Market value of home

When buying a property, it is important to learn about the land and its history. While background checks have been widely used in business, property background check offers a way for home buyers to obtain information about a specific property address, including the families who rented or owned the land, accidents occurred and many more. A property background check can help both the owners and investors who wish to find something interesting about the property.

The good thing about obtaining property background check is you don’t need to leave your home. The process of obtaining property background checks used to involved going down to the office of the country assessors and requesting access to the information. Unfortunately, most documents available in these offices are either illegible or missing. In addition, you are not allowed to get duplicates of the documents y you need. Today, this process has become easy because of electronic property background checks you can acquire within minutes.

A typical property background check would include information such as, names and contact numbers of the current owners; tax records from the latest tax rolls; deed transfers; satellite photos of the property; year the property was built; total rooms, stories and living space; all legal information; mortgage information and information on the lot including land characteristics, zoning classification, area, width and depth. Other useful information included in a property background check include assessed value, sale price, sales history, information on various home features, such as fireplace, heating, cooling, pool and parking as well as neighbor and neighborhood information.

When you have information about a certain property, you can learn about your existing home that you might want to sell or a new home you’re planning to buy. All property documents are public record, so anyone can obtain a property background check for any land, regardless of whether he or she holds ownership of the land.

By: Ann D. Gill

The Fair Market Value of a promissory note is dependent on three key elements-enforceability, collectability and marketability.

Attorney Training

Most attorneys are trained to draft promissory note loan documents that are enforceable in a court of law. But, that is only providing one-third of the necessary valuation features that the client actually needs. The additional valuation features required are that the note be collectable and marketable. Most attorneys have little actual experience in structuring the notes for collectability and marketability.

Generally, promissory note valuation engagements require a determination of the Fair Market Value of the note. Fair Market Value is defined as:

Definition of Value

“The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.”

No Market Place

The first challenge that the valuation expert must deal with is that there is no recognized market place when private promissory notes are bought and sold. There are stock markets, bond markets, and commodity markets, but there is no private note market. These notes change hands informally, based on one-on-one negotiations, between the parties. In order to even obtain a tentative offer or quote from a potential buyer, the seller must first locate the correct person or entity that understands the specifics of the note being offered and has the capital to make a bona fide offer.

Typically, note buyers tend to be specialists, because the individual notes are each specially tailored to a specific business transaction-each note is unique. As an example there are farm and ranch note buyers, single family home note buyers, business sale note buyers, and commercial and industrial note buyers. Some note buyers only deal with individual notes, some only with packages of notes, some only with small denomination notes, and some with only large denomination notes. Some only deal in one state, some only in one region, and some deal nationally.

Analysis of Collateral Security

The second challenge that the valuation expert must deal with is the analysis and evaluation the collateral security and the documentation supporting the promissory note. There are numerous documents and information needed: in order to value a promissory note the expert doing the valuation must have as much information as possible relating to the specific transaction that originated the note. Additionally, the valuation expert needs all the documentation available that supports the note’s value and relates to its terms, collectability, and enforceability.

Additional Components to Analyze

Being able to analyze the following items and documents are vital to determining the Fair Market Value of a promissory note.

Collateral Security Information:
Appraisal Report
Title Insurance Report

Borrower’s Credit and Financial Information:
Credit Score
Work History
Income Statement
Balance Sheet

PROMISSORY NOTE INFORMATION
Copy of the Note
Copy of the Deed of Trust/Mortgage
Copy of any Related Documents–Assignment of Rents, etc.
Copy of the Payment History– Payments Past Due
Valuation Date-Date of valuation has a huge impact on the conclusion

Other Important Documents
Copies of other important documents such as probate documents, executor and Personal Representative documents, divorce documents, partnership documents, disillusionment documents, Bankruptcy documents, etc.

