Posted via email from Joe Murphy Knows Real Estate in Bradenton
Posted via email from Joe Murphy Knows Real Estate in Bradenton
Posted via email from Joe Murphy Knows Real Estate in Bradenton
Posted via email from Joe Murphy Knows Real Estate in Bradenton
I wasn’t sure if I told you already…but my office is sponsoring a FREE short sale seminar for the general public and realtors we will be addressing the Home Affordable Foreclosure Alternative program as well. I have a CPA from Shinn & Co. speaking about cancellation of debt taxable issues.
The seminar is at the Hyatt Place at the Sarasota-Bradenton Airport May 12 at 5:30PM until 7PM.
Cynthia A. Riddell, Esq.
RIDDELL LAW GROUP
3400 S. Tamiami Trail
Sarasota, FL 34239
Ph: 941.366.1300
Fax: 941.366.6973
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As a Realtor in Sarasota and Bradenton west of the trail is known to be the most desirable location in terms of convience to get to everything you need. Walking distance to shopping, nightlife and fine dining. Sarasota Memorial Hospitial is just down the road too.
This has been quite a busy May especially for entry level condos.
Prices have dropped so dramatically that a small condo in Sarasota or Bradenton for investment, or as a second home makes a lot of sense.
Prices of most of these "entry level" condos are at 50% to 25% of their peak values!
For example, I just put a condo in Sarasota pending that was listed for 49,900. This price was market value based on recent sales, and other active units that are in the complex. This unit had sold new for over 180,000 5 years ago!
One factor that seems challenging is that as prices of these type of units go down their condo fees tend to be the biggest hurtle for prospective buyers. As an experienced Realtor in the Bradenton and Sarasota market I hear this over and over. Buyer's like the low prices, but the condo fees seem enormous compared to the low, low prices of the condos.
When the condo was priced for 180,000, 300 dollars a month seems reasonable, but with it priced at 50,000 that 300 dollars seems huge.
The prices for condos in Sarasota have dropped so dramatically because of the lack of financing options for "primary home buyers", and first time buyers.
Because of the high proportion of rentals, and the potential issues with foreclosures, many lenders do not write loans for these units. No loans, means that only cash buyers can purchase, which lowers the buyer pool. The price points have dropped so far now that someone can buy a condo in Sarasota for cash for around 50,000. Then rent it out, and have that 50,000 dollars back out in rental income in 5-10 years. That does not account for any potential future market appreciation either.
If you have been considering buying an entry level condo in Sarasota or Bradenton, you should be jumping in now. We are out of the winter season, but I am seeing that any well priced condos are getting sold quickly.
Please give me a call if you are interested to see all the best buys in the Sarasota and Bradenton real estate markets.
Joe Murphy, broker-associate
Coldwell Banker Residential Real Estate
941-780-3260
When you need the help of a FULL-TIME, Top-Producing, agent in Manatee County please now I am here to help.
Call/Text/email me anytime. I am an experienced agent that can deal with short sales, bank owned homes, vacation homes, and everything in between.
Joe Murphy, Broker-Associate
Coldwell Banker Residential Real Estate
941-780-3260 cell
Wednesday, March 10, 2010
Short Sales From a Tax Perspective - Myth vs Truth
Short sales, principal reduction loan modifications, deeds in lieu and foreclosures all present unique tax consequences, and they vary from one person to another. Much of what we are hearing from clients, which they are hearing from others, is either not true or not true for them.
Here are my Top 10 Myths --and the corresponding truths-- in this area. With a few exceptions, the myths stem from a grain of truth. But just like the game of telephone, the fact that it began as truth doesn’t mean what you’re hearing is reliable.
Myth #1 - “I won’t owe any income tax because this is homestead property.”
This myth began with the passage of the Mortgage Debt Forgiveness Relief Act (“MDFRA”) in December 2007, which does provide some relief to those taxpayers who face debt forgiveness (which would otherwise be taxable) relating to their real estate.
There are significant limits on the relief, however. Here are the requirements:
- The debt applies to a principal residence as defined in Internal Revenue Code Section 121. (Principal residence is NOT necessarily homestead property in Florida.)
