Home
Terrilee Fitz

Realtypath Associate Broker

Home     Buyers/Sellers     Property Search     Reviews     Communities     Contact


Terrilee Fitz
PSA, GRI ABR CDPE ARC CNE CDAT B.S.
Sandy
7985 S 700 East, Utah 84092
(801) 867-2829
Cell: (801) 867-2829
theonlyfitz@gmail.com



 



 It's better to be prepared than to try and put out fires afterwards!

Crime reports click here!

What you will find on this page:

Avoiding Foreclosures

 

What is a Short Sale? 

Fannie Mae Loans

 Lease to Own info

 

What is a 1031 and their time lines?

What is a Notice of Default and it's Time Line?

Freddie Mac and Fannie Mae Loan changes that effect investors.

 

Short Sales in Real Estate - How to Handle Real Estate Short Sales

How To Do Short Sales

There are many ways to lose a home but signing away ownership in a manner that destroys credit, embarrasses the family and strips an owner of dignity is one of the hardest. For owners who can no longer afford to keep mortgage payments current, there are alternatives to bankruptcy or foreclosure proceedings. One of those options is called a "short sale."

When lenders agree to do a short sale in real estate, it means the lender is accepting less than the total amount due. Not all lenders will accept short sales or discounted payoffs, especially if it would make more financial sense to foreclose; moreover, not all sellers nor all properties qualify for short sales.

If you are considering buying a short sale, there could be drawbacks. For your protection, I suggest that all borrowers:

As a real estate agent, I am not licensed as a lawyer nor a CPA and cannot advise on those consequences. Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, be aware the I.R.S. will consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A lawyer can determine whether your loan qualifies for a deficiency judgment or claim.

Although all lenders have varying requirements and may demand that a borrower submit a wide array of documentation, the following steps will give you a pretty good idea of what to expect.

  • Call the Lender
    You may need to make a half dozen phone calls before you find the person responsible for handling short sales. You do not want to talk to the "real estate short sale" or "work out" department, you want the supervisor's name, the name of the individual capable of making a decision.

  • Submit Letter of Authorization
    Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan. The letter should include the following:

    • Property Address
    • Loan Reference Number
    • Your Name
    • The Date
    • Your Agent's Name & Contact Information

  • Preliminary Net Sheet
    This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions, if any. Your closing agent or lawyer should be able to prepare this for you, if you do not know how to calculate any of these fees. If the bottom line shows cash to the seller, you will probably not need a short sale.

  • Hardship Letter
    The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment. Lenders are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family, but lenders are not particularly empathetic to situations involving dishonesty or criminal behavior.

  • Proof of Income and Assets
    It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value. Lenders are not in the charity business and often require assurance that the debtor cannot pay back any of the debt that it is forgiving.

  • Copies of Bank Statements
    If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender. In addition, the lender might want you to account for each and every deposit so it can determine whether deposits will continue.

  • Comparative Market Analysis
    Sometimes markets decline and property values fall. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a
    comparative market analysis (CMA). Your real estate agent can prepare a CMA for you, which will show prices of similar homes:

    • Active on the market
    • Pending sales
    • Solds from the past six months.

  • Purchase Agreement & Listing Agreement
    When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement. Be prepared for the lender to renegotiate commissions and to refuse to allow payment of certain items such as home protection plans or termite inspections.

Now, if everything goes well, the lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but realize that the lender is under no obligation to accommodate this request.

Below is an actual case study of a short sale compared to the bank foreclosing and taking the property back as an REO. Notice, the bank loses $12,080 if they go ahead and foreclose on the property – and that doesn’t include the additional $8,775 in closing costs they will likely pay before they are done. In this case, the bank could save almost three times as much if they allow a short sale.

 

Read more about Before you Buy a Short Sale.

Click Here For Page Two About Short Sales

 

Check Out These Free Bayview 1031 Tools

1031 Calculator. Use our calculator to see how a 1031 Exchange can maximize investor leverage.

1031 Video Overview. Discover valuable information as we walk you through the mechanics and benefits of 1031 in a short 7 minute video presentation.

