- Get the lowest price.
- Get the best terms.
- Protect your interests.
- Solve Problems.
- Avoid disputes and lawsuits.
- Avoid costly mistakes.
- Make sure that the property is
properly inspected.
- Negotiate the best terms of
inspection.
- Save your money on repairs and
renovations.
- Help you close on time.
D) The importance of your agent’s
personal and negotiation skills cannot be underestimated.
E) Having a buyer’s agent work for you
is a ‘no-brainer’. The commission your agent earns is paid at closing
and is already in the price of every listed property.
F) The best Buyer’s Agent costs the
same as brand ‘X’, so get the best.
G) The Gated Communities Specialist®
has represented clients on Hilton Head Island for 33 years. You will
benefit in many important ways from his skills and
experience. Please read about what some of our clients have to say in
their success stories.
3. What About
Buying From a Developer?
A) Bluffton, Okatie and Hardeeville
have many new homes and communities. It’s your right to have a Buyer’s
Agent represent you when you buy a new a new home, villa or lot from a
developer.
B) The developer’s on-site salesperson
represents the developer - not you.
C) When a developer asks you if you
have an agent, write in your agent’s name: Go Gated Realty®.
D) You pay nothing more to have the
Gated Communities Specialist® represent you. The commission earned is
already in the price of the developer’s property.
E) Go Gated Realty® will help you
evaluate the value of the developer’s community and properties compared
to other houses, lots or villas for sale in the area. Broker-in-Charge
Richard Kadesch was a former licensed South Carolina Homebuilder. It
helps to know construction where you’re buying a new house.
F) Developers don’t lower their prices
because just because you decide to work directly with them. You’ll
benefit with the Gated Communities Specialist® on your side.
4. Know About Your
Credit and Pre-Qualify Early.
A) Don’t wait to learn if you have a
credit problem that can take months or longer to fix. Use this site to
get your federally mandated free annual credit report from each of the
three major agencies now:
www.annualcreditreport.com. Stay current and check your credit with
one of the three agencies every four months. These reports do not give
credit scores. To get your score, a lender will pull your report for a
small fee.
B) Talk to a lender early in the
process with no cost or obligation to learn about:
1. Today’s interest rate and
the trend.
2. Available programs.
3. Origination fees and discount points.
4. How they view your situation.
5. Mortgage insurance.
6. Loan escrow requirements.
C) Pre-qualify early in the process
on-line without cost or obligation. Most lenders have their application
forms on-line and use e-mail fluently. They will want to know:
1. What’s your credit score and
what debt does it show?
2. Your verifiable assets.
3. Your employment and verifiable income.
4. Your income and debt ratio.
D) The standard Hilton Head real estate
contract requires a pre-qualification letter within a short time of the
agreement and some Sellers require a pre-qualification letter with an
offer. Even when it’s not required, it’s a good idea.
E) When you choose a lender, they will:
1. Ask you for your application
of $400-$500 to cover their out of pocket expenses for your appraisal and credit report. Properties costing
more than a million dollars may require two appraisals and twice the fee.
2. Send a Truth in Lending
Statement and Good Faith Estimate to you within three days. The TIL gives you the cost of the loan over time
and the GFE gives you an estimate of every closing cost you will have.
F) Your lender must approve you and
know about the property. They do this on a home with an appraisal and
survey. For villas, they have an approved list based on whether owners
use the location for primary or second homes, reserves of the Regime and
other factors. Most condominiums are already on a local lenders approved
list.
G) Properties that are non-conforming,
unwarrantable and ‘jumbo’ loans of more than $417,000 may require higher
interest rates. Buyers may want to finance loans larger than $417,000
with two loans to get the lowest rate.
H) You will have to decide whether to
pay discount points or an origination fee that will lower the interest
rate on your loan. This decision is related to how long you intend to
own the property. Your lender can tell you how many years it will take
to break even on the cost of a point or origination fee.
1. A discount point costs 1%
the amount of the loan.
2. A discount point will reduce your interest rate by 1/8-1/4%.
3. A loan with an origination fee will have a lower interest rate than a
loan without an origination fee.
