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Washington Report: Capital Gains Takes on Change

by Allison Simson & Joyce Nenninger

Question:  Allison, I heard that Congress recently changed some of the capital gains laws.  What have you heard?

Answer: Hardly anybody noticed it, but Congress tucked away a valuable bit of holiday cheer for real estate when it passed its final tax bill of the year.

It was the first substantive change in years to the generous capital gains rules governing sales of principal homes.

According to Kenneth Harney, most homeowners and real estate professionals can recite these rules in their sleep: Married, joint-filing sellers of houses can exclude up to $500,000 of gain, and single-filing sellers can take up to $250,000 … provided they've used the property as a principal residence for a cumulative two of the previous five years.

But what happens when a married home owner dies? Does the surviving spouse still qualify for the full $500,000 -- or does she or he only get to exclude $250,000?

The answer from the IRS has been this: you only get the full $500,000 if you sell during the tax year in which you were married and filing a joint return. Otherwise, the tax code sees you as single, and then you're limited to $250,000.

In other words, if your wife or husband died in June of 2007, you can only claim the full $500,000 benefit if you sell before December 31, 2007.

After that, as long as you remain unmarried, you're capped at the $250,000 limit for single taxpayers.

As a practical matter, most surviving spouses inherit their husband's or wife's share of the property at what's known as a "stepped up" tax basis, with no capital gains tax liability at the current market value.

But here's the problem: Some surviving spouses complain that they feel rushed into sales by the current tax rules. This is especially true for people who've lost their loved ones during the final few months of the year.

With everything else going on, they don't want the additional pressure of having to make the decision to sell the family home quickly. They want more time. Fair enough.

Well, now they've got it. Legislation signed into law before the holiday recess gives surviving spouses two full years to qualify for the $500,000 exclusion -- even though technically they're single.

And who says Congress doesn't have a heart?

Since your tax professional may not be familiar with this yet, here's the official citation: The bill is H.R.3648. The capital gains change is in Section 7.

 

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

Benefits of working with someone locally versus working with an Internet lender?

by Allison Simson & Joyce Nenninger
Question: Our goal for this next year is to buy a home in Summit County. We want to get some information on financing and are considering using an Internet lender. What would be the benefits of working with someone locally versus working with an Internet lender?
 
Answer: There are numerous advantages when using a local mortgage lender as compared to a mortgage lender obtained over the Internet.
 
Customer service is the number one advantage. A local mortgage lender is familiar with the properties in their area, whereas an Internet lender may have limited knowledge of the requirements associated with a resort area.
 
With a local lender the borrowers will have an individual who is personally working on their loan application, as every borrower's needs and financial situations are unique. The borrower also has a contact person to check the status of their application and to answer any questions they may have. Plus they will be able to speak directly with a local lender without having to play phone tag or leaving messages in voice mail that can be associated with the larger mortgage corporations. This can be frustrating to the borrowers.
 
The lender is responsible for ordering the appraisal on the property, which should be from a local appraiser. This is very important. A local appraiser is familiar with the area and the values of the properties and any changes in the area that can affect those values.
 
When purchasing a condominium unit, local lenders will be familiar with the condominium projects in the area and will know if the project meets the lender's requirements.
 
There is also the working relationship with the local title companies, surveyors and insurance companies to meet the state's requirements to provide each borrower with clear title to the property. There are several steps that must be completed to take a borrower from application to approval to the closing date. Working with the local mortgage lenders, title companies, appraisers and surveyors makes all these steps come together. You have the advantage of the individuals familiar not only with the area but also the requirements of each purchase contract.
 
Purchasing a home whether it's your first home, vacation home or a rental property can be stressful, working with your local professionals can make this process a lot easier.
 
 
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

Benefits to hiring an interior decorator to "Stage" your home.

by Allison Simson & Joyce Nenninger
Question: Our Realtor has suggested that we hire an interior decorator to “stage” our home. Is there any benefit in this?
 
Answer: Originally popularized in California, staging helps homes sell quickly and for more money.
Staging concentrates not on changing the interior in terms of painting or adding carpeting, says Carole Talbott of home decorating company Visual Coordinations. These are things the buyers would most likely prefer to choose themselves. Rather staging depends on "selling the space."

When a home is staged, it's reorganized--first with the furniture, then artwork, and finally by accessories. The furnishings remain the same, except for well-worn pieces or those that break up the design. Many times accessories are used to add color to a room.

