How to Sell Your House

by | Real Estate Tips

How to Sell Your House

​How to Sell Your Home

​

Selling Homes in Port St Lucie

Selling Port St Lucie Homes

When it comes to selling your home there are a multitude of issues to be mindful of in order to sell the property at the highest price and shortest time possible. Without a good planning the homeowners risk either leaving money on the table or wait for a long time to sell.

For Sale by Owner or Sale by Realtors®

Making the decision of selling by owner or hiring a Realtor® is perhaps the most important step in sale of any property. While homeowners may think that it’s all about the commission the issue is much broader than the money alone. The Realtors® are trained and experienced in many aspects of the sale of properties that homeowners may not be familiar with. The following is a brief list of what a Realtor® bring to the table and the homeowners could risk to lose many or face legal consequences if they’re not an expert in any of these fields:

  • Pricing a Home for Sale – The correct pricing of a home for sale is the first step in sale of any property. The homeowners should be aware of false prices floating around on different real estate related website. The algorithm of most such websites are not able to differentiate between a related and unrelated compatible sales. For example, the prices of the 3 homes sold in the same area does not necessarily portrays the average price to use for the sale of your home. This is because one of the homes could have a swimming pool while the other offers 2 extra bedrooms and the third home was built more recent than the other two. As a matter of fact, there has been lawsuits by homeowners against one of the most prominent real estate websites for miscalculating the home prices. The Realtors®, on the other hand, have access to many compatible home sales records and the knowledge of how to adjust the prices when the comps are not exact the same. According to the National Association of Realtors® report in 2016, the average home prices sold by For Sale By Owners was $185,000 while the average for homes sold with Realtors® assistance was $245,000 q whopping $60,000 difference. This is a little over 30% deficit which makes the average customary commission of 6% charged by real estate companies a true bargain. This is the main reason why some homeowners have claimed they have lost money due to the incorrect lower price estimate by the real estate websites.

  • Negotiating the Price – Like any other transactions, everything is negotiable when selling a home and the negotiation is not limited to the price of the property. There are items such as title insurance or repairs in the outcome of the inspection that can be negotiated to pay by either party to transaction. How to negotiate the price and when to stand firm or counter offer are crucial negotiation skills which may lack in the For Sale by Owner sales.

  • Inspection Problems – In most transaction the buyers will hire an inspection companies to make sure there are no hidden defects in the property. Some inspectors have the tendency of over-exaggerating the simple flaws in the house which may create panic by the home buyers. In one instance we had an inspection report indicating a cost of $760 for replacement of a sliding glass door which only needed couple of rollers at cost of less than $20. An experienced Realtor® is well versed in recognizing the bogus defects in inspector report from the serious ones. However, it is the Realtors® duty to skillfully negotiate the legitimate shortcomings in the inspection report in order to preserve the integrity of the transaction while minimizing the costs to the home sellers.

  • Appraisal Issues – Sometimes everything going smooth in a transaction until the appraised value falls short of the agreed upon contract price. The Appraisal issues generally arise from the appraised value falling below the contract price. There are few reasons for this:

    • Wrong List Price – Sometimes, the problem stem from the Realtors® knowingly price the listing much higher than the fair market value in order to please the sellers to list with them. Other times the incorrect pricing is done unknowingly by inexperienced or out-of-area Realtors®. Once the appraisal report is published it will be very difficult to convince any buyer to pay more than the appraised value and most importantly the lender will not grant a mortgage for more than what the appraiser has priced the property. Tin case of the cash deals, the more sophisticated buyers would order appraisal. In all real estate transactions, the sellers and their agents should discuss and have a plan B to face any appraisal shortfall.

      • Appraisal Miscalculations – At times the appraisal issues are due to the miscalculations by the appraiser. This could be due to many different circumstances:

      • Out of the Area Appraiser – Although appraisers are only depend on the latest compatible home sales in the area to correctly estimate the value of any property but the lack of knowledge the local real estate market and trends could create a problem. For example, during the crazy real estate market in the Broward County during the mid-2000s at some point the property values were rising on staggering rate of 10% a month. This created a problem when an out of area appraiser used the compatible sale from 3 months earlier without considering the market trend.

      • Lack of Compatible Sale – This is more true when it comes to sale of a property in a unique subdivision or gated community where there are not enough sales for the appraiser to locate compatible properties necessary to correctly estimate the value. Appraisers generally consider the sales of similar properties taking place in past 3 months, within the same community or one-mile radius as acceptable comps.

