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PURCHASE REAL ESTATE WITH YOUR IRA

by Tom Stachler,ABR,CDPE - Group One Realty Team
A self-directed IRA is used for real estate investing.

A self-directed IRA is used for real estate investing.

If you have been frustrated over the performance of your IRA investments in stocks, bonds or mutual funds, investing your IRA funds in real estate may be a desirable alternative. 

 

IRAs can be used to purchase real estate of any type, such as a single-family Home, commercial building or even raw land. However, there are rules and limitations regarding how IRA-owned real estate can be purchased and used. Violating these rules can result in adverse tax consequences.

 

Self-Directed IRA

Although IRS rules permit IRA funds to be invested in real estate, IRS rules do not require an IRA trustee to offer real estate as an investment option. Most trustees who offer traditional IRA investments, such as depository banks, do not allow an IRA owner to invest in real estate because of the extra administrative burden of real estate management. As a result, if you want to invest your IRA funds in real estate, you will most likely have to convert your traditional IRA to a self-directed IRA—which is an IRA that requires you to decide what investments to make, such as real estate. In general, you can establish a self-directed IRA with a nondepository bank or trust company.

Prohibited Transactions

IRS rules require IRA-owned real estate to be for investment purposes only. This requirement places several prohibitions on how the real estate can be purchased and used. Key to understanding the prohibitions is the term “disqualified persons.” This term is used in the IRS rules regarding IRA-owned real estate to refer to the IRA owner and related persons--that is, the IRA owner and spouse, ancestors (mother, father, grandparents) and descendents (children, grandchildren and their spouses). The term disqualified person also includes the IRA-owner & investment advisers, including a trustee of the IRA funds, and any business in which a disqualified person has a 50 percent or greater interest. IRS rules prohibit the use of IRA funds to purchase real estate from a disqualified person. The rules also prohibit a disqualified person from using any real estate purchased with IRA funds, either as a home or business. These rules even preclude you from purchasing a vacation home that is only partly for personal use and otherwise rented to others.

Financing Issues: UDFI Tax

If you use all cash to purchase your IRA-investment real estate, the income produced by the property and the gain from a future sale of the property will remain in your IRA tax-deferred until you start taking distributions. However, if you acquire a mortgage as part of your purchase of the real estate, you will have to pay taxes on any income or gain attributable to the financed part of the transaction, called Unrelated Debt Financed Income, or UDFI. With regard to a mortgage, you must also keep in mind that you cannot guarantee repayment of the mortgage, as this would violate the disqualified person rule. This may require you to use another property as additional security for the lender or pay a higher interest rate and other costs.

Tax Consequences

If you violate the IRS rules regarding prohibited transactions, the IRS will consider the IRA funds used in the transaction as a distribution of your IRA. You will be taxed on the funds from the first year in which the transaction occurred, with penalties and interest included. Depending on your age, you may also incur an additional penalty for taking an early distribution.

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how to purchase real estate using your ira account.  buy income property using an ira. information on how to use your ira to purchase real estate. ann arbor real estate for sale using your ira account. tom stachler with real estate one can help you make the right investment and real estate purchase decisions. real estate one ann arbor michigan saline dexter ypsilanti realty to purchase

Fannie Mae Expands Investor Financing Options

by Tom Stachler,ABR,CDPE - Group One Realty Team

Great Option for Investors

Fannie Mae recently announced an expansion of it's Homepath Mortgage product that provides Home buyers and investors financing for the purchase of any Fannie Mae-owned property.

The new product will soon allow eligible individual and LLC borrowers the option to finance up to 20 properties using the Homepath Mortgage. Our Realtor association, NAR has long called for the expansion of financing opportunities for investors as a way to increase the absorption of REO properties. 

Fannie Mae will offer flexible lending terms and will not require appraisals of the properties.   Contact us today for assistance in the acquisition of Residential or Commercial Income properties.  I have field work sheets to help you determine the bottom line returns.  (NOI or Net Operating Income) and 35 years of experience in the income property business. 

Click the link above for Investor Income property Inventory Results under "All MLS Listings"

Michigan Property Tax Homestead Exemption Information

by Tom Stachler,ABR,CDPE - Group One Realty Team

New Changes in the State of Michigan Homestead Exemption Filing Dates

Good News.  The Michigan Association of Realtors was instrumental in helping get this signed yesterday. The former deadline date of May 1st for your homestead exemption and discount on property taxes for Michigan property has been changed.  

See the information below regarding your Michigan Property tax homestead exemption and tax discount.

Legislation Signed by the Governor
5/2/2012

Today, Governor Snyder signed legislation providing homebuyers a fair process when it comes to their property taxes.