4. Points and discount fees are tax deductible for purchases.
I) Your lender may require that you
escrow at closing:
1. Property tax for one year.
2. Insurance payments of 3-14 months.
J) Your total closing costs will range
from about 1.5% to 5% of your loan amount and will vary depending on:
1. If you pay cash
2. Get a loan
3. If you pay a discount point or origination fee.
K) Hilton Head lenders will allow you
to finance some or all of your closing costs. Your lender can confirm
how much and Go Gated Realty® will write that into the contract of sale.
L) Ask the Gated Communities
Specialist® to send you a list of Hilton Head Island lenders.
5. Talk to Your
Accountant About Taxes Before You Buy.
A) You should talk with your accountant
before you buy so that you completely understand real estate tax
benefits that include:
1. Interest and expense
deductions.
2. Depreciation benefits.
3. 1031 exchanges.
B) Your accountant can help you decide:
1. If you can use real estate
tax benefits.
2. How renting your property will affect your tax situation.
3. Should file a South Carolina tax return if you live out of State?
4. Should you get a loan or pay cash?
5. Should you get a new loan secured by the new property you buy or use
cash from the
refinance of a property you already own?
6. What per cent of your purchase should you finance?
7. If you should borrow your down payment.
6. What is a
1031 Exchange?
Go Gated Realty®
works with many Hilton
Head buyers and sellers who benefit from the use of 1031 exchanges.
These exchanges are not complicated but they do have specific rules,
require planning and the participation of a certified intermediary like
WaMu Exchange (Washington Mutual) a national leader in 1031 exchanges.
I have found The WaMu staff to be exceptionally courteous and generous
with their time and advice and I recommend them to anyone interested in
1031 exchanges. They can be reached by telephone toll-free at
1-800-966-1031 or by e-mail at
timcor@timcor.com
The following
information is presented with their permission from their website
www.wamu1031x.com
Normally when you sell property, you
must recognize gain or loss in that transaction. If it is a gain, it is
subject to tax (Federal capital gains tax, potential state income tax
and potential depreciation recapture taxes).
Section §1031 of the Internal
Revenue Code (IRC), however, provides an
exception to that general rule.
IRC §1031 states that:
"No gain . . . shall be recognized on the exchange of property held
for productive use in trade or business or for investment if such
property is exchanged solely for property of like kind . .”
The concept is simple:
In a 1031 exchange,
you exchange Property A for Property B.
The sale proceeds from A are used to pay for the purchase of B.
By using a "Qualified Intermediary" (also called "Accommodator") to
transfer both properties and funds, rather than you doing so directly,
your tax liability is deferred.
Benefits
Instead of selling a property, paying
taxes on it, and then using the reduced after-tax proceeds to buy
other real estate, IRC §1031 allows you to defer the capital gains tax
owed. This enables full reinvestment of your sale proceeds. The amount
not paid in capital gains tax to federal and state governments creates
increased equity in your investment.
Tax deferment increases the
availability of your money which can be invested into better
property(s) of greater value. Tax deferment is leverage, and leverage
creates wealth. In effect, you receive an interest-free loan from the
government, in the amount you would have paid in taxes.
Basic Requirements for a Successful Exchange
IRC §1031 states that:
"No gain … shall be recognized on the exchange of property held
for productive use in a trade or business or for investment if such
property is exchanged solely for property of like kind …".
To qualify, the following
requirements must be met:
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There must be at least two properties in an exchange:
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One (or more) that you are selling, and one (or more)
that you are replacing it with. |
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The properties being exchanged must "qualify":
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They must be held for use in trade or business (e.g.,
office building, warehouse, industrial space, farmland, retail
building) or for investment (e.g., raw land, rental
home/apartment/condo). The properties that you are exchanging do not
have to be identical. All of the above examples are "like kind" in
nature, so you can exchange land for warehouse, office for rental
home, etc.
Property that you own for
personal use (e.g., your primary residence or a vacation home) does
not qualify for a 1031 exchange. |
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To defer ALL of your capital gains:
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The purchase price of your replacement property(s)
must be equal to or greater than the sales price of your
relinquished (sold) property(s).