  • Communication with All Parties – In addition to the buyers and sellers there are many other people and companies involved in each real estate transaction. An experienced Realtor® shall always be in constant communication with all parties and report any and all issues to the sellers. The bank or mortgage companies, title company, appraisal, and inspection companies are few entities who are routinely involved in the outcome of all real estate transactions.

  • Closing on the Property – The Closing Disclosure will be send to both buyers and sellers by title company 48 hours prior to closing. Examine the Closing Disclosure thoroughly and don’t hesitate to ask questions and challenge any fluff charges. Please note, some of the expenses are non-negotiable, fixed line-items such as Doc-Stamp or pro-rated property taxes that are collected on behalf of the County or State of Florida.

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Home Sale Capital Gain Taxes

by | Real Estate Tips

Home Sale Capital Gain Taxes

Capital Gain Taxes on Sale of Your Home

Capital Gaine Tax DeductionsWhile most people may be aware of the of the $250,000 exclusions in  capital gain taxes on the sale of homes, $500,000 if file joint returns, but there is more to this law  than those two numbers.   Knowing the qualifying factors and limitations of the law may become beneficial to homeowners planning to sell their homes.

  • Qualifying Homes for Exclusion of Capital Gain Taxes

The exclusion for capital gain tax applies only to the primary residence.  If there are more than one home, the homeowner could designate only the residence that they truly live in as their primary residence.  The IRS guidelines are strictly enforced when it comes to designating such properties.  Some of the rules include the place where homeowner works, vote and spend most of their time during a calendar year.

  • Residency Duration

The homeowners have to live in their residence at least 2 of the last 5 years.  The 24 months period is not concurrently, and could be broken into segments.

  •  Homeownership Duration

Same as the Residency Duration, the homeowner must own the home for at least 24 months during the past 5 years.

  • Maximum Duration and Unforeseen Circumstances

The maximum duration of homeownership and residency do not apply to unforeseen circumstances such as death, divorce, change of job to over 50 miles and serious health issues.

  • Maximum Deductions Could Be Less Than $250,000 and $500,000

For homeowners who have lived in their primary residence for less than 24 months may qualify for capital gain tax exemption, but the amount of the maximum deductions may be less than $250,000 or $500,000.  The total amount of the deduction is prorated only for homeowners who have to sell their homes under some unforeseen circumstances.  For example, if a couple who file joint return taxes are forced to sell their property after 1 year of ownership due to unforeseen circumstances will qualify for half of the $500,000 capital gain exemption, or $250,000 instead of the $500,000

  • Married Couple Deductions and Ownership Rules

The $500,000 deduction for married couples also falls under the 24 months out of past 5 years ownership and residency restrictions.  The residency rule applies to both spouses but the ownership does not.  Only one spouse could own the home but both must meet the occupancy period threshold.

  • Lowering Capital Gain Taxes Through Deductions

Not all sales of properties qualify for the $250,000 or $500,000 exemptions on capital gain taxes, but this doesn’t mean there are no other deductions available to reduce the amount of capital gain taxes.  Generally, most expenses occurred in selling a home are deductible from the total capital gain.  To reach the net capital gain, the home sellers could deduct the closing costs, commissions, advertising expenses as well as the costs associated with improving or remodeling the home.

For Example, If a homeowner has a capital gain of $300,000, but has spent $30,000 in kitchen remodeling, $20,000 in new roof and $5,000 in new A/C and a total of $35,0000 in commission and closing costs, he has occurred $90,000 in total expenses, which could be deducted from his capital gain.  In this case, the homeowner capital gain is $300,000 gain – $90,000 Expenses= $210,000.

For professional advice, it is always best to speak with your Accountant on these matters.

 

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Best Month to Buy a Home

by | Real Estate Tips

Best Month to Buy a Home

Best Months to purchase Homes

Best Month to Buy HomesEvery year during the holiday season centered around Thanksgiving, Christmas and New Years Eve, the number of home buyers significantly decrease.  This results in homes staying on the market longer, which leads to the eventual price drops by sellers.   To add to that, families with kids who make a large pool of buyers are absent during winter months due to the schooling of their children.  This creates a perfect storm for the price drop in December.  Most homes sales closed in January have shown the best prices compared to other months.  Typically these homes go under contract in December.  Since the loan underwriting is expected to take a longer time to close than previous years under the new lending guidelines, it is possible that the closings in February take the prize for lower prices this year but the purchase contracts are still from December.

