Unless you have a boatload of cash under your mattress, buying a home usually costs more money than you currently have. First, you’ll need a competitively-priced loan.
When I need a good laugh, I like to read Vanity Fair magazine’s ‘Actual Complaints from Actual Rich People’ column. The monthly column is a super-short, super-funny compilation of woes of the very rich, as overheard by the author. My guess is that most of these sayings seemed totally sensible to the person who said them in the course of the conversation. In retrospect and out of context, though, they seem crazy and out-of-touch, even ridiculous.
Here’s a recent example: “I don’t ask my wife how many horses she has, she doesn’t ask me how many cars I have.”
Ridiculous, right? Well, while these folks are easy to poke fun at, many of us say things during a heated moment or emotional experience that we have a hard time standing behind later. Selling your home is one of those experiences that causes even the most stable, calm human being to feel panic, outrage, anxiety, and sometimes all of the above, all at the same time.
These volatile emotions give rise to a handful of seller sayings that seem silly when seen in a sober light. Here they are, along with some insights to help you ensure you don’t let them foul up your home selling decisions.
Don’t Let Emotions Sabotage Your Sale!
1. But I spent X years or $X on that! The ability to customize your home to your personal tastes and your family’s wants and needs is one of the biggest non-financial perks of home ownership. Creating a soundproof meditation room or a floating pool theater is your right as a home owner.
I encourage owners to make changes to their homes that will improve their quality of life while they live there, rather than fixating on whether they’ll be able to recoup their investment when they sell it 20 years down the line. (Of course, if you’re planning to sell in the near future, it might not make sense to invest in super-personalized home improvement projects.)
That said, the fact that YOU loved the idea of having a sports court, billiards room or Japanese garden enough to spend tens of thousands of dollars on it does not necessarily mean that your home’s buyer will place the same value on it – or any value, for that matter. I was once involved in a sale where the sellers had spent decades cultivating a beautifully complex Japanese garden which the buyers, busy professionals, had no time or interest in maintaining.
Not only were they not willing to pay a premium for it, they planned to rip it out and replace it with low-maintenance, low-water landscaping.
Let it go. Understand that other than the kitchen, bathroom, amenity and decor upgrades that appeal to many home buyers, if you’ve invested your time or money in customizations for your own personal enjoyment, then your enjoyment is your return on that investment. If your home’s eventual buyer also happens to love them, fantastic! But don’t approach the home selling process expecting every buyer to share your value system and pay through the nose for them.
2. We just need to find a buyer who understands my tastes. There are certainly occasions, with rare properties, where there is truly a narrow niche of buyers that will have to find, understand and appreciate a property. In cases like that, with acreage, converted warehouses, horse properties, and the like, this saying is not ridiculous at all.
But this saying is ridiculous when it is uttered by the owner of a home with potentially wide appeal as a reason for not staging or preparing their home for sale, or in the effort to avoid neutralizing highly, uh, personal design and decor choices.
If your home is lagging on the market while others sell, and your agent has suggested that you tone down the polka dot paint job or delete the Al Pacino mural on your dining room walls, think about how much time and money your decision to wait for the buyer who understands these design choices is costing you.
Rethink your position: as the ultimate marketing decision-maker in your home’s sale, your job is to maximize your home’s appeal to a broad segment of ready, willing and able buyers (not to find the one needle in a haystack who likes the Godfather as much as you). You’re moving on from the property, so move on emotionally, too. Don’t let your emotional attachment to your decor decisions or stubborn refusal to spend on staging keep your life or your finances stuck.
3. I want to price it high, so I have room to come down. Now, in all fairness – there’s a time and a place for this. By that I mean that there are certainly local markets where it’s very much standard practice for buyers to expect to come in below asking, and sellers can price their properties a few thousand dollars higher than the target price point without killing their deals. If you live in a place like this, your agent will surely work with you to price accordingly.
That said, when the market is slow enough that buyers are routinely paying below asking for homes, pricing your home above-market is actually dangerous. It runs the risk of causing no one to view your home as a good enough value to see it in the first place.
If other sellers are pricing appropriately and yours is priced too high over what the market will bear, many buyers won’t even bother trying to negotiate you down. Rather, they’ll go find one of the homes on the market with a more realistic price, they’ll wait until you lower the price or they’ll wait until your home has been lagging so long they sense you might be desperate, and will swoop in with a lowball offer of their own.
Even in a relatively hot market climate like today’s, the aggressively priced homes get the most buyer traffic and, accordingly, get the most offers. In turn, these bidding wars drive the eventual sales price up. If you want to sell your home in a buyer’s market, or sell it at top dollar in a seller’s market, overpricing it might actually sabotage your success.
4. That offer is an insult – I won’t even dignify it with a response. Your home might be very personal to you. It represents a massive investment of your money, time, hopes and dreams. It probably also represents your personal tastes, style and some precious memories of your family’s life.
But once it’s on the market, get a thick skin and decide not to take anything – anything – personally. If someone offers to pay many thousands of dollars for your home, it’s not an insult, even if the offer is far afield from what you are willing to sell the home for, or from what you believe it is worth. They might be deeply misguided, and not yet experienced enough in the market to know that the offer was unreasonable. Or they might just love your home and be going for it, even though it’s really outside of their personal resources.
