What you should .expect from a Realtor

Businesses must treat customers fairly if they expect to do business with them again or get recommendations to their friends. Customers of stores like Nordstrom’s understand that a salesperson is an employee and represents the company.


The line becomes less clear in some industries, especially ones that involve real estate. Agency is a legal relationship authorizing a person to act for or in the place of another. It involves responsibilities that exceed treating a person fairly.

The duties a buyer or seller can expect to receive from a real estate salesperson or broker include but are not limited to honesty, accountability, full disclosure, representation and reasonable skill and care. Buyers and sellers might additionally expect representation, obedience, loyalty and confidentiality.  State laws can differ on specific duties.

Mortgage and title officers are limited in their duties to the buyer to honesty and accountability and specific requirements under the federal Real Estate Settlement and Procedures Act.

A special relationship with a real estate agent makes it advantageous to have them coordinate efforts with the other professionals in the home buying process. Since most buyers’ and sellers’ transactions are infrequent, the agent can bring valuable experience to the transaction.

Every buyer and seller should discuss the level of service they expect from the real estate professional they work with. Another good question is what happens if the purchase and sale are within the same company.

Why Do We Want You to Get Pre-Approved? Here's Why!

Surely, you remember being a child at an amusement park when after having stood in line with your friends and family, waiting to get on a terrific ride, you discovered the sign that read, “you must be this tall to ride.”


Not only was it disappointing, it was slightly embarrassing. You never want to go through that again.  (I still go through it! ;))

A remarkably similar situation occurs when people are buying a home. After finding the right home and negotiating the contract, they find out that they don’t measure up financially.  It’s not something that anyone wants to go through if they have a choice.

Regardless of what you think you know, if you’re buying a home with a loan, you need to physically visit with a trusted mortgage professional before you get serious.

• You’ll find out your credit score which will directly affect the mortgage rate you’ll pay. 
• You might discover blemishes on your credit that possibly can be corrected. 
• You’ll even get a pre-approval letter that you can submit with an offer which could dramatically affect your negotiations in the current competitive market.

Some rides don't turn out to be as good as you thought they were going to be.  A person certainly doesn’t want that disappointment with a lender. Contact me for a recommendation of trusted mortgage professional.

1031 Tax Exchange- Great option for investors.

The cartoon character Wimpy would say that he’d gladly repay you Tuesday for a hamburger today. Some real estate investors say a similar thing to Uncle Sam to be able to hold on to their proceeds from the sale of an investment and agree to pay the tax later. 

The benefit of a 1031 exchange is that it allows the investor to defer the tax due from the sale into the replacement property. This allows more money to be reinvested. In the example shown, the investor has 27% more to invest now by deferring the tax into the future.

The property to be exchanged must be like-kind which means real estate for real estate.   Rental property can be exchanged for other rental or investment property.  Personal-use properties like a first or second home are not eligible for exchanges.

There are some critical dates that restrict the validity of the exchange. The investor must identify the replacement property within 45 days of the sale of the relinquished property. The replacement property must be closed within 180 days of the sale of the relinquished property.

• The replacement property must be equal to or greater in value, equity and debt than the one being relinquished.
• All net proceeds must be used in acquiring the replacement property.

There are specific rules involved in constructing a valid tax-deferred exchange. There are three professionals that should be involved: a tax advisor, a real estate professional and a qualified intermediary who will assist in the acquisition and transfer of both the relinquished property and the replacement property. Additional information can be found in IRS Publication 544.

Its A Great Time To Buy A Rental.

Rentals are IDEAL

Rental homes are the IDEAL investment because they offer a higher rate of return than other investments without the volatility of the stock market. With certificates of deposit and bonds at less than 2%, people need an alternative investment that they understand and with a reasonable amount of control.

In this case, IDEAL is an acronym identifying the advantages of rental properties.

• Income from the monthly rent contributes to paying the expenses and a return on the investment.
• Depreciation is a non-cash deduction that shelters income for some investors.
• Equity buildup occurs with amortized mortgages because each payment is composed of interest owed and principal reduction to retire the loan by the end of the term.
• Appreciation is achieved as the value of the property goes up.
• Leverage can increase the return on investment by using borrowed funds to control a larger asset.

