Tax benefit you or your loves ones should know about.

Special consideration is made by IRS for the sale of a jointly-owned principal residence after the death of a spouse. Surviving spouse may qualify to exclude up to $500,000 of gain instead of the $250,000 exclusion for single people if certain requirements are met.

• The sale needs to take place no more than two years after the date of death of the spouse. 
• Surviving spouse must not have remarried as of the sale date. 
• The home must have been used as a principal residence for two of the last five years prior to the death.  
• The home must have been owned for two of the last five years prior to the death.
• Survivor can count any time when spouse owned the home as time they owned it and any time the home was the spouse’s residence as time when it was their residence.
• Neither spouse may have excluded gain from the sale of another principal residence during the last two years prior to the death.

If you have been widowed in the last two years and have substantial gain in your principal residence, it would be worth investigating the possibilities. Time is a critical factor in qualification. Contact your tax professional for advice about your specific situation. Contact me to find out what your home is worth in today’s market. See IRS Publication 523 – surviving spouse.

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.

Mortgage Rate History

It’s not “if” the rate goes up but “when” the rate goes up; it could make a big difference for some buyers. Freddie Mac predicts that mortgage rates will be at 4.5% a year from now.
If buyers can afford a home with higher interest rates, it means higher payments. Higher payments might mean they won’t have the money to spend on other things like furniture or improvements to the home or an unrelated purchase like a new car.
When the rate moves 0.50% on a $250,000, the payment goes up by $70.66 a month. If it moves 1.00%, the payment goes up by $143.74 per month, each and every month for the entire term of the mortgage which means paying over $50,000 more for the house.
The question facing every borrower in this situation is “How will you feel about having to pay more to live in the same house because you were not ready to commit?”
Then, there’s the borrower who is absolutely maxed out as to what they can qualify for or sometimes, it is a borrower who just refuses to pay a higher payment. When that’s the case, the buyer has to make a larger down payment. In the same example, a 0.50% increase in rate would require $14,873 more in down payment. That could make the purchase impossible or require the buyer to buy a lesser price home that will not have the same amenities.
Mortgage rates have been low for so long that some people think that is what they should be. There are some economists who believe that the economy will not be strong again until mortgage rates are in the 7% range.
To see how this type of scenario might affect you, go to the If the Rate Goes Up calculator.

Real Estate Photos Are Extremely Important

Listing photos may be one of the most important marketing efforts that lead to a potential buyer.
Nearly, all buyers use the Internet during the home search process. They usually start looking at homes online before they contact an agent. It’s far more efficient to screen properties by looking at the pictures that have been posted than to make appointments with each homeowner, drive all over town and waste a lot of time looking at homes that would never meet a buyer’s criteria.

• There needs to be enough pictures of a property to adequately represent the home; most websites allow for at least 24 and more may be needed if it is a large home.
• Take horizontal shots to accommodate the format of most listing websites.
• The pictures should be well-lit so that it is easy to see all of the features of the room. Natural light is preferred over the limitations of flash.
• They should be taken with a wide-angle lens so that you can see the majority of the room in one picture.
• Large rooms can be taken from different angles to give the buyers a different perspective.
• Rooms should be set if not staged prior to taking the pictures so they will give the buyer an idea of what the room might look like with their own things in it.
• Arrange pictures in website to help buyers visualize the floorplan as if walking through it.
• Think about using a tripod; professionals do to absolutely hold the camera still.
• They should definitely not be “photoshopped” to modify factual elements like removing power lines.

Everyone occasionally takes a great picture but it doesn’t make them a photographer. Since the photography can be one of the most important marketing efforts, consider using a professional photographer to show the home to its best advantage.

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.

The Right Questions are Key

Asking the right questions will lead to the answers that help you determine which agent to use for one of the largest investments that most people make…the purchase or sale of their home. 
Rudyard Kipling wrote the verse “I keep six serving men, they taught me all I knew; their names were what and why and when and how and where and who.” Prefacing your questions with one of these words can help you get the information you need to make a good decision about the REALTOR® you use.

• How long have you been selling homes and is this your full-time job?
• What designations or other credentials do you have?
• How many homes did you and your company sell last year?
• What is your average market time compared to MLS and your top competitors?
• What is your sales price to list price ratio?
• When will you report to me on the progress of my transaction?
• Who can you recommend for service providers like mortgage, inspections, repairs and maintenance?
• Why do you want to work with me?
• Where are the biggest opportunities to expose my home to the largest market?

Finding the right person to represent you is a little like the person who ordered a lobster dinner at a restaurant. When the waiter brought out the meal, the lobster only had one claw. The customer asked why it only had one claw and the waiter said: “I don’t know; I guess it was in a fight.” The customer looked at him and said: “then, bring me the lobster who won.”

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.