How To Purchase House

If you are an investor in real estate business planning to buy and sell a lot of properties to earn dividends from this booming sector, you must have already heard about ‘property exchange’. You may have already ‘exchanged’ properties. In case you are a newbie in the real estate business or somehow in need of selling your real estate investment property, you need to know what property exchange is all about. Here is a simple instance to make it easier to understand:

Say, you bought your home at a cost of $300,000 two years back. Within this time your property value has appreciated by $50,000. Now, you plan to sell your home either for job relocation or for making a timely profit. If you directly sell your home to a buyer, you shall be considered to have a capital gain of $50,000 which will involve a levying a Capital Gains Tax to the Government exchequer. This will significantly reduce the sales profit you desired to achieve. Instead, if you undertake a ‘property exchange’ (which literally means exchanging your property with a ‘like-kind’ property), payment of your Capital Gains Tax can be deferred to a future date. This will allow you sufficient time to realize the profit from the property now and pay the tax later when it becomes easier. In the U.S., this type of transaction has been authorized by IRS (Internal Revenue Service) Code’s Section 1031 hence real estate property exchange of this kind is popularly known as a ‘1031 exchange’.

1031 exchange has been found to be an effective real estate asset protection strategy. Through this property exchange, a real estate investor can reinvest full equity from a property sale into the buying of a like-kind property evading capital gain recognition. At the end of transfer/exchange both the seller and buyer benefit immensely from the transaction.

Due to inherent advantages, property exchange is becoming increasingly popular amongst the real estate businessmen. A personal residence, however, does not qualify for such exchange. The striking advantages of a property exchange or a 1031 exchange in particular are:

• Capital Gains Tax is deferred to the advantage of the exchanger.

• Equipment having a fair market value of 15% of the main real estate property can be included with the exchange without recognizing a capital gain.

• It allows you to have a better leverage thus improving cash flow.

• 1031 exchange is mostly done with a three-party delayed process with the involvement of a financial intermediary or accommodator. This ensures safe and reciprocal exchange of funds.

• You can achieve diversification and improvement of your real estate portfolio with the cash saved from the tax deferment.

Although profitable, property exchange involves a complicated process. Detailed knowledge of the system is a pre-requisite for a successful exchange. However lucrative, you must consult a reputed realtor before you embark on a property exchange venture.

If you are an investor in real estate business planning to buy and sell a lot of properties to earn dividends from this booming sector, you must have already heard about â??property exchangeâ??. You may have already â??exchangedâ?? properties. In case you are a newbie in the real estate business or somehow in need of selling your real estate investment property, you need to know what property exchange is all about. Here is a simple instance to make it easier to understand:

Say, you bought your home at a cost of $300,000 two years back. Within this time your property value has appreciated by $50,000. Now, you plan to sell your home either for job relocation or for making a timely profit. If you directly sell your home to a buyer, you shall be considered to have a capital gain of $50,000 which will involve a levying a Capital Gains Tax to the Government exchequer. This will significantly reduce the sales profit you desired to achieve. Instead, if you undertake a â??property exchangeâ?? (which literally means exchanging your property with a â??like-kindâ?? property), payment of your Capital Gains Tax can be deferred to a future date. This will allow you sufficient time to realize the profit from the property now and pay the tax later when it becomes easier. In the U.S., this type of transaction has been authorized by IRS (Internal Revenue Service) Codeâ??s Section 1031 hence real estate property exchange of this kind is popularly known as a â??1031 exchangeâ??.

1031 exchange has been found to be an effective real estate asset protection strategy. Through this property exchange, a real estate investor can reinvest full equity from a property sale into the buying of a like-kind property evading capital gain recognition. At the end of transfer/exchange both the seller and buyer benefit immensely from the transaction.

Due to inherent advantages, property exchange is becoming increasingly popular amongst the real estate businessmen. A personal residence, however, does not qualify for such exchange. The striking advantages of a property exchange or a 1031 exchange in particular are:

â?¢ Capital Gains Tax is deferred to the advantage of the exchanger.

â?¢ Equipment having a fair market value of 15% of the main real estate property can be included with the exchange without recognizing a capital gain.

â?¢ It allows you to have a better leverage thus improving cash flow.

â?¢ 1031 exchange is mostly done with a three-party delayed process with the involvement of a financial intermediary or accommodator. This ensures safe and reciprocal exchange of funds.

â?¢ You can achieve diversification and improvement of your real estate portfolio with the cash saved from the tax deferment.

Although profitable, property exchange involves a complicated process. Detailed knowledge of the system is a pre-requisite for a successful exchange. However lucrative, you must consult a reputed realtor before you embark on a property exchange venture.