These individual benefits working together make rental real estate a good investment for today’s economy. Increased rents, high rental demand, good values and low, non-owner occupied mortgage rates contribute to positive cash flows and very favorable rates of return.
  

To find out more about how rentals might complement your current investment plans, contact your real estate professional.

Plan Your Estate Properly - Be Prepared

An estate plan is a collection of documents to ensure that your wishes are carried out because of death or incapacity to make decisions for yourself. Spouses, minor children, adult children, property and investments can all be factors that should motivate a person to undergo the process.

Will – this document specifies the way a person wants to manage and distribute his/her assets after their death. When a person dies without a will, the laws of the state where the person resided will determine the distribution of the property.

Durable Power of Attorney – this document grants to a designated person the authority to act on behalf of the principal in in legal affairs should the principal become incapacitated. Among other things, this would allow the attorney-in-fact to buy and sell property on the behalf of the principal.

Healthcare Proxy – this document grants that a designated person can legally make healthcare decisions on behalf of the principal when they are incapable of making and executing specific decisions stated in the proxy.

Living Will – this document directs physicians with respect to life-prolonging medical treatments in case they become unable to communicate their decisions.

Hippa Release – this document allows heath care providers to release your health care information to a designated person. Otherwise, they are required by federal law to protect the privacy of your health information.

Letter of Instruction – This document contains information and instructions about a person’s wishes upon death. It is intended to offer details on whom to contact and where to find important documents about personal and financial matters.

Requirements of these documents can vary from state to state and legal advice should be obtained. If you need a current estimate of value on real estate that may be involved, usually a price opinion from a licensed real estate professional will suffice. It would be my privilege to assist you with this at no cost or obligation.

Attention Investors?

Single-family homes offer an investor the ability to borrow large loan-to-value amounts at fixed interest rates for long terms on appreciating assets, tax advantages and reasonable control. Some of these characteristics are not available through other investments.

75-80% loan-to-value mortgages are available on most residential properties up to four units. Comparatively, the stock market allows you to borrow up to 50% on a stock but if the price goes down, they will require additional cash to keep the ratio at or below 50%. If it isn’t available, your stock can be sold to satisfy the loan.

Real estate investors call getting a long-term mortgage putting an investment to bed. The fixed-rate and the 20-30 year terms are exceptions to loans for most other investments, if they’re available at all.

Real estate tends to go up in value over time. There can be a lot of variables that affect the price like supply and demand, condition and available mortgage money, in addition to the general economy.

Rental real estate has several different tax advantages. The profits are taxed at lower, long-term capital gains rates for investors who have owned the property for more than 12 months. While the property is being rented, investors are given a non-cash deduction based on cost recovery of the improvements. Tax deferred exchanges can also be available if specific conditions are met which allow an investor to postpone paying the tax on the gain.

It isn’t necessary to have a partner with most rental homes if the investor can qualify for the mortgage. This allows investor control to make all the decisions that an owner is entitled such as setting the rent, making improvements and determining when to sell.

Rental real estate can earn a much higher rate of return than other available investments while providing income during the holding period. It certainly is worth investigating the possibility with a real estate professional who understands and works with rental properties.

Don't Forget to Save for Home Maintenance

Homeownership, part of the American Dream: a home of your own where you can feel safe, raise your family, share with your friends and enjoy life. The benefits are easily recognizable but maintenance is just a real and should be considered.
Property taxes and insurance are two of the largest expenses homeowners have aside from their mortgage interest. But, as any homeowner knows, there will be occasional expenses for repairing toilets, faucets, windows and other things. There are also the significantly larger expenses that arise like replacing a water heater or HVAC unit. And don’t overlook the periodic maintenance like painting or floor coverings.

Financial experts suggest that homeowners save one to four percent of the home’s value per year for repairs and maintenance. Two to eight thousand dollars a year may sound like more than you’ll need but the cost of an air conditioning unit can easily be $6,000.

Some homeowners purchase home warranties to avoid the unexpected costs. An annual premium instead of an unexpected large expenditure. Coverage varies from company to company and are not intended to cover existing conditions.

