10-2-17 • Vol. 2017 Issue 35 • Brian Copeland, 2017 President • Phil Newman, Editor

TAKEAWAYS:
The mortgage-interest deduction’s huge impact in TN
BROKERS: join us 10/23 for free CE session + lunch
Hotline: legal guidance for properly dispersing earnest $
Get hot tax tips in Taxbot’s webinar tomorrow, 10/3
Boost your marketing with Instagram: webinar 10/4

Tennessee Taxation…
The Power of the Mortgage-Interest Deduction
Losing it Could Drop Property Values by 10% or More

How important is protecting the mortgage-interest deduction (MID) for Tennesseans? Very. Of approx. 1,660,000 owner-occupied houses, 995,000 or 59.9% had a mortgage in 2014**, while 443,600 Tennessee taxpayers claimed a deduction for mortgage interest. The total deducted was $3,562,440,000. The average taxpayer claiming the MID subtracted $8,050 from taxable income. At a marginal rate of 25%, the average taxpayer saved $2,010. Total tax savings from the MID in Tennessee was $890,610,000. Digging a bit deeper, 509,300 Tennesseans claimed a deduction for real estate taxes, deducting $1,389,843,000. The average taxpayer claiming the real estate tax deduction subtracted $2,750 from taxable income. At a marginal rate of 25%, the average taxpayer saved $680 as a result of the real estate tax deduction. The total savings from the deduction in Tennessee was $347,460,750.

If the MID and real estate tax deductions were eliminated, the loss would not be a one-year event; it would affect homeowners every year. The present value of lost savings could total $31,745,403,800. The value of all owner-occupied real estate in Tennessee was $303,266,543,000. If the lost tax savings are fully capitalized into the price of houses, the average decline could be 10%. The median-priced home in Tennessee was $143,200; a decline in value as projected could mean a value loss of $15,000 for the typical homeowner.

**all stats are as of 2014. Sources include: Internal Revenue Service, American Community Survey National Association of REALTORS®; All calculations are by the NAR Research Division, July 2017.

*New from TREC* Self-Print Your TN License

The Regulatory Boards Division of the Dept. of Commerce and Insurance has exciting news for licensees of the Tennessee Real Estate Commission: You may now print your license directly without extra cost. This allows you to immediately have a copy of a new or renewed license once your application is approved. For now, self-print is offered only to licensees of TREC, the Accountancy Board, the Burial Services Program, and the Board of Funeral Directors and Embalmers, with hopes of adding all TN licensees by the end of 2018. Questions or suggestions? Email  or call (615) 741-3449.

‘Turn Your Home Office into a Heap of Cash’
Jump on a free 60-minute webinar with former IRS attorney Sandy Botkin of Taxbot, a Tennessee REALTORS® partner, at 10 a.m. Central on Tuesday, Oct. 3(tomorrow!). Register HERE. You’ll learn how to qualify for home office deductions, increase your savings, and set yourself up for success in the event of an audit.

The webinar will also cover:

  • Two unique, rewarding and legal methods to get cash out of your home office
  • Surprisingly simple ways to calculate and document your deduction
  • Shocking truths behind common home office myths

Save your spot NOW.

Grow Your Biz w/ Instagram — Free Webinar 10/4
Instagram is the #2 social-media platform, with 700 million+ users. Get fresh tips on how to leverage it in your business and improve your visibility, with Craig Grant and Juanita McDowell in a free webinar from the Real Estate Technology Institute (RETI), a Tennessee REALTORS® partner, at 3 p.m. EDT/2 p.m. CDT this Wed. 10/4. Register HERE.

Mark Your Calendar!
REALTOR® Advocacy (1/29) + Day on the Hill (1/30)
The New Year will be here before we know it, and soon after the Tennessee General Assembly will reconvene on the Hill to discuss and debate legislation with huge implications for real estate and property rights throughout the state. On this front, please mark your calendar and plan now to join us for two power-packed days in Nashville:

1. REALTOR® AdvocacyMonday, Jan. 29, Doubletree by Hilton Hotel Nashville. Gain strategies and fresh ideas for advocating on behalf of your industry and spreading the word about the value of investing in the REALTORS® Political Action Committee (RPAC). You don’t want to miss this insightful program!

2. Day on the HillTuesday, Jan. 30, State Capitol / Legislature. Meet with your Senate and House members to discuss issues vital to property owners and REALTORS® in your community.

