July 2010

SALES TAX ON TITLES?

It seems as if this question is asked every few years, although you, the real estate professional, may not have been aware of this. Every time the question is raised, we, the title insurance community, start lengthy conversations with our officials in Albany. Historically, the results of these conversations have gone in our favor.

This time around, we were alerted that sales tax would become a reality for our industry starting March 1, 2010. As we started our conversations, the date was pushed back to June 1, 2010 and then to September 1, 2010.

The New York State Department of Taxation and Finance has now issued a memorandum dated July 19, 2010, “Sales and Compensating Use Tax Treatment of Certain Information Services” which imposes a sales tax on our industry starting September 1, 2010. This memorandum states in part:

“Section 1105(C) (1) imposes sales tax on receipts from the service of furnishing information by printed, mimeographed or multigraphed matter, or by duplicating written or printed matter in any other manner. Services subject to tax under this section include the services of collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons”

“As a general rule, furnishing information created or generated from a common data base, or information that is widely accessible, is a taxable information service”

“Services that are generally sold in a manner that meets the criteria described above for taxable information services include, but are not limited to:

• Public records furnished (electronically or in paper format) by a private entity, such as a document retrieval service (examples include real property deeds, motor vehicle accident or violation reports, etc. however public records sold by a governmental entity, such as a county clerk, are not subject to tax)

The memorandum calls for the taxation on “abstracts of title” although I have not seen the definition of this term. This, and many other question have been placed before the Department but we are still waiting for clarification on how this tax will be imposed. As I read these guidelines and discuss them with other industry leaders (and CPA’s) as to how they will affect our normal work product, the general consensus is that all of the searches that we refer to as “Departmental Searches” or “Municipal Searches”, “Co Op Searches”, “Last Owner Searches” and all other special searches are all subject to the tax. It is also the general consensus that surveys and survey inspections are not.

Consequentially, MacGregor is now in the process of re-programming our computers to calculate “Sales tax”. There will be a separate line on our invoice putting forth this amount. This item will appear on all our invoiced and statement as soon as the programming is complete. However, no tax will be collected for any of these services “sold” prior to September 1, 2010. It will be collected on all closing on or after September 1, 2010. All of this is, of course, subject to change as the Department of Taxation and Finance clarifies their position. (NYS TSB-M-10(7)S)

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April 2010

Short Sale Tips for the New York Real Estate Professional
In this current market, MacGregor has been very involved in the deluge of short sales. Yet I am still being asked many questions by those real estate professionals who are just jumping into the marketplace now. As I search the web, I find many sites offering advise on short sales to the consumers, but I have not found one for the professional looking to start working these transactions.

First, here are a few definitions:
SHORT SALE: This would more accurately be called a “short payoff”. This is a devise that is sometimes used to avoid foreclosure. The existing mortgage lender agrees to accept an amount of money as payment in full on the existing loan which is less then they are due. This usually happens when the current homeowner is financially distressed and the real estate is “under water”.

UNDER WATER: This is the term used when a homeowner’s mortgage debt is more that the value of their home. This makes it almost impossible for the homeowner to refinance the mortgage. The only way they can sell would be to kick in (usually) a lot of cash, or get the existing mortgage holder to accept a “short sale”.

Is it too late to start?
Short sale transactions have been in vogue for quite some time now. They have become “business as usual”. There are some people and organization out there that excel in processing these transactions. But it is not too late for the real estate professional to get started in the short pay-off arena. There is still a hugh glut of homes underwater which would make any mortgage holder nervous enough to entertain the idea of a short sale.

From the mortgage holder’s perspective, their only other option is to foreclose the mortgage. In reality, the courts are jammed with a backlog of foreclosures. Recent laws passed in New York, some of which include the distressed homeowners right to financial counseling before the foreclosure is complete, have made the foreclosure process more difficult and time consuming for the lenders. And when the lender is successful at bringing the property to public auction, there are very few bidders. The lender usually ends up owning a non performing asset which requires them to insure, pay taxes on, maintain and maybe even improve before they market it to sell. Then, when they do find a buyer, they sell at significantly less then the lender has invested in the property.

Yes, there are still thousands and thousands of homes out there which are ripe for a short sale transaction. The savvy real estate professional still has ample room to conduct business.

