Real Estate

by Barry

Four Tips for Every New Homeowner

Congratulations on the purchase of your new home! Whether this is your first home or you are upgrading or downsizing from your current home, the purchase of a home is a big event in your life. When major life events occur, it is important that you have a plan in place to ensure that you are properly prepared for the future. Below are a few things to consider now that you finally have the keys to your new home.

1. Update Your Address

Now that you are in your new home, it is very important that you update your address with the appropriate entities. Your local United States Postal Office has a form you can fill out. If you cannot make it into the post office, you can also update this information on their website. This will assist them in forwarding your mail to you. 

To ensure that you do not miss any important tax notices or refunds, you will also want to update your address information with the Internal Revenue Service using Form 8822, as well as with your local state tax agency.

2. Make Sure That Your House Title Coordinates with Your Estate Plan

While it is still fresh in your mind, take a look at your new deed to determine how your new home is titled. Ideally, you had a discussion with an estate planning professional prior to purchasing the new property to determine how you would like to own your new property, whether in your name individually, jointly with a spouse, or in the name of your trust. It is important to review your current estate plan after the purchase of the home to ensure that it aligns with your estate planning goals.

For example, if your plan had a specific instruction to give your prior property to someone, and the instruction references the address of your prior home, you will want to ensure that you update this provision once you no longer own the previous property to avoid confusion down the line. On the other hand, if this is your first home and your estate plan includes a trust to avoid probate, you will need to ensure that your home is titled in the name of the trust and not in your name individually. Alternatively, you could have a transfer-on-death (TOD) deed prepared to add the trust as a beneficiary to the home. Additionally, if you would ultimately like your property to be distributed to a specific individual or held in trust for the benefit of your loved ones (for example, your minor children), you will want to ensure that provisions are added to accomplish this.

3. Check Your Life Insurance Coverage and Beneficiary Designations

Unless you were fortunate enough to pay cash for your new home, chances are you now have a monthly mortgage expense. In order to protect your loved ones, it would be prudent to prepare for the possibility of dying before you pay off your mortgage. You may want to consider whether you have enough life insurance to pay off the balance of the mortgage. This is especially important if you have a surviving spouse or children who will likely continue to reside in the home to ensure that they have sufficient funds to alleviate one of the largest monthly expenses they will probably have. Life insurance can provide valuable funds during what is usually an emotionally—and sometimes financially—difficult time.

When you buy a new home, it is a great opportunity to double check your beneficiary designations. Life changes happen so quickly that sometimes updating beneficiary designations can be overlooked. If your designations do not align with the rest of your estate plan, you may end up inadvertently disinheriting a family member, having a large sum of money fall directly into the hands of an individual (for example, a young adult or minor child) without any guidelines, or having your hard-earned money and property go to someone you no longer want to benefit from your life insurance.

Lastly, now that you have a home and homeowner’s insurance, call your insurance agent to make sure that you are getting all of the discounts to which you are entitled. Many insurance companies will offer discounts when you bundle services. If you already have car insurance through a carrier and use the same company for your homeowner’s insurance, you may be entitled to a better rate than if you obtained the policies at separate carriers. In addition, homeowners often get discounts that renters do not.

4. File for the Homestead Exemption

As a new homeowner, one of the best ways to reduce your property taxes is to file for a homestead exemption in the county where your home is located. The homestead exemption offers a significant property tax break for homeowners who occupy their home as their primary residence. It’s a simple process that can save you money every year!

To file for the exemption, you’ll need to visit your county’s tax assessor’s office or tax commissioner’s office or apply online, depending on your county. Generally, you’ll need to provide proof of residency, such as your driver’s license and a copy of your deed. Most counties require that you file by April 1st of the year after you purchase your home, so don’t wait too long. Once granted, the exemption renews automatically as long as the property remains your primary residence.

This small step can make a big difference in your property tax bill—so make it a priority after settling into your new home!

We Are Here to Help

Buying a new home is a big step, and we are here to help you plan to protect both your loved ones and your new investment. Give us a call so we can help ensure that your new purchase and your estate plan are working together to accomplish your goals. Contact us today to schedule your in-person or virtual appointment.

by Barry

Condo Association CCRs and Leasing Restrictions: What Real Estate Investors Need to Know

When considering the purchase of a condo as a long-term investment, one of the most important factors you need to understand is the condo association’s declaration of covenants, conditions, and restrictions (CCRs). These are the rules that govern how you can use your condo, and they can have a significant impact on your investment strategy—especially if you plan to lease the unit. Leasing restrictions outlined in the CCRs can determine whether or not you’ll be able to rent out your condo, and they can even affect the condo’s eligibility for Fannie Mae loans.

