Jan 20, 2014 | Home Buyer Tips, Home Seller Tips, Interesting Stuff
An LLC is a valid and effective way to hold and manage real estate. An LLC is recognized 
as a separate legal entity for tax and liability purposes.
1. An LLC can provide certain tax and liability advantages. In certain circumstances, holding title to real estate in an LLC can provide a valuable tax advantage. However, if the main intent of forming an LLC to hold real estate is for its tax advantages, you should be sure to speak with a qualified tax advisor. Be certain that you obtain a specific tax identification number from the IRS for the LLC. Applying for an Employer Identification Number or tax id is a rather simple process and can be done online. You will need to provide a tax id number to the closing attorney.
2. There is a cost to create and maintain an LLC. The cost to file for and create an LLC in Massachusetts is around $500.00. This does not include the cost of legal counsel. An annual report will need to be filed with the Mass. Secretary of State each year at a cost of $500.00 per LLC. In most circumstances, if the intent of having an LLC is to avoid legal liability associated with the ownership of real estate, you should probably have two LLCs. One LLC to hold title and one to manage the property. Be certain that the application to create an LLC and operating agreement are prepared properly. Mistakes made in filing for an LLC can be costly and time consuming to correct. Don’t file for an LLC in any other state or jurisdiction unless you have a really good reason for doing so. Cost should not be the sole reason. Consult qualified legal counsel to assist you.
3. An LLC is not right for every situation. Although an LLC can hold title to real estate, it does not mean that it is the best way to do so. You should carefully consider the pros and cons of using a realty or nominee trust, a standard corporation, or individual ownership for each piece of real estate. We often find that sellers spend needless time and money to hold title in an LLC when it really was not necessary or proper for their situation. It may be considered “fashionable” to have an LLC, but it is not always prudent.
4. An LLC is not like a regular corporation. One of the primary differences between an LLC and standard corporation, or S Corp, is the way gains and losses are accounted for between members and shareholders. With an LLC, gains and losses can be allocated disproportionately between members, not so with an S Corp where it is shared between pro-rata shares of ownership. With LLCs, members are able to pass losses to their personal income reporting. This can’t be done with a regular corporation.
5. An LLC must be in good standing with the state in order to sell its real estate. If your LLC holds title to Massachusetts real estate you will need to prove that the LLC is in good standing with the State before you can actually close on the sale. The most acceptable way to show good standing is to obtain a certificate from the Secretary of State’s office. The Secretary will not issue a certificate if the LLC is not current with its annual report filings. The cost of a Certificate of Good Standing is about $25.00. Obtain it well in advance of an anticipated sale, the closing attorney will likely require it prior to closing.
Nov 20, 2013 | Home Buyer Tips
Buying real estate for the first time is a very exciting step in life. It is likely to be one of the biggest financial commitments that you make, so it’s very important to navigate the purchasing process wisely.
Many first-time home buyers make rookie mistakes that bring on negative consequences and a lot of frustration. Outlined below are common errors home buyers make, so you can learn from their missteps and avoid them yourself.
1. Buying More Than What You Can Truly Afford
Just because the bank says that you qualify a certain amount for a mortgage doesn’t mean that you have to choose a house at the very top of this price range. Many people get carried away and buy the most expensive house that they qualify for.
If something unexpected happens, they may find it difficult to keep up with their monthly mortgage payments later on.
Remember that you will also have student loan payments, vehicle costs, credit card bills, health insurance, groceries, retirement savings and other expenses, so make sure that your mortgage payments will comfortably fit within your budget.
2. Failing To Get A Home Inspection
Before buying a house, you should always have a professional inspection done. Not doing so is a big mistake. You don’t want to get stuck with hidden damage that could saddle you with the expense of ongoing repairs.
Hiring a professional to assess the home’s condition is absolutely essential before making your final decision.
3. Disregarding Your Future
When you are buying real estate, don’t just think about how the home will work for you in the immediate future. Also consider what your needs will be five, ten or even 20 years from now.
Find out the development plans for the neighborhood. Look for reputable schools if you intend to start a family. And consider whether the street’s home values are likely to increase or decline in the future.
Your Next Steps
Don’t let the home-buying process overwhelm you! Learn from these common first-time home buyers’ mistakes, so you can avoid them.
A great next step toward planning for your first home purchase is to consult with a trusted, licensed mortgage professional who is trained in providing the best advice on how a new home will affect your budget.
Nov 16, 2013 | Home Buyer Tips
An open house gives you a great opportunity to look more closely at real estate you might be interested in buying. It also affords you the chance to chat with the owner or real estate agent so you can bring up any issues or hesitations you have with the home.
Knowing what to ask can be difficult, so below are examples of questions to ask at the next open house you attend.
Why Has The Seller Decided To Sell Now?
If you ask why the seller is moving, you could learn valuable information to help determine your offer or possibly whether or not you want to buy the home.
Knowing whether the owners are about to go into foreclosure, have experienced trouble in the neighborhood, or if they’ve retired and completely paid off the home can help you understand how urgently they need to sell their property.
Has The Seller Had Any Other Offers?
Don’t forget that you are not only negotiating with the seller for a price, you are also competing with other potential buyers. It really helps to know what you are up against.
