Contracts


The Winter SnowForeign Investment in Real Property Tax Act (FIRPTA) is a unique tax. It requires the buyer, that’s right, the buyer to withhold from a foreign seller and pay to the Internal Revenue Service (IRS) a tax on a percentage (formerly 10%) of the amount realized (sales price) upon the sale of any U.S. real property.

FIRPTA changed in December, 2015 for those closings on or after 2/17/16. There are some exceptions to the rule and an increase of the tax to 15%.

 

 

  1. If the sales price is $300,000.00 or less, the buyer intends to occupy the subject property and executes a certification of the facts (Buyers Affidavit of Residency, Intent and Price), the withholding rate is 0%.  This exception remains unchanged and was reconfirmed by the PATH Act.
  2.  If the sales price exceeds $300,000.00 but does not exceed $1,000,000.00, the buyer intends to occupy the subject property, and executes a certification of the facts (Buyers Affidavit of Residency, Intent and Price), the withholding rate is 10%.  This exception was newly created.

For all other transactions the withholding rate is 15% unless the foreign seller has obtained from the IRS a written Determination of Reduced or Waived Withholding.

Questions? 702 245 1787. Darren

Short Sale Tax Issues 2014Tax Exclusion on Short Sales, extended to end of 2014. As in two weeks!

My original post on this matter is here: Income Taxes & Foreclosures/Shortsales 12.21.2007.

See also January 2013’s, Income Taxes & Foreclosure/Short Sales 2013 Update

As you know the tax code had an “Exclusion from gross income of discharge of qualified principal residence indebtedness (Sec. 108)”

…in other words many home owners were not taxed for 1099C income received as a result of foreclosure/short sale.  This exclusion expired 12.31.2103, well, it has been reinstated and extended to 12.31.2014. Good news for the short sale market.

UPDATE 12.24.2014 – Many questions as to when a real estate transaction must close. It must close in the year of 2014 to take advantage of this tax break.   But see these other posts from the I.R.S. which are helpful for non-owner occupied short sale/foreclosure tax concerns.

Ten Facts about Mortgage Debt Forgiveness

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

OTHER SHORT SALE POSTS

7 Tips for Short Sale

Addendum to Short Sale Listing 1.26.2010

Advance Fees Continued and the FTC 1.6.2011

Advance Fees – Short Sales – FTC II 5.4.2011

Charging for negotiating short sales/Negotiators 10.1.2010

Deficiency Judgments Nevada 4.27.2007

Foreclosure and the One Action Rule in Nevada 4.10.2007

HAMP the Federal Shortsale Program coming April 2010

Income Taxes & Foreclosures/Shortsales 12.21.2007

IRS PUBLICATIONS shortsales/foreclosures:

Ten Facts about Mortgage Debt Forgiveness

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

Judicial Foreclosures (Short sales are looking more attractive..) 3.23.2012

Lender Short Sale Approval Addendum

Nevada Home Owner’s Bill of Rights (Foreclosure/Short Sale/Judicial Foreclosure)

Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale

Nevada Short Sale Documents

Seller Being Released From Liability Language in Shortsale

Seller Liability After Short Sale 4.20.2007

Short Sale Advanced Fees

Short Sale Addendum to Purchase Agreement October 2010

Short Sales and Bankruptcy and Waiting Periods 10.5.2012

Short Sale – “Dual Tracking” and the Homeowner’s Bill of Rights in Nevada May 2013

Short Sale Junior Lien/Senior Liens Rights To Sue & Other Changes

Short Sale Wallet Size Answer Sheet

Questions? email me darren@dwelshlaw.com

ImageThis is a continuation of my August 24, 2007 entry How Nevada Probate Affects Listings and Sales Contracts.

Listing Property during Probate. Real property can be sold during probate. That is prior to the real estate being transferred to the heir(s).  Per Nevada law 148.110 the personal representative of the estate can enter into an exclusive listing agreement. The commission must not exceed 7% for improved (that’s both residential and commercial) and 10% for raw land.

Warnings to Buyers.  If you are the listing agent, make sure and make a note in the agent to agent remarks that the “sale is subject probate court approval/confirmation hearing.”  Also, counter any offers with this same language.

Buying During Probate.  If you are the buyer’s agent, remember your purchase is subject to Nevada law 148.270 which requires that after the estate representative has agreed to sell, a hearing is held for Court Approval. The hearing is a public auction in open court.  Bids are accepted at this hearing as follows: if the sales price is less than $100,000, competing bids must be at least 5 percent of the sales price, if more than $100,000, then bids $5,000 above the sales price are accepted.  It is best that the buyer be present at the hearing. In the event the buyer’s contract is out bid at the hearing; that first buyer can participate in the bidding process to potentially save their purchase.

Real Estate Sales Commissions.  If the procuring buyer is outbid, the first buyer’s agent is still paid ½ of the real estate commission per Nevada law 148.120.

This is a continuation of my August 24, 2007 entry How Nevada Probate Affects Listings and Sales Contracts

Don’t hesitate to contact me with questions or a referral for a real estate – probate attorney.  darren@dwelshlaw.com

 

Image

  On May 13, 2013 I wrote to you about the Nevada Homeowner’s Bill of Rights.  The link is here.

Short Sale – “Dual Tracking” and the Homeowner’s Bill of Rights in Nevada May 2013

Tomorrow October 1, 2013 it becomes law.  You can review the law by clicking the post above. As a reminder here are some bullet points that affect sales:

TO WHOM DOES IT NOT APPLY, YOU ASK?

(a)    Notice that these additional restrictions apply only to a notice of default and election to sell which is recorded on or after October 1, 2013.

(b)   Lenders with less than 100 foreclosures per year, are exempt.

(c)    A lender that complies with United States of America et al. v. Bank of America Corporation et al., is exempt from these provisions.

UNIQUE EFFECTS OF THE  LAW

Duel Tracking Prohibited.  Prohibits the lender  from continuing the foreclosure process while an application for a foreclosure prevention alternative is pending (short sale). (Section 13).

Arm’s Length Not Required. Sec. 16.5. declares a short sale cannot be denied based upon the . No provision of the laws of this State may be “non arm’s length,” in other words, if you relative buys the property, that cannot be the reason for lender denial.  This is big point, the exact language if a lender asks for it is “Sec. 16.5. 1. No provision of the laws of this State may be construed to require a sale in lieu of a foreclosure sale to be an arm’s length transaction or to prohibit a sale in lieu of a foreclosure sale that is not an arm’s length transaction.” That’s found on page 17 of Nevada Senate Bill 321.

Single Point of Contact. The Lender must provide a single point of contact for a borrower who requests a foreclosure prevention alternative (short sale).

Notice of Information. At least 30 calendar days before recording a notice of default and election to sell and at least 30 calendar days after the borrower’s default, the lender must provide to the borrower information concerning the borrower’s account, the foreclosure prevention alternatives offered by the lender and a statement of the facts supporting the right of the mortgagee or beneficiary to foreclose.

Rescission of Notice of Default.  Any notice of default and election to sell recorded must be rescinded, and any pending foreclosure sale must be cancelled, if:

(a)    The borrower accepts a permanent loan modification

(b)   A notice of sale is not recorded within 9 months after the notice of default and election to sell is recorded

(c)    A foreclosure sale is not conducted within 90 calendar days after a notice of sale is recorded.

Did you catch that? A foreclosure has to start over, including new recording of notice of default, if the foreclosure does not take place if 1.) a notice of sale is not recorded 90 days after the notice of default and then the next deadline is 2.) if the foreclosure does not take place 90 days after the notice of sale.  That will be interesting.

$50,000 Penalty. If a Court finds a lender in violation of this law, the Court can order and award to the borrower the greater of treble actual damages or statutory damages of $50,000.

Alright, that should make it fun until Christmas 2013 at least.

OTHER SHORT SALE POSTS

7 Tips for Short Sale

Addendum to Short Sale Listing 1.26.2010

Advance Fees Continued and the FTC 1.6.2011

Advance Fees – Short Sales – FTC II 5.4.2011

Charging for negotiating short sales/Negotiators 10.1.2010

Deficiency Judgments Nevada 4.27.2007

Foreclosure and the One Action Rule in Nevada 4.10.2007

HAMP the Federal Shortsale Program coming April 2010

HUD Suspends Pending Dual Agency Limitation – Short Sales 9.26.2013

Income Taxes & Foreclosures/Shortsales 12.21.2007

Income Taxes & Foreclosure/Short Sales 2013 Update

IRS PUBLICATIONS shortsales/foreclosures:

Ten Facts about Mortgage Debt Forgiveness

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

Judicial Foreclosures (Short sales are looking more attractive..) 3.23.2012

Lender Short Sale Approval Addendum

Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale

Nevada Short Sale Documents

Seller Being Released From Liability Language in Shortsale

Seller Liability After Short Sale 4.20.2007

Short Sale Advanced Fees

Short Sale Addendum to Purchase Agreement October 2010

Short Sales and Bankruptcy and Waiting Periods 10.5.2012

Short Sale Junior Lien/Senior Liens Rights To Sue & Other Changes

Short Sale Wallet Size Answer Sheet

Questions? email me darren@dwelshlaw.com

Open Road   I received a text on May 31, 2013; if accelerator clauses are legal, a good idea? etc.  That’s funny, I had the same question posed to me, only not by text, years ago.  Here is what I said in 2004, as in 9 years ago.  Remember 2004?

