Newsletter
June 2008
Top Deals
- $14M refinance of a Manhattan apartment building
- $10.3M refinance of a commercial building in Manhattan
- $5.4M purchase of a commercial property in Manhattan
Tip of the Month
If a decedent leaves no will, he dies intestate, and an administrator or all the heirs must then convey the property. Simply because an offspring has been living in the property for several years does not give him the authority to convey the estate of the deceased. The title company may accept an affidavit of heirship for a simple estate instead of going through the expense and time of an actual proceeding, but if there are missing or non-cooperative heirs, a formal administration proceeding will be required.
Notable News
Mortgage Rates
Although only modestly, mortgage rates for May rose four times in five weeks before settling at a fixed rate of 6.19 percent for a 30-year loan. The fixed rate for a 15-year loan lists at 5.78%, and the jumbo 30-year fixed rate on a 1-family dwelling (for mortgages up to $729,750.00) is at 6.375 percent. Note that the FHA limit for a 2-family is currently at $934,000.00; a 3-family, at $1.1 million and a 4-family, at $1.4 million. 'The Federal Housing Administration lending increases are at amazing levels,' says Lars Lerner, a mortgage professional at Banner Mortgage Group in Scarsdale, NY. 'Now highly-desirable areas like Park Slope and Bedstye in Brooklyn, and Silver Lake in White Plains, are more accessible than ever before.' Low down payments, FICA scores, PMI rates and other factors apply. Despite these pluses, however, the national housing scene remains bleak with a 7.7 percent decrease in prices, the most significant drop in decades.
Article of Interest
GIFTING PROPERTY: REAL ESTATE STRATEGIES
If you have done very well for yourself and are blessed with an accumulation of liquid assets or investment real estate, chances are you may be thinking about passing down that wealth to your children or perhaps even your grand- or great-grand children. Of course, depending on a variety of factors you may want to, or even need to, maintain control over the assets to a certain degree, or secure an income or such like from it, so you can all benefit. If that's the case, then the FLP (family limited liability partnership) or LLC (limited liability company) may be for you.
An LLC is a hybrid entity combining the limited liability of a corporation with the tax advantages of a sole proprietorship or partnership which makes it an excellent strategy for gifting purposes because your liability in it is limited. The FLP on the other hand, is even more advantageous because, a partner's liability in it, is limited to his/her capital invested. Both strategies are recommended because, in both instances, the gifted property can be transferred out of the owner's estate faster than in other transactions.
According to the Real Estate Journal, there are a number of reasons to begin thinking about transferring property out of your name and into someone else's.
1. to minimize your taxable estate by reducing/removing increasingly valuable assets
2. to begin familiarizing the recipient with the particulars of the property
3. to manage more effectively estate tax issues for gift tax purposes
It is important to note that, once an estate tax issue surfaces, it is prudent for the grantor to act quickly in order to take advantage of tax discounts made available by the IRS for the gifting of minority interests to family members. Tax expert Ted Dallek of Grassi & Co. says that, because you will be gifting shares, or a percentage of interest, an entity must first be formed to hold the property. Once the entity is formed, you can transfer the value of the specific interest therein, not the pro-rated value of the commercial real estate itself. The gifted interest portion (minority interest) is worth much less than what would be considered its 'proportional equivalent of the fair market value of the underlying asset' which is the reasoning behind the discounts in the first place. But, the discounts must be associated with a LLC or FLP in order to be recognized by the IRS, and properly supported by necessary data to indicate how the specific discount level was arrived at. If you are a gift-giver, it is recommended that you work with a knowledgeable real estate attorney to establish the level of control and liquidity that your recipient will have and develop agreements to reflect your specific goals. The more control retained in the property, the higher the discounts and consequently, less gift tax will be due.
Leisa Premdas
Industry News
Title Insurance and Short Sales
In today's market, short sales are a very frequent occurrence, and underwriters are becoming increasingly cautious about insuring these 'high liability' transactions. Because of the heightened sensitivity to the issue, title companies are being required to get underwriting approval before these types of transactions can be insured. In turn, title companies are requiring that they are notified immediately once it has been determined that a transaction involves a short sale. Ample notification, as well as these generic guidelines may help to prevent any unnecessary setbacks that can frustrate and disappoint clients and attorneys alike:
1. Obtain a written payoff letter from the existing lender. It must state the reduced amount and the specific conditions stipulated by the lender in order to fully satisfy the loan.
2. Follow closing instructions. Pay close attention to the existing lender's closing instructions and special conditions, if any. There can be no variation from the short lender's payoff instructions.
3. All payments, whether made at closing or outside of closing, must be disclosed on the HUD-1 Settlement Statement, and the title company must be provided with an approved copy. If the sale does not involve a new lender, a closing statement must be prepared by the buyer's attorney and signed by all parties to the transaction including all attorneys, advisors and other third parties associated with the conveyance.
4. If as a condition of sale the seller may not receive any proceeds, the underwriter will require copies of the proceeds check and an affidavit from the settlement agent, if applicable, and buyer acknowledging that the seller has not received any proceeds.
5. All junior mortgages and other liens must be satisfied and releases/discharges must be obtained. The title company must have written confirmation or actual releases/discharges/satisfactions of all junior liens. If no documentation exists, the junior lienor will remain an exception to the coverage of the policy.
6. If foreclosure proceedings have commenced, the "payoff" letter from the foreclosure attorney must state that upon tender of the amount stated in the "short" payoff letter, the attorney will discontinue the foreclosure action and discharge the Lis Pendens, with no additional fees or costs.
7. After the closing, the title company should follow up and record all satisfactions or releases, as applicable, of all mortgages and other liens.
Company News
Madison Hires New Sales Associate
Madison continues its expansion endeavors with its hire of Jessica Rapilla, formerly an Assistant Manager at Hugo Boss. Jessica will be assisting Michael Karger and the sales team with securing new accounts and executing closings. She is a graduate of Pace University in Pleasantville, NY. Please join us in welcoming Jessica to the Madison team!
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Scarsdale, New York 10583
Scarsdale, New York 10583
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