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Avoid Capital Gains Tax When Selling Real Estate

June 16, 2011 By dlabcrea Leave a Comment

You can cut the capital gains tax out of a real estate sale with the use of Exchange 1031.  Exchange 1031 provides that if you are going to use proceeds of the sale of a real estate property to purchase additional property, you can avoid paying the capital gains tax.

The idea is to bolster real estate sales by allowing taxpayers to waive this tax on your property sale if the main purpose of the sale is to purchase another property.  This provision gives an incentive for both the buying and selling of property.

Capital gains taxes assessed in the sale of real estate are estimated at around 20%-30%.  If a taxpayer is engaged in a “like kind” real estate purchase, the tax reduces his ability to purchase a similar property by effectively cutting the resale value of their property by 20%-30%.  This, in turn, will reduce the amount of money that they are likely to spend on a “like kind” purchase of another property.

There, of course, are conditions to deferment of capital gains tax under Exchange 1031.

The value of the property you are purchasing with the proceeds from the sale of your property must be equal to or more than the net profits from the selling of your property.

The full equity realized from the sale of your property must be used to purchase the “replacement” property.

If the replacement property you purchase under an Exchange 1031 provision turns out to be of lesser value than the property you sold, you will be liable to pay an accrued tax.  The amount of your tax liability will be determined by the amount the replacement property fell short of the full equity of the sold property.

In other words, the amount of tax liability you incur will depend upon your given situation and the amount of full equity you realized after the sale of your property.  Therefore, part of the tax is deferred in this instance, rather than deferring all of the capital gains tax.

The hope of this provision is that such a substantial tax savings will encourage real estate sellers to purchase “replacement” property rather than invest the income from such a sale of real estate into some other venture.  It is a good provision for people looking to “buy up” in the housing market.

Written by Chintamani

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Real Estate Sellers Revolt! Rejecting Ridiculous Offers

June 16, 2011 By dlabcrea Leave a Comment

It is in the past that we find the quaint efficient way to handle the negotiations of the real estate contract.

The simple concept of  ‘in good faith’ has (over time) been strengthened by the holding of earnest money. Earnest Money and Faith are held hand in hand. Hence, the seller and the buyer have typically agreed to earnestly act in good faith in order to make a real estate deal happen.

The Realtors and the real estate attorneys involved in the transaction take on the roles of coach and referee, while the mortgage lender provides the ball. Pulling a fake out will be grounds for a penalty, so remember to act earnestly (and always) proceed in good faith.

The subject at hand, has to do with today’s real estate market.

The market has had a huge shift in prices, and reasonable sellers have lowered their expectations along with their prices.

It took some time, but the adjustment seems to have taken place across many real estate markets.

Unfortunately, the adjustment has not made it over to the buyers side.

Rumors and misinformation have filled the minds of reasonable buyers and turned them into vultures looking for road kill. There is a supposition that all sellers are in foreclosure and desperate to sell their homes. The news media reiterates this information daily.

And, here, below, is a look at how this type of transaction works in real life:

The sellers get the offer, it’s 30% below list price.

NOTE: The sellers have already priced their home 30% below market value (what they would have received a year ago. Their home is adjusted for what is now current fair market value.

The sellers counter offer looks something like this:

“We will reject your offer.

See, we are not desperate. We just want a reasonable offer, not a low ball offer 30% off our asking price. Okay, to be fair, we will counter the offer.

Absolutely, counter it at full price, not a penny less.”

The buyer then cops an attitude:

“There are plenty of homes on the market and I will just keep looking until I find someone who wants to actually sell their home.”

As the Realtor, let me interject:

“The sellers have made their home sparkling clean, model perfect;  they have packed up most of their daily possessions; they have brought the home to new current market values…they have had the home pre-inpsected and are offering a home warranty with it as well. It should handily appraise. The sellers aren’t in foreclosure, what  information are you basing your offer on other than you were told all sellers are desperate and they will accept any price? “

The buyer:

“This is a buyers market and if the seller is going to be unreasonable, I will just keep looking.”

A thought about this. The sellers may be facing a difficult selling market, but unless you are a cash buyer, the seller has to take it your offer on good faith; that you will earnestly march forth and provide the lender with all the documents that they may need to get you (the buyer) through to the closing table.

What if sellers took the stance that all buyers  (except cash buyers, got to love’em) were unqualified because of new strict lending policies or  looming layoffs. Yes, you may qualify now, but rumors that the ax is falling on more jobs means that you may never close.The negotiation of real estate purchases is still a two way street.

People typically buy houses to make them into a home. If you are an investor, stick with the foreclosures. If you are honestly looking for a house for you and your family to call a home, then proceed in such a manner.

Again, from the sellers:

“When you get serious about offering a negotiable price, we can move forward. We are not overly proud nor are we desperate. If you don’t want the house at a fair price, and don’t want to act in good faith, maybe this house isn’t for you. We are looking for someone to work with. Someone who will love our home, the moment they enter it. Not someone looking for roadkill. In the mean time, we are going to seek other buyers.”

This conversation, sprinkled with a little attitude and you have a perfect recipe for a terrible sandwich. One that will leave a bad taste for real estate in everyones’ mouth.

A Home Quiz for you:

Have you heard any of these sayings before?

Home is where the heart is.
Home is where my honey is.
Home, sweet home.

Ahh, I thought so.

Charlotte NC Real estateis a good sound investment. The home buying and selling transaction is like none other. It is tied to heart strings…emotions. If you find a home you love, proceed forward with your negotiations, and be realistic. Eventually, the shoe will be on the other foot, and someday you will be the home seller. You will find yourself hoping that someone will come along and buy your home, and that they too, will love it like you do.

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Real estate seller ? Researching on potential sellers

June 16, 2011 By dlabcrea Leave a Comment

The person who is going to sell a real estate property is called the real estate seller. The transaction of a property can be directly between a buyer and a seller without the involvement of a real estate agent. The sellers need to have knowledge on the state laws on real estate in the state he is going to do the business, the federal and local laws, and also the requirements of different real estate companies. However, the buyer can find a potential seller in many ways.
Researching for potential sellers
If you want to find a potential seller, you will have to research on the estate sellers:
1. County courthouse – Visit the county court of a county where you want to buy your property. You will be able to get the information from the Public Records room there. You can also ask for help from the court clerk. He can help you in finding the countyforeclosure lists. These foreclosure lists and tax sale lists contain information on the owner whose property is to be foreclosed. Most of the time, sellers are also open and ready to sell off their property to anyone interested in buying and if that person has the ability to buy that property.
2. Check out advertisements – You can also look into your local newspaper for “Classified Ads.” Search for especially the advertisements on estate sales. These kinds of sales generally include not only the furnishings, but also the adjacent land due to the family wanting to settle a will after the death of the parents. When you will research for potential real estate sellers, try to be sensitive to the ideas and feelings of the family when you go to them about the property.
3. Check your neighborhood – You can also get potential sellers from your neighborhood. Check out in your neighborhood if any yard or garage sale is going on. If you find out that any homeowner is selling off large items like furniture, campers or may be motor homes, this might be a sign that the family is going to relocate. You can ask the person politely if he is going to sell his/her home.
4. Check with local real estate office – Another thing that you can do is checking out with your local real estate office. The realtor or the broker may be of some help to you in your research for potential sellers.
You can also talk to a real estate agent. Agents deal with both sellers and buyers so they may be able to give you some information on potential sellers.

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