The Most Important Elements in Determining the Value of a Note
Loan to value ration

Down payment amount and the property used as the down payment

Vale of the collateral security

Position or rank of the encumbrance—1st position, 2nd position

Size of the note

Mortgage’s Title Insurance Policy

Credit history and financial history of the borrower

Payment history on the note

Interest rate of the note

Term/length of the note

Late payment penalty clause in the note

Due on Transfer clause

Default interest rate

Default collection costs provision

Holder In Due Course status

Why Are Promissory Notes Appraised?

There are numerous business, taxation, and legal reasons why a promissory note valuation is required. List below are examples:

Bankruptcy

Mortgage Fraud

Marital Dissolution (Divorce)

Probate & Wills

Trusts

Gifts

IRS Estate Tax Filing 706, 709, 8283

Estate Planning

Fractional Valuations

Estate Settlement Valuation for Divorce, Partnership, and IRS Taxation issues etc.

Accounting Matters – Balance Sheet Promissory Note Valuations

Conclusion

Determining the fair market value of Promissory Note is as much an art as a science.

Each note has its own unique terminology, collateralization, and history. The investors that comprise the market for these individual notes are a small, fragmented, and specialized group. The various techniques that can use in determining the value of a note are like mechanic’s tools. The one to use depends on the situation and your goal. Just as no mechanic’s tool is appropriate for every job, neither is any one valuation technique appropriate for every situation. Each valuation technique has advantages and disadvantages, and most are only useful in a narrow range of circumstances.

It is probably obvious now that the valuation of a promissory note is influenced by many, many facts, documents, and assumptions. Further, it should be clear that the “value” of any note is tied to the valuation definition being used. As an example, a valuation that would satisfy someone receiving a note as a gift might not satisfy the IRS for taxation purposes; the valuation that would satisfy a father loaning his son down payment money probably would not satisfy a third-party professional note investor. Depending upon your specific legal and practical needs, select a valuation expert that has the training and the experience to delivery a defendable valuation report.

By: Lawrence Tepper

With home prices down significantly in New Jersey from levels during the peak of the artificially inflated real estate boom in 2006, more homeowners may be entitled to a reduction in their property taxes in this prolonged economic downturn. Homeowners who bought during the height of the real estate boom or who live in towns that conducted recent revaluations, may be paying more property taxes than their homes are worth. Figuring out if your home assessment is fair, and if you are a good candidate for a NJ property tax appeal in 2010 and beyond will require some grunt work, and you should start the process knowing most appeals fail. This sobering fact is not meant to discourage, but to give a realistic picture of what a taxpayer faces going into this process. At a time when cash-poor consumers are worrying about the economy and just holding onto their jobs, that leg work could go a long way, either resulting in a successful NJ property tax appeal, or at least in saving you time, effort, and misery if you don’t qualify.

Already, the average property owner looking to do a NJ property tax appeal pays about $6,000 a year in property taxes, about twice the national average. And with New Jersey already facing projected budget shortfalls in the $1 to $2 billion dollar range and already falling revenues, the chance of property owners getting any kind of meaningful property tax reform legislation is slim.

One of the few ways to reduce your property taxes is to catch any mistakes and correct any errors in your annual tax assessment. The implosion of the housing market has caused housing prices to fall over the past three years. Many New Jersey homeowners may now have an opportunity to lower their property tax bills by filing a tax appeal to challenge their tax assessment.

If you think you home assessment is unfair or incorrect, you have until April 1 to file your appeal. To find out if you’re a good candidate for a NJ property tax appeal, you should first have some understanding of how property is assessed in New Jersey and how the appeal process works.

Every year, in either late January or early February, tax assessors are required to mail to each property owner in New Jersey, an annual tax assessment notice. It’s typically printed on a small green card and it simply states your home’s assessed value for both the land and any improvements. The number on the card is calculated as of October 1 of the pre-tax year. So, for example, the tax assessment date for 2009 is October 1, 2008. That number, however, is virtually meaningless unless you know what your town’s average tax ratio currently is.

Every year, the state Division of Taxation with the help of assessors computes these average ratios by analyzing sales of comparable properties over the prior 24 months. The list of these ratios is published every year, usually right after Christmas, on the division’s website.

The Math Involved in a NJ Property Tax Appeal

To determine whether your property is over or under assessed, there is some math involved.

