BrokerIPTV: Today we are talking with Bill Henry; he is a partner with Robinson & Henry Law firm and Law associates, welcome to the show.
Bill Henry: Thanks, nice to meet you.
BrokerIPTV: Hey legal questions, when it comes to real estate obviously quite a few I would like to consult with my attorneys on a pretty regular basis, but one thing that people wouldn't think about is, well what if I didn't have a down payment for a home.
Bill Henry: Sure.
BrokerIPTV: Will I call an attorney? Probably not, but you say yes.
Bill Henry: Well, you know I would say you need to speak with your tax adviser, because right now a lot of banks obviously, credit is really tight and we are not getting the loans that we used to get back in 2006. So, there is a bunch of different tax advantages that you can take advantage of in your 401(k) and your IRA, with the 401(k) you are allowed to take a loan out in many circumstances, and you can use that for your down payment, now to loans you are paying yourself back and you are going to pay interest on that, but you can then avoid PMI in mortgage insurance, on the IRA front if you are a first time home buyer, there is a lot of opportunity for you to be able to take out a $10,000 withdraw, and not pay the penalty and then use that for your down payment. Now obviously it's pretty complex and you definitely want to speak with the tax adviser to make sure that you fit within the exceptions and then you can make that without hitting that probably.
BrokerIPTV: And this is an area that you guys specialize in.
Bill Henry: Yeah we do a lot of tax work, we do for debtor defense and tax defense within also tax planning, and of course there is lot more tax planning going on a few years ago and now it's a lot more defense, but at the same time it's we are starting to move back in that direction.
BrokerIPTV: All right. We are in the final days of the tax credit, whether or, not it will be extended is a whole another show and so forth, but obviously lot of focus, lot of attention on first time home buyers what is the update?
Bill Henry: Well, you know realtors obviously know about the $8000 credit, and they know that it's expiring November 30th, so there is not a lot of time if you can get your contractor to get it closed by November 30th, and the national association realtors they are pushing for a lot of other organizations who want that extended. Well, right now unfortunately there was recently a Shaun Donovan who is the secretary for the department of housing and urban development who said to a hearing in the senate, that you know he didn't know if the benefits of the program outweighed the cost, and that the administration was going to look at everything and then make that determination.
Now, on the other hand we have also heard of talk that well, may be we should open up that credit and extend it and open it not just to first time home buyers, but to any home buyer. So, that would obviously be great, I know this morning I read an article where in September the sales of preexisting homes were more than they have been in the last two years, and that was really driven by those first time home buyers, so and there is a lot of evidence out there that the program is helping, so hopefully it will pass and who knows what will happen with congress.
BrokerIPTV: Let's quickly touch on short sales and foreclosures, because there is some tax ramifications with both types of sales.
Bill Henry: Sure. Yeah, with short sales and foreclosures, what happens whenever you take out a loan with a bank is you are getting all this money, but there is not tax problem, because you are going to have to pay it all back, so you are not getting that income. However, if the bank is going to write off a portion of that on the short sale or, they are going to write it off after a foreclosure that can, at least initially look like it's going to be income, because you don't have to pay it back. There is a law that's been put in place till 2012 for primary, if it's on your primary home they are discharging it that you are not going to be charged for that income, but if you have got an investment property that doesn't apply.
Now there is two different ways you can look at avoiding that, one would be bankruptcy, so if you file bankruptcy you are not going to charged with that discharge of [Inaudible][00:03:20] income or cancellation of [Inaudible][00:03:21] income, the other one is to prove you are insolvent, and that is a complex determination, generally really general, it saying that my debts exceed my assets, but again you need a tax professional to really walk you through the steps and help you there.
BrokerIPTV: It's you know like foreclosures and short sales are complicated enough thanks, I appreciate good to meet with you.
Bill Henry: Nice meeting you.