The alternative to not saving for these anticipated expenditures means that a homeowner might have to put it on a credit card at a very high interest rate or get a home improvement loan. Appreciation is a distinct benefit of home ownership and deferred maintenance can limit the value as well as lengthen the market time when it sells.

Do You Need Down Payment Assistance? You May Actually Have it and Don't Realize It.

Saving the down payment may be unnecessarily keeping would-be buyers from getting into a home. They may be unaware that the funds might be available.
The NAR Profile of Home Buyers and Sellers reports that 81% of first-time buyers got all or part of their down payment from savings. Less than 4% said that all or part of the down payment came from a withdrawal in their IRA and 8% from their 401(k) or pension fund. 
Traditional IRAs have a provision for first-time buyers which include anyone who hasn’t owned a home in the previous two years. A person and their spouse, if married, can each withdraw up to $10,000 from their traditional IRA for a first-time home purchase without incurring the 10% early-withdrawal penalty. However, they will have to recognize the withdrawal as income in that tax year. For more information, go to IRS.gov.
Allowable withdrawals from traditional IRAs can be from yourself and your spouse; your or your spouse’s child; your or your spouse’s grandchild or your or your spouse’s parent or ancestor.
Roth IRA owners can withdraw their contributions tax-free and penalty-free at any age for any reason because the contributions were made with post-tax income. After age 59 ½, earnings may be withdrawn as long as the Roth IRA have been in existence for at least five years.
Up to half of the balance of a 401(k) or $50,000, whichever is less, can be borrowed by the owner at any age for any reason without tax or penalty assuming the employer permits it. There can be specific rules for loans from a 401(k) that would determine the repayment; interest is usually charged but goes back into the owner’s account. You can consult with your HR department to find out the specifics.
A risk in borrowing against a 401(k) comes if your employment ends before the loan has been repaid. The loan may have to be repaid as soon as 60 days to keep the loan from being considered a withdrawal and subject to tax and penalty. Even if you continue with the same employer, failure to repay the loan could be considered a withdrawal also.
Your tax professional can provide you specific information on how making a withdrawal from your retirement program might affect you. Additional information can be found on www.IRS.gov.

Real Estate is in High Demand

Real estate is the overwhelming preferred choice by Americans as identified in a recent survey. With the Dow Jones industrial average reaching record highs, it might be expected that the stock market would be the favored choice but that wasn’t the outcome.
Analysis of the report suggests that the popularity for houses could be that they are tangible assets that you can see where your money is actually invested compared to stocks and bonds which tend to be unclear where the money is invested.
There are several distinct advantages of homes as investments over other popular alternatives.

1. High loan-to-value mortgages available
2. At fixed interest rates
3. For long periods of time
4. On appreciating assets
5. With definite tax advantages
6. And reasonable control.

Another advantage of rental homes is that most people are comfortable with them. It is the same type of property that they live in but used as a rental. They have a tendency to understand the key components such as value, appreciation, rent, maintenance and financing.

Buy Now or Buy Later

It has been said that change is the only constant. Most of the financial experts have been expecting interest rates to increase along with home prices. While homes, in most markets, have definitely seen increases over the past five years, the mortgage rates today are actually lower than they were a year ago. 
If the interest rates were to increase by 1% over the next year while homes appreciated at 6% during the same time frame, a $250,000 home would go up by $15,000 and the payment would be $211.53 more each month for as long as the owner had the mortgage. The increased payments alone would amount to $17,769 for the next seven years.
When facing a decision to postpone a purchase for a year, a legitimate question to ask oneself would be: “how will it feel to have to pay more to live in basically the same home a year from now?”
It is easy to understand that if the price of a $250,000 home goes up by 6%, it increases the price by $15,000. A slightly more difficult concept to realize is that if the interest rate were to go up by ½%, it is approximately equal to a 5% increase in price. A 1% increase in mortgage rates would approximately equal a 10% change in price. This means that if a home goes up in price by 6% and the interest rate goes up by 1%, it is equivalent to the price of the home going up by a little more than 16%.
Use the Cost of Waiting to Buy calculator to estimate what it might cost to wait to purchase based on your own estimates of what interest rates and prices will do in the next year.

