Seller's Resources
Here you'll find helpful information and tips for selling property in Westchester...specific, local, useful information. Remember... It is a great time to sell! Buyers can now afford buying because interest rates are low and the home buyers' tax credit is back. Contact us today to take full advantage of these benefits and our extensive experience and knowledge.
Owners' & Buyers' Tax Credit Curb Appeal Draws Buyers Considering Offers
Finding the Right Agent Getting Highest Price in Shortest Time Insist on a Home Inspection
Know Why You are Selling Landscaping Affects Property Value Making a Good First Impression
Making Moving Easier Packing List Plan of Action
Preparing Property For Sale Pricing Right Is Key To Selling Your Home Reduce Taxes Through Ownership
Setting the Price Technology Changes Housing Process What is Your Home's Value
Tax Exemptions Lead Poisoning Radon
Underground Oil Tanks Commons Ways of Holding Title Difference Between Condos & Co-Ops
Living Trusts Types of Real Estate Liens Understanding Short Sales & Foreclosures
We Have News To Tell…. the Home Buyer Tax Credit Has Been
Extended and Expanded…
From now until April 30, 2010, first-time home buyers and move-up buyers have another great reason to get on the path to purchasing a new home! The benefit to first-time homebuyers is a tax credit up to $8,000 and for move-up buyers a tax credit up to $6,500. The tax credit does not have to be repaid provided you live in the new home for a minimum of three years. Military families are exempt from this stipulation.
At a Glance:
FIRST TIME BUYERS
Credit: Equal to 10 percent of the home's purchase price, up to $8,000
Who Qualifies?
- Those who haven't owned property in the last three years
- Those with income up to $225,000 for couples or $125,000 for individuals (credit phases out for people who make more than these amounts)
- Must be at least 18 years of age to claim credit
- Purchase price must be $800,000 or less
Deadlines:
- Have until April 30, 2010, to enter into a contract for a home purchase
- Have until June 30, 2010, to close on the purchase
CURRENT HOMEOWNERS
Credit: Equal to 10 percent of the home's purchase price, up to $6,500
Who Qualifies?
- Those who have owned and lived in their principal residence for at least five consecutive years during the past eight years
- Those with income up to $225,000 for couples or $125,000 for individuals (credit phases out for people who make more than these amounts)
- Must be at least 18 years of age to claim credit
- Purchase price must be $800,000 or less
Deadlines:
- Have until April 30, 2010, to enter into contract for a home purchase
- Have until June 30, 2010, to close on the purchase
In addition, buyers have another year to take advantage of the higher loan limit for mortgages backed by the Federal Housing Administration, Fannie Mae or Freddie Mac set at 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost housing markets. The limit in normal markets will remain $271,050 for FHA and $417,000 for Fannie Mae and Freddie Mac.
Please consult with a tax professional for individual eligibility and implications of the Homebuyer Tax Credit. Purchaser must attach documentation of purchase to tax return.
Making a good first impression is as important when selling your home as when meeting a business associate. We call it "curb appeal." And it's what draws a potential buyer out of their car and into your home.
Begin by taking an objective look at your home. When you drive up, what's the first thing you see? Is it an inviting setting that encourages buyers to stop and take notice? Or is the first thing you see your brother-in-law's old boat, children's toys strewn around the yard, or overgrown landscaping? Here are some tips for ensuring your home makes a good first impression:
Nice landscaping: Prune overgrown trees and bushes. Pull weeds and dead or diseased plants. Fertilize and mow your lawn to make it look green and healthy. Consider planting flowers along walkways or in pots along the sidewalk to bring eye-catching color to your landscaping. Spread mulch or beauty bark around trees, shrubs and flowers to give your front yard a clean, well-kept look.
Attractive front entry: Polish your front door handle and other hardware. Paint or stain your front door if needed. Consider hanging a pretty wreath or floral swag. Set out pots of flowers near the front door and/or where potential buyers are likely to notice them. If you have a front porch, set the mood by featuring a charming bench or chairs with a table and flowers. Keep all sidewalks, porches and walkways swept. Buy a new front door mat in neutral tones. Clean and polish light fixtures.
Less is more: Just as you would inside the house, make sure your front yard does not look cluttered. Move cars into the garage and out of the driveway whenever possible. Keep the kids' bikes, toys and other play equipment out of sight. To minimize distractions, keep lawn and garden ornaments to a minimum. In other words, create an environment that invites buyers into your home and allows them to picture themselves enjoying your front yard.
See Also Preparing Your Property For Sale
When reading an offer, keep in mind that you are out to get the best price AND the best terms for you. If you focus solely on the price, you may overlook terms that could be favorable to you as a buyer.
Some terms that may work in your favor:
- higher-than-market-interest in a second mortgage for your home
- the buyer will pay for most or all of the closing costs
- the buyer will take care of any repairs
- quick close - the buyer is pre-approved and ready to close in a time that best suits you
- all-cash deal
When reading through offers, remember to look at the whole package. Take the time that you need to assess what is being offered and if it meets your needs.
Not all agents work the same way. The most important attribute of an agent is that he/she is well connected to the real estate industry. He/she should know the market and provide information on past sales, current listings, his or her marketing plan, and at least 4 solid references. In addition, you also want to look for an agent that is honest, assertive, and one that best understands your needs.
Use a CENTURY 21 Royal agent. They can better serve your needs; they are familiar with what the local market condition is, the local prices are, and what's hot or not in your community.
Getting the Highest Price in the Shortest Time
In order to get the highest price in the shortest time, you need to know how to market your home. The better you market your home, the more offers you will get. And the more offers you get, the more choices you have to get the price and terms you want.
The most important factor of marketing your home is pricing it right. Your price should be adjusted to reflect the market, and the property's worth. The key is to get many people checking out your property at a fair price instead of having no buyers because your price is set too high.
Another important factor is the condition of your home. Make sure that your home looks ready to be sold. Fix any defects (peeling or faded paint, cracks, stains, etc.) Condition alone can sometimes prompt fast buying decisions. Not only should you fix any defects, but consider upgrading your home by making major repairs and cosmetic improvements before selling. A nice looking home triggers the emotional response that can lead to a financial response.
Learn how to negotiate the best terms for all parties involved. Terms are another factor which may be adjusted to attract buyers. If you insist on getting your asking price, think of what you can offer to the buyers, for example, improvements you've made, or even offering seller financing at a lower than market interest rate on a portion of the sale price. Convince them why they should be paying the price you have set.
Lastly, get the buzz out about your home. List your house with a CENTURY 21 Royal agent that ensures your house is listed on the MLS and on the Internet. On your own, get the word out. It should be visible to passerby’s that your house if for sale, whether it be signs, local advertisements or you telling friends, family, and acquaintances.
A home inspection usually covers the following:
- Plumbing conditions - if there is leakage or clogging
- Roofing conditions - the extent of deterioration, if there is leakage
- Electrical conditions - if there are inadequate circuits or potential fire hazards
-
Structural problems - if there are problems with the underlying foundation of your home
- See also other aritcles on our site regarding Home Inspection.
As a seller, the home inspection reports protect you because it establishes the actual condition of the property at the time of sale.
If you know exactly why you are selling, then it is easier for you to set the right plan of action to get what it is that you want.
If you are a seller who needs to close a sale as quickly as possible, then you should know that getting the highest price possible is not one of your priorities. It does not mean that you won't or cannot get the highest price, but it means that the price is not the deciding factor. A buyer who can give you a quick closing time will appeal much more to you than a buyer who can offer you more money but the negotiation and closing time drag on.
It's always good to know how low you will go, in terms of selling price. This will help to eliminate some of the offers that you find simply offensive or ridiculous. Even though you should consider all offers seriously and take into consideration the terms of each offer, sometimes, if you know the bottom line and are strict about it, you can save yourself time.
Once you know what your limits and reasons are, discuss them with your agent so that they can help you set your goals realistically. If you decide to list your home on your own, make sure you do research on the current market, and you get the proper advice you need in terms of legal issues, etc. The key is to be realistic and to know what your goals are so that they can be met.
Landscaping Affects Property Value
Those trees in your yard provide more than just shade. According to a recent study by the U.S. Forest Service, trees can increase a home's value by three to seven percent. Meanwhile, poor landscape design can actually decrease property values by up to 10-percent according to a 2004 study published in the Journal of Environmental Horticulture.[Sources: Miami Herald, Realtor Magazine Online and Money.]
Landscaping can be a smart investment; a buyer's first impressions can often make or break a sale, and the exterior of your home is the first thing everyone sees. For a small investment of time and money, you can use landscaping to make your house stand out and be noticed. The following are aspects of landscaping you should consider before putting your house on the market:
LAWN: Your lawn should be well maintained. Mow often and set your mower higher: grass that is clipped too short will be more prone to drying out and weeds. Take the extra time and edge sidewalks and paths.
REMOVING PLANTS: Obviously, weeds should be removed. Overgrown plants and bushes should be pruned, and if they look too bedraggled, removed. If you have the time, some shrubs (like forsythia) can be brought back to life by cutting them back to a foot or so off the ground. They will grow back lusher and more full, but this will take time. Overgrown perennials can be dug up, divided, and used to plant new areas. If you have extra plants in areas that aren't easily seen, move them to more obvious locations.
CHOOSING PLANTS: Landscaping plants, bushes, and trees all take time to establish themselves and grow. Of course, you can buy full-sized bushes and fifteen foot trees, but these can cost a significant amount of money, as well as needing specialized equipment to plant them. If your current landscaping is spartan or nonexistent, a wise choice is often to purchase one largish bush or small tree as a focal point, and surround it with smaller, cheaper plants. Annual plants (plants that die off each year) can provide a show of color and take less time to fill out than perennials. Annuals can also be significantly less expensive, especially if you grow them from seed. If you have a couple of months before you plan on listing your home, flower seeds like zinnias or alyssum grow quickly and provide a good show of color. Ornamental grasses can provide interest and height, and may grow faster than flowering plants or shrubs.
PLANT LOCATION: Choose a highly visible area for your planting; near the front of the house or next to a front path or stair is usually a good choice. Landscaping should match the style of the house: a small cottage will look good with a little plot of mixed wildflowers in front of the front porch, while a neo-classical or modern house may look better with a single sculpted evergreen and several smaller plants. Most smaller plants look best in odd-numbered groups: group 3 or 5 plants together instead of having one of everything. Plant smaller plants in front and larger plants in back. If your planting is not next to a house or wall, surround a taller plant with gradually shorter plants.
MULCH: Mulch can make all the difference when it comes to getting that manicured, landscaped look. Not only will a good layer of mulch keep the weeds down and retain moisture for the plants, but it can make the garden areas around your house look well cared for. If your planting areas border your lawn, use flexible edging to keep the mulch neatly in place.
HARDSCAPE: Hardscape refers to the non-living elements of your landscaping. If your property is overflowing with rocks, consider edging areas with stone, or if you have larger rocks, arrange them in a pleasing configuration and surround them with mulch. Add a ceramic bird or two for a dash of color and interest. If you live in a dry, arid climate, use Zen gardens for inspiration; arrangements of gravel, sand, and stone can be just as beautiful as plant life. Benches and bird feeders can beautify side and back lawns, especially when they are placed against a backdrop of taller plants. (A note on garden gnomes, ceramic ducks, plastic flamingos, and the like: while you may love and treasure these things, you should be aware that potential buyers may not be of a similar mindset. It is best to remove any inanimate objects that possess a face from your yard before showing your house.)
The trick to landscaping a house to sell is to get the most selling advantage for the least amount of money. Focus on the main areas: near the front entrance, along a path, and the front of the house. Choose one or two larger plants or shrubs, and surround them with smaller, cheaper plants. If you choose flowering plants, make a note of when they flower and how they look after flowering. A mass planting of tulips will look gorgeous while they are in bloom, and terrible later in the summer.
If you are completely lost as to which plants to pick or where to plant them, consult a gardener friend or ask advice from your local nursery. (Gardner friends are also sometimes a useful source of extra plants.) When in doubt, you should be pretty safe planting three different heights of plants next to a foundation wall, as long as you make sure they get the required amount of sunlight.
Making a Good First Impression
If you want buyers to be interested in your home, you need to show it in its best light. A good first impression can influence a buyer into making an offer; it influences a buyer emotionally and visually. In addition, what the buyer first sees is what they think of when they consider the asking price.
A bad first impression can dissuade a potential buyer. Don't show your property until it's all fixed up. You do not want to give buyers the chance to use the negative first impression they have as means of negotiation.
Ask around for the opinions others have of your home. Real estate agents who see houses everyday can give solid advice on what needs to be done. Consider what architects or landscape designers have to say. What you need are objective opinions, and it's sometimes hard to separate the personal and emotional ties you have for the home from the property itself.
Typically, there are some general fix ups that need to be done both outside and on the inside. As a seller, you should consider the following articles in our section of Seller's Tips: Preparing Your Property For Sale, Curb Appeal Draws Buyers, and Landscaping Affects Property Value.
Making Moving Easier
Whether you're planning a move across town or across the country, making the move hassle-free is what it is all about. Besides the traditional garage sale and packing of boxes, there are a few details you won't want to forget before you begin loading the truck:
Plan Ahead
Experts recommend scheduling moves at least one month in advance, especially during the peak-moving season between May and September. Some estimates indicate 80 percent of all moving and storage business is done when schools are out. That's when employees are most likely to be transferred.
