The Winter SnowForeign Investment in Real Property Tax Act (FIRPTA) is a unique tax. It requires the buyer, that’s right, the buyer to withhold from a foreign seller and pay to the Internal Revenue Service (IRS) a tax on a percentage (formerly 10%) of the amount realized (sales price) upon the sale of any U.S. real property.

FIRPTA changed in December, 2015 for those closings on or after 2/17/16.  There are some exceptions to the rule and an increase of the tax to 15%.

 

 

  1. If the sales price is $300,000.00 or less, the buyer intends to occupy the subject property and executes a certification of the facts (Buyers Affidavit of Residency, Intent and Price), the withholding rate is 0%.  This exception remains unchanged and was reconfirmed by the PATH Act.
  2.  If the sales price exceeds $300,000.00 but does not exceed $1,000,000.00, the buyer intends to occupy the subject property, and executes a certification of the facts (Buyers Affidavit of Residency, Intent and Price), the withholding rate is 10%.  This exception was newly created.

For all other transactions the withholding rate is 15% unless the foreign seller has obtained from the IRS a written Determination of Reduced or Waived Withholding.

Questions? 702 245 1787. Darren

 

IMAG1262[1]Merry Christmas and Happy Holidays from the U.S. Treasury Department. As we all know, the Mortgage Debt Forgiveness Act was set to expire at the end of 2015. This law grants tax relief when there mortgage (debt) forgiveness in a short sale. Debt relief is treated like income and is taxable. The Mortgage Debt Forgiveness Act was included in the fiscal 2016 federal appropriations and tax relief bill and was signed into law December 18, 2015. The Short Sale tax break lives on! “A Merry Christmas to us all; God bless us, every one!” Tiny Tim, circa 1850.

Az SpringNew Rules and New Forms Effective August 1, 2015.

Loan Estimate.

Combined the Good Faith Estimate (GFE) and the initial Truth-in-Lending disclosure (initial TIL). The Loan Estimate form is designed to provide disclosures that will be helpful to consumers in understanding the key features, costs, and risks of the mortgage loan for which they are applying, and must be provided to consumers no later than the third business day after they submit a loan application.

Closing Disclosure.

Combined the HUD-1 and final Truth-in-Lending disclosure (final TIL and, together with the initial TIL, the Truth-in-Lending forms) The Closing Disclosure is designed to provide disclosures that will be helpful to consumers in understanding all of the costs of the transaction. (Replacing the HUD-1 Settlement Statement and final Truth-in-Lending Disclosure).

This form must be provided to consumers at least three business days before consummation of the loan. The forms use clear language and design to make it easier for consumers to locate key information, such as interest rate, monthly payments, and costs to close the loan. The forms also provide more information to help consumers decide whether they can afford the loan and to facilitate comparison of the cost of different loan offers, including the cost of the loans over time.

Escrow Closing Notice.

Escrow Closing Notice. The Escrow Closing Notice and mortgage servicing transfer and partial payment notices. Provided no later than three business days before the consumer’s escrow account is canceled. This is when the Homeowner elects to pay insurance, for example, directly, and not via an impound.

Special Information Booklet.

The Special Information Booklet (RESPA Settlement Costs Booklet).  Creditors must provide a copy of the special information booklet to consumers who apply for a consumer credit transaction secured by real property, except in certain circumstances. The special information booklet is published by the Bureau to help consumers applying for federally related mortgage loans understand real estate transactions. If the consumer is applying for a HELOC the creditor (or mortgage broker) can provide a copy of the brochure entitled “When Your Home is On the Line: What You Should Know About Home Equity Lines of Creditinstead of the special information booklet. The creditor need not provide the special information booklet if the consumer is applying for a real property-secured consumer credit transaction that does not have the purpose of purchasing a one-to-four family residential property, such as a refinancing, a closed-end loan secured by a subordinate lien, or a reverse mortgage. Creditors must deliver or place in the mail the special information booklet not later than three business days after receiving the consumer’s loan application.

DISCLOSURE REQUIREMENTS

Changes to Party Responsible for Disclosure

Escrow Now to Provide. The settlement agent is required to provide the seller with the Closing Disclosure reflecting the actual terms of the seller’s transaction. The settlement agent may comply with this requirement by providing the seller with a copy of the Closing Disclosure provided to the consumer (buyer) if it also contains information relating to the seller’s transaction. The settlement agent may also provide the seller with a separate disclosure, including only the information applicable to the seller’s transaction from the Closing Disclosure. However, if the seller’s disclosure is provided in a separate document, the settlement agent has to provide the creditor with a copy of the disclosure provided to the seller.

RETENTION

Record Retention.