Have your calculator handy for this part. Every township also gives itself a margin of error which is equal to plus and minus 15 percent of the average ratio. This huge 30 percent sway is the first of many reasons that many appeals are denied. Are houses mis-assessed? Yes. Are they incorrectly assessed by this large a swing? Not very often.

For example, the average tax ratio for Town XYZ in 2010 is 88.54 percent. On the low end, the town’s ratio is 75.26 percent and on the high end its 101.82 percent. All these ratios are important to figuring out if your home is assessed fairly. If a home in Town XYZ is assessed at $500,000, the property owner must divide his or her home’s assessment by the average ratio — 88.54 percent — to determine the fair market value of their property, in reality, what the town thinks the property is really worth. In this example, the true value comes out to $564,717.

But don’t forget about that margin of error! Property owners should then repeat this same exercise, using the town’s lower ratio and the highest ratio, so they can see the ranges they are dealing with. Using the previous example, dividing their home’s assessed value of $500,000 by 75.26 percent gives you $664,364 and dividing it by 101.82 gives you around $491,063.

If the comparable home sales on your block have been selling for less than $491,063 and your assessed value is $500,000, Congratulations! You are a good candidate for a tax appeal. If you win, the township is required to reduce your assessment. Conversely, if all the homes on your block are selling for more than $664,364, you might want to lay low and start praying that everyone else lays low as well. Your home is probably under-assessed. And if you fall in between those ranges, abandon the idea of an appeal. You’ll not only lose your NJ property tax appeal, you could even open the boards eyes to the prospect of jacking everybody else’s assessment up in order to increase revenues. The only plus side to this scenario is that this is how school districts are funded, so if you have kids, they will at least see some of your lost money down the road in better textbooks.

Your Supporting Documentation for a Successful NJ Property Tax Appeal

Not to beat a dead horse here, but keep in mind that most taxpayers that file an appeal will lose their appeal. We already talked about one reason… the margin of error. The second reason is that the burden of proof is on the taxpayer, and most taxpayers fail to present the proper evidence to support their case, and municipalities don’t grant appeals out of the goodness of their heart. They have interests they are obligated to protect just like you.

The best evidence a taxpayer can supply in a NJ property tax appeal is recent comparable sales of between three and five other properties of a similar type in your neighborhood. This brings us to reason number three that an NJ property tax appeal is denied: the shortage of recent sales data.

Why is there a shortage of sales data, you ask, when you see nothing but for sale signs around your neighborhood? It all boils down to that notice stuck to the front door. Welcome to reason number four that a NJ property tax appeal is denied: estate sales, foreclosures, short sales, sheriff’s sales, etc. are not considered “arm’s length transactions,” in New Jersey and therefore you are not allowed to present those types of transactions as comparable sales data during your appeal. These transactions are considered transactions “under duress” and are generally not considered valid comparable sales.

Even with all these hurdles, there will be situations occurring where the taxpayer, after compiling the available evidence and doing the proper due diligence, will have a better than average chance of successfully winning a NJ property tax appeal. The good news is that you can get a pretty good idea of your chances of success BEFORE you are standing in front of the assessment board. Good luck.

By: Cynthia Roland

Q: I am a California resident, I want my spouse to own 100% of our home when I die, so we’ve decided to hold it in joint tenancy, as husband and wife. Is that the best way to hold title?

A: No it’s not, unless you feel the government deserves more than its entitled to. While Joint Tenancy does have one positive in that it avoids probate court administration after a death to clear title. However, it gives an unnecessary windfall to the IRS because the surviving joint tenant/spouse does not get the “step-up” in his or her tax cost basis to the home. A relatively new way of holding title in California, called Community Property with a right of survivorship * both avoids probate and gives the surviving spouse the full “step-up” in tax basis.

The “step-up” in tax basis means that upon death of the first spouse, the surviving spouse’s two ? interests ( his/her original ? interest plus the ? interest they inherit) have their original cost basis increased to the fair market value of the property as of the date of death of the initial decedent spouse or the alternative value date selection for estate tax purposes.

