Debt Relief = Income –

Many times a homeowner might feel relieved being out from under the obligation of a mortgage they can’t afford even though the property was lost due to foreclosure or short sale. If a lender cancels or forgives debt, a taxpayer must include the cancelled amount in their income for tax purposes depending on the circumstances. The tax significance could be serious.
Congress enacted the Mortgage Relief Act specifically to help homeowners who might be affected in the housing crisis that started approximately in 2007. The Act expired on 12/31/12 but was temporarily extended by Congress until December 31, 2013.
This relief only applies to a taxpayers’ principal residence which does not include second homes and investment property. The maximum amount is limited to $2 million of mortgage debt forgiveness or $1 million if filing separately.
Another provision is that the debt relief is limited to acquisition indebtedness used to buy, build or improve the property. It excludes cash equity loans whether made separately or in a refinance of the original mortgage.
Due to the serious consequences involved in short sales and foreclosures, it is advised that homeowners faced with this possibility should seek expert advice from their legal and tax professionals.

Get Your Offer Accepted –

Serious Buyers
Inventory is dramatically shrinking and it is commonplace in many markets to have multiple offers on a home. While the sellers would prefer to be able to choose the best offer for them, it can be incredibly frustrating for the buyers who might consider the following tips to get their offer accepted.
1. Remove the uncertainty that you may not be approved for a mortgage by having a pre-approval letter from your mortgage company.
2. Show your sincerity by increasing the normal amount of earnest money customary for the area and price of the home. The earnest money will be applied toward your down payment and closing costs. Consider placing even more money in escrow when the contingencies have been met.
3. Specify a closing date in the contract but acknowledge that you can be flexible to accommodate the sellers moving date. If it becomes an issue, it still must be mutually agreed upon.
4. Make the contingency periods shorter if possible to make the seller feel that they’ll know sooner that the offer is solid.
5. If the contingency really isn’t important to you, leave it out of the offer. The more contingencies included in a contract, the more the seller will feel might happen to keep it from actually closing.
6. Write a personal note to the seller explaining why you like and want their home. Consider including a picture of your family and pets.
7. Physically sign the offer with a felt tip pen of contrasting color. You’d be surprised how this adds a personal touch to the offer.
Offer a fair price for the property in your initial purchase agreement. It shows sincerity and good faith that you’re actually trying to purchase the home and not trying to take advantage of the seller. The old adage that you can always go up later may never happen if there are multiple offers on the property in the beginning. Call me or text me at 970-227-7355 or email me at [email protected] for more informtion on how to get your offer accepted

Renters Want to Buy –

Fannie Mae, in a recently released study, states that consumer attitudes continue to be favorable about homeownership, particularly with the younger generations, ages 18 to 34. Slightly over half of them think that owning makes more sense than renting when comparing the financial and lifestyle benefits.
90% of aspiring owners expect to purchase a home someday and slightly over half think they’ll do it within five years. The primary challenges are having sufficient savings and the difficulty of getting a mortgage today. Younger renters see renting as a temporary stepping stone toward homeownership.
Homeowners are far more likely than renters to be “very positive” about their housing experience. Some of the benefits identified are:
• Having control over what you do with your living space
• Having a sense of privacy and security
• Having a good place for your family or to raise your children
• Having the best investment plan
• Living in a nicer home
• Building up wealth
• Saving for retirement
• Living in a place where you and your family feel safe
• Feeling engaged in your community
To satisfy a buyer’s doubts about qualifying for a mortgage, make an appointment with a trusted mortgage professional. If you’d like a recommendation at no cost or obligation, please call or text me at 970-227-7355 or email me at [email protected] to check out this Rent vs. Own concept in more detail.

Fast and Easy But is it Accurate?

There are sites all over the web that offer to tell you what your home is worth.  Simply plug in your address and email and you’ll get a value.  It’s fast; it’s easy but is it accurate?

The value is determined by what is called an Automated Valuation Model (AVM) that analyzes public record data with computer decision logic.  Square footage, age, number of bedrooms and location are easily definable objective data.  The challenge is identifying, measuring and comparing the subjective data.

An AVM cannot identify how unique features might add or detract from the value, if the market is declining or why the comparable sales apply or don’t apply to the subject property.  Is a home worth more because it is near shopping or less because it is across the street from a high-traffic commercially zoned property?

Experienced professionals are more likely to make proper adjustments for condition, market appeal and positive and negative influences.

Imagine that you’re going out for dinner and you consult HamburgerAVM.com to tell you how much a hamburger is worth.  It might be accurate based on condiments, vegetables and weight but can it address things like taste, quality, cleanliness, service, convenience or atmosphere.  You certainly couldn’t present the printout to the waiter to negotiate a lower price.

An AVM can be a tool that a homeowner, prospective buyer, mortgage officer, appraiser or real estate agent can use to get a quick idea of price but there are inherent limitations that can only be considered by personal examination balanced with experience in the market place.

Experience and understanding of the subject property and the marketplace are critical to having confidence that a value is accurate.  Any person could go through the same steps to arrive at a value but an experienced, well-trained professional is far more likely to assess all of the variables more accurately.

