Gloucester County, NJ Real Estate

Replacement Property - In a 1031 exchange, a replacement property, or properties, must be designated within 45 days of the sale of relinquished property. The replacement property, or properties, chosen within the 45 days must go to settlement within 180 days of sale of relinquished property.  If not the 1031 is dissolved.  The only penalty is the capital gain tax. 

Example properties - "Like-Kind" is what it is all about.  Like-kind refers to a property's nature or character.  i.e. - Multi-units, apartment complexes, raw land, shopping malls, storage centers, warehouses, parking lots, office buildings, hotels, single family, farms, etc. One may chose any like-kind property or properties to replace his relinquished property

It is important to note that Steve Kappre is not a tax accountant or an attorney and only offers this information in regards to his personal experience. Consult your personal 1031 exchange consultant for your personal needs and scenario.

 

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving the South Jersey* area. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.
• Reverse Mortgages for seniors age 62 or older.
• Equity Management strategies for high-end homes and high net worth individuals. If you would like to subscribe to these updates via e-mail, look into the right column about 3 inches under Steve's picture. There is a yellow box. Enter your e-mail address and click the "Subscribe" button. You will automatically receive these updates regarding New Jersey, South Jersey, Mortgages, Real Estate and other important news.

A Qualified intermediary is a third party that enters into a written agreement with the tax payer, and facilitates the exchange for the taxpayer

• The written agreement between the taxpayer and the intermediary expressly omits the taxpayer's rights to receive, pledge, borrow or otherwise obtain the benefits of the money or property held by the intermediary. 
• QI acquires relinquished property, transfers the relinquished property, acquires the replacement property, and transfers it to the seller.
• QI also performs tasks such as paperwork, set-up of holding account, and assuring correct legal actions
• QI does not have to receive or transfer title
• QI to be contacted BEFORE process begins of buy / sell.  Some "custom" 1031 set-ups can be very complicated.

QI places funds from the sale into a separate account just for your transaction. QI also keeps the money "away" from you - if you were to hold the money it would not be in the manner of a 1031 and could be a taxable situation. As with any transaction, make sure you are working with well qualified professionals ... not all QI's are created the same. Also, chosing the wrong QI could be very risky, as they literally could leave with your money.

A qualified intermediary cannot be your agent at the time of the transaction. This includes a person who has been your employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the 2-year period before the transfer of property you give up. (IRS Publication 544)

It is important to note that Steve Kappre is not a tax accountant or an attorney and only offers this information in regards to his personal experience. Consult your personal 1031 exchange consultant for your personal needs and scenario.

1031 Exchanges offer benefits to real estate investors. 

"In a like-kind exchange, both the property you give up and the property you receive must be held by you for investment..." -(IRS Publication 544)

In a 1031 a seller may be...

• An individual
• Married couple
• LLC
• Corporations
• Partnerships *
• "Tenants in common" vs. Partnership

It is important that the party relinquishing the property be the same party that acquires the new property. 

Scenarios that wouldn't work...

• Husband and wife relinquishing investment and just wife acquiring replacement property
• LLC relinquishing investment and a member of the LLC acquiring replacement property

* Example issue: a husband that owns a property solely and wishes to exercise 1031 - may have to have his wife sign for lender requirements on title - this would nullify the 1031 and create a taxable situation.

It is important to note that Steve Kappre is not a tax accountant or an attorney and only offers this information in regards to his personal experience. Consult your personal 1031 exchange consultant for your personal needs and scenario.

Where did the 1031 Exchange get its fancy name from?

The fancy name is taken from IRS code 1031. In a nutshell here is what a 1031 allows; when executing the sale/purchase of an investment property via a 1031 exchange, a taxpayer is allowed to defer capital gain taxes on like-kind exchanges. All properties utilized in a 1031 must be used for investment purposes.

Under normal circumstances, selling an investment property would bring upon a capital gain tax.  To properly execute a 1031 exchange, you will need a Qualified Intermediary (QI).  A QI is a third party that receives the proceeds of the investment property sale and holds them until a new investment property is purchased.

In short the entire process works like this: 

1. A seller hires a Qualified Intermediary.
2. Seller sells investment property (relinquished) and designates new investment property (replacement). 
3. QI uses proceeds from sale to purchase replacement property.  Under normal circumstances all capital gain tax is avoided.
4. Replacement property is deeded over to investor.

This is an overview.  Soon we will discuss in detail what like-kind exchanges are, the strict time frames for buying and selling, who a QI can and can not be, alternate ways to utilize a 1031, and more. 