Finally, they might actually just be trying to get you to come down a bit on the asking price. Some buyers see making a very low offer as part and parcel of negotiations.
In any event, you should always respond to an offer made by a qualified buyer. If you have another offer or offer(s) that are more realistic, just respond with a pleasant decline. If you have no other offers, respond with what you and your agent formulate as an appropriate counter. You might be surprised at how even a very low offer can come together with a respectful, reality-based counteroffer and a little negotiating.
5. I need $X to get the home I want and take my Australia trip – let’s list the place for that.There are lots of respectable strategies for setting a list price, but all of them have their basis in one thing: data. They all start with a look at the nearby, similar homes that have recently sold, and what they sold for; this is what agents call “comparable sales data.”
Depending on market dynamics, trends in inventory and home values, how similar/dissimilar your home is to the recently sold properties and what your own priorities are (e.g., sell fast, sell for top dollar, etc.), an experienced local agent might advise you to start with “the comps” and adjust your home’s list price down a bit, or to start with “the comps” and adjust upwards to get to your home’s list price.
But never will a savvy, experienced agent tell you that the proper way to price your home or understand its value is to do the math on how much cash you want and need, and set your list price by that.
Of course – you need to do your “move up math” in the process of listing your home in order to know whether your home sale is feasible or not. And you might actually have to factor in what you need to pay off your mortgage and move into your pricing decisions – that’s not bizarre.
But you should do so only with the awareness that your home’s ultimate value is based on what a qualified buyer is willing to pay for it – not what you need to move.
|A vacation home can be a house, apartment, condominium, mobile home or boat. If you own a vacation home that you rent to others, you generally must report the rental income on your federal income tax return. But you may not have to report that income if the rental period is short.In most cases, you can deduct expenses of renting your property. Your deduction may be limited if you also use the home as a residence.
Here are some tips from the IRS about this type of rental property.
• You usually report rental income and deductible rental expenses on Schedule E, Supplemental Income and Loss.
You may also be subject to paying Net Investment Income Tax on your rental income.
• If you personally use your property and sometimes rent it to others, special rules apply. You must divide your expenses between the rental use and the personal use. The number of days used for each purpose determines how to divide your costs.
Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.
• If the property is “used as a home,” your rental expense deduction is limited. This means your deduction for rental expenses can’t be more than the rent you received. For more about this rule, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
• If the property is “used as a home” and you rent it out fewer than 15 days per year, you do not have to report the rental income.
Get Publication 527 for more details on this topic. It is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
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Pocket listing are nothing new, but before putting your home on the market with just an individual agent or company, i.e. not listed in the MLS, you should be aware of the pitfalls as it may reduce your final sales price. It doesn’t matter if your in Sun Valley Idaho or New York, the sames issues apply.
Below is an article about how the California Association of Realtors is dealing with this issue in an attempt to make sure these potential problems are disclosed to sellers prior to putting their properties on the market for sale. Many times the only person that gains from a “Pocket Listing” is the listing broker. Now to the article, plus a link to the disclosure publication CAR created.
Pocket listings can adversely affect a seller’s goal of getting the best price reasonably for a home
About 1-in-4 home sales are reportedly pocket listings in some Northern California markets, and the California Association of REALTORS® is warning agents to tread carefully.
CAR says that pocket listings or off-MLS listings are not illegal if the listing agent fully discloses the pros and cons to the home seller and follows the rules, but CAR says pocket listings “may not be in the best interest of the property owner — particularly if a client does not know about the benefits of marketing his or her property through the MLS.”
CAR warns that “pocket listings” can adversely affect a seller’s goal of getting the best price reasonably for a home.
The increase in pocket listings has alarmed many in the industry, particularly at a time with inventory shortages in many markets. For example, 26 percent of home sales were pocket listings in the first quarter of 2013 in some Northern California markets, according to a recent study by MLSListings Inc. That’s an increase from 15 percent in 2012
CAR has published a booklet on pocket listings for agents to provide to their clients, “The Pros and Cons of Off-MLS Listings: What Consumers and Real Estate Agents Should Know.” CLICK TO READ
As the real estate market significantly rebounds, some buyers and sellers are dipping their toes in the waters for the first time. Inevitably, they come into the market with assumptions about how it works.
Their assumptions may come from TV reality shows or watching their parents’ house-hunting experiences. Maybe they’ve learned about real estate from a co-worker’s recent home buying or selling experience. The trouble is, the new buyer or seller’s assumptions are sometimes based on outdated or generalized “real estate myths.” Here are three such myths that many less-seasoned home buyers and sellers assume are true.
Myth No. 1: Spring is the best time to sell a home
Historically, real estate seasons were tied to summer and the end of the school year. Families were the typical buyers or sellers, and they wanted to move during the summer so their kids could start anew in September. That’s how spring became the prime selling season. It’s true there are still more homes for sale in the spring, which means there’s a lot of activity and buzz. But spring isn’t necessarily the best time to sell a home anymore.