Educate Yourself on Taxes for Your Investment Property

In the last few years, some people who were unable to sell their homes, rented them instead. The market has improved in most places and the home may easily sell now and possibly, for a higher price.


Even though the opportunity to sell in the near future might not change, there could be another opportunity that could quickly disappear for some homeowners.

Most homeowners are aware that there is a capital gain exclusion on the profits of a principal residence of up to $250,000 for single taxpayers and $500,000 for married taxpayers filing jointly. The rule requires that you must own and use the home as your principal residence for two out of the last five years.

A homeowner can rent their home for up to three years and still be eligible for the exclusion. As an example, if they had owned and lived in it for two years and then rented it for two and a half years, they would need to sell and close the transaction before the remaining six months expired.

If there was a $200,000 profit in the home that didn’t qualify for the exclusion, a 15% long-term capital gain tax of $30,000 could become due depending on the tax bracket of the owner. With some careful planning, the tax could be avoided. Awareness of the time frames and the right team of tax and real estate professionals could save a considerable amount of the homeowner’s equity.

Down Payment Options for Buyers.

For the person who has good credit and income but not enough money for the down payment on a home, their qualified retirement program could offer them some help. The rules are different depending on whether it is a 401(k), a Roth IRA or a traditional IRA.
Up to half of the balance of a 401(k) or $50,000, whichever is less, can be borrowed by the owner at any age for any reason without tax or penalty assuming the employer permits it. There can be specific rules for loans from 401ks that would determine the repayment; interest is usually charged but goes back into the owner’s account. You can consult with your HR department to find out the specifics.
A risk in borrowing against a 401(k) comes if your employment ends before the loan has been repaid. The loan may have to be repaid with as soon as 60 days to keep the loan from being considered a withdrawal and subject to tax and penalty. Even if you continue with the same employer, failure to repay the loan could be considered a withdrawal also.
Roth IRA owners can withdraw their contributions tax-free and penalty-free at any age for any reason because the contributions were made with post-tax income. After age 59 ½, earnings may be withdrawn as long as the Roth IRA have been in existence for at least five years.
Traditional IRAs have a provision for first-time buyers which include anyone who hasn’t owned a home in the previous two years. A person and their spouse, if married, can each withdrawn up to $10,000 from their traditional IRA for a first-time home purchase without incurring the 10% early-withdrawal penalty. However, they will have to recognize the withdrawal as income in that tax year. For more information, go to IRS.gov.
Another interesting fact about this provision is that the taxpayer making the withdrawal can help a relative includes children, grandchildren, parents and grandparents.
If you want more information to clearly understand the issues involved relative to your specific situation, talk to your tax professional or consult www.IRS.gov.

Investment in rental homes.

Rental homes can be a natural alternative investment choice for homeowners because they are already familiar with houses. Maintenance on a rental is not that much different than on your personal home. The same plumbers, painters and other workmen can be used to make repairs. 
Single family homes offer an investor high loan-to-value mortgages at fixed interest rates for long terms on appreciating assets with defined tax advantages and more control than other investments.

1. High loan-to-value mortgages – most investments require that you pay cash but rental properties can be purchased with 20% down payment.
2. Fixed interest rates – most commercial loans are based on a floating rate such as prime interest plus one or two percent compared to real estate loans as fixed rates for the term.
3. Long terms – commercial loans are generally short-term such as six months or a year with the possibility of being renewed for another six months or a year unlike real estate where a 30-year mortgage is commonplace.
4. Appreciating assets – real estate has a long-term history of going up in value.
5. Defined tax advantages – many investments are taxed as ordinary income but rental real estate enjoys a non-cash deduction called cost recovery, the profits from sale are taxed at lower long-term capital gains rates or may be eligible for a tax-deferred exchange.
6. Control – rental homes don’t require partners and afford the investor more options than investing in mutual funds and other traditional investments.

The demand for good rentals is strong and the rents continue to go up in most markets.  There are people who choose not to buy or cannot buy a home who would prefer to live in a single family home rather than an apartment.