Some tips:
The short pay-off transaction can be time intensive. Negotiating with the payoff bank is usually awkward. The foreclosing lenders are usually not sufficiently staffed to handle the volume of transactions. It behooves the real estate professional to qualify the transaction before they invest themselves into a transaction that will yield them nothing.

Get a credit report.
This is quick and inexpensive. You are not really interested in a high credit score as much as you are looking for judgments. Judgments, if properly docketed, would create junior liens on title which would have to be address before the transaction closes. If the property goes through the foreclosure process, these junior liens would be cut off and would no longer affect the property. In a short sale, that does not happen.

Get a short title abstract search done.
This is a little more expensive and time consuming than a credit report, but the information the title company gives you would be very valuable. Their search will consist of “public information: which is usually free. But the effort of compile this information varies form municipality to municipality.

What do you want from your title abstract search?
Last Owners: The last deed of record will verify that the person (or persons) you are talking to is the current owner of the property.

Lien search: You will want all the open mortgages of record. You will want all junior liens. Your title insurance company can assist you in local laws. In areas such as New York City, a parking ticket can mature into a lien on real property. There are also Transit Adjudication Bureau liens which can be acquired by turnstile jumping on the subway. These and other such items may not turn up on your credit report but could create a problem in a short pay-off transaction.

The short period title abstract search would also reveal any unusual interests, such as a life estates or the reservation of a power of appointment which may be created through recitals in recorded documents which would create complications for your transaction. Even after a successful negotiation with the payoff bank, you will need these items addressed before the title company will issue the buyer an Owners Title Insurance Policy.

Tax searches: Not too important. The current lender is probably paying the taxes. If they fail to pay the taxes, the unpaid taxes could become a lien with priority over there mortgage. This means that if they do foreclose, they will not be able to cut off the taxes. They will still have to pay them, but now with penalty and interest.

Certificate of Occupancy: Not too important. Most of your prospective short sale sellers bought their homes with the help of an attorney. They also took out a purchase money mortgage from a lender who was represented by an attorney. At the time of their closing, any certificate of occupancy issues would have been addressed. There are exceptions to this rule of thumb. If the current owner built an additional story on their house, or an extension, you may have issues to address. This will not come up that often to make this a major concern right from the start.

MacGregor Abstract does these short title abstract searches for our clients on a regular basis. Depending on the location of the property, the cost is usually $200.00, sometimes less.

Looking for a buyer.
In 2007, the New York State legislature passed into law what we refer to as the “Home Equity Theft Prevention Act”. It is outside the scope of this article to go into all the details of this act. The act makes it very risky, almost impossible for an investor to become the buyer on a short sale transaction. If a distressed homeowner (distressed being defined as 2 months or more in arrears on their mortgage) sells to a buyer and the buyer does not move in to the home as their residence, the distressed (former) homeowner can find it very easy to void the transaction for up to two (2) years after the sale. You should be looking for a buyer who wants to move into the property as their home.

The prospective new buyer should be educated to the consequences of negotiating the short pay-off. It could take quite some time. The buyer should be patient and not have unrealistic expectations. Many deals have fallen apart after the short payoff has been successfully negotiated because the buyer gets frustrated and cancels the contract.

However, there are a good number of prospective buyers that are pre qualified for a mortgage that may be ready, willing and able to step into a transaction where the short sale has been negotiated and needs to close quickly. It would be a very valuable thing to have a short list of people who could fall into this category. It could save your deal.

Get some money from your distressed seller.
Many of these distressed homeowners are not making payments on their mortgage. They may even be receiving rent from those living in the house with them. If they have income and they are living rent free, you can probably get enough money to cover the expenses of the credit report and the title search.

There are, of course, those situations where the distressed home owner is distressed because they lost their income. This may be a difficult situation to try to collect even your costs of searches.

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September 2009

General Obligations Law Amended
The General Obligations law concerning Powers of Attorney (POA) has been amended. The new law becomes effective September 1, 2009. Here are some of the highlights:

Effective: The new form will not be effective prior to September 1st. Continue to use the existing POA forms through August 31,2009 as they will still be effective and will continue to be honored in the future. Remember; use only the new form after September 1st 2009.

Execution: The new form must be executed not only by the Principal, but also by (all) the agent(s). All signatures must be acknowledged by a Notary Public before the POA will be effective. There is no requirement for all the parties to execute simultaneously, but the document will not become effective until ALL parties execute and have their signatures acknowledged.

