DEAR BENNY: In the recent purchase of my first home, I was shocked when presented with a completed form titled "Seller’s Affidavit of Nonforeign Status" and asked to initial said form to acknowledge its receipt. What bothered me was that I was being made privy to the sellers’ Social Security numbers on the form. In addition, I was presented with this completed form not once, but twice: once while signing a stack of disclosure statements with my agent, and again, several weeks later, during closing at the escrow office! Both my agent and the escrow office attempted to placate my concerns when I voiced them.

In today’s age of rampant identity theft, I’m surprised to learn the real estate industry can be so careless. Please tell me this is not common practice. –Kevin

DEAR BENNY: In the recent purchase of my first home, I was shocked when presented with a completed form titled "Seller’s Affidavit of Non-foreign Status" and asked to initial said form to acknowledge its receipt. What bothered me was that I was being made privy to the sellers’ Social Security numbers on the form.

In addition, I was presented with this completed form not once, but twice: once while signing a stack of disclosure statements with my agent, and again several weeks later, during closing at the escrow office! Both my agent and the escrow office attempted to placate my concerns when I voiced them. In today’s age of rampant identity theft, I’m surprised to learn the real estate industry can be so careless. Please tell me this is not common practice. –Kevin

DEAR KEVIN: The document you questioned is called a FIRPTA form. That’s an acronym for the Foreign Investment in Real Property Tax Act of 1980. Back then, Congress was concerned that rich foreigners — from countries such as Japan, Germany or Saudi Arabia — were selling property here in the United States and not paying the appropriate capital gains tax.

So, if the seller is a non-U.S. citizen and the residential property sells for more than $300,000, this form must be used and forwarded to the Internal Revenue Service.

My office conducts settlements here in Washington, D.C., and in Maryland. I checked with the person in charge who showed me the form we use. It is a seller’s affidavit, signed only by the seller, certifying that he/she/they are not foreign nationals.

Yes, the Social Security number is on that form, but the buyers in my office do not see that form.

I am not familiar with how other settlement and escrow companies handle this issue. I do, however, agree that there is too much disclosure on the legal documents used when buying and selling a house. Social Security numbers used to be on deeds of trusts (mortgages), which becomes a public document. Hopefully, that practice has stopped.

DEAR BENNY: Almost six months ago, we made an offer to buy a condominium. Our real estate agent called it a "clean deal," as we are paying cash and all closing costs. Our offer was less than the amount the seller owes on his mortgage, so I assume this is called a "short sale."

Our broker has called the listing agent and I have called the lender’s bank to try to find out when they will respond to our offer. That lender says they cannot discuss this with me for legal reasons.

My wife and I are anxious, as we really want to buy a home and settle down. Didn’t our president get a new law enacted that is forcing the banks into a more prompt reply situation? I heard that they must respond within 90 days. Is there anything we can do to expedite this? –Bob …CONTINUED

DEAR BOB: Yes, back in May of this year — and then again in October and at the end of November — the Treasury Department announced programs and guidelines designed to expedite the short-sale process.

By way of background, a short sale is one where the bank allows its borrower to sell their house for a price that is less than the outstanding mortgage. Up until a year or so ago, no one ever heard of short sales; banks preferred to foreclose rather than take a loss on the mortgage — even though the bank often lost more when they foreclosed on the home.

Within the past two years short sales have become very popular, but not without problems. Banks have become notorious in delaying the process for months before they give an answer.

The Treasury Department has announced that lenders (or those who service mortgage loans) may receive "incentive compensation" of up to $1,000 for successful completion of a short sale. Additionally, borrowers may also receive compensation of up to $1,500 to assist with relocation expenses. Treasury has released some guidelines that are designed to speed up the process.

Some suggestions: (1) banks will talk only to their borrowers, unless you get written authorization from the borrower (seller) authorizing you to discuss the loan situation with the bank. The privacy laws restrict such communication with others. You will need the loan number as well as the borrower’s Social Security number.

If your borrower is willing to give this information to you, send the written authorization to the bank so that you discuss your short-sale offer with them; (2) your contract should have a termination date; if the bank does not approve your offer within "X" days, your offer will become null and void so that you can look for another property; and (3) you and your real estate agent should literally "bug" the bank on a weekly basis, as pressure sometimes helps expedite the process.

DEAR BENNY: I purchased land using a 1031 (Starker) exchange with proceeds of some land that I had sold. If I were to build a house on the new land — in which I would live for two of the five years of owning it — would I then be exempt from paying the capital gains tax if I then the property sold for $250,000? –Edie

DEAR EDIE: You question stumped me, so I checked with Nancy Grekin, a Hawaii attorney and author of "Like-Kind Exchanges Under Code Section 1031."

Here’s her response: "The issue isn’t about 121 but 1031. If he buys vacant land, builds a house on it and lives in it, it isn’t investment property. The regs say you can hold vacant land for ‘increase in value.’ When clients want to move into improved 1031 property I recommend they wait at least two years — the longer the better but after two years it is said by revenue agents to be ‘old and cold.’ Trouble with vacant land is any time he builds on it, if he moves in it is going to look like he never held it for investment and always meant to build on it and live in it. The only way he could cure this (and he won’t like it at all) would be to build a house on it, rent the house for at least two years, then move in." …CONTINUED

Grekin is referring to the interplay between section 121 of the tax code — where the up to $500,000 exclusion is found — and section 1031, which deals with like-kind exchanges of real estate. I believe she has provided you with a clear response.

DEAR BENNY: My husband and I are in our 70s and are having a hard time maintaining our home both financially and physically. We are probably going to put our house up for sale and if we can sell it in these times we will move back up north to New Jersey. Our daughter is a single mom and we would like to all get a house together.

My question: What is the best way to go for getting a mortgage (all three of us on mortgage or maybe our daughter on mortgage with us as co-signers) and for having the title set up? I am assuming if we have to put our names on the mortgage at all, we need to be on the title. If my daughter can do it on her own and doesn’t need us, how can we be protected if anything happened to her? We would be sharing all expenses. Would that have to go through her will? –Dot

DEAR DOT: This is an excellent question that impacts a lot of my readers. So please bear with me for a long response. Although I firmly believe that reverse mortgages should be a last resort, if you can still physically live in the house, you may want to explore that option.

If not, and as you state in your question, there are two ways that this can be handled. Although I do not know all of the facts, I would suggest that if your daughter can qualify on her own to buy a house, that would be best for everyone. She can let you live there, and even have you pay rent to assist her with her mortgage payments, but having her as sole owner makes sense to me.

You asked about how to protect yourselves if she is solely on title? She can give you a written life estate in the property. She should also sign a Last Will and Testament that will provide guidance as to her intent. She should get her own attorney to assist her with these decisions and to draft all appropriate documents.

If, on the other hand, she cannot qualify on her own, I suggest that title be as follows (note, this is a general statement; your own state may have different rules): Husband and wife and tenants by the entirety as to one half of the property and as joint tenants with rights of survivorship with daughter as to the other half.

How will this play out? If you or your husband dies first, your half of the property will automatically go to the survivor. When both of you die, since the property is held as joint tenants, your daughter will become the owner. Probate will not be necessary. If your daughter should die first, the property would automatically go to the two of you.

Since your daughter is a single mom, she should also arrange for a trust for her child.

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.

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