Homes are among the priciest items most of us ever buy. A
significant slice of the purchase goes into paying the real estate
professionals. Clients should know what they’re paying.
Listing agents throughout the United States charge sellers 5-6%
of the home’s sale price. In cold, hard, dollar terms: a commission of 5% on a
$200,000 house is $10,000. Even after seller concessions, that original figure
is in your agreement and it is binding.
Buyers and sellers alike should know how the fees are
structured, and that these fees are negotiable in the initial agreement stage. While
many buyers assume the seller covers agents’ fees, at the end of the day, the
buyer pays for the asset. In effect, the buyer pays all fees, as the seller
prices these costs into the home sale.
Continue reading “How Much Will You Pay Your Real Estate Agent?”
Owners of U.S. investment or business properties should know
about a key tax-deferral provision allowed by the Internal Revenue Service: the
1031 exchange. Also called a like-kind exchange, it’s a way of swapping
one investment property for another.
Upgrading to a more valuable investment property would
usually involve a taxable sale. But by carrying out a like-kind exchange under Section
1031 of the Internal Revenue Code, the property owner defers capital gains taxes.
This leaves more value for the investor to put into a replacement property.
Continue reading “For Property Investors: Six Steps to a 1031 Exchange”
A recast mortgage could be an option for homeowners who need
to tweak their mortgage payments. Most big banks allow at least one recast for a
client with a conventional (Fannie Mae or Freddie Mac) mortgage loan.
To recast the loan, the owner makes a lump-sum payment to
the loan principal. The minimum amount that has to be made is the lender’s call.
The lender then issues a new amortization schedule, now with lower payments. Reducing
the debt left on the loan principal means there is now less interest to pay.
In short, the main idea with a loan recast is keeping the
same loan terms — especially important to people whose loans already have low
interest rates, and those who wish to avoid resetting the term of years — but lightening
the monthly payment due from here on. A recast can be an appealing prospect for
a homeowner who’d like to lower the principal in one fell swoop, leaving the
length of the loan as it is, only with lower future payments.
Continue reading “Fine-Tuning Your Mortgage: Can a Recast Loan Make Sense?”
For a homeowner who has built up substantial equity, a cash-out refinance can free up funds for big projects. Lenders expect to see many requests for these loans this year. According to industry research, cash-out activity should spike in the second half of 2021, when the economy is on better footing, yet interest rates are still low.
A redesigned bathroom, a renovated kitchen, an addition to
the floor plan, the installation of central air or a security system… These are
the big-ticket items that cash-out refinancing supports. Assume a homeowner wants
to do a $30K kitchen upgrade. There’s a balance of $100,000 on the current mortgage.
The new, cash-out refinance mortgage will amount to $130,000. That’s $100,000,
plus $30K in cash from the lender. Then the homeowner can do that kitchen
upgrade, and do it at a better rate than credit cards typically offer.
So, the cash-out refinance creates a bigger mortgage — and
may also extend its term of years. The bigger loan can mean bigger interest tax
deductions if the money is used to build or upgrade the home, or
install accessibility features.
Continue reading “How to Replace Your Current Mortgage With Cash-Out Refinancing”
Today’s low interest rates are exciting, and many homeowners
are thinking about refinancing their mortgage
loans. There’s a sort of FOMO (Fear of Missing Out) in the rush to get
loans. But for those who already have fairly low, fixed interest rates (say, 5%
or under), saving money through refinancing can cost more than it’s worth.
The question: Given the costs of refinancing, will a reduced
interest rate prove worthwhile? The answer: It all depends. Let’s take a look some
pros and cons of refinancing now.
Continue reading “Interest Rates Are Low. Does That Make Refinancing a Good Deal?”
What if a potential buyer is interested in acquiring a part
of your property, and you’re willing to sell?
If you’re a land owner with full rights in a piece of
property, you may legally sell any part of it — unless bound by an agreement to
the contrary. If a parcel is mortgaged, an owner may not subdivide parts to
sell, thereby shrinking the loan collateral, without the lender’s approval. A
homeowner who attempts to sell mortgaged property without the lender’s
permission invites the risk of triggering the loan’s “due
on sale” clause and having to pay off the full mortgage.
Thus, to transfer title to a part of a property, the owner must
first receive a partial release of mortgage. This instrument allows the
sale of a section of a property, free and clear, yet keeps the mortgage on the
How does the partial release process play out? In this
article, we boil it down to a few key elements. We also offer some contextual
questions to consider. By examining the context of a potential sale, a
potential seller can avoid serious losses in value.
Continue reading “The Partial Release of Mortgage: When You’re Only Selling Part of Your Property”
A quitclaim deed is sometimes used for transferring a home between
spouses, but another option in some states is the interspousal transfer
grant deed (“interspousal deed”). It, too, can pass a house between spouses
without a sale. The interspousal deed, whose entire purpose is to change the
ownership on the title, is the preferred instrument for couples in California.
can find California’s interspousal grant deed here.
Traditionally, interspousal conveyances are not subject to
gift or transfer taxes. But in 2021 you might ask: What about California’s Proposition
19? Will that trigger a tax reassessment on interspousal transfer grant deeds now?
The short answer is no.
Continue reading “On the Rise (and Protected From Prop 19): The Interspousal Deed in California”
There’s an old saying: Where there’s a will, there’s a
relative. Like many old sayings, this one is nearly always true.
Still, what if someone dies, leaving no heirs to take title
to a house left behind? In some cases, wills are found, but they either
rule out or just fail to name any currently living heirs. What happens to the
If all else fails, the state has the right of escheatment.
The government may ultimately take title to assets of deceased people
who pass away without leaving any known heirs or instructions.
But again, this is a rare occurrence. Whether there’s a will
or not, there’s almost always a way to find an heir.
Continue reading “Escheat Homes and the Bizarre Business of Heir-Tracing”
Tax season is here. What better time to think about the tax
implications of a real estate investment?
Here is a selection of updates and tips, based on 2021 news
and policy trends. We’ve designed this article to be informative for homeowners
and aspiring homeowners alike.
Continue reading “Hot Tips for Tax Season — And for Hopeful Homeowners”
Real estate buyers qualify for home loan benefits from the
U.S. Department of Veterans Affairs if they’ve performed 181 consecutive days
of active duty (90 consecutive days in wartime), or spent 6 years in the
National Guard or Reserves. Surviving spouses of veterans who died in service,
or from related causes, may also qualify. A knowledgeable lender can tell you
if you qualify — and assist you in obtaining official confirmation, in the form
of a VA Certificate of Eligibility (COE).
Here, we lay out the nuts and bolts of the process.
Continue reading “Buying a Home With a VA Loan”