Ask Questions
Take the time to get as much information as possible from moving companies before selecting one. Check on truck size and availability. Ask about moving supplies, such as boxes, dollies and furniture pads. Find out about protection plans for your possessions. Ask about lost or damaged property claim procedures. Determine price differences in packing the truck yourself or having it professionally packed. Get estimates.
Save Your Receipts
Many of your moving expenses are tax deductible, so hang onto your receipts. Consult with your tax advisor to find out what is deductible, or call the Internal Revenue Service and request Publication 521: "Tax Information On Moving Expenses" to find out which moving expenses are deductible.
Collect Documents
If you're moving out of the area, you'll need to gather your family's personal records. Remember to get your medical and dental records, school transcripts, legal documents, titles, bank records, tax returns, stocks and bonds certificates, birth certificates, passports and insurance documents. Be sure to empty your safe deposit box.
Also see our Packing List.
A few general things you need to know about packing:- Keep boxes to 50 lbs or less. Put heavy items in small boxes and light items in big boxes.
- Pack non-breakables tightly in smaller boxes, so they're not too heavy.
- Buy clean newsprint to wrap items, and bubble wrap for padding.
- Pack breakables loosely in plastic storage bins with lots of bubble wrap.
- Rent furniture pads.
- Mark your boxes by room, so you know exactly where everything goes. Color coding or using a number system works great (i.e., red stickers for bedroom or 1 for bathroom.)
- Write "FRAGILE" on all boxes with breakables and stack these boxes on top.
Packing the big things
- Beds: Tie bed frames together with tape or rope. Then label the pieces so they're easy to reassemble.
- Bureaus: Fill drawers with clothes or fragile, well-wrapped items. Cover with a blanket or furniture pads and rope securely.
- Tables: Remove legs, pad and tie together. Put nuts and bolts in a bag and tape under tabletop.
- Big appliances: Empty, defrost and drain the fridge, freezer and dishwasher. Clean the interiors and put accessories in bags. Stuff towels between washer sides to prevent rotating and tape down moveable parts. Cover with blankets and tie.
- Computers, TVs, & Electronics: Use original packaging, or buy electronic-specific boxes.
Packing the small (but still important) things
- Small appliances: Put your microwave, VCR, etc. into boxes, and cushion with wadded paper.
- Books: Pack them flat in small cartons, alternating bindings. Try to keep each box under 30 lbs.
- Clothing: Pack hanging items, including drapes, in wardrobe boxes. Leave small items in drawers.
- Collectibles: Wrap fragile items in bubble wrap and tape securely.
- CDs: Pack upright and cushion with newspaper.
- Kitchenware: Stack pots & pans, and cushion with paper. Put a few of these items in the "open first" box.
- Dishes: Never stack them flat. Wrap each piece in bubble wrap. Pack plates & saucers on edge, with cups & bowls placed around them.
Packing the awkward things
- Chairs: Wrap arms & legs with bubble wrap. Leave slipcovers on or buy chair bags for protection.
- Bicycles: Loosen the handlebars and turn them sideways. Cover chains and pedals to keep grease off other items.
- Mirrors, artwork & frames: Wrap small pieces in newsprint and pack in mirror boxes. Cover larger pieces with cardboard, tape securely and stand them along the truck's sides or inside wardrobe boxes.
- Lawn furniture: If heavy or bulky, disassemble. Put nuts and bolts in a bag and tie together.
- Rugs: Roll up and secure with rope or tape.
- Plants: Put in plastic bags with air holes, then in boxes. Water before you leave.
- Power and garden tools: Wrap all sharp edges and use plenty of cushioning to prevent injury. Tape long-handled tools together and place small ones in boxes.
- Lawn mowers/yard edgers: Empty gasoline from all tanks, and check for oil leaks.
- Garage & attic stuff: Use medium-sized boxes for spray paints, brushes, car waxes, etc. Throw away oily rags or anything combustible.
- Pets: Always keep them in a pet carrier up front with you. Ask your vet how to make their, and your, move less traumatic.
See Also Making Moving Easier
Preparing Your Property For Sale
Your Home’s Exterior
Your home's exterior is the first thing a potential buyer sees when visiting your home. The following tips will help you increase your home's curbside appeal and create a strong first impression to potential home buyers.
Fence
Replace missing slats, stakes and posts.
Repair broken hinges and paint or stain the fence if necessary.
Yard
Mow, trim and fertilize the lawn.
Weed flower beds and replace dead plants and trees.
Driveway, Garage, Carport
Clean up grease or oil spots on concrete surfaces.
Make sure the garage door opens freely and the automatic door opener is working.
Provide an unobstructed view of your home from the street by not parking cars, boats or other vehicles in the driveway.
Front Entry
Polish door handles and door knockers.
Replace worn or broken items, such as an unsightly mailbox or rusty doorbell.
Be sure porch lights are working and add welcoming features such as a new door mat and flowering plants.
Siding and Trim
Consider painting the highlight features of your home, such as trim work, shutters, gutters, downspouts and railings.
If necessary, add a fresh coat of exterior paint to the exterior siding.
Roof
Remove debris such as tree branches and leaves.
Make any necessary repairs to worn shingles or cracked surfaces.
Patio, Deck
Flowering plants and outdoor furniture add appeal.
Remove any unnecessary items such as gardening equipment.
Tidy any visible items, such as an outdoor grill or barbecue.
Your Homes Interior
Experience shows that creating a housewarming feeling inside your home increases its desirability. View your home with a critical eye. Clean, complete minor repairs, and add finishing touches.
Doors and Windows
Consider adding a fresh coat of paint to your front door.
Polish brass fixtures and be sure door locks work properly.
Oil hinges to both doors and windows.
Keep stairways tidy and secure handrails.
Repair or replace bent or damaged screens and window glass.
Cut back outdoor plants that restrict natural light.
Keep windows clean and tidy with draperies firmly affixed and in proper working order.
Floors and Carpets
Repair or replace missing or damaged tile, hardwood, vinyl and baseboards.
Steam-clean or shampoo carpets.
Secure loose carpeting and replace damaged areas.
Be conscious of odors caused by dampness, high-traffic areas or pets.
Closets and Storage Areas
Ample storage space increases the desirability of the home.
Keep closets tidy.
Discard any unnecessary items and consider storing those you do not use frequently.
Bedrooms and Living Areas
Keep living areas clean and inviting.
Arrange furniture to allow a spacious atmosphere.
Make beds, arrange couch cushions, dust shelves, vacuum carpets and touch-up walls with paint or spackling as necessary.
Wallpaper should be clean and adhere smoothly to the walls.
Finishing touches such as flowers or candles add to the home's housewarming appeal.
Kitchens and Bathrooms
Clear counters, drawers and cabinets of unnecessary items.
Clean soap dishes, mirrors, faucets and appliances (inside and out).
Store cleaning supplies and hang freshly washed towels.
