Two Major Homeowner Tax Provisions to Expire:

Major trade groups urge Congress to renew two major homeowner tax provisions

Set to expire end of 2016

This year two of the biggest tax provisions at the top of Congress’ pile to renew impact housing and homeowners, especially first-time homebuyers.

At this point, it’s standard practice for Congress to renew a handful of tax extensions at the end of the year, given that these provisions are constantly reaching their expiration date.

The Mortgage Bankers Association, the National Association of Home Builders, and the National Association of Realtors wrote a joint letter to House Speaker Paul Ryan, R-Wis., and Minority Leaders Nancy Pelosi, D-Calif., Mitch McConnell, R-Ky., and Leader Harry Reid, D Nev., to urge Congress to act on two critical tax provisions that are scheduled to expire at the end of 2016.

There are only 36 temporary provisions that are set to expire at the end of 2016, compared to the 52 that expired at the end of 2014, according to the Tax Foundation.

The foundation added that these 36 provisions are expected to reduce federal revenue by about $17.7 billion a year.

Here are the comments in the letter on each tax provision:

  1. Mortgage debt provision:

The first provision ensures that any mortgage debt that is forgiven by a lender in connection with a principal residence will continue to be excluded from the taxable income of the borrower.

This prevents “underwater” homeowners from being taxed if their lender reduces the principal balance or a portion of their mortgage debt is forgiven in connection with a so-called “short sale.”

Consequence:

If Congress fails to act, struggling homeowners who accept short sales or a loan modification offer could be faced with a substantial tax assessment. The current provision, if extended, would aid many loss mitigation efforts and provide borrowers with the certainty that they will not be faced with a large, unexpected tax bill.

  1. Mortgage insurance premiums

We believe that Congress should extend the tax deduction for mortgage insurance premiums paid by homeowners. For a $200,000 home, many homeowners are presently able to deduct between $600 and $1,000 from their taxes.

Consequence:

Retaining this deduction beyond 2016 will greatly benefit the large number of homeowners, particularly first time home buyers, who cannot afford a 20% or greater down payment and who use mortgage insurance in order to purchase a home.

The Tax Foundation stated that these two provisions, which are two of the biggest on the list, were projected to cost $7.5 billion in 2016.

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Question About Escrow Deposit

By Margy Grant, ESQ

November 21, 2016 — It’s a question we often get on the Florida Realtors Legal Hotline: Is earnest money required to make a contract legal and binding. The answer: no.

Deposits are often provided as evidence of a buyer’s commitment to the purchase, but they are not required by law. A binding contract to purchase real estate only requires consideration. Consideration is defined as something of value offered for something else of value.

According to the Florida Bar, “The formation of a contract is accomplished when there is an offer and acceptance between the contracting parties of the exchange of ‘consideration’ (that is, something of value). This offer and acceptance are sometimes referred to as a ‘meeting of the minds.’ If the parties have not reached a meeting of the minds, then there is no agreement.” In the case of a real estate purchase contract, the consideration the buyer is offering is the purchase price in exchange for the deed to the property.

Most purchase contracts contain a section to indicate the amount of an escrow deposit and when it’s due. Purchase contracts also usually contain a liquidated damages clause that entitles the seller to keep the deposit if the buyer defaults. Liquidated damages are common in real estate purchase contracts, even though the parties are agreeing what the remedy is for the other side in the event the buyer defaults.

If you as the listing broker receive a contract that is either cash or 100 percent financing with a deposit amount of “0,” you must present it to the seller. This contract is valid despite the lack of an earnest money deposit. You may explain to the seller that because there’s no deposit, there is nothing for the seller to keep as liquidated damages if the buyer defaults. Buyers and sellers can negotiate these terms just like all other terms of the agreement.

Some sellers look at a lack of deposit as unfair. Why, they ask, would they remove their house from the market if the buyer is not serious enough to put down a deposit? A seller certainly may insist on a deposit before agreeing to the contract; this is allowable if the buyer agrees. However, it is not legally required. In addition to a deposit, sellers will also sometimes ask for other requirements like proof of funds or a prequalification letter.

Transactions come in all shapes and sizes. Realtors do well to understand some components of contract law to assist them in working with buyers and sellers. All parties should review purchase contracts carefully, preferably with an attorney, to understand their rights under the agreement in the event the other party does not perform as promised.

Margy Grant is vice president and general counsel of Florida Realtors

© 2016 Florida Realtors®

Important Home Buying Tip

When buying a home be careful to check if permits were pulled as required or closed with a final inspection…

No permits… who ever is the deeded owner of the property at the time the municipality discovers the code violation of doing work without a permit will  become the violator. 

They could be made to hire an engineer to inspect the work, draw an as built plan or wtite a report to submit to the municipality to issue a permit, usually at double fee and sometimes with a fine. 

Further if work is found not to be up to code, they will have to fix it which could mean removal of part or all of the code defficent areas and do the repairs correctly including all required permits and inspections. 

If this involves a set back violation then a varrience will need to be filed to wave the set back. If that is not granted then the section over the set back violation will have to be removed.

 Non-permitted work can be very exoensive to remedy. I am addressing this as a retired designer & general contractor of 22 years prior to my current real estate practice.

Seller Q&A Series No.9

Question 9 of 43 in the Seller Q&A Series.

Q: Do I need an attorney to sell a home?

A: Although most sellers can handle routine real estate purchase contracts, some experts say it is a good idea to be represented by an attorney, particularly if you are selling on your own.  You should choose one with expertise in real estate transactions.  Before hiring someone discuss all the details of the transaction, including all legal costs you will incur.  A good attorney will assist you in completing the deal swiftly and with confidence.

 

Seller Q&A Series No.8

Question 8 of 43 in the Seller Q&A Series.

Q: What are some costs associated with buying a new home?

A: Basically, the costs are no different from when you purchased your existing home. They include moving expenses, loan costs, the down payment, a home inspection, title work and policy, and paying for a new hazard insurance policy. Your lender can give you a disclosure of estimated costs when you apply to be pre-qualified for a home loan.

Seller Q&A Series No.7

Question 7 of 43 in the Seller Q&A Series.

Q: What are some costs associated with selling my home?

A: Besides the costs related to making repairs and improving the overall appearance of the home, as the seller you will also need to pay the following:

  • A real estate commission, if you use an agency to sell.

  • Advertising costs, marketing materials, and other fees if you sell the home yourself.

  • Attorney, closing, or other professional fees.

  • Title insurance

  • Excise tax for the sale.

  • Prorated costs for your share of annual expenses, such as property taxes, homeowner association fees, and fuel tank rentals.

  • Any other fees normally paid by sellers in your area, including points, survey, and appraisal fees.

To get a better handle on all costs, ask a real estate agent. Agents deal with this information daily and can give you a pretty good estimate of the closing costs you can expect to pay.