What is Closing Cost?

Originally posted 2009-05-01 15:10:36. Republished by Blog Post Promoter

Have you ever worried what is included in closing cost?  Closing cost only accrues when a seller conveys title of a property through a real estate contract.  When the contract is executed through changing of deed of ownership, transfer of funds, and signatures of all parties, there is an action commonly called a “closing”

                       

The closing cost is paid at the closing of the transaction are:

• Title service cost
• Recording fees
• Document or transaction stamps or taxes
• Survey fees
• Brokerage commission
• Mortgage application fees
• Points
• Appraisal fees
• Inspection fees
• Home warranties
• Prepaid insurance
• Pro-rated property taxes

 

The title search is most important of these simply because it ensures several things that are important to the ownership being conveyed.

• Title search ensures the individual who is selling the property owns the property and can convey title.
• Title search ensures that there are no judgment and/or liens on the property.

 

The recording fee is the fee charged to file an official recording of the change ownership.  The instrument used to convey ownership is a deed, so the charge is for filing a new deed. 

 

Home warranty can be paid for by party, the buyer or the seller.  A home warranty ensures major household systems against repair or replacement for a least a year after purchase of the home. 

 

Pre-paid insurance is paid for by the buyer.  The insurance protects both the buyer’s personal assets and the property that the buyer is purchasing. 

 

Document or transaction stamps or taxes are not necessary in all states. However, if required it must be paid at the closing of the transaction.  The document or transaction stamps or taxes are simply an excise tax charged by the government when change in ownership occurs.

 

Survey fees are charged if a buyer requests a survey.  It lets the buyer know the boundary of the land that is being conveyed. 

 

Brokerage commission is the compensation to the brokerage company for brings the two parties, the buyer and seller, together. 

Mortgage application fees are paid tot the lender.  It covers the cost of processing your loan application. 

 

Points are paid by the buyer to the lender to lower the buyer’s interest rate on the loan.

 

Appraisal fees are usually paid for by the buyer to the appraiser.  The appraiser gives the lender a professional evaluation of the value of the home that the buyer is purchasing. 

 

Inspection fees are usually paid for the buyer for a home, pest, or inspection that the buyer deems is necessary so that the buyer can ascertain the condition of the property. 

 

The title cost is an important and necessary cost in purchasing a home so it is important that the buyer understand what the cost covers. 

 

 

Record Keeping for Real Estate Investors

Originally posted 2008-12-18 02:22:43. Republished by Blog Post Promoter

An investor needs accurate records of his or her rental income and expenses to prepare the investor’s income tax return.

                The following items should be recorded to collect required income tax information for each individual property:

·         Rental Income/Capital Expenditures

·         Rental

·         Expense

·         Additional Information

·         Sale of Rental Property

On the rental income form, enter all rents received even advance rents.  However, security deposits are not classified as rent.  Once the deposit is converted into paid rent or damages then it is calculate as rental income.  If the tenant performs services or the tenant pays for repairs and the investor compensate him or her through reduced rent, include the value of these services as rental income.  In addition, the investor will be entitled to an equivalent deduction for the expenses.

                Upkeep and maintenance of the property are considered rental expenses.  In addition, the cost of labor paid to contractor to maintain the property for the investor is a rental expense, as well. The payment to the contractor is income for the contractor; therefore, as an employer the investor needs to collect the social security number of the contractor so that the investor can withhold and pay employment taxes for the contractor.  The contractor will need to fill out W2 form.      

                Another expense that the investor will have is travel.  Travel include going to the rental property to collect the rent and trips to deposit the rent into the bank.  For mileage, keep a log. 

                Capital expenditures are expenditures that improve the useful life of the rental property.  Purchase of furniture or appliances for the tenant’s use are capital expenditures, as well.  These items may have a useful life of over one year and need to be depreciated.  For example, the difference between repair and replacement of a roof determines whether the item is an expense or capital expenditure.  If shingles on a roof is replacement, but not the whole roof replaced then the work is a deductible expense; however, if the entire roof is replaced then it is a capital expenditure because it extended the useful life of the property.

                If the property is used for both personal and business use then expense will need to separate between personal and rental use.  The interest, taxes, insurance, and utilities are partially deductible expense. On the other hand, repairs to the rental property are fully deductible expenses.   To determine the investor’s personal expenses, a business use percentage will be determined and this amount will be applied to the partially deductible expense to calculate the personal expense.

                Accurate recordkeeping will help the investor ensure that him or her get credit for every deduction that the investor is entitled too.  It is also important to keep receipts and payment records of all items listed.  Lastly, keep all records and closing papers of rental properties bought and sold.

 

 

Bad Credit Does Not Have to Stop You From Getting Your Next Home

Originally posted 2009-05-15 13:55:31. Republished by Blog Post Promoter

Have you imagine unlocking the door to your new home, but are afraid to try for that home due to bad credit?

