Tuesday, July 26, 2011

No Federal Capital Gains Tax?

For the years 2008 through 2012, the federal long term capital gains tax rate is 0% if you belong in the income tax bracket of 10% or 15%. Those who are in the 25% income tax bracket or higher are still subject to a 15% long term capital gains tax rate. You are in the income tax bracket of 10% or 15% if you have a taxable income of $67,900.00 or less if you are married filing jointly, or a taxable income of $33,950 or less if you are filing single. Taxable income is not the adjusted gross income ("AGI"), but the income after accounting for standard or itemized deductions and the number of exemptions for your household usually found on the second page of the IRS form 1040. Going forward from year 2013, the long term capital gains tax rate is 10% for taxpayers in the 10% or 15% income tax bracket, and 20% for taxpayers in the 25% or higher income tax bracket.

Tuesday, July 12, 2011

Sellers in a Short Sale

For a brief explanation of a short sale, see the post on Purchasers in a Short Sale here.  As mentioned in that post, a short sale involves a sale of the seller's home which the proceeds of the sale will be insufficient to pay off the entire outstanding balance of the seller's home loan.  The seller's mortgage holder accepts this short payoff to enable the sale of the house and removes its mortgage lien on the house.  A short sale is an attractive option to both the seller and the seller's lender because it avoids foreclosure.

The seller should know, however, that even though the mortgage holder may agree to a short sale of the seller's home, the the mortgage holder has the right to pursue the seller for the deficiency amount unpaid on the outstanding mortgage loan after short sale proceeds have been applied.  For example, the short sale of the seller's home brought about the sum of $300,000.00 to be applied to the seller's mortgage debt.  Seller's mortgage debt is an outstanding balance of $400,000.00.  That means the seller's bank has the right to sue or collect, from the seller, the remaining balance of $100,000.00.  This is because even though the bank may agree to release its lien on the house, the seller is still personally liable to the bank for the loan.  When obtaining a mortgage loan, the seller signs two important documents among hundreds.  The first is the note, which makes the seller personally liable to the bank for the loan.  The second is the mortgage instrument, which gives the bank security, for the loan given to the seller, by holding the seller's property as collateral.  As part of a seller's short sale transaction and as one of the most crucial elements to the seller in this kind of a deal, the seller's attorney should be ensuring that the seller's bank agrees to forgive the remaining balance of the debt of the seller, or that the seller is released from any further obligation on the mortgage loan, or that seller's bank waives and forgoes its rights against the seller for the remaining balance of the loan.

Thursday, July 7, 2011

Purchasers in a Short Sale

You find a house in a neighborhood that you love.  The price is reasonable, although you will probably have to put in new carpet or floors to replace the ones that look like they haven't been replaced for thirty years.  Just down the block, you find a similar house in better condition.  The best part is that it is asking for $50,000.00 less. You get to save money and there is no major work to be done.  Sounds great.  But the catch is that this one is a short sale.  Is a short sale for you? It depends.