The Virtual Vacation Home

Second-Home Owners 'Visit' Via Webcams; Spying on Guests, Monitoring the Pool Guy
By JUNE FLETCHER

Helena Peterson's favorite show these days depicts shadows flickering on artwork and furniture in a deserted dining room.
It's not an avant-garde production but a Webcam view of the vacation house that Ms. Peterson bought last year in Southport, N.C. Using a computer at her primary home in Ellsworth, Maine, she monitors the house in the tiny fishing town via an Internet connection. Though there's little to see she says she finds it mesmerizing -- and a way to spend time, at least virtually, in her second home while stuck at her first one. "It's a fantasy experience," says Ms. Peterson, a public-health program director.
PODCAST: VACATION-HOME MONITOR


WSJ's June Fletcher discusses how owners of vacation homes are using webcams and other home-monitoring devices to spy on their tenants.
As Webcams and other home-monitoring devices become smaller, cheaper and easier to install, some people have become voyeurs of their own vacation homes. While the ostensible purpose of the cameras is to monitor for intruders, some people use them to check up on the lawn guy or cleaning service, spy on visiting relatives or renters, or simply daydream about a place they'd rather be.
Last November, Tim Duchene installed a Webcam on the patio of the ocean-view condo that he and his wife, Carolyn, bought on Maui, Hawaii, three years ago. He intended to use it as a marketing tool to attract renters, but finds himself checking it daily to watch storms, see the palm trees sway and track the ash clouds given off by distant volcanoes. Because airfares have skyrocketed, the Aliso Viejo, Calif., couple gets to the island only half as often as before. The Webcam is a bit of a compensation, says Mr. Duchene, a technology executive.
Bruce Macpherson
Second-home owners often plug Webcams into an old PC or laptop they keep turned on and connected to the Internet. Other Webcams can link up to the Internet directly via WiFi or a cable. Basic Webcams cost as little as $10, though makers put out far more expensive ones with more capabilities. WowWee Ltd. and iRobot say they'll soon launch Webcam-topped robots that can roam about the house while sending pictures, then dock themselves at a base for recharging.
Using a $10.95-a-month Web service called Rogo, Bill Edwards of Raleigh, N.C., checks out the doings at his Wrightsville Beach, N.C., vacation home several times a day -- from his office, his home, even his car. "I'm spending way more time on this than I should," he admits. The real-estate broker has his weatherproof Webcam mounted outside his house and focused on his backyard, where he can keep an eye on his new 27-foot boat and watch visiting grandkids play. And since he can check out his house live on his iPhone, it's also a great way to show it off to his friends, he says.
WowWee says its planned Wi-Fi robotic camera, Rovio, will roam houses.
Other systems are more complex and costly. Alarm.com provides wireless Internet cameras as part of elaborate home security and monitoring setups. Customers can remotely arm or disarm the system or set up temporary access codes for service people. Such dealer-installed systems typically cost $300 to $1,000, depending on how many sensors are used, with monthly monitoring fees of $30 to $46.
Webcams sometimes catch questionable behavior. Using his Alarm.com camera, Tom Tweit in South St. Paul, Minn., saw teenage houseguests standing by the front door of his Orlando, Fla., vacation home sharing a suspicious-looking pipe. The retired electrician contacted the teens' parents and the youths left the house.
Most of the time, Webcams are put to more mundane uses. Interior designer Louis Cohen says he uses cameras to cut down on the amount of time he needs to spend for maintenance reasons at his pied-a-terre in Philadelphia and a family retreat in Aventura, Fla. With Webcams posted at entrances he can see whether landscapers, pool cleaners, deliverymen and other service people show up when they say they will -- and once caught a no-show dog walker this way. "They don't know they're being watched," says Mr. Cohen, whose main home also is in Aventura.
Above, Logitech's QuickCam Vision Pro is one of many Webcams on the market. Below, IRobot, maker of robotic floor cleaners, also plans a roving Webcam device, ConnectR.
But watching other people without their knowledge in a private home -- or even in a backyard not visible from a public street -- can pose legal issues, says David Elder, a professor of law at Northern Kentucky University and author of "Privacy Torts." Mr. Elder says homeowners, especially those who rent out their houses, should refrain from pointing Webcams towards interior spaces -- particularly bedrooms and bathrooms, which people expect to be private. "People do bizarre and strange things in leased apartments," he says. Cameras should be revealed to tenants and guests, preferably in writing, he adds.
Ross Twiddy, a property manager who oversees 780 houses on the Outer Banks of North Carolina, promotes wireless security systems that also allow remote control of water heaters and air conditioning. But he says he draws the line at cameras due to privacy concerns.
In February, Tamara Cowen placed a Webcam aimed at a beach used by renters of her nine vacation cabins at Big Wood Lake in Jackman, Maine. She installed the $500 weatherproof camera both as a marketing tool and to quell the curiosity of would-be renters who constantly ask her about the weather. Worried about how renters would respond to being watched, she posted a sign pointing out the Webcam's presence and an offer to take it down should anyone object. No one has -- in fact, one renter used it to wave to envious co-workers while he was on vacation, while another posted a sign on the beach asking his brother to hurry up and join him at the cabin, she says.
John Scott had Webcams installed as part of security system overhauls both in his primary home in College Park, Md., and the vacation home that he and his wife, Anne, bought in May in Port Aransascq, Texas. Together, the alarm systems cost $3,200, plus monthly monitoring fees. But the expense is worth it, he says. When he's in Maryland, knowing that his Texas property isn't being damaged by storms gives him peace of mind. Yet he's also found it surprisingly soothing while in Texas to watch the trees rustle gently and sunlight flit across the yard of his Maryland house. "It relaxes me, so I really feel like I'm on vacation," he says.
Write to June Fletcher at june.fletcher@wsj.com

