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Step by Step Guide to Buying Homes with your IRA

Posted by Michael Collins, CDPE, SFR on June 7, 2013 at 3:13am

How to Buy Investment Properties with an IRA - Step by Step (Part 4 of 4)

Using a self-directed IRA to buy real estate is a sound investment strategy for many people. The ability to buy assets that can provide strong returns is appealing to a wide range of people. Listed below are the basic steps necessary to buy a property in compliance with the IRS rules governing the use of an IRA account.

: photo credit: roberthuffstutter via photopin cc

1. Contact a financial firm that has experience with self-directed IRA’s. Working with a firm that is familiar with these accounts and the real estate transactions is the most important step.

2. Understand the IRS rules. A property bought via the IRA must be an investment home. Second homes, vacation homes and primary residences are strictly prohibited. Furthermore, distributions from the account are not allowed until the owner of the IRA is at least 59 ½

3. Deposit funds into the account. One of the important rules about buying property with an IRA is that all funds for the purchase as well as any other expenses has to come directly from the IRA. The owner cannot chip in extra money to help cover property tax or replacing the roof, in example.

4. All revenue received on the property must be deposited to the IRA account. The revenue cannot be given to the IRA owner or relatives.

5. Take time to preview multiple properties. It is wise to enlist the assistance of a real estate agent who has knowledge with these types of transactions. An agent can recommend properties in areas that have strong rental history. Furthermore, the agent can help calculate the return on investment based on average rent payments for the area.

6. Once you have picked out an investment property it is time to put down an offer. Contact the custodian for your IRA account and tell them you want to buy a property. The custodian will then fill out the necessary forms and sign all real estate documents on the behalf of your IRA account.

7. It is a wise idea to get a contract with a property manager to handle the finances of the property. This will prevent you from collecting the rent payments and making any necessary repairs yourself. A property manager can keep all the transactions clean and legal and free you from the headache of property management.

It is important to understand the rules concerning using an IRA to buy and manage real estate investments. Failing to follow the rules can lead to penalties and possibly loss of the tax advantages associated with an IRA account. When in doubt consult a tax professional before making any decision or transaction with the IRA funds.

This is Part 4 of a 4 Part Series.

Part 1: How a Realtor® can help you invest in your IRA

Part 2: Purchasing Investment Properties for your IRA

Part 3: How to invest in real estate using an IRA

Part 4: Step by Step Guide to Buying Homes with your IRA

How to invest in real estate using an IRA

Posted by Michael Collins, CDPE, SFR on June 6, 2013 at 4:13am

How to invest in real estate using an Individual Retirement Account, IRA (Part 3 of 4)

Traditional retirement accounts, like a 401(k) or an IRA, can be powerful when the economy is strong and businesses are experiencing growth. This is due to the stocks and bonds that are typically bought and sold through these typical investment strategies. However, what happens when the economy is not so strong and stocks are struggling? This is when a self-directed IRA can come into play.

More Flexibility

: photo credit: Neil Kremer via photopin cc

A self-directed IRA gives individuals a chance to buy other assets such as gold and even real estate. These accounts charge an annual fee that can reach up to $300 per year. The ability to buy and sell real estate has led to the growth in popularity of these accounts in the past few years.

The real estate decline from the last several years has led to many homes being rented out instead of selling at top prices as the owners had hoped. This is a great environment for investors to come in and make a fair offer on a property and add the home to their portfolio.

Ignorance of Tax Law Can Be Costly

This is not to say that a self-directed IRA is just a large checking account to be used to buy assets. The complexity of these accounts makes any financial mistake quite costly in the form of penalties assessed by the IRS.

A person cannot receive any type of benefit from the account prior to age 59 ½. This sounds vague, and it actually covers quite a bit of territory.

For instance, the owner of the self-directed IRA cannot live in a property owned by the account nor can they receive rent payments from the property. If the rental property is in need of a repair or property tax payment that money must come from the IRA.