There is no better place than home. Whether you live in Paris, London, Switzerland, Tokyo or Los Angeles, your heart always longs for your home. Your home provides you with all your needs and fulfills your wants. No place can replace your sweet home. It is paradise for you.
Your ideal home must meet all your needs so it’s necessary to do a lot of shopping until you find the place that’s just right. The best way to be assured that you’ll find your dream home is to compare several homes shown to you by different agents. It will enable you to zero in on the positive and the negative points of each.
It is very difficult to find everything you want in a particular home. Begin my checking the design and size of the structure and note if it will enable you to fulfill your wants and needs. If not, renovation may help.
When looking for a home, it is tempting to buy something that has some of the features you like, but it is advisable to wait, and continue looking until you find the home that has all, or most of the features you require.
For instance, when shopping, sometimes, it is tempting to sacrifice your preference in terms of number of rooms because of something else you like in the home.
Don’t be afraid to buy a home that has a good floorplan, and all of the square footage you need, just because the house is old, or is in need of remodeling.
An older home that has a good floor plan, has the right square footage, and also the right number of rooms could be ideal, but not attractive because it is outdated. Be prepared to spend time remodeling, or hire a contractor to make small changes that will make the home liveable, and also a place that you will want to stay long term.
The size of your home must be big enough to live comfortably. You may want to add a garden to outdoor enjoyment. Color also plays a very important role mentally. You may dislike the color of your roof, interior, exterior, or carpet. There should be enough bedrooms and bathrooms for the members of your family to live comfortably. There should be proper garage and basement space for extra storage. Apart from the home itself, you may need to check out the various amenities and facilities in the surrounding area like parks, children’s entertainment centers, proximity of office, school, market, bank, proper drainage systems, well-built area roads and smooth traffic, and proximity to public transportation.

Estate Agents

Moving home is one of the most stressful things that we go through, and one of the most expensive.

Whilst moving home will always be expensive, here are a few ways in which you could save money. With some planning you can cut hundreds or even thousands of pounds off the bill.

One of the biggest costs associated with moving is estate agent fees. A typical fee you can expect to be charged will be in excess of 1.5% of your sale price, plus VAT, this will often be higher if you use more than one agent to market your property. Before committing to an agent do a bit of research about commission levels. Some agents may offer free HIPs (Home Information Pack) but the cost is likely to be offset by higher commission, so double check as to whether you are actually saving.

One way to get away from these fees is to sell your property online there are a number of sites that charge no commission like houseladder.co.uk, others charge as little as £9.99. Do some research. The added benefit is you don’t have to deal with an estate agent!

Mortgage

The best mortgage deal is not necessarily the one with the lowest rate. Getting the best mortgage deal is an easy way to cut costs when moving. Check out our article The guide to a better mortgage – Part 1.

At the time this article was written the Bank of England base rates are 5.25 %. It is believed that a cut in interest rates in order to mitigate the effects of the global credit crunch and the threat of recession from the US is imminent. Inflation is running at 2.5%, half a percentage point higher than the Bank’s inflationary target of 2%.

One way you could save is to consider timing your move with the expiration of your current mortgage deal. If you move while still tied in, you may have to pay an exit penalty to redeem your mortgage.

Solicitor Fees

Solicitor fees for selling and buying can escalate to over £1,000. But there are cheaper deals to be found on the internet. Be aware though that the cheapest firms usually take on more business than they can manage, and may be slow and inefficient.

The best way to find a reliable solicitor is to get a recommendation from someone you know. But if you can’t get a recommendation then do your own research, one way to save is choose a solicitor from outside of the South-east as it will be cheaper, however doing all your paperwork by post could take longer, and means you can’t pop in to the office to sign a document if you need to.

One tip when choosing a solicitor is go to the office if you hear the phone ringing constantly it’s a sign that one day that could be you.

Stamp Duty

Stamp duty is usually the biggest single cost of moving, and if you’re buying an expensive property, the bill can run into tens of thousands of pounds. One piece of advice that could save you is if you’re looking to buy a property valued at around any of the stamp duty thresholds of £125,000, £250,000 or £500,000 – you could save thousands in tax by buying a slightly cheaper property, or negotiate the price down.

When a property jumps up to £250,000 the rate jumps from 1 to 3 %. This means you will end up paying £5,000 more in tax, simply because you bought a house for £251,000 as opposed to £249,000.

The next jump at £500,000 is where the rate goes up from 3 to 4 %. But if you’re spending that much on a house, then the extra few thousand pounds may is not much in the grand scheme of things.