Be conscious of odors caused by dampness, hampers, garbage and various foods.
Counters and Cabinets
Store infrequently used counter-top items to allow a spacious look in the kitchen and bathroom.
Keep drawers and cabinets tidy and organized.
Garage or Workshop
Items should be neatly stored in shelving or wall units.
Allow appropriate space for the homebuyer to visualize their vehicle or workbench.
Consider moving excess or over-sized items to mini-storage.
Mechanical and Electrical Fixtures
Increase your home's chance of being sold by ensuring that the mechanical and electrical components are in working order.
Lighting
Be sure light switches, lamps and fixtures (inside and outside the home) are working properly and all light bulbs have appropriate wattage.
Remember, bright light can make a small space appear larger.
Softer light can provide a warm, cozy atmosphere to empty spaces.
Plumbing
Re-enamel, patch or replace badly chipped or stained fixtures.
Repair noisy toilets and faucets that leak or spray water.
Ensure that sprinkler systems and outdoor faucets are working properly.
Heating and Cooling Equipment
Ensure that heaters and air conditioners are working properly.
Clean floor and wall ducts.
Additional Fixtures
Check batteries in smoke detectors.
Be sure security systems are working properly
Tips for Showing Your Home
Once you've prepared your home for sale, keep a checklist of items to help you showcase your property to potential homebuyers. Remember that your home will be judged not only on its outward appearance, but also on the feelings it evokes in those who view the property.
Sight
Use light to showcase your home.
Open draperies in the daytime and turn on lights (day and night) to accentuate a cheerful atmosphere.
If you have a fireplace, burn a Duraflame log.
Remove any potentially offensive posters or signs.
Sound
Consider playing soft background music while people tour your home.
If there is exterior noise, such as traffic or nearby construction, work with your sales associate to schedule showings around noisy times of day.
Smell
Grinding fresh lemon in a garbage disposal or boiling cinnamon sticks can add a clean, fresh scent.
Candles, potpourri and flowers look nice and smell pleasant.
Lingering scents of strong-smelling foods, smoke or pets should be aired out prior to showing the home.
Touch
Your home should appear livable.
Potential homebuyers may like to sit in a living area and visit with their sales associate.
Taste
Baking cookies or bread before showing the home adds a pleasant scent to the home.
Adding to the hospitable atmosphere, potential homebuyers may also appreciate a cookie or lemonade.
Common Sense
To ensure your safety, remember to remove keys, jewelry and other valuables from the home during showings.
Be sure to share necessary information with your sales associate and potential homebuyers.
Gather manuals and warranties on appliances in the home.
Make a list of items to be excluded from the sale of the home and whenever possible, remove them from the property.
(For example, an outdoor hot tub may look as though it is part of the home, but you plan to take it with you when you move.)
See Also Making A Good First Impression
Pricing Right Is Key To Selling Your Home
When you decide to sell your home, you want the highest possible return from its sale. Determining price is the most critical step in preparing your home for sale.
Obviously, pricing your property too low won't provide the best return. You are apt to be deluged with lookers and may get many offers, but you could lose thousands of dollars on your family's largest investment.
Likewise, pricing a property too high is risky. Homes priced too high miss their target market. Qualified buyers who might find the home just right for their needs won't see your home, or make an offer on it, because it is out of their price range. If they are shown an overpriced home during its early marketing stages and do not buy because it isn't a good value, they are unlikely to revisit your home once the price is lowered. Real estate agents will hesitate to show an overpriced home, unless it will make a competing property look like a better value.
Many home sellers make a mistake by implementing the 'let's try it and see' pricing attitude. But testing the market can be dangerous. A property receives its best exposure during the first three to five weeks on the market.
If your home is priced right from the outset, you maximize your opportunity of reaching the most qualified buyers. Buyers who have seen most available homes in their price range are waiting for the right house to come on the market. This is why a well priced home often sells quickly once it is put on the market.
Multiple listing association statistics show that the longer a home is on the market, the lower the selling price. The home becomes stale and a price reduction results.
Pricing a home is part art and part science. It's based on hard evidence by looking at sale prices for comparable properties. But, no two homes are identical. That means the evidence must be evaluated by an experienced CENTURY 21 Royal agent.
The right price really is the right price range to attract the maximum number of qualified buyers within a time frame that suits the sellers' needs. Pricing strategy depends on the market conditions at the time your home is put up for sale. It can best be determined by a CENTURY 21 Royal agent who is active in the market, who constantly views homes and is monitoring the changing market conditions.
Reduce Your Tax Burden Through Home Ownership
Here's a nice surprise...good news involving the word "taxes."
Recent changes in the tax laws have made real estate a more attractive investment than ever before. As a homeowner you are eligible to take advantage of these tax changes and deductions to keep more money in your pocket this year.
Profits from the sale of your home
Congress did homeowners a huge favor by passing the Taxpayer Relief Act of 1997. Today, you can exclude up to $250,000 in profits (or $500,000 if you are married and filing a joint return) from the sale of your primary residence from your taxable income. Previously, this type of deduction only applied to those who were age 55 or older.
Let's say a married couple purchased a home for $300,000 five years ago and sold it for $450,000 in 1998. They get to keep the $150,000 profit tax-free, provided they have lived in the home for at least two years. The IRS allows people of any age to claim the exemption each time they sell their home, but no more frequently than once every two years.
Homeowners looking to downsize will benefit the most from the tax change. You no longer have to reinvest the profits in a home that is similar in price to avoid paying capital gains tax, and you free up cash for additional investments like rental property, mutual funds, education and more.
Mortgage interest, real estate taxes and points
In most cases, the interest you pay on your primary mortgage and your real estate taxes are fully deductible on your tax return. Your lender will send you Form 1098, outlining the amount you paid in interest and real estate taxes over the course of the year.
Mortgage points are also deductible. If you bought a home last year, you can deduct the full amount of the points you paid as home mortgage interest. Meanwhile, if you sold a home in 1998 and paid points, you cannot deduct them as interest but you can claim them as a selling expense if your profit is subject to a taxable gain.
One last point about points. If you were one of the many homeowners who took advantage of low interest rates and refinanced your mortgage last year, the points you paid on the refinanced mortgage are not fully deductible on your 1998 return. You can, however, deduct refinancing points as mortgage interest over the life of the loan. And, if you are refinancing for the second or third time, don't forget to deduct the remaining balance of your previous refinance (those points not yet deducted). This extra deduction can be claimed in the same year your do your new refinance.
Home office deduction
Writing off your home office is a little tricky. To qualify for the home office deduction your office must be your principal place of business -- the place where you meet with clients, customers or patients -- and must be used exclusively for your business. Rooms that double as an office by day and family room by night do not apply. If you meet all of these criteria, you may be able to deduct a percentage of your real estate taxes, mortgage interest, utilities, depreciation and repairs.
