Can Taxes Due After I Sold Effect My Credit?

QUESTION:

In May, 2007, I sold my house in Limerick Maine to a single woman.  It was a cash deal ( no Lender was involved ).  I had paid the tax bill due on March 15, 2007 which, I understand paid me in advance through June 30, 2007. In fact, at closing, I received a credit for almost a month of taxes which I had paid in advance.  Now I find that my credit scores have been lowered because Limerick reported that I owe taxes for the two pay periods after I sold.  Isn’t this the responsibility of my Buyer?  Can the town do that to me.  This seems absolutely wrong and there should be a law preventing this type of thing to happen to innocent law biding citizens.

Angry in Falmouth

BOB’S ANSWER:

You ask and you shall receive!!  36 Maine Revised Statutes Annotated 558-A was enacted in April, 2008 to protect people in your situation.  In essence, it states that you can bring a court action against the Buyer whom failed to pay the real estate taxes for the following fiscal year ( in your case July 1, 2007 through June 30, 2008 ).  The Buyer would be obligated not only to pay the tax but also liable for any costs of court, costs of removing the lien and attorneys fees.  Once the affected Seller ( you ) obtains judgment against the Buyer, Maine Law requires the credit bureaus to treat the lien as ” invalid” thereby reinstating your credit.

(Be sure and email your questions to Attorney Bob Boudreau at boudlaw@myfairpoint.net or leave it in the comment section below.  Your question and his answer may be published in this website at a later time).

How Should We Take Title?

QUESTION: 

My best friend and I are purchasing an apartment building together.  How should we take title to the property?  What different ways are available to us?  Should we incorporate?  Should we use a trust?  Our Lender indicated that these decisions are up to us.  Can you give us some guidance?

 

Bill from South Portland

 

 

BOB’S ANSWER: 

Bill:

 

This is a business transaction ( buying an apartment building ).  Accordingly, if one of you should pass away during said ownership, I would think that the deceased person would have wanted his share to go to his family/ relatives by virtue of his Last Will and Testament.  If you agree, the least expensive way of holding title would be as TENANTS IN COMMON not as joint tenants.  If you are concerned about liability emanating from the operation of the apartment building, you may want to hold title in the name of a corporation or Limited Liability Company.  This will provide you with some insulation from legal liability but will cost you for its formation ( $600 or so with filing fee ) and tax return annual preparation ( several hundred dollars ).  A trust can also be used to hold title.  I would have a tendency to prefer the corporation or Limited Liability Company OR, the less expensive TENANTS IN COMMON.  In contrast, if you were buying the apartment building with your wife, you would likely take title as joint tenants with rights of survivorship.  If you want further information, you can email me at boudlaw@verizon.net.

 

(Be sure and email your questions to Attorney Bob Boudreau at boudlaw@verizon.net or leave it in the comment section below.  Your question and his answer may be published in this website at a later time).

 

What is Maine’s Improvident Transfer Rule?

QUESTION: 

My mother died eight years ago and my father has been living alone in a large house that my brothers ( Phil and Ed ) and I grew up in.  Phil and Ed now live in California and are both well off.  I live here in Standish in an apartment that I can’t afford with my two young children.  Well, enough about me.  Here is my question.

 

My eighty three year old father wants to sell me his house!  I believe it is valued at $250,000 and he owes nothing on it.  He wants me to buy it for $150,000.  Can I do this without defrauding my brothers?  Will a bank give me a loan?  Can you advise a course of conduct?

 

Stanley in Standish

 

BOB’S ANSWER: 

Maine has a law known as the IMPROVIDENT TRANSFER RULE.  In essence, it states that your father needs his own lawyer separate and independent of you to represent him and provide assurances that your dad is providing this generous gift to you for all the right reasons.  The law classifies groups of people that may be in a position to unduly influence an elder person ( defined by statute as being over the age of 60 ).  The short list would include:

 

A.  Children and other relatives

B.  Priests, rabbis and spiritual advisers

C.  Doctors and nurses caring for the elder person

D.  Best Friends

E.  Next Door Neighbors

 

If your dad does not have his own lawyer perform this service, he has up to six years to demand that you return the real estate to him.  By the way, your Lender ( assuming you took out a loan to support the $250,000 purchase price ) would be exempt from this Law. 

 

So my best advise is to make sure your dad has independent legal counsel, find a good Lender, say goodbye to your rented unit and say hello to your new ( old ) home!

 

(Be sure and email your questions to Attorney Bob Boudreau at reliabletitleinc@gmail.com or leave it in the comment section below.  Your question and his answer may be published in this website at a later time).

Did FHA charge too much interest on my payoff?

QUESTION:  

I refinanced my original mortgage, which was an FHA loan on March 29, 2007.  My payoff with FHA required me to pay interest through April 30, 2007 even though FHA got its money many weeks before that.  Why was I charged so much?

 

BOB’S ANSWER:

 

FHA loans require the collection of interest for the complete month within which FHA receives payment.  This is unusual and not like all conventional loans, which only take interest through the date, the payoff is actually received and processed.  Ideally, you should have arranged to close your loan around March 23, 2007 (a Friday).  Your three (3) day right to change your mind (counting Saturday, Monday and Tuesday) would have expired on March 27^th.  Your payoff would have been sent on Wednesday the 28^th.  The payoff would have included interest only through the end of March.  You would have saved a full month of interest on your FHA loan.

