Blog

Jul 9 2014
The HUD rule makes recently flipped properties ineligible for FHA mortgage insurance. It also allows FHA to better manage its insurance risk by requiring additional support for a property's value when a significant increase between sales occurs. Features include: Sale by Owner of Record: Only the owner of record may sell a home to an individual who will obtain FHA mortgage insurance for the loan; it may not involve any sale or assignment of the sales contract, a procedure often observed when the homebuyer is determined to have been a victim of predatory practices. Time Restrictions on Re-sales: •  Re-sales occurring 90 days or less following acquisition will not be eligible for a mortgage to be insured by FHA. FHA's analysis disclosed that among the most egregious examples of predatory lending was on "flips" that occurred within a very brief time span, often within days. Thus, the "quick flips" will be eliminated. •  Re-sales occurring between 91 and 180 days will be eligible provided that the lender obtains an additional appraisal from an independent appraiser based on a re-sale percentage threshold established by FHA; this threshold would be relatively high so as to not adversely affect legitimate rehabilitation efforts but still deter unscrupulous sellers, lenders, and appraisers from...

Jun 23 2014
WHAT IS A TAX FREE EXCHANGE? Partially born in the summer of 1990, Section 1031 of the U.S. Internal Revenue Code, allows investors to trade one property for another without paying federal income taxes on the transaction -- provided certain qualifications are met. This makes it possible for investors to sell and buy property of “like-kind” while deferring tax consequences. In essence, a 1031 tax exchange allows an investor to reinvest 100% of the equity from one sale of a property - into the purchase of a replacement property - without recognizing any gain. This type of property sale and reinvestment can either be done through a simultaneous or delayed 1031 tax exchange. Normally, a 1031 tax exchange is handled as a three-party delayed exchange, or "Starker Exchange", in which an “intermediary” ensures a reciprocal transfer of the properties and provides a "safe harbor" against the actual receipt of exchange funds. Note: You should always consult a tax professional when you are doing anything related to taxes and/or real estate. WHAT IS THE ADVANTAGE OF A 1031 TAX FEE EXCHANGE TO ME? The clear Advantage to the investor for using a Tax Free exchange is the deferred capital gains tax. This means that the taxpayer has more cash on hand to reinvest – or "trade-up" - into another, more valuable replacement...

Jun 11 2014
"DUE ON SALE” CLAUSES  - EXEMPTIONS FOR RESIDENTIAL MORTGAGES under the Garn-St. Germain Act. Exemption of specified transfers or dispositions.  With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon: (1) the creation of a lien or other encumbrance subordinate to the lender’s security instrument; (2) the creation of a purchase money security interest for household appliances; (3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety; (4) the granting of a leasehold interest of three years or less not containing an option to purchase; (5) a transfer to a relative resulting from the death of a borrower; (6) a transfer where the spouse or children of the borrower become an owner of the property; (7) a transfer resulting from a decree of a dissolution of marriage, legal separation agreement; (8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy.