A better way to deliver EMDs

Delivery of earnest money deposit checks is about to become incredibly easy and more secure than ever.

We are excited to share with you the benefits of our new partnership with ZOCCAM, a revolutionary service that lets real estate agents and homebuyers send their EMDs directly to Federal Title's escrow account – with just a few taps on their smart phone.

Simply take a picture of the front and back of your EMD check, select Federal Title's escrow account, confirm the information on your check and hit send.

You and the homebuyer will immediately receive email notification that the EMD was received, plus you’ll have saved yourselves the time and hassle of driving a check across town.

ZOCCAM doesn’t contain or hold any financial account information, and all content is encrypted and sent using state-of-the-art security techniques that ensure every client’s non-public personal information is protected.

We're in the final stages of building our partnership with ZOCCAM and believe it’s only a matter of time before this superior method of delivering EMDs becomes standard practice in our business.

We look forward to providing this great benefit to all real estate agents and homebuyers very soon and will keep everyone posted when the service goes live.

Close It™ House of the Week: Light-filled historic row house in Mount Pleasant

This week we’re heading into the white-hot Mount Pleasant neighborhood to check out a light-filled historic row house that dates back to the 1920s. With original hardwood floors, coffered ceilings and transom windows, it’s filled with original character. List price is $899,000.

Possibly the best feature of this 3BR / 3BA abode is the enclosed reach porches that have created a sunny and tranquil family room as well as second-floor solarium den space that overlooks a rear garden. The first-floor enclosed porch also opens onto an outdoor deck.

Assuming a homebuyer puts down 20 percent on a conventional loan, her cash to close number will be approximately $203,985.12. Monthly payments will then be around $3,843.24. For a complete picture of the cash to close, including the seller’s side of a transaction like this, try the Web version of Close It™ or download the free Close It™ iOS app.

Beware of possible malware attack

Several real estate agents and lenders who work with Federal Title recently received an email purporting to be from a Federal Title employee with the same name as a local real estate professional and with a file attachment for download. The email is a scam, and we implore you to delete the email immediately.

If you ever have questions or concerns about an email you received from Federal Title, please do not hesitate to contact us to verify its authenticity. Also, know that we will never ask for or provide personal / financial information through unsecure channels.

Our technology team suspects the email sent last Thursday at approximately 6 pm was a malware attack. Malware is software that’s intended to damage or disable computers and computer systems.

A malware program might log keystrokes of a user to obtain sensitive login information. Malware can create a computer zombie, allowing a hacker to use that computer to conduct other malicious attacks usually without the owner’s knowledge. An estimated 50 to 80 percent of spam sent worldwide is attributable to zombie computers.

This is not the first time a hacker has impersonated a title company, real estate professional – even a consumer – in an attempt to install dangerous malware or gain access to sensitive information. We want our clients to be aware of another common scam we have observed, one that attempts to steal the consumer’s down payment funds via a fraudulent wire transfer. This kind of attack is unfortunately becoming commonplace, and once the funds have been wired to the scammer’s account they are gone.

The Federal Trade Commission posted a bulletin that explains how scammers phish for mortgage closing costs. They offer a few ideas to help real estate professionals and their clients avoid phishing scams.

  • Don’t email financial information. It’s not secure.
  • If you’re giving your financial information on the web, make sure the site is secure. Look for a URL that begins with https (the "s" stands for secure). And, instead of clicking a link in an email to go to an organization’s site, look up the real URL and type in the web address yourself.
  • Be cautious about opening attachments and downloading files from emails, regardless of who sent them. These files can contain malware that can weaken your computer’s security.
  • Keep your operating system, browser, and security software up to date

We also want to remind you that Federal Title takes Internet security very seriously. We use military-grade email encryption technology and adhere to the American Land Title Association’s Best Practices for the proper handling of each and every individual’s non-public personal information, i.e., social security and bank account numbers.

Unfortunately we anticipate malware and phishing scams will remain a threat to our industry for the foreseeable future. The best way to defend against such attacks is to be skeptical of any email that contains an attachment download or requests sensitive information – and always exercise extreme caution when providing sensitive information online.