In this post, we’ll break down what CCRs are, how leasing restrictions work, and what real estate investors should be aware of to avoid buying a condo they can’t lease.

What Are CCRs?

Covenants, conditions, and restrictions (CCRs) are the rules established by the condo association that govern what owners can and cannot do with their property. When you purchase a condo, you automatically become part of the condo association, which means you agree to abide by the CCRs. These rules are designed to maintain the appearance, value, and quality of life within the community, and they can cover a wide range of topics, such as:

• Rules for common areas (pools, parking lots, gyms, etc.)
• Exterior changes or renovations to individual units
• Pet policies
• Noise restrictions
• Leasing restrictions

While some CCRs may seem straightforward, others—like leasing restrictions—can have a serious impact on your ability to use your condo as a rental property.

Understanding Leasing Restrictions

Leasing restrictions in condo CCRs are rules that limit the ability of owners to rent out their units. These rules are becoming more common as condo associations aim to maintain a balance between owner-occupied and rental units within the community. The idea is that a higher proportion of owner-occupied units tends to enhance the stability and overall quality of life in the condo development.

Here are some common leasing restrictions you might encounter:

Waiting Periods: There may be rules that require new owners to wait a certain period—such as one or two years—before they are allowed to lease their units.

Minimum Leasing Periods: Some condo associations require that units be leased for a minimum period, such as six months or a year. This prevents owners from renting their units on a short-term basis, such as through Airbnb or similar platforms.

Rental Caps: A rental cap limits the percentage of units in the building that can be leased at any given time. For example, the condo association may restrict leasing to no more than 25% of the total units. Once that cap is reached, owners who want to lease their unit will have to wait until other units come off the rental market.

Lease Approval Requirements: Some associations require that leases be submitted for approval by the board before tenants can move in. This adds an extra step to the process and can delay finding renters.

Fannie Mae Loan Eligibility and Leasing Restrictions

If you plan to finance your condo purchase with a loan backed by Fannie Mae, it’s important to understand how leasing restrictions can affect the condo’s loan eligibility. Fannie Mae has specific requirements for condo projects that are eligible for its loans, particularly when it comes to the percentage of owner-occupied units versus rented units.

For a condo project to qualify for Fannie Mae financing, typically at least 51% of the units must be owner-occupied. If leasing restrictions cause the number of rental units to increase beyond that limit, Fannie Mae may refuse to back loans for units in the building. This can limit your ability to get a mortgage and can also affect the resale value of the condo in the future.

Pitfalls to Avoid for Real Estate Investors

For real estate investors, purchasing a condo that you intend to lease without thoroughly understanding the CCRs and leasing restrictions can lead to significant issues. Here’s what you should do to avoid pitfalls:

Consult with an Attorney: Working with a real estate attorney, like those at Edwards Law, can help ensure you fully understand the implications of the CCRs and protect your investment.

Read the CCRs Carefully: Before making an offer on a condo, make sure to request a copy of the association’s CCRs and review them thoroughly. Pay special attention to any sections on leasing restrictions.

Ask About the Current Rental Cap: If the condo association has a rental cap in place, find out what percentage of units are currently being rented. If the cap has been reached, you may not be able to lease your unit immediately after purchase.

Check the Fannie Mae Eligibility: Ensure that the condo development meets Fannie Mae’s owner-occupancy requirements if you plan to finance your purchase with a loan backed by Fannie Mae.

Investing in a condo can be a smart long-term strategy, but it’s essential to know the rules set by the condo association before you buy. Leasing restrictions in the CCRs can significantly impact your ability to rent the unit and even affect your financing options. At Edwards Law, we’re here to help real estate investors navigate the complexities of condo purchases and ensure your investment is protected. Contact us today for a consultation and let us guide you through the process.

by Barry

Georgia’s New Transfer on Death Deeds: A Simple Way to Protect Your Property

As of July 1, 2024, Georgia property owners have a new option for estate planning: the Transfer on Death (TOD) Deed. This legal tool allows you to name a beneficiary who will inherit your property automatically when you pass away, without the need for probate. It’s a straightforward and effective way to ensure that your property goes to the person you choose, and it offers some important benefits for property owners. In this blog post, we’ll explain what a TOD Deed is, how it works, and what you need to know if you’re considering one.

What Is a Transfer on Death Deed?

A Transfer on Death (TOD) Deed is a special type of deed that allows you to transfer ownership of your real estate to a beneficiary upon your death. Unlike a regular deed, which transfers ownership immediately, a TOD Deed only takes effect after you die. This means that during your lifetime, you remain the full owner of your property and can sell, mortgage, or change your mind about who will inherit it.

How Does a TOD Deed Work?