Senate Bill 349, sponsored by Senator Dave Hildenbrand (R-Lowell) creates two Principal Residence Exemption (PRE) filing dates; one on June 1st, and the other on November 1st. Additionally, this legislation allows bank-owned properties to retain their PRE so that buyers can qualify at the lower rate of taxation. This is particularly important since foreclosures have flooded the market in recent years.

Below are a few FAQ's regarding the new law:

1) Does the legislation take effect this year?
A) Yes. The new law moves current May 1st PRE filing deadline to June 1st of this year.

2) How does it work?
A) If a homebuyer purchases a Principal Residence and closes on or before June 1st, they can take advantage of a significant tax break by filing for a Principal Residence Exemption.

3) When is the additional filing date? A) November 1st. This allows for tax relief in those communities that still collect a portion, if not all of their non-homestead mills, on the December tax bill.

4) If my client buys after June 1st this year, what can they expect?
A) If a homebuyer purchases a Home after the June 1st filing deadline, and their local tax authority collects all non-homestead mills on the spring tax bill, their property taxes may not reflect the exemption until the next tax bill. If however that local tax authority collects a portion of the non-homestead mills on the winter tax billing cycle, the homebuyer can file for a PRE before the November 1st and exempt themselves from any non-homestead mills collected on the December bill.

5) What about the foreclosure provisions?
A) Banks have the option of maintaining the home's Principal Residence status by filing a Conditional Rescission. By maintaining this exemption status, it's the expectation that borrowers will be able to qualify for financing on these foreclosed properties at the PRE rate and begin paying the lower rate of taxation as soon as they move into the home. To make up for the lost school revenue, banks will be assessed a newly defined tax that will keep the 18 mills (which they presently pay on any foreclosed property) when a property can no longer qualify as a principle residence. It is important for those REALTORS® working with bank clients to let lenders know about the change and communicate the benefit of filing a Conditional Rescission.

Source: Michigan Association of REALTORS®

Michigan Property Tax Homestead Exemption Information

Happy Holiday Yodeling Cat Video

by Tom Stachler,ABR,CDPE - Group One Realty Team

Check out this Cool Cat Video

Happy HOlidays Everyone!

 

Best of luck in the coming New Year!

Please keep us in mind if we can help you or an associate with their real estate pursuits in 2012!

Ann Arbor Area Community Information Click here

 

Covenant Deed vs. Warranty Deed and Quit Claim

by Tom Stachler,ABR,CDPE - Group One Realty Team

Title Issue that Comes up When Buying a Foreclosure

"Covenant deeds are not illegal. With a warranty deed, the grantor is warranting title against all prior claims - even claims that arose prior to the grantor acquiring title to the property. With a covenant deed (or "deed C") the grantor's warranty is limited to claims arising from the actions of the grantor. You get a little more from a covenant deed that you would get through a quit claim deed. Bank/sellers` are never going to give someone a warranty deed, the battle is typically over whether the bank will give a covenant deed or only a quit claim deed.

If I was a buyer, I would push for the covenant deed and in all events make sure that I had good title insurance in place to protect me. Good title insurance from a reputable company is always important but particularly so if you are getting something less than a warranty deed. Purchasers need to keep in mind that there is title insurance out there these days that really doesn't protect the them because the exceptions to coverage are way too broad.

I usually review the title company's pre-committment policy and often with recommend that buyers taking covenant deeds (or quit claim deeds) should strongly consider having their real esate attorney look at the title commitment/policy before they close. This is even more important if the policy is coming from an affiliate of the seller/bank --or other title company that we may not be as familiar with."

 

Check out the "All MLS Listings" above or our other Blog postings including "Things to Do in Ann Arbor"

 

Get Direct MLS Access that Real Estate Brokers Use  Click here to View

Mortgage Insurance Cancellation: Myths and Realities

by Tom Stachler,ABR,CDPE - Group One Realty Team

When it comes to private mortgage insurance (PMI), there are several myths that exist that make buyers reluctant to consider a conventional loan with PMI as an option when purchasing a Home. One of the more common misconceptions is that cancelling PMI is a difficult—not to mention time-consuming—process.

The irony is that the majority of buyers don’t harbor those same beliefs or reservations about an FHA insured loan when, in reality, FHA coverage may be less easily cancelled, or take longer to cancel, than PMI.

HPA Makes Cancellation Clearer
When it went into effect as a new federal law, the Homeowners Protection Act (HPA) of 1998—which applies to both FHA and PMI insured loans—required lenders and servicers to provide disclosures regarding MI for residential loans obtained on or after July 29, 1999. Prior to this, consumers were responsible for requesting PMI cancellation if they met two factors: one, their loan balance was paid down to 80 percent of the property; and two, they had a good payment history.

While many lenders obliged consumer requests to drop PMI coverage, consumers had sole responsibility for keeping track of their loan balance.

The HPA established three different times when a lender or servicer must notify consumers of their rights.

