Archive

Archive for April, 2011

6 real estate headlines: 29-April

A daily dose of headlines for real estate agents, mortgage lenders, homebuyers and home sellers.

A new template for smart growth
Washington Post
: Shifting demographics, along with increasing consumer interest in a more-urban existence, are redefining the real estate market.
Projects shelved spring back to life
The New York Times
: Factors contributing to the building trend include higher rents, aging office stock and a possible decline in labor costs.
Weighing whether to buy a vacation home
Wall Street Journal
: With an increasing range of options�from managed resorts in the Maldives to a self-owned bungalow in Bali�deciding what type of vacation home to own, and what investment risks to take, is becoming a more complicated process.
Homeownership drops
Housing Wire
: While the homeownership rate across the country continues downward after the housing crash, a recent survey from Pew Research showed 81% of adults still believe buying a home is the best long-term investment a person can make.
How history killed the suburb
The Atlantic: Projected growth in housing demand is going to come largely from young people who are much more comfortable with urban lifestyles and from retiring baby boomers who no longer need large amounts of house and yard space.
6 tips to help you avoid real estate law suits
Inman News
: Even if you have adequate errors and omissions insurance coverage, being a defendant in a lawsuit can have a huge negative impact on both you and your business.

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Categories: Uncategorized

Transfer taxes, real property taxes… Explained

“In this world nothing can be said to be certain, except death and taxes,” Ben Franklin once famously said. Yet when it comes to taxes on real property � especially for first-time homebuyers � we find much uncertainty and confusion exists.

Homebuyers should expect to pay two main types of taxes on their homes, 1) transfer taxes are non-recurring and paid once at settlement and 2) real property taxes are recurring and paid semi-annually (when you pay depends on where you live).

Transfer Taxes

Aside from the down payment, transfer taxes are often the single largest expense a homebuyer will pay at settlement. Transfer taxes are also known as recordation taxes, stamp taxes or grantee taxes but are all lumped together on the HUD-1 settlement statement and identified, collectively, as “Transfer Tax.”

For example in Montgomery County, Maryland, a homebuyer will customarily pay one-half of the total county transfer tax, state transfer tax and recordation tax. The total of these three taxes will be collected as a single line item on the HUD-1 and called “Transfer Tax.”

Even more confusing in the District of Columbia and Virginia, the law requires homebuyers to pay the “Recordation Tax,” yet federal regulation requires those recordation taxes to be lumped together and identified on the HUD-1 as “Transfer Tax.”

For the purpose of this discussion, the term “Transfer Tax” will include any and all one-time, non-recurring, taxes customarily paid by the homebuyer at the time of closing.

Transfer taxes vary depending on where the property is located, which may lead some homebuyers to think they are being penalized if purchasing a home in a city or county with a higher transfer tax rate, such as the District of Columbia.

While it's true that transfer taxes for DC properties are significantly higher than in Maryland or Virginia, the overall amount a homeowner will pay in taxes evens out over time thanks to property tax rates.

Property Taxes

Homeowners are typically expected to pay their property tax bill in two installments spread over the year. (For a summary of real estate tax rates by jurisdiction, including when property tax payments are due, see the homebuyer tax section of our website.)

As mentioned above, the District of Columbia may have one of the region's highest transfer tax rates, but it also boasts the region's lowest property tax rate at just $0.85 per $100 of assessed value. In Bethesda, Maryland the property tax rate is $1.027 per $100 of assessed value, while homeowners in Arlington County, VA pay $0.958 per $100 of assessed value.

Tax Comparison

Let's see how the taxes shake out for a homeowner in Washington, DC versus Bethesda, MD versus Arlington, VA over the course of 10 years, assuming tax rates remain unchanged. Remember: “Transfer Taxes” include ALL state recordation taxes and state/county transfer taxes as customarily apportioned, by jurisdiction, between the homebuyer and seller.

This figure also assumes that the purchase 1) is an owner-occupied residential purchase and, 2) that the homebuyer is a first-time homebuyer. Let's use $500,000 as our purchase price with 20 percent down:

 

Total taxes paid (estimate)
$500,000 purchase price


Jurisdiction Transfer taxes Property taxes
Total
District of
Columbia
$7,250.00 $36,762.50 $44,012.50
Bethesda,
Maryland
$4,052.50 $51,350.00 $55,402.50
Arlington,
Virginia
$2,999.70 $47,900.00 $50,899.70

As you can see, the total amount of transfer tax plus property taxes paid over 10 years is far less in the District of Columbia compared to Maryland and Virginia.

This is partly because of the lower annual tax rate of just $0.85 per $100 of assessed value, and largely due to the Homestead Deduction, which homeowners qualify for so long as the property is their principal residence. Individuals who own multi-unit dwellings with five or less units also qualify for the deduction so long as they occupy one of the units.