- The debt was used to acquire, construct or substantially improve the principal residence (as defined in Internal Revenue Code Section 163(h)).
- The amount of the forgiven debt is not included in the taxpayer’s income, but it reduces the taxpayer’s basis in the property.(This will increase the gain on the sale if the property is sold, and that gain is taxable).
- The amount of the forgiven debt also reduces, dollar for dollar, the amount of gain that can be excluded under other provisions (IRC Section 121).
- Only the first $2 million of forgiven debt is excluded from income.
A principal residence for IRS purposes is not the same as homestead property under Florida law. A principal residence is property which has been owned and used, during the 5-year period ending on the date of the sale or the debt forgiveness, as the seller’s primary residence for a total of at least 2 years. Often, a seller did not use the property as a principal residence for 2 years or more during the prior 5 years, even if he declared it as homestead property. If it’s not a principal residence under this definition, there is no tax relief under the MDFRA.
The other requirement that is often not met is the use of the debt to acquire, construct or substantially improve the principal residence. Many property owners refinanced to access cash for reasons unrelated to the property: they started a business, paid off a car loan or credit cards, or took a vacation. Any part of the funds used for those purposes remains taxable. However, if the proceeds were used to add a pool, renovate a kitchen or replace the roof, that portion of the debt forgiven will be excluded from taxable income.
Myth #2 - “I’ll have a loss on the property, so I don’t need to worry about tax.”
Capital losses resulting from the sale of the property will not offset the income resulting from the forgiveness of debt. Also, sellers often believe they have a “loss” on their property when in fact they don’t – selling it for less than you owe isn’t the test. If your basis is less than the debt forgiven, you can actually have a gain. This often happens in the short sale situation, due to the reduction of basis (see 1c above).
Myth #3 - “I can use the $500,000 capital gain exclusion to wipe out any taxable income from the short sale.”
The $500,000 exclusion (for married filing joint, $250,000 for single taxpayers) is a capital gain exclusion only. Income from debt forgiveness is ordinary income, not capital gain. This exclusion is only helpful if a capital gain results from the reduction in the basis of the property. But beware, (as mentioned in 1d above) the amount of the forgiven debt which is excluded from taxable income also reduces the amount of gain that can be excluded under this provision, dollar for dollar.
Myth #4 - “I’m in a low tax bracket, so the tax won’t be that much.”
Before the transaction in question, the seller probably was in a low tax bracket. If the debt forgiven is large (and it’s not unusual these days to see amounts of $50,000-$150,000 and higher), this increases the seller’s taxable income by that amount. It’s like getting a big fat paycheck that you never see, and it puts many sellers into higher tax brackets than their historical rates.
Myth #5 - “I have no assets, so I’m insolvent and don’t need to worry about the tax consequences of a short sale.”
This is true as far as it goes: Section 108 of the IRC indeed provides for excluding forgiven debt from income to the extent the seller is insolvent. However, just because a seller is upside down on their property doesn’t mean they’re insolvent for this purpose. The extent of insolvency for IRS purposes is the difference between the outstanding liabilities and fair market value of the assets (this is all assets, including protected assets such as retirement accounts) owned by the Seller on the date of the short sale. It is virtually impossible to reach a conclusion on insolvency for this purpose without a detailed analysis of all of the seller’s assets and liabilities, including those unrelated to the property, as well as the basis reduction that would occur in the short sale.
The good news on this one is that, unlike the MDFRA, the insolvency exclusion applies to investors. This is an important aspect to explore for them particularly.
Myth #6 - “I heard that the IRS isn’t going after people due to the economic climate.”
Ok, this one doesn’t stem from a grain of truth; it’s just wishful thinking. The IRS is actually increasing its enforcement and collection efforts in the current economic climate. It’s primary purpose is to collect revenue; and the government needs revenue as much as anyone else these days.
Myth #7 - “I’ll just tell the lender that I don’t want a 1099.”
Good luck with that. The 1099-C requirement is not negotiable: it’s the law. If the debt is forgiven, the tax liability has been generated. The lender must report it, and so must the property owner (even if they don’t receive a 1099-C by January 31 of the year following the short sale). Sellers can be subject to a 25% reporting penalty if they don’t report the debt forgiveness; this is not one to be taken lightly.
Myth #8- “I heard on the news that there is no tax on short sales anymore.”
See Myth #1. And stop watching the news.
Myth #9 - “I’ll just let the property go into foreclosure, rather than do a short sale, to avoid the taxes.”
This wouldn’t necessarily help you. The tax is the same regardless of how the debt forgiveness comes about: a short sale, principal reduction loan modification, deed in lieu of foreclosure or foreclosure all have the same effect. The only potential difference is the amount of the debt forgiven. For example, default interest, attorney’s fees and costs continue to add up during a foreclosure, which might be avoided or reduced in a short sale, typically making the unpaid balance of the loan (and resulting debt forgiveness) in a foreclosure higher than if a short sale were completed.
Myth #10 - “If I end up owing tax, I’ll just file bankruptcy.”
Chances are, you’ll still owe the tax. Income tax is not typically discharged in bankruptcy. While there are a few exceptions, most will not apply in these cases.
The tax implications of foreclosures and short sales are more complex than mass media would lead us to believe, and there is considerable misunderstanding among property owners as to what the rules are and how they would apply. Hopefully we can help to dispel the myths by steering our clients toward tax professionals who can help and help them plan appropriately.
-JoAnn M. Koontz, Esq., CPA
Yesner & Boss, P.L.posted by Yesner and Boss, P.L. at 1:55 PM 0 Comments
This is a great guide to frequently asked questions for homeowners considering a short sale.
Courtesy of Michael Taylor
We are fast approaching the deadline for the Home Buyer’s Tax Credit, remember that Buyers need to be under contract by 4/30 (only 45 days away) and closing must take place on or before June 30th! There is one exception to the rule that you need to be aware of: U.S. servicemen out of the country for 90 days (since 2008) may have an extra year to get the tax credit, up to $8,000, for buying a home. The active-duty rule is not new. It’s part of the current tax credit law, though its use is limited. The qualification must be for “official extended duty outside the United States for at least 90 days after 2008 and before May 1, 2010.” Should that be the case, however, the homebuyer has an extra year to buy a home. He or she has until April 30, 2011, to secure a binding contract, and until June 30, 2011 to close on the home. Other conditions such as a maximum $8,000 for first-time buyers and $6,500 for move-up buyers still apply. For advice in any specific case, consult a qualified tax advisor. The applicable IRS publication is posted online (PDF format) at: http://www.irs.gov/pub/irs-pdf/p3.pdf.
J. Michael Taylor|Managing Broker| Coldwell Banker Residential Real Estate | 8334 Market Street |Bradenton, FL 34202 | P: 941-907-1033| F: 941- 907-1055| E: michael.taylor@floridamoves.com | visit http://www.floridamoves.com
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It's getting pretty common for well priced foreclosure homes to get multiple bids. Here in Manatee County I sell a lot of Bank owned homes to buyers looking for a great deal. Our prices have dropped to about Half of the peak prices, and our inventory is tight. Manatee County now has about half the homes from three years ago. Multiple offers is something that I am used to dealing with, but this week I was thrown a curve from Freddie Mac.
As a Bradenton real Estate agent with plenty of experience I am not afraid of multiple offers. As a listing agent multiple offers are a great thing, for a buyer's agent not so much..
As a buyer's agent multiple offers to compete against is never good news!
That "low-ball" offer with all the contingencies does not look as enticing now..
In the past when I was involved with a multiple bid situation the listing agent would present a "
I was writing an offer for a Freddie Mac owned home in Parrish, FL, and was told that the seller only considers "one offer at a time". There was also another offer in, and it would only be considered if the first was not successful.
I am not sure if I like the new system. As I see it, the only person benefiting is the "first" buyer to come along since they do not have to compete with any offers.
this procedure is bad for pretty much everyone else
The first scheduled launch was canceled due to inclement weather, so we stayed the night to see it go off. With the extra time we went to the Kennedy Space center. I haven't been there since I was a kid, and I must say that the whole family had a great time. I would have expected it to be crowded, but there were no lines, no crowds.
If you get the chance to go to the Kennedy Space Center I would highly recommend it.