Accelerator Clauses

   Accelerator clauses are appearing in buyers’ offers.  “Buyer will pay $___ over any other offer better than theirs.  Seller must provide Buyers copy of better offer.”  Selling agents are declaring that this should ‘guarantee’ a buyer to be in first position.  Listing agents are interested in accepting these clauses to ensure the highest price in a bidding war.  There are forms and clauses being exchanged.

The issue is the meaning of the clause and what terms are being accepted.  The lower offer may have different financing, closing costs, escrow dates, lease backs, repair request, etc. Thus when the clause is triggered….it renders, potentially, another purchase agreement in first position. But is that in a seller’s best interest? What other terms differ between the former highest bid and now the Accelerator Clause triggered bid?

In a recent scenario a listing agent entertained 4 offers, all different prices, close dates, finances, closing costs and different styles of buyer.  The buyers varied from investor group, independent flipper, and first time buyer. If the Seller accepts the accelerator clause of one of the buyers, what does it mean?  Does a buyer now have to change their terms of financing to meet another offer?  As to financing, this will not necessarily work. Does the Buyer have to close earlier or later?  There is little meeting of the minds as to most aspects of the sale, all very important aspects, other than the purchase price.

By accepting the ‘accelerator clause’ the Seller may loses their ability to choose what they feel is the ‘best offer.’  From a seller’s perspective, did they get enough? What if a seller does not accept the Clause and counters All Parties for a highest and best to be ‘reconfirmed,’ by the Seller.  From a buyer’s perspective you have agreed to a higher price, was the other offer even feasible? Assuming it is valid, was it a possible offer? Was the other buyer not concerned about the price due to an appraisal contingency?  Does the Clause Buyer have that protection?.  The now accepted offer triggered by the Clause may or may not be subject to appraisal.

The accelerator clause does not solve much.  It is attractive because it gives hope. The Accelerator Clause is a cousin to the lease option in the family of bad ideas.  In all markets, it is not just price.

  Darren Welsh, 2004

So, that was my opinion in 2004.  Not much has changed.  Except, as fair warning, the Nevada Real Estate disagrees with Accelerator Clauses for different reasons.  In the 2012 Third Edition Nevada Law And Reference Guide, p. 86 (§A(4)(c)) the NRED hints Accelerator Clauses may not be fair dealing.

“Acceleration” Clauses (not what you think!) – The Division has stated it is a violation of fair dealing to insert what it identifies as an “acceleration” clause. This is not the “acceleration clause” found in general contract or financing law. According to the Division, an acceleration clause is a clause in which the offeror promises to pay a certain set amount above the highest offered sale price and usually provides for a maximum or cap amount. The Division’s example is, “I will pay $2,000 over the highest offer up to $300,000.” This type of clause automatically gives one offeror a stated advantage over other offerors and may not allow fair dealing for the other offerors.”

“Though the previous two activities (disclosing offer terms and inserting an acceleration clause) are not a direct violation of any law or regulation, and there is some controversy regarding this, nevertheless, the Real Estate Commission has found these practices to be highly suspect.”

O.K.…per NRED, they are are not an outright violation, but apparently frowned upon as it gives one buyer a “stated advantage.” Clear as mud. I am not sure where the NRED is going with that, considering the fact that merely offering a higher sales price is a stated advantage.  Nonetheless yet another reason the clauses are problematic.

Scotland 2013

Scotland 2013

Recently the Nevada State Contractor’s Board and real estate agents in Nevada have debated whether or not a real estate broker can ‘order’ a repair of a part of real property during a listing period. If that order is in the name of the agent is that agent performing duties of a licensed contractor? This is NRS 645 vs. NRS 624. My position was that such a task is in line with the servicing of a listing and should be exempt from the control of the Nevada State Contractor’s Board as falls under the licensed activities of NRS 645.030.

NRS 624 has been modified…and upon its signing by the Governor of Nevada very soon, the is now clear that such activity by a real estate agent is exempt, provided the work does not require a building permit and does not exceed $10,000.

Below is the relevant text – or you can read it the entire AB334  here http://www.leg.state.nv.us/session/77th2013/reports/history.cfm?id=758

 11. A person licensed as a real estate broker, real estate broker-salesperson or real estate salesperson pursuant to chapter 645 of NRS who, acting within the scope of the license or a permit to engage in property management issued pursuant to NRS 645.6052, assists a client in scheduling work to repair or maintain residential property pursuant to a written brokerage agreement or a property management agreement. Such assistance includes, without limitation, assisting a client in the hiring of any number of licensed contractors to perform the work. Nothing in this subsection authorizes the performance of any work for which a license is required pursuant to this chapter by a person who is not licensed pursuant to this chapter or the payment of any additional compensation to a person licensed as a real estate broker, real estate broker-salesperson or real estate salesperson for assisting a client in scheduling the work. The provisions of this subsection apply only if a building permit is not required to perform the work and if the value of the work does not exceed $10,000 per residential property during the fixed term of the written brokerage agreement, if the assistance is provided pursuant to such an agreement, or during a period not to exceed 6 months if the assistance is provided pursuant to a property management

agreement. As used in this subsection:

 (a) “Brokerage agreement” has the meaning ascribed to it in NRS 645.005.