Refusal to honor POA: GOL section 5-1504: No third party located in this state shall refuse, without reasonable cause, to honor a statutory short form power of attorney. Reasonable cause, defined in subsection 3 shall include the refusal by a title insurance company to underwrite title insurance for a transfer of real property made pursuant to a major gifts rider or non-statutory power of attorney that does not contain expressed instructions or purposes of the principal

Major Gifts Rider: To enable the attorney in fact to transfer interests in property, the Principal must also execute the Major Gifts Rider

For a Downloadable form please Click Here
For the Statute Chapter 644 please Click Here
For the Statute Chapter 4 please Click Here
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January 2008

Mortgage tax increases throughout New York State
Legislation was recently passed allowing counties to elect to increase the amount of mortgage tax they impose. So far, the following counties have raised their tax rates:
Rensselaer County
Cortland County
Genesse County
Dutchess County
Essex County
Schoharie County
The MT-15 is used to compute mortgage recording tax when a mortgage encumbers property in more than one locality and different rates of mortgage tax apply. For an up to date Mortgage Recording Tax return (MT-15) Click Here
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December 2007

Recording deeds in Columbia County
Effective Decenber 1, 2007 ALL DEEDS that are recorded in Columbia County are required to be accompanied by the: COLUMBIA COUNTY SUPPLEMENTAL REAL ESTATE TRANSFER TAX RETURN (SRETTR) The filing of the SRETTR requires a filing fee of $5.00. A copy of the SRETTR is available Here
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May 2007

New 2006 ALTA Policy
As of May 1, 2007 the new 2006 ALTA owner's and ALTA loan policy will replace the prior 1992 ALTA policy. The new policy has a number of benefits including automatic survey coverage on loan policies (limited to 1-4 family dwellings); an expanded definition of the insured, a 10% increase in the amount of Insurance under certain circumstances, and numerous other changes. Please feel free to request a copy of notes from the Macgregor seminar dealing with this issue.
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April 2007

Home Equity Theft Prevention Act
This law creates certain new protections for sellers of property on an active tax lien sale list or sellers of property who are in default of their mortgage. Unless certain procedures required under the law are strictly followed, the seller may have the right to rescind the sale for up to two years.

Certain types of transactions are exempt from this law. (see attached affidavit)

If you would like more information on this subject, please contact Macgregor Abstract for a copy of notes from the MacGregor Seminar given on this subject.

Section 265-a of the New York Real Property Law
265-a of the New York Real Property Law

Section 595-a Banking Law
Section 595-a Banking Law

New York RPAPL section 1303
New York RPAPL section 1303
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January 2007

Attached see Internal Revenue Services Guidelines for obtaining a pay off letter for Federal tax liens.
Letters for Federal Tax liens
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July 2006

July 2006-Reduction in Rates
Various underwriters in New York have entered into a 15% rate reduction agreement with the New York State Insurance Department for all purchase transactions (residential and commercial) with a liability amount below one million dollars. This rate reduction does not apply to mortgage or loan policies, building loans or construction mortgages.
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New DEP Water Charges

Time Frame for Various Municipal
Due to the numerous questions which arise concerning the approximate time frame for obtaining various municipals we are posting the following schedule. This schedule provides the information for the five Boroughs, as well as Nassau, Suffolk and other counties. We hope you find the following link helpful.

Municipal Turnaround Time By County
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March 2006

Real Property Law
Section 275 of the Real Property Law

As amended by
Chapter 467 of the Laws of 2005
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February 2005

New York State Insurance Department Opinion
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January 2005

New IT-2663 (2005)    Instructions

New IT-2664 (2005)    Instructions
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August 2004

New TP-584 Procedures for Nassau County
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June 2004

RP-5217 Fees Increase
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April 2004

ACRIS E-Tax Form Submission
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February 2004

Westchester County Mortgage Recording Tax Increase
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October 2003

Allegany & Chautauqua Counties Mortgage Tax Increase
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September 2003

Revised TP584
NOTE:  The Revised TP-584 and the IT-2663 can be found in the Real Estate Forms area under
"City and County Forms"

Rockland County Tax Increase
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May 2003

Real Property Transfer Tax Increase
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