Tuesday, May 27, 2014

Record Improvements Now

Register-250.jpgThere is a significant difference in how the money you spend on your home is treated for income tax purposes.  Repairs to maintain your home’s condition are not deductible unlike rental property owners who can deduct repairs as an operating expense.

On the other hand, capital improvements to a home will increase the basis and affect the gain when you sell which may save taxes.

Additions to a home or other improvements that have a useful life of more than one year may be considered an increase to basis or cost of the home.  Other increases to basis may include special assessments for local improvements like sidewalks or streets and amounts spent after a casualty loss to restore damage that was not covered by insurance.

Unlike repairs, improvements add to the value of a home, prolong its useful life or adapt it to new uses.

You can read more about improvements and see examples beginning on the bottom of page 8 of IRS Publication 523.  For a form to keep track of money you spend, print this Improvement Register.

Tuesday, May 20, 2014

Cut Your Housing Costs in Half

50% off (small).pngSerious shoppers wait for a 50% off sale to make the decision because of the bargain factor.  Renters who are serious about lowering their monthly cost of housing should consider buying with today’s low mortgage rates.  For an example, let’s assume a person buys a $200,000 home with 3.5% down payment on a 4.5% FHA mortgage for 30 years.

The total house payment would be approximately $1,508 per month.  However, once you consider the equity build-up due to normal amortization, a monthly appreciation estimated at 2% annually for this example, the tax savings and paying maintenance that a tenant wouldn’t be required to do, the net cost of housing is $772 a month.  This is almost half of the full mortgage payment.

If this person was paying $1,750 a month for rent, it would cost him almost $978 more to rent than to own. In the first year alone, it would accumulate to over $11,000 which is more than the down payment required of $7,000.

Owning a home is the largest investment that most people make and the down payment of $7,000 to purchase this home would grow to $58,837 in equity by estimating a 2% appreciation and normal amortization.

To check out what your real housing costs might look like, go to Rent vs. Own or contact your real estate professional.

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Friday, May 16, 2014

Tuesday, May 13, 2014

Who Saves the Commission?

Save Commission-250.jpgOne of the most common reasons buyers want to deal directly with the seller is because they feel they can save the commission.  It’s a valid consideration but interestingly, it’s the same reason the seller isn’t employing an agent; they feel they can save the commission.

Both parties cannot save the commission.  The buyer feels they have earned it because they’ve had to find the home, determine its value and negotiate with the seller.  They had to arrange their own financing, title and inspections.

The seller equally feels that they have earned the commission because they have incurred all of the marketing expenses and have invested hours upon hours to be available to show the property, hold open houses and answer inquiries.  They have had to research value, financing, title work and make decisions. 

There is certainly value in all of the things that buyers and sellers are willing to do to save the commission but only one person can save the commission only if the buyer and seller can reach a written agreement.

There is value to having a third party advocate helping each party to the transaction.

The Profile of Home Buyers and Sellers (Exhibit 8-1) reports that 14% of sales were For-Sale-by-Owners in 2004 compared to just 9% in 2013.  The trend shows that agent-assisted sales rose to 88% in 2013 from 82% in 2004.

The three most difficult tasks identified by for-sale-by-owners is attracting potential buyers, getting the price right and understanding and performing the paperwork. When surveyed, sellers most value the home selling in an anticipated time frame and for an expected amount.

The reality is that both parties cannot save the commission.  It is earned by providing specific services that are essential to the transaction.  The capital asset of a home represents the largest investment that most people make.   An investment that important certainly deserves the consideration of a professional trained and experienced to handle the complexities involved.

Tuesday, May 6, 2014

Consideration could be the key to your new home

Keys in Hand Small.jpgConsideration associated with a contract is generally thought to be the price and terms but being sympathetic and courteous towards the seller could make a difference in getting the home you want.

Business people, like store owners, expect to deal with customers and even come to expect behavior that might not be accepted in a purely social atmosphere. Homeowners, on the other hand, may not be aware of what to expect.  They are opening the sanctity of their home to the public for review and criticism.  Buyers may be detached from emotional feelings while the sellers might react unfavorably to comments that are taken personally. 

  1. Be on time for appointments; cancel if necessary.  The sellers may be rearranging their schedules and making an additional effort to make it convenient for you to see the property.
  2. Be a good guest and respect the seller’s privacy.  Look at the home and avoid looking at the seller’s personal items; there is no reason to look in refrigerators or furniture drawers.
  3. Don’t sweat the small stuff.  Try to focus on critical items of a home like location, floor plan, layout, size and not dwell on cosmetic items that are easily and inexpensively changed.
  4. It’s not a good negotiating technique to list the defects.  Most people become defensive when presented with a list which could have the opposite effect of helping you get a better deal.
  5. Limit your visits until you actually own the home.  It’s natural to be excited and making plans to move into your new home but it is still the seller’s until closing and they’re making plans to move too.
  6. Negotiations are generally finished when a contract is completed.  It can be frustrating to continually be asked for “one more thing.” Make a deal with the seller and live with it.  If there’s something you’re not sure about, specify it in writing in the contract.

Some things are obvious: the seller wants the most for their home and the buyer wants to pay the least possible.  Showing consideration to the seller about things that don’t have anything directly to do with price can actually benefit the buyer.

Friday, May 2, 2014

Midland, Michigan Real Estate Spotlight: A Move Toward Luxury

No matter your season of life, a move toward luxury is always a good choice.  If you're interested in Midland Michigan real estate, we have the perfect option for you: 5608 Powder Horn Trail, $650,000

Whether you’re hosting cocktails for four or a catered event for forty, your entertainment needs are easily accommodated in this executive home. The butler’s pantry with full prep kitchen allows any mess to remain out of sight. Relax and enjoy time together in the open kitchen and family room; or move into the dining room and formal living room to enjoy the floor to ceiling windows.

Beautiful cherry cabinets and stainless steel appliances will delight the cook in your family. The expansive island provides storage for all your kitchen supplies and is a great place for a quick morning breakfast or a few hours of homework. The stunning Brazilian Cherry floors flow throughout the entire main level.

The private master suite is located on the south side of the home and offers a beautiful view of the wooded backyard. With enough space for a comfortable seating area, this could be the peaceful retreat you need after a long week. The attached master bath features a tile rain-shower with seat and privacy windows and a separate water closet. His and hers vanities and walk-in closets finish off the suite.

The second story is devoted to three large bedrooms, each with their own walk-in closet. The front bedroom has an attached full bath and the other two bedrooms share a Jack & Jill bathroom.  At the top of the stairs is a desk space which could easily be used for storage or study sessions. Separated from the main living areas, this upper level has privacy and plenty of personal space for guests or any member of the family.

The lower level offers an additional 1400 square feet of living space to meet your unique needs. With a fifth bedroom and full bath, it could function as a private living area. It would also be a perfect place for your in-home movie theater or gym. Currently, the space houses both a family room and workout area. Also located in the lower level is a quiet place to get a bit of work done, or the perfect space for your home business. The large den is tucked away in the lower level of the house and features a full wall of above-grade windows. This space would also function beautifully as a library or hobby room.

Your new car will reside in style in the heated garage. With 3 full-size stalls there is room for your sports car or the young driver in your home. Sports equipment, winter boots, backpacks, or gym bags– you need a place to drop your “stuff”. The mud room allows you to keep all these items out of sight while still in a convenient location.

For a private showing of 5608 Power Horn Trail, or any other Midland, Michigan houses for sale, contact agent Shelley Park Cluff at 989-698-1100 or email sold@shelleypark.com.