Bad news for unrecorded real estate deed

DEAR BOB: Must a deed be recorded to be considered valid? Isa deed not a contract regardless? –Irvin S.

DEAR IRVIN: Without recording in the public records wherethe real property is located, a deed properly signed and notarized or witnessedis valid only between the grantor and the grantee. Because it is not recorded,it does not give “constructive notice” to the world.

Purchase Bob Bruss reports online.

A deed is not a contract; it is just evidence of aconveyance of real property.

Some states have statutes requiring deeds to be recordedwithin a time period, such as one year, or they are presumed to be not valid.For details, please consult a real estate attorney in the state where theproperty is located to determine if the deed is valid between the parties eventhough it is not recorded.

DEATH IS THE ONLY WAY TO AVOID DREADED DEPRECIATIONRECAPTURE TAX

DEAR BOB: Almost a year ago, I bought a rental condominiumto complete an Internal Revenue Code 1031 Starker tax-deferred exchange. Due tomy job loss, I sold my primary residence and moved into the condo because ithas no mortgage payments. Is this OK? Also, somewhere I read (maybe in yourarticles) that if I own my primary residence acquired in an IRC 1031 exchangefor five years and live in it at least two of those years I can qualify for the$250,000 primary residence sale exclusion. Does this also apply to the deferredgain as well as any gain on the condo’s market value? –Mark L.

DEAR MARK: Yes. Your information is basically correct.However, when you sell your personal residence, which was acquired in an IRC1031 tax-deferred exchange, your Internal Revenue Code 121 principal residencesale tax exemption up to $250,000 (up to $500,000 for a qualified marriedcouple filing jointly) does not apply to the 25 percent depreciation recapturetax.

The only way to avoid that dreaded depreciation recapturetax is to die while still owning the property. Death is the ultimate taxshelter of all. For details, please consult your tax adviser.

BUYING VACATION CONDO IS SPECULATING, NOT INVESTING

DEAR BOB: I am interested in buying a vacation condo on theisland of Kauai, Hawaii, where I see one-quarter- and one-sixth-share purchasesbeing advertised. How do these work in terms of getting mortgages, and whocontrols the property decisions such as when to paint and replace appliances orfurnishings? I am interested in buying a vacation condo and selling offtimeshares –Linda M.

DEAR LINDA: That is not real estate investing. That’sspeculating. What you describe is very risky. The condo management companyusually makes the decisions. Investigate very carefully.

Never spend money on high-risk vacation properties,especially such as the situation you describe, where you will ever need to seeyour money again.

The new Robert Bruss special report, “How to Sell YourHome for Top Dollar in a Buyer’s Market,” is now available for $5 from RobertBruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736or instant Internet delivery at www.BobBruss.com.Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

Copyright 2006 Inman News

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