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Good-Faith Changes From HUD

Washington post
By Jack Guttentag


Ever since its last effort to reform mortgage market practices was defeated by the lending industry in 2002, the Department of Housing and Urban Development has been promising to come back with some less ambitious, but possibly more acceptable, proposals.
This spring, it finally did.
The latest proposals have three major thrusts. The first is to convert the required good-faith estimate of fees and charges into a document that borrowers can use to shop among loan providers. I'll discuss that this week.
The second thrust is to protect borrowers against various types of opportunistic pricing that the current good-faith estimate facilitates. The third is to make mortgage brokers' pricing transparent, which the current system does not. I'll discuss those in future articles.
The good-faith estimate provides borrowers with an estimate of costs associated with a mortgage, but it is not binding. The form does not have the critical summary information on loan features that borrowers need to shop effectively. In addition, the fees and charges shown are not totaled in meaningful ways. Even if the information were complete and dependable, furthermore, the borrower doesn't get it until after submitting a loan application, which is too late for it to be useful in shopping.
For the good-faith estimate to be an effective shopping tool, it must 1) provide borrowers with critical information about the features and prices of the borrower's desired loan; 2) limit the right of loan providers to change the fees and charges; and 3) require loan providers to view issuance of the good-faith estimate as a loan approval, subject only to verification of the information provided by the borrower. The proposed good-faith estimate does all of this.
The information on the proposed good-faith estimate includes the interest rate, total lender charges and total third-party charges. That's enough to allow a borrower to shop effectively for fixed-rate mortgages. On adjustable-rate mortgages, HUD plans to require additional information on the factors that affect future rate adjustments and is seeking comments on how best to do this.
The fees and charges laid out in the proposed good-faith estimate would no longer depend entirely on the "good faith" of the loan provider. Changes between the numbers shown on the estimate and those contained in the HUD-1 final closing document will be limited.
The new good-faith estimate would also be a conditional loan approval -- my term, not HUD's -- based on six pieces of information provided by the borrower: name, Social Security number, property address, gross monthly income, loan amount and house value. HUD envisions borrowers seeking estimates from multiple loan providers, making a selection from among them and then submitting a loan application. The application provides the much more detailed information required by lenders, but it cannot be rejected unless the new information is materially different from that submitted in applying for the good-faith estimate. The burden of proof is on the loan provider.
One loose end I see is verification of the borrower's income. If the borrower cannot verify the income stated on the good-faith-estimate application, the lender must be allowed to reject the application without becoming vulnerable to legal challenge. The best way to deal with this is to add an item to the list required for the good-faith estimate: "Will you verify income?" If the borrower says no, the loan provider can set the higher price of a "stated income" loan. If the borrower says yes, it is clear that the burden of proof shifts to the borrower.
The proposed good-faith estimate would not protect the borrower against lowballing -- when a loan provider offers a low quote to get the business, then raises it when the borrower locks the price. The first item on the new estimate reads, "The interest rate for this GFE is available until . . . " followed by a blank space where the loan provider will place a date. In practice, that date will always be the current day, because in a volatile market no loan provider would ever commit to tomorrow's price.
HUD's unsuccessful 2002 proposals included a rate-indexing provision for dealing with this problem, but this time it has been ignored. While price volatility is not a problem that can be solved by regulation, borrowers should be placed on notice that the problem exists. HUD views the new good-faith estimate partly as an educational document, yet leaves the borrower wholly in the dark on this critical issue.
In addition to warning borrowers about this problem, HUD should encourage them to ask the loan provider how a new price will be determined after the borrower submits a loan application and wants to lock the price. When loan providers realize that their answer to this question may well affect whether they get the loan, they will come up with solutions. One would be to index price quotes to wholesale prices.

Short Sale know how

If you've taken out a large mortgage, and perhaps refinanced to cover remodeling or other expenses, you may find yourself unable to keep up with your mortgage payment after a layoff, divorce or illness. More and more people are finding they need to sell their homes for less than they owe on the mortgages, known as a "short sale."

Selling short is definitely better than foreclosure, which stays on your credit record for ten years. But it's best to try to work things out with your lender before going through the embarrassing and laborious process of selling your home on a short sale.

Tax Issues
Before you put your home on the market for a short sale, it's best to talk with a tax advisor about possible tax repercussions. It's likely the IRS will consider the difference between the value at which you sell your home and the mortgage balance as "income" on which you'll have to pay taxes.

An exception to this rule is if you can prove that you were "insolvent" - that your debts were bigger than your assets- before your mortgage lender agreed to a short sale of your property. A tax advisor will be able to tell you for sure whether you'd be considered insolvent by IRS standards.

If you can't prove you're insolvent, and the tax bill on a short sale would be more than you can pay, you may have to let the mortgage lender foreclose, or declare bankruptcy.

Be Upfront With The Real Estate Agent
If you find selling you house for less than you owe on the mortgage is an option short of foreclosure or bankruptcy, you'll want to find a real estate agent who understands your situation. Agents typically take a much lower commission on short sales, and it often takes much longer to actually close the sale once the seller accepts an offer. But many agents sympathize with financial problems brought on by unexpected circumstances, and may want to help.

Convincing Your Mortgage Lender
The buyer will need your help in negotiating a short sale approval with your mortgage lender.

Your bank will have to be convinced that you deserve to be approved for a short sale. You'll need to tell your mortgage lender about your financial hardships, including layoffs, divorce or medical issues.

While this may seem obvious, now is not the time to rack up the purchase of luxury items, like fancy cars or jewelry. Your lender will see these debts on your credit report and become convinced you're a loose spender who doesn't deserve a break.

It may also be necessary to provide the lender, either directly or through the buyer or buyer's agent, documentation of your financial hardship, such as paystubs, bank statements and so forth. While this may seem like an invasion of your privacy, try to think of it as the fastest way out of an otherwise overwhelming debt.

Short sales take much longer to close than more conventional sales, so plan accordingly. If it works, you've avoided bankruptcy and an ugly mark on your credit report. If it doesn't work, you'll know that you've done everything you could to avoid foreclosure and/or bankruptcy.

Если какие-то ограничения в американском законе для иностранцев?

Вопрос об инвестировании:
Если какие-то ограничения в американском законе для иностранцев?
Ответ: Никаких ограничений нет.

Права и процедуры приобретения и аренды недвижимости

Иностранец (физическое или юридическое лицо) может приобрести в собственность недвижимость на всей территории США.
Для покупки недвижимости надо иметь счет в американском банке, так как большая часть расчетов осуществляется через банк.

Приобретение недвижимости проходит несколько этапов:

Первый этап – это выбор агента (подписание с ним договора). Рекомендуется иметь собственного агента, а не пользоваться агентом продавца, поскольку агент продавца представляет его интересы, следовательно, заинтересован в более высокой стоимости приобретаемой недвижимости. Выбранный агент будет подбирать вариант, соответствующий вашим требованиям и желаниям.

Второй этап – переговоры и подписание договора о намерениях. Если достигнута предварительная договоренность (дом и цена нравятся), то подписывается договор о намерениях, и вносится депозит в размере 1%, который вернется в случае расторжения договора о намерениях и уйдет продавцу в случае совершения сделки. После этого покупатель проводит экспертизу дома (Physical inspection, termite inspection) и получает подтверждение получения кредита (если это необходимо), на это дается 17 дней. Если есть намерение приобрести недвижимость в кредит, оптимальным будет считаться наличие предварительного согласия банка о его предоставлении (pre-approved letter).

