Imagine a homeowner consulting with their agent about the price to place on their home. The agent suggests that the market data indicates that $200,000 to 210,000 would produce a quick sale by pricing it properly. The owner puts a $210,000 price on the home.
The first person who looks at the home offers $205,000. When the seller receives the offer, he comments that he thinks he priced the home too low and counters for full price. The counter-offer is rejected, the home stays on the market and at the end of the first month when based on market conditions, the home should be sold, no other offers have been made.
It may be human nature that when an offer is received so quickly, the first thought to come to mind is that it was priced too low. A more appropriate thought might be that it was priced correctly. In some cases, when a home comes on the market, there is increased competition (real or perceived) among the buyers waiting for the “right” home to come on the market. The home can sell for a higher price than if it sits on the market for several months.
There may be stories of sellers who turned down the first offer and ended up receiving a better offer that would net more money. However, real estate professionals say the first scenario occurs frequently.
The wisdom of experience advises owners to find a real estate professional that they trust and have confidence. Allow that professional to become familiar with your home and compare it to similar homes in the market that have sold recently and ones currently on the market. Determine the demand for homes in the area compared to the inventory. Decide on a price that will allow the home to sell within a relatively short period of time. And lastly, be satisfied if your home sells quickly near the price you put on it.
As people near or enter retirement, one of the decisions that typically comes up is whether to sell their “big” home and buy a smaller one. If you know anyone who has been faced with that situation, selling one home and buying a smaller one may not save enough money to make it worthwhile.
There are sales expenses on the property being sold and acquisition costs on the replacement home. Generally speaking, homeowners may not mind a home with less square footage, but they usually don’t want to give up amenities or locations that they’ve become accustomed.
After a little number crunching, the move may not make enough difference in savings and they end up staying in their current home even if it doesn’t fit their needs anymore.
What if while this couple were still in their peak earning years, they acquired a home in an area where they would consider retiring and rent it during the interim. They could put it on a 15-year mortgage and possibly, even accelerate the principal payments to have it paid off by their anticipated move.
In the meantime, they could continue living in the “big” home until it is time to make the transition. Sell the “big” home that may be paid for by then and avoid up to $500,000 of capital gain. Take part of the proceeds and remodel the rental/transitional home and invest the proceeds for retirement income.
Ideally, the former rental would be mortgage free by this point, so the retirees would not have a house payment. Even if at this point, they changed their mind about retiring to this particular home, they still have a property that acted as a hedge against rising prices and have sufficient equity to purchase something else without using the proceeds from the “big” home.
It is difficult to know what the situation will be years from now when a person retires. It is clearly advantageous to have a plan that allows for options and choices. To find out more about purchasing your retirement home today, give me a call at .
For the last 25 years, most buyers have gotten a new mortgage or paid cash when purchasing a home. For a practical reason, owner-occupant buyers have another alternative: assuming a lower interest rate existing FHA or VA mortgage.
In the late 80’s, both FHA and VA began requiring buyers to qualify to assume their mortgages. Prior to that, good credit or even a job wasn’t required. The real reason there haven’t been significant numbers of assumptions in the past 25 years is that interest rates have been steadily going down. If a person had to qualify, they might as well do it on a new loan and get a lower interest rate.
Even though mortgage money is currently attractive and available, it is at a four-year high. When interest rates on new mortgages are higher than the rates of assumable FHA and VA mortgages originated in the recent past, it may be more advantageous to assume the existing mortgages. Conventional loans have due on sale clauses that prevent them from being assumed at the existing rate.
FHA loans that originated with lower than current interest rates have great advantages for buyers and sellers.
- Interest rate won’t change for qualified buyer
- Lower interest rate means lower payments
- Lower closing costs than originating a new mortgage
- Easier to qualify for an assumption than a new loan
- Lower interest rate loans amortize faster than higher ones
- Equity grows faster because loan is further along the amortization schedule
- Assumable mortgage could make the home more marketable
This financing alternative can save money for the buyer in closing costs and monthly payments. While the equity may be more than the down payment on a new mortgage, second mortgages are available to make up the difference. Call us at to find out if this may be an option for you.
Homeowners are familiar that they can deduct the interest and property taxes from their income tax returns. They also understand that there is a substantial capital gains exclusion for qualified sales of up to $250,000 if single and $500,000 for married filing jointly. However, ongoing recordkeeping tends to be overlooked.
New homeowners should get in the habit of keeping all receipts and paperwork for any improvements or repairs to the home. Existing homeowners need to be reminded as well, in case they have become lax in doing so.
These expenditures won’t necessarily benefit in the annual tax filing but may become valuable when it is time to sell the home because it raises the basis or cost of the home.
For instance, let’s say a single person buys a $350,000 home that appreciates at 6% a year. Twelve years from now, the home will be worth $700,000. $250,000 of the gain will be exempt with no taxes due but the other $100,000 will be taxed at long-term capital gains rate. At 15%, that would be $15,000 in taxes due.