The following examples illustrate why holding title to your home as community property with a right of survivorship can save California residents a lot in taxes over holding title as joint tenants.

Example 1 (joint tenancy): Jane and John Smith are California residents who hold their home as joint tenants. They bought it ten years ago for $400,000. John was the first to die. At the time the fair market value of the house was $1,000,000. Jane inherits John’s ? interest in the house by right of survivorship as the surviving joint tenant. This means that the transfer avoids the lengthy and expensive process of probate.

Jane’s ? interest’s tax basis is $200,000 (1/2 of $400,000). Jane inherits John’s ? interest with a ‘stepped up” basis of $500,000 (1/2 of $1,000,000). Jane’s total tax basis on the home is now $700,000 ($500,000 plus $ 200,000).

Assume Jane has financial problems and is forced to sell the house. She is able to sell the home for the $1,000,000 fair market value. She will pay capital gains taxes on $300,000 (or $1,000,000 FMV minus her $700,000 tax basis).

Now lets look at what happens if the California residents’ house was instead held in Community Property with a right of Survivorship.

Example 2 (community property w/ right of survivorship): Assume the above facts except that Jane and John Smith now hold title to the home as Community property with a right of survivorship.

Again assume John is the first to die. Jane inherits John’s ? interest in the home by the right of survivorship as the surviving spouse. This means again that the transfer avoids the lengthy and expensive process of probate. However, Jane now gets a “stepped-up” basis on both her two ? interests (her original 1/2 interest and John’s ? interest she inherited). Jane’s new “stepped-up” basis is now $1,000,000 ($500,000 for her original ? interest and $500,000 for John’s original ? interest bequeathed to her).**

So now if Jane has financial problems and is forced to sell the home for the $1,000,000 fair market value she will incur Zero federal capital gains taxes because there will be no gain to tax ($1,000,000 FMV minus her $1,000,000 tax basis = 0). **

Clearly holding title as community property with a right of survivorship is more likely a better alternative for John and Jane than Joint Tenancy. Community Property with a right of survivorship accomplishes two goals: one it minimizes capital gains taxes if the surviving spouse should ever need to sell, and two it avoids probate’s lengthy process and rather large fees.

This is just an example and there can be other reasons why you might want to hold title differently (e.g. in a living revocable trust, or separate property of one spouse). The contents of this article cannot be deemed legal advice, nor does it give rise to an attorney-client relationship. The contents of this article are not intended as attorney advertising or as solicitation for legal services.

Always consult a qualified estate planning attorney licensed in your state before making any changes to the way you hold title to your assets.

* Cal. Civ. Code ? 682.1

** [Internal Revenue Code ? 1014(b)(6)].

*** Note that Jane will also not incur estate taxes because property that one spouse wills or transfers to the other is not subject to estate taxes under an estate tax deduction called the “marital deduction.” [ Internal Revenue Code ? 2056(a)].

By: Christopher Twining

The recent Oregon Court of Appeals case, Marker v. Marker, is a fine example of a case that could have had a different result with proper planning. The facts are simple and common: A father and son organized a trucking company in 1982. Father owned 52 percent of the shares and Son owned 48 percent, meaning that Father essentially controlled the company. Both are employees. Over time, disputes arose between Father and Son and in 2006 Father fired Son. Son continued as a shareholder but Father stopped sharing any corporation information with Son. There is no indication that a buy-sell agreement between Father and Son existed.

Son sued Father alleging among other things that Father engaged in oppressive conduct. The trial court found that Father’s behavior was oppressive and as a remedy ordered Father to purchase Son’s shares at their “fair value” – a term not to be confused with “fair market value”.

The court enlisted the services of an appraiser to determine the shares “fair value”. The appraiser determined that the “fair market value” of Son’s 48 percent ownership interest was $78,000.00 after applying applicable discounts (minority ownership discounts and lack of marketability discounts). However, the appraiser determined that under Oregon law, the “fair value” standard did not allow for discounts making the “fair value” of the shares $134,000.00. The court ordered the company and Father to pay this amount within 20 days from the date of entry of the judgment.