Третий этап – открытие Escrow (специального счета), изучение и подготовка всех соответствующих документов. Составление договора купли-продажи обычно происходит после всех инспекций (поскольку они могут существенно влиять на стоимость дома). Если объект покупается в кредит, то на проведении всех необходимых инспекций будет наставить банк, если наличными – то это дело владельца. Договор содержит имена сторон, подробное описание объекта, данные о вознаграждении продавца.

Завершение сделки. Когда контракт купли-продажи подписан и авансы внесены, банк направляет оценщика для определения обоснованности продажной цены объекта. Если проверка прошла успешно, покупатель получает от банка документ (Commitment Letter), подтверждающий согласие выдать ему конкретную сумму в виде ипотечного кредита на конкретный объект недвижимости. Это может занять некоторое время. Оптимальной является ситуация, когда у покупателя имеется предварительная договоренность с банком, подтверждающая готовность банка выдать ипотечный кредит. После этого все докуаменты передают адвокату, которого нанимает банк для завершения сделки.

Завершение процесса приобретения – оформление settlement statement. Затем осуществляют официальное закрытие сделки – обязательно в присутствии нотариуса. Происходит передача денег и ключей от жилья. Сделка должна быть зарегистрирована в тот же день в специальном районном отделе регистрации. Право собственности на жилье подтверждается свидетельством о праве собственности (Title).
Рекомендуется производить не только страхование дома, но и страхование прав владения недвижимостью (если окажется, что какие-либо документы неверны).
После приобретения недвижимость может быть сдана в аренду, продана, передана по наследству, отдана в управление.

Расходы на проведение сделки:

Операция:

Страхование и проверка подлинности документов 0,5%–1,0% покупатель
Реестровые пошлины 0,5%–0,2% покупатель
Судебные пошлины 0,5%–1,0% покупатель
Судебные пошлины 0,5%–1,0% продавец
Налог на передачу прав собственности 0,01%–2,0% продавец
Плата брокеру 6% продавец

Раcходы покупателя: 1,05%–2,20%
Расходы продавца: 6,51%–9%

Кредитование

В Соединенных Штатах существуют два основных варианта покупки недвижимости: вы можете купить недвижимость за наличные деньги или в кредит.

Единственная разница при получении ипотеки для нерезидентов состоит в том, что – в отличие от американцев – первоначальный взнос при приобретении недвижимости составляет для них не 10%, а 30%. В остальном же условия для всех абсолютно равны.

Townhouse for Sale in Owings mills, Maryland

Short sale unlikely for owners current on mortgages

Unemployed couple seeks best way to preserve credit when they default
By Ilyce Glink, Friday, April 11, 2008.

Co-written by Samuel J. Tamkin
Inman News

Q: We have worked extremely hard to preserve and improve our credit our entire adult lives. We currently have a homestead property, and are upside down on a second property in a hybrid option adjustable-rate mortgage.

I am current on the mortgages, but we are close to imminent default.

We just hired Realtors to do a short sale, as we just cannot afford the second property. My wife and I just lost our jobs. The property was listed at $450,000, and we received an offer for $375,000 -- which the banks will reject -- but there seems to be interest in the property.

If we can build a short-sale case for the banks, the second-lien holder will get essentially nothing but will save on the costs of foreclosing. Because we are not late on our payments, the banks view us as current on the loans, but we are desperate.

Our goal is to preserve and shield my credit as much as possible. We will not do a deal with a deficiency judgment. Can we push for the bank to agree to our terms without stopping our payments on the mortgages? Will our credit be affected?

A: You are in an unfortunate situation, one that many homeowners share. You're correct that most lenders have their hands full with borrowers who have already defaulted on their loans. These borrowers have had their loans go into foreclosure and seen their credit scores plummet.

It's unlikely that a lender will even talk to you about the prospect of a short sale when you are current on your mortgage. You should try anyway, but the lender is under no obligation to accept a short sale -- that is accepting an amount that was offered to you to buy your second property, but is less than what you owe your primary lender.

Unless you fail to make payments on your mortgages and have a contract in hand with a buyer for your home, you probably won't be able to get the lenders' attention -- much less get the first lender to accept a short sale and get the second lender to release the lien on the equity or second loan on your home.

But your credit history and credit score will certainly be affected by your failure to make payments on your loans and your failure to pay the first lender in full and your failure to pay the equity lender at all.

Currently, you are at the mercy of the slowdown in real estate and credit problems in the marketplace. You probably have no easy way to preserve your good credit history and credit score at this time. If you fail to make your payments to any of your lenders, both your credit history and credit score will suffer. If you fail to make good on paying in full your loan obligations, your credit history and credit score will also be hurt.

It's tough to see how a lender would agree to let you off the hook for paying your loan obligations in full without hurting your credit. You might get the first lender to accept the short sale and may even get the lender to agree to not report the short sale negatively to the credit reporting bureaus, but if you can't and won't pay anything to the equity lender, that lender will likely report the loan as written off and delinquent.

It doesn't seem likely that you are in a position to agree to repay the balance of the mortgage or equity loan after the sale of the home. You should know, however, that either lender has the right to sue you for the amount you owe under the loan unless you pay each loan off in full or have each lender agree that they will not seek additional payment from you after you sell the property.

If you do not get an agreement from each of the lenders, they could sue you after the closing and obtain a judgment for the difference between what they got paid and the amount owed under the loan. That judgment would be called a deficiency judgment.

You should know that your credit score will be affected, but the methods of computing how and to what degree your credit score would be hurt is proprietary.

In the range of options, if you were to declare bankruptcy, your credit score would be hurt the most and if you're able to have the first lender agree to take a short sale and have the equity lender agree to forgive all of the debt, your credit will still be hurt but, perhaps, not as much.

But it may help to know that if you wipe your slate clean and start over, you will be able to rebuild your credit history and score in just a few years.

Q: We just sold my wife's deceased mother's house and we got a 1099-S form that says gross proceeds were $525,000. What amount do we pay taxes on? The money went directly into my wife's living trust. We got a check from the closing in the amount of $434,000.

A: I'm sorry for your loss. If you sold the house within a year of your wife's mother's death, it's possible that you will owe no taxes on the sale.