The cost of buying a home in Montgomery County to increase Sept. 1

Despite protests from the local real estate community, the Montgomery County Council last week unanimously approved an increase to the recordation tax, paid by homebuyers and sellers at closing, as a way to pay for school construction.

The recordation tax rate will now increase for the first $500K from $6.90/$1,000 to $8.90/$1,000 and for amounts above $500K from $10/$1,000 to $13.50/$1,000, a "pretty significant increase said County Council President Nancy Floreen who proposed the bill.

Put another way, a property purchased for $400,000 under the old tax rate would carry a recordation tax of $2,415 split between the buyer and seller. Under the new rate, the recordation tax will be $2,670, an increase of $255. A property purchased for $700,000 will see an increase of $1,155 in recordation taxes. A property purchased for $1,000,000 will cost an additional $2,205 in recordation taxes.

The median sales price in Montgomery County was approximately $411,000 last April, up 1 percent from a year ago.

Initially the tax increase was slated to take effect July 1, but the Council pushed it back to Sept. 1 amid protests from the real estate community who said they need more time to adjust to the change. The Council also opted to increase the county’s principal residence exemption from the first $50,000 to the first $100,000 in response to industry concerns.

Those in favor of the tax increase, such as the county’s Board of Education and the PTA, said funding increases for schools have not kept pace with growing enrollment. Montgomery County Public Schools is adding around 2,500 new students per year.

Those opposed to the tax increase said the financial burden was being unfairly placed upon a small subset of the county’s population. Roughly 13,000 units are bought and sold each year in Maryland’s most populous county that is home to over 1,000,000 residents. They also said increasing the recordation tax unfairly affects first-time homebuyers and elderly residents.

In the near future, the Council will examine ways to ease real estate tax burdens for senior citizens. They are also contemplating a 6 to 9 percent increase in property taxes.

Check back for updates as we hear more from County Council.

State, federal tax benefits for homeowners

The ink has dried and keys have been exchanged. Your real estate agent snapped a few pictures for social media, commemorating the day you became a homeowner.

If you’re like most Americans, your home is now your largest asset. And while that comes with great responsibility, it also comes with some perks. Among those perks are the myriad tax benefits Uncle Sam has made available to homeowners, and here we will explore many of them.

  • Mortgage Interest Deduction

    Taxpayers who own their own home may deduct the interest paid toward their mortgage loan from their total income earned when it comes time to pay income taxes in April. The IRS says you can claim this deduction for a primary residence as well as a secondary residence such as a vacation home, provided you spend at least a few weeks out of the year at the secondary home.

    Points paid to lower home mortgage interest rate

    Some homebuyers and borrowers opt to pay “points” up front when obtaining a mortgage loan to lower the cost of their interest rate over the course of the loan. Each point is typically equal to 1% of the principal loan amount. The IRS says home mortgage points as prepaid interest, and therefore in most cases considers them tax deductible. Points paid on a home improvement loan, such as a home equity line of credit (HELOC) are also potentially tax deductible.

    Interest paid on home improvement loans, i.e., HELOC

    If you took out a home improvement loan to build or make improvements to your home, the interest may be tax deductible the IRS says, under the same guidelines as the mortgage interest deduction. It’s worth noting that to qualify for the full deduction the home interest benefit offers, the total amount of debt on all outstanding loans must be $1 million or less.

    Private Mortgage Insurance

    It’s common for homebuyers who put down less than 20% as a down payment to have to pay some kind of insurance policy on their mortgage loan. Amounts paid as mortgage insurance may be counted as home mortgage interest, the IRS says, which means private mortgage insurance (PMI) – also known as a "funding fee" for Veterans Affairs loans and "mortgage insurance premium" for FHA loans – may be tax deductible each year.

    Income / Interest on Reverse Mortgage

    A reverse mortgage is a loan product available for homeowners who are 62 years of age or older that allows them to convert the equity in their homes into cash. It’s called a reverse mortgage because the lender pays out the homeowner’s accrued equity each month rather than the homeowner paying a mortgage payment.

    The homeowners get to keep the title to their home and are not required to pay back the loan until they move, sell, reach the end of a pre-determined loan-period or die. At that time, the reverse mortgage would be due with interest.