Stagers charge approximately $500 to $750 for a three-bedroom, two-bath home; Talbott advises owners to stage only the main living areas to avoid high costs.

Some staging advice for homeowners who want to go it alone: furniture should be kept away from walls by grouping at angles in the middle of the room; colors should be chosen from artwork and fabrics, and accessories should be chosen to accentuate them; collections should be kept together; and mirrors should be placed in locations where favorable scenery will reflect. To attract attention to the exterior, the front door should be the first thing painted or decorated.  
 
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

How important is it for the Homeowner's association to have a capital reserve fund?

by Allison Simson & Joyce Nenninger
Question: I am thinking of buying a condominium in Summit County and want to find a property with low homeowner’s association dues. How important is it for the association to have a capital reserve fund?
 
Answer: Condominium buyers should be wary of associations that lack adequate reserves--money set aside to pay for emergency or major repairs--because they could be forced to pay special assessments to cover costs when the association cannot. Additionally, a future sale or refinancing could be denied based on the association's reserves; and it is difficult to find a buyer under such conditions.

Insufficient reserve funds can lead to declining property values, as educated buyers refrain from purchasing condos in the community, according to the Community Associations Institute, a national nonprofit organization that educates and provides resources to homeowner groups.

Annually, an association's board of directors is required to predict the next year's income and expenses--usually through a reserve analysis study. This report consists of a property evaluation--architectural and engineering--by qualified engineers. The engineers determine the useful life and repair costs of things like boilers, elevators, and roofs to determine how much money should be set aside each year to plan for future replacement.

The reserve funds are generally collected from the condo owners on a monthly or quarterly basis and deposited into Treasury bills or other secure government-insured funds. If a repair is necessary and the association needs to raise the money immediately, there are three steps it can take: increase the monthly assessment amount; impose special assessments, in which the owner immediately pays a fee based on the percentage interest he/she has in the association (sometimes amounting to hundreds of dollars); or get a loan.

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

Reverse Mortgages Wrong for Some Seniors

by Allison Simson & Joyce Nenninger

Question: I am interested in a reverse mortgage but am not sure that this is my best option. Do you have any information on reverse mortgages?

 

Answer: Although reverse mortgages are an ideal fit for many senior homeowners, they are not the best option for all of them.

A reverse mortgage would not be in the best interest of someone who intends to make a move in the foreseeable future, the AARP and other sources note. Reverse loans usually come with stiff upfront fees and closing costs of up to 10 percent of the loan amount, which are distributed over the life of the loan. Owners who sell their homes quickly will also lose their equity quickly.

Reverse mortgages may not be suitable for seniors who want to leave a free-and-clear property behind as a legacy to their heirs. At the same time, some experts say elderly homeowners should consider a reverse loan as a way to meet living expenses or settle medical bills while they are alive, without worrying about what will happen when they die. Their offspring still can keep the property by paying off the reverse mortgage with funds from the estate or with their own money, or by taking out a new mortgage.

Experts warn that reverse loans may not be the solution for the youngest seniors, because longer life expectancy qualifies borrowers for less money, or for those in the midst of a temporary financial emergency, who might be better off taking out a home equity line instead.

Finally, another alternative, such as selling the property and using the proceeds to downsize into a smaller house or to rent, might make sense for some seniors.

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

Books or other references for the first time- second home buyer?