Self-directed IRA’s also prevent the use of a mortgage to purchase a home.

Cash is King

Because of these restrictions most transactions that occur through a self-directed IRA are handled with cash. The majority of individuals will have a small number of properties in their portfolio. It is quite common for people to purchase either a duplex or a four-plex in order to maximize the rent payments coming to the account.

This is advantageous in two ways. First, a cash deal makes the whole process much quicker. There is no waiting on a mortgage approval from a lender. The person buying the home can choose the appraiser and title company and make their own decision based on the information provided. Secondly, buyers are in a very strong position when they can offer all-cash payment, right now, to an interested seller. Many sellers are willing to offer a discount for the promise of cash.

This is Part 3 of a 4 Part Series.

Part 1: How a Realtor® can help you invest in your IRA

Part 2: Purchasing Investment Properties for your IRA

Part 3: How to invest in real estate using an IRA

Part 4: Step by Step Guide to Buying Homes with your IRA

Fannie Mae Has Taken New Steps to Stream Line the Short Sale Process and Alleviate Valuation Issues

Posted by Jason Opland on June 6, 2013 at 2:30am

Fannie Mae recently introduced a new tool to help short sale real estate specialists successfully close short sales. Short Sale listing agents are now asked to register accepted short sale offers (accepted between the buyer and homeowner) with Fannie Mae to provide greater transparency into the process and allow Fannie Mae to proactively work with the mortgage servicer / lender to finalize the sale. This process is the next step in Fannie Mae’s effort to work more collaboratively with real estate agents on short sales.

“Fannie Mae recognizes the very important role real estate professionals play in the short sale process and we want to work closely with them to get short sales done,” says Jay Ryan, vice president for real estate sales, Fannie Mae. “Our objective is to help stabilize neighborhoods by completing short sales as close to fair market value as possible. We believe this new process will help ensure all parties are in communication early on and are able to come to an agreeable and appropriate sales price. At the end of the day, Fannie Mae wants to get short sales done so that we can prevent foreclosures and help neighborhoods recover.”

Moving forward, agents are asked to provide short sale offer information, such as the property address, MLS listing information, offer details, and subordinate lien information, through Fannie Mae’s Homepathforshortsales.com website. Agents will also be asked to upload scanned copies of the sales contract, estimated net sheet or HUD-1 settlement statement and borrower authorization form. REALTORS® are also encouraged to proactively reach out to Fannie Mae early in the short sale process to request list price guidance to aid in marketing efforts.

Agents who have challenges such as valuation disputes, delays by servicers or uncooperative subordinate lien holders may also use the short sale escalation process on the website to request assistance. Once a case is escalated, Fannie Mae will directly engage with the agent or servicer to address challenges. Since the escalation tool was announced in February 2013, over 10,000 short sale cases have been submitted and successfully closed. In 2012, Fannie Mae completed 73,528 short sales.

For more information, visit www.fanniemae.com.

If you are a homeowner who feels they might qualify for a loan modification or short sale please give us a call as we’d be happy to assist you in your efforts to understand your options and in determining which option is the best for you! All consultations are COMPLETELY CONFIDENTIAL and ABSOLUTELY FREE.

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley Columbus Delaware Downtown Dublin Gahanna Grandview Heights Granville Grove City Groveport Hilliard Lewis Center New Albany Pickerington Polaris Powell Upper Arlington Westerville Worthington

Article originally from RisMedia by Keosha Burns - Fannie Mae Takes Additional Steps to Streamline Short Sale Process

Purchasing Investment Properties for your IRA

Posted by Michael Collins, CDPE, SFR on June 5, 2013 at 8:41am

Purchasing Investment Property using an IRA (Part 2 of 4)

Using an IRA account to purchase real estate can be a great way to add to an existing retirement plan or simply diversify current holdings. Following the guidelines of the law for these types of investments can bring strong yields to the IRA owner.

