REALTORS & BROKERS
Join Our Strategic Alliance Partnership Program Today!
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Nagle Law Group is proud to continue with its
Realtor/ Broker - "Strategic Alliance Partnership Program." Nagle Law Group is excited to work with realtors and brokers - together providing outstanding service to their clients. Those realtors and brokers who become members of this program will enjoy the benefits of working with experienced Real Estate attorneys in helping their clients understand the legal and financial risks and liabilities involved in selling or purchasing a home in today's real estate market, while providing them with first-class legal counsel at competitive rates. The benefits of this program are highlighted on our website: www.naglelawgroup.com Sign up today - you and your clients deserve an extra layer of protection!
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Short Sales and Foreclosures: The Looming Tax Trap
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Short sales and foreclosures typically result in all or a portion of the mortgage debt being cancelled by the lender. This cancellation of debt is generally treated as ordinary income for federal tax purposes (this ''income" is generally referred to as "COD" income). There are, however, exceptions to the general rule that taxpayers owe income taxes on the amount of the debt that has been cancelled.
The exception most taxpayers rely on in order to avoid having to pay taxes on COD income is the Mortgage Forgiveness Debt Relief Act. This law, which was passed several years ago, enables taxpayers to exclude up to $2 Million Dollars of cancelled mortgage debt; provided, however, the debt must be secured by the homeowner's principal residence and was used to purchase, construct or substantially improve the principal residence. Thus, second home mortgages and any portion of a home equity loan that was not used to substantially improve the residence would not be covered by this law.
This law, however, expires December 31, 2012.
Homeowners should not rely on the law being extended as the ever changing political climate may result in its expiration. Further, because of the length of time that it sometimes takes for a short sale or foreclosure to be completed, it is possible that the law may expire before the homeowner's foreclosure or short sale is finalized.
Homeowners, therefore, may want to factor in the possibility of this law's expiration into their calculation of when to sell or walk away from their home as the potential exists that when their short sale or foreclosure is concluded, they will not be able to take advantage of this law.
Insolvency and bankruptcy are two other exceptions to the general rule that COD income is taxable, but homeowners should consult a tax advisor as to the applicability to their particular situation of these and any other exceptions to the rule regarding taxability of COD income.
Finally, it is worth noting that the rule regarding COD income only applies if the mortgage debt is "recourse." With regard to home mortgages, recourse debt is debt for which the lender can sue the borrower for any deficiency after foreclosure. Because of the applicability of Arizona's anti-deficiency laws, even though most, if not all home mortgages are written as recourse debt, it may be argued (although, as of yet, there is no definitive court or IRS ruling on this argument) that where the mortgage is purchase money, the debt is, in fact, non-recourse and thus the rules regarding COD income do not even apply.
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Real Estate Brokers: We Respect the Fees YOU Earn | |
Here in Arizona, attorney involvement in residential real estate transactions was practically unheard of - until the mortgage crisis hit our state. As real estate professionals in the Valley already know, more and more underwater homeowners are looking to short sale as a way out of their toxic mortgage and it has become imperative for agents and brokers to seek assistance from an experienced real estate attorney when managing these transactions. Unfortunately, some of these attorneys are costing YOU money.
At Nagle Law Group, we have been serving Arizona real estate clients for more than 12 years. There has been a noticeable increase in the number of short sale consultations at our firm over the past year and expert predictions estimate some 300,000 Arizona foreclosures coming over the next several years; certainly many of those homeowners will be turning to real estate professionals for short sale assistance.
It recently came to our attention that, on top of consultation fees, some law firms charge a percentage of the transaction amount at the time of closing a short sale.
A big difference between Nagle Law Group and other real estate law practices: none of our fees are ever paid by real estate agents, brokers or the title companies.
What is truly upsetting is the lack of respect these other law firms have for the hard work that brokers and agents put into every transaction. They view the commission as disproportionate to the work performed, failing to appreciate that, for every deal that closes, there is a fair share of deals that do not. At Nagle Law Group we understand this critical detail and never include contingent fees when providing guidance for a short sale client.
We offer residential real estate services to homeowners at modest fixed fees. Our team of professional, experienced attorneys is extremely knowledgeable in short sale transactions and you can be assured that your clients will receive the superb personal service and responsiveness that our firm has become known for.