by Allison Simson & Joyce Nenninger
Question:  Allison, do you have any books or other references that you recommend to the first time- second home buyer?
Answer: If you are thinking about buying a vacation or second home, first read "Second Homes for Dummies" by Bridget McCrea and Stephen Spignesi. It will alert you to many of the pros and cons of owning these unique properties, which are often hundreds of miles away from one's primary home and are frequently for personal use and renting to tenants.
According to Bob Bruss, formerly of Inman News, McCrea, a former real estate agent, explains virtually all the considerations of buying a second home. Although the book starts out very slow and basic, it picks up pace in the second half where the author gets away from the home-purchase basics and into the specifics of vacation homes, such as supervising from afar and avoiding costly mistakes. There is even a chapter about buying a foreign vacation home, but it is very incomplete and hardly worth reading.
The book could have used more personal examples, but the author shares her few limited experiences with vacation homes and managing rentals from long distances. She never really says it, but making sure renters don't trash your vacation home appears to be her theme of the sections about renting second homes.
About all McCrea can do is alert readers to the possible pitfalls and explain the importance of having reliable neighbor "informants" and possibly a property management company specializing in short-term rentals.
In the chapters about selecting a vacation or second home, the author spends considerable effort discussing the usual home-purchase precautions, including working with a local buyer's agent and other real estate professionals. Heavy emphasis is placed on hiring an experienced professional home inspector to alert buyers about possible undisclosed defects of the home under purchase contract.
However, one key topic that was missing was the vital subject of water and sewer connections. Because many vacation properties are not on community water systems and do not connect to a city sewer, these can be major problems for uninformed buyers.
Lack of adequate well water and/or a poor septic system is something most buyers of vacation homes don't think about until after they hold the title to the property. Detailed advice on this topic would have been invaluable, including the importance of well water and septic system tests.
Most of the book is about topics which first-time buyers of vacation or second homes might overlook. The importance of location is heavily emphasized, both for rentals and for potential resale appreciation in market value. McCrea explains the pros and cons of buying in a resort area where, if you plan to rent to tenants for part of the year, competition from other rentals is an important consideration.
Because the book raises so many topics that might easily be overlooked, it should be read from cover to cover, perhaps skipping only those topics in which the reader is not interested, such as buying a vacation home in a foreign country.
Chapter topics include "The Lowdown on Buying and Owning a Second Home"; "Figuring Out Whether You Can Afford a Second Home"; "Relying on the Experts When Buying Your Second Home"; "Inspecting Your Second Home Before You Sign on the Dotted Line"; "Setting Up Your New Digs"; "Renting Out Your Second Home to Pay for Itself"; "Handling the Maintenance and Upkeep on Your Second Home"; "What Uncle Sam Wants to Know: Important Tax Implications"; and "Selling Your Primary Home and Settling into Your Second Home."
One topic that looms in the background throughout the book is the possibility the reader will buy a vacation or second home now and later convert it into a retirement home. McCrea explains special considerations for buyers who may be thinking of future retirement use. On my scale of one to 10, this excellent new book rates a solid 10.
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

What should we look for in a final walk-through inspection?

by Allison Simson & Joyce Nenninger
Question: Allison, we have just put a contract on a place in Frisco and notice in the contract that it talks about a “final walk through”. What should we look for in a final walk-through inspection?
Answer: Basically, the property should be in same condition as day you signed the contract.
Most home buyers will have at least two opportunities to inspect their property before closing on the purchase.
First, most buyers will include a contingency in the contract that allows them to do a professional home inspection by the home inspector of their choice. This inspection typically happens right after the sales price has been agreed to, usually within a week or 10 days.
If the home inspector finds anything wrong in the property or decides further inspections (perhaps for radon, heating and air conditioning systems, or mold) are called for, the home buyer will be able to hire specialists to figure out if there is an insurmountable physical problem with the property.
Assuming those inspections go well, the second opportunity to inspect the property is just before the property closes. The pre-closing inspection, or final walk-through, as it is often referred to, is a home buyer's last opportunity to walk through the property before closing.
According to Ilyce Glick of Inman News, what you're looking for here is not at the same level as the initial professional home inspection. In a preclosing inspection, you simply want to make sure that the property is in the same condition as it was on the day you agreed to buy it.
To avoid getting burned, you schedule the walk-through as close to the actual closing as possible, certainly within the 24 to 48 hours prior to closing. If possible, the sellers should have already moved out.
The whole point of the walk-through is to protect yourself and your future property from sellers who aren't as nice as they seem to be or who are actually as nasty as they appear. By inspecting the premises, you're making sure the seller has lived up to his or her agreements in the sales contract. And if he or she hasn't, you want to know about it in advance of the closing so remedies (both monetary and otherwise) can be agreed upon before money changes hands.
What should you look for in a walk through inspection? To start with, you want to make sure that the condition of the home hasn't changed since you signed the contract several months earlier.
Believe it or not, a lot can change in the ensuing weeks. To make sure the home is in the same condition, you'll want to turn on every appliance, open every door, make sure nothing's broken (lights, fixtures, windows, etc.), be certain everything the seller agreed to leave is actually there and in good shape, and be certain that when the sellers moved out, they did no damage to the home.
Sometimes movers can accidentally scrape a wall or pull up carpet in the process of packing up the contents of a house. If you do your walk through inspection while the movers are there, you'll have a harder time getting around them to make sure that the property is in good shape.
If you get there before the sellers have packed anything up, you might wind up with some unpleasant surprises on the day you move into the property.
Ilyce Glick learned the hard way that sometimes sellers just don't want you to find out certain things until you've closed on the property.
Nearly 20 years ago, her husband and she bought their first place. It was a vintage co-op built in the 1920s. The sellers were seniors, and they were a bit quirky. The property hadn't been touched in years.
When they did our final walk-through, they noticed that the water was turned off in the kitchen sink. They wanted to run the dishwasher, which was really old, but didn't want to turn on the water if it was off.
“Looking back”, as she says, “it's hard to imagine why this wasn't a red flag for us. But we were really happy to be buying our first place, which was taking just about all the money we had in the world. We didn't question it. We just bought it and moved in.
The first night we unpacked the dishes and decided to run a load in the dishwasher. At well past midnight, my husband turned on the water and we put in the dish soap and turned on the machine. We went to bed.
We were awakened early the next morning with pounding on our front door. Our downstairs neighbors came into their kitchen and noticed that the liquid contents of our dishwasher had dripped down through the ceiling into their kitchen, ruining their window shade.
My husband and I looked at each other and we knew why the water had been turned off. Too bad we didn't find that out ahead of time. Still, the damage could have been worse.
As I recall, it cost us $600 to fix the damage in our neighbor's apartment.”
Take some time to do your walk-through inspection. It might just save you time and money later.
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Can a second home qualify for 1031 tax-deferred exchanges

