All posts by tfsammons

How to attract a Buyer in a down market

Real Estate-Sales

Most of the buyers at closings for the last few months have not sold their current home yet. Many are close to all-out panic and ask what can be done to attract a buyer.

Some suggest offering a bonus to the selling agent of $1500 or more. But as one thoughtful agent that I know said "That would be great if I (the agent) was buying the house, but I’m not."

Another way to find a buyer is to offer an interest rate "buy down". Most lenders offer these, or you can just credit the buyer at closing and do it yourself.

How it works: Say the buyer would be getting a 6% mortgage for $200,000 to buy your home. You offer to "buy down" the interest rate to 4% for one year and to 5 % for the second year. In this example you would owe the Buyer at closing about $4200 for the  buy-down of the rate.

The monthly payments at these rates are as follows:

4% $954
5% $1073
6% $1199

The math is pretty simple. The Buyer gets a 6%, 30 year fixed rate mortgage. The seller contibutes the amount to buy down the rate each month for the first year to 4% (about $250 per month) and then continues to contribute the amount needed (about $120 per month in year 2) to buy down the rate from 5% to 4% in the second year. After that the Buyer has a 6% rate and is on his or her own.

You either give the buy-down funds to the Buyer directly at closing (or if done through the Buyer’s lender, the funds are placed in a separate account with the Buyer’s lender that is used to subsidize the payment each month for 2 years). Obviously you would have to cap the amount of the mortgage
size and interest rate.

Bottom line: But the bottom line is that the Buyer gets a really low rate for two years and you get your house sold.

Roth 401ks are here

Estate Planning

IRS recently approved Roth 401ks. Employers have to amend their 401k plans to allow for them. Distributions can be taken at age 59.5 and must begin at 70.5 years old or on death or disability. The funds must be in the Roth 401k for five years before they can be distributed without penalty. All earnings on the account are tax free.

The maximum in all 401ks for 2006 $15,000.00, or $20,000.00 if you are over age 50.

These look like a great opportunity, especially for high income earners who don’t qualify for a Roth IRA.

Series LLC comes to IL

Real Estate Rental

Delaware pioneered the Series LLC. It’s an LLC that can have different series within one LLC entity. In August 2005, IL approved a similar statute.

Once the bugs are worked out, a Series LLC may be the perfect vehicle for real estate investors. Each property could be put in a different Series. There would be only one filing fee for the Series LLC and the client would not have the cost and hassle of multiple LLCs to hold title to multiple properties.

One commentator does not recommend using Series LLCs in IL yet.

The IL statute says that if the correct filings are done with the state:

"then the debts, liabilities and obligations incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and not against the assets of the limited liability company generally or any other series thereof…"

Here is the link to the IL statute.

Major Medicaid Overhaul Coming

Elder Law

It is expected that on February 1, 2006, President Bush will sign a bill drastically changing medicaid planning. Many things will change including:

1. 36 month look-back period extended to 60 months;
2. The start of the penalty period is no longer the date of the gift;
3. Recordkeeping requirements for gifts;
4. Homes over $500,000.00 in value will not be exempt.

Here is a good summary of the proposed changes.

Watch Out for Illinois Estate Tax

Estate Planning

There is an Illinois inheritance tax. Watch out for it, because it takes a bite from large estates. I just finihsed working on an estate for a client of mine who died in 2005 with an estate of 2.0 million. His children owed $180,000 to IRS and $91,000 to the state of Illinois. The first $1.5 million of his estate was not taxed because that was the tax-free amount in 2005. So, only $500,000 of the estate was subject to tax and Illinois took almost 20% of that!

For 2006, the Illinois tax will affect those estates greater than $2.0 million any stays there until 2010 when there is no Illinois inheritance tax (or federal tax) for 1 year. Then, in 2011 the Illinois inheritance tax will affect those estates of $1 million or more. The Illinois attorney general’s web site explains this messy situation.

The solutions to this problem: Make Florida your residence if you can. It has no "state" estate tax. Try to reduce your estate to under $2.0 million with proper estate planning. GRATs, QPRTs and ILITs can help reduce large estates.

Get a Copy of Your Deed Online

Real Estate-Purchases, Real Estate-Sales

Obtaining a copy of the deed to your house was always a cumbersome thing. In Cook County, you can now get a copy of your deed online for about $2. Go to www.ccrd.info You will need the PIN number of your property (from your tax bill). Type in the PIN and the property recording history will appear. Input your credit card and you can download the deed. I use this all the time and it works well, (except for a period of about two months in April and May of 2005 when it didn’t work at all). Now the bugs are worked out and it’s a great convenience.