed to Spouse A in home equity for the $20,000 owed to Spouse B for back alimony. While this may appear to be a fair and reasonable way to settle the issue, it does not meet the IRS requirement for alimony to be paid in cash in order for it to be tax deductible. This issue is surprisingly common, and just recently the IRS Tax Court disallowed an ex-husband’s deduction for alimony (2006-122 Rocke Richard LaBozetta, Petitioner v. Commissioner of Internal Revenue, Respondent) because it was a trade of equity for back alimony and not paid in cash. Had the ex-husband known this prior to the settlement, he may have structured the settlement agreement differently to take advantage of the tax deduction.
Again, this could be a very common mistake for many individuals and could be a very costly mistake when counting on an extra tax deduction. It is important to take the time to meet with divorce and tax professionals that can help you make the correct financial decisions. If you need or know of someone who needs a referral for a tax or divorce professional, please contact me and I will be happy to recommend either to you.
* Further information may be obtained by contacting Nancy White, Partner with Steptoe & Johnson for a no cost consultation. This initial chat is free for all clients of Raphael as a courtesy.