 

(Remember, you can email your questions to Attorney Bob Boudreau at reliabletitleinc@gmail.com or leave it in the comment section below.  Your question and his answer may be published in this website at a later time).

What is a Short Payoff? (and when would this apply?)

QUESTION:

 

My property value has gone down quite a bit in the last several months.  I really need to sell my house because I cannot continue to make my mortgage payments.  I got behind when I missed a month of work due to an injury.  My real estate broker tells me that she can sell my house for about $150,000, but I owe $146,000 and I am sure the broker wants to get paid.  I am in a box and don’t know how to get out. My friend mentioned a “ short payoff “ but didn’t really know how it works.  Can you explain?

 

 ANSWER:

 

We are in a very “ soft “ real estate market where values are generally going down and buyers are looking for extraordinary bargains in buying property.  Your Lender is very much aware of this reality.  You can list your property for sale subject to a short sale.  This means that you will be asking your Lender to take less money from the sale then may actually be due them.  You may ask, “ Why would my Lender do that? “  The answer is that your Lender should be looking at the value of the collateral (your home) and seeing realistically how much money it can derive from a sale to pay down your loan.  This might be a better approach by your Lender than waiting until you stop making your payments and force the Lender to begin foreclosure proceedings.

 

Hopefully, the Lender will be practical and make sense out of the transaction.  Using the information you have provided, the Lender knows that working with a buyer paying full value ($150,000) is favorable to going through a foreclosure process and paying for advertising as well as legal fees and ultimately selling it at auction for less than $150,000.  So what will the Lender (mortgagee) do?

 

The Lender should require you to have the property appraised to assure itself that $150,000 is a good price.  The Lender will allow for your reasonable costs of sale (deed preparation, brokers’ commission, transfer tax and recording fees) and then want to take the remaining amount and apply it to your loan.  The Lender may enter into financial terms with you as to how the unpaid balance can be addressed.  In some instances, there can be a debt forgiveness (watch out as to the income tax consequences).

My Mortgage Payoff is Too High!!

QUESTION: 

 

I recently sold my condo in Old Orchard Beach On March 15, 2007.  I had paid my March 1st  payment and my principal balance before this payment (according to my statement) was $146,721.  Yet, when I went to the closing, the papers showed that I owed $147,665.  Why was I overcharged?

 

BOB’S ANSWER:

 

When you take out a loan, real estate mortgage or otherwise, you pay interest “ after the interest is earned.  This is the opposite of rent where you pay in advance.  Therefore, when you paid your March 1st  payment, you paid for the month of February.  At your closing you paid interest from March 1st  until the date, which the closing attorney or title company believed the check would be processed by your lender (mortgagee). By way of example, if you had a closing on March 29, 2007 (a Thursday), the title company would likely FedEx or overnight your payoff amount so it is received on Friday, March 30th.  To be safe, the title company processor may have added additional days through perhaps the following Tuesday to make sure that the payoff had enough money when it was received and processed.  If this is the case, your Lender (mortgagee) should send you back the excess directly.

 

(You can email your questions to Attorney Bob Boudreau at reliabletitleinc@gmail.com or leave it in the comment section below.  Your question and his answer may be published in this website at a later time).

Confusion about Real Estate Taxes in Maine

QUESTION:  

Can you explain to me how real estate taxes work in Maine?  I recently paid my tax bill on April 15, 2007, the due date.  What period does that pay for?

 

BOB’S ANSWER: 

In Maine, the cities and towns operate on a fiscal year (beginning July 1st  and ending June 30^th).  When you paid your April payment, it paid somewhat in the middle of the period for which the payment was made.  The April payment covered the period of January 1, 2007 through June 30, 2007 (which is the second half of fiscal year 2006). 

 

 

(You can email your questions to Attorney Bob Boudreau at reliabletitleinc@gmail.com or leave it in the comment section below.  Your question and his answer may be published in this website at a later time).

 

 

Regarding APR

QUESTION:

 I recently obtained a mortgage loan for $200,000 from my bank at a quoted interest rate of 6.5% fixed.  When I got my Truth In Lending Statement (TIL) it indicated that my Annual Percentage Rate (APR) was 6.875%.  Why do I have two different interest rates?  Can you explain this to me?

 

BOB’S ANSWER:

 

Generally, you have costs associated with obtaining your loan in addition to the interest rate.  These “ costs” may include an origination fee, a discount fee, prepaid interest etc.  The purpose of the APR in the Truth In Lending Statement is to blend together in an annual percentage rate the entire cost of getting the loan. For your closing, the impact of the fees charged to you equates to about 0.375% per year which when added to the 6.5% brings you to the total annual percentage cost of credit (derived from fees and interest) to the 6.875%.  In essence, if you had no fees of any kind and had an interest rate of 6.875% per year, you should pay the same amount over the life of the loan as you have done by completing your closing at 6.5% interest per year.

 

 

(You can email your questions to Attorney Bob Boudreau at reliabletitleinc@gmail.com  or leave it in the comment section below.  Your question and his answer may be published in this website at a later time).

Why Not Ask Bob?

Whether you’re an individual purchasing or refinancing a home, a real estate agent or a loan officer or mortgage broker, you all have questions regarding real estate transactions.  Now you have some place to ask those questions. Attorney Bob Boudreau, shares his experience in real estate transactions in Maine, New Hampshire and Massachusetts right here on the Why Not Ask Bob? blog.  You can submit your questions either by making a comment here or e-mailing reliabletitleinc@gmail.com  and they will be answered here at a later date.