1031 Audio Topics. Learn as you listen to exchange experts discuss basic & advanced subjects.

Visit Bayview1031.com for more online tools

Tax Deferred Exchanges

Internal Revenue Code, Section 1031 provides that no gain or loss is recognized when business or investment property is exchanged for other business or investment property of like kind.  A tax deferred exchange is one of the few methods available to defer income taxes on the sale of real property.

The advantage of a tax deferred exchange is that the taxpayer can sell income, investment or business property and replace it with like-kind property without having to pay federal income taxes on the transaction. There must be an actual exchange of property.  A sale of property followed by a reinvestment of the proceeds does not qualify under Section 1031.

General Requirements 

           Business or Investment Property.  The property sold (“relinquished property”) and the property received (“replacement property”) must both be held for productive use in a trade or business or for investment purposes.

           Property Excluded.  Neither property can be: stock in trade or other property held primarily for sale; stocks, bonds or notes; interests in partnerships; certificates of trust or beneficial interests; or choses in action.

           Like-Kind Property.   The relinquished property and the replacement property must be of “like kind.”  Generally speaking, any real property exchanged for other real property should qualify as like kind.  For example, an apartment house property can be exchanged for raw land.

            Exchange.  There must be an exchange of property, not a sale and a reinvestment of the proceeds in another property.

Types of Exchanges

           A simultaneous or two party exchange is an exchange in which the relinquished property and the replacement property are exchanged on the same date, with each party swapping its property in exchange for the other party’s property.  This type of exchange is not common in the real estate area.

           A non-simultaneous or two party delayed exchange is an exchange in which the taxpayer closes on the sale of the relinquished property on one date, but does not close on the purchase of the replacement property until a later date. The exchange is not simultaneous or on the same day. This is sometimes referred to as a "Starker Exchange" after a Supreme Court case which ruled in the taxpayer's favor for a delayed exchange.  A Starker Exchange is utilized where the taxpayer must close on the sale of the relinquished property but has not yet located or is not yet able to close on the purchase of the replacement property.  This is the most common type of exchange in the real estate area.

           A reverse exchange is an exchange in which the taxpayer needs or desires to close on the replacement property before he has found a buyer to buy his relinquished property.  Generally an intermediary takes title to the replacement property and holds or “parks” the property until the taxpayer has sold the relinquished property.  These are sometimes called “parking transactions.”

There are many ways to structure an exchange and with proper planning almost any transfer of real estate can be structured as an exchange.  However, like-kind exchanges must be carefully planned with appropriate documentation and adherence to the applicable Code provisions and Regulations.

Special Rules for a Starker or Non-simultaneous Exchange

The most popular form of exchange is a non-simultaneous or Starker exchange in which the taxpayer closes on the sale of the relinquished property and at a later date closes on the purchase of the replacement property. Section 1031 and the applicable regulations permit Starker exchanges with the use of a qualified intermediary and set out the procedures which must be followed.

A taxpayer who wants to do a Starker exchange under Section 1031 will typically market his property just as he would without consideration of the exchange. A sales contract is signed which contains language requiring the buyer to cooperate with the taxpayer in the intended exchange. Prior to closing, the taxpayer enters into an exchange agreement with a qualified intermediary which permits the qualified intermediary to substitute for the taxpayer in accordance with the requirements of the Code and Regulations. Among other things, the exchange agreement contains provisions for:
 

           An assignment of the taxpayer's contract to the qualified intermediary.

            Payment of the proceeds of sale at closing to the qualified  intermediary instead of to the taxpayer.

           Deeding of the property directly by the taxpayer to the buyer.

After closing on the sale of the relinquished property, the taxpayer locates replacement property.  There are special rules relating to the manner of identification of the replacement property, time limitations on identification and acquisition of replacement property, and the use of qualified intermediaries.

Identification Period. The taxpayer must either close on replacement property or identify the Replacement property within 45 days from the date of transfer of the relinquished property. This requirement is satisfied if replacement property is received before 45 days has expired. Otherwise, the identification must be made in writing signed by the taxpayer and hand-delivered, mailed, faxed, or otherwise sent to the Qualified Intermediary, or other persons named in the regulations. After 45 days have expired, it is not possible to designate any additional replacement properties.