Now, let's try the same thing, only this time we'll use $300,000 and $700,000 price points:

 

Total taxes paid (estimate)
$300,000 purchase price


Jurisdiction
Transfer taxes
Property taxes Total
District of
Columbia
$3,300.00 $19,762.50 $23,062.50
Bethesda,
Maryland
$2,362.50 $30,810.00 $33,172.50
Arlington,
Virginia
$1,999.82 $28,740.00 $30,739.82

 

Total taxes paid (estimate)
$700,000 purchase price


Jurisdiction
Transfer taxes
Property taxes
Total
District of
Columbia
$10,150.00 $53,762.50 $63,912.50
Bethesda,
Maryland
$6,052.50 $71,890.00 $77,942.50
Arlington,
Virginia
$4,999.58 $67,060.00 $72,059.58

First-time Homebuyers

Homebuyers who have not owned property in Maryland and the District of Columbia may be exempt from paying their portion of transfer and recordation taxes. Unfortunately for Virginia homebuyers, no tax incentive exists.

To qualify for the transfer tax exemption in Maryland, all buyers must be first-time homebuyers. So, for example, if a wife owned a condo prior to marriage and now wants to purchase a house with her husband who is a first-time homebuyer, the exemption would not apply.

Furthermore, if you are purchasing as a “first-time homebuyer,” and you intend to take title in the name of your revocable trust, or another type of entity, you will not qualify for the tax exemption in Maryland.

In the District of Columbia, the program is known as DC Tax Abatement, and, for a purchase price of $332,000 or less, it provides an exemption from the DC 1.1% Recordation Tax and an allowable credit from your seller(s) of 1.1% equal to the DC Transfer Tax. This is a 2.2% swing in favor of the homebuyer!

Additionally, the DC Tax Abatement program excuses first-time homebuyers from having to pay real property tax on their property for five years beginning October 1 following the date of closing. To qualify,� first-time homebuyers must 1) prove they live in DC, 2) must not have owned a property in the District for one year prior to the closing date, 3) meet the income requirement and 4) meet the purchase price requirement.

In sum, homebuyers can expect to pay two kinds of taxes on their property: transfer taxes and property taxes. Even though transfer taxes may be higher from one jurisdiction to the next, it doesn't necessarily mean a homebuyer is guaranteed to pay more taxes over the course of his/her ownership. First-time homebuyers may be eligible for tax exemptions.

For more information on taxes paid at settlement or during the course of homeownership, please contact the team at Federal Title.

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Categories: Uncategorized

6 real estate headlines: 28-April

A daily dose of headlines for real estate agents, mortgage lenders, homebuyers and home sellers.

The Donald's real estate record
Wall Street Journal
: Though he's flirting with a presidential run, Donald Trump is a developer first. (As well a reality-show star, author, New York icon and hairstyle inspiration to millions.)
Prince William and Kate's starter home valued at over $76 million
Curbed DC
: Clarence House, where Middleton and Prince William will live once married, is valued at more than $76.68M and worth 343 times the average newlywed starter home ($223,282) in England.
Region's home price recovery tops U.S. in February
Washington Examiner
: Northern Virginia and the District are leading the rise in prices locally while the Maryland suburbs lag.
Home prices drop in 19 U.S. cities
Washington Post
: But economists and real estate agents are noticing what they call a key first step for any housing recovery: a drop in the glut of homes for sale in markets hit hardest by foreclosures.
Search to Web to save on title insurance
Philly.com: The one-time cost is usually paid at closing. Most buyers use the insurer their lender or lawyer recommends, though a 1974 federal law gives purchasers the right to choose.
Affordable rental housing scarce
Washington Post
: Analysts say they expect rents to keep climbing as developers try to ramp up new projects and catch up with demand.

http://twlv.net/9WqDTa

Categories: Uncategorized

House tries to speed up short sales

Short Sales. These two words strike fear in buyers, agents and title companies. Whenever we receive a contract for a short sale, there is an immediate push to get out the seller HUD-1 to the short sale lender, ASAP!

We get calls from everybody involved to drop everything and get that short sale HUD-1 out for review immediately. We're told that any delay by us will delay the settlement.

The reality is that after we send out the short sale HUD-1, the short sale lender doesn't even bother to review it and approve it for months. I've had plenty of frantic calls from listing agents insisting that the short sale HUD-1 needs to be sent out by the end of the day, only to not get an approval (and thus a closing) for six months. In some cases, the response has taken even longer.

Apparently Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-NJ) have heard about these issues as well. They recently introduced a bill in the House of Representatives that would require mortgage servicers to respond within 45 days of receiving a short sale request.