At loan closing, lenders must disclose:
• The right to request PMI cancellation and the date on which the request can be made
• The requirement that PMI be automatically terminated and the date on which this will occur
• Any exemptions to the right to cancellation or automatic termination
• A written initial amortization schedule for fixed-rate loans only

Each year, loan servicers must send borrowers a written statement that discloses:
• The right to cancel or terminate PMI
• An address and telephone number to contact the loan servicer for determining when PMI may be cancelled

When MI coverage is cancelled or terminated, lenders must send a notification to borrowers stating:
• PMI has been terminated, and the borrower no longer has PMI coverage
• No further PMI premiums are due

Termination of Coverage
Under the terms of the HPA, mortgage lenders or servicers must automatically cancel borrower-paid MI coverage when the mortgage has amortized to 78 percent of the original property value, with all unearned premiums returned to the borrower within 45 days of the cancellation or termination date. This provision also requires that the borrower be current on mortgage payments required by the terms of the loan, and if the loan is delinquent on the date of automatic termination, a lender must terminate the coverage as soon as the loan becomes current.

Cancellation of Coverage
Also under the HPA, a homeowner has the right to request PMI cancellation when the mortgage balance reaches 80 percent of the original property value. All payments must be current, meaning a homeowner must not be 30 days late on a mortgage payment within one year of their request, or 60 days late within two years.

However, a borrower can only initiate a cancellation request for FHA based on their prepayment of the loan, and even then, it can only be requested beginning five years after the loan origination date.

With PMI, homeowners can request cancellation based on prepayment of the loan, as well as an appraisal. Despite falling property values, it’s possible for homeowners to gain enough equity in their home to request cancellation in less than five years based on a home appraisal.


Five Mortgage and Foreclosure Myths

by Tom Stachler,ABR,CDPE - Group One Realty Team

In a mortgage market that changes as quickly as this one, today’s fact is tomorrow’s fiction.  For buyers, misinformation can be the difference between qualifying for a Home loan or not. Sellers and owners, knowledge is foreclosure-preventing, smart decision-making power! Without further ado, let’s correct some common mortgage misconceptions.

1.       Myth: Buyers with bad credit can’t qualify for home loans. Obviously, mortgage guidelines have tightened up, big time, since the housing bubble burst, and they seem likely to tighten even further over the long-term. But just this moment, they have relaxed a bit.  In the last couple of weeks, two of the nation’s largest lenders of FHA loans announced that they’ve dropped the minimum FICO score guideline from 620 (which allows for some credit imperfections) to 580, which is actually a fairly low score. 

At a FICO score of 620, buyers can qualify for FHA loans at many lenders with only 3.5 percent down. With a score of 580, the lenders are looking for more like 5 to 10 percent down – they want to see you put more of your own skin in the game, and the higher down payment lowers the risk that you’ll default.  However, if your credit has taken a recessionary hit, like that of so many Americans, this might create a glimmer of hope that you’ll be able to take advantage of low prices and interest rates without needing years of credit repair.

2.     Myth: The Mortgage Interest Deduction isn’t long for this world.  Homeowners saved over $85 billion in 2008 by deducting their mortgage interest on their income tax returns. A few months ago, the National Commission on Fiscal Responsibility and Reform caused a massive wave of fear to ripple throughout the world of real estate consumers and professionals when they recommended Mortgage Interest Deduction (MID) reform, which would dramatically reduce the size of the deduction.

Fact is, the Commission made a sweeping set of deficit-busting recommendations to Congress, a few of which are likely to be adopted.  Fortunately for buyers and sellers, MID reform is not one of them.  Very powerful industry groups and economists have been working with Congress to plead the case that MID reform any time in the near future would only handicap the housing recovery.  Congress-folk aren’t interested in stopping the stabilization of the real estate market.  As such, the MID is nearly universally thought of as safe – even by those who disagree that it should be.

3.       Myth:  It’s just a matter of time before loan guidelines loosen up. 
 The US Treasury Department recently recommended the elimination of mortgage industry giants Fannie Mae and Freddie Mac. I won’t get into the eye-glazing details of it here, but the long and the short is that (a) this is highly likely to happen, and (b) it will make mortgage loans much harder and costlier to get, for both buyers and homeowners.   It’s possible that loans are as easy to get as they’re going to get.  So don’t expect that if you hold out, zero-down mortgages will come back into vogue anytime soon. Fortunately, Fannie and Freddie aren't likely to disappear for another 5-7 years, so you have a little time to pull your down payment and credit together. If you want to get into the market, the time to get yourself ready is now!