If you are a real estate professional such as a Realtor, lender, title clerk, appraiser, etc. you need to be aware of the 1031 exchange.

If you are an investor, even an investor with just one property such as a single family rental (which is becoming much more common with lease-to-purchase options, prior owner occupied properties becoming rentals, etc.), you need to have a fairly decent knowledge of how to utilize a 1031 exchange.  It will save $1,000's +

Come back for our second part where we will go into more detail on how to properly utilize a 1031. 

- Steve Kappre, Certified Mortgage Planner

 

  

It is important to note that Steve Kappre is not a tax accountant or an attorney and only offers this information in regards to his personal experience. Consult your personal 1031 exchange consultant for your personal needs and scenario.

Check out some of the content posted recently regarding South Jersey Mortgage and Real Estate News.

 

 

Steve Kappre is a Certified Mortgage Planner with Treasury Mortgage, a subsidiary of Aurora Financial Group, serving the South Jersey* area. Steve specializes in;

• All areas concerning First-Time buyers; First-Time Buyer mortgages, grants, down payment assistance, tax credits, police and fire loans, rehab loans for first time buyers, and more.

• Reverse Mortgages for seniors age 62 or older.

• Equity Management strategies for high-end homes and high net worth individuals.

If you would like to subscribe to these updates via e-mail, look into the right column about 3 inches under Steve's picture. There is a yellow box. Enter your e-mail address and click the "Subscribe" button. You will automatically receive these updates regarding New Jersey, South Jersey, Mortgages, Real Estate and other important news.

 

* We lend in all 50 states as well.

One of the most common questions in the mortgage world is in regards to first time home buyer mortgages and financial assistance for down payments and closing costs.

In South Jersey there are several down payment and grant assistance programs for first-time home buyers. A short discription of each is listed below.

As an example, each South Jersey County below has at least one grant program.  If utilized correctly, many buyers can get into a home with little or no money of their own. 

Burlington Cty Grant = $3,500 - $7,000

Camden Cty Grant = $5,000 - $10,000

Gloucester Cty Grant = Up to $10,000

Statewide NJ Grant and Down Payment Assistance

Known as the NJ Smart Start program, this program allows 2%, 3%, or 4% of the purchase price to be delievered as a grant to assist with closing costs and down payments.  For instance, on a $200,000 purchase, a first-time buyer* can receive up to $8,000 towards the purchase of a home. This program can be utilized with Conventional, FHA, VA, or even 100% USDA financing. Like many assistance programs, there is an income limitation depending on the size of your family. 

Other Considerations

Currently available is the USDA rural housing loan that offers 100% financing for designated areas. Concerning South Jersey, all of Salem County is applicable, much of Gloucester County, and a small portion of Camden County.  Qualifying borrowers can utilize county grant assistance, along with 100% financing, get a great rate, and have all of your closing costs paid. 

If you have been paying attention, mortgage rates are great right now.  Several days this week you could have locked a rate below 5%, depending on your scenario.  We haven't seen rates like this in several years. 

So who benefits from these low rates?  This article is not going to get into FICO scores and loan-to-values.  The people who benefit from low rates are primarily clients who have a solid working relationship with a mortgage professional.  Consider this scenario ...

1. 9:45am: Ratesheets show great pricing on mortgage rates.  Loan officer (L.O.) calls clients that could benefit from these low rates.
2. 11:15am: Client calls L.O. back to ask questions.  L.O. is on the phone.
3. 12:03: L.O. calls client back.  Client is out to lunch.
4. 1:10: Client calls L.O. back.  L.O. is in a meeting with a new client for the next hour and a half.
5. 2:50: Loan Officer calls client back, and finally gets client on the phone.  At this point, the market hasn't done well on the day and rates go up .25%.  Rates change daily, even several times a day.  In this scenario, EVERYONE loses.

So how can this be avoided?  By having a working relationship with the professionals you surround yourself with, in this case a mortgage professional. Imagine the same scenario above, BUT for each client that the loan officer is working with, there is a target rate/points scenario designated, so that the moment the ratesheet allows, the loan is locked in, in a matter of a few minutes.  Who wins then?  EVERYONE. 

There are a few reasons why this scenario isn't more common.  One reason could be that the client doesn't trust the loan officer enough to "commit" to this scenario, even though it is 100% free.  Another reason could be that the loan officer doesn't have this ideal scenario anywhere in his mind, so a pre-emptive strike would be impossible. The relationship in this case can only hope to get lucky.  It has been shown countless times that when the media reports low mortgage rates, it is almost always to late for the consumer to benefit.  Rates have already gone up to where it isn't beneficial to the consumer.