Stamp duty is not payable on properties under £125,000 – although there are increasingly less properties in this price bracket. Particularly in London where fewer properties are below this level making it difficult for first time buyers to avoid the tax.

Since the government came in power in 1997 they have made £31.5 billion in stamp duty revenue. This is why there are calls for them to raise the stamp duty bottom threshold to £200,000.

Survey

A basic survey will cost you around £250, a full structural survey can cost upwards of £600. If money is an issue, and your property is new, you could probably get away with just the basic survey.

You may be able to find the right mortgage provider that will offer this for free, or give cash-back for a basic survey. If the property is older, it’s essential to get the full survey done. Which, could save you money in the long run.

Moving Day

If you use a removal company to pack and move your possessions this could cost in excess of £500. You can save money by packing and moving yourself. Hiring a van for the day would be a much cheaper option. If you do use a removal company, again as with anything research the firm that gives the best value for money.

Changing Address

One of the most tedious things about moving is letting the numerous companies that you deal with your change of address forgetting to do this could cost you money. Website iammoving.com will email all the companies you deal with in one go. A fantastic service as forgetting to change your address with credit card and utility companies means you won’t get your bills and could result in late fees.

Buying and selling an house are very particular moments, these are actions that can have a very deep and long lasting impact on our life, so it is better to carefully consider every aspect before proceeding.

The real estate buying and selling acts, juridical speaking, are plain juridical legal document drawn up by an individual and they wouldn’t necessitate the intervention of a third person, despite the one of notary at the moment of the signs notarize. However the matter is quite complex and delicate, so it would be advisable to consult a lawyer for the preparation of acts of compromise and deed. The compromise is the preliminary contract, or promise of sale, while the deed is the act of sale itself.

A different figure is the one of the real estate agent, not essential but very useful to the aim that supply and demand in the housing market can match. In any case, on both sides, always better not to limit his freedom of action with “irrevocable promise” or “exclusive assignments”. Activity management is a delicate moment for the agency, especially in this time when even the outbreak of the real estate bubble is feared, manage property and customers in an appropriate manner is essential. In fact, it is very important to provide customers with proposals as close as possible to their needs and expectations, to be able to carry out the business.

Last data says that in the big cities the timing of sales are around 138 days, in growth compared to 128 days registered exactly one year ago. These data provide us with the idea of what now has been happening for months on the real estate market: the larger supply of homes allows the buyer having more choice and deferring purchases until the house is “suitable” to his own needs. To this we have to consider also that the gap between the demands of potential vendors and the availability of potential buyers spending involves longer negotiations and inevitably the time needed to complete the purchase lengthens. In light of these data is clear that a correct method for the company management is the key to success.

In a market in which transactions are slowing down or in any case are in clear decrease in comparison to last years, also adopt some correct strategies is decisive to carry on as many commercial transactions as possible. Buying and selling seem to decrease, this is a sign of a frozen market, but quotations don’t seem to be much irritated by this. The case of Milan appears to be almost anomalous, because here house’s prices still increased of 2%, especially if compared to London. In the British capital, house’s prices in December decreased of 5%. The crisis seems to spare, at least in part, the Italian real estate market.

By Martina Meneghetti with support from agenzia immobiliare consulenza for any information, please visit software gestione immobiliare or visit programma gestione immobiliare

In OECD countries, roundtrip transaction costs are generally below 10%.

However there are some countries with transaction costs which are really unnecessarily high. South Korea has the highest housing transaction cost, at 22% of the property’s value in Seoul, according to work by the Global Property Guide.

Transaction costs in Belgium, Italy, France, Luxembourg and Greece exceed 15% of the property’s value.

On the other hand, total costs for purchasing a house in Slovakia, Iceland and Denmark are around 3% or less.

Transaction costs are typically between 5% and 7% in the UK, Norway, New Zealand, Switzerland, Australia, Japan, Sweden, Poland, Ireland, and Canada. Assumptions

To make the calculations comparable, the Global Property Guide has assumed that the property purchased is a condominium worth either €250,000 (for European countries) or US$250,000 for other countries, and located in the financial or administrative capital. This allows us to arrive at a ‘typical’ transaction cost figure, though in practice transaction costs are a range, depending on many factors.

Transaction cost figures reflect the purchase of old properties, not new (therefore in most cases Value-Added Tax (VAT) is not included). The costs also reflect foreigners’ costs, not locals’ (often very different). Where foreigners must purchase property through companies, the cost of forming and maintaining a company is not included.

Costs included in the term ‘transaction costs’:

• Registration costs

• Legal fees

• Real estate agents’ fees

• Transfer taxes

Property and capital gains taxes are not included, although they must typically be paid before the property is registered. Fees in acquiring the prerequisites for property purchase such as residency permits and company formation are also not included. Over-taxed

South Korea’s very high transaction costs are largely attributable to the unusual feature that all real estate transfers are subject to 10% VAT (only vacant land and government produced housing are exempt).