4.       Myth: If you don’t have equity, you can’t refi. Much ado is being made about how stuck so many people are in their bad loans, because they don’t have the equity to refinance their way out of them.  If you’re severely upside down (meaning you own much, much more than your home is worth), stuck may be the situation. But there are actually a couple of ways homeowners can refi their underwater home loans.  If your loan is held by Fannie or Freddie (which you can find out, here), they will actually refinance it up to 125% of its current value, assuming you otherwise qualify for the loan.  That means, if your home is worth $100,000, you could refinance a loan up to $125,000, despite the fact that your home can’t secure the full amount of the loan.

If your loan is not owned by Fannie or Freddie, you might be a candidate for the FHA “Short Refi” program. While most mortgage workout plans are only available to people who are behind on their loans, the Short Refi program is only available to homeowners who are current on their mortgages and need to refinance up to 115 percent of their homes’ value.  So, if you owe $250,000 on your home, you can refinance via an FHA Short Refi even if your home’s value is as low as $217,000. If you think you’re a good candidate for a short refi, contact your mortgage broker, stat – there are some in Congress who think that this program is so underutilized (only 245 applications have been submitted since it rolled out in September – no typo!) that its funding should be diverted to other needy programs.

5.       Myth: 
 If you’ve lost your job and can’t make your mortgage payment, you might as well mail your keys in.  Until recently, this was essentially true – virtually every loan modification and refinancing opportunity required that your economic hardship be over before you could qualify. And documenting income has always been high on the requirements checklist. But there are some new funds available in the states with the hardest hit housing and job markets, which have been designated specifically for out-of-work homeowners.

The US Treasury Department’s Hardest Hit Fund allocated $7.6 billion to the states listed below – all of which are now using some portion of these funds to offer up to $3,000 per month for up to 36 months in mortgage payment assistance to help unemployed homeowners avoid foreclosure.  Contact the state agency listed below if you need this sort of help:

3818 Century Ct, Ypsilanti, MI 48197

by Tom Stachler,ABR,CDPE - Group One Realty Team

3818 Century Ct, Ypsilanti, MI  48197

Pittsfield Township Taxes, Ann Arbor Schools.  

2600 square foot 4 Bedroom Home with 2.5 Baths.  This home backs to a common area in Palisades Subdivision.  Features include Granite kitchen counters, hardwood floors in master bedroom, family room and foyer leads to a stylishly updated powder room.  Located on a quiet cul du sac and close to shopping, parks and Freeway access making it a popular commuter area.

RECOMMEND VIEWING FULL SCREEN BY CLICKING THE FOUR ARROWS BOTTOM RIGHT CORNER. 720P HD RESOLUTION

2600' 4B$/2.5B home with plenty of hardwood floorS, granite counters along with an updated powder room. Located on quiet cul du sac and backs to subdivision common area for plenty of setback from the neighbors and space for the kids to play.

Call Listing agent Tom Stachler for more information at (734) 996-0000 or visit his website at www.TheRealtyTour.com

CLICK HERE FOR MORE HOME ON 3818 CENTURY COURT, PITTSFIELD TOWNSHIP, MI  48197

Why Banks prefer to Foreclose than Modify your loan

by Tom Stachler,ABR,CDPE - Group One Realty Team
Video Video

The President says everyone should.... within reason, be given the opportunity to stay in their Home and avoid foreclosure and eviction. Watch this Short video to provide you with some insight on how the cards maybe stacked against the loan modification process and understand how the banks are making more money on real estate Foreclosures.  Its no wonder why it is so difficult to get their lender to lower their mortgage payment or interest rate.  

This short video will provide you with a little insight and perhaps something you should write your Washington representative about.  Please forward this to anyone you know who might be looking for help either with a short sale or interest in the foreclosure process.  

We have many additional resources available on our website here for Ann Arbor Short Sale Information and I am always available to confidential advice.  Also try this short sale web site http://www.annarborhome.info/

Get the latest Ann Arbor Real Estate Listings and Saline real estate listings for sale using this link. 

Video Welcome to Ann Arbor

by Tom Stachler,ABR,CDPE - Group One Realty Team
Video Video

Welcome to Ann Arbor, Michigan

Visitors and potential residents should check out this brief video clip for some sites and sounds of Ann Arbor.  We have other Blog Video's about specific and interesting places in Ann Arbor and the surrounding areas that you might like to check out when you get a moment in the "Places & Events" category to the right.  

Looking for Real Estate for purchase or rental?  

Click on the "All MLS Listings" above to get started.  

Questions?  Try our Chat Button at the bottom of any page to reach us quickly or note our contact information above.  We thank you for your consideration and we look forward to meeting you in person.  We specialize in relocating families and making their transition a fun experience and smooth process.

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Photo of Tom Stachler Real Estate
Tom Stachler
Real Estate One, Group One Realty Team
555 Briarwood Circle
Ann Arbor MI 48108
Direct: (734) 996-0000
Fax: (734) 661-0102