Let's step back. Form 1099-S is merely the form that the closing agent sends to the seller of real estate that sets forth the sales price for the home. In this case, you sold the home for $525,000. That number reflects only the price the home sold for and does not indicate whether you made a profit or loss on the sale of the home.

If this was your home and you had purchased it for $500,000 and sold it for $525,000 and had closing costs of $25,000, you still would have no profit on the sale of the home and probably would have no tax to pay the IRS.

However, if you inherit a home, you would pay tax on the difference between the value of the home at the time the person died and the sales price of the home when you sold it.

You know the sales price for the home, but you may or may not know the value of the home at the time your wife's mother died. Generally, if the property is sold within a year of the time of death, that sales price is a good indication of the value of the home.

If you sold it a couple of years after she died, you would have to determine the value for the home at the time of her death and then factor in any costs to sell the home and, perhaps, any improvements you made to the home to get it set for sale. A new roof, for instance, could be added to the cost basis of the home.

For more information, talk to an accountant, estate attorney or enrolled agent, and for general information you can go to the IRS Web site at www.irs.gov. One publication that is useful in reviewing the factors that affect the value of a home is Publication 523.

Understanding Starker exchange rules

The difference between death and taxes is death doesn't get worse every time Congress meets." --Will Rogers

In this series of tax articles, I have discussed the tax benefits for residential properties, such as the exclusion of gain of up to $500,000, or the various tax deductions available to homeowners.

Now we turn to the tax benefits available to real estate investors.

If you own investment property, and sell it, you will have to pay capital gains tax; for 2007, the tax rate is 15 percent.

But investors are required to depreciate a portion of their property. While this may provide a small tax benefit each and every year, when the property is ultimately sold, in many cases this depreciation must be recaptured at the rate of 25 percent.

Enter the like-kind exchange, which is a way of deferring that tax. At the outset of this column, it must be pointed out that contrary to popular opinion, this is not a "tax-free" transaction. The exchange, authorized by section 1031 of the Internal Revenue Code, will only defer -- not avoid -- the capital gains tax. It will not relieve you from the ultimate obligation to pay the capital gains tax.

Many years ago, a man by the name of T.J. Starker sold property in Oregon, pursuant to a "land exchange agreement," but did not receive any money for the sale. Instead, the seller -- a couple of years later -- transferred replacement property to Starker. The Internal Revenue Service considered this a taxable sale, but the 9th Circuit Court of Appeals held that this was a deferred exchange permitted under Section 1031 of the Tax Code. In other words, the exchange did not have to take place simultaneously.

The ideal exchange is a direct exchange. I own investment property A and you own property B (also investment). Both are of equal value. On Aug. 1, 2007, you convey B to me and on that same day I convey property A to you. If there is a written agreement between us that this is to be a 1031 exchange, neither of us will have to immediately pay any capital gains tax on any profit we have made.

But it is almost impossible to arrange such a transaction. The logistics of finding the replacement property to be exchanged simultaneously with the relinquished property is very difficult to coordinate.

Accordingly, most 1031 exchanges today are deferred.

There are two kinds of deferred (Starker) exchanges:



Forward exchange: You sell the relinquished property, and within the time limitations spelled out in Section 1031, obtain the replacement property;




Reverse exchange: You obtain title to the replacement first, and then sell the relinquished property.


The rules are complex, but here is a general overview of the process. With some important exceptions (discussed below) the rules apply equally whether the exchange is forward or reverse.

Section 1031 permits a delay (non-recognition) of gain only if the following conditions are met:

Must be investment property: The property transferred (called the "relinquished property") and the exchange property ("replacement property") must be "property held for productive use in trade, in business or for investment." Neither property in this exchange can be your principal residence, unless you have abandoned it as your personal house. Your vacation home would also not qualify as investment property, unless you actually start to rent it out more or less full time.

The area of vacation homes is complex and often misunderstood by taxpayers and lawyers alike. The IRS recently promised to provide more information to taxpayers regarding the treatment of these vacation homes.

There must be an exchange: The IRS wants to ensure that a transaction that is called an exchange is not really a sale and a subsequent purchase. Practically, an exchange looks like a sale, but the paperwork involved with the transaction makes it an exchange. It is important that anyone considering a 1031 exchange retain counsel who is familiar with the various rules.

The replacement property must be of "like kind": As a general rule, all real estate is considered "like kind" with all other real estate. Thus, a condominium unit can be swapped for an office building, a single-family home for raw land, or a farm for commercial or industrial property.

Once you meet these tests, it is important that you determine the tax consequences. If you do a like-kind exchange, your profit will be deferred until you sell the replacement property. However, it must be noted that the cost basis of the new property in most cases will be the basis of the old property. Discuss this with your accountant to determine whether the savings by using a like-kind exchange will make up for the lower cost basis on your new property. Many taxpayers are excited about the concept of deferring their gain, but when they analyze their situation, they realize that the tax will only be a few thousand dollars. Additionally, becoming a landlord again may not be that attractive.

There are two important time limitations that are spelled out in the statute and cannot be waived or modified:

1. Identification of the replacement property within 45 days. Congress did not like the fact that Mr. Starker had no time limitations on when the exchange could take place. Accordingly, the law now requires that the taxpayer identify the replacement property no later than 45 days after the relinquished property has been sold. According to the IRS, the taxpayer may identify more than one property as replacement property. However, the maximum number of replacement properties that the taxpayer may identify is either three properties of any fair market value, or any number of properties as long as their aggregate fair market value does not exceed 200 percent of the aggregate fair market value of all of the relinquished properties.

The replacement property or properties must be unambiguously described in a written document. According to the IRS, real property must be described by a legal description, street address or distinguishable name (e.g., The Nathan Apartment Building).

2. A neutral party is essential. If the taxpayer has any control of even one penny of the relinquished property's sales proceeds -- even for one minute -- the exchange will fail. All such proceeds must be held in escrow by a neutral party until the taxpayer is ready to close on the replacement property. At that time, the funds must go directly into that purchase. Generally, an intermediary or escrow agent is involved in the transaction. In order to make absolutely sure that the taxpayer does not have control or access to these funds during this interim period, the IRS requires that this agent cannot be the taxpayer or a related party. The holder of the escrow account can be a broker or an attorney, unless the attorney had within the past two years represented the taxpayer. In such cases, the IRS takes the position that the client controls the attorney and the funds would be constructively in the hands of the taxpayer.