Stop imagine, and give your credit and you a chance.   Advantage Mortgage offers the loan that will meet your needs even with bad credit.  The company offers many opportunities for someone with challenged credit such as,

• bailout/foreclosure loans
• lease and buy back

The bailout/foreclosure loan is for anyone who may be facing foreclosure an option that will help the homeowner keep his or her home.   The homeowner will need to have a credit score of over 500 and have some equity in his or her home to qualify.  It is important to note that the homeowner will have to pay a higher interest rate, but it is worth it if the homeowner is able to stay in his or her home. 

As a reward for the troubled homeowner paid the bailout mortgage on time for one year, the company offers a refinance to the homeowner at a lower interest rate.

With the lease and buy back program, the homeowner leases the home from the bank for one year until the homeowner gets his or her finances back in order and then the bank allows the homeowner to purchase the home back at the same price that the bank paid for it.

If you are interested in any of the above products, please fill out an application.

Tax Exemptions and the Investor

Originally posted 2008-12-19 09:27:42. Republished by Blog Post Promoter

                  Tax exemptions are important. 

However, as an investor the investor is not eligible for tax exemptions on his or her investment properties.  There may be exemptions already on the property hence the reason this is mention.  Every state has homestead exemption.  Homestead exemption is for every person holds legal or equitable title to property, and maintains the property as his or her primary residence. Another exemption that has been on the property is mortgage exemption.   Some states have other exemptions like age, veteran, etc.  These exemptions can cause the taxes to be low, but remember it may be lower for only one year after ownership.  It is beneficial to find out what the taxes are before the exemption to determine if the property is a buy and hold property or a flip property.

 

 

Related Articles

 

Real Estate Investor Related Articles

Protecting Your Investments - This article discusses the business entities that are available that are available for investors to protect their personal assets when buying and holding properties.

 

 

Property Tax Related Articles

Indiana Property Tax Appeal (Part 2) -Filing a property tax appeal can be difficult.  This article gives links to the forms needed to file the appeal and a video tutorial on filling the forms out.

At Last…Someone Has Unlocked the Secrets of Short Selling Your Home

What’s Your Best Chance To Sell Your Home in Today’s Market?  The Answer Below May Surprise You.

A short sale can be difficult if you go it alone.  Learning an effective and efficient way to accomplish that goal of short selling your home is a much needed skill, wouldn’t you agree?

 

The single biggest complaint homeowner has is knowing how the short sale process works, and if the short sale will stop the foreclosure process.  The answer is the short sale stops the foreclosure process only after a buyer with an offer.

 

As a homeowner who is facing the scariest and worst market for selling a home in decades it is important to have a guide along the way that help you understand what will or will not happen when and if you get a buyer for your home.  It is important to remember that a short sale means that the lender is willing to accept less than what you owe, so price your home aggressively. 

 

As a homeowner, it is reasonable to want to understand the tax laws to avoid capital gain or loss.  It is equally reasonable for a homeowner to want to be able to sell his or her home before the sheriff sale. 

 

As a homeowner, the short sale and the pending foreclosure can become overwhelming.  In order to make the short sale an easier process it is important to understand the process and the options and choices that the homeowners have during the process. 

 

There is an amazing new book “Should I Short Sale My Home.”  It covers nearly everything you need to know about the short sale process and the effects the sale has on your federal income taxes.  It also gives you the secret formula that your lender uses to approval or deny your short sale.

 

Imagine knowing how to get your home sold before the sheriff’s sale.  Would that be nice?  And can you imagine how great you’ll feel to have a clear and precise package to present to the lender to get the home sold before it is foreclosed on.  Imagine learning a little known technique that will give you an additional 45 to 60 days to find a buyer to sell your home too.

 

Just a few minutes from now you will understand what a short sale is and what happens if you are an insolvency homeowner who sold your home in a short sale.

 

Did you hear that sold your home in the short sale?  Some homeowners list their home and it does not sell before the foreclosure, and the homeowner do not understand why the home did not sell.

 

And it’s not like any book you may have read on short sale of home before foreclosure, the book gives you all of the recent changes to the law that helps the insolvent homeowner and helps the homeowner understand the process of the short sale.

 

Why?

 

Simply, every section in the book is there because you asked for it.  Well, not “you” really.  But from real live questions.  Questions from people who have tried to sell their properties and sold their properties using a short sale, and the homeowner wants to make sure all the capital gain or loss is not going to negative affect him or her at tax time.   Questions from homeowners who wanted to know if they can ever own a home again after selling their home using a short sale.  In other words, a face to face question and answer section was completed.

 

And imagine selling your home before the sheriff sale.  You can definitely do that.  Imagine being in control of selling your home.  Some homeowners are able to buy a home in 4 to 6 years after the short sale.  Not bad just for selling your home before the sheriff sale, huh?

 

·        You can save your family from the embarrassment of the foreclosure process

·        You can save on federal income taxes by proving that you are insolvent due to job loss, medical bills, etc.

·        You could save your credit from the foreclosure

 

Would that be a great lifestyle or what?  That’s what this brand new book gives you the knowledge of the short sale process and the hope of selling your home before the sheriff’s sale and being able to purchase a home in the future. 

 

To get your paperback copy today for only $15.00 click on this link and get a downloadable copy for $8.00 of  “Should I Short Sale My Home”  http://www.lulu.com/content/paperback/shouldisalemyhome/6381193