Mar 17, 2015 | Home Buyer Tips
Few people consider the tax implications of buying a home, but there are many. Here are a few ways buying a home can impact the amount of tax you pay.
Mortgage Interest
Most people put down the minimum amount of money needed to buy a home and finance the rest, usually over 30 years. This means that, especially in the early years of the loan, most of what they are paying are the finance charges. The good news is that all that interest is tax-deductible for people who itemize their deductions, which adds up to several thousands of dollars in deductions annually. You also can deduct interest on home equity loans, up to a certain amount.
Property Taxes
Another way that buying a home affects your taxes is property taxes. In most jurisdictions, property taxes are based to some extent on the price you pay for your home, meaning the more you pay, the higher your taxes will be. The positive is that, just as with mortgage interest, those property taxes you pay are deductible if you itemize deductions on your income tax return.
Points
Points are up-front fees you pay to lower the interest rate on your home mortgage. If you paid them when buying your home, you can deduct the entire amount on your tax return. If you paid points on a refinance or home equity loan, you have to deduct them a bit at a time over the entire term of the loan.
Tax-Free Appreciation
One of the reasons many people treat homes as an investment is the favorable tax treatment on profit from a sale. For example, in the United States as long as the home is your principal residence for at least two years out of the five years before you sell, you can exclude up to a $250,000 gain from capital gains taxes, or $500,000 if you are married.
Retirement Accounts
Buying a home for the first time is one of the few situations in which the government allows you take money from retirement accounts early without paying a tax penalty. For example, you can take up to $10,000 out of an individual retirement account without having to pay the early withdrawal penalty, although you still might face income taxes if your contributions were tax-deferred.
If you are considering buying a home, contact a real estate professional to discuss the potential tax and other benefits.
Mar 5, 2015 | Home Buyer Tips
It can take a time and effort to find the perfect home to purchase. After you have found that home, you need to convince the seller that your offer is the one they want to choose. There may be multiple offers made at the same time, and you may be in a situation where you are competing for the home.
Even if your offer is the only one the seller receives, there is no requirement that they must accept the offer you make. Crafting an effective offer that will catch the seller’s attention is important, and you may be able to accomplish this by following a few tips.
Offer Close To The Asking Price
One of the first things most sellers will look at when they receive an offer is the price you are offering to pay. You may feel as though the seller is asking too much for the home, and your agent may advise you to offer a lower price. On the other hand, there may be multiple offers, and you may feel as though you need to offer a price higher than what is being requested. With your real estate agent’s advice in mind, consider that a seller will be more inclined to accept an offer if it is close to what they are asking. If your offer is too low, they may decline it without looking at the other merits to your offer.
Request A Quick Closing
When you prepare your offer, one of the factors that you will have control over is the requested closing date. Sellers generally want to close quickly, but this is not always the case. Each market is unique, but a general rule of thumb is to offer a closing date that is 21 to 28 days away, contingent on mortgage approval. You may work with your real estate agent and mortgage company to determine when a reasonable closing date is. However, offering a quick closing generally shows that you are a motivated buyer.
Choose A Shorter Option Period
A sales contract has an option period, which allows the buyer to back out of the deal for any reason. This may be a time when you get your third party reports, such as the property inspection, completed. A shorter option period may be preferred by sellers. This is because the buyer is generally locked into the contract contingent on mortgage approval after the option period has expired.
Offer A Higher Non-Refundable Good Faith Amount
When you make an offer, you will also give the seller a good faith or earnest money deposit. The amount of the deposit will be disclosed in the contract, and you will typically hand it off after the offer has been accepted. This is the amount of money that you stand to lose if you do not follow through on the terms of the contract. A higher good faith or earnest money amount shows that you are serious about buying the home.
There are many factors that a seller is thinking about when reviewing an offer. While the entire offer will be reviewed fully, the fact is that these factors are generally given significant weight in most seller decisions. You can work with your real estate agent to structure the best offer possible.