As might be expected, the National Association of Realtors immediately backed the bill. The hope is that the bill will assist homeowners who are unable to avoid foreclosure, since the lengthy delays often correspond with the seller's inability to make timely monthly payments.

Even if the bill is passed, it remains to be seen if it is practical. Often approvals are needed from multiple entities, and obtaining approvals from all the parties in 45 days may be difficult. Also, the bill requires that the servicer must send notification to the borrower within the deadline whether or not the request is approved, changed or if additional information is needed.

So this does leave a servicer the opportunity to ask for additional information, thereby extending the deadline.

Despite this, passage of the bill could be a significant step in improving the short sale process, and saving all of us in the real estate industry some stress when it comes to a short sale closing.

http://twlv.net/B0hMKA

Categories: Uncategorized

6 real estate headlines: 27-April

A daily dose of headlines for real estate agents, mortgage lenders, homebuyers and home sellers.

Residential development heats up as demand swells
Washington Examiner
: Condominium sales increased by 44 percent last year in the District, compared with a 14 percent increase regionally.
Lenders, appraisers catching up with green homes
HSH.com
: Many who improve their homes with energy-efficient products do so with high hopes of return, only to find that their appraisals are disappointingly low. The reason is inadequate appraiser training.
Buyer's market? Stressed sellers say not so fast
Wall Street Journal
: A nearly five-year slide of home prices has left many sellers unable or unwilling to lower their prices.
Mortgage denied: Sometimes for no good reason
CNN Money
: Getting a mortgage just keeps getting tougher, and many homebuyers are getting rejected for loans they could easily afford.
Realtor.com rolls out iPad app
Inman News
: Agents need to make sure the information they're putting into their multiple listing service is as accurate, up-to-date, and detailed as possible,
Home loan applications rise
Bankrate.com
: The index that measures home purchasing activity was up 10 percent to the highest level in more than four months. That jump was driven largely by a 17.6 percent increase in applications for so-called government loans.

http://twlv.net/DBqKib

Categories: Uncategorized

Pending settlement reached in JPMorgan Chase class-action military mortgage lawsuit

Earlier this year, JPMorgan Chase admitted to improperly overcharging thousands of military service members on their mortgages and foreclosing on their homes. As the result of a class-action lawsuit filed in a federal court in Beaufort, South Carolina, JPMorgan has agreed to pay $56 million to settle those claims.

The pending settlement includes the following terms:

  • A total of $27 million will be paid to approximately 6,000 active-duty service members who were overcharged on their mortgages, and will also be used to lower interest rates on their mortgages and to return homes that were improperly foreclosed on.
  • Approximately $6 million in payments have already been made to service members who were overcharged on their mortgages.
  • Approximately $6.4 million will be paid to service members who may have undergone 'wrongful foreclosure practices.'
  • Another $8 million will be paid in legal fees to the service members' attorneys
  • JPMorgan will be required to reduce interest rates on all deployed service members' mortgages for one year to 4%
  • All houses that were improperly foreclosed upon, but remain unsold, are to be returned. �
  • For those houses already sold, JPMorgan will pay the service members the fair market value of the property.
  • JPMorgan will forgive any outstanding mortgage balances for those service members who were improperly foreclosed upon.
  • Any remaining unused funds will be donated to the charity of choice selected by the U.S. military.

The above-referenced terms have been agreed to by all the parties involved, however the final approval of the settlement has yet to be issued by U.S. District Judge Margaret B. Seymour. http://twlv.net/NMK4PT

Categories: Uncategorized

6 real estate headlines: 25-April

A daily dose of headlines for real estate agents, mortgage lenders, homebuyers and home sellers.

7 basic facts about home insurance
HSH.com
: Whether you're a first-time homebuyer or a veteran homeowner, understanding home insurance is critical for protecting your investment.
4 costly homebuying contract errors
Bankrate.com
: When buying a home, mean what you say and say what you mean when filling out the contract.
How solar panels affect home value
DC Urban Turf
: The value of adding solar panels to your home is two-fold: yearly savings on your utility bills and the value the panels add to the home if you plan on selling it.
Senate report lays bare mortgage mess
Wall Street Journal
: The report shows Wall Street in gritty, day-to-day detail, angling to profit from a booming mortgage market, and then scrambling to cope with its collapse.
New apps help homebuyers
Market Watch
: Instead of jotting down notes on paper while walking through an open house, buyers are bringing up listings on their iPads and sending e-mails to their agents.
FHA vs. private loan insurers
Washington Post
: It's true that the FHA has just gotten a little more expensive, but it may still have the total package you need to do the deal.

http://twlv.net/JlSZQy

Categories: Uncategorized