It is important to understand that you might not get a 100% straight answer to this question as most sellers know that competition or perceived competition can cause a potential buyer to move forward more quickly and at a higher price.
If you’re comfortable in this discussion, you might want to try and see if you can find out the details of any other offers.
Does The Property Have Special Ownership Costs?
Ask the agent or owner about the other costs associated with owning the property, such as Home Owners Association fees within a condo complex or a gated community. It’s important to know about these extra expenses in advance so you can make an informed offer.
You may also want to ask about any pending litigation concerning the property. Litigation is not always a deal killer, but it’s better to know the details before you sign closing documents.
What Furniture And Appliances Are Being Sold With The House?
Most of the time, a seller will include their major appliances such as the refrigerator, stove and dishwasher with the home, but this isn’t always the case. If you don’t already have these items, it’s important to know whether they are included in the purchase price.
Is There Anything Else That You Want To Leave With The Home?
This is an important question to ask. Especially if there are specific things in the home that you have a strong interest in. Perhaps there is custom art work or a pool table that fits perfectly in the game room.
The seller may be eager to part with those items and include them in the sale of the home or sell them at a large discount. The open house is a great opportunity to learn more about a home before making the decision to buy it, so be sure you ask the right questions.
Nov 1, 2013 | Home Buyer Tips, Home Seller Tips
It never fails. After a potential buyer’s home inspection of what is otherwise the perfect property, there are issues that require the seller’s attention. Whether it is a faulty furnace, double tapped electric circuit breaker, rotten steps or mold, inspection defects like these can bring a screeching halt to the simplest of transactions.
A home buyer has the right to expect certain defects to be addressed by a seller, and often a seller will give a concession by reducing the sale price or providing a closing cost credit. But when a concession is not an option, a seller can always agree to repair or correct the defects at the seller’s expense prior to closing. (more…)
Oct 30, 2013 | Home Buyer Tips
With the economic downturn, anyone dealing in real estate quickly became familiar with previously little-known terms such as foreclosure and short sale. Now that the housing market is picking back up and people are moving on, a new term is coming to light — zombie titles.
The Zombie Title
This is when a home has been vacated because the owners defaulted on their loan and their bank started the foreclosure process. However, for some reason or another the bank never completed the foreclosure and sold the home.
So, when the city starts fining someone for the overgrown grass and dilapidated structure, the homeowner who thought they were finished with the property gets the bill.
A Home That Keeps Haunting
Homeowners think they don’t own the property any longer and therefore try to move on by rebuilding their credit score and finding a new place to live. It can be a rude awakening to find out that not only do they still own a home they could have been living in, but also its long vacancy has caused it to fall into disrepair.
It‘s Spooking The Neighborhood
These vacant homes can decrease the value of a neighborhood. If the bank or the un-suspecting homeowner are neither one taking care of the property, then it can become overgrown and an eyesore on the block. It becomes a problem with no solution because the owner won’t want to invest any money in fixing up the property when the bank could come back with the foreclosure at any time.
Nail Shut The Foreclosure Coffin
Homeowners who have foreclosed on a home should double check that their bank actually followed through to closing on a sale. They could contact their lender or check public property records just to make sure. Otherwise, they could be haunted by their housing nightmare all over again.
Don’t let the zombie title of a past property haunt your future! Check with your bank to make sure you’re free and clear of your foreclosure. If you’d like more information on zombie titles or have other questions about local real estate, please contant your trusted real estate professional.
Oct 15, 2013 | Home Buyer Tips
By the time you get to the final walkthrough on your property, the home buying process is almost complete. However, it is still important to pay close attention to this final step, as it will be crucial in the success of your home purchase.
The final walkthrough is your last opportunity to ensure that everything in the home is in working order and that there are no potential problems waiting for you when you take over ownership of the property.
While conducting a final walkthrough of the property, give yourself enough time to look carefully at everything and not be rushed. You are looking for any new issues that might have arisen since the last time you viewed the home.
Once you close on the purchase the previous owners will not be obligated for fixing any damage. For this reason, you should schedule your walkthrough approximately 24 hours before closing on a home.
What You Should Look For?
When you are performing your walkthrough, here are some of the important issues that you should be watching out for:
- Are all major appliances in working condition? Do they all have their warranties and owner’s manuals?
- Do all of the light switches and outlets work?
- Have any of the fixtures or appliances gone missing, even though the seller agreed to leave them behind?
- If you have agreed on any repairs, has the seller had these repairs completed?
- Are there any signs of damage (i.e. scratched walls or floors) as a result of the previous owner moving out?
- Do all of the water faucets and toilets function as they should?
- Check the exterior of the house, especially if there has been a storm or strong winds since your last visit.
- Did the previous owner leave any garbage, extra furniture or unwanted items behind?
What To Do If You Spot A Problem?
If you find a problem when you are going through your walkthrough, there are a few options of what you can do. If the issue is very serious, you might choose to walk away from the deal completely. However, if the issue is not that significant you might decide that it is not worth losing your dream home over.
You could simply pay for the repair yourself, or postpone the closing until the seller fixes the problem. If the repair was agreed upon during the negotiations, you have a legal recourse.
To find out more about buying property, feel free to contact your trusted real estate professional.
