Florida resident sells a home in New Jersey? What taxes will you pay?

Sold a home at a profit, what taxes will you pay?

Is it really New Jersey's "exit tax"?

Out of state residents who own real estate in New Jersey are often shocked to find that a minimum of two percent (2%) of the sales proceeds is collected at closing and sent to the State of New Jersey Treasury.  Some call this an "exit tax" when, in reality, it's nothing more than an estimated income tax payment.

This article from NJMoneyhelp.com discusses this payment:

Q. I have been a resident of Florida for the past 16 years and have just sold a two-family family house in New Jersey. Do I need to file anything other than an A3128 for a refund? We did make a substantial profit. What should I expect? — Seller

A. Congrats on your home sale.

It looks like you may need to pay taxes to New Jersey on your profit.

Unless the house was used solely as a personal residence and falls within the guidelines for the sale of a personal residence — which is unlikely given that you’ve lived in Florida for 16 years — you should expect a tax bill, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

You will have to file Form NJ-1040-NR as a non-resident, he said.

The profit will be calculated based on the difference between the selling price and the cost basis,” Karu said. “ If the property has been rented, there may be depreciation recapture as well.”

Upon the sale of a business, business interest, or real property in New Jersey, a non-New Jersey resident is subject to New Jersey gross income tax on the profit from that sale, he said.

“In order for the State of New Jersey to be sure that it gets paid, taxes are withheld at closing,” Karu said. “While people call it an ‘exit tax,’ the reality is that the payment is simply an estimate tax payment against the tax that gets calculated when the non-resident income tax return is filed.”

* * * *

So, there you have it, it's a tax but not an "exit tax."

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Medicaid and a reverse mortgage

Reverse mortgages are a popular lending vehicle that allows seniors to alleviate financial strains.  Reverse mortgages take different forms, tailored to each borrower's specific needs.

But the question arises on the pages of NJMoneyHelp.com:

What happens to a reverse mortgage with Medicaid?

Q. Does recovery of a Medicaid lien on a home take precedence over a reverse mortgage? Or even a regular mortgage? I could foresee a situation where someone would take out a reverse mortgage to cash out, figuring they would be losing their home to Medicaid anyway.
— Curious

A. You’re right that people try all kinds of strategies to protect their assets from Medicaid.

But the rules surrounding Medicaid eligibility are strict, and the scenario you pose isn’t a simple one.

Regular mortgages and reverse mortgages take precedence over a Medicaid lien, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

But, she said, there is a limit to the amount of equity that a person can take from a reverse mortgage.

“Moreover, reverse mortgage payments may affect a person’s eligibility for Medicaid benefits,” Whitenack said. “Mortgage payments are not counted as income as long as they are spent in the same month that they are received.”

Whitnack said the unspent balance from a lump-sum reverse mortgage, however, can result in excess resources over the Medicaid limit.

In addition, she said, if a person moves out of their home, for example, to a nursing home, the mortgage will likely come due.

You can read the above, and other columns of financial interest at NJMoneyHelp.com.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Commit short-sale fraud; you wind up in jail

Father and son sentenced in fraudulent short sale scheme

 Real estate investing is one way to make money.  Sometimes, though, you wind up in jail.  Per the US Department of Justice:

A father and son from Bergen County, New Jersey, were sentenced today to 27 months in prison and eight months of home detention, respectively, for their roles in a scheme to use straw buyers and short sales on properties to defraud mortgage lenders out of hundreds of thousands of dollars and to avoid paying taxes on the proceeds of the scheme, U.S. Attorney Craig Carpenito announced.

George Bussanich Sr., 60, of Park Ridge, New Jersey, was sentenced to 27 months in prison. He previously pleaded guilty before U.S. District Judge Claire C. Cecchi to a superseding information charging him with one count of bank fraud conspiracy and one count of tax evasion. His son, George Bussanich Jr., 39, of Upper Saddle River, New Jersey, was sentenced to eight months of home detention. He previously pleaded guilty to tax evasion. Judge Cecchi imposed both sentences today in Newark federal court.

Apparently, these two were not content with the normal practice of buying low and selling high.  Instead, they rigged the low side of the transaction and the subsequent sales.

Read the full report here. 

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Questions you should ask about title insurance

Title insurance is a must have for home buyers.

Some questions about title insurance

Title insurance protects property buyers and their mortgage lenders against defects or problems with a title.

At Vested Land Services LLC, we are a policy issuing agent for several title insurance companies. In order to issue our policy we search land and court records to make sure there are no undisclosed interests in the property, unpaid taxes, pending legal action, errors, fraud or other problems with the title.