Beginning in 1999, your home office may qualify under a new liberal definition of "principal place of business" if you use it for management and administrative tasks related to your business but meet with clients elsewhere. Under this new law, the home office deduction may be available to more homeowners.
Rental property
Be sure to report any income you receive from rental property on your return and deduct your expenses as well. Allowable expenses include depreciation, repairs and operating expenses such as advertising, taxes, utilities and interest.
Since these rules are generalizations, it is best to consult with your tax advisor to find out how these deductions apply to you and your tax strategy. Meanwhile, please call me for more information about how a real estate investment can pay off and other benefits of homeownership.
See also Existing Homebuyers and New Homebuyers Tax Credit Facts
Several factors will contribute to your final decision. First, you should compare your house to others that are in the market. If you use a CENTURY 21 Royal agent, he/she will provide you with a Comparative Market Analysis (CMA). We offer these two features on our site for a hassle free CMA: Instantly View Recent Home Sales In Westchester & Request Customized, Specific CMA For Your Property. The CMA will reflect the following, among many other factors:
- properties in your price range and area sold within the last half-year
- asking and selling prices of properties
- current inventory of property on the market
- features of each property on the market
From the CMA, you will find out the difference between the asking price and selling price for all homes sold, the condition of the market, and other houses comparable to yours.
Also, try to find out what types of property are selling and see if it applies to your area. Buyers follow trends, and these trends can help you set your price.
Always be realistic. And understand and set your price to reflect the current market situation.
Technology Creates Changes in The Buying and Selling Process
We hear a lot today about how technology is changing our lives. Many of the changes are so subtle we might miss them if we don't look closely. The Internet receives a lot of attention because of its impact on the real estate research process, but technology has also created other efficiencies in the real estate market that haven't yet grabbed headlines.
Faster loan approval
Years ago, it took an average of 30 to 45 days for a lender to grant approval on a home loan. Today, we can get approval in as little as 24 hours. Thanks to online databases created by national mortgage companies Fannie Mae and Freddie Mac, your financial information is now evaluated electronically by banks and lenders. Today, a loan can be approved in a matter of hours rather than weeks.
Greater efficiency
CENTURY 21 Royal has made a substantial investment in an Intranet site, which has increased the efficiency of our internal operations. By logging onto our internal system, we can access the most current information on new listings for buyers, or if you're selling your home, we can ensure your listing is shared among other sales associates and with the public quickly. CENTURY 21 Royal Intranet also allows us to access various forms, software and information to enhance our ability to serve you better. Contact us for details
Century21Royal.com
Century 21 Royal is exposed and exposes its listings on 195 major search engines / sites. In addition to listings we offer profiles of sales associates, information on buying and selling, relocation services, luxury property, and a wide variety of other useful information. And, we have e-mail links to our office, sales associates and key company personnel. Contact us for details
Experts predict that many more changes will come as we apply emerging technologies to the real estate business. Will technology ever replace real estate agents? Not likely. Buying and selling real estate is still, and always will be, a personal service. Real estate professionals like Century 21 Royal Agents are the best resource for guiding you through these complicated transactions. We are experts at matching buyers and sellers, negotiating prices and helping you find your perfect home. We have a top-notch internal education program, professional networks and personal experience that cannot be captured in a database. Technology has provided useful tools to help me make the most efficient use of our time, but the relationship we have with clients will always be the most important element in a successful transaction.
Have you ever wondered why the market value of your home differs from what your bank appraises it as? And what value is being used to set and/or increase your property tax bill? It's easy to be confused about the different valuations being used in the home buying and selling process, but knowing a home's value or worth in the real estate market will help you get a fair price.
There are generally three ways to determine the value of a home: through a Comparative Market Analysis (CMA), a professional appraisal or an assessed valuation. A CMA, performed by an experienced CENTURY 21 Royal agent, can determine a reasonable listing price for your home. When we prepare a CMA, we consider a number of factors including the home's size, age, location and amenities. We also research the list prices of properties that are currently for sale, have recently sold or expired in your neighborhood. We offer these two features on our site for a hassle free CMA: Instantly View Recent Home Sales In Westchester & Request Customized, Specific CMA For Your Property.
An appraiser (used by a lender) determines the market value of your home by looking at the supply and demand of like properties in the area, comparing your property with others that have recently sold, determining the amount of money it would take to replace your home at current material and labor costs and/or determining how much income a property would produce (this last approach is used more often for rental property, apartments and commercial property). Lenders frequently require a professional appraisal upon which to base your loan amount.
Local governments also perform independent appraisals to determine your home's assessed value, available on public record, so that your property is taxed fairly.
When comparing the CMA and the appraised values, don't be surprised if they do not match. There are a number of reasons that these differences occur.
The "market value" determined by the appraisal can be different from the "market price" determined through our CMA. In essence, the appraisal amount reflects the cost of replacing your home. But the goal of the CMA is to determine a price that someone will pay for your home. The sale price can be much different from the appraisal value, especially if there are multiple offers on the home.
Also, the real estate market is constantly changing. A home that was worth $100,000 last year may be worth $120,000 this year and possibly more next year. Meanwhile, all city and county property assessments are assigned an effective date, valid for that particular point in time. The more time that has passed since the appraisal, the greater the possibility for disparity in the values. For example, some governments appraise properties annually; others appraise properties once every four years.
We can help you determine the value of your home by researching its appraisal history and performing a Competitive Market Analysis. We can also recommend professional appraisers. Please call us to discuss the current real estate conditions that affect the market price of your home or visit our Instantly View Recent Home Sales In Westchester & Request Customized, Specific CMA For Your Property.
New York State and Westchester County offer a number of tax reduction programs to qualified individual owners of single family, multi-family houses, condominiums, and cooperative apartments. Many homeowners are entitled to reductions in their property taxes, but do not receive them because they have never applied.
This is a list of New York State and/or Westchester County property tax exemption benefits:
- STAR (School Tax Relief)
- Senior Citizen
- Veterans
- Homestead Option
- Disabilities & Limited Incomes
- Agriculture, Farms, Land, Buildings & Forests
It is important to file applications before the deadline to take advantage of all the benefits offered.
See Also Homebuyer's and Homeowner's Tax Credit Facts
Lead poisoning is a serious problem which can lead to adverse health problems. In children, high levels of lead can cause damage to the brain and nervous system, behavioral and learning problems, slow growth, and hearing problems. In adults, lead poisoning can cause reproductive problems, high blood pressure, digestive problems, nerve disorder, memory and concentration problems, and muscle and joint pain.
Lead poisoning is especially a problem in cities with older buildings. Typically, lead is present in the paint from older buildings, in the water supply, and in the environment from cars and buses. Preventing lead poisoning in large cities, where there is so much possibility for exposure is both difficult and expensive. Federal programs have attempted to address this problem.
