Real Estate Hints and Help

October 17, 2013

Thinking About Restructuring Your Mortgage? Why Now is the Time.

When thinking about restructuring a mortgage or even going through the foreclosure process, most homeowners are motivated by the bottom line-lower monthly mortgage payments or relief from burdening debt.

What most homeowners do not consider is that along with lower mortgage payments, they may receive an income tax bill from the Internal Revenue Service (IRS). The Internal Revenue Code, which embodies the federal tax laws, classifies some discharge or forgiveness of debt as taxable income.

In other words, if the bank agrees to foregive or reduce your principal on the mortgage you signed, then you may owe income tax on the foregiven portion of the mortgage. For example, say you restructure the mortgage on your New York State home and you consequently owe $30,000 less, that $30,000 is considered “income” and is potentially taxed. The idea is that if you borrow money, which is then not paid back, it is a debt that is not being paid back and is akin to receiving “free” money. The taxing authorities consider such foregiveness “income,” because you got the value, but are now not paying it back.

September 30, 2013

Attention New York Property Owners – Reduce Your Property Tax Bill.

by Peter Klose

In New York, grieving your property taxes means more than just complaining when your bill and assessment arrives. Each year the tax assessor for hundreds of municipalities sets a base line “assessment” for how much your they believe your real estate property is worth. Then, based upon formulas adopted by the State, they determineshow much you pay in taxes. You have the right to “grieve” your taxes by filing the correct form with your local “assessor,” in a formal review of the assessment, called a “tax grievance.”

As the property values escalated during the last decade, municipalities gleefully re-assessed the properties at higher and higher values so they could increase the amounts of revenue they collected from the real estate taxes. Homeowners are traditionally skitish about filing a tax grievance for various reasons– maybe they benefitted from such increased assessments because they took out home equity loans, or mortgages. That said, others refrained from filing a grievance fearing that the Town would reassess their property, find the various improvements made to the property, and then tax you more? While you may not file objections every year, the municipality is not permitted to raise your assessment because you grieved your taxes.

What does it mean for New York homeowners to “grieve” your property taxes. To begin with, you must file an RP-524 Form. This process is supposed to be simple, and is well explained here.

September 20, 2013

What if the Mortgage Company Revokes my Mortgage after a Commitment was Issued in New York.

by Peter Klose

Yesterday’s Blog dealt with what happens if you don’t diligently apply for your mortgage while attempting to buy a house. But, what happens if you got your commitment and the bank thereafter revokes it?

According to the case law, a purchaser should be entitled to return of the down payment. Kapur v. Stiefel (1999) 695 N.Y.S.2d 330, 264 A.D.2d 602 (1999). In that case, the purchaser obtained a refund where the mortgage commitment was revoked, makeing the mortgage contingency clause (generally relied upon to cancel the contract)unavailable. This is not automatic, and the question becomes whether the purchaser acted in “bad faith,” or intentionally caused the bank to withdraw the commitment. Although litigation might errupt over whether the purchaser acted in bad faith, if a court finds that they did not (based upon documentary evidence), then the purcahser should be able to get the money back from the seller.

Specifically, the Court held:

September 19, 2013

How protecting your downpayment begins with your mortgage application in New York Real Estate Contracts.

by Peter Klose

One of the must mis-understood concepts is the “Mortgage Contingency Clause,” and how you, as a home buyer, must diligently protect your right to cancel a real estate contract if you are unable to secure a mortgage. This blog is not about the situation where your Bank issues you a mortgage commitment, and then pulls out of the deal for some reason. By then, you have likely waived your mortgage contingency.

In New York State, signing a contract to purchase real estate is usually accompanied by a “downpayment,” which is held in escrow by the seller’s attorney. The downpayment is sometimes called an “earnest money” deposit. (I always thought that such term appropriately described the deposit because you are “excited” to be purchacing a house, but you must earnestly apply for a mortgage. Many times, it is traditional to put as much as ten percent of the cost of the house up as a “downpayment,” and that is the amount at risk if you do not properly apply for your mortgage.

In New York, the downpayment also represents a seller’s damages if the buyer breaches the contract and refuses to purchase the house without justification. A downpayment can represent up to ten percent, or more, of the purchase price depending on negotiations between buyer and seller.

September 5, 2013

New Yorkers– Keep your STAR benefits: Everything you need to know.

by Peter Klose

Is there ever any tax relief? Property Taxes in New York are ever escalating. As a result, many tax payers claimed that their real estate was eligible for School Tax Relief (STAR), when many of such properties were not actually eligble. Asssessors around the State were missing out on millions of dollars. As a result, the New York State Legislature amended the law to require many New York homeowners to re-apply.

To qualify for STAR, you must occupy your home and your income plus your spouse’s income cannot exceed $500,000 per year. STAR then exempts the first $30,000 of the full value of a home from school taxes. Until now, homeowners signed up once for STAR and enjoyed the benefits year after year. However, the New York Department of Taxation and Finance is changing the rules for 2014. To continue receiving STAR benefits in 2014, a new law requires homeowners to re-affirm their eligibility. Registration started on August 19 and will end on December 31, 2013.