Robert Nagle is the managing partner of Nagle Law Group and can be reached at 602-595-3156 or via email at robert.nagle@naglelaw.com.
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Homeowners Who Walk Away are Credit Savvy, Study Shows | |
New research confirms: strategic default is the behavior of responsible people.
Underwater homeowners who 'walk away' or strategically default pay bills on time and plan ahead, according to a new study by FICO, the financial analyst firm that created the FICO credit score. FICO defines strategic defaulters as homeowners who are underwater on their mortgage - owing more than their home is worth - and more than 90 days delinquent on payments, but current on other credit lines. FICO began analyzing strategic default data in an effort to provide lenders with new tools to identify mortgages they consider "at risk" for strategic default.
The FICO researchers found that, as a group, strategic defaulters tend to be more savvy managers of their credit than the general population. Compared with other mortgage defaulters, strategic defaulters generally:
- Have higher credit scores; the majority of them above 620
- Use credit more judiciously; more than 35% of non-strategic defaulters max out their credit cards vs. less than 10% of strategic defaulters
- Shop for new credit card lines before they strategically default
Why do some people decide to walk away? Because higher interest rates, unfavorable terms and plummeting property values end up costing more in the long run; strategic default starts to make sense for borrowers who are extremely underwater on their loans with little prospect for price recovery.
According to the most recent data from CoreLogic, 23% of American homeowners with a mortgage are underwater. Here in Arizona the percentage is drastically higher than the national average; Zillow recently reported that nearly 70% of Phoenix-area homeowners are underwater.
There are many factors to weigh if you are underwater with your mortgage, especially mortgage and payment modifications, but funneling vital cash into big monthly payments on a home that might never recoup its value can be a big waste, especially when there are less expensive rentals in the area.
Speaking of rentals; are you worried about being able to rent after strategic default? Consider this: more than three-quarters (82%) of independent landlords say they would rent to someone who lost a home in foreclosure, assuming the applicant traditionally had good credit, according to a recent survey released by The National Association of Independent Landlords. That sounds a lot like those who have strategically defaulted, doesn't it?
Even though strategic default makes economic sense, many homeowners do not consider it as a viable option out of guilt or shame. But, as more research like this is shared, it will be obvious that the decision to strategically default on an underwater mortgage does not signal to lenders that you are an irresponsible American.
Want to know more about your options if you are underwater? Please contact me directly.
Robert Nagle is the managing partner of Nagle Law Group and can be reached at 602-595-3156 or via email at robert.nagle@naglelaw.com. |
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FREE Event for Underwater Homeowners:
Register NOW! |
At Nagle Law Group, our philosophy about residential real estate law is educating homeowners with clear, honest information and providing practical advice. Our attorneys regularly attend community events to help struggling homeowners in Phoenix. Why? Because in today's market, more and more homeowners need expert legal counsel; nearly 70% of Phoenix-area homeowners are underwater, according to Zillow.
When you are behind on your mortgage, dealing with lenders can sometimes make you feel powerless over the situation - but with the right information and knowledge, YOU are in charge; knowledge empowers you to make decisions in you own best interest, not the bank's.
What can you do if you are underwater and you are considering a strategic default? What if you are experiencing financial hardship due to job loss, medical expenses, divorce or other life events? Nagle Law Group is sponsoring a free event for consumers who seek answers from attorneys - the Consumer Awareness Expo is being held on Saturday, May 21.
The Consumer Awareness Expo will provide homeowners with information about the full spectrum of options available; attorneys from Nagle Law Group will be there to assist homeowners with information and options about short sale, foreclosure and bankruptcy options - come and talk to us face-to-face for practical, honest advice.
This Expo is completely FREE to the public. Attendance is limited and you must register by May 18th at http://consumerawarenessexpo.eventbrite.com
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| Nagle Law Group in the News! | |
What happens to your Facebook profile when you die? Estate planning attorney Jim Rees from Nagle Law Group in Phoenix talks about digital assets and estate planning on ABC 15 news. (click on the image to view the video).
Jim Rees, estate planning attorney from Nagle Law Group, is live in-studio with tips about including your digital assets in an estate plan (such as Facebook, Twitter, email accounts and online banking accounts).
Jim Rees is live in-studio on 12 News (NBC) discussing digital assets and estate planning and why it is important to include digital assets in your estate plan.