For buyers and sellers, lead poisoning is also an issue. Houses that were built before 1978 probably have paint that contains lead. Federal law requires that sellers disclose known information on lead-base paint hazards before selling a house. Sales contracts must include a federal form about lead-based paint in the building. Buyers will have up to 10 days to check for lead hazards and are likely to stipulate corrections.
Print or view free Protect Your Family From Lead in Your Home Pamphlet
Radon
Radon is a colorless and odorless radioactive gas that has been estimated to cause 5,000 to 20,000 lung cancer deaths yearly. It is second only to smoking as a cause of lung cancer. It has been estimated that nearly 1 out of every 15 homes in the US has elevated radon levels.
Radon is produced when small amounts of uranium and radium in soil and rocks decay. Radon gas will also decay into smaller and radioactive particles that can be inhaled into the lungs where it can damage cells and cause lung cancer.
Radon is mainly released from soil, water and natural gas which have already been exposed to radon, from solar-heating systems that use radon-emitting rocks, and from uranium or phosphate mine tailings. Radon is naturally released in low concentrations, but inside your house, radon gas can become more concentrated. Lack of ventilation exhaust fans that bring in air from outside can increase the amount of radon in your home.
The United States Environmental Protection Agency (EPA) suggests that homes be tested for radon, which should have a radon level of 4 picocuries per liter or less. For people selling their homes, the EPA recommends that the house be tested for radon, and radon levels be reduced, if necessary. Radon levels can be reduced by increasing the airflow into the house, keeping the vents open year round, and discouraging smoking in the house. For people buying homes, the EPA recommends obtaining radon test results in addition to information about radon reduction systems.
If you are planning to have your home tested for radon, the EPA recommends that the test be conducted in the lowest level of the home that is suitable for occupancy, and you should make sure that the test is done correctly by following the EPA Test Checklist.
There are two different types of testing devices available: passive devices and active devices. Passive devices, such as charcoal canisters, alpha track detectors, and charcoal liquid scintillation devices are exposed to air in the home for a specified amount of time, and sent to a laboratory to be analyzed. Active devices, like continuous radon monitors and continuous working level monitors, continuously measure and record the amount of radon in the air, and require operation by trained testers. These tests can be performed over a long term, or a short term, with the long term tests by active devices considered to be more accurate.
Underground heating oil tanks can pose many potential problems to both home buyers and sellers. They have been the source of many environmental problems such as contamination of surrounding soil and ground water.
Leaks are caused by the rust inside underground tanks, or by an electrical condition sparked by electric utility lines.
Buyers should have the tank inspected to make sure that it is structurally sound. Buyers who do not want an underground fuel tank can arrange for an above ground tank to be installed in the basement, an underground tank to be shut off. Cleanups of any leaks will also have to be taken care of.
For buyers, the underground heating oil tank should be written in the sales contract. For sellers, your lawyer should make sure that the description and condition of the underground heating oil is accurate and up-to-date.
Common Ways of Holding Title
How Should I Take Ownership of the Property I am Buying?
Real property has become increasingly more valuable and the question of how parties can take ownership of their property has gained greater importance. The form of ownership taken -- the vesting of title -- will determine who may sign various documents involving the property and future rights of the parties to the transaction. These rights involve such matters as: real property taxes, income taxes, inheritance and gift taxes, transferability of title and exposure to creditor's claims. Also, how title is vested can have significant probate implications in the event of death.
The Land Title Association (LTA) advises those purchasing real property to give careful consideration to the manner in which title will be held. Buyers may wish to consult legal counsel to determine the most advantageous form of ownership for their particular situation, especially in cases of multiple owners of a single property.
The LTA has provided the following definitions of common vestings as an informational overview. Consumers should not rely on these as legal definitions. The Association urges real property purchasers to carefully consider their titling decision prior to closing, and to seek counsel should they be unfamiliar with the most suitable ownership choice for their particular situation.
Common Methods of Holding Title
SOLE OWNERSHIP
Sole ownership may be described as ownership by an individual or other entity capable of acquiring title. Examples of common vestings in cases of sole ownership are:
1. A Single Man/Woman:
A man or woman who has not been legally married. For example: Bruce Buyer, a single man.
2. An Unmarried Man/Woman:
A man or woman who was previously married and is now legally divorced. For example: Sally Seller, an unmarried woman.
3. A Married Man/Woman as His/Her Sole and Separate Property:
A married man or woman who wishes to acquire title in his or her name alone.
The title company insuring title will require the spouse of the married man or woman acquiring title to specifically disclaim or relinquish his or her right, title and interest to the property. This establishes that it is the desire of both spouses that title to the property be granted to one spouse as that spouse's sole and separate property. For example: Bruce Buyer, a married man, as his sole and separate property.
CO-OWNERSHIP
Title to property owned by two or more persons may be vested in the following forms:
1. Community Property:
A form of vesting title to property owned by husband and wife during their marriage which they intend to own together. Community property is distinguished from separate property, which is property acquired before marriage, by separate gift or bequest, after legal separation, or which is agreed to be owned only by one spouse.
Real property conveyed to a married man or woman is presumed to be community property, unless otherwise stated. Since all such property is owned equally, husband and wife must sign all agreements and documents of transfer. Under community property, either spouse has the right to dispose of one half of the community property, including transfers by will. For example: Bruce Buyer and Barbara Buyer, husband and wife as community property.
2. Joint Tenancy
A form of vesting title to property owned by two or more persons, who may or may not be married, in equal interest, subject to the right of survivorship in the surviving joint tenant(s). Title must have been acquired at the same time, by the same conveyance, and the document must expressly declare the intention to create a joint tenancy estate. When a joint tenant dies, title to the property is automatically conveyed by operation of law to the surviving joint tenant(s). Therefore, joint tenancy property is not subject to disposition by will. For example: Bruce Buyer and Barbara Buyer, husband and wife as joint tenants.
3. Tenancy in Common:
A form of vesting title to property owned by any two or more individuals in undivided fractional interests. These fractional interests may be unequal in quantity or duration and may arise at different times. Each tenant in common owns a share of the property, is entitled to a comparable portion of the income from the property and must bear an equivalent share of expenses. Each co-tenant may sell, lease or will to his/her heir that share of the property belonging to him/her. For example: Bruce Buyer, a single man, as to an undivided 3/4 interest and Penny Purchaser,
a single woman, as to an undivided 1/4 interest, as tenants in common.
Other ways of vesting title include as:
1. A Corporation*:
A corporation is a legal entity, created under state law, consisting of one or more shareholders but regarded under law as having an existence and personality separate from such shareholders.
2. A Partnership*:
A partnership is an association of two or more persons who can carry on business for profit as co-owners, as governed by the Uniform Partnership Act. A partnership may hold title to real property in the name of the partnership.
