What happens if you own real estate jointly with someone (i.e as joint tenants with right of survivorship or as tenants by the entirety) and the other property owner dies? Who gets his or her half of the property? Did they want you to have it? How do you get it? Don’t worry, if the joint tenant dies, the property is yours. That is the purpose of joint tenancy — if one owner dies the other owner(s) automatically get the ptoperty. But when it comes time to sell the real estate, the title company will be looking for proof that the joint owner has passed on, and a death certificate is not enough. Fortunately, the process of removing a deceased joint tenant from title is simple. A form called a Deceased Joint Tenant Affidavit needs to be prepared by someone with knowledge of the facts (typically the surviving joint tenant),… read more →
Many buyers think that a professional inspection for a newly constructed home is unnecessary. After all, it’s a new house — everything is brand new and absolutely perfect, right? Wrong. I strongly urge all of my clients to obtain a professional inspection of any home they are purchasing, even it’s just been built. In the course of my work, I see inspection reports on homes that have been previously lived in, as well as new construction homes. The lists of defects, however, are pretty much the same in length regardless of the age of construction. In fact, new construction homes sometimes have a longer list of defects because there is no one living there to have found and fixed those defects yet. For example, a switch that is supposed to be wired to an outlet may not be working properly, or a shower diverter may leak. While the builder probably… read more →
If you are selling property and involved in a 1031 exchange, you certainly want to know what your deferred tax liability is. The important thing to remember is that you are taxed on your gain, NOT on your profit and NOT on your equity. In other words, you can sell your property, have no profit and no equity, and still be subject to tax liability under the 1031 rules because there is a gain. How can you calculate what you might owe? Well, see an accountant. But if you’re stubborn and you refuse to go to your accountant, here’s a little formula that will point you in the right direction: First of all, you need to calculate your Adjusted Basis. To do this, take your original purchase price, and then add the cost of your improvements (assuming you have not already claimed them as expenses). Then subtract any depreciation you… read more →
Up until now, if you sold your principal residence, you could pocket up to $250,000 in profit, tax-free (or $500,000 if you are married filing taxes jointly) as long as you were living in it for at least two of the last five years. In other words, if you owned rental or investment property and you moved in and used the property as your principal residence for at least two of the last five years, you could receive substantial profits tax-free upon the sale of the property. You could sell your home and move into your vacation property or rental unit for just two years, and still avoid paying capital gains tax. Well, lawmakers have finally caught on. If you plan to buy, sell or live in an investment or rental property that you own after January 1, 2009, you will still be able to receive some of the profit… read more →
Periodically I come across a client who is interested in a land trust, but doesn’t know all that much about it. Well, here you go, land trusts in a nutshell: Land trusts are a fancy way to hold title to real estate; instead of holding title in your own name or in the name of your company, you can hold title in a land trust. There are basically two types of land trusts: 1) Land trusts that are administered by a bank (typically for an annual fee of a few hundred dollars) and 2) Land trusts that you can administer yourself, with the help of an attorney who can set it up for you. There are a number of advantages to having a land trust: 1) Land trusts can be useful estate planning tools, especially for smaller estates.2) Land trusts allow the transfer of property quickly upon your death. The… read more →
Congress passed a new bill last week, and if you’re buying a home and meet all of the following requirements, you’re in for a sweet deal: 1) You don’t own a home now, and have not owned a home in the last three years;2) You closed on the home you’re buying after April 9, 2008, or, if you haven’t closed yet, you will close before June 30, 2009;3) You are a U.S. Citizen or resident alien;4) You did not finance the property using a tax-exempt bond mortgage; and5) You are using the property you are buying as your primary residence. If you meet all of these requirements, you can can claim a credit of up to 10 percent of your purchase price, up to $3,750 (or up to $7,500, if you are married filing taxes jointly), on your 2008 or 2009 taxes. If your adjusted gross income is over $75,000… read more →
As more and more of my clients are buying foreclosed properties, the question of who is responsible for paying unpaid condo assessments keeps coming up. Buyers feel that it should not be their problem; after all, they didn’t own the property when the assessments became due. Associations, on the other hand, want their money; they don’t particularly care where it comes from. Because homeowners’ associations require payment of assessments by all unit owners in order to meet their budget and keep their property in good repair, the Illinois legislature has sided with them on this issue. The Illinois Condominium Property Act states that if you buy foreclosed property from the bank, you are responsible for assessments for the six months immediately prior to when the association instituted legal action to collect the assessment, assuming that such assessment is still unpaid. Take note: if the homeowner did not pay assessment for… read more →
The law states that if the seller of residential property in Illinois fails or refuses to provide the Illinois Residential Real Property Disclosure prior to the sale of the property, the buyer has the right to terminate the contract (765 ILCS 77/55). This is bad news for sellers — what if they simply forgot to provide the disclosure? The law doesn’t care. It doesn’t matter why the seller didn’t provide the Residential Real Property Disclosure or whether he was acting in good or bad faith. As long as the seller did not give the disclosure to the buyer, the buyer can opt out of the transaction. While this issue is not litigated often, it did come up just recently. In Muir v. Merano, 378 Ill.App.3d 1103 (5th Dist. 2008), the buyer repeatedly asked the seller for the disclosure statement, but the seller never delivered it. The buyer then terminated the… read more →
Typically, even when you buy property “as-is”, the seller has a duty to disclose latent material defects. Furthermore, if the seller misrepresents facts to the buyer, the buyer has the right to sue after closing. But buyers beware, a recent Illinois case has held that if you agree to buy property as-is, you are really buying it as-is, and if you learn something about the condition of the property after closing and decide to go after the seller for failing to tell you about it, you may very well lose. Kopley Group V, LP v. Sheridan Edgewater Properties, Ltd., 376 Ill.App.3d 1006 (1st Dist. 2007) illustrates this point. In Kopley, the buyer purchased a large residential/commercial building as-is. The contract allowed the buyer time to inspect the property, and if the buyer was not satisfied after his inspections, he could cancel the contract and receive a full refund of his… read more →
Because of the severe storms, flooding and tornadoes in the midwest, the IRS is providing extensions to people or entities attempting a 1031 exchange in certain affected counties in Illinois, Indiana, Iowa, Missouri and Wisconsin. These extensions will allow people to search for or close on appropriate exchange properties without missing the strict IRS deadlines (45 days from the date of your original sale to identify exchange property, and 180 days from the date of your original sale to close — for more general information on the 1031 exchange process, click here). So who is eligible for these extensions? Well, first of all, you must be an affected potential exchangor. An affected potential exchangor is anyone (a) who lives in or has its primary place of business in one of the affected counties (see the list below) or (b) who keeps his books or records in an affected county, or… read more →