3. Take title within 180 days: Title to the replacement property must be obtained no later than the earlier of 180 days after the relinquished property is transferred or the due date of the taxpayer's income tax return for the year in which the transfer is made. If, for example, you transferred the relinquished property on Dec. 1, 2007, your tax return is due on April 15, 2008, which is only 136 days. You either have to obtain the replacement property by that date or get extensions from the IRS so that you can extend out to the full 180 days. Nowadays, getting an extension is automatic. If by the due date, you file Form 4868, you will get an extension for six months. Please note, however, that while this allows you to late file your tax return, you still have to pay the tax by April 15, 2008.

4. Interest on the exchange proceeds.

What happens to the interest earned while the sales proceeds are held in escrow? The IRS calls this the "growth factor," and any such interest to the taxpayer has to be reported as earned income. Once the replacement property is obtained by the exchanger, the interest can either be used for the purchase of that property or paid directly to the exchanger.

Reverse exchanges: It is often difficult to meet the 45/180-day requirements. You have found the replacement property, but do not yet have a buyer for your relinquished property. And the owner of the new property is not prepared to wait until you are able to go to closing on your current property.

The reverse Starker -- if done properly -- can solve this dilemma. Here are some of the important rules:

1. The taxpayer must arrange for the replacement property to be held in a "qualified exchange accommodation arrangement." In government language, this is called "QEAA."

2. Qualified indicia of ownership of the property by the QEAA is required. This means that the QEAA must either have legal title to the replacement property or some other arrangement that is acceptable to the IRS to demonstrate ownership. For example, a land sales contract (also called "contract for deed") may suffice. Under this latter arrangement, the QEAA will not have actual legal title, but will have contractual obligations. This may -- depending on state or local law -- avoid having to pay a double recordation-transfer tax. Otherwise, this tax must be paid when the property is first transferred to the QEAA and then again when it is transferred to the ultimate taxpayer.

3. No later than five business days after the property is transferred to the QEAA, the taxpayer and the exchange accommodation titleholder (called the QEAT) must enter into a written agreement that states that the latter is holding the property for the benefit of the taxpayer in order to facilitate an exchange under section 1031. Generally, this can be accomplished by a lease of the property from the QEAT to the taxpayer.

4. Both the taxpayer and the exchange accommodation titleholder (the QEAA) must file separate federal income tax returns, so as to advise the IRS of any income and expense incurred while the QEAT had ownership of the property.

5. No later than 45 days after the replacement property is transferred, the taxpayer must identify the relinquished property. The IRS allows the taxpayer to identify alternative and multiple properties, and if the taxpayer owns several investment properties, this provides some flexibility as to which property will be sold.

6. No later than 180 days after the replacement property is transferred to the QEAT, it must be conveyed to the taxpayer.

7. Perhaps the most important aspect of a reverse Starker is the requirement that the taxpayer have a legitimate desire to engage in a 1031 exchange. According to the IRS regulations:

At the time the qualified indicia of ownership of the property is transferred to the exchange accommodation titleholder, it is the taxpayer's bona fide intent that the property held by the exchange accommodation titleholder represents ... replacement property ... in an exchange that is intended to qualify for non-recognition of gain (in whole or in part) or loss under §1031.

In other words, you cannot buy the replacement property and then -- as an afterthought -- decide to treat the transaction as a 1031 exchange.

The rules are extremely complex. You must seek both legal and tax accounting advice before you enter into any like-kind exchange transaction -- whether forward or reverse.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

'Creative financing' tactics to lure home buyers

Retired seller moving abroad not looking to make big profit


By Benny L. Kass
Inman News

DEAR BENNY: I recently retired and am planning to move out of the country. I own a single-family house in a desirable area. I owe only about $70,000 on my current mortgage. The value of the house before the recent market crash was about $470,000. Despite the current market, numerous people have looked at the house, but only one has made an offer (a very lowball offer). I am not desperate to sell, but I want to move on with my retirement plans. The house is older, but has recently had about $30,000 in improvements in order to appeal to buyers.

Since I will not need the money from the sale of the house, how could I offer a very appealing owner-financed mortgage, perhaps with an introductory "teaser rate"? I called the bank that holds my mortgage, but it does not have anything in place to assist individuals with owner-financing. I could offer the house with a fair rate, but I do not want to have to fly back from another country to collect late payments, foreclose, make repairs or redo legal paperwork. Therefore, I am apprehensive about renting or offering a mortgage to anyone with less-than-perfect credit. Any suggestions you could offer would be appreciated. --Bob

DEAR BOB: There are a number of ways that you can market your house with what I call "creative financing."

First -- a land sales contract. Here, you enter into an agreement with your buyer that he or she will start making monthly payments. Your attorney will hold the deed to the property in escrow. When the buyer is able to obtain sufficient funds to pay the entire contract price, the deed will be recorded in the buyer's name. If the buyer does not make the payments, the agreement states that he or she will immediately move out, and you still own the house and keep the moneys that have been paid thus far.

Second -- a wraparound mortgage. You sell the house and take back a mortgage (deed of trust). Since you already have a mortgage that has not been paid in full, this would be a second trust.

Example: You sell the property for $470,000; the buyer pays you $20,000; and this second trust is for $450,000. Let's assume your current mortgage carries an interest rate of 5.5 percent, and the new mortgage is at 6.5 percent. You receive payments based on the higher mortgage rate, but pay off your lender at the existing rate. In my example, you will make 1 percent on the money you owe your bank, and 6.5 percent on the difference.

Third -- a seller take-back. If you -- or your buyer -- can come up with the money to pay off your outstanding mortgage, then you can take back a first deed of trust at an interest rate to be negotiated. You can start off with a low rate for a couple of years, and have it increase periodically.

You do not have to worry about flying back to handle these issues. You can appoint a bank or an attorney to handle all of these issues, including collecting the monthly mortgage payments or assessing any late fees, and you can enjoy your retirement wherever you are.

DEAR BENNY: I am on the board of directors of a 112-townhome development. A new development is being built right next to ours, and the developer has requested permission to tap into our water line. I assume that since he asked we must have some rights. We have an attorney researching this. Our development is approximately 22 years old. What are the pros and cons for allowing this and should we charge a fee? Thanks for your advice. --J.D.

DEAR J.D.: It appears obvious to me that your association has certain rights; otherwise, the developer would not be asking for your permission.

The very first thing I would have your attorney do is contact the water authority in your county, which must be involved in any discussion and decision that is made.

It concerns me that your water line will be used by another development. Is this only a temporary request (which under certain conditions would not bother me as much) or is this a permanent situation (which in my opinion is not acceptable)?

