It is not a deduction, it is an interest free government loan given to you as a tax credit. A deduciton only reduces your taxable income before taxes are computed. Once you have computed your tax bill, a tax credit reduces the amount of tax you pay on a dollar for dollar basis. As a general rule, tax credits are better than deductions.
Here are some more details about the tax creditCan only be used by first time homebuyer who is purchasing a primary residence.Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps at $95,000 and $170,000, respectively.The credit is recaptured. 6.67 % of credit will be repaid each year for 15 years. If home sold before 15 years, then remainder of credit recaptured on sale.Applies to purchases closed betwen April 9, 2008 and July 1, 2009The "tax credit" isn’t really a tax credit, instead, it is just a tax free and interest free loan (with some qualifications) that must be repaid. You have to start paying back this loan within two years and you make equal payments over 15 years. When you sell your home, any profits will go first into paying off that loan. If you sell at a loss, the difference will be forgiven… meaning you will not owe any money on the loan (although it should be recorded as income, so you will owe taxes on it).
[ Edited by DaveT on Date 11/10/2008 ]
Just to piggy back on Dave T, we should also note that the "tax credit" is equal to 10% of the purchase price of your primary residence, or, $7500, whichever is less.
If you sold the property, you should have a legitimate sales agreement detailing the terms of the sale. You might be able to record this sales agreement or memorandum against the property to help you recover your funds in the future.
However, I do not understand why you would sell a property (or transfer beneficial interest) without receiving some sort of compensation. Did you not use an escrow company for the transfer? Did the seller not live up to their end of the bargain? Are you tyrying to renegotiate the sales terms after the sale is completed?
Obviously, the circumstances of the situation will dictate what options are truly availabl;e to you.
Demand the eleven months of taxes and a warranty deed. Remember that there are winter taxes here too, and you should be paid the seven months of winter taxes also. Otherwise you want your money back, or there will be legal action. Having an attorney review the contract and send the letter would increase your chances of getting what you want.
When I close on a home, I ask all questions under the sun before signing anything. A number of closing agents have accused me of being a pain but I always tell them that after I sign on the dotted line, I am committed to the deal. I only have the power BEFORE I sign.
Now, with your situation, it appears that you have already done the deal. Did you purchase Owners Title insurance? From everything that was said above, I am not clear if you did or not but I am assuming that you did not because of the responses you are getting from the Title company.
The quit claim deed is totally not acceptable. A quit claim only releases whatever interest the signor may or may not have in the stated property. It does not "warrant" anything. Tomorrow if a lien is discovered on the property, the seller can wash hands off entirely. However, a warranty deed is like a promise. The grantor is stating and promising that they are the true owner of the peoperty in question and that they are transferring it to the grantee and insuring against any claims. So if a disgruntled ex-spouse shows up, a quit claim deed is useless but a warranty deed will stand up better in court.
Also the fact that the parcel numbers are off is huge. The county will record the deed to the parcel number it shows on the document. They will assume it is correct as-is and they will not help you fight over whether this was the right number or not. It is the owners responsibility to make sure the parcel number is right.
I tuly hope you bought owners title insurance or you may be in the midst of a legal conundrum. In this case, I think I agree that the cost of an RE attorney wiould be well worth it to get this cleared up properly.
Quote:
On 2008-08-05 17:18, ypochris wrote:
Remember that there are winter taxes here too, and you should be paid the seven months of winter taxes also. Chris,
If there are seven months in the winter tax cycle, are there also seven months in the summer tax cycle -- 14 months in a Detroit year?
Or, do you have some sort of overlapping tax season where a couple of months taxes are paid twice?
"For one year, the Federal Housing Administration (FHA) will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. The properties, which must purchased by owner-occupants, will no longer be subject to the customary 90-day waiting period..."
Since the last post, has anyone found a way around the 90-day title seasoning requirement? I run a mortgage brokerage and have inquired with a great many lenders and so far have found no exception to this rule. It appears that FHA will finance a property for a new buyer, regardless of whether it was a HUD property, after 90 days, but with the stipulation that the seller (me) provide such things as before-and-after photos, receipts, and perhaps a second appraisal. Are Land Trusts a viable option for property flippers? If so, that would eliminate the need for 90 days seasoning.
It is not a deduction, it is an interest free government loan given to you as a tax credit. A deduciton only reduces your taxable income before taxes are computed. Once you have computed your tax bill, a tax credit reduces the amount of tax you pay on a dollar for dollar basis. As a general rule, tax credits are better than deductions.
Here are some more details about the tax creditCan only be used by first time homebuyer who is purchasing a primary residence.Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps at $95,000 and $170,000, respectively.The credit is recaptured. 6.67 % of credit will be repaid each year for 15 years. If home sold before 15 years, then remainder of credit recaptured on sale.Applies to purchases closed betwen April 9, 2008 and July 1, 2009The "tax credit" isn’t really a tax credit, instead, it is just a tax free and interest free loan (with some qualifications) that must be repaid. You have to start paying back this loan within two years and you make equal payments over 15 years. When you sell your home, any profits will go first into paying off that loan. If you sell at a loss, the difference will be forgiven… meaning you will not owe any money on the loan (although it should be recorded as income, so you will owe taxes on it).
