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A lack of buyer’s in the housing market is making things tougher on divorcing couples.   Sadly, many people are stuck, unable to find a buyer for their co-owned property.    While one solution may be for one spouse to buy out the other, please take the time to understand the consequences and future liability.   If not, you may end up paying the ex much more than you planned.

 Things to Know Before You Buy Property From Your Spouse or Ex

Internal Revenue Code 1041:  Section 1041 states that gains or losses are NOT recognized by the IRS on transfers between spouses during marriage, or on transfer’s between ex’s, if the transfer was a part of the divorce settlement.  

For example, if you agree to pay the ‘ex’, or to ’ex’ to be, $200,000 for their equity in your co-owned property, the cost basis of the property will not increase.  If you sell in the future, you will pay income taxes based upon the original cost basis of the property, excluding your $200,000 payment.

State Taxes:  Many states do not recognize gains or losses on property transfer’s to spouses or ex’s.  Check on the tax consequences about a future sale before making an offer.

Real Estate Fee’s and Transaction Costs: Take into consideration what the costs of the sale would be.  Calculate what each of you would expect to receive (net) today, after paying real estate commissions, repairs and closing costs in order to determine a fair purchase price.

Summary:  When determining the value of co-owned, marital property, consider that the spouse who is buying will effectively pay the selling costs, along with the federal and state income taxes, on the other’s share, so account for it.   And remember, it is always advisable to seek the council of a tax professional when discussing issues dealing with real property.

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Buying a home can be exciting and a little scary at the same time.  Fortunately, you can save yourself a lot of money and trouble by focusing on the 5 Area’s of a home that cause the most reported problems.

5 Trouble Spots You Should Pay Close Attention To

1. Attic:  It is amazing what you can learn about the structure of a home by looking in the attic.  You can easily see the framing, the condition of the roof and decking, and the insulation or lack of it.  The attic is also a great place to find evidence of leaks, past or present, and any mold issues that may have resulted.  Tip:  If you see new insulation in some area’s, it usually means there has been a leak there at one time.
2. Electrical:  The electical system is a commonly reported problem in older homes and new construction.  The best and safest advise here is to rely on the expertise of a good home inspector.
3. Foundation:  Foundation failures are expensive problems to fix.  In addition, they can cause other problems that may be hard to detect.  Although cracks do not always indicate a big problem, you should key in on any cracks in the foundation or siding.   Watch for root invasion from tree’s that are planted to closely to the house.  Also, check to be sure that all the doors and windows open and close properly.  If not, it may indicate that the foundation is or has shifted.  A professional home inspector will be very helpful in determining issues with the foundation.
4. Landscape:  Landscape can be a huge selling feature for any home and it can be an indicator of  potential problems.  If landscaping has been planted closer than 12 inches from the foundation, it is too close to the house.   When plantings are too close, they can cause moisture problems and cracks in the foundation.  Vines which creep up the sides of the house can push siding and brick away from the stucture, weaken mortar and cause staining.  Large tree roots can upheave sidewalks, decking, porches and damage the foundation.  Landscape beds should be elevated and sloped to drain all water away from the house and foundation.
5. Plumbing:   Water leaks are often hard to see and cause of a lot of expensive problems later on.  In addition to undermining wood surfaces and flooring, leaks also result in mold issues that are difficult to treat and expensive to cure.   Tip:  Always look closely underneath sinks and plumbing fixtures to find evidence of mold or past water damage.  Tip:  Don’t forget to move the refrigerator out and look behind it.

The best advise when buying a home is don’t scrimp on your inspector.  Hire a licensed, professional home inspector and follow them around throughout the entire inspection.  The more you know about the condition of the property, the better off you will be.  Remember that common sense, due diligence and a good inspector are invaluable and can help you avoid most of the costly mistakes.

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Mortgage applications jumped over 25 percent in the first week of January, spurred on by low interest rates. The indicators showed the demand for home refinancing has not been as high in the last 5 years.

While many experts report that rates will stay low for months, 30 year rates of 4.5 percent were too attractive for borrower’s to pass up. Due to the fact that rates change, locking in now a great rate now appears to be a smart move.

While low rates have not yet spurred buying activity, low prices and cheap money certainly provide hope that we may be reaching a bottom in the US housing market.

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While battered, beaten down and bruised, the US housing market is not dead.  In fact, it is beginning to show some signs of life.   Those looking for an opportunity to Buy Low and Sell High should pay close attention.  These Signs could be an early Signal that we have reached the Bottom.