All of your sale equity (cash) must be reinvested in the replacement
property(s). |
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You MUST use a "Qualified Intermediary"
(Accommodator). |
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The IRS will not allow you to receive cash proceeds
or take "constructive receipt" of the funds in any way, or else you
will be taxed.
It is the accommodator who legally sells Property A to buy
replacement Property B on behalf of the taxpayer, creating an
exchange of properties. The client has the freedom to identify what
he wants to sell and what he wants to replace it with, but the
accommodator is the legal vehicle through which the properties are
transferred.
The accommodator guides the 1031 process and provides appropriate
documentation that enables qualification. Most importantly, the
accommodator must be totally independent: it cannot provide tax,
legal, or financial advice to you. |
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Timing rules must be met |
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Failure to meet any of these deadlines will
disqualify the exchange:
Prior to closing on the relinquished property: demonstrate intent to
perform an exchange via a written agreement with the accommodator.
Within 45 days from the closing date on the relinquished property:
identify one or more potential replacement properties.
Within 180 days from the closing date on the relinquished property:
acquire one or more of the replacement properties which have been
identified. |
The Exchange Process: A Simple Example
Mary wants to sell her land in Texas to Mr. Smith for $200,000 and use
the sale proceeds to buy a $300,000 rental condo in Florida from Mrs.
Jones. If she simply sold the land to buy the condo, she would pay
capital gains tax on the land (which would leave her less money in hand
to buy the condo). However, if the
transaction is structured as a 1031 exchange, she defers paying that
tax.
The 1031 process
works like this:
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Prior to closing on the land sale, Mary provides
TIMCOR (usually through her escrow, title company, or closing
attorney) with information about her pending sale. She then signs an
exchange agreement prepared by TIMCOR indicating that she intends to
do an exchange, and that TIMCOR assumes the role of seller on the
land. |
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At the moment she closes on the sale, Mary's land is
deeded directly to Mr. Smith. He, in turn, pays money for the land,
and the money goes to and is held by TIMCOR. |
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From the closing date, Mary has 45 days to identify
replacement property(s) for her land, and 180 days to close on it.
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Prior to closing on the replacement rental condo,
Mary again contacts TIMCOR. An additional agreement is prepared for
her signature, specifying that TIMCOR assumes the role of buyer for
the condo. |
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When the condo closes, the condo is deeded directly
to Mary. Mrs. Jones is paid the funds TIMCOR is holding from the
sale of Mary's land, plus additional funds from Mary, or her lender,
since there is more owing on the more expensive condo.
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In summary, Mary exchanged her land for a condo. The
proceeds from the sale of land went to pay for the condo without
ever touching Mary's hands. |
7. Attorney’s
Fees and Other Closing Costs.
A) In South Carolina, the buyer and
seller each have an attorney for closing.
B) You have the right to choose your
attorney.
C) You may close by mail and do not
have to attend the closing in person.
D) Attorneys charge a fee of about $650
plus additional fees. Your attorney and paralegal assistant will:
1. Communicate directly with
the Seller’s attorney and paralegal assistant.
2. Draw the closing statement for your review.
3. Review your note and mortgage.
4. Search the title of the property.
5. Arrange for a survey.
6. Refer you to a 1031 exchange intermediary.
7. Buy title insurance for you and the lender.
8. Resolve disputes and give legal advice.
9. Explain all closing documents to you.
10. Receive and disburse the money.
11. Record your note and deed at the courthouse.
12. Form a partnership, LLC or corporation for you.
13. Provide forms for you to put utilities into your name at closing.
14. For a villa, let the Regime know that you are a new owner.
15. Withhold capital gains tax for the State of South Carolina.
- The attorney is required to
withhold 7% of the purchase price at closing from non-State
residents.
- You should file a South Carolina
tax return to receive withheld tax in excess of what is owed as well
as to avoid dual taxation in your home state.
E) Other costs the
buyer will pay at closing include:
1. A .25% Transfer Tax paid to
the Town of Hilton Head.
2. Escrowed property tax equal to 3-14 months payments.
3. Escrowed homeowner’s insurance of about one year’s payment.
4. 25% Transfer tax paid to the gated community but transfer fees vary.
Please call or write
if you have any questions. |