Yes, if the association and the developer enter into a written agreement, the developer should pay for the use of your water. But I am not sure how this can be determined. I suspect that a submeter will have to be installed, which must be at the expense of the developer and subject to the approval of the local water authority.

Bottom line: It's not a good idea.

DEAR BENNY: My daughter and her boyfriend are thinking about buying a house, and she is putting a larger down payment. Is this a good idea? --Doug

DEAR DOUG: There are ways to protect your daughter should they end up separating before marriage. As you no doubt recognize, that is always a possibility.

There are two ways they can take title -- either as tenants in common or joint tenants with right of survivorship.

Under the latter arrangement, should one of the owners die, the other owner will automatically -- by what is known as "operation of law" -- become the owner of the entire property. Unfortunately, very few states (to my knowledge) allow a disproportionate interest with such a tenancy. Basically, both parties own the entire property equally. So there is no guarantee that your daughter's investment in the property will be protected.

In a tenants-in-common arrangement, ownership can be based on the amount of money that each party invests in the property. So, for example, if your daughter is putting up 75 percent of the down payment, title can be held as tenants in common, 75-25.

With that arrangement, should one of the parties die, his or her interest will be distributed in accordance with that person's last will and testament, and probate is required. So if your daughter has a larger interest, her share will go by way of her will.

Accordingly, at least until the couple gets married, I would recommend a tenant-in-common arrangement. Once they get married, if they so desire, they can change the title into tenants by the entirety, which is reserved for husband and wife.

I also suggest that they enter into a "partnership arrangement," which would spell out such matters as what happens if one party wants out of the deal, dies or cannot afford to assist with the house payments.

DEAR BENNY: My husband and his mother bought a commercial property as joint tenants seven years ago. His mother has developed a mental illness and has announced that she wants to file bankruptcy. What are his legal options? His mother's business is located in the building, which she is going to include in bankruptcy. She has quit making mortgage payments but will not agree to sell. --Leigh

DEAR LEIGH: This is obviously a difficult problem for you and your husband, especially since his mother is involved. I am not a bankruptcy attorney and suggest that you immediately consult an attorney with that expertise.

Did your mother-in-law ever give anyone her power of attorney? That should be investigated. If there is such a document, the holder of that power may be able to take appropriate action and resolve the situation.

If there is no such power, you may want to consider going to your local court to have a conservator and guardian appointed to act on her behalf. Your mother-in-law will have to be in court, if she is able to do so, and the judge will have to find that she is incapacitated -- meaning that she does not have the capacity to make financial or personal decision on her own. Again, your attorney should be able to assist you.

Depending on what conditions the judge puts in the court order, a conservator will have full authority to investigate the matter and take all appropriate action. However, the conservator must act in the best interests of your mother -- and not your husband.

DEAR BENNY: We want to accept a contract on our property. The buyers disclosed on their financial statement that they have $10,000 in a checking account. They wrote the earnest money check for $20,000 from that account. All other items on the contract are acceptable. Do we have a contract at this point? --Greg

DEAR GREG: In order to have a binding, legal contract, there must be (1) an offer, (2) acceptance and (3) consideration. Money -- the earnest money deposit -- is the consideration.

In a follow-up e-mail, you told me that you do not want to sell the house now. So if you have not signed the document, there is no contract. You may have a problem with your real estate agent who may claim that you owe a commission based on your listing agreement, but that's a different issue.

If you have already signed, there is a contract. You should demand that the real estate agent holding the check deposit it immediately. Agents generally have the legal obligation to deposit those checks within a certain period of time -- usually five to seven days from receipt.

If the check is good, you have a valid, binding contract and it will be difficult to get out from under it. If the check is not good, there was no "consideration" and thus no binding sales contract.

I don't know why they wrote a check for $20,000 when they disclosed that they have only $10,000 in their checking account. It could be that they deducted the deposit check and then disclosed the difference on their financial statement.

IRS to step up enforcement of Starker exchanges

Survey finds property owners abusing tax rules

By Benny L. Kass
Inman News

If you are considering a 1031 exchange (also known as a "Starker exchange"), you better make sure that you do it right. The Internal Revenue Service plans to increase its audits and its enforcement of these exchanges by the summer of 2008.

Usually, when a taxpayer sells a business or investment property, the taxpayer must pay a tax on any profit that is made. If the property was owned for more than one year, it will normally be considered a long-term capital gain and the tax will be based on your income. Currently, the highest tax rate is 15 percent.

However, if the taxpayer engages in an exchange, and strictly follows the complex rules, this gain can be postponed. For example, if you purchased your investment property for $100,000 and sold it for $200,000, you would in most cases have to pay the IRS $15,000 in addition to any state or local tax. However, if this property was sold in connection with a Starker exchange and you obtained another investment property worth $300,000, you would not have to pay any capital gains tax. Instead, the basis of the old property would be transferred to the new one; you would have to pay the tax only when you ultimately sold the replacement property and did not engage in yet another 1031 exchange.

But you must understand that a 1031 is not a "tax-free" process; it only defers the time when you have to pay the capital gains tax.

In a report issued last month, the Treasury Inspector General for Tax Administration (TIGTA) advised the IRS that "there appears to be little IRS oversight of the capital gains (or losses) deferred through like-kind exchanges."

When a taxpayer engages in a 1031 exchange, he or she must file Form 8824 with the IRS for the year in which the exchange took place. The Inspector General reported that more than 338,500 forms were filed in 2004 (the year of the TIGTA's study). This amounted to deferred gains or losses of more than $73.6 billion. According to the report, "while this represents a doubling of the number of like-kind exchanges reported in 1998, the total dollars amounts deferred more than tripled."

Like-kind 1031 exchanges serve a valuable function. According to the TIGTA report:

Taxpayers who take advantage of like-kind exchanges increase their purchasing power, as well as their financing and leverage capabilities, because payment of federal tax on the gains is deferred ... with additional equity to reinvest, taxpayers can execute exchange after exchange to create a pyramiding effect. The tax liability may be forgiven upon the death of the investor because the heirs may qualify for a stepped-up basis on the inherited property.

But because of the lack of enforcement by the IRS, taxpayers have been taking advantage of these favorable tax rules. For example, the Government Accountability Office (GAO) conducted a similar survey and found that taxpayers often made misrepresentations of the assets that were being exchanged. In order to have a successful 1031 exchange, real property must be exchanged for like-kind property. While this is a very broad category -- you can exchange a single-family investment property for raw land, an office building for a shopping center, or a condominium unit for a cooperative apartment -- the exchange will not be accepted if you want to exchange your principal residence for some other kind of property. Nor can you exchange a business for real property: it is not "like-kind."