In New Jersey, the title must be insurable, meaning that the seller really does own the property and is free to sell it.

Home buyers typically pay for two title insurance policies at closing: an owner’s policy and a lender’s policy, which protects the lender.

Here are six questions a home buyer should ask about title insurance.

1. Are title insurance prices regulated?

In New Jersey, they are, so there won’t be a difference in premium quotes among companies.  However, some companies charge different fees for searches and third party services.  Quotes are sometimes misleading since certain charges may be left off or understated.

At Vested Land Services LLC, our quotes contain the standard charges for our files, including charges for services required by most lenders.  We're always ready to discuss out quotes.

2. How much coverage do I need?

Owner’s policies are issued in the amount of the purchase price.  They provide coverage against fraud, forgery, undisclosed heirs and spousal claims.  We'll be glad to provide you with a copy of the policy jacket while you shop for your title insurance agent.

3. Who pays for title insurance?

The home buyer or owner is responsible for paying for its policy and the lender's policy.

4. Is the seller pushing a specific title company?

If you pay for the title insurance, you have the right to select the company. 

Be wary if the seller is pushing his title company.  Are problems being buried? A fresh set of eyes could unearth title issues allowing them to be fixed before the closing.

5. Whom do I trust?

Real estate brokers often have a hidden relationship with a title agency.  If you select the real estate broker's recommendation, you may not be properly served.  If you have hired an attorney recommended by the real estate broker, tell her that you won't to select the title agency.

The same goes for referrals by mortgage lenders.

6. How much reassurance do I need?

Banks and insurance companies aren’t supposed to go under, but they sometimes do. If you want to verify that the underwriter issuing the insurance policy is sound, check its financial solvency with ratings companies such as Fitch Ratings, Demotech Inc. or A.M. Best Co.

You can also research the title insurance company and title agent on line.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Towns making money off of tax foreclosures?

DS News reports on a Michigan case where a property was foreclosed upon by the town for unpaid taxes, and then sold at a "profit."  A comment caught our eye, [our comments in brackets.]

A study from Quicken Loans revealed that as of 2018, 21% of Michigan homeowners were unaware their property was behind on property taxes, and another 61% of renters in tax-delinquent properties were unaware of the home’s tax status.  ["Unaware" sounds ludicrous to us.  Could a homeowner be that foolish?]

Here's the full story written by Seth Welborn.

Tax Foreclosures Under Scrutiny

The Michigan Supreme Court is being urged by Pacific Legal Foundation to halt a state law which allows counties to “profit” from the sale of foreclosed properties, after a home in Oakland County was sold for $24,500 after being foreclosed on for $8.41 in unpaid taxes.

“It is akin to stealing,” said Pacific Legal Foundation attorney Larry Salzman, in Bridge Magazine. “The government shouldn’t be taking more than is owed to them to cure the tax deficiency. I understand states are under [budget] pressure but government should not use citizens  as a bank teller or an ATM machine.”

According to Bridge Magazine, county tax foreclosure is a common practice in Michigan, and counties have foreclosed on over 177,000 properties in the state since 2012. Oakland County, the state’s second largest in population, foreclosed on over 5,500 properties between 2012 and 2017 according to state records, but 65% of county foreclosures took place in Wayne County (Detroit).

A study from Quicken Loans revealed that as of 2018, 21% of Michigan homeowners were unaware their property was behind on property taxes, and another 61% of renters in tax-delinquent properties were unaware of the home’s tax status. However, property tax foreclosures in Detroit are at a 14-year low. In 2018, 2,920 properties faced property tax foreclosure auction, down from 6,052 in 2017, and far below the peak of 15,000 in 2015.

“As Detroit comes back, we need to do everything we can to make sure those who stayed in our city through good times and bad are able to stay in their homes,” Mayor Mike Duggan told Quicken Loans. “We are seeing real progress in tax foreclosure reductions that impact all of our neighborhoods, and through programs like Neighbor to Neighbor, we will continue this important work in close partnership with the community.”

Although outreach programs have helped improve Detroit's tax foreclosure issues, the city still faces other foreclosure-related challenges. According to GOBankingRates and data from Zillow, 34.4% of homes are currently underwater, and the median home value at the Detroit-Warren-Dearborn metro-area level is $161,300, far below the national median of $226,300. GOBankingRates puts Detroit second on its list of U.S. cities most likely to enter a housing crisis.

Read the article on line.
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Your comments are always welcome.

We are the New Jersey title insurance agent that does it all for you. 

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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