 (b) “Property management agreement” has the meaning ascribed to it in NRS 645.0192.

 (c) “Real estate broker” has the meaning ascribed to it in NRS 645.030.

 (d) “Real estate broker-salesperson” has the meaning ascribed to it in NRS 645.035.

 (e) “Real estate salesperson” has the meaning ascribed to it in NRS 645.040.

ImageThe Nevada Seller’s Real Property Disclosure Form (SRPD) has changed effective March 8, 2013.  The changes clarify the section warning “purchaser may not waive the requirement to provide this form and a seller may not require a purchaser to waive this form,” per N.R.S. 113.130(3) removing the former citation of the Senate Bill 34(3)/Senate Bill 314. It kept the “type of seller” can be selected from a Bank, an Asset Management Company, Owner-occupier or Other.”

I want to take this time to address waiver of rights in a Nevada residential real estate transaction. Specifically the Buyer’s Remedy Waiver Of NRS 113.150 Rights.

The issue is that even though a seller may not require a purchaser to waive the receipt of the SRPD per N.R.S. 113.130(3), a buyer may waive any of her rights as to remedies under NRS 113.150.  The section 150 is where the Buyer finds their remedies for a non-disclosure.

Although the law says the Seller cannot force a Buyer to waive the right to receipt, if the Seller does not provide the SRPD, the transaction may still close. More importantly a Seller can simply avoid the subject of not providing the form and focus on getting the Buyer to waive the remedies of the non-performance by a Seller.

As described in the form Buyer’s Remedy Waiver Of NRS 113.150 Rights:  The Buyer may waive their right to:

  1. rescind the purchase pursuant to NRS 113.150(1)
    This means – that although the buyer cannot be forced to waive the right to receive the SRPD form, they can waive their right to cancel the transaction because they did not receive the form. This waiver is the least potentially damaging to a buyer. If a seller is “demanding” as a contingency that this form be signed, number 1 is the safest for a buyer to check.  The reason is that a buyer can still conduct their own inspection, find a defect and cancel the transaction per NRS 113.150(2), subject to the terms of the purchase agreement.
  2. rescind the purchase agreement pursuant to NRS 113.150(2)(a)
    This means – that although the buyer cannot be forced to waive the right to receive the SRPD form, they can waive their right to cancel the transaction even if they are informed of a new defect during escrow.  Remember NRS 113.150(2) is when…before the conveyance of the property to the purchaser a seller informs the purchaser of a defect in the property of which the cost of repair or replacement was not limited by provisions in the agreement to purchase the property… This is potentially more damaging to a Buyer.  As described above, checking number 1 on the Waiver Of Rights form still allows the Buyer the chance to cancel if they are informed of a new defect.  By waiving this right in #2, the Buyer is potentially not able to cancel the transaction without penalty even if the Seller discloses a new material defect during escrow.
  3. recover from the Seller three times the amount necessary to repair or replace any defect per NRS 113.150(4).
    This means – that although the buyer cannot be forced to waive the right to receive the SRPD form, they can waive their right to collect treble damages.  This waiver is powerful.  It eliminates the Buyer’s ability to pursue treble damages as described in my March 2012 entry, Disclosure In Real Estate Sales, As Is, NRS 113, Treble Damages, basically nullifying the clarification the Nevada Supreme Court describes in Webb v. Shull.  If a seller is “demanding” as a contingency that this form be signed, number 1 is the safest for a buyer, number 2 the next safest, number 3 is highly suspect.  Arguably a seller could not disclose, perhaps even intentionally, and not be held liable.
  4. All of my legal rights under NRS 113.150.
    This means – that although the buyer cannot be forced to waive the right to receive the SRPD form, they can waive their right to cancel the transaction because they did not receive the form; they can waive their right to cancel the transaction even if they are informed of a new defect during escrow and they can waive their right to collect treble damages.

This is a series of Disclosure Entries see also:

Disclosure In Real Estate Sales, As Is, NRS 113, 

Treble Damages

Nevada Disclosure In Residential Sales

Private Transfer Fee (Seller’s Real Property Disclosure Form)

An Updated All Inclusive & Belt Way Disclosure

The New, Improved All Inclusive Disclosure

Nevada Condominium Hotel Disclosure

Nevada S.R.P.D. New Clarification of Real Estate Disclosure Laws in Nevada

questions …  email me darren@dwelshlaw.com

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