Setting up a TOD Deed in Georgia is a relatively simple process. Here’s how it works:

1. Creating the Deed: To set up a TOD Deed, you’ll need to prepare a deed that names your chosen beneficiary. This person is called the Grantee beneficiary. The deed must include a legal description of the property and be signed and recorded with the county clerk where the property is located.
2. Maintaining Control: One of the biggest advantages of a TOD Deed is that you keep full control of your property during your lifetime. You can sell it, take out a mortgage, or even revoke the TOD Deed if you change your mind. The Grantee beneficiary has no rights to the property until after your death.
3. Transfer of Ownership: When you pass away, the property automatically transfers to the Grantee beneficiary. To finalize the transfer, the beneficiary must record an affidavit with the county clerk within nine months of your death. This affidavit must confirm your death, state whether you were married to the Grantee beneficiary at the time of your death, and include a copy of your death certificate.
4. Avoiding Probate: One of the main benefits of a TOD Deed is that it allows your property to avoid probate. Probate is the court process that happens when someone dies, and it can be time-consuming and costly. By using a TOD Deed, your property passes directly to your chosen beneficiary without the need for probate.

Important Considerations

While TOD Deeds offer many benefits, there are some important things to consider:

1. Encumbrances on the Property: If you have any mortgages, liens, or other debts tied to your property, these remain in place even after the property is transferred to the Grantee beneficiary. The beneficiary will inherit the property along with any outstanding debts.
2. Spousal Rights: The rights of a Grantee beneficiary under a TOD Deed are superior to those of a spouse you marry after the deed is executed. This means that if you marry after recording a TOD Deed, your new spouse will not have a claim to the property unless you update or revoke the deed.
3. Revocability: One of the great features of a TOD Deed is that it can be revoked or changed at any time before your death. If your circumstances change, you can simply execute a new deed or revoke the existing one.
4. Grantee’s Responsibilities: It’s important for the Grantee beneficiary to understand that they must take action after your death to claim the property. If they don’t record the necessary affidavit within nine months, the property will revert back to your estate.

Is a TOD Deed Right for You?

A TOD Deed can be a valuable tool in your estate planning, especially if you want to ensure that your property passes directly to a specific person without the delays and costs of probate. However, it’s important to consider your overall estate plan and whether a TOD Deed fits your needs. For example, if you have multiple properties or complex family dynamics, you may need to explore additional or alternative estate planning strategies.

In short, Georgia’s new Transfer on Death Deed offers a simple and effective way to manage the transfer of your property after your death. By understanding how it works and the responsibilities involved, you can make informed decisions that help protect your assets and provide for your loved ones. If you’re interested in setting up a TOD Deed or have questions about how it fits into your estate plan, contact Edwards Law today to learn more about how we can assist you in securing your property’s future.

by Barry

Understanding 1031 Exchanges: A Guide for Real Estate Investors

Are you thinking about buying or selling investment real estate? If so, you might want to consider a 1031 exchange. This blog post will provide a basic overview of how 1031 exchanges work, including the definition of “like-kind exchange,” the tax benefits, deadlines, common issues, and how to choose a qualified intermediary. Let’s dive in!

What is a 1031 Exchange?

A 1031 exchange, named after Section 1031 of the Internal Revenue Code, allows real estate investors to defer paying capital gains taxes when they sell an investment property and reinvest the proceeds into a similar property. This process is also known as a “like-kind exchange.”

What is a Like-Kind Exchange?

A like-kind exchange means that the properties exchanged must be of similar nature or character, even if they differ in quality or grade. For real estate, this generally means exchanging one piece of real estate for another. For example, you can exchange an apartment building for a retail store or a vacant lot for an office building, as long as both properties are held for business or investment purposes.

Tax Benefits of a 1031 Exchange

The primary benefit of a 1031 exchange is the deferral of capital gains taxes. When you sell an investment property, you typically owe capital gains taxes on the profit. However, by completing a 1031 exchange, you can defer these taxes indefinitely, as long as you continue to reinvest in like-kind properties. This allows you to leverage more of your money to invest in new properties, grow your portfolio, and potentially increase your overall wealth.

Deadlines for a 1031 Exchange

To successfully complete a 1031 exchange, you must adhere to two critical deadlines:

1. 45-Day Identification Period: Within 45 days of selling your property, you must identify one or more potential replacement properties. This must be done in writing and delivered to the qualified intermediary handling the exchange.
2. 180-Day Exchange Period: You must complete the purchase of the replacement property within 180 days of selling the original property. Both deadlines run concurrently, meaning you have a maximum of 180 days from the sale of the original property to close on the new one.

Choosing a Qualified Intermediary

A qualified intermediary (QI) is a crucial part of the 1031 exchange process. The QI holds the proceeds from the sale of your property and facilitates the exchange to ensure it complies with IRS regulations. Here are some common concerns and recommendations for choosing a QI:

Experience and Expertise

• Problem: Is the QI experienced and knowledgeable about 1031 exchanges?
• Solution: Choose a QI with a proven track record and extensive experience in handling 1031 exchanges. Ask for references and check their credentials.

