Monday, June 13, 2011
Friday, June 10, 2011
Friday, May 27, 2011
Distributees beware! The IRS is now using state land-transfer records to discover unpaid Estate Taxes on gifts of real property to family members.
Although federal exemptions are currently at $5 million, gifts amounting to $13,000.00 or more must be reported to the IRS by filing Form 709 for U.S. gift and generation-skipping transfer taxes.
As a result of these investigations in which the IRS uses land-transfer records as evidence, many people are being examined, and possibly taxed, fined, or penalized.
Lesson: If a gift of real property is worth more than $13,000, even if within the lifetime exemption amount of $5 million, a gift-tax return must be filed or it must be reported!
Thursday, May 26, 2011
Wednesday, May 25, 2011
Lenders became concerned by the new HETPA enacted as they feared that this would cause problems with deed-in-lieu transfers in foreclosure actions. However, the Banking Department have put these fears at ease with a further explanation of the statute, its possible interpretations, and the legislative intent.
In recent years, there have been issues with deed theft, home equity theft, and foreclosure rescue scams in which loan modification companies scam distressed homeowners. Legislature enacted the Home Equity Theft Prevention Act (HETPA) which includes Real Property Law 265-a. The purpose of the act was to protect homeowners where a homeowner mistakenly deeds their property to a loan modification company by coercion from the same under the guise that this will assist in obtaining a modification, refinancing, or a new loan. Another situation the legislature protects against is where the homeowner is told to sign over the deed, and knowingly does so, under the misapprehension that the loan modification company will deed it back to them in a more affordable way, after “renting” the property from them, but the loan modification company makes this impossible and unaffordable.
The aforementioned act creates protection in a few different ways. First, by ensuring that homeowners are provided with essential information in making an informed decision when transferring their property. There are also prohibitions against unconscionable contract terms, fraud and deceit. There is also a two year statutory right to rescind a contract (from the date of recording) where an equity sale is in material violation.
Issues have arisen wherein banks, foreclosure counsel, and title insurance companies have become concerned about the potential misapplication of the subject statute. Specifically, they are concerned that “deed in lieu of foreclosure” (a/k/a “deed in lieu” or “DIL”) transfers will be subject to the same. A DIL is an instrument wherein a mortgagor conveys the property to the lender to avoid costly foreclosure proceedings, and releases them of all or most of the personal liability on the note. This option is useful to homeowners/borrowers who are not financially able to participate in a loan modification process or cannot otherwise afford a foreclosure proceeding. HAMP (Home Affordable Mortgage Program), HAFA (Home Affordable Foreclosure Alternatives), HUD and Fannie Mae all acknowledge that DILs may be useful and necessary in some foreclosure situations.
The Banking Department has put these fears at ease by pointing out that with statutory interpretation, it is essential to pay careful attention to legislative intent. Conspicuous in its absence in this bill is any mention of deeds in lieu of foreclosure. Although this statute does apply to a “residence in foreclosure”, it does not apply to DIL which gives the holder of the mortgage in default the property, as they might be entitled to it in a foreclosure proceeding anyway. Although the language does not specifically exclude them, the intent of the drafters evidences the fact that the purpose was to apply to “scammers and unscrupulous entities who stole a homeowner’s equity and to bona fide purchasers who might buy the property from them”. Further, case law does not support the contention that this bill was meant to be applied to DILs with lenders.
Sources: http://www.banking.state.ny.us/il110510.htm
Saturday, May 21, 2011
Thursday, May 19, 2011
Here is the case:
Pettis v Haag
2011 NY Slip Op 03944
Decided on May 12, 2011
Appellate Division, Third Department
Published by New York State Law Reporting Bureau<http://www.courts.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
Decided and Entered: May 12, 2011
510882
[*1]JODY PETTIS et al., Respondents,
v
BRYAN HAAG et al., Appellants.
Calendar Date: March 23, 2011
Before: Peters, J.P., Rose, Lahtinen, Malone Jr. and Garry, JJ.
Timothy A. Benedict, Rome, for appellants.
James J. Devine, Oneida, for respondents.
MEMORANDUM AND ORDER
Garry, J.