Identification Notice. The identification notice must contain an unambiguous description of the replacement property. This includes, in the case of real property, the legal description, street address or a distinguishable name.

The taxpayer may identify more than one property as replacement property but the maximum number of replacement properties that the taxpayer can identify is (i) any three properties regardless of their market values (the 3-Property Rule); (ii) any number of properties as long as the aggregate fair market value of the replacement properties as of the end of the identification period does not exceed 200% of the fair market value of the relinquished property (the 200 Percent Rule); or (iii) any number of replacement properties but only if the taxpayer receives identified replacement property constituting at least 95% of the aggregate fair market value of all identified replacement properties (the 95% Rule).

Exchange Period. The replacement property must be received and the exchange completed no later than the earlier of 180 days after the transfer of the Relinquished property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was transferred. The replacement property received must be substantially the same as the property which was identified under the 45-day rule described above. There is no provision for extension of the 180 day period.

If an exchange commences late in the tax year, the 180-day exchange period can end later than the April 15 filing date of the taxpayer’s tax return. If the exchange is not complete by the time for filing the tax return, the taxpayer must obtain an extension of time to file. If the taxpayer does not obtain an extension, the exchange period will end on the due date of the return.

Qualified Intermediary

During the exchange period, the taxpayer must avoid actual or constructive receipt of money or other property from the sale of the replacement property.  Any receipt of money or other property before the acquisition of the replacement property will disqualify the exchange.  This means that the taxpayer may not receive cash in hand, nor may the taxpayer derive economic benefit from cash or other property held by an intermediary in an exchange escrow account.  The funds in escrow cannot be pledged as security for a loan to the taxpayer.

Accordingly, at the closing on the sale of the relinquished property, a qualified intermediary (instead of the taxpayer) receives the cash proceeds and holds the proceeds in an escrow account for use in acquiring replacement property.

A qualified intermediary may not be the taxpayer or a “disqualified person.” The Regulations define a “disqualified person” as any “agent of the taxpayer”, meaning generally any employee, attorney, accountant, investment banker, real estate agent or broker who had such relationship with the taxpayer during the two year period leading up to the exchange, as well as family members.

The qualified intermediary enters into an exchange agreement with the taxpayer to acquire the relinquished property from the taxpayer, transfer the relinquished property to its buyer, acquire replacement property, and transfer the replacement property to the taxpayer.  The qualified intermediary holds the proceeds from the sale of the relinquished property and applies the proceeds to the acquisition of the replacement property. 

In practice, the taxpayer may enter into a contract to sell the relinquished property and thereafter assign the contract to the intermediary.  The deed may pass directly from the taxpayer to the buyer.  Similarly, the taxpayer may enter into a contract to purchase the replacement property.  The contract is then assigned to the qualified intermediary, the seller is notified of the assignment, and the replacement property is deeded directly to the taxpayer.

The exchange agreement should clearly spell out the intention of the taxpayer to engage in a tax deferred exchange, the duties and obligations of the qualified intermediary, and limit the right of the taxpayer to receive money or other property held by the qualified intermediary.

Conclusion.

When an owner of real estate wants to dispose of one business or investment property and acquire another property, consideration should be given to structuring the transaction as a like-kind exchange under Section 1031.  With careful planning and appropriate documentation, most transactions can be structured as exchanges.  The savings realized by deferring taxes can be substantial.  However, an exchange should not be undertaken without a thorough consideration of all alternatives and discussion with the taxpayer’s accountants, attorneys and tax advisers.

For further information or if you have any questions or comments regarding the issues presented, please do not hesitate to contact Robert W. Warfield (410) 544-1020 (rww@wmdlaw.com).

Disclaimer: This publication provides general information and is not intended to provide legal advice.The information presented should not be construed to be formal legal advice or the formation of a lawyer/client relationship. Persons accessing this site are encouraged to seek independent counsel for advice regarding their individual legal issues

 

 

 Exchange your 1031 into investment property without management costs +cash flow

What are your time lines

 Explains benefits of a 1031! 