Different Ways to Use IRA with Real Estate

: photo credit: j l t via photopin cc

There are actually several ways to use an IRA as an investment in real estate.

* Act as a bank – The money in the IRA account can be loaned out to individuals who offer up real estate as the primary collateral. In essence, the IRA account becomes a mortgage lender.

* Own property – Most people choose to use their IRA funds to outright purchase an investment property. The seller of a home enters into a contract with the IRA and the IRA becomes the owner of the property.

* Partner with others that own property – It is possible for an IRA to become a partner with investors such as other IRA’s, entities or individuals.

Property Value Requirements

Most IRA companies will require that the property has a report of market value in order to be accepted as an investment. Furthermore, some companies may require that a new value report be presented each year. This is to ensure that the correct property taxes are being paid. The report can come in the form of an appraisal or a market analysis completed by a real estate agent.

Basic Guidelines for IRA Real Estate Investment

* All transactions must be arm’s length – This means that the owner of the IRA cannot buy any property from the IRA. Conversely, the IRA cannot purchase one of your existing properties.

* The owner of the IRA cannot use the real estate – This means that you cannot live in the home nor can you use it as a second home or vacation property.

* The IRA account only invests for the account – The owner of the IRA cannot receive any type of immediate benefit from the investments.

* No sweat equity allowed – Any repairs or improvements made to a property must be completed by a third party.

How to Manage the Property

Once an IRA has bought real estate, the expenses for the property will need to be managed via the IRA account. The expenses can be controlled by a property manager or by the IRA owner. Once again, there are some rules to keep in mind.

* You are in control of decisions for the property – You have the say in which plumber to hire, who is allowed to rent the home and other similar decisions. However, you cannot do any physical work on the property.

* No personal funds used for the property – Your personal funds cannot be used to pay property taxes, secure insurance or anything else related to the property. For this reason it is always wise to open up an IRA account with a nice cash buffer to handle expenses.

This is Part 2 of a 4 Part Series.

Part 1: How a Realtor® can help you invest in your IRA

Part 2: Purchasing Investment Properties for your IRA

Part 3: How to invest in real estate using an IRA

Part 4: Step by Step Guide to Buying Homes with your IRA

Ocwen as Junior Lien Holder

Posted by Sondra Oczkus, Realtor on June 5, 2013 at 7:56am

I have a short sale w Ocwen 2nd. Ocwen agreed to 10 %, has now switched the amount twice for much more money. I have tried the escalation dept. & Ombudsman- need investors to make an exception. Please send me your suggestions.

How a Realtor® can help you invest in your IRA

Posted by Michael Collins, CDPE, SFR on June 5, 2013 at 3:28am

A Realtor® can help you invest in an IRA (Part 1 of 4)

Using a self-directed IRA can be a great way to start your journey to owning real estate as an investment. However, being familiar with the rules and regulations associated with these accounts will prevent you from making expensive mistakes. Here are some helpful tips from Realtors® that you should consider before you start investing in real estate with an IRA account.

: photo credit: 401(K) 2013 via photopin cc

* Loans can be hard to find – A loan used in an IRA are required by the IRS to be a non-recourse loan. Basically, the owner of the IRA cannot sign as guarantor on the loan. This will require a minimum of a 40% down payment to acquire the property and possibly 50%.

* Do not put a good-faith deposit on a home with your personal check – In the eyes of the law an IRA account and its owner are considered two separate entities. Writing a deposit check from a personal account to secure a home and then transferring the home to the IRA is a no-no. It is best to set up the IRA account first and use that account for the real estate transactions.

* Choose the right Self-Directed IRA account – Various financial firms offer custodian service for their self-directed accounts. However, it may not be necessary for you to have a custodian. It is important to research the firms and decide which one offers the best account for your needs.

* In the event of a loan, credit does not matter – One of the best things about these accounts is the lack of credit scrutiny. If you need to finance a home purchase with the IRA account the lender will mostly be concerned with the condition and location of the home. This means your existing credit will not play a part in the loan.

