All Forum Posts by: Account Closed

@Brian Pulaski No, the only one appraised so far is the first one at $125K. However, it was an FHA appraisal, which as I understand it goes into the system. I'm assuming that does not affect the other FHA positively. Not sure how it affects the duplex that sold with a conventional loan.

@Chris Mason Thanks for your comments. Not sure how I "ignored the market" or what I could have done differently. Initially we put the first one on the market, it sold within 2 days at $190K to a buyer with an FHA loan. I understand that you and other lenders believe it can't be compared to a SFH. But in this particular area there were no other duplexes of it's type sold. The SFH on the block that did sell was the same building that the owner converted to a SFH by taking a kitchen out, etc. Same identical structure. In fact, when these properties were originally built 100+ years ago they were all identical. They were all placed, as a group, into the National Register as historic buildings. We thought it was a decent clue for value. And actually, at the price, sold more quickly and had more interest than the SFH. There was no homework that I could have done that would have led me to go 5.5 miles away to find my comp. In fact, I could go 5 miles in another direction and find duplexes selling for twice the value. As I said, the properties are somewhat unique, as buildings go, hard to comp. But let's take your analogy of a "firesale". So yes, we had a firesale that took place at $190K. That looks like where the buyers, unrelated, found value. Why were not these values at least reflected in the appraisal? They were on the same block, not 5.5 miles away.

I put several duplexes on the market through a real estate agent for roughly $190K. We didn't pluck this number out of thin air. There was another property that had sold on the street a few properties away for $190K.....although it was a single family home. Same basic building structure, his was SFH, mine were duplexes. So, 2 days after they were placed on the market, we sold the first one around $190K. Then we sell 2 more in the 1-2 weeks also for $190K. So at this point they all show as pending in the MLS. The other day the appraiser for the first one comes out. He appraises the property for $125K. BTW, this is an FHA loan, people wanting to do a house hack. One of the other is an FHA as well, the third is conventional loan. So obviously, the $125K is a problem. My agent has submitted a rebuttal on the appraisal to the lender.

Anyone with suggestions as to how to approach this?  Frankly a 30% difference between an appraisal and 3 independent sales seems like the appraiser is ignoring the market.

Don't know about your city, but I think in many locations you're going to have a hard time explaining to the code people or the health department about why rat control is the tenant's responsibility.  I like the idea of hiring a pest control company so that you can prove you took action.

"Owner financing" is a very broad term, and can include many variations.  But assuming you're talking about a basic form of owner financing, you really only need a deed  to deed the property to the new buyer.  You need a note for the amoount they will borrow.  And you'll need a deed of trust to secure the note to the property.  Now, you could find all these on the internet.  I would suggest though that you spend some money on a good real estate attorney and have him draw the documents up, meaning the note and the deed of trust.  You could do your closing at a title company, they'll do your deed for you.  While you're at the attorney, I'd ask him some questions about some of the newer rules like the Safe Act, and Dodd-Frank.  These will come into play if you do much owner financing. 

What's up with the video? Not seeing it on desktop, ipad, or iphone.

@Steven Hamilton II

Maybe I created a misimpression. The CPA told me that you could sell a personal house to an S Corp. He didn't know if you could do that with an LLC. He wasn't suggesting to tax the LLC as a corporation.

We have no idea of what the basis in this house is. It's been in my wife's family for almost 90 years. We've made various improvements, but at that we aren't able to prove that at this time. Either way, if we could sell the house at market value to the LLC we think it would be advantageous to us because A) the house in the LLC would have a new depreciable value and B) Presumably we would not have to pay any personal tax on it because of the personal exemption,...we've owned it over 5 years.

The CPA originally told us we'd have to contribute the house at it's basis. When I asked my question, he checked into it. He said he couldn't find anything about selling a personal house at market price to an LLC that we are members of. What he said he could find was that that you could sell a personal house to an S Corp. at the market price.

Just trying to figure out what could be done.  My CPA was not of much help.

Thanks for your response. The house is owned 100% by my wife's revocable trust. The LLC is owned 50/50 by her trust and my revocable trust.

We want to put the house in our LLC. It needs to be put in at a value. Later that value will be depreciated. If we are able to sell the house at market value to the LLC it would be preferable to deeding it at our adjusted basis, which would be quite low. Hope that's clear.

We decided to buy a new house and to rent out our current house. We have other properties, all of which are held in an LLC. So our plan is to deed the house from ourselves to our LLC. We consulted our CPA, told him what we were doing, and asked him what price should our house be deeded at. His initial idea was that we should deed it at our cost basis. We have owned this house for decades. Frankly, our cost basis would only be a guess. In any case, the CPA after some study said that if our LLC were a sub chapter S corporation we could sell the property to the corp at market value, then use the $250K exemption personally. He could not determine whether this was true for an LLC. Other details, the house is owned by my wife's revocable trust. The LLC is owned 50/50 by her revocable trust and my revocable trust. The LLC is a partnership. So my question is can my wife deed the property from her revocable trust to the LLC owned by the two of us, using market value as the sales price.? We think this would give us a good depreciable basis in the LLC, no tax due personally on the sale. There's no loan, but we could give the LLC a loan to buy the house. Any thoughts?

Keep in mind, the market never does the same thing twice.  People are allows fighting the last war.  I've been through several downturns.  I don't recall that they started with rents going down.  What I recall is a growing number of defaults due to a variety of things.  People that lost their houses went to live with friends or family, not your rental.  I had to drop my rents slighting during that period.  By the time people got tired of living at home, the market started firming, for both rents and prices.  The cycle is slow, so you have time to observe as things come down.  BTW, I don't think we're on the precipice.  Just my opinion.

You know, an older house like yours and an FHA loan are a accident waiting to happen. I think I would just tell your agent you're not going to do all those extras. Period. If the seller can get it approved and close in the next week. Great. If not, move on. And next time, don't do an FHA. Look at some of the conventional loan FHA look alike products.

Here's the thing, in a negotiation you don't get anything unless you're ready to walk away.  Put the pressure on them.  The buyer wants the house, so does his agent.  Let them talk with their lender.  Otherwise, you walk.  

Meanwhile figure out what all those repairs would cost.  Is that amount worth it?  You can always change your mind if it is.  Otherwise,  walk unless they come back ready to close.  There's always another buyer.