Home is Worth the Sacrifice

 

There are many reasons people want a home with the most frequent responses being a place of their own, to raise their family, share with their friends and feel safe and secure.  These are all strong motivations fueling the American Dream of owning your own home.

The motivation is so dominant that buyers are willing to make sacrifices to have their dream come true.  According to the 2014 National Association of REALTORS® Home Buyers and Sellers Survey, 72% of first-time buyers cut spending on luxury or non-essential items.  They also cut spending on entertainment, clothes and even cancelled vacation plans.

The value of getting their own home is more important than the immediate gratification of things that are considered less important.  While qualifying guidelines were increased last year, there are still more buyers purchasing homes at near record-low mortgage rates.

the most frequent responses being a place of their own, to raise their family, share with their friends and feel safe and secure.  These are all strong motivations fueling the American Dream of owning your own home.

The motivation is so dominant that buyers are willing to make sacrifices to have their dream come true.  According to the 2014 National Association of REALTORS® Home Buyers and Sellers Survey, 72% of first-time buyers cut spending on luxury or non-essential items.  They also cut spending on entertainment, clothes and even cancelled vacation plans.

The value of getting their own home is more important than the immediate gratification of things that are considered less important.  While qualifying guidelines were increased last year, there are still more buyers purchasing homes at near record-low mortgage rates.

 

Converting a Home to a Rental

A simple decision to rent your current home instead of selling it when moving to a new home could have far reaching consequences.

If you have a considerable gain, in a principal residence and you rent it for more than three years, it can lose the principal residence status and the profit must be recognized.

Section 121 provides the exclusion of capital gain on a principal residence if you own and use it as such for two out of the last five years.  This would allow a temporary rental for up to three years before the exclusion is lost.

Let’s assume there is a $100,000 gain in your principal residence.  If it qualifies for the exclusion, no tax would be owed. If the property had been converted to a rental so that it didn’t qualify any longer, the gain would be taxed at the current 20% long-term capital gains rate and it may incur a 3.8% surcharge for higher tax brackets.  At least $20,000 in taxes could be avoided by selling it with the principal residence exclusion.

Depreciation, a tax benefit of income property, is determined by the improvement value at the time of purchase or at the conversion to a rental whichever is less.  If the seller sold the home and took the exclusion and then, bought an identical home for the same price, he would be able to have 60% more cost recovery and avoid long term capital gains tax.

It is always recommended that homeowners considering such a conversion get advice from their tax professional as to how this will specifically affect their individual situation.

A simple decision to rent your current home instead of selling it when moving to a new home could have far reaching consequences.

If you have a considerable gain, in a principal residence and you rent it for more than three years, it can lose the principal residence status and the profit must be recognized.

Section 121 provides the exclusion of capital gain on a principal residence if you own and use it as such for two out of the last five years.  This would allow a temporary rental for up to three years before the exclusion is lost.

Let’s assume there is a $100,000 gain in your principal residence.  If it qualifies for the exclusion, no tax would be owed. If the property had been converted to a rental so that it didn’t qualify any longer, the gain would be taxed at the current 20% long-term capital gains rate and it may incur a 3.8% surcharge for higher tax brackets.  At least $20,000 in taxes could be avoided by selling it with the principal residence exclusion.

Depreciation, a tax benefit of income property, is determined by the improvement value at the time of purchase or at the conversion to a rental whichever is less.  If the seller sold the home and took the exclusion and then, bought an identical home for the same price, he would be able to have 60% more cost recovery and avoid long term capital gains tax.

 

Save on Homeowner’s Insurance

Insurance is a way to hedge the risk of a possible loss on an asset that a person or entity cannot afford.  The cost of the coverage is determined by risk and exposure to the insurer and reflected in the premium.

Another way to say it is: don’t buy insurance when you can afford the loss.  If you have a mortgage on your home, you must have insurance.  It is probably prudent for most people to have property insurance but certain coverage might be avoided because you can afford the loss if you were to have an occurrence.

  1. Call your current agent and review your insurance coverage.  Ask if there are any available discounts whether your property qualifies for now or after certain improvements are made.  Monitored alarm systems, dead bolts, smoke detectors, updated electrical, certain types and ages of roofs among other things may be eligible for individual discounts.
  2. Compare the newly revised coverage and premium with other reputable agencies and insurers.  Shopping can be time consuming but experts agree that the exercise can be valuable and should be considered every few years.
  3. Deductibles are an easy way to affect the premium based on the initial amount of loss that the insured wants to assume.  The higher the deductible, the lower the premium.  Determine the amount of risk you want to assume and select an appropriate deductible.
  4. Consider bundling your home and auto policies for possible discounts and leverage for better service.
  5. Don’t become a co-insurer.  Most policies stipulate that a building must be insured for at least a certain percentage, usually 80% of its insured value to be able to collect the full amount of a partial loss.  Insured value is not always the same as market value.  The land is not considered in the value but replacement cost of the dwelling is.

It isn’t possible to purchase insurance after a loss; it must be purchased before a loss is incurred.  Premiums are based on careful analysis of insurer’s loss and overhead expense plus a profit.  As a homeowner and an insured, it would be equally wise to analyze coverage, claim service, your risk tolerance and the premium you’ll pay for that coverage.

