Your Questions About Foreclosures | foreclosureorder.com

Your Questions About Foreclosures

Your Questions About Foreclosures

Lizzie asks…

I invested in LLC that built homes for sale. Bank foreclosed on property. I lost 100% Is this tax deductable?

I was approached by a friend in 2005 who was building / selling luxury real estate in Colorado. He had been doing this for several years, and needed investors to fund several new homes for sale. I, along with about 10 other investors gave him money. We put our money into a pot, structured as an LLC.

Basically, when the housing market tanked, he couldn’t sell the house. Ultimately, the property was foreclosed upon and 10 of the 11 investors were out 100% of their principal. 1 investor, the first principal, was able to pull out his initial investment.

My question is this – since this was an investment property, am I able to write this principal off for tax purposes? I assume I am (by assume I mean hope) but I haven’t been able to find a definite answer on the IRS website.

Would be greatful for any answers or ideas on where to look for answers.
Wow. I’ve got some great responses – thanks all. I just wanted to clarify one earlier question.

I was an investor in the LLC, not a partner. The way the contract was structured was that I, and others, loaned the LLC money and we were supposed to see a fixed return on investment. In my case 20%. I however, got no return, and no principal back. So, in essence, lost 100% of the investment.

Your Questions About Foreclosures

The Expert answers:

Regarding the LLC: You need to check and see how it was created. Chances are good that it was set up as a partnership. If that is the case then the LLC will have to do a partnership return which will give you, and all the other investors, a K-1 for your personal return. This will probably be a final partnership return so you can also claim the loss on a Schedule D showing a loss as a termination from a partnership. The date you invested will be the acquire date, the date it became worthless will be the sold date, the amount you invested, minus any return of capital you have received will be the basis and the sales price will be zero.

Hope this helps!

Virginia Cunning, Enrolled Agent, Master Tax Advisor
H & R Block

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more.

Your Questions About Foreclosures

Ruth asks…

How do you purchase foreclosed homes from banks before they go up for sale with an agent?

Your Questions About Foreclosures

The Expert answers:

You probably know which area you want to purchase in already. The best way to do this is to go to the source. Go into the banks in the neighborhood that you are interested in and ask for their foreclosure lists. The banks want these properties off their books in the worst way. It really screws up their cash flow and they will go out of their way to help you purchase one of their foreclosures. In many instances they will come up with special loan packages just to help you out. Its a Win Win situation. The bank clears its books and you get a good home at a good price. Why talk to agents and middle men when you can go right to the source and do it yourself. Good luck.

Your Questions About Foreclosures

Thomas asks…

Foreclosured homes for sale?

I have a lot of foreclosed homes in Columbia,SC that must sell. What is the best way to advertise these properties to potential buyers. I would love to build a data base of buyers that I could email a list of properties weekly.

Your Questions About Foreclosures

The Expert answers:

Try this site http://foreclosedhomemls.com

Your Questions About Foreclosures

Sharon asks…

How do I know if an empty foreclosed home (Built 1900) for sale has a working septic system?

The town doesn’t have any records other then it was pumped on 2005. The septic (from what I can tell) was built in 1972. The home has been empty for about 1 to 2 years. Not much in the way of records.

Your Questions About Foreclosures

The Expert answers:

My question to you (or anyone) is:
Why was it pumped in 2005?
Was it for periodic maintenance?
Or was there a problem with the system not functioning properly?
An operating septic system that is properly maintained requires pumping very seldom;
about once every 10-15yrs or so.
This is to clear the residual waste material that doesn’t break down in the processes of the enzymes that break down the waste that leaches out of the leach-pit.
Namely the sludge and scum.
(nice terminology huh?)
The sludge is a byproduct of the process and it settles at the bottom of the tank(s).
The scum is the material that floats at the top.
As they both increase during use; the sludge rising, and the scum descending, they will eventually meet in the middle and throw a wrench in the gears so to speak.
Hence the periodic pumping.
But if the leach-pit has failed,
the waste water has nowhere to go and will fill up the tanks,
and eventually back up into the house.
One major problem with leach-pits is grease.
People will constantly pour small amounts of cooking grease down the drain, and it builds up in the tanks and leach-pit until it completely plugs up the holes in the pit, and not allow the waste water to percolate into the ground.
Before you purchase a house, you (or they) should have the septic system inspected and, if it’s in good working order,
the inspector will issue a certification stating the fact.
The roof should also be certified.
I’m not sure who bears the costs of the certifications,
the seller or the buyer, or if it’s shared, but it’s in your best interest as the buyer to attain them.
Good luck to you.

Your Questions About Foreclosures

Paul asks…

how low can you go on a foreclosed home?

So i know that you can make an offer on homes for sale and im wondering if that also applies to foreclosed homes? if so, how low can you go? I dont know if im explaining myself right but this one house is at 199k and i wanted to make an offer but whats like a reasonable offer i guess?
the house is in ok condition and ready to move in condtion. i originally wanted to spend no more than 175k. any help?

Your Questions About Foreclosures

The Expert answers:

Make whatever offer you think you want to go to. But, I have found that banks aren’t necessarily jumping at low-ball offers on foreclosures. Depending on the housing market, there are actually bidding wars going on for the better foreclosures. For example, in the San Diego market, the winning bid is generally about 5% over the asking price. And, the only low-ball offers the banks are even considering are cash-only offers, since there’s no chance they’ll fall out of escrow for lack of funding (like a financed offer could). And still, these are maybe only 5% less than the asking price.

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Your Questions About Foreclosures
Your Questions About Foreclosures
Your Questions About Foreclosures
Your Questions About Foreclosures
Your Questions About Foreclosures

Your Questions About Foreclosures

Your Questions About Foreclosures