Feb 26, 2015 | Home Buyer Tips
Your home is your castle, your own little piece of the American dream. But lately, your little corner of the world has been feeling cramped and you find yourself eyeing those larger homes. Is it time to pull up stakes and move on from your starter home?
Growing Family
If you’ve added to your family in recent years, you may have more bodies than bedrooms. A two-bedroom home may have been a great idea when it was just you and your spouse, but with two kids, you’re starting to have turf wars over the play area.
Overflowing With Stuff
From an overflowing toy chest to closets packed so tightly with shoes and coats you risk an avalanche every time you open the door, your home just doesn’t have the space to keep all your things. You may have even had to move some things off-site, spending money to rent storage space to keep that antique dresser your grandmother left you or the set of state spoons you carefully collected during your college years.
No Rest For The Weary
You’d love to spend an afternoon soaking in the tub, but before the warmth of the water can take you away, there’s a banging on the door of the only bathroom in the house and a chorus of “hurry up” invading your quiet time. And the man cave you dreamed of? Those visions of a big screen television were shattered by the realization you needed somewhere for the kids to sleep.
No Room For Extras
When you first moved in, the two-car garage doubled as your woodworking shop. Now, the equipment has been sent to storage to make room for the family’s second car. You’d love to take up organic gardening, but your tiny yard barely has room for a grill and a lawn chair. You’d love to host your friends visiting from out of state, but there is hardly room for their luggage, much less them.
Changes In Career
You may have opted for a starter home when you first entered the market because you had a smaller income. Now, thanks to changes in careers or promotions at work, you can afford a home with greater square footage and room for your growing family that will provide the space you need for many years of happy memories.
Home prices across the country are starting to rise. Contact your local real estate agent today and take advantage of the opportunity to give your family the most space at the best price now.
Feb 12, 2015 | Home Buyer Tips
There’s a whole lot to learn when buying one’s first home, an investment that can bring joy, but sometimes, grief. A competent real estate agent can assist in locating those homes that meet the home buyer’s needs and can advise on factors such as market value of the home and neighborhood services. The agent will help the buyer through the negotiation and purchase process. But the buyer should take responsibility to make sure that the steps below are taken.
Home Inspection Contingency Included in Purchase Offer
At the point where the buyer finds a home and decides to make an offer, the contract should be written contingent on an acceptable inspection. If serious issues are found, the buyer has the options of requesting certain items to be fixed, to be compensated for the costs of repair, for a lower purchase price or to cancel the contract. Without this contingency, the buyer is bound to the contract without these options and may suffer huge costs.
Selecting the Home Inspector
Reputable and successful home inspectors may be recommended by the real estate agent or friends. The buyer should talk with prospective inspectors and ask for references. Another indication of competency is an affiliation with professional groups such as the American Society of Home Inspectors (ASHI) or the National Association of Home Inspectors (NAHI).
Inspecting the Home
There are potentially many problems in homes that are not visible to the eye. The home buyer that engages a professional home inspector can be assured that major problems will be identified. As an added value, by accompanying the home inspector and asking questions, the first-time buyer can learn about proper maintenance and of possible problems that will not go into the report.
What Will the Home Inspector Do?
The home inspector examines the entire home, both outside and inside, and checks for safety, defects, replacement or repair needs, and potential problems that should be monitored closely. The inspector will then produce a report covering the findings. The inspection generally takes two to three hours and costs between $200 and $500.
What Will Be Inspected?
External inspections will cover the roof, exterior walls, foundation, grading, garage, and may include sprinklers, lawn, porch lights, walkways and driveways as well. Interior inspections will examine the plumbing and electrical systems, HVAC (heating, ventilation and air conditioning), the water heater, kitchen appliances, laundry room, fire safety and bathrooms.
Taking this optional step of completing a home inspection, even with a new home, will be well worth the time and additional cost. It will provide a basis on which to make a more realistic offer and give the buyer the peace of mind of having in-depth knowledge about the house being purchased.
