"You must gain control over your money or the lack of it will forever control you." - Dave Ramsey
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Posted in Economist Commentaries, by Amanda Riggs on November 9, 2015
Some homeowners opt to sell their residence without a real estate agent to get around paying a commission and make more of the profit. Forty-eight percent of people who sell without a real estate agent think that if they sell themselves, they’ll end up doing a little extra work in exchange for not paying a commission or closing fee. According to the research, however, what they actually get is a lot of time spent hustling to make the sale and a final selling price that is less than what the market can bear.
Do you have a lot of extra time to market your home and do all the work to meet and greet properly? Are you versed in local trends on the housing market and know the latest regulations for closing a sale? Do you have a list of potential buyers ready to view your home? Eighty-nine percent of all homes sold in 2015 were sold with the assistance of an experienced real estate professional, according to the 2015 Home Buyers and Sellers Profile. Most leave it to the professionals, yet there is still a small group of people who prefer to do it themselves. Eight percent of home sellers chose to list themselves, known as For-Sale-By-Owners (FSBO) home sales. That number has steadily declined since 2004 where only 82 percent of all home sales were agent-assisted and 14 percent of homes were listed FSBO. FSBO sales are currently at an all-time low since data collection began in 1981.
Let’s break it down further. Thirty-eight percent of all FSBOs—that’s only three percent of the total home sales in 2015—were homes sold to people where the buyer knew the seller selling to a friend, neighbor, or family member. However, 62 percent of FSBO home sales—five percent of total homes sold—were sold by the owner to someone they didn’t know. According to the 2015 Home Buyers and Sellers Profile report, sellers cited creating yard sings, listing their homes online on multiple websites, spreading the news through word of mouth, putting out classified ads, displaying on social media, hosting an open house, and registering with the Multiple Listing Service (MLS) database. That’s a lot of work just on marketing and finding potential buyers.
The time it takes to sell a home on the market was roughly the same for FSBOs and for agent-assisted homes, the median time listed was four weeks for both groups. A third of all homes were sold in less than two weeks last year. Most FSBO homes sales were located in a resort area (16 percent), rural area (15 percent), or a small town (13 percent). Seventy-five percent of FSBO sales were detached single-family homes. Ten percent were mobile or manufactured homes. FSBOs typically had lower incomes than those who worked with an agent. The median income of FSBOs was $84,000 and for those who sold through an agent was $105,600. Those who sell themselves have the perception that they have less money to pay for assistance when selling their home and opt to go it alone.
As it turns out, FSBO make less money on their home sales than buyers who work with a real estate agent. According to the report, the median selling price for all FSBO homes was $210,000 last year. When the buyer knew the seller in FSBO sales, the number plunges to the median selling price of $151,900. For homes sold with the assistance of an agent, the median selling price was $249,000 ̶ almost $40,000 more for the typical home sale. According to NAR’s 2015 Member Profile, sixty-nine percent of all real estate agents get paid by a percentage commission split between two agents representing the buyer and seller.
Talk to an agent and find out what they suggest for the commission and then do the math yourself. The closing price for the agent-assisted seller is likely going to be way above an FSBO. In reality, homes sold by the owner make less money overall. Based on these closing numbers, why not save yourself time and make more money by working with a real estate agent that is excited to sell your home?
Helping clients understand the complexities of title insurance keeps potentially small legal issues from snowballing.
SEPTEMBER 2015 | BY AIMEE HUI
Your client is under contract to buy a condo. The seller's disclosure statement mentions: "The deeded parking stall is space #8, but all present and previous owners have been using space #3." The transaction closes smoothly, but afterward, your client receives a letter from another owner notifying her that the parking space she's using isn't hers. Your client notifies her title insurer, who denies coverage because space number eight was insured by the policy, her use of #3 was not insured, and the issue was disclosed by the seller. As a result, your client is left to address the issue at her own expense. A lawsuit will most likely be filed unless a compromise between the affected unit owners can be reached. Your client is left wondering why you didn’t help her catch this in the first place.
As you can see, it's important for home buyers to be aware of title insurance matters during transactions. And while it is not your role as a real estate practitioner to offer advice about specific policies, it is helpful if you can point out issues that clients need to investigate further. After all, the seller’s disclosures may affect your client’s title insurance coverage for future claims. Here we clarify eight common misconceptions that consumers and real estate professionals may have about title insurance.
1. Title insurance only insures "clear title." Policies typically cover defects, liens, or encumbrances on titles. But, depending on the form, they may also cover losses related to access, building permits, subdivision of the land, zoning, land use, encroachments, setbacks, easements, damage to structures, and supplemental tax assessments.
2. Title insurance covers matters shown in the policy. If an item is listed in Schedule B of the policy, any loss arising from that item is exempt from coverage. For example, if Schedule B of the policy lists a roadway easement in favor of the owner of the adjacent property, any dispute or loss arising from that easement is not covered by the policy.
3. Title insurance guarantees a property is free of liens and clouds against title. Title insurance is not a guarantee. It's an insurance contract, indemnifying the insured for actual loss arising from matters covered under the policy’s terms. Not everything is covered. For example, if an insured person, before closing, knew of an unrecorded roadway easement in favor of her neighbor, the policy would not cover loss arising from the easement.
4. If a title issue is discovered, the title insurer must fix it so escrow can close on time. The title insurer has the right and obligation to investigate the claim, even if it was tendered under time constraints imposed by a pending escrow. The title insurer is not required to fix the problem so escrow can close on time, nor is the insurer liable for loss arising from delay or loss of the sale.