Stay tuned for more details on these important opportunities to make your voice heard in the halls of leadership. Visit our website HERE for Vote. Act. Invest. information. 

*Sign Up!* BROKER CE Session / Lunch: Mon. 10/23
If you’re a broker, join us at Tennessee REALTORS® or live online for a 1-hour CE** Broker Involvement Meeting on Monday, Oct. 23, 9:00 to 11:00 a.m. (with lunch to follow). The meeting will focus on involvement with the REALTORS® Political Action Committee (RPAC), keys to increasing participation among your agents, and a special law/rules update from the Tennessee Real Estate Commission (TREC). There is NO charge but seats are limited; go HERE for more details and to register. Lunch is generously sponsored by the Bradley law firm. **To earn 1 hour of CE, you must attend at our office OR watch online at a participating Local Association office.


Source: Tennessee REALTORS® Legal & Ethics Hotline Counsel

Properly Disbursing Earnest Money
Earnest money is a vital part of many transactions, and how it is disbursed it of great importance. For starters, TREC Rule 1260-2-.09(7) outlines how a broker may distribute earnest money: “A broker may properly disburse funds from an escrow or trustee account: (a) upon a reasonable interpretation of the contract which authorizes him to hold such funds; (b) upon securing a written agreement which is signed by all parties having an interest in such funds, and is separate from the contract which authorizes him to hold such funds; (c) at the closing of the transaction; (d) upon the rejection of an offer to purchase, sell, rent, lease, exchange, or option real estate; (e) upon the withdrawal of an offer not yet accepted to purchase, sell, rent, lease, exchange, or option real estate; (f) upon an interpleader action in a court of competent jurisdiction; or (g) upon the order of a court of competent jurisdiction.” Bear in mind that according to TREC Rule 1260-2-.09(7), this should be done within 21 days from the date it is first requested in writing. Read on for more guidance on this critical topic.

‘Reasonable Interpretation’ for Release of Funds?

Q: If the buyer sends me a notification form requesting to terminate the contract, and seeking a refund of their earnest money, can I refund the money even if the seller will not sign a release?

A: There are certain contingencies wherein the buyer is permitted to terminate the contract and receive the earnest money. Under the terms of the contract, the buyer is permitted to do this. He does NOT need the approval of the seller to do so. Therefore, the notification is adequate to convey that the buyer is exercising his contingency and terminating the contract. It also contains language requesting return of the earnest money pursuant to the terms of the contract.

The Earnest Money/Trust Money Disbursement and Release form (RF 481) is not technically required in that situation since the contract states that the buyer has the right to terminate and, if he does so, he is entitled to the earnest money. However, some brokers want a document in which both parties agree to the distribution of the funds. This is because they may not be comfortable making a reasonable interpretation of the contract, which would be done in the event that the earnest money is returned without the signature of RF 481.

If you are the holder of the funds and returning the money to the buyer, it will make your life easier and lessen your liability if you secure the signature of the seller on the release form. If the seller is unwilling to sign the form, the principal broker is permitted to make a reasonable interpretation of the contract and release the funds.

Who Signs the Release?

Q: The buyer sent a mutual release and requested a return of the earnest money. The seller is refusing to sign this document. It is my understanding that if the listing broker agrees, they can sign the release and send the earnest money back to the buyer. Please advise.

A: Only the buyers and sellers can sign the earnest money disbursement and mutual release of the Purchase and Sale Agreement. However, a principal broker may make a reasonable interpretation of the contract and return the earnest money.

Which Court for Interpleader + Corporate Lawyer?

Q: We have an earnest money dispute. (1) Which court do we file the interpleader? (2) We are a corporation. Do we have to have an attorney to represent us in court?

A: The procedure for interpleader actions differs from county to county and from general sessions court to chancery court. An interpleader action should be filed in general sessions court if the amount of earnest money is less than $25,000. If the amount is $25,000 or greater, the action should be filed in either circuit or chancery court.

The firm will be the party listed as the plaintiff. Please bear in mind that if the firm is incorporated, an LLC, and certain types of partnerships, they must be represented by an attorney. An individual cannot represent the interests of an incorporated entity without a law license.

LINKS:

Past issues of The Digest
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Tennessee Real Estate Commission (TREC)
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