President Obama has just cut NASA's budget and basically took away the the funding needed to move the space program forward. Is this a bad thing?
I first thought this was not such a good idea. I like that the United States has been the leader in space exploration. But, in reality the bad economy, and Obama's massive cuts have now allowed private industry to move into the push to space and really bring it to the NEXT LEVEL.
We learned on the tour that the founder of "PAYPAL" had a facility on the NASA site were they were developing their own waiting....... launch vehicles. Wow! This was the guy that sold it to GOOGLE for a LOT of MONEY. He was doing massive R&D and it was not costing American taxpayers a nickel.
I think that NASA, and the administration did the right thing by backing off on the current technology, and looking forward. Also, embracing the private sector, and the rest of the world with space exploration may be the first step to getting everyone on the planet to realize that we are all more alike than different.
Just like the "Internet" that was originally developed by the government it was not until the private sector was allowed to embrace it that it took the technology
The Russians will have the only way to deliver people and supplies to the INTERNATIONAL SPACE STATION for the next 7 years. They raised the price that they will charge to deliver passengers from 35 million to 52 million. For that kind of money, I could see an opportunity to people willing to get into the next space race.
Would J.F.K. believe that we are relying on the Russians to support our space program?
Amazing how things change with time. The international cooperation with regards to space really impressed me, and just like the Internet, it seems that space exploration has no boundaries.
Who knows? Maybe our kids will see the day when commercial space travel becomes mainstream.
If we do.
We will have to thank President Obama's cuts, and the current recession
I guess everything happens for a reason...
My son now wants to be an
astronaut.
The Hubble.. And it's replacement ... technology marches on..
When you need the help of a FULL-TIME, Top-Producing, agent in Manatee County please now I am here to help.
Call/Text/email me anytime. I am an experienced agent that can deal with short sales, bank owned homes, vacation homes, and everything in between.
Joe Murphy, Broker-Associate
Coldwell Banker Residential Real Estate
941-780-3260 cell
941-840-0150 office
Thanks,
Joe Sent from my iPhone Joe Murphy, broker-associateSales Prices from $52,000 to $165,000
Purchase Price | Title Insurance | Doc Stamp | Purchase Price | Title Insurance | Doc Stamp |
$52,000 | $299 | $364 | $109,000 | $620 | $763 |
$53,000 | $305 | $371 | $110,000 | $625 | $770 |
$54,000 | $311 | $378 | $111,000 | $630 | $777 |
$55,000 | $317 | $385 | $112,000 | $635 | $784 |
$56,000 | $322 | $392 | $113,000 | $640 | $791 |
$57,000 | $328 | $399 | $114,000 | $645 | $798 |
$58,000 | $334 | $406 | $115,000 | $650 | $805 |
$59,000 | $340 | $413 | $116,000 | $655 | $812 |
$60,000 | $345 | $420 | $117,000 | $660 | $819 |
$61,000 | $351 | $427 | $118,000 | $665 | $826 |
$62,000 | $357 | $434 | $119,000 | $670 | $833 |
$63,000 | $363 | $441 | $120,000 | $675 | $840 |
$64,000 | $368 | $448 | $121,000 | $680 | $847 |
$65,000 | $374 | $455 | $122,000 | $685 | $854 |
$66,000 | $380 | $462 | $123,000 | $690 | $861 |
$67,000 | $386 | $469 | $124,000 | $695 | $868 |
$68,000 | $392 | $476 | $125,000 | $700 | $875 |
$69,000 | $397 | $483 | $126,000 | $705 | $882 |
$70,000 | $403 | $490 | $127,000 | $710 | $889 |
$71,000 | $409 | $497 | $128,000 | $715 | $896 |
$72,000 | $415 | $504 | $129,000 | $720 | $903 |
$73,000 | $420 | $511 | $130,000 | $725 | $910 |
$74,000 | $426 | $518 | $131,000 | $730 | $917 |
$75,000 | $432 | $525 | $132,000 | $735 | $924 |
$76,000 | $438 | $532 | $133,000 | $740 | $931 |
$77,000 | $444 | $539 | $134,000 | $745 | $938 |
$78,000 | $449 | $546 | $135,000 | tdtdtdtd