 

1031 Exchange Information


C O N T E N T S

Section 1031 Exchanges: The Basics

Exchange Information for REALTORS®

Rules, Forms, & Guidelines from the IRS

Reverse Exchanges

Tenancy-In-Common (TIC) Exchanges

Web sites for more information

Books & Other Resources

  Section 1031 of the U.S. Internal Revenue Code allows investors to defer capital gains taxes on the exchange of like-kind properties. 1031, or tax-deferred, exchanges hold great advantages for both investors and REALTORS®. This Field Guide provides access to articles, manuals, forms, ideas, and other information to help you start building your 1031 niche.


WHAT'S THE PASSWORD? Articles marked with the red Q () are provided by ProQuest for NAR members only. Click here for the required password.

 

 

Want “PASSIVE INCOME and need a 1031 Exchange”?

 

Need Answers for your 1031 EXCHANGE? How about some passive income with NO WORRIES!!!! Email me and I will set you up with properties that will give you income and you won’t have to take care of all the busy work.

 

Here is a Program that will take your 1031 Exchange and Invest it with a Return!

 

As an industry leader in providing 1031 Tenants-in-Common (TIC) replacement properties, FOR 1031 offers advantages others don't.

Our program provides real estate buyers with the monthly rental income advantage of a triple-net (NNN) leased, single-tenant property with the appreciation advantages of a multi-tenant property. By owning TIC interests in multi-tenant commercial properties across a wide geographical area, real estate buyers can enjoy the diversification that is not possible if you were to buy just one single location property.

The FOR 1031 plan is well-suited for the 1031 exchange buyer seeking monthly income that increases annually, unlimited appreciation potential, and flexible and easy closings. In short, you get the advantages of a long-term, triple-net lease without the disadvantages.

 

Increasing monthly rental income with a NNN PLUS lease

After you purchase property with FOR 1031, the 20-year NNN PLUS lease provides you with an escalating rental income. This escalation occurs by increasing the rent payments each year for the entire duration of the 20-year lease.

FOR 1031 has partnered with a substantial, experienced real estate operator to NNN lease the entire 1031 exchange property (known as a NNN PLUS lease) from the buyer and to pay a monthly lease income that increases annually.

NNN PLUS lessee bears risk of operations and interest rate risk on any property loans and has great incentive to increase property cash flow and, therefore, property value.

Potential appreciation is yours

Unlike other NNN leases, under the NNN PLUS lease, the potential appreciation of your real property benefits you and not the triple-net lessee.

The NNN PLUS lease terminates at buyers' option or upon sale of the property. Thus, the future value of the property is not limited by a long-term triple-net lease, but rather it is derived from the true market rent potential of the property.

Seller contracts with a lessee with an established history of 1031 experience

The NNN PLUS lease is backed by a substantial real estate ownership and management company with an established history of 1031 experience. You can join more than 4,000 satisfied real estate investors that have come to the lessee to fill their 1031 exchange and other real estate ownership needs.

 No closing costs

With the FOR 1031 program, you get great properties with no closing costs. Closings can occur in 10 business days or less if required.

Low minimum purchases

Buyers can purchase Tenants-in-Common (TIC) interests exactly equal to their available cash equity in one or more 1031 exchange properties.

1031/Tenants-in-Common (TIC) Information

 

What is a 1031 exchange?

Under section 1031 of the Internal Revenue Code, a real property owner can sell his property and then reinvest the proceeds in ownership of like-kind property and defer the capital gains taxes. To qualify as a like-kind exchange, property exchanges must be done in accordance with the rules set forth in the tax code and in the treasury regulations. The 1031 exchange can offer significant tax advantages to real estate buyers. Often overlooked, a 1031 exchange is considered one of the best-kept secrets in the Internal Revenue Code.

Who should consider a 1031 exchange?

If you have real property that will net you a gain upon sale (generally property that has been substantially depreciated for tax purposes and/or has appreciated in fair market value), then you are exactly the person who should consider a 1031 exchange.

There are 5 tax classes of property:
1) Property used in taxpayer's trade or business.
2) Property held primarily for sale to customers.
3) Property which is used as your principal residence.
4) Property held for investment.
5) Property used as a vacation home.

