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Arseny Antonov
Arseny Antonov

Money To Buy A Home

A group of Black Lives Matters leaders are facing questions about the purchase of a $6 million home in Southern California. It was bought with donations made to the Black Lives Matter Global Network Foundation, also known as BLMGNF. This transaction is raising questions about how the social justice organization is using donations.

money to buy a home

Sean Campbell wrote a story about the home that appeared in New York Magazine this week. He's an investigative journalist and adjunct professor at Columbia Journalism School and joins us now. Welcome.

CHANG: OK. Well, to give people an idea of the amount of money that this foundation, BLMGNF, has collected, you say that they've previously reported something like $90 million in donations in 2020 and spent about 30 million of that by February of 2021 - this house being one of the purchases. When it comes to the $6 million house, like, what are leaders saying to justify why they spent so much money on it?

CAMPBELL: Yes. It's a very luxury property. So I can tell you the Global Network Foundation justified the purchase as a space where Black creatives could come and create their art and influence things for the movement. They also, in a memo that I obtained later, wanted to use the home as a safe house when people were feeling threatened or receiving death threats, other things. That was their justification for this.

CAMPBELL: So I can say I haven't seen any formal statements just yet, but leaders that I've spoken with for some chapters - they're upset. They feel like these resources could have been put to better use. They could have been done more efficiently. I know Tory Russell in Ferguson - he's been working with Mike Brown Sr., who is father of the slain Mike Brown Jr. whose death sparked the protests in Ferguson in 2014. He's been struggling to get $1.2 million for a community center that would have the opportunity to provide safe housing or housing for some of the activists he's seen go homeless.

CAMPBELL: To be fair, we could say that. I could also tell you that I know that the house is monitored by Patrisse Cullors' brother, and he is paid with BLM funds, and that they've been in regular contact with Patrisse Cullors about the use of the property while not having that same information available to other activists within the organization. Patrisse wasn't just aware of the home, she used it. She used it for her own personal YouTube channel, where she shot a number of videos, which we discuss in the publication, including conversations with Melina Abdullah and Alicia Garza on the patio of the property.

If you're shopping for a new home, you may be looking for ways to fund the purchase. Taking out cash from a retirement account such as an IRA might be an option in some cases. However, before you withdraw money from an IRA, you'll want to evaluate the short-term and long-term consequences. Use the following criteria to help decide whether to use your IRA to buy a house.

When you open an IRA, the account is established to help you save for the future. Normally you'll need to wait until you are age 59 1/2 to start withdrawing funds. If you withdraw money from the account before age 59 1/2, you will typically have to pay a 10% penalty on the amount withdrawn. The distribution will also be subject to taxes.

However, there are certain circumstances in which you might be able to take out funds from the account before reaching age 59 1/2 and not incur penalties. One exception to the early withdrawal penalty is for the purchase of a first home. "Although it's possible, using money in your IRA to purchase a home is generally not advisable," says Doug Jackson, president of Tennessee Tax Solutions in Nashville, Tennessee. "Accessing large sums of money in an IRA prior to retirement can set you back big time."

For instance, perhaps you decide to withdraw $5,000 from an IRA to help put together a down payment for your first home. That amount will not have the chance to grow and earn interest over decades. This means you could potentially lose thousands or tens of thousands of dollars that could have been added to your account balance before your retirement.

If you decide to take savings from your IRA to put toward the purchase of a home, you'll first need to make sure you qualify. The IRS allows a withdrawal of up to $10,000 from an IRA to buy a home for the first time. To be considered a first-time homebuyer, you cannot have owned a primary residence at any time during the previous two years. "This $10,000 exception is available for every individual, so a married couple can withdraw $10,000 from each of their IRAs for a total of $20,000 that can be used for a down payment," Jackson says.

In addition to purchasing your own home, you may qualify to help others buy their first house. "IRA owners can withdraw funds penalty-free to help their first-time home buying children, grandchildren or parents purchase a home," says Michael Walsh, a wealth advisor at Walsh & Associates in Sarasota, Florida. "However, $10,000 is the lifetime maximum for first-time homebuyer withdrawals." The total of your withdrawals must remain under the $10,000 mark to avoid the early withdrawal penalty.