Homeowners currently receiving Basic Star should watch their mail. The State Taxation Department is mailing STAR codes to STAR recipients. The code is required to register. Letters were already sent to homeowners in Western New York in the following counties: Allegany, Cattaraugus, Chautauqua, Chemung, Erie, Genesee, Livingston, Monroe, Niagara, Ontario, Orleans, Schuyler, Seneca, Steuben, Wayne, Wyoming and Yates. The remainder of New York State will receive letters containing the codes by early October.

July 29, 2013

Insurance Tips when Buying a Home In New York.

by Peter Klose

Last month we spoke about some tips for new home buyers in New York State when purchasing home owners insurance, and we solicited the help of my friend Bill Allen, an independent insurance broker at the William C. Allen Insurance Agency, Mineola, NY 11501. Here are some ways to try to lower those costs:

1) Consider installing a security system and smoke detectors: A security system that is monitored by a central station alarm company or notifies the police directly will typically provide a 5% discount. Smoke detectors are a standard safety feature in new homes and should be installed in older homes. Having them may not only save a life but could also reduce the cost of insurance.

2) Raise the deductible. Higher deductibles equal reduced premiums: A homeowner willing to take a greater portion of the risk by agreeing to paying a higher deductible in the event of a claim, will pay a much lower premium. Since insurance should only be used for catastrophic events and never for small claims, it makes sense to have higher deductible.

July 15, 2013

A Homebuyer’s Essential: The Appraisal Clause in a Real Estate Contract in New York.

by Peter Klose

So, you are buying a house in the suburbs of New York City and you want to rely upon the Mortgage Contingency to protect your hard earned down payment. But, what if the bank offers you a smaller mortgage than you applied for because the appraisal came in low? Did your attorney protect you with an “Appraisal Clause?”

Every homebuyer wants to get a good deal, but how can you prevent overpaying for your new property? And why is it so important? The key to making sure the price is right is to make sure you have an appraisal and that your sales contract includes an appraisal clause.

An appraisal is a detailed report, created by an independent professional, to establish the value of the home you are buying. The value is what other buyers would pay in a competitive market. Most appraisers will compare the home you want to other homes in the neighborhood that recently sold. The appraiser will make adjustments for the unique features of your home.

June 29, 2013

Insurance Tips For First Time Homebuyers In New York State

by Peter Klose

Let’s face it– the purchase of a home is a life altering, stressful and often expensive proposition with hidden fees, costs, and expenses. Many times, a Mortgage Commitment comes from the bank with the requirement that the new homeowner purchase home owner insurance. My clients often call the agent who issued their automobile policy and ask for insurance, but they don’t ask the right questions, or make assumptions that hamper them later– particularly when they need that policy to respond to some sort of loss. I took up this issue with my friend and compatriate in the real estate world– William C. Allen, William C. Allen Insurance Agency, 372 Willis Avenue Mineola, NY 11501. Here are some helpful insurance tips.

Although it is an intangible product, insurance is the safety net that fills the gap when things go terribly wrong so adequately protecting a home, usually one’s largest asset, is essential. Considering the high costs associated with buying a home, many new homeowners make the mistake of trying to save money by purchasing the most inexpensive insurance they can find. This does not mean they should overpay, but inexpensive policies often omit or limit coverage and may contain exclusions (things that aren’t covered) that could end up costing the homeowner more in the long run if a loss occurs.

First time home buyers should ask trusted friends, family members or their attorney for a referral to an experienced insurance agent who can explain the various nuances associated with homeowners insurance. Because an agent’s job is to manage risk, a good one will include in the discussion what the coverages are, what different insurance companies have to offer and, lastly, ways to limit the cost of the insurance.

May 31, 2013

ilence is Golden for Sellers in New York– the Property Condition Disclosure Statement (PCDS)

by Peter Klose

Who knows the most about your house? Its history, its features, its quirks, its problems? The answer is you, the seller. As someone about to sell a New York home, consult your lawyer (not your realtor) about the Property Disclosure Statement. Under New York State Law, you have a decision to make– complete a 35 question exam about your house, or give a $500 credit for not disclosing to buyers.

This disclosure or admission is part of New York’s Property Condition Disclosure Act, which became law in 2002. The law applies to all land that is improved by one to four family dwellings that are used or intended to be used as residences. Condominiums, cooperatives, vacant land to be used for construction, and certain other forms of ownership are exempt from disclosure.

It sounds simple, but the law demands much more than saying, “My home is in excellent condition!” or “My home is great!” In fact, the Act requires sellers to complete a six-page form that includes questions ranging from the age of your house to whether your property ever contained a fuel storage tank to whether you have ever tested the water quality and flow.

April 1, 2013

NYS STAR Exemption– Calling ALL homeowners in New York

by Peter Klose

After various district attorneys around the state found that homeowners were cheating the system, the New York State Legislature is poised to make all home owners RE-REGISTER for the STAR exemption which can result in a reduction of school taxes. According to recent reports, homeowners will have a year to re-apply for the program, with a deadline of April 1, 2014.

Under the STAR program, New York homeowners who make less than $500,000 and live in their property are eligible, making the the first $30,000 of the full value of a home from school taxes. New Yorkers 65 and older may qualify for the enhanced STAR program. That exempts the first $63,300 of the full value of a home.

Homeowners can apply for the STAR exemption on the website of the state Taxation and Finance Department.