1. Foreign Buyers are overwhelming interested in acquiring property in the US.  Recent polls show the deep correction, weak dollar and once in a lifetime pricing opportunities have investors salivating for US real estate.  Foreign investors are bullish and ready to buy, especially in hard hit Florida, Arizona and California.
2. Investors which specialize in distressed assets are grabbing up properties at bargain prices all over the US.
3. Buyers recently snapped up thousands of foreclosures, bank-owned property and deeply discounted property owned by desperate sellers.
4. The Credit Crisis is Over.  The latest poll of mortgage applicants showed that 80+ percent experienced no problems in obtaining financing at historically low rates of interest.

The real money has always been made by the Brave who Buy when Everyone Else is Selling.   Smart investors should pay close attention to the bullish signs and be prepared to act on the deal of a lifetime.

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The IRS is offering some much needed tax help in 2009.  The Tax Relief Programs, which address real estate matters are outlined below.

1. 1.  First Time Homebuyer Tax Credit:  People who recently bought a home or those who are considering buying one should pay close attention.  The program, which could be worth $7500 to those qualified, defines “first time buyer” as anyone who has not owned a primary residence in the past three years.   If this is you, check out the IRS program details.
2. Offers in Compromise on Home Values:  An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS.  An OIC is a viable option for taxpayers experiencing money difficulties, as the agreement settles a tax debt for less than the full amount owed.  Under IOC guidelines, the IRS realizes that real estate valuations may not be accurate.  In instances of financial hardship, where the accuracy of local real estate values are in question, the IRS will give a new review of the information before determining their final offer.
3. Real Estate Tax Deduction:  Taxpayers can claim an additional standard deduction, based on state and local real estate taxes paid in 2008.  The maximum deduction is $500 per person or $1000 for joint filers.
4. Workouts and Foreclosures:  For most homeowners, debt forgivenness is now tax free.  Homeowners can exclude forgiven debt on their principal residence if their loan was for owe less than $2,000,000.  The limit is $1 million for individuals and married couples filing separately.

Thank you for visiting InfoTube.net homes for sale or rent website. If you are interested in more information, consult your tax planner or visit www.irs.gov.

Inman News, a leader in real estate news and publishing, is hosting its annual Real Estate Connect Conference in New York City this week. 

On Wednesday, a well respected panel of industry experts sounded off during a “Bulls vs Bears” discussion of the real estate market in 2009.   We were anxiously waiting to report a little good news from these real estate guru’s, but sadly there were no Bulls in attendance.

We thought our readers might be interested in the highlights, so we outlined some of the widely held opinions and sentiments expressed by the panel.

• Home prices will remain unaffordable in many markets.   
• Until home  prices reach a level that a couple on entry level salaries can afford to buy a starter home, the market will continue to correct.
• With rising unemployment, it is unrealistic to expect that lower interest rates will be enough to stimulate home sales.
• 12 months of unsold home inventory is extremely excessive.  Too many houses is another sign that a turnaround is no where in sight.
• Housing will not have a V-shaped recovery, with prices rebounding quickly from a bottom.  The chart will be L-shaped, with a long period where prices stay flat.
• Time is our best friend.  The ecomony will take years, not months to play out.  At a macroeconomic level, there is no point in talking about recovery yet.
• All the rescue plans, tax credits and bailouts will have little effect in the face of rising job losses, along with falling wages and confidence.
• If people understand the magnitude of the problem, and they plan to stay in their home for 5-10 years, then there is no real reason they shouldn’t buy now.
• No one on the panel reported that they see a glimmer of light at the end of the tunnel. 

In the end, the “Bulls and Bears” session concluded with a sigh.  The experts concurred that the market will still be grappling with many of the same issues it is today, one year from now.  But, they are adapting to the new world order.  New York Times reporter, Andrew Ross Sorkin stated that instead of spending his time writing about mergers and acquisitions, he is still busy.  His new subject…Covering Bankruptcies.

Thank You for visiting InfoTube.net.  We are here to talk about real estate.  If you have an opinion, let us hear from you.

Dear InfoTube:

We are selling our home by owner and just received an offer.  We think it is a good offer, but my husband and I are afraid to respond, without having our attorney read it first.  We don’t want to stall and risk losing the buyer.  What should we do?   Thank you for your help and your great website!

Dear InfoTube Customer:

First, congratulations on your offer.   It sounds as if you have done everything right, including your hesitation to rush a response.  While the offer may be perfect for you, it is always wise to consult a lawyer, if you feel the least bit unsure about the terms.  Fortunately, there is an easy solution to help you respond, without legally binding yourself.   This contingency works when buying or selling a home.

This contract is contingent upon the approval of the seller’s/buyer’s attorney.

Write or type this statement in the “special provisions” section of the contract, then have all parties initial the change.  By doing so, you have acknowledged the offer in a serious and timely manner, while reserving your legal rights.

Thank you for your business and kind words.  I hope we were of help to you, and please let us know how your sale progresses. 

Disclaimer:  The author is a licensed real estate broker, not an attorney.  The author is not offering legal advise.