3.8% Sales Tax on Homes
There has been a rumor on the Internet that the health care reform bill includes a 3.8 percent transfer tax on real estate sales. It gives an example that a $500,000 home sale would generate a $15,400 tax bill.
Fortunately, this is not entirely true. It appears there will be a 3.8 percent tax on taxable net income from real estate sales.
The $250,000 for individuals and $500,000 for a married couple are intact for primary residences. The 3.8 percent will be computed on profits over that amount. So if a married couple has a $600,000 net profit from the sale, the tax would be $3,800 (3.8 percent of the $100,000 in profit over the exempt $500,000).
On investment property, this would be 3.8 percent of any net income (profit) upon sale, unless exchanged in a 1031 exchange. This is scheduled to take effect in 2013 and only applies to individuals with taxable incomes over $200,000 and married couples with taxable incomes over $250,000.
There has also been a lot of talk lately about the so called “robo-signers.” In a rush to process foreclosures as quickly as possible, some lenders hired people to sign-off on thousands of foreclosure affidavits per month.
By signing the affidavits, preparers attested to have personally reviewed each file. But given the rate these documents were being processed, many robo-signers admit they didn’t have time to properly review each case.
Backlash about the practice led some major mortgage servicers to temporarily halt foreclosures until internal investigations are completed.
Most of the robo-signing is related to judicial foreclosures. In California, foreclosures are non-judicial. California requires lenders to sign a document that certifies they made attempts to reach borrowers and offer different options to avoid foreclosure (e.g. loan modifications).
The bottom line is, on average, these borrowers are 18 months behind on payments. The robo-signer issue is a technicality that’s not likely to stop foreclosures altogether for most of these borrowers. It will probably just delay things for a few weeks.