3. As Trustees of A Trust*:
A trust is an arrangement whereby legal title to property is transferred by the grantor to a person called a trustee, to
be held and managed by that person for the benefit of the people specified in the trust agreement, called the beneficiaries.
4. Limited Liability Companies (L.L.C.)
This form of ownership is a legal entity and is similar to both the corporation and the partnership. The operating agreement will determine how the L.L.C. functions and is taxed. Like the corporation its existence is separate from its owners.
*In cases of corporate, partnership, L.L.C. or trust ownership - required documents may include corporate articles and bylaws, partnership agreements, L.L.C. operating agreement and trust agreements and/or certificates.
Remember:
How title is vested has important legal consequences. Consult an attorney to determine the most advantageous form of ownership for your particular situation.
Difference Between Condos and Co-Ops
Are you tired of paying rent and ready to purchase your own apartment? Learn about the differences between condominiums and co-op apartments and decide which one is right for you.
Search Westchester County Condominimums (Condo) and Co-Operatives (Co-Op)
What is a Co-op?
When you buy a co-op, you don’t actually own your apartment. Instead, you own shares of a co-op corporation that owns the building. The larger your apartment, the more shares within the corporation you own. Monthly maintenance fees cover building expenses including heat, hot water, insurance, staff salaries, and real estate taxes.
Advantages of Buying a Co-op
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Co-ops are generally less expensive than comparable condominium apartments.
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Some of your monthly maintenance fees are tax deductible
Disadvantages of Buying a Co-op
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All prospective purchasers must be approved by the Board of Directors. The Board approval process is often time-consuming and rigorous -- requiring extensive information regarding finances, employment, and personal background. Even celebrities have been turned down by some selective New York co-op boards.
- Monthly maintenance fees for co-ops are much higher than for condos. This is because the monthly fee includes part of the underlying mortgage for the building.
- Many co-op boards limit the amount of the purchase price that can be financed and require higher down payments than are usually required for condominiums.
- It is harder to sub-lease a co-op. Each co-op building has its own rules, but many limit or forbid subletting.
What is a Condominium?
Condominiums are becoming more popular as new residential buildings are constructed. Unlike co-ops, condo apartments are "real" properties. Buying a condo is much like buying a house. Each individual unit has its own deed and its own tax bill. Condos offer greater flexibility, but are often priced higher than comparable co-op apartments.
Advantages of Buying a Condo
In most cases, buyers can finance a larger portion of the purchase price (up to 90%) and put less money down.
- With a condominium, you don’t have to deal with board approval.
- Condo apartments can be freely sublet/renting is allowed, giving you more flexibility.
- Monthly maintenance fees for condos are much lower than for co-ops.
Disadvantages of Buying a Condo
- Condos are generally more expensive than comparable co-op apartments.
- Monthly maintenance payments are not tax-deductible.
- There are fewer condos in some real estate markets, which limits your options.
Courtesy of About.com
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Living Trusts
Estate planners often recommend "Living Trusts" as a viable option when contemplating the manner in which to hold title to real property. When a property is held in a Living Trust, title companies have particular requirements to facilitate the transaction. While not comprehensive, following are answers to many commonly asked questions. If you have questions that are not answered below, your title company representative may be able to assist you, however, one may wish to seek legal counsel.
Who are the parties to a Trust?
A typical trust is the Family Trust in which the Husband and Wife are the Trustees and, with their children, the Beneficiaries. Those who establish the trust and transfer their property into it are known as Trustors or Settlors. The settlor's usually appoint themselves as Trustees and they are the primary beneficiaries during their lifetime. After their passing, their children and grandchildren usually become the primary beneficiaries if the trust is to survive, or the beneficiaries receive distributions directly from the trust if it is to close out.
What is a Living Trust?
Sometimes called an Inter-vivos Trust, the Living Trust is created during the lifetime of the Settlors (as opposed to being created by their Wills after death) and usually terminates after they die and the body of the Trust is distributed to their beneficiaries.
Can a Trust hold title to Real Property?
No, the Trustee holds the property on behalf of the Trust.
Is a Trust the best way to hold my property?
Only your attorney or accountant can answer the question; some common reasons for holding property in a Trust are to minimize or postpone death taxes, to avoid a time consuming probate, and to shield property from attack by certain unsecured creditors.
What taxes can I avoid by putting my property in trust?
Married persons can usually exempt a significant part of their assets from taxation and may postpone taxes after the first of them to die passes. You should check with your attorney or accountant before taking any action.
Can I homestead property which is held in a Trust?
Yes, if the property otherwise qualifies.
Can a Trustee borrow money against the property?
A Trustee can take any action permitted by the terms of the Trust, and the typical Trust Agreement does give the Trustee the authority to borrow and encumber real property. However, not all lenders will lend on a property held in trust, so check with your lender first.
Can Someone else hold title for me "in trust?"
Some people who do not wish their names to show as titleholders make private arrangements with a third party Trustee; however, such an arrangement may be illegal, and is always inadvisable because the Trustee of record is the only one who is empowered to convey, or borrow against, the property, and a Title Insurer cannot protect you from a Trustee who is not acting in accordance with your wishes despite the existence of a private agreement you have with the Trustee.You should always consult a Living Trust expert.
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A voluntary lien is a lien that you agree to have recorded against your property. These are used when you put property up as collateral for a loan, as with a mortgage or a car loan. You might not think of a mortgage as a lien, but the lender does have a lien on your house for the duration of the mortgage, meaning you can't sell the house unless you can pay off the mortgage and remove the lien.
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One common type of lien is levied when you don't pay for work done on your property. These are known as contractors' liens, mechanics' liens or construction liens, because these professions are the most common ones to go unpaid. Other professionals can be allowed to file liens as well, including architects, engineers and surveyors. Some states require that you be notified before a lien is filed, but other states allow a lien to be filed without your knowledge.
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A lien can be placed on your property by the federal government for unpaid federal taxes. The Internal Revenue Service (IRS) must notify you of the exact amount due and demand payment in writing. If you don't pay the entire debt within 10 days of the notice, you will receive Notice of a Federal Tax Lien and a lien will be filed against all your property, including your house and car, and against all your rights to property, including business assets.
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A divorce lien is placed on property that is co-owned by former spouses. It ensures that the spouse who has the right to live in the property gives the other spouse his share of any profit when the house is sold.
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A homeowners' association lien is filed against property when the owner fails to pay mandatory dues to the association. If you sell a home that belongs to a homeowners' association, you must present a certificate from the association that states all dues have been paid and your account is current.
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Creditors can go to court and get judgment liens against you for unpaid debt. These include credit card debt, defaulted bank loans and repossessed vehicles. In some cases, you can be forced to sell property to pay off the debt.
A lien is a legal claim against your property that prevents you from selling or transferring that property until a debt is paid and the claim is discharged. A lien doesn't give someone else ownership of your property, but if you sell property on which there is a lien, you are legally bound to pay off the debt out of the proceeds.