  1. Five Years. The creditor must retain copies of the Closing Disclosure (and all documents related to the Closing Disclosure) for five years after consummation.
  2. Two Years. The creditor, or servicer if applicable, must retain the Post-Consummation Escrow Cancellation Notice (Escrow Closing Notice) and the Post-Consummation Partial Payment Policy disclosure for two years.
  3. Three Years. For all other evidence of compliance with the Integrated Disclosure provisions of Regulation Z (including the Loan Estimate) creditors must maintain records for three years after consummation of the transaction.

Darren J. Welsh
Office of the General Counsel
Berkshire Hathaway HomeServices
Arizona Properties
Email: darren.welsh@bhhsaz.com

Short Sale Tax Issues 2014Tax Exclusion on Short Sales, extended to end of 2014. As in two weeks!

My original post on this matter is here: Income Taxes & Foreclosures/Shortsales 12.21.2007.

See also January 2013’s, Income Taxes & Foreclosure/Short Sales 2013 Update

As you know the tax code had an “Exclusion from gross income of discharge of qualified principal residence indebtedness (Sec. 108)”

…in other words many home owners were not taxed for 1099C income received as a result of foreclosure/short sale.  This exclusion expired 12.31.2103, well, it has been reinstated and extended to 12.31.2014. Good news for the short sale market.

Help keep a strong focus on REALTOR® Safety throughout the year by sharing these safety tips with others.

Pool Pump 2014

11 Tips for Holding a Safe Open House

  1. If possible, always try to have at least one other person working with you at the open house.
  2. Check your cell phone’s strength and signal prior to the open house. Have emergency numbers programmed on speed dial.
  3. Recommend that colleagues use a covert emergency communications device.
  4. Upon entering a house for the first time, check all rooms and determine several “escape” routes. Make sure all deadbolt locks are unlocked to facilitate a faster escape.
  5. Make sure that if you were to escape by the back door, you could escape from the backyard. Frequently, high fences surround yards that contain swimming pools or hot tubs.
  6. Have all open house visitors sign in. Ask for full name, address, phone number and email.
  7. When showing the house, always walk behind the prospect. Direct them; don’t lead them. Say, for example, “The kitchen is on your left,” and gesture for them to go ahead of you.
  8. Avoid attics, basements, and getting trapped in small rooms.
  9. Notify someone in your office, your answering service, a friend or a relative that you will be calling in every hour on the hour. And if you don’t call, they are to call you.
  10. Inform a neighbor that you will be showing the house and ask if he or she would keep an eye and ear open for anything out of the ordinary.
  11. Don’t assume that everyone has left the premises at the end of an open house. Check all of the rooms and the backyard prior to locking the doors. Be prepared to defend yourself, if necessary.

(Sources: Washington Real Estate Safety Council; City of Mesa, Arizona; Nevada County Board of REALTORS®; Georgia Real Estate Commission; Sponsor)

Stiletto by Secure Couture is a sponsor of Realtor Safety USA and is also partnering with the NCDSV to raise funds to provide consulting, training, and advocacy directed to improving women’s safety. Their work will also provide subsidized Stiletto personal security products and services to women’s shelters, women on campus, K-12 teachers, and others at risk.

Stay Safe,

Realtor Safety USA
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All tips are taken from NAR’s REALTOR® Safety Resource Kit. See www.REALTOR.org/Safety for more information on the important topic of REALTOR® safety.

Seller Financing and the Dodd-Frank Wall Street Reform and Consumer Protection Act  (“Dodd Frank”)

The Arizona Association of REALTORS® has a clear and helpful post on the Dodd-Frank seller financing regulations that go into effect January 2014.  You can read the Arizona Association of REALTORS® December 2, 2013 post by clicking here.

It discusses and explains when seller financing will fall under the guidelines of Dodd-Frank Act in other words is that lender a “loan originator?” (§ 1026.36(a)(4).  It describes the two exceptions and provides examples of four (4) new forms, listed below. I encourage you to read the post.

  1. SELLER FINANCING ADDENDUM; Credit Transaction Secured By A Dwelling — Seller providing financing for only one residential property in any 12-month period.
  2. SELLER FINANCING ADDENDUM; Credit Transaction Secured By A Dwelling — Seller providing financing for three or fewer residential properties in any 12-month period.
  3. SELLER FINANCING ADDENDUM; Credit Transaction Not Secured By A Dwelling.
  4. LOAN ASSUMPTION ADDENDUM.

ImageMany of you have heard that short sales were going to be limited so that the buyer’s and seller’s agent could not be from the same brokerage.  The new rule was effective October 1, 2013.

You can read the July 9, 2013 Mortgagee Letter (#2013-23) from HUD here.

The latest news from the National Association of REALTORS(r) is that as of yesterday September 25, 2013 HUD officials reported that they would reissue the July Mortgagee Letter (#2013-23) and remove all dual agency language.  The issue is not completed,  but the  dual agency policy will not be implemented on Oct. 1.