However, the Inspector General discovered that the IRS generally will not impose any penalties if a taxpayer does not file Form 8824.

The report also highlighted other abuses, such as related party exchanges, incorrect basis figures, and partial, step and bartering exchanges. These are highly complex technical issues that will not be discussed or explained in this column.

Based on its findings, the Inspector General made three specific recommendations, all of which have been accepted by the IRS.

1. The IRS should study tax-reporting and compliance issues involved with like-kind exchanges The IRS agreed to conduct research studies and complete its work by Aug. 15, 2008. Based on the outcome of this research, it appears likely that exchanges that take place this year will be given greater scrutiny.

2. The IRS should provide better information and guidance to taxpayers on how to conduct a proper 1031 exchange. The IRS has agreed that by Jan. 15, 2008, it will provide more information on a number of its publications and forms so as to assist taxpayers in understanding how the exchange process works. Specifically, Publication 17 (entitled Your Federal Income Tax) will be updated to specifically remind taxpayers that they must file Form 8824 with their income tax return if they have been involved in a 1031 exchange during the previous year.

3. The IRS must provide clear guidance to taxpayers regarding the rules and regulations governing like-kind exchanges with respect to second and vacation homes that were not used exclusively by owners.

This is an area that is extremely complex. According to the Inspector General, "the absence of clarification on this issue leaves unrebutted the sales pitch of like-kind exchange promoters who may encourage taxpayers to improperly claim deferral of capital gains tax by selling nonqualified second and vacation homes through 'tax-free' exchanges."

Here, too, the IRS agreed. By March 15, 2008, the IRS will provide additional information to consumers and to tax practitioners about the filing requirements for Form 8824. More importantly, the IRS will increase its "consumer warnings" so as to caution taxpayers to be "wary of individuals promoting improper use of like-kind exchanges."

The IRS will not discourage the use of the Starker exchange. This process is specifically authorized in Section 1031 of the Internal Revenue Code. But investors must be on their guard against deceptive and fraudulent promotional schemes. Keep in mind that a Starker exchange is not a "tax-free" exchange; it is a "tax-deferral." If done properly, it will allow the taxpayer to use the moneys that otherwise would go to Uncle Sam for additional investments.

If you plan to get involved in a 1031 exchange, you should make sure your own lawyer and accountant review the process at every step.

In fact, depending on the amount of your gain, it may be best to just pay the capital gains tax and not become a landlord on the new replacement property. Your financial advisors will be able to assess and assist you in making this important decision.

(Note: The entire report can be located on the Web at www.tigta.gov; click on 2007 audit reports. It is report 2007-301-72).

10 ways to sell your home faster

A few basic elements can make the difference between a quick home sale and a frustrating ordeal. The experts offer their best tips.

By Liz Pulliam Weston

No matter how long your home lingers unsold, you can comfort yourself that at least you're not Mark Twain.

The celebrated author put his Hartford, Conn., home on the market for $60,000 in 1901, according to biographer Fred Kaplan. Despite repeated markdowns, the elaborate house failed to attract a buyer until the price was finally slashed to $25,000 two years later.

What was a once a much-loved home -- and one in which Twain estimated he'd invested more than $100,000 -- became a painful albatross.

"I would rather go to hell," Twain wrote the friend who was helping him sell the place, "than own it 50 days longer."

If you want to avoid Twain's agony, you'd be smart to do some work up front to make sure your house sells fast. That's particularly important these days as some of the hottest real-estate markets show signs of cooling and homes start to linger on the market longer than their sellers expected.

10 tips from the experts
Here is some of what experts advise to speed up your sale:

Finish the "honey do" list. Just about every homeowner has a string of little repairs that never quite get done. Now's the time. Fix the screens, oil that squeak, patch the cracks, paint the trim. Stuff that you've long since stopped noticing could be shouting "Deferred maintenance!" to every potential buyer.

The cost: A few bucks if you're handy, a couple of hundred or so if you hire someone who is.

Get inspected. A pre-sale inspection can help in two ways, says real-estate columnist Tom Kelly. Professional inspections can identify problems that could thwart a sale in time to fix them. And if there are no major problems, he said, an inspection can publicize that fact to skittish buyers.

"Having an inspection (report) right on the counter during the open house… shows the buyers that the seller's got nothing to hide," said Kelly, author of several real-estate books, including "Cashing in on a Second Home in Mexico."

The cost: Around $400.

Pack up the clutter. "Clutter eats equity," said real-estate broker Barb Schwarz, CEO of StagedHomes.com and a pioneer of the concept of professionally preparing houses for sale.

Too much stuff makes rooms look smaller and focuses buyers' attention on your possessions rather than the home you're trying to sell. That's why many professional stagers recommend removing as much as a third of your things to better show off rooms and closets.

"Since you're going to have to pack it up anyway, do it now," advised Schwarz, who said she has staged more than 5,000 homes. Buyers "can't imagine themselves living there if they can't see the space."

The cost: $150 to $300 a month for three months' storage.

Depersonalize and neutralize. The first items that should go in those packing boxes: family photos, collections and just about anything else that says "you." Streamline your artwork and consider toning down bold decorating statements, said Ilyce Glink, author of "50 Simple Steps You Can Take to Sell Your Home Faster and for More Money in Any Market." That means neutral shades if you need to repaint walls or replace carpets.

"Buyers have a hard enough time envisioning how their stuff will look on your walls," Glink said. "By neutralizing your decor, you can help give them the blank canvas they need to imagine your house as theirs."

The cost: $10 and up for paint; $500 and up for new carpet.

Clean like a fiend. "I mean Q-Tip clean," said Schwarz, who recommends taking a cotton swab to faucets and fixtures, scouring fingerprints from all the switch plates, shining windows until they're spotless and vacuuming up every last dog hair from the baseboards. "You should be able to eat off the kitchen floor, the bathroom floor."

You'll need to banish suspect smells as well; you don't want your house to become known in real-estate circles as "the cat pee place." If your pets have had one too many accidents, you may need to replace the affected carpet and padding and have the underlying floor sealed. If you're not sure how your place smells, get your least tactful friend to take a few whiffs and tell you the honest truth.

The cost: $10 or so in home cleaning products, if you do it yourself; $75 and up if you hire help.

Stage the rooms. Stand in the doorway to find each room's focal point, and use furniture placement to highlight that. The back of your sofa shouldn't block the view of the fireplace, for example, and the dining room table shouldn't be sharing space with a stair climber.