Security of Funds

• Problem: Will your funds be safe with the QI?
• Solution: Ensure the QI uses segregated accounts and has strong security measures in place to protect your funds. Look for QIs who are bonded and insured.

Transparency and Communication

• Problem: Will the QI keep you informed throughout the process?
• Solution: Choose a QI who communicates clearly and regularly. They should provide detailed documentation and be available to answer your questions.

Fee Structure

• Problem: Are the QI’s fees reasonable and transparent?
• Solution: Compare fees from multiple QIs and ensure you understand their fee structure. Beware of hidden costs or unusually low fees that might indicate subpar service.

Common Issues and How to Resolve Them

Missed Deadlines

• Problem: Missing the 45-day or 180-day deadlines can disqualify your exchange.
• Solution: Plan ahead and stay organized. Work closely with your QI and real estate professionals to ensure all deadlines are met.

Identifying Suitable Replacement Properties

• Problem: Finding appropriate replacement properties within the 45-day window can be challenging.
• Solution: Start your search early and identify multiple potential properties to increase your chances of success.

Complex Transactions

• Problem: Complex transactions, such as exchanging multiple properties or dealing with different types of real estate, can complicate the process.
• Solution: Consult with experienced professionals, including a knowledgeable QI, real estate attorney, and tax advisor, to navigate complex exchanges.

A 1031 exchange can be a powerful tool for real estate investors looking to defer taxes and grow their portfolios. By understanding the basics of how 1031 exchanges work, adhering to important deadlines, and choosing a qualified intermediary, you can successfully navigate the process and maximize your investment potential.

Thinking about a 1031 exchange? Contact Edwards Law today to ensure your transaction is handled smoothly and effectively.

by jenrchapman

Understanding and Preventing Seller Impersonation Fraud in Real Estate

Seller impersonation fraud is a growing concern in real estate, especially for property owners and real estate brokers. This type of fraud involves criminals posing as property owners to sell real estate they do not own, often leaving the true owner and the unwitting buyer to deal with the fallout. Here’s a guide on how to identify and prevent seller impersonation fraud to protect your assets and your transactions.

What is Seller Impersonation Fraud?

Seller impersonation fraud typically occurs when fraudsters identify properties that are free of mortgages or other liens—such as vacant land, rental properties, or vacation homes. They then pose as the owners to sell these properties quickly, often at below-market prices. The fraud is usually conducted remotely, with all communications happening via email or text, and fake documents are used to complete the transaction.

Red Flags to Watch Out For

Both property owners and real estate brokers should be aware of the following red flags that may indicate seller impersonation fraud:

1. Remote Seller: The seller resides out of state or out of the country, only communicates via email or text, and refuses to meet in person or via video call.
2. Urgent Sale: The seller insists on a quick sale, often pricing the property below market value.
3. Digital Presence: The seller has a limited or exclusively digital presence, such as using a P.O. box for an address.
4. Unknown Notary: The notary chosen by the seller is unknown or not located in the same state as the property or seller.
5. Unusual Payment Requests: The seller demands that proceeds be wired to an account in a different location than the property, or provides wiring instructions that seem suspicious.

Steps to Prevent Seller Impersonation Fraud

Verify Seller Identity:

• Use independently discovered phone numbers to contact the seller directly.
• Ask for government-issued identification and review it for signs of tampering.
• Use identity verification platforms like CertifID to validate the seller’s credentials.
• Compare the seller’s signature with previously recorded documents.
• If dealing with an entity, verify the details of the officers or registered agents against official records.

Verify or Select Notary:

• Confirm the notary’s credentials with the commissioning authority.
• Require notarization by a vetted and approved notary, possibly using Remote Online Notarization (RON) if authorized by the state.
• Avoid using a notary chosen by the seller without proper vetting.

Control Disbursement:

• Refuse to send funds to anyone other than the name on the title.
• Require that seller proceeds be paid by check rather than wire transfer.
• Confirm wire instructions match the account details on the seller’s disbursement authorization form.

Investigate Property:

• Search the property address online for any existing listings or advertisements.
• Talk to neighbors, relatives, or tenants to verify ownership.
• Ask the seller property-specific questions that only the true owner would know.

By being vigilant and following these best practices, property owners and real estate brokers can significantly reduce the risk of falling victim to seller impersonation fraud. Always verify the identity of all parties involved, scrutinize documentation thoroughly, and trust your instincts if something feels off.

Contact Edwards Law today to learn more about how we can help protect your real estate transactions and ensure a secure and seamless process.