[ Edited by DaveT on Date 11/10/2008 ]
Just to piggy back on Dave T, we should also note that the "tax credit" is equal to 10% of the purchase price of your primary residence, or, $7500, whichever is less.
Swaf,
When you sold this property was a HUD-1 filled out as part of the sale?
John $Cash$ Locke
[addsig]
Hi John,
Nice to speak with you again.
No HUD-1, just a transfer of beneficial interest in a trust.
How much interest did you transfer and how much did you retain?
the simplest wasy would be to set up a note and TD as if it was a second and then just record it.
The other party would have to be willing to sign the docs.
And if they are not willing to sign a note?
your pretty much screwed.
Unless it was for services which would be covered by a mechanics lien.
If you sold the property, you should have a legitimate sales agreement detailing the terms of the sale. You might be able to record this sales agreement or memorandum against the property to help you recover your funds in the future.
However, I do not understand why you would sell a property (or transfer beneficial interest) without receiving some sort of compensation. Did you not use an escrow company for the transfer? Did the seller not live up to their end of the bargain? Are you tyrying to renegotiate the sales terms after the sale is completed?
Obviously, the circumstances of the situation will dictate what options are truly availabl;e to you.
JS.
Perhaps it would be worth the money to pay a real estate atty for an hour to look over the docs and make sure everything is correct.
Demand the eleven months of taxes and a warranty deed. Remember that there are winter taxes here too, and you should be paid the seven months of winter taxes also. Otherwise you want your money back, or there will be legal action. Having an attorney review the contract and send the letter would increase your chances of getting what you want.
Curious- where is the house located?
Chris
The home is in Detroit.
warranty deed or (I think better) a grant deed and title insurance.
If you are new to investing you might want to get some legal help as there are odd aspects to your transaction.
Did they or you have any agent? You might check w/ them.
[ Edited by rubyarias on Date 08/26/2008 ]
When I close on a home, I ask all questions under the sun before signing anything. A number of closing agents have accused me of being a pain but I always tell them that after I sign on the dotted line, I am committed to the deal. I only have the power BEFORE I sign.
Now, with your situation, it appears that you have already done the deal. Did you purchase Owners Title insurance? From everything that was said above, I am not clear if you did or not but I am assuming that you did not because of the responses you are getting from the Title company.
The quit claim deed is totally not acceptable. A quit claim only releases whatever interest the signor may or may not have in the stated property. It does not "warrant" anything. Tomorrow if a lien is discovered on the property, the seller can wash hands off entirely. However, a warranty deed is like a promise. The grantor is stating and promising that they are the true owner of the peoperty in question and that they are transferring it to the grantee and insuring against any claims. So if a disgruntled ex-spouse shows up, a quit claim deed is useless but a warranty deed will stand up better in court.
Also the fact that the parcel numbers are off is huge. The county will record the deed to the parcel number it shows on the document. They will assume it is correct as-is and they will not help you fight over whether this was the right number or not. It is the owners responsibility to make sure the parcel number is right.
I tuly hope you bought owners title insurance or you may be in the midst of a legal conundrum. In this case, I think I agree that the cost of an RE attorney wiould be well worth it to get this cleared up properly.
Godd Luck.
JS.
Quote:
On 2008-08-05 17:18, ypochris wrote:
Remember that there are winter taxes here too, and you should be paid the seven months of winter taxes also. Chris,
If there are seven months in the winter tax cycle, are there also seven months in the summer tax cycle -- 14 months in a Detroit year?
Or, do you have some sort of overlapping tax season where a couple of months taxes are paid twice?
New Kid,
In Michigan Winter is 7 months long,
The other season, Road construction, is only 5 months.
Could be worse, the property could be in Minnesota where Winter is 8 months long.
Shoot! And I was all excited too. The fine print, found at: http://170.97.167.13/news/release.cfm?content=pr08-082.cfm, says
"For one year, the Federal Housing Administration (FHA) will insure foreclosed properties marketed and sold by property disposition firms on behalf of lenders. The properties, which must purchased by owner-occupants, will no longer be subject to the customary 90-day waiting period..."
Thanks for the depressing heads up, Chris.
Since the last post, has anyone found a way around the 90-day title seasoning requirement? I run a mortgage brokerage and have inquired with a great many lenders and so far have found no exception to this rule. It appears that FHA will finance a property for a new buyer, regardless of whether it was a HUD property, after 90 days, but with the stipulation that the seller (me) provide such things as before-and-after photos, receipts, and perhaps a second appraisal. Are Land Trusts a viable option for property flippers? If so, that would eliminate the need for 90 days seasoning.