Feb 10, 2015 | Home Buyer Tips
Finding the perfect property is an exciting feeling, but its relative location can leave a lot of room for worry. Buying a home in the city is a venture that comes with an entire assortment of advantages and disadvantages. While the location might be close in proximity to businesses, services, and other people, it’s easy to worry about the other aspects of city living. What are the great and not-so-great facets of living on a busy street?
Pro: Access to Businesses and Schools
The chances are high that anyone living in a busy area is within walking distance of any store, shop, or service. Likewise, children have a range of options for education in busier areas; there are often multiple schools to choose from in any given busy area.
Pro: Access to Many Internet/TV Providers
In highly populated areas, a large number of internet and TV providers can co-exist. This means residents have a number of options when the time comes to choose providers. Luckily, it’s often difficult for providers monopolize densely populated areas.
Pro: Sense of Community
Many people that live in busy areas will be quick to share that they adore the sense of community. In fact, a large population is often one of the biggest reasons that people choose to move to bigger areas.
Con: Noise Level
As a street sees more activity, there’s no doubt that the noise level will also be a bit higher than usual. Residents that own homes on busy streets not only hear lots of noise from outside traffic, but they also often hear police sirens, animals, conversation, and more.
Con: Higher Price
It’s no secret that busy areas are a bit more expensive to live in. As anyone would expect, the convenience of city living comes with a higher price. Expect to hand over quite a bit more for a property in a highly populated area.
Con: Parking
Depending on the location of the neighborhood, parking can also be a problem. If street parking isn’t allowed, a resident in a big city might have to sacrifice their vehicle or park it a long distance from the property. This can be off-putting for many buyers.
If you’re on the fence about purchasing a property on a busy street, get more information from your trusted real estate agent before making a decision. A professional agent can provide valuable information about the property, neighborhood, chances for resale in the future, and much more. Don’t proceed any further without an agent’s advice!
Jan 29, 2015 | Home Buyer Tips
Are you currently shopping for a new home? While it’s true that real estate transactions can be stressful, this stress can be minimized by following a few simple tips. For example, following proper etiquette plays a big role in making your real estate experience go smoothly, and in this post we’ll share four key etiquette tips that are sure to help.
Get Preapproved
Prior to shopping, a buyer should check with a lender to determine the maximum loan amount they qualify for. This is proper etiquette because both the seller and the real estate broker have likely prepared themselves and assume you have as well.
Keep It Professional
Shopping for a home seems personal, but keeping interactions on a professional level can ease the awkwardness of the process. One step in that direction is being considerate of others’ schedules. Proper etiquette includes being realistic about how many properties can be seen in a span of time. Allowing time for a sellers’ special conditions, pets or children is also good etiquette.
Negotiate Through A Representative
When it’s time to negotiate pricing between a buyer and seller, the real estate agent should be used as the intermediary. While touring a property, it is best not to make offers or discuss how much the house is priced for, or make any counter offers without involving the real estate agent. It is also not advisable to point out stains, outdated designs or noticeable damage in the hopes of getting a discount.
Use Closing Credits
Home sellers should not be surprised once a buyer has decided to close and begins to negotiate the price. Home inspections reveal problems a home has and the buyer’s willingness to continue negotiating can depend on how willing the seller is to address those problems. A closing credit can be a win-win for both parties. If the buyer and seller of the home agree on closing credits instead of repairs and inspections, the buyer has the option of hiring a contractor and dealing directly with the contractor if not satisfied. Meanwhile, sellers are typically ready to move out or are not living at the property, so closing credits save them time.
Well-mannered people handle real estate transactions in a way that lets them join the ranks of successful buyers and sellers who operate with as little stress as possible. The good news is that real estate agents can help with understanding what proper home-buying etiquette is. Call a real estate agent to receive guidance on how to navigate a real estate transaction with ease.
