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Taxes on the Transfer?
Q: Do you have to pay property transfer tax when you buy a condo?
A: We usually think of "real estate" as that single-family home surrounded by a white picket fence. Technically, if you own real property you typically own a piece of ground and all "improvements" permanently attached to it, such as a house or a shopping mall. In addition, you also have rights below the ground and above it. As examples, think of "mineral rights" beneath property that allow people to mine for coal and "air rights" above railroad tracks which are sometimes used by to construct buildings.
A condo can have its own parcel of land or it might be a unit that occupies air space above ground. In either case, it's real estate.
When real estate is sold, the shifting of title from one owner to another typically sets off a range of transfer taxes collected at closing. An exception in some jurisdictions occurs when the title is changed in exchange for "good consideration" - love and affection. For specifics, speak with an attorney in your jurisdiction.
Q: We're in the process of buying a home, and there have been issues with the title. The closing date is approaching; what options do we have at this point? If we walk away is it in any way the seller's responsibility to reimburse us for the money we have invested?
A: Take a look at your purchase agreement. It may say that you're buying a good, marketable and insurable title. If so, that's what the owner must deliver.
You need to resolve title problems because there will be a point in the future when you or your heirs will want to sell or refinance the property. You do not want to be in the position of having title issues that could cloud your ability to sell, so you want to demand that the terms of the agreement are met.
As an example, I once refinanced a property. I had sent in the usual mass of paperwork, the property had been appraised and the lender was happy - until the title was checked. It turned out that an old note was reportedly unpaid.
Actually, the note had, in fact, been paid, but the pay-off had not been reported in the official records. Contacting the closing attorney who had handled an earlier refinance easily solved the matter - the documents to be recorded were sitting in a file.
If the owners do not deliver title as promised, if they do not meet the terms of the agreement, then just like buyers who don't perform the sellers could have a significant liability. Imagine, for example, that you have sold your current residence or given up an apartment under the assumption that the seller would deliver the property at closing. Please have an attorney or legal clinic review the sale agreement.
Q: What's the difference between "right of first refusal" and "right of first offer"?
A: In general terms, if you hold a "right of first offer" it means the owner, before publicly offering the property for sale, must first offer it to you. If you accept, the property is yours, but if you decline the owner can sell to others.
Alternatively, imagine that an owner has been marketing a property and has an offer to buy. If you have a "right of first refusal" then you have the right to cut in line, match the offer and get the property.
These two concepts raise a number of ideas:
- If you're a property owner, you do not want to agree to either right without compensation up front. Why? Because either right makes your property less attractive to potential buyers.
- If you're a possible buyer, you would rather have a "right of first refusal" because you then have a market-based offer with a visible price and terms. With a "right of first offer" you aren't privy to the interest from other buyers.
- If you're a seller, you need to make certain that all buyers know up front and in writing that there's a "right of first refusal." Speak with your broker for specifics.
- If you get or give a "right of first refusal" or a "right of first offer," ask a local real-estate attorney if your paperwork must be posted with local property records. Such a posting will create a notice to anyone checking the title that you have certain rights.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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