Attorneys from Nagle Law Group regularly appear on The Money Line with Eric Lay, Saturdays at 11:00am! Tune in May 14, June 11 and June 25 and call in with your real estate questions.
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What Happens to Your Facebook if You Die? | |
Including your "digital assets" in estate planning is vital in today's social media age.
A recent study shows that more than half of Americans are on Facebook - chances are that includes you or somebody in your family. It is estimated that some 375,000 U.S. Facebook users will die this year; a number that will continue to rise as total membership continues to grow. Have you ever thought about what happens to your Facebook profile if something happens to you? Estate planning attorneys are now including instructions for Facebook and Twitter (and other digital identities) in estate plans. For example, when you pass away a family member must notify Facebook to either remove the profile or leave it up so people can memorialize you on your 'wall' (Facebook has created this form for loved ones to notify them of a user's death).
Facebook, Yahoo and other services also require certain documentation regarding death of the user and the relationship of the requesting party; in your Will you may designate a person to take direct action regarding Facebook by providing account login information.
But beyond Facebook, it is important to include digital assets in your estate plans to prevent identity thieves from using your personal information after your death. Unfortunately, Arizona is one of the leading states for identity theft.
Suggestions from Nagle Law Group's estate planning attorneys include:
Designate the person responsible for managing your digital identity in your Will and let them know what your wishes are if something happens to you. This person may or may not be the personal representative designated in the Will. If it is not, the Will should specifically provide that another person has such authority and you might consider granting a limited power of attorney. In any event, the Will should address these types of items because the law has not caught up with technology in terms of predetermined rules. Digital information is not clear in terms of what type of asset (financial, intangible, etc.) or if it even is an asset that would be recognized under the laws of intestacy. Therefore, without addressing these issues in the Will and possibly with an additional written set of directions outside of the Will, these accounts may languish and a personal representative may struggle getting cooperation from the company maintaining the account.
Make some kind of file, whether it's on a Flash drive, or in an actual physical notebook, with logins / passwords, accounts, etc. Keep it updated and stored securely, and make sure somebody (spouse/partner, loved one, sibling, etc.) knows where you keep it. There are some password storage applications you can use to keep all passwords in one secure place; this is also important so that people don't steal your identity after your death. A person may want to differentiate between different types of accounts and who is responsible. For example, you may designate one person with authority to contact Facebook, to view personal email to notify friends and colleagues of your passing, and still have yet another person acting as the personal representative administering online financial accounts. Note that it is critically important to provide a list of all accounts (such as a Scottrade or TD Ameritrade account) to the personal representative since a person may own stocks or other financial assets and all communications are online (such as monthly statements); without a list and/or email access, the personal representative might never know about them.
Make sure to include your email password(s) in your file so that your designated person can access your email and turn off accounts. Regularly "clean out" your email rather than storing unimportant messages indefinitely; there is no need to keep 10 years worth of email messages. Create folders for email messages that are important and organize your email account with those.
If you decide you want your Facebook profile to remain as a memorial, designate what photo you want used. This might sound morbid, but what if something happened to you and the last profile photo you used was something silly or "just for fun?" Designate which profile photo you prefer to be used.
Make some provision in the Will for disposition of digital assets such as photos. Unlike traditional photo albums, digital photos may be provided to more than one person, so designate all the appropriate recipients. If the person maintains a blog, a trusted person should be authorized to not only close down the blog, but also process and/or maintain the intellectual property of the blog. For example, there might be copyrightable material that should be used or maintained in a particular manner for the benefit of the estate.
Planning for the future of your loved ones has become especially important given our current economic climate. Establishing a clear plan for the distribution of your assets (including your digital assets, like Facebook) and planning for your care in the event that you become incapacitated, protects your property, your health and your family members. Our estate planning attorneys work closely with clients to identify goals, plan for contingencies and create a comprehensive Arizona estate plan that makes sure that your wishes are carried out. In addition, as a full service estate planning law firm based in Phoenix, our probate law attorneys offer comprehensive probate and estate administration services. We have the necessary resources to handle everything, from probating the Will in court to working with investment advisors to fund a trust. Whatever your needs, we have the experience and tools to provide for an easy transition to your heirs. Contact us today at 602-595-3156.
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