Assume during the time the home was owned that a variety of improvements totaling $100,000 had been made. The adjusted basis in the home would be $450,000 and the gain would only be $250,000. No capital gains tax would be due.
Some repairs may not qualify as improvements but if the homeowner has receipts for all the money spent on the home, the tax preparer can decide at the time of sale. Small dollar items can really add up to substantial amounts over many years of homeownership.
You can download a Homeowner’s Tax Worksheet that can help you with this recordkeeping. The important thing is to establish a habit of putting receipts for home expenditures in an envelope, so you’ll have it when you are ready to sell.
The 2016 Color Trends Are …
If you like to stay up to date on the latest in home design, you may be interested to hear the color trends predicted for 2016. From Benjamin Moore’s Simply White to Behr’s Ivory Keys, the leading color trend is white, which serves as a neutral backdrop for other dramatic elements.
But before you go out and buy gallons of white, note that this year’s on-trend whites have color and warmth to them. These subtle variations in tone make them the perfect accompaniment to other hot colors highlighted this year, so keep that in mind as you select accent colors.
To update your space using the neutral white trend, take the following steps:
- Create a blank canvas — Paint an entire room in your favorite warm white. Starting with a neutral background lets other elements in the room stand out and become the focal point. Neutral rooms tend to be minimalist, so scale back on accessories and let the major pieces support your design.
- Experiment with hues — Try layering with several shades of white. Create a clean, classic look with a white room and an occasional pop of color. The design possibilities using a white color palette are surprisingly endless.
- Add contrast — Bold accent colors and crisp lines create sharp contrasts against white walls. Consider creating a feature wall with one of the other 2016 trend colors, like Blue Cloud from Olympic Paints or Paradise Found by PPG Porter Paints. You can also add other architectural elements in a dark wood or with geometric patterns.
I look forward to helping you find your next home!
The numbers don’t lie; often well-staged homes can see faster sales and higher offers than their cluttered counterparts. The key is getting an early start on the process. By beginning the monumental task of clearing the clutter and doing a pre-pack now, you can reduce the stress of preparing for showings and make it easier to move when your home sells.
Try these five staging and organizing tips to help you reach a faster sale.
Purge From Top to Bottom — Do a proper sort and purge, getting rid of outdated clothing, duplicate items and rarely used gadgets. To keep this task from turning into a source of serious frustration, tackle one room (or even one drawer) at a time.
Pack Up Everything but the Essentials — Start pre-packing your home, storing non-essentials or out-of-season gear in the garage or off-site. The idea is to give potential buyers a sense of space, which can’t be done if your home is overloaded with clutter.
Fix Glaring Problems — Remove out-of-style wallpaper, replace broken light fixtures, update cabinet and drawer pulls, and refresh dated window treatments. Simple fixes like these can make your home stand out from the competition.
Depersonalize — Remove family pictures and personal collections, and replace them with neutral artwork and simple accessories. The idea is to give potential buyers a neutral canvas so they can imagine their belongings in your home.
Go for Polished — Research the latest design trends and stage your house to match. Professional stagers recommend tailoring the design style to your target demographic. For example, if you’re in a family neighborhood, style the bedrooms for children, even if none live in your home.
I look forward to helping you buy and sell your next home!!
5 Popular Flooring Options
Thinking about giving your floor a facelift? You’ve got several flooring options, including the following:
Hardwood — Hardwood is a classic choice that works with any architectural style and can last for more than a century with the right care. Maintenance is a cinch and repairs are simple enough when normal wear occurs or pets leave their mark. That said, keep in mind that wooden floors can be cold and loud if they’re not accessorized with rugs.
Carpet — Carpet, whether natural or synthetic, is one of the more versatile flooring options. Wool carpeting is durable and resists moisture and stains better than synthetic fibers like nylon and acrylic. Easy cleaning and natural insulation properties for both sound and temperature are upsides, but carpet can also turn into a mildew nightmare if water damage occurs.
Cork — Looking for a more sustainable flooring option? Cork flooring offers a warm look and spongy comfort underfoot, plus the irregular grain hides imperfections. Though it’s easy to install, cork flooring can be damaged by pets’ claws, heavy furniture and sharp items.
Laminate — Good quality laminate floors are an economical alternative to hardwood. They resist scratches and discoloration and typically work well in moist environments like bathrooms and kitchens. Unlike true hardwood floors, laminate flooring can’t be sanded and refinished though, and it may offer a lower resale value when it’s time to sell a home.
Tile — This versatile flooring option not only lasts a long time and is easy to clean, but it also offers serious design flexibility. Tile’s resistance to scratches, stains and moisture is a major plus, but it doesn’t offer any insulation properties and installation can be difficult.
I look forward to helping you buy and sell your next home!!