Mortgage professionals are just like realtors, lawyers, accountants, financial planners, etc ... there are tons of mediocre ones out there, some bad, and some really good ones.  Having a network of your own professionals, even as a regular 'ole Joe from Anytown, USA, you can bring about much more financial success for yourself.  By working with such professionals, you create a scenario where financial success for you isn't a flip of the coin.  It is a predetermined decision. It isn't a question of if the right scenario will come about, it is a question of, "Am I ready for that scenario at the drop of a hat?"

by Steve Kappre

Steve Kappre is a Certified Mortgage Planner in New Jersey and can be reached for more information at 856-419-3561 or via his Mortgage Website.

 

You have probably heard every side of the story ... Are we at the bottom of the market? Is it a good time to purchase? And countless others. If you have created a relationship with a real estate professional, one that keeps you updated on the market and relates it to your personal goals, then you may well know the right information that you need.  (If not, consider reading this recent article about the benefits of having professional relationships.) 

Here is a short list to help those on the fence to better know which side to fall on.

1. If you are a first-time buyer it is truly a no-brainer.  Mortgage rates are awesome, the government is giving $7500 tax credits for buying your first home (or if you haven't owned in 3+ years), and housing prices are the lowest in years.  As far as financing programs go, don't believe the fear the media protrudes.  There is 100% financing in many areas, and 97% financing in almost every single area, save the very high-end.  If need be, there are county and state grant programs in place to help with the down payment and closing cost requirements.  You may get in a home, literally, with $0.
2. If you are selling and purchasing the picture may be much better than you think.  Maybe you have heard it before; Real estate is relative. The fear of the recent depreciation of your current home, and having to sell it for less than you could a couple of years ago, can be replaced with the knowledge that the home you are moving up into is going to cost you that much less to purchase.  (Check out this great article about Selling Your Home in a Buyer's Market).
3. FHA down-payment requirements are going up on Jan 1st, 2009.  If you are truly on the fence right now, maybe the extra .5% will help you.  FHA down-payment requirements are going from 3% to 3.5%.  For some this is insignificant.  But for others, it is the difference between a new home and a new rental lease. 

Find a professional to give you straight, accurate advice. It shouldn't be your job to decipher what the real estate and mortgage market is truly doing. There are professionals to do that for you. You have your own career to deal with.

Mortgage Interest Rates*

Rates as of Monday, 8th December, 2008:

Conforming APR Payment per $1,000 Jumbo APR Payment per $1,000 30-Yr Fixed 5.25% 5.509% $5.52 5.875% 5.967% $5.92 NJ First-Time Buyer 7% 7.148% $6.65 7% 7.099% $6.65 100% Financing 5.5% 5.635% $5.68 5.5% 5.590% $5.68 15-Yr Fixed 5.125% 5.604% $7.97 5.75% 5.905% $8.30

*Rates are subject to change due to market fluctuations and borrower's eligibility.

Interest rates above are based on 30-day locks with one point. The conforming loan amount used for this ratesheet is $200,000 with a $250,000 purchase price. Non-conforming l/a of $500,000 based on $650,000 purchase price. Credit challenged, recent bankruptcy, first-time buyers, 100% financing, investment properties, and commercial financing available. Treasury Mortgage/Aurora Financial Group is licensed by the NJ Dept of Banking and Insurance.

With the recent drop in interest rates, I thought it a good idea to give people a realistic idea of where rates are.  I rarely post rates, because they change daily, or even multiple times a day.  But with the government's $600 billion infusion into our Mortgage-Backed Securities (MBS), rates are significantly lower now then they were a week or two ago.  As always, if you have any questions, just drop me a line.

Mortgage Interest Rates*

Rates as of Monday, 1st December, 2008:

Conforming APR Payment per $1,000 Jumbo APR Payment per $1,000 30-Yr Fixed 5.375% 5.509% $5.60 5.875% 5.967% $5.92 NJ First-Time Buyer 7% 7.148% $6.65 7% 7.099% $6.65 100% Financing 5.5% 5.635% $5.68 5.5% 5.590% $5.68 15-Yr Fixed %5.375 5.604% $8.10 5.75% 5.905% $8.30

*Rates are subject to change due to market fluctuations and borrower's eligibility.

Interest rates above are based on 30-day locks with one point. The conforming loan amount used for this ratesheet is $200,000 with a $250,000 purchase price. Non-conforming l/a of $500,000 based on $650,000 purchase price. Credit challenged, recent bankruptcy, first-time buyers, investment properties, and commercial financing also available. Treasury Mortgage/Aurora Financial Group is licensed by the NJ Dept of Banking and Insurance.