You should remove any extraneous pieces of furniture, but you may be able to "repurpose" them in another room. A wingback chair that's crowding the family room might help create a nice reading nook in the master bedroom, Schwarz suggested. The cost: Nothing, if you do it yourself; $1,500 and up if you hire a professional stager.

Tend to the floors. Keeping them spotless won't help if they're dated, worn or impossibly stained. You shouldn't spend a fortune installing hardwood or tile, though, since you're unlikely to recoup the cost. Look for compromises that can improve the home's appearance without busting your wallet. If the damage to a tile floor is limited, for instance, replacing a few tiles and regrouting might do the trick, according to home-improvement expert Joseph Celli, author of "First Aid for Home Sellers." (Available through his Web site.) If it's extensive, he recommends replacing the floor with high-quality vinyl as a more cost-effective option.

Carpets should be steam-cleaned to see if they're salvageable, Celli said. If not, you may be able to reduce the costs of replacement by offering to do some of the work, such as removing the old carpet and moving furniture.

And banish scatter rugs, Schwarz advised. Little rugs add to the visual clutter and can be dangerous besides.

The cost: Anywhere from a few bucks to a few hundred bucks.

Kick up the curb appeal. By now, you probably realize the garden gnomes are a no-no. But you may not realize how many sales you're losing before potential buyers even get to the front door.

"Most people will start their search for a home on the Internet. If your house's Internet photo doesn't 'wow!' them, they might never call for a showing," Glink said. "That's why your front landscaping needs to be in perfect condition."

Given the pressure to make a good first impression, you'll need to do more than trim back the hedges and plant a few pansies.

"Hire a professional landscaper to clean up the leaves, plant some fall flowers, trim the bushes and trees, and really manicure your lawn," Glink suggested. "If your front walkway is cracked, now might be the time to replace it."

The cost: $300 to $500 for the landscaping, more if you need to fix walkways or driveways.

If you're going to try to sell your home yourself, make sure you're up for the job. Hawking a home, especially in a slowing market, can be hard work.

The cost: 3% to 6% of the sale price of your home.

Set the right price. In frenzied markets, sellers who put outrageous price tags on their homes sometimes are rewarded. As markets cool, however, a too-high asking price can lead to a home being shunned by agents and buyers. A seller may think she's just testing the market, assuming buyers will at least make an offer, but buyers may assume she's unreasonable and move on.

Your goal should be a fair price -- something that's reasonable given the price of other homes in your area.

"Buyers who are actively searching for a fairly-priced home," Glink said, "will pounce on what they perceive is fair value."

How to prevent foreclosure

Contacting lender before missing payments offers advantage


By Ilyce R. Glink
Inman News
I received a call to my radio show just before the end of the year from a woman who had just received a letter from the bank that it was starting foreclosure proceedings.

Let's just say that it wasn't the year-end gift she was hoping for.

She told me how she had lost her job and used up all her savings to keep making her mortgage, home equity line of credit, and credit-card payments each month. After awhile, it was too much to manage, even after she got a new job.

What she wanted to know was where she could go to get help that would stop the foreclosure proceedings.

By the time you get a court date, it's a little late to unwind the clock. Instead, if you want to stop the bank from foreclosing on your house, the time to get help is before you've missed a single payment.

Most people know how to account for every dollar that comes in. It may not be your favorite task each month, but if money is tight and you're trying to make ends meet, you know when the budget is about to snap.

When you have a list of debts and bills, you should sort them from most important to least important. While all of the bills should be paid, the one that goes at the top of the list is the one that will cause your family the most damage if it isn't paid on time.

If I were organizing a list, it would read: mortgage payment; home equity loan/line of credit payment; utility bills; car payment(s); credit-card debt(s); and other bills.

Once you know that you won't have enough cash to go around, it's tempting to skip the biggest bill, which is typically your mortgage payment. But in some states, foreclosure is fast-tracked, which means you could find yourself receiving a foreclosure notice from your lender in as little as 60 days.

So let's back up: Once you know there isn't enough money to go around, and you know you'll be missing a payment, you need to call your lender. If you've already missed a payment, and your lender has called you, you need to pick up the phone and return the call. Talking to your lender is the best way to stop foreclosure.

Many borrowers have complained that when they call their mortgage company, no one picks up the phone. Or, they get transferred from department to department.

The truth is, if you don't talk to the lender, and it doesn't get recorded in your file, it doesn't matter how often you tried to call. When it comes to foreclosure, "trying" doesn't count.

If you're having trouble reaching your lender, call a HUD-certified housing counselor, who may be able to reach out to your lender on your behalf. The toll-free number is (800) 569-4287, or go online to www.HUD.gov/foreclosure/index.cfm.

Once you miss a payment, your lender will start sending you letters. If you want to avoid foreclosure, open the letters. These are supposed to contain information on how you can save your home.

In order to help you save your home, lenders can make changes to the terms of your loan agreement. The best time to do this is either just before or just after you miss your first payment.

Lenders can: (1) reinstate your loan (you'll catch up with everything you owe by a certain date; (2) offer forbearance (give you a few months off from making payments, while developing a plan to get you current on your loan down the line; (3) set up a repayment plan (where you agree to pay a little each month for the next six months or a year until you're caught up); or (4) modify your loan (this will change the terms so that the payments are more affordable).

All of the talk you're hearing about the government-sponsored solution to the mortgage crisis deals with loan modifications. The federal government is pushing investors who bought your loan to agree to modify the terms for the next few years. When a lender agrees to modify your loan, it could mean that the missed payments will be added to the loan amount, or that the interest rate will be changed from a variable rate to a fixed, or perhaps it will be lowered to a different interest rate. A final loan modification option is to adjust the amortization schedule, so that you have a longer loan term, but your payments each month are smaller.

For some borrowers, there's one other way to save your home: It's called a partial claim. A partial claim may be available only on certain loans and in limited circumstances. If you and your loan are eligible, you can set up an additional loan that will help you make up your missing payments.

This limited program is available to people who are several months behind in their home loan payments, and it allows them to become current on the loan. But the borrowers' circumstances must be such that they have overcome the reasons why they couldn't make their payments and can make the future payments on their loan. For more information, you can contact your current lender or get more information from HUD at http://www.hud.gov/offices/hsg/sfh/nsc/faqpc.cfm.

But don't delay in contacting your lender. The longer you wait, the tougher it will be to stop the lender from foreclosing on your property.