Voluntary Liens
Contractors' Liens
Federal Tax Liens
Other Types of Liens
Even if a lien is recorded against your property you may be able to resolve the problem without further payment to the lien claimant. This possibility exists where the proper procedure for establishing the lien was not followed because each claimant is required to strictly adhere to a well-established procedure in order to create a valid lien.
Needless to say, this is one area of the law that is very complex, thus consult an attorney if you become aware that a lien has been recorded against your property. In the event you discover that a lien has been recorded but no effort has been made to enforce the lien, a title company may decide to ignore the lien. However, be prepared to be presented with a positive plan to eliminate the title problems created by the type of lien. This may be accomplished by means of a recorded lien release from the person who created the lien, or other measures acceptable to the title company.- Income documentation such as W-2s and pay check stubs to verify the borrowers’ income
- Bank statements to verify the borrowers’ assets
- Hardship letter – this letter will describe for the lender the reasons the borrowers are in the financial position they are in and will ask the lender to accept the short sale
- Fair market value for the property – depending on the lender they may require an appraisal or may accept an opinion from the real estate agent known as a Comparative Market Analysis (CMA)
- Preliminary proceeds sheet from the sale of the property. This will show the proceeds of the sale of the property after the mortgage is paid off and all other closing costs and fees are paid. This will be negative in the case of the short sale and this negative amount is the amount of the shortage
- Exclusive Right to Sell Listing Agreement
- Offer to Purchase
- Purchase agreement
Understanding Short Sales and Foreclosures
We are the Short Sale/Foreclosure experts in Westchester County. Contact us today for expert help.
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National & Westchester County Short Sale, Foreclosure, Pre-Foreclosures, Sheriff Sales, Bankruptcies, & Tax Liens PropertiesWhat is a short sale / pre-foreclosure?
With the increase in foreclosures lately you may have heard the term “short sale” and wondered what it was. A short sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually, the lender will accept the short sale to avoid the time and expense of a foreclosure.
When a borrower is in default on a mortgage they not only owe the back payments but also may owe late fees, property inspection fees, attorney fees, etc. This can add up quickly to eat up all the equity the borrower had in the property. If the borrower is unable to bring the account current the lender will then foreclose on the property. With a foreclosure, the lender can lose up to 40% of the mortgage amount because of the extra costs involved with foreclosing on a property: attorney fees, court costs, lost interest, eviction costs, property maintenance costs, and selling costs. Foreclosing on a property can also take up to two years in some states. Therefore, it is sometimes in the best interest of the lender to accept the short sale.
It also can be in the best interest of the borrower. They will not have to endure the time and stress of a foreclosure and their credit may not be as adversely affected as it would with a foreclosure. It is quicker and easier and does not subject the borrower to the embarrassment of a foreclosure.
How does it work?
The first thing the borrower should do when they can no longer afford a property is to contact the lender immediately. The last thing a lender wants to do is foreclose on the property. Secondly, contact a real estate agent to negiotiate with the bank on your behalf. Be sure the agent is knowledgable about short sale properties, has successfully completed a pre-forclosure sale, and is capable of handling such a work load. This will be particularly handy during negotiations with the lender. An experienced short sale/pre-foreclosure agent knows who to contact, how to reach them, and how to approach each situation. Lenders typically have departments that work with real estate agents to resolve the situation.
The lender will usually require the agent to submit a lot of information to the lender on behalf of the borrower in order to consider the short sale. The information required may include:
When the lender reviews all of this and accepts the short sale, you will close on the sale of your property and the lender will take the loss. Although not the normal practice, the lender still has options to try to collect this shortage. As a condition of the short sale the lender may require the borrower to sign a note to repay the shortage. They may also file a collection or a judgment for the amount of the shortage. This is something that an attorney with expertise in this area of real estate needs to be consulted. Also, the IRS may come after the borrowers for income taxes on the amount of the shortage. If the shortage was forgiven, the lender will report the shortage as income to the IRS and the IRS will collect taxes on this amount. Again, for the specifics on this please consult a tax professional.
What is a foreclosure?
It is an unfortunate commentary, but when economic activity declines and housing activity decreases more real property enter the foreclosure process. High interest rates and creative financing arrangements also are contributing factors.
When prices are rapidly accelerating during a real estate "bonanza", many people go to any lengths available to get into the market through investments in vacation homes, rental housing and "trading up" to more expensive properties. In some cases, this results in the taking on of high interest rate payments and second, third and even fourth deeds of trust. Many buyers anticipate that interest rates will drop and home prices will continue to escalate. Neither may occur, and borrowers may be faced with large "balloon" payments becoming due. When payments cannot be met, the foreclosure process looms on the horizon.
How does it work?In the foreclosure process, one thing should be kept in mind: as a general rule, a lender would rather receive payments than receive a home due to a foreclosure. Lenders are not in the business of selling real estate and will often try to accommodate property owners who are having payment problems. The best plan is to contact the lender before payment problems arise. If monthly payments are too hefty, it may be that a lender will be able to
make some alternative payment arrangements until the owner's financial situation improves.
Let's say, however, that a property owner has missed payments and has not made any alternate arrangements with the lender. In this case, the lender may decide to begin the foreclosure process. Under such circumstances, the lender, whether a bank, savings and loan or private party, will request that the trustee, often a title company, file a notice of default with the county recorder's office. A copy of the notice is mailed to the property owner.
If the default is due to a balloon payment not being made when due, the lender can require full payment on the entire outstanding loan as the only way to cure the default. If the default is not cured, the lender may direct the trustee to sell the property at a public sale.
In cases of a public sale, a notice of sale must be published in a local newspaper and posted in a public place, usually the courthouse, for three consecutive weeks. Once the notice of sale has been recorded, the property owner has until 5 days prior to the published sale date to bring the loan current. If the owner cures the default by making up the payments, the deed of trust will be reinstated and regular monthly payments will continue as before.
After this time, it may still be possible for the property owner to work out a postponement on the sale with the lender. However, if no postponement is reached, the property goes "on the block". At the sale, buyers must pay the amount of their bid in cash, cashier's check or other instrument acceptable to the trustee. A lender may "credit bid" up to the amount of the obligation being foreclosed upon.
With the recent attention given to foreclosure, there also has been corresponding interest in buying foreclosed properties. However, caveat emptor: buyer beware. Foreclosed properties are very likely to be burdened with overdue taxes, liens and clouded titles. A buyer should do his homework and ask a local title company for information concerning these outstanding liens and encumbrances. Title insurance may or may not be available
following a foreclosure sale and various exceptions may be included in any title insurance policy issued to a buyer of a foreclosed property.
- Monthly maintenance fees for co-ops are much higher than for condos. This is because the monthly fee includes part of the underlying mortgage for the building.