by Allison Simson & Joyce Nenninger
Question: Allison, we’ve heard a lot about 1031 tax-deferred exchanges and would like to know if our second home would qualify for a like-kind exchange with another piece of property that is closer to our home. We have never rented our current property, but consider it an investment due to it’s appreciation the past few years.
Answer: Your question is a good one – and one that has been in the media and in the courts quite a bit in the past few months. To get an accurate assessment of your particular situation, I recommend you speak with a company that specializes in 1031 tax-deferred exchanges. According to Inman News, a similar case to yours was tried in court. Here are the details. In 1988 Barry and Deborah Moore purchased a second home on Clark Hill Lake. It included a home to which the Moores added a deck and other improvements.
The property was a three-hour drive from their principal residence. The Moores and their children visited the property two weekends each month between April and September each year.
But in 1995 the Moores changed their primary-residence location, making the drive to the Clark Hill Lake property a five- to six-hour trip. As a result, they used the property only a few times each summer.
The Clark Hill Lake property was never offered for rent to short- or long-term tenants. On their income-tax returns, the Moores deducted their mortgage interest and property tax payments as personal itemized deductions.
In 2000, the Moores found a five-bedroom, four-bathroom house on 1.2 acres of land adjoining Lake Lanier, just a few hours from their home. It has five screened-in porches, a party deck and veranda.
They decided to make an Internal Revenue Code 1031 tax-deferred trade of the Clark Hill Lake property for the larger and closer Lake Lanier property. They justified the exchange by stating both properties were held for "investment" rather than for personal use.
Upon audit, the IRS denied the IRC 1031 tax-deferral on the sale of the Clark Hill Lake property. The IRS auditor noted the property had never been rented and was used only by the Moore family on weekends. But the Moores argued they held the property as an investment for future appreciation in market value. They took their dispute to the U.S. Tax Court.
If you were the judge would you allow the Moores to defer the capital gains tax on the trade of the Clark Hill Lake property as an investment?
The judge said no!
To qualify for an IRC 1031 tax-deferred exchange, the judge began, both properties involved in the trade must be held for investment or for use in a trade or business. Although the Moores pointed to the appreciation potential of the Clark Hill Lake property, he continued, "It is a taxpayer's primary purpose in holding the properties that counts."
"Property held for investment is property held for the production of income," the judge explained. "We accept as fact the Moores hoped that both the Clark Hill and Lake Lanier properties would appreciate," he noted.
"Mere hope or expectation that property may be sold at a gain cannot establish an investment intent if the taxpayer uses the property as a residence," the judge emphasized. There was no convincing proof either property was held for the production of income as a rental since the family used both properties primarily as vacation retreats, he added.
Because the evidence strongly showed both vacation homes were held for personal use, rather than for production of income, neither property qualifies for an IRC 1031 tax-deferred exchange, and the Clark Hill Lake property sale is taxable, the judge ruled.
Based on the 2007 U.S. Tax Court decision in Moore v. IRC, T.C. Memo 2007-134.
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Don't buy home without checking title report

