Simple Real Estate Decisions May Not Be That Simple - Real Estate Q&A
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You purchase private mortgage insurance when buying a property to cover yourself in the event of default. Or you decide to make improvements to a property you already own. These sound like straightforward decisions, right? Maybe not; there may be legal and tax consequences.
Whether you’re involved in commercial or residential real estate, you need to consider the consequences of seemingly simple decisions. Do you fully understand the terms? Are you aware of current laws? What you think is in your best interest may, in fact, have costly results.
The best way to make sure you know what you’re getting into is to consult with experts who can provide you with up-to-date information and can advise you as to how your decision will affect you in the future. Then you can decide how you’d like to proceed. Consider the following scenarios:
Bashore Green & Wix
Q: In 2012, my bank foreclosed on my home, leaving a significant deficiency. I paid PMI with my loan payments prior to defaulting. Am I liable for the deficiency?
A: You may still be liable. Private Mortgage Insurance (PMI) protects the lender, not the homeowner. In a foreclosure, the mortgage insurer pays the lender based on the terms of the PMI policy — yet this does not prevent the insurer from coming after the homeowner for losses related to the foreclosure or the lender pursuing the homeowner, if the insurance proceeds did not cover the deficiency. And this is despite the homeowner having paid for PMI!
Most, if not all, homeowners never realize this and, several years later, after working hard to rebuild, they may be required to battle the insurer pursing the claim. While some states have restricted insurers from dunning homeowners after foreclosure, we’ve defended such a case in the last 30 days, and it looks like an upcoming trend in Michigan.
It’s important to have an attorney involved whenever you buy a home. They can help you understand not only your loan documents, but the risks involved with paying PMI. Know your rights so this doesn’t happen to you.
Bashore Green & Wix
Lionel E. Bashore
Attorney and Counselor
Diamond Offi ce Plaza
Address: 49100 Van Dyke Ave., Shelby Twp., MI 48317
Phone: 586-803-0500 Fax 586-803-0501
Q: Is it true that there are revised tangible property regulations that might affect people in real estate?
A: Yes, if you’ve acquired, produced, or improved tangible property. Here are five things to keep in mind:
- If you can carry it (work computers, desks and chairs, etc.), the regulations might apply.
- If you can’t carry it, but you use it for business (i.e., machinery, leased equipment, even signs), the regulations might apply.
- If it improved your business property, it might qualify. (Think of improvements made to buildings and manufacturing plants you own. Have you repaired a bank of elevators or updated the HVAC, security, plumbing, or electrical systems?)
- The revisions are largely considered good tax news, as they help clarify a lot of issues that cause taxpayers frustration.
- It’s suggested you meet with your tax adviser to take advantage of any possible deductions or capitalizations.
Phil Bahr, CPA, CGMA and Steve Maltzman, CPA, CGMA
Regional Managing Principals
Address: 1500 W. Big Beaver, Troy, MI 48084