5. The title insurer won't do anything if there's no coverage under the policy. In cases where there's no coverage for a claim, the title insurer has the right, but not the obligation, to address the claim and the insured has a duty to cooperate.
6. The title insurer will clear title if a covered title problem is discovered. The title insurer is not required to clear title. If a claim is covered, the title insurer has options it can exercise, such as 1) attempting to fix the problem; 2) filing a lawsuit; 3) negotiating a settlement with the insured or a third party; or 4) paying the insured’s compensable loss.
7. Only one title insurance policy is paid for at closing. If the property is purchased with a loan, two title policies are usually paid for at closing: an owner's policy and a loan policy. The owner's policy insures the person or entity that acquired title and the loan policy insures the lender.
8. Refinancing a loan does not require a new title insurance policy. The lender will generally require a new loan policy insuring the refinance mortgage. Sometimes an endorsement to the original policy or other arrangements may be made to reduce the cost of insuring the refinance mortgage.
Don’t rouse the IRS or pay more taxes than necessary — know the score on each home tax deduction and credit.
As you calculate your tax returns, be careful not to commit any of these nine home-related tax mistakes, which tax pros say are especially common and can cost you money or draw the IRS to your doorstep.
Sin #1: Deducting the wrong year for property taxes
You take a tax deduction for property taxes in the year you (or the holder of your escrow account) actually paid them. Some taxing authorities work a year behind — that is, you’re not billed for 2013 property taxes until 2014. But that’s irrelevant to the feds.
Enter on your federal forms whatever amount you actually paid in that tax year, no matter what the date is on your tax bill. Dave Hampton, CPA, a tax department manager at the Cincinnati accounting firm of Burke & Schindler, has seen homeowners confuse payments for different years and claim the incorrect amount.
Sin #2: Confusing escrow amount for actual taxes paid
If your lender escrows funds to pay your property taxes, don’t just deduct the amount escrowed. The regular amount you pay into your escrow account each month to cover property taxes is probably a little more or a little less than your property tax bill. Your lender will adjust the amount every year or so to realign the two.
For example, your tax bill might be $1,200, but your lender may have collected $1,100 or $1,300 in escrow over the year. Deduct only $1,200 or the amount of property taxes noted on the Form 1098 that your lender sends. If you don’t receive Form 1098, contact the agency that collects property tax to find out how much you paid.
Sin #3: Deducting points paid to refinance
Deduct points you paid your lender to secure your mortgage in full for the year you bought your home. However, when you refinance, you must deduct points over the life of your new loan.
For example, if you paid $2,000 in points to refinance into a 15-year mortgage, your tax deduction is $2,000 divided by 15 years, or $133 per year.
Related: How to Deduct Mortgage Points When You Buy a Home
Sin #4: Misjudging the home office tax deduction
The deduction is complicated, often doesn’t amount to much of a deduction, has to be recaptured if you turn a profit when you sell your home, and can pique the IRS’s interest in your return.
But there’s good news. There’s a new simplified home office deduction option if you don’t want to claim actual costs. If you’re eligible, you can deduct $5 per square foot up to 300 feet of office space, or up to $1,500 per year.
Sin #5: Failing to repay the first-time homebuyer tax credit
If you used the original homebuyer tax credit in 2008, you must repay 1/15th of the credit over 15 years.
If you used the tax credit in 2009 or 2010 and then within 36 months you sold your house or stopped using it as your primary residence, you also have to pay back the credit.
The IRS has a tool you can use to help figure out what you owe.
Sin #6: Failing to track home-related expenses
If the IRS comes a-knockin’, don’t be scrambling to compile your records. File or scan and store home office and home improvement expense receipts and other home-related documents as you go.
Sin #7: Forgetting to keep track of capital gains
If you sold your main home last year, don’t forget to pay capital gains taxes on any profit. You can typically exclude $250,000 of any profits from taxes (or $500,000 if you’re married filing jointly).
So if your cost basis for your home is $100,000 (what you paid for it plus any improvements) and you sold it for $400,000, your capital gains are $300,000. If you’re single, you owe taxes on $50,000 of gains.
However, there are minimum time limits for holding property to take advantage of the exclusions, and other details. Consult IRS Publication 523. And high-income earners could get hit with an additional tax.
Sin #8: Filing incorrectly for energy tax credits
If you made any eligible improvements in 2014, such as installing energy-efficient windows and doors, you may be able to take a 10% tax credit (up to $500; with some systems your cap is even lower than $500). But keep in mind, it’s a lifetime credit. If you claimed the credit in any recent years, you’re done.
Installing a solar electric, solar water heater, geothermal, or small wind energy system can also make you eligible to take the Residential Energy Efficient Property Credit.
To claim the deduction, you have to use the complicated Form 5695, which can mean cross-checking with half a dozen other IRS forms. Read the instructions carefully.
Sin #9: Claiming too much for the mortgage interest tax deduction
Taxpayers are allowed to deduct mortgage interest on home acquisition debt up to $1 million, plus they can also deduct up to $100,000 in home equity debt.
This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.
Read more: http://www.houselogic.com/home-advice/taxes-incentives/common-tax-mistakes/#ixzz3VGzkOhV4
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By John Riha
You’re going to save money with DIY home improvement projects. Sure, everybody knows that.
But did you know how much? Cut professionals out of the equation and you can save half the cost of a project — or more. On a minor bathroom refresh, that could be up to $10,000.
What’s more, you get a great return on your investment. Meaning, the financial value you get out of a DIY project is much more than what you put in.
Of course there are projects where pro installation is going to be much faster and safer, and worth the price of a hiring a contractor. Major exterior improvements, such as replacing roofing and siding, are prime candidates.
And