* Custodian signs loan papers, not you – This is the main sticking point in IRA real estate transactions. Since an IRA is set up to benefit a person, the person cannot sign real estate transactions. The custodian will need to handle the signatures.

Working with a Realtor®

When you partner with a Realtor® to help guide you through the process of buying a home through your IRA account, there are several benefits that the agent brings to the table.

* Investment advice – Your agent can obviously help you find a home to be used as a rental property. But the agent can do much more. Based on current rent information you can see what type of return you should expect on the property and see if it meets your long term goals. You can also compare rent levels across multiple areas to see which places have the best return.

* Diversity of portfolio – Stock managers routinely advise their clients to spread their money around multiple accounts. This prevents major losses from having too much tied up in one stock or bond. A real estate agent can help you spread your investment across multiple types of properties to help you maximize your growth and minimize the loss.

Using a Realtor® that understands the intricacies of a self-directed IRA and one that has experience with investment properties can make a big difference in how your portfolio performs over the long term. This is Part 1 of a 4 Part Series.

Part 1: How a Realtor® can help you invest in your IRA

Part 2: Purchasing Investment Properties for your IRA

Part 3: How to invest in real estate using an IRA

Part 4: Step by Step Guide to Buying Homes with your IRA

WITH FOREIGN BUYERS AND SELLERS - REALTORS NEED TO KNOW ABOUT FIRPTA

Posted by Richard Zaretsky on June 5, 2013 at 1:48am

With foreign buyers again flocking to buy United States real estate, it is important as a Buyer Realtor to remember to advise them of their obligations and liabilities when they sell it. FIRPTA (Foreign Investment in Real Property Tax Act) has been around for decades, yet many Realtors forget to tell their foreign buyers of the implications of FIRPTA when the foreigner is looking to buy, thereby possibly short changing their client on options and surprising them with expenses when they sell.

Some Basics:

There is no tax when the property is purchased - it is when it is sold.

A corporation owned by a foreign national is generally subject to FIRPTA.

If a married couple owns the house and one spouse is foreign, then the foreign spouses' one-half interest is subject to FIRPTA.

If a married couple owns the house and one spouse is foreign but is deceased, the deceased interest is still counted as being foreign owned.

The way FIRPTA works, at the sale the closing agent or the new Buyer must withhold and submit to the IRS 10% of the sale price. Note, that is 10% of the contract sale price, not the net to seller! The Seller then needs to file a tax return and either pay the additional tax (if more would be due) or seek the refund.

Short Sale transactions are NOT exempt and require the tax be paid.

There Are Some Areas of Relief:

You can apply for an Exemption Certificate from the IRS, which as of now takes about a month to obtain. If you have no one familiar on how to do it, our firm can do it for you. The Exemption Certificate sets forth the financial aspects of the prior purchase and the present sale of the property and shows that no profit is being made, and thus the IRS will issue a certificate to that effect, exempting the closing agent/buyer from having to withhold the 10% of the sale price.

If the property being sold is residential property and the sale price is under $300,000, and the Buyer will sign an affidavit that the Buyer and family will be the exclusive user of the property for half of EACH of the next two years, then the closing agent can rely on the affidavit and not collect the withholding 10% tax. A bit weird but many transactions fall into this category.

If a foreign corporation that has elected to be treated as a domestic corporation and furnishes the buyer with a Non-Foreign Person Certification (Entity Transferor), then no withholding will be required.

See my previous articles on FIRPTA here on ActiveRain at FIRPTA and SHORT SALES - DANGEROUS LIABILITY TO BUYER AND CLOSING AGENT and at SHORT SALE AND FIRPTA TAX WITHHOLDING - IRS ISSUES PRIVATE GUIDANCE. The IRS law on FIRPTA can be found at Foreign Investment in Real Property Tax Act of 1980.

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Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.