 

A Well Planned Garage Sale

A well-planned garage or yard sale can make room in your home, get rid of unused items and make some money but it needs some planning to be successful.

  • Start early to research and plan
  • Promotion is key
  • Display items attractively
  • Price items right
  • Organize checkout

Saturdays are generally the best day but there may be some exceptions.  Experienced garage-salers believe that a well-planned one-day event will do as well as a multi-day event.  Serious purchasers will look for the “new” sale and most people don’t come back multiple days.

Advertise in local newspapers and free online classified sites like craigslist.  If several families are going together for the sale, mention that in the ad; it will be a big draw.  Mention your bigger-ticket items like furniture, equipment and baby items.

Garage sale signs can be purchased or made at Staples, Fedex Office or Kwik Signs.  Signs need large lettering so they’re easy to read while people are driving. Most important info: Garage or Yard Sale, address, date and time.  Directional signs are also important.  Balloons and streamers to attract attention to the signs are very helpful.

Consider using the service Square so that you can take credit cards.  The cost is 2.75% per swipe and can be done on your smartphone or iPad.  You’ll need to sign up at least two weeks in advance to receive your reader.

Unless you’re having an estate sale, keep your home locked.  You don’t want people wandering through your home while you’re outside.  If you start to accumulate a lot of money, take some of it inside.  Don’t discuss how much money you’ve made during the sale or how successful it has been.

People will want to bargain; it’s the nature of the game.  Consider this strategy: less negotiations early in the sale and possibly, more toward the end of the sale.

HOME SELLERS: HOW YOUR REALTOR DOES IT BETTER

Written by Blanche Evans

In 2015, approximately 89% of home sellers hired a REALTOR®. What do they know that you don’t?

To sell your home yourself, you’ll be competing against experts who have more tools and connections than you do. In addition to multiple listing services, broker Websites, real estate Websites, personal Websites, and professional-grade videos and photos, real estate professionals network with each other to sell many homes before they are introduced to the marketplace.

You’ll have to perform all the jobs a professional would do for you, along with adopting a professionalism you haven’t been trained for, all while holding down your own job. When will you have time to study the market, create a marketing plan, buy advertising, show your home, and negotiate with buyers?

It’s no problem for a Realtor when a buyer wants to see your home at any time, but will your boss let you take off in the middle of the day to show your home? Will she allow you to use the company’s graphics and editorial team to whip out a top quality listing presentation for you? Will you have the long-term price trends to defend your price to buyers?

You won’t know whom you’re allowing to see your home. Even if you could arrange a time to show your home to buyers, how do you know they aren’t coming into your home to steal your prescriptions or worse?

Serious buyers are vetted through their real estate agents and bankers so only buyers who are qualified to buy your home can be allowed to see it. Do you know how to put a buyer through instant credit checks so you’ll know whether or not they’re suitable before you let them in your home?

eal estate transactions are rife with opportunities to make legal mistakes. Do you know what you have to disclose to the buyer to be compliant with state laws? If you did add-ons yourself and didn’t get a building permit, you might be in violation of city codes that could come back to bite the buyer and you.

Closing in a garage doesn’t mean you can add square footage to your home without subtracting market value for no longer having a garage. Your local taxing authority should reassess your home so that the size and amenities match the marketing materials and disclosures you’ve provided about your home.

Once you have a contract, you have to get to closing and many contracts don’t make it that far. The buyer can decline to buy for a number of reasons, including FHA or VA requirements that your home might not meet. An agent can help negotiate problems and make sure every entity in the pipeline is doing their jobs in a timely fashion so there are no bad surprises.

Those are only a few of the many reasons sellers hire real estate professionals.

How Long it Takes to Save for a Down Payment

DAILY REAL ESTATE NEWS

Which age groups are financially fit to buy homes the fastest? Hanley Wood’s Data Studio recently used Metrostudy and Census data to find out how long it would take each generation to save up a 10 percent down payment on a home based on the median household income and median home price for each age group.

Millennials and retirees tend to save for the longest amount of time in order to put a 10 percent down on a home, according to the study. More specifically, younger millennials aged 18 to 24 – who are usually recent college graduates – will have to save the longest at an average of 8.77 years in order to save enough for a 10 percent down payment on a home costing $221,600.

Retirees aged 65 and over will take, on average, about 7.37 years to save up for a down payment on a $291,000 home.

Americans aged 45 to 54 years old – who tend to be at their top earnings power — take the least amount of time to save up for a down payment. Still, it takes more than three-and-a-half years to save for that age group.

Here’s a breakdown of the years to save up for a down payment based on age:

  • 18-24: 8.77 years (average monthly mortgage payment: $597)
  • 25-34: 7.34 years (average monthly mortgage payment: $950)
  • 35-44: 5.45 years (average monthly mortgage payment: $1,073)
  • 45-54: 3.54 years (average monthly mortgage payment: $891)
  • 55-64: 3.72 years (average monthly mortgage payment: $766)
  • 65 and over: 7.37 years (average monthly mortgage payment: $532)