In most countries, in contrast, only new properties are subject to VAT.

Property buyers in South Korea are also obliged to purchase Housing Bonds worth 5% of the official price. Proceeds from the Housing Bonds are intended for construction of housing for the poor. Typically, most buyers immediately sell the bonds at a discount of about 10% to 15%.

Buyers in South Korea must pay registration tax (3% of purchase price), education tax (20% of registration tax), acquisition tax (2% of purchase price), agricultural and fisheries tax (10% of acquisition tax) and stamp duties (maximum of 0.2% of property value).

These taxes are intended to dampen demand and discourage property speculation. However, in reality, these very high transaction costs exacerbate the housing shortage, by adding to the overall cost of housing. The costlier housing is, the less people can afford to buy it, the less gets built. The housing shortage can better be relieved by other means – better rural transport and services, more competition in the construction industry. French law is a handicap

Average transactions costs in countries with French legal origin are significantly higher than elsewhere, as noted in a previous article about European costs (Housing transaction costs in Europe).

The same phenomena is observed throughout the OECD. Average transactions costs in OECD countries with French legal origins are 14.2% of property value; while in German origin countries they are 11.5%, Socialist 7.4%, English 6.5%, and Scandinavian 5.2%.

Grouping countries in terms of legal origins reveals institutional differences in property transactions. Sales and transfer taxes are more common in French legal system countries. Roundtrip transaction costs normally exceed 10% of property value.

The services of lawyers are used most widely in French and English legal systems. In several countries with French legal systems the use of lawyers is mandatory with fees set by law. Countries grouped by legal origins:

English common law: Australia, Canada, Ireland, New Zealand, UK, US;

French commercial code: France, Belgium, Greece, Italy, Luxembourg, Mexico, Netherlands, Portugal, Spain, and Turkey;

German commercial code: Germany, Austria, Japan, South Korea, and Switzerland;

Scandinavian civil law: Denmark, Finland, Iceland, Norway and Sweden; and

Socialist civil law: Czech Republic, Hungary, Poland, and Slovakia.

Source: La Porta et al, 1999Restrictions on foreign ownership

Several OECD countries restrict foreign ownership of houses. In Iceland and Denmark, only resident foreigners are allowed to purchase houses. The property can only be used as primary residence and not as a rental investment.

In Switzerland, the Federal Government has set an annual quota of permits for non-resident foreigners seeking to acquire property. Generally, major cities such as Zurich, Frankfurt and Lausanne are closed to foreign buyers.

Foreigners need the approval of the Administrative Office (AOB) before they can buy property in Budapest. In Australia, approval of the Foreign Investment Review Board (FIRB) is needed.

Foreigners can freely buy condominium units in Poland but buying land is a bit trickier. Generally, a permit from the Ministry of Internal Affairs is needed.

In Greece, EU nationals can freely purchase property, while there are few restrictions for non-EU nationals. Acquiring property near national borders and in some islands requires special permission from the Local Council. Such permission is not granted to non-EU nationals.

In Turkey, property purchases are open to foreigners, on the basis of reciprocity, i.e., Turkish people must be entitled to purchase real property in the country of the foreign national buying property.

In Mexico, foreign buyers need to set-up a bank trust called ‘fideicomiso’ to be able to buy properties. The bank (trustee) holds the trust deed for the purchaser (beneficiary). While the trustee is the legal owner of the real estate, the beneficiary retains all ownership rights and responsibilities and may sell, lease, mortgage, and pass the property on to heirs.References:

La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny, (1998). “Law and Finance,” Journal of Political Economy 106, 1113-1155.Housing Transaction Costs in the OECD (Full Report)- http://www.globalpropertyguide.com/articleread.php?article_id=95&cid= Housing Transaction Costs in Europe – http://www.globalpropertyguide.com/articleread.php?article_id=88&cid= Economics Team:

Prince Christian Cruz, Senior Economist

Phone: (+632) 750 0560

Time Zone: UST+8.00

Email: prince@globalpropertyguide.comPublisher and Strategist:

Matthew Montagu-Pollock

Phone: (+632) 867 4220

Cell: (+63) 917 321 7073

Time Zone: UST+8.00

Email: editor@globalpropertyguide.com

Address:Global Property Guidehttp://www.globalpropertyguide.com

5F Electra House Building

115-117 Esteban Street

Legaspi Village, Makati City

Philippines 1229

info@globalpropertyguide.com