The court of appeals did not dispute the valuation since ORS 60.952(a)(A) provided that the proper valuation formula for the court to use when it orders the sale of stock is the “fair value” formula without applying any discounts. In Marker and in the case of most small companies the difference between fair value and fair market value is great and a compelled sale of the stock at “fair value” could potentially cripple, if not destroy, a small business. Consequently, most companies would like to avoid these results if at all possible.

The use of a buy-sell agreement (also known as a restrictive stock agreement) is one way that shareholders can limit the application of ORS 60.952 and its potentially crippling results. ORS 60.952(3) provides that the remedies provided in ORS 60.952 can be limited by an agreement entered into by the shareholders. Consequently shareholders can agree to a valuation formula different from the “fair value” formula and can also limit the circumstances in which a court can force the sale of stock. It can also provide circumstances that require the sale of stock, but provide for the proper valuation of that stock.

A buy-sell agreement is an agreement between shareholders that controls a shareholder’s ability to voluntarily and involuntarily transfer shares of stock in the company and provides for circumstances that, if they occur, would compel the Company or shareholders to purchase another shareholders’ shares of stock. It can limit a shareholder’s ability to sell or gift shares and can compel the sale of shares when a shareholder dies, retires, gets divorced, files bankruptcy or has their employment terminated.

The agreement also provides a valuation formula which may be different depending on the event that occurs that compels the sale of stock. For example, the agreement can provide that upon a shareholder’s death, the deceased shareholder’s estate must sell any shares owned by the deceased shareholder to the company or the living shareholders. The value can be the fair market value of the shares at the time of death, their fair value, or their book value. The shareholders can determine whether discounts or premiums should be applied in determining value. Whether these discounts or premiums should be applied may depend on the circumstances. The shareholders may want a discount to apply upon a shareholder being fired but not when a shareholder dies or retires.

In the case of the Marker shareholders, they could have agreed that upon an employee’s termination, the company or remaining shareholders were required to purchase the terminated shareholder’s shares at the share’s fair market value. By forcing the employee to sell his shares to the company or remaining shareholder, the company ensures that a disgruntled and disinterested shareholder is not involved with the company. If they agreed that the proper valuation formula was the fair market value with applicable discounts, the company and father would have saved over $50,000.00 (not including attorney fees and costs incurred in the litigation).

An additional benefit of a properly drafted buy-sell agreement is that the agreement provides for an installment payment plan that allows the company and remaining shareholders to pay the ex-shareholder over time (such as a 10 percent down payment with the balance payable in monthly installments over the next 10 years). As a business owner, imagine having 20 days to produce $134,000.00 to pay your son.

In order to avoid the crippling results of Marker and ORS 60.952, companies with more than one shareholder need to have a buy-sell agreement in place. If you have an existing business and you do not have a buy-sell agreement, it’s not too late to enter into a buy-sell agreement. Such an agreement can be entered into by the shareholders at any time.

©11/04/2010 by Kevin J. Tillson. All rights reserved.

By: Kevin Tillson

There is a way for you to save thousands of dollars by challenging you property tax bills; the first step is to find out if you are being over taxed. As the people who deal with the taxes have many different ways of checking home values, some of them just look at previous sales of some homes. Most of these tax assessor’s start to give out tax notices as early as the first of July.

The tax rates are different by city but there is a common rate of 1.2 percent of your assessed value. Your annual taxes can be check online at your tax assessor’s website; you also have to provide information of three different comparable sales which took place in the year 2008 in order to have a good case. The various real estate appraisers will offer this particular service for you for a fee, the method which the assessor uses to value your home is done around all the houses in the area you live.

And because this particular manner valuing your home can lead to your home being over valued and which will have to get a reassessment. You have the right to file an appeal in order to have your property reassessed so to ease some of the high yearly property tax. In the state of California people are paying double the amount of property taxes that they should be paying you will have to make sure you do not end up like these people.

By: Colin Scott