Section 1031 applies to the first and fourth categories, and potentially the fifth category. Business use is defined as, "To hold property for productive use in trade or business." Property retired from previous productive use in business can be qualifying property. Investment purpose defined as real estate, even if unproductive, held by a non-dealer for future use or increment in value is held for investment and not primarily for sale. Investment is the passive holding of property, for more than a temporary period, with the expectation that it will appreciate. Property held for sale in the immediate future is not held for investment.

Why should you consider a 1031 exchange?

·         Defer paying capital gains taxes.

·         Leverage.

·         A properly structured exchange can provide real estate investors with the opportunity to defer all of their capital gains taxes. By exchanging, the investor essentially receives an interest-free, no-term loan from the government.

·         Relief from property management. The lessee takes the responsibility to sublet and maintain the property allowing real estate buyers to avoid most of the day-to-day management headaches.

·         Upgrade or consolidate property.

·         Diversify. Own multiple properties rather than just one.

·         Relocation to a new area.

·         Differences in regional growth or income potential.

·         Change property types among residential, commercial, retail, etc.

What are the 1031 exchange rules?

1.       The real property you sell and the real property you buy must both be held for productive use in a trade or business or for investment purposes and must be like-kind.

2.       The proceeds from the sale must go through the hands of a qualified intermediary and not through your hands or the hands of one of your agents or else all the proceeds will become taxable.

3.       All the cash proceeds from the original sale must be reinvested in the replacement property - any cash proceeds that you retain will be taxable.

4.       The replacement property must be subject to an equal level or greater level of debt than the relinquished property or the buyer will either have to pay taxes on the amount of the decrease or have to put in additional cash funds to offset the lower level of debt in the replacement property.

 

1.The real property you sell and the real property you buy must both be held for productive use in a trade or business or for investment purposes and must be like-kind.

2.The proceeds from the sale must go through the hands of a qualified intermediary and not through your hands or the hands of one of your agents or else all the proceeds will become taxable.

3.All the cash proceeds from the original sale must be reinvested in the replacement property - any cash proceeds that you retain will be taxable.

4.The replacement property must be subject to an equal level or greater level of debt than the relinquished property or the buyer will either have to pay taxes on the amount of the decrease or have to put in additional cash funds to offset the lower level of debt in the replacement property.

1031 timelines

Identification Period: Within 45 days of selling the relinquished property you must identify suitable replacement properties. This 45 day rule is very strict and is not extended should the 45th day fall on a Saturday, Sunday, or legal holiday.

Exchange Period: The replacement property must be received by the taxpayer within the "exchange period," which ends within the earlier of . . . 180 days after the date on which the taxpayer transfers the property relinquished, or . . . the due date for the taxpayer tax return for the taxable year in which the transfer of the relinquished property occurs. This 180-day rule is very strict and is not extended if the 180th day should happen to fall on a Saturday, Sunday or legal holiday

Identification Period: Within 45 days of selling the relinquished property you must identify suitable replacement properties. This 45 day rule is very strict and is not extended should the 45th day fall on a Saturday, Sunday, or legal holiday.

Exchange Period: The replacement property must be received by the taxpayer within the "exchange period," which ends within the earlier of . . . 180 days after the date on which the taxpayer transfers the property relinquished, or . . . the due date for the taxpayer tax return for the taxable year in which the transfer of the relinquished property occurs. This 180-day rule is very strict and is not extended if the 180th day should happen to fall on a Saturday, Sunday or legal holiday.

Replacement property identification

3-property rule: You may identify any three properties as possible replacements for your relinquished property. More than 95% of exchanges use the 3-property rule.

200% rule: You may identify any number of properties as possible replacements for your relinquished property as long as the aggregate value of those properties does not exceed 200% of the value of your relinquished property.

95% exemption: You may identify any number of properties as possible replacements for your relinquished property as long as you end up purchasing at least 95% of the aggregate value of all properties identified.

3-property rule: You may identify any three properties as possible replacements for your relinquished property. More than 95% of exchanges use the 3-property rule.

200% rule: You may identify any number of properties as possible replacements for your relinquished property as long as the aggregate value of those properties does not exceed 200% of the value of your relinquished property.

95% exemption: You may identify any number of properties as possibl



Copyrighted © by RealtyDrive.com.