Foreclosure Stats - Montgomery County - Good News???
After the real estate disaster that was 2011, I am always on the lookout for any type of silver lining in the real estate market cloud for the past several years. Recently, the foreclosure statistics for Montgomery County Pennsylvania for the past several years came across my desk and revealed the following hopeful information that the downward pressure on real estate prices occasioned by the foreclosure crisis may be relenting.
The data reveals that the total number of foreclosure complaints filed in Montgomery County for the year 2011 was 1,544. This is the lowest number of foreclosure complaints filed since 2007 and this number represents a 39% decrease from 2010. Further, the number of units exposed (went) to Sheriff's Sale dropped from 6,977 in 2010 to 4,540 in 2011, a 35% decrease. While we are on a roll, the number of units sold at a Sheriff's Sale decreased from 786 in 2010 to 631 in 2011, a 20% decrease. Although we should still keep the champagne on ice, this is positive news in a negative direction.
Does The Affordable Care Act Of 2010 Impose A New Tax On Real Estate?
There has been some misinformation floating around about the health care bill that was passed under the current administration that may have come across your desk. DISCLAIMER: This is not intended to be a political defense or statement about the benefits or burdens of the Health care Act passed, but merely intended to supply you with the tools to answer an inquiry from your clients.
It has been making the rounds that if you sell your house after 2012, you will be required to pay a 3.8% sales tax on that sale. For example, a $200,000 sale will incur a tax of $7,600. What? Outrageous! Well, it's not an accurate statement of the law. This tax will not be imposed on all real estate transactions. When the legislation goes into effect in 2013, a 3.8% tax MAY be imposed on SOME income from interest, dividends, net rents and net capital gains. The tax, if imposed, will only effect those individuals with an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI.
The most important thing to remember is that the existing capital gains exclusions that apply to residential real estate still apply. What does that mean? It means that even if your seller has an AGI above the thresholds discussed above, the new tax would only apply if the PROFIT FROM THE SALE (not the sales price) is greater than $250,000 for individuals or $500,000 for a married couple.
Things To Remind Your Client After Settlement...
Do you have a will? Now that they own property, your clients would be best served by consulting an attorney to have a simple will set up so that there is no issue as to what happens with the home after the passing of a spouse.
Are your clients currently unmarried but will be getting married sometime after the settlement? Please make sure you tell them to change the tenancy on their deed after the wedding from joint tenants with rights of survivorship (a divisible joint interest which could be attacked by creditors of just one spouse) to tenants by the entirety (an indivisible joint interest which cannot be attacked by the creditors of one spouse only).
Yes, I know this is a repeat from last issue, but it is a very important asset protection device.
Removing/Adding An Owner From A Deed - No Big Deal, Right?
At least once a week, I get a call from a prospective client wanting to get a "quit claim" deed from another owner on title to remove that owner from title (or add a new spouse/person to the title). This owner to be removed/added could be a spouse or a non-related co-owner. No problem, right? Come on in and we'll do those documents for you, right?
Not so fast. The first question out of my mouth is "Do you have a mortgage on the property?" Almost always the answer is, "yes, but I am going to (or he/she is not going to) be responsible for the payment of the mortgage." Home safe, right? Your client is paying the mortgage!
Hold your horses. Paragraph 18 of the Mortgage executed at closing states as follows: "If all or any part of the Property or any Interest in the Property is sold or transferred without Lender's prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument." Therefore, it may be a default under the client's mortgage to just add or subtract someone from the deed. So, the first thing I tell them is that they need to get the lender's approval to the proposed change in ownership.
Therefore, a good practice is to have a search done on the property anyway because the owner may not know all the mortgages/liens on the property. Once that search is received, I can advise the client as to the next move in the transfer.
Once there is a search and lender approval, are we finally good to go? Maybe. When was the property purchased? If it was purchased prior to 2006, the title insurance policy that was in effect was the ALTA 1992 policy which voided/modified the Owner's Policy of title insurance in the event of such a transfer which means the client would need to pay for a new Owner's Policy to replace the voided or modified policy. After 2006, the ALTA 2006 Policy is in effect which, among other things, removed that voiding issue in these situations.
In sum, the change can be made, but several questions must be asked and searches made.
ABOUT THE AUTHOR...
Andrew J. Monastra, Esquire is a real estate attorney and owner of Heartland Abstract, Inc. located in Pottstown, Pennsylvania. You may contact him to discuss real estate issues at his office (that's it on page 1) at 740 East High Street, Pottstown PA 19464. His telephone number is 484-941-0912 and his e-mail address is Andrew@monastralaw.com.
He has been involved in over 10,000 real estate closings, either as lender's counsel, title insurance agent or buyer/seller counsel.