Appeal from an order of the Supreme Court (Cerio Jr., J.), entered January 5, 2010 in Madison County, which denied defendants' motion for, among other things, summary judgment dismissing the complaint. In April 2007, defendants listed their residence in the Town of Canastota, Madison County for sale, and executed a Property Condition Disclosure Statement in accord with Real Property Law article 14. Within this statutory disclosure document the sellers asserted, among other things, that there were no material defects in the roof or electric service of the residence, and no flooding, drainage or grading problems that resulted in standing water on any portion of the property. Plaintiffs contracted to purchase the property and hired an inspection service to examine the residence. The inspection report listed several areas of concern — including missing shingles on the roof, incorrect wires in a breaker box and evidence of water seepage in the basement that could require grading work — prompting the parties to execute an addendum to the purchase contract, in which defendants agreed to repair and replace the missing shingles, remove the incorrect wires and add electrical breakers as necessary prior to the closing. In August 2007, plaintiffs performed a walk-through inspection, and closed on the property shortly thereafter. Plaintiffs discovered in October 2007 that defendants had not remedied the electrical problems listed in the addendum. In February 2008, they found additional wiring problems that had been concealed behind the basement ceiling. The property suffered extensive flooding repeatedly. The roof lost approximately 40 shingles annually due to wind. In May 2009, [*2]plaintiffs commenced this action presenting these issues, and alleging that defendants had knowingly made fraudulent material representations about the condition of the property relative to these flooding, roof and electrical problems. Prior to joinder of issue, defendants sought dismissal of the complaint for failure to state a cause of action and a defense based on the documentary evidence or, in the alternative, summary judgment. Supreme Court denied the application on both grounds, and defendants appeal.
To establish their cause of action for fraud, plaintiffs must demonstrate that defendants knowingly misrepresented a material fact upon which plaintiffs justifiably relied, causing their damages. "Although New York traditionally adheres to the doctrine of caveat emptor in an arm's length real property transfer," a seller may be liable for failing to disclose information if the conduct constitutes active concealment (Klafehn v Morrison, 75 AD3d 808<http://www.nycourts.gov/
Similarly, defendants asserted in the disclosure form that there were no electrical problems and denied actual knowledge of such problems in their affidavits; plaintiffs' inspection only revealed the problems with the breaker box and the electrical intake, as the additional electrical issues hidden behind the basement ceiling — and apparently related to renovation work by defendants — were not discovered until the ceiling covering them collapsed. In their opposition, plaintiffs submitted an invoice from a construction company describing the hazardous electrical conditions allegedly created during the course of the basement renovations. Thus, we agree with Supreme Court that there are factual issues posed as to defendants' [*3]knowledge and active concealment of those problems. Finally, defendants argue that the general disclaimer of warranties and representations in the closing documents negates any allegations of fraudulent misrepresentation by plaintiffs. Such allegations based upon the statutory disclosure form, however, survive general, "as is" disclaimers in the closing documents (see Real Property Law § 465 [2]; Daly v Kochanowicz, 67 AD3d 78<http://www.nycourts.gov/
Peters, J.P., Rose, Lahtinen and Malone Jr., JJ., concur.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as denied defendants' motion seeking dismissal of the claims relative to the electric breaker box and roof problems; motion granted to that extent and said claims dismissed; and, as so modified, affirmed.
Usually a foreclosed home is not in excellent condition. Most of them have been neglected by their owners for lack of funds to maintain as well as make the monthly payments. The Bank-owned properties are called REO’s(real estate owned) and are back on the market for sale as is. Some will not pass an appraisal for a loan and must make use of a rehabilitation loan (203 k)that can be obtained through FHA or a construction loan-both of which are expensive and time consuming. Distressed properties, which are short sales and foreclosures, made up 40% of the sales last month.* Many buyers are not prepared to wait 3-6 months or longer for bank approval to move forward on these homes. They are looking to buy a house and move into it within 3 months.
In addition to that, 35% of these sales are all cash because financing is not obtainable or they are investment homes which are also difficult to finance at this point in time. Most of the time the electricity and the water are turned off and lenders must have the heat and water on to approve the loan. And a Certificate of Occupancy. The interest rate on a FHA rehab loan is ¼ point higher and usually has one or two points in it.
Sometimes you can get that bargain home through an REO but you can also get a great home now with your local realtor because prices are still low.
*The New York Times, May 15, 2011, Maryann Haggerty
Karen R. Laurence
Mortgage Loan Office
Email: klaurence@bethpagefcu.com
Bethpage Federal Credit Union
899 S. Oyster Bay Rd
Bethpage, NY 11714
Blackberry: 516-203-6286
Cell: 516-524-3953
Fax: 866-815-5710