by Allison Simson & Joyce Nenninger
Liens and easements could make purchase a bad move
How would you feel if you bought a home that seemed perfect, only to find out you couldn't use the property like you thought you could?
One buyer bought a home with a good-sized yard that he thought would be perfect for his large dogs to roam free. Soon after the sale closed, he hired a contractor to construct a fence around the property. The day the work started, a neighbor showed up to inform the new homeowner that he couldn't completely fence the property because of an easement that ran across his property.
An easement grants property rights to someone other than the property owner. Common easements are for ingress and egress, utilities and sewers. Easements must be kept unencumbered.
In the case above, the easement provided the neighbors access to their property. A fence could not be built over the easement because it would deny the neighbor their rights to access.
The property owner had to revise his fence design, which was disappointing. But, easements can be even more problematic, particularly if you assume there is an easement in favor of your property but there isn't.
According to Dian Hymer of Inman News, A homeowner in the Oakland Hills (Calif.) subdivided his property and sold off the lower half to a builder who constructed a new home on it. The homeowner then put his home on the market and entered into contract to sell it.
The buyer's real estate agent reviewed the preliminary title report and found that there were no easements either benefiting or restricting use of the property. In particular, there was no sewer easement.
The agent asked the seller how the sewer line from the house connected to the main city sewer line. It turned out that the sewer line ran downhill across the portion of the property that had been subdivided and sold.
In this case, an error of omission occurred during the subdivision process. A sewer easement should have been granted in favor of the owner of the upper portion of the property. Consequently, the owner of the upper property no longer had a legal right to run his sewer line across the adjacent property.
HOUSE HUNTING TIP: Make sure you have a clear understanding of the title issues affecting a property before you buy it. In some states such as California, title companies check the record and issue a title report that includes such things as the recorded owner and liens, easements and encumbrances affecting the property. In other states, buyers hire attorneys to search the title record and produce a report.
In the aftermath of the subprime lending crisis, it's especially important to investigate the status of any liens secured against the property. A preliminary title report will give you the original amount of such items as mortgages and taxes owed. But, the preliminary report won't necessarily tell you the amount the sellers currently owe.
All liens secured against the property must be paid in full in order for the seller to pass clear title to a buyer. If the seller has an interest-only mortgage and has not made any payments toward retiring the principal amount borrowed, he could still owe the original amount he borrowed. If the mortgage was a teaser-rate adjustable with an option to pay the minimal amount due, the seller could owe more than what is indicated on the title report.
THE CLOSING: Problems that could delay or derail closing can develop when the owner of record is not the same person who listed the property for sale. Before concluding a home purchase, make certain that the seller has the power of sale and that the property you're buying is what you bargained for.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
 
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

Using Their IRAs to Make Home Loans

by Allison Simson & Joyce Nenninger
Question: Joyce, I’ve heard about using my IRA to make a loan…can you provide more information? 
Answer: Yes! According to Kelly Greene of the Wall Street Journal, investors can use self-directed individual retirement accounts (IRAs) to write short-term mortgages, primarily to buyers of fixer-upper properties or borrowers in need of bridge loans to cover mortgage payments on their old homes while they wait for them to sell. Most IRA investors impose interest rates of at least 10 percent, though the maximum is set forth by the state. Additionally, they typically do not lend more than 50 percent to 70 percent of the home's value. While some of these investors are willing to help homeowners encountering financial difficulties, others look forward to foreclosures because they can take ownership of properties at a dramatic discount. However, foreclosed properties can cost them so much money for legal fees and repairs that their IRAs could run out of money; and investors then would be forced to obtain a loan or shell out money for the taxes and penalties imposed when IRAs are closed.
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  

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Summit Real Estate
The Bright Choice
330 Dillon Ridge Way, Suite 10
Dillon CO 80435
970-468-6800
800-262-8442
Fax: 970-468-2195

Allison Simson, Owner/Broker, is a licensed Colorado Real Estate Broker