The reality: The best time to sell is during the holidays and right after
Today, more than half of buyers aren’t married, and their decisions aren’t based upon school schedules. So spring isn’t as relevant as it used to be. Instead, the best time to sell a home is in November, December and January.
It’s a supply-and-demand issue. Most sellers assume buyers aren’t seriously looking during this prolonged holiday season. And yet, many buyers are looking at properties in person and online right up until Christmas Eve. If the right home goes on the market in mid-December, a serious buyer — and there will be a lot of them — will take note.
After New Year’s Eve, most buyers jump back into their routine with a resolve to get into the real estate market, even though many sellers wouldn’t even consider listing in January. The net effect: Savvy sellers will face less competition for a still-strong pool of buyers during this period. And that makes November-January a great time to sell.
Myth No. 2: Always start with your lowest offer
There’s no generalized strategy for making an offer on a home anywhere, ever. A seller could have overpriced or underpriced the home on purpose. Some markets may be more competitive than others. But, somehow, in the back of the buyer’s head is good old Uncle Bob saying “never offer the full asking price.” That strategy might work if you’re trying to buy a used computer on eBay. And it worked in some real estate markets years ago. But times have changed.
The reality: A low offer may get you nowhere fast
A buyer in a strong, tight inventory market today would be wasting their time making low offers right from the start. It’s likely a home that’s priced right and shows well can receive multiple offers, sometimes even over the asking price. In this environment, constantly throwing in low offers because that’s what your Uncle Bob advised you to do will likely lead to disappointment. Instead, work with a good local real estate agent to understand the market. You’ll quickly learn after a few weeks on the open house circuit (and maybe a disappointment or two) that starting low may not get you anywhere.
Myth No. 3: A cash offer trumps all
There’s an assumption that a seller, considering two different offers, will always go with the cash offer because there’s less risk. As a result, many buyers who hear they’re competing with a cash offer assume they won’t get the home. They may not even make a formal offer. At the same time, many cash buyers assume that because they’re paying cash, they can make an offer below the asking price, and it will likely be accepted.
The reality: A savvy seller may be more tempted by a solid financed offer
Consider a seller with a home priced at $399,000. The seller receives two offers: One is a cash offer of $375,000. The other is an offer for the full asking price, with 25 percent down, a bank pre-approval letter and swift contingency periods.
A good buyer’s agent, upon learning their client is competing with a cash offer, will arm the seller with lots of data supporting their client’s finances, such as a credit report and verification of income or assets. The agent might even arrange a call between the seller and the buyer’s lender.
Learn your market
When you become a buyer or seller, especially for the first time, the most important thing you can do is learn your market. Talk to a savvy local agent, and don’t make assumptions based on what you think you know. Real estate is local. Every market is different, with its own customs. If you believe there are general rules for real estate strategy that apply everywhere, anytime, you’ll likely be fooled — not only in April, but every other month of the year.
SOURCE: Fox Business News
If your lender cancelled or forgave your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2012.
Here are 10 key facts from the IRS about mortgage debt forgiveness:
1. Cancelled debt normally results in taxable income. However, you may be able to exclude the cancelled debt from your income if the debt was a mortgage on your main home.
2. To qualify, you must have used the debt to buy, build or substantially improve your principal residence. The residence must also secure the mortgage.
3. The maximum qualified debt that you can exclude under this exception is $2 million. The limit is $1 million for a married person who files a separate tax return.
4. You may be able to exclude from income the amount of mortgage debt reduced through mortgage restructuring. You may also be able to exclude mortgage debt cancelled in a foreclosure.
5. You may also qualify for the exclusion on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. The exclusion is limited to the amount of the old mortgage principal just before the refinancing.
6. Proceeds of refinanced mortgage debt used for other purposes do not qualify for the exclusion. For example, debt used to pay off credit card debt does not qualify.
7. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Submit the completed form with your federal income tax return.
8. Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit cards or car loans. In some cases, other tax relief provisions may apply, such as debts discharged in certain bankruptcy proceedings. Form 982 provides more details about these provisions.
9. If your lender reduced or cancelled at least $600 of your mortgage debt, they normally send you a statement in January of the next year. Form 1099-C, Cancellation of Debt, shows the amount of cancelled debt and the fair market value of any foreclosed property.
10. Check your Form 1099-C for the cancelled debt amount shown in Box 2, and the value of your home shown in Box 7. Notify the lender immediately of any incorrect information so they can correct the form.
SOURCE: IRS Tax Tips 2013-31
|The Internal Revenue Service has some important information for those who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may be able to exclude all or part of that gain from your income.Here are 10 tips from the IRS to keep in mind when selling your home.
1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
3. You are not eligible for the full exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
4. If you can exclude all of the gain, you do not need to report the sale of your home on your tax return.
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
6. You cannot deduct a loss from the sale of your main home.
7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude. Most tax software can also help with
8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
9. Special rules may apply when you sell a home for which you received the first-time homebuyer credit. See Publication 523, Selling Your Home, for details.
10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.
For more information about selling your home, see IRS Publication 523, Selling Your Home. This publication is available at IRS.gov or by calling 800-TAX-FORM