While there will not be a penalty on early IRA distributions for a first home purchase, you can expect to pay taxes on the amount withdrawn. For example, if you are in the 22% tax bracket, a $10,000 withdrawal for a home purchase will lead to $2,200 in taxes. For a couple in the 24% tax bracket who withdraws $20,000, the taxes due would come to $4,800.

For those who want to take funds from a Roth IRA rather than a traditional IRA, the rules are slightly different. "You can withdraw money from your Roth IRA before retirement age without penalties as long as the account is at least five years old," says Dominic Trupiano, the vice president of sales at Artesys in St. Louis, Missouri. You will be able to withdraw any amount up to the total amount you contributed without being subject to taxes.

In addition to your Roth IRA contributions, you might opt to take out some of the earnings in the Roth IRA. "You can withdraw an additional $10,000 from the earnings under the first-time homebuyer exemption," Trupiano says. Before doing so, you may want to look at calculations to see how your retirement funds could be impacted. "Withdrawing $10,000 from an IRA at age 30 could cost a person $57,000 at retirement, assuming a 6% rate of return," Trupiano says.

Instead of accessing cash from your IRA, you could search for other ways to fund a home purchase. You might withdraw from a different account, such as a short-term savings account, money market account or a 401(k) plan. Some 401(k) plans may allow for a loan to help with a home purchase. "Loans from a 401(k) typically incur no penalty or taxes, but the borrower will need to pay interest on the loan," Trupiano says. "Similar to the IRA, borrowing money from a 401(k) could potentially hurt retirement prospects." You may also decide to apply for a regular home loan to help cover the costs of the purchase.

Through the program options below, USDA Rural Development offers qualifying individuals and families the opportunity to purchase or build a new single family home with no money down, to repair their existing home, or to refinance their current mortgage under certain qualifying circumstances. There are also programs to assist non-profit entities in their efforts to provide new homes or home repair to qualifying individuals and families.

Without the requirement of earnest money, a real estate buyer could make offers on many homes, essentially taking them off the market until they decided which one they liked best. Sellers rarely accept offers without the buyers putting down earnest money to show that they are serious and are making the offer in good faith.

On the other hand, you may not want to put too much earnest money down. Coming up with that much money, and losing the use of it for weeks or months before the sales contract closes, may not be the best use of your cash.

Always check the credentials of the title company or real estate broker taking the deposit, and verify that the funds will be held in escrow. Never give the earnest money to the seller; it could be difficult or impossible to get it back if something goes wrong.

If the real estate transaction falls through, a small cancellation fee is usually taken out of your earnest money deposit, but the remainder remains in escrow. Whoever holds the deposit determines whether you should get the earnest money back under the terms of the purchase and sale contract. Make sure that the purchase agreement covers how an earnest money deposit refund is handled.

To be on the safe side, make sure the purchase agreement contains contingency addendums that stipulate how a refund is handled (e.g., an inspection contingency protects the buyer if the real estate fails a home inspection). Buyers can also usually get their earnest money back if they find problems with the property, or if they are unable to get title insurance.

A financing contingency ensures that the earnest money is refundable and the buyer can get out of the transaction if he cannot get financing. Keep in mind that a pre-approval from a lender does not guarantee a borrower can get a loan at mortgage rates he can afford. Even if a buyer has a good credit score and is pre-approved for a mortgage loan, the lender can still turn him down based on unforeseen factors such as the appraisal amount being too low. In such cases, a standard contingency allows buyers to renegotiate the purchase contract, or get their money back.

Dena Landon is a writer with over 10 years of experience and has had bylines appear in The Washington Post, Salon, Good Housekeeping and more. A homeowner and real estate investor herself, Dena's bought and sold four homes, worked in property management for other investors, and has written over 200 articles on real estate.

Chiquita Pittman is an experienced agent in New Jersey who works with 7 more townhomes and 21 more condos each year than the average agent in her area. She also conducts monthly webinars for first-time homebuyers with the New Jersey Housing and Mortgage Finance Agency and the Puerto Rican Action Board. 041b061a72


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