According to Lawrence Yun, the Chief Economist for the National Association of Realtors®  “The seasonal decline is not all price depreciation of homes” in winter, Yun notes. “A good portion of the movement is driven by a higher proportion of lower priced and smaller-sized homes getting sold during the winter months. The reason for this is that families with school-aged kids are generally not in the market during the winter because they do not want their kids to be disrupted during a school year, and it is the families with kids that generally require the larger homes that carry higher prices.”

Read more on Yun’s article in Forbes: Best Month to Buy Homes

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Florida Homeowners Insurance

by | Real Estate Tips

Florida Homeowners Insurance

home_insuranceHomeowners Insurance in Florida

Paying too much for homeowners insurance policy? Have you explored all discounts to lower you insurance premium? The homeowners insurance in Florida could be much higher than many other places including the neighboring states.  The single important factor for the higher premium for the homeowner insurance policies in Florida is the geographical situation of the state that makes it more prone to damages caused by the hurricanes coming from both directions of the Atlantic Ocean and the Gulf of Mexico.  The other contributing factor for higher premium is the location and proximity of the properties to large bodies of water.  The homes or condos located on barrier islands and other beachfront properties come with a higher insurance tag and at times even difficult to insure.  To obtain insurance policies for such properties homeowners must shop around and work with insurance companies that are affiliated with more than one insurer.  

Wind Mitigation and Four Points Reports

For homes after 2001 there your agent might order the wind Mitigation Report, which is one of the least expensive solutions that could save substantially in your premium.  The report not only helps with obtaining the homeowner insurance for homes in the high-risk area but also could result in a discount on the premium that will justify the small cost of the report.  There is also Four Points Report that is for older homes.  This report could also result in great savings on insurance policies, just like Wind Mitigation Report.

How to Save on Insurance Premium

The Wind Mitigation Report is also a good tool for most homeowners in lowering their insurance premiums, specifically for the homes that are built after 2001 that generally meet the current Florida Building Codes enabling them to withstand hurricane force winds.  The homes that are built before 2001 could also receive a discount if their roof is replaced after 2001 under the new codes.  The cost of the homeowner insurance in Florida could be in thousands of dollars, but there are simple ways of receiving discounts that an insurance agent could advise you on them.  While you might not want to change your Gable roof for the sake of a discount on your homeowner policy but you may consider installing smoke detectors in case of a fire could also save more precious commodities than your home.

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Save Your Home from Foreclosure

by | Foreclosure Properties, Real Estate Tips

Save Your Home from Foreclosure

New Closing DisclosureSaving Homes from Foreclosure

Finally, there might be a light at the end of the tunnel to save homes from the foreclosure plague that has been hovering over thousands of families living in Florida and some other states in recent years.  While the federal government’s plans to save the financial institutions were nothing short of a miracle, but the homeowners, on the other hand, were left watching their dream washing away in the sea of foreclosures.  The homeowners that hung in there and kept up with their mortgage payments were rewarded with a large decline in their home equity when the home prices plummeted.  For those homeowners who bought their home during the real estate boom things became even gloomier when they ended up owing more on their homes than it was actually worth.  The term “underwater homes” or “upside down mortgages” refers to these unfortunate homeowners who had no way out of this mess.

Rebuilding American Home Ownership Plan

That was until finally a good man by the name of Senator Jeff Merkley from Oregon came up with a plan called: the 4% Plan or Rebuilding American Homeownership.  Under this proposal, a trust that is established either in the Federal Home Bank or Federal Reserve will buy and then refinance the upside down mortgages as long as the homeowners are current in their mortgage payment.  The Rebuilding American Homeownership plan is a brilliantly thought out solution for the homeowners with underwater mortgages with no cost to the taxpayers.  The low-interest rates are offered at 4% for 15-year mortgages that although it might not reduce the monthly payments but it will allow the homeowners accumulate equity quicker.  The next plan is a 30-year mortgage with 5% interest that offers a much lower monthly payment to make it possible for most homeowners to keep their homes.  There is also a two-part plan for the first mortgages.   The first part covers 95% of the current values and a second for the balance of the mortgage with no payments or accruing interest for five years.  The two part plan is also designed to lower the monthly mortgage payments.

 Link:  Senator Jeff Merkley’s Rebuilding American Homeownership in pdf format

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