    Because reverse mortgages are considered loan advances and not income, proceeds received from a reverse mortgage are not taxable, the IRS. Any interest accrued on the reverse mortgage is not tax deductible until it is paid.

    This article is for general information purposes only. Consult your tax professional. For further reading, consult IRS Publication 503 and IRS Publication 936
  • Homestead Tax Deduction

    The District’s Homestead Deduction allows homeowners to reduce the value of their property’s assessed value by $71,700 when computing their yearly tax liability, under the DC's Office of Tax and Revenue’s current guidelines.

    At Federal Title, your closing agent or attorney will assist with filing the necessary paperwork. You must file a properly completed DC Homestead Deduction application with the OTC and be able to demonstrate the property is 1) your principal residence and 2) the property is owner-occupied and contains no more than five dwelling units (including the unit occupied by the owner).

    Read more about the DC Homestead Tax Deduction

    Senior Citizen Deduction

    This is an important tax benefit to be aware of not only for senior citizens living in the District of Columbia, but also for the buyers of homes that were previously owned by senior citizens because it can give the potential buyer / would-be owner a false sense of the annual real property tax assessment.

    Property owners aged 65 and older (as well as District residents who can claim disability) may file an application for senior citizen and disabled property owner tax relief. This benefit reduces the qualified property owner’s real property tax liability by 50%. Income restrictions may apply in addition to the criteria that must be satisfied to qualify for the DC Homestead Deduction.

    When searching for homes and condos online, it’s common for websites like Redfin, Zillow, Homesnap and Trulia to list the previous year’s real property tax assessment. However, it doesn’t necessarily indicate if the previous owner qualified for any kinds of tax benefits that may have significantly lowered the liability compared to what a new owner would be liable for.

    DC Tax Abatement

    The District’s tax abatement program was designed by the local government to help lower income residents purchase property. Homebuyers who qualify for DC Tax Abatement are exempt from paying recordation tax at settlement. What’s more, they are also exempt from paying property taxes for the first 5 years they live in the home, beginning the next full tax year.

    For those who were unaware of the DC Tax Abatement program when they purchased their homes, it’s possible to apply for this tax benefit up to three years from the original purchase date. You will still need the meet the guidelines and supply proper documentation; however if you in fact qualify you may be entitled to a refund of part of the recordation tax paid at settlement.

    Purchase price and income restrictions apply – and they change from time to time – so check in with the DC Office of Tax Revenue or ask your Federal Title closing agent for the latest information.

    Read more on DC Tax Abatement.

    This article is for general information purposes only. Consult your tax professional. For further reading, consult IRS Publication 503 and IRS Publication 936
  • Homestead Tax Credit

    The Maryland Homestead Tax Credit operates to limit how much your property taxes can go up each year, if you live in the property as a principal residence. A homeowner pays no property tax on the amount of any increase of the assessed value that is above a cap. The Homestead Percent Caps for Maryland jurisdictions are listed on the website of the Maryland Department of Assessments and Taxation.

    In Maryland, if you meet the requirements and file an application, you may receive a discount on your real property taxes. To qualify you must 1) live in the property as your principal residence, 2) have been in the property as your principal residence for at least a year and 3) submit an application to the MD DAT.

    When you purchase your property, a document is typically filed with the deed stating you will be living in the property as your principal residence – each County has its own form. Once the Assessor’s Office for the County in which you purchased updates the assessor’s records to reflect you as the new owner, an Application for Homestead Tax Credit Eligibility is sent to your property.

    If you do not get an application via mail, you can download a Homestead Tax Credit application off the Maryland government website, fill it out and mail it in. Unlike other tax credits and exemptions, you need only apply once as opposed to every year.

    Read more about the Maryland Homestead Tax Credit.

    Homeowners Property Tax Credit

    This tax credit that offers relief for lower income homeowners sets a limit on the amount of property taxes any homeowner must pay based upon his or her income. Applicants must report total income – gross income before any deductions are taken – and the homeowner must provide documentation of all income sources, including non-taxable retirement benefits like Social Security and pensions, according to the Maryland Dept. of Assessments and Taxation. To qualify a homeowner’s net worth must not exceed $200,000 while the gross household income must not exceed $60,000 annually.