See our easy to find articles at

TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES.

Are You Practicing Law Without A License?

Posted by Bryant Tutas on June 5, 2013 at 12:36am

Good morning Superstars.

One of the questions I frequently see is from agents wanting lender contacts so they can have a foreclosure stopped or postponed. My standard response is that the borrower needs to speak with an Attorney and they need to do it ASAP.

It is not our job, as agents, to get involved with stopping foreclosures. Last I checked our licenses are for selling real estate not practicing law. Foreclosure defense is a legal issue not a real estate issue.

Usually the response I get when I answer like this is “Well I’m just trying to help these people out”. No. You. Are. Not.

You are harming them by trying to do something you are not qualified to do.

As Short Sale agents we have to know what we can and what we can’t do. Stopping a foreclosure is one of the things we can’t do. Now we may get lucky every now and then BUT it is still practicing law.

Sellers with a looming foreclosure date need an Attorney. As a Short Sale agent be sure to align yourself with an Attorney that you know and trust so you can feel comfortable referring your Sellers to them when needed.

Align yourself with a good

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10 Short Sale Mistakes
VA, HAP and FHA
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BSi Financial Cancel the Short Sale

Posted by Nora Anaya on June 4, 2013 at 10:06am

Does anyone have a supervisor number to BSI Financial or can guide me on how to follow up, I have been negotiating with BSi a short sale and we were schedule to close on the 30th of this month which buyer having a FHA financing needed additional time and asked for an extension, BSI financial said no and wanted us to put the house on market which we did and the next day they said they are canceling the short sale without explaining why.

My seller filed Bk7 but nation star is offering her a loan modification now she is holding the SS

Posted by wally pelaez on June 2, 2013 at 5:04am

Is that possible? The house was included on the Bk7.

NEWSLETTER: Fannie, Hafa, & Promissory Notes. What's The Deal?

Posted by Bryant Tutas on June 2, 2013 at 12:30am

Good morning Superstars,

Here's a sampling of this week's Superstar discussions.

Discussions	Replies	Latest Activity
Fannie, Hafa, & Promissory Notes? With all of the changes on Fannie short sales, I want to be sure I have this straight. My client has been offered a Fannie short sale and a… Started by Gabrielle Nemes	9	5 hours ago Reply by Kevin - Greenville, SC
Wells Fargo Escalation Contact Please Good morning Super Stars, I need an escalation contact at Wells Fargo. I listed a property for 220k. Wells countered back with 235k. Th… Started by Marlon Rankine	4	18 hours ago Reply by Brian Avery
BPO expiration, need your help! Hello everyone: So we have a SS file (both 1st/2nd with U.S. Bank). The first is still waiting for approval from the second in order to mov… Started by Tracy Johnson	2	yesterday Reply by Tracy Johnson

Foreclosure after discharged bankruptcy I have been talking to a potential client that has gone through a bankruptcy and been discharged. The house is now set for foreclosure in… Started by Rob Olson	4	on Thursday Reply by Ron Scribner

BofA FHA Short Sale - Buyer Assistance My wife and I have had an accepted offer from the seller since January 23rd, 2013. BofA came back to us multiple times in the first few mo… Started by Joshua Walters	2	on Thursday Reply by Brian Avery
Chase - What Will They Pay? Has anyone had a short sale with Chase where they paid for termite treatments? I represent the buyer in this case and we found out about th… Started by Rita Cox	3	on Thursday Reply by Minna Reid
Seller has FHA loan I received approval on a short sale today where my seller had an FHA loan. There is nothing in the approval letter stating that the defici… Started by RoJane Maybee	2	on Thursday Reply by Minna Reid
NJ-NationStar does not want to cover oil tank remediation. Anybody with the same problem? This is a New Jersey Short Sale Transaction - After battling with NS about not getting a property on their fraudulent Auction.com, we later… Started by Ismael Medina	1	on Thursday Reply by Minna Reid