    This article is for general information purposes only. Consult your tax professional. For further reading, consult IRS Publication 503 and IRS Publication 936
  • Mortgage Certificate Program

    This is a relatively new program for first-time homebuyers offered by the Virginia Housing Development Authority. The credit matches dollar-for-dollar 20 % of the total mortgage interest paid by the homebuyer each year, thus reducing the amount of federal income tax they owe. The remaining 80 % of the total mortgage interest paid that year remains eligible for a tax deduction.

    Like most of the tax benefits mentioned in this article, the Mortgage Credit Corticated program comes with income and purchase price limitations. Those amounts vary depending on where the house is located. In the DC metro area, the limits are $121,900 for households of two or less and $142,300 for households of three or more, while the purchase price limit is $500,000.

    Further, with this program a homeowner who sells his or her property in the first nine years of homeownership may subject to a federal recapture tax.

    Livable Home Tax Credit

    The Virginia Department of Housing and Community Development administers this $5,000 income tax credit that offers tax relief to individuals and corporations who purchase a new accessible residence and a credit of 50 % of the cost of improvements up to $5,000 to retrofit an existing property.

    Like most of the tax benefits mentioned in this article, the Mortgage Credit Corticated program comes with income and purchase price limitations. Those amounts vary depending on where the house is located. In the DC metro area, the limits are $121,900 for households of two or less and $142,300 for households of three or more, while the purchase price limit is $500,000.

    Further, with this program a homeowner who sells his or her property in the first nine years of homeownership may subject to a federal recapture tax.

    For a new residential unit to qualify, an applicant must be able to demonstrate the residence includes three features of “Universal Visitability” or include at least three accessibility features such as a zero-step entrance, doors with a minimum of 34 inches of clear width and hallways that are a minimum of 36 inches of clear width, according to the latest application guidelines.

    For a retrofitted unit to qualify, an applicant must be able to demonstrate improvements included at least one accessibility feature.

    Historic Rehabilitation Tax Credit

    Those who choose to purchase and rehab a historical property in Virginia may be eligible for a rehabilitation tax credit aimed at preserving the state’s historic homes. The credit is equal to 25 % of the rehabilitation expenses, while the work must also be certified by the Virginia Department of Historic Resources. The cost of the rehab project must be equal to a least half of the residence’s assessed value or 25 % if the residence is owner-occupied.

    This article is for general information purposes only. Consult your tax professional. For further reading, consult IRS Publication 503 and IRS Publication 936
  • Office In-Home Tax Deduction

    Technically this would be a business expense tax deduction, but if you use a portion of your home as a home office, you may qualify for an Office In-Home tax deduction.

    To qualify for this benefit, the IRS says a taxpayer must use a specific area of his or her home strictly for business, although the space does not need to be marked off with a permanent partition.

    These Items are NOT Tax Deductible

    Most closing costs – title fees, home inspection fees, home warranties, real estate commissions and most other expenses related to the closing process are most likely not tax deductible. Only the items mentioned above are eligible for a tax write-off.

    Home improvements – costs associated with home improvements (outside of interest paid on a home improvement loan) are not tax deductible, but there is a silver lining. Since many home improvements add to the value of a home, it’s possible you could sell your property for more money down the road and recoup your investment.

    Transfer / Recordation taxes – these taxes are traditionally split by the homebuyer and seller in the DC metro area and are dependent on the sales price of the property. While they are not deductible, the IRS says buyers can include them in the cost basis of the property and sellers can reduce the amount realized on the sale.

    For Your Friends Who Are Still Renters...

    The District of Columbia and Maryland offer a tax deduction for renters to offset costs landlords add to their rental rates to pay their tax-deductible property taxes. Both credits come with income and other restrictions, but renters could get back as much as $1,000. Virginia does not currently offer a tax deduction for renters.

    Taking advantage of the renter tax credit is one way renters may be able to save toward a down payment on a house.

    This article is for general information purposes only. Consult your tax professional. For further reading, consult IRS Publication 503 and IRS Publication 936

Did we miss anything?

Tax credits and deductions for homebuyers and homeowners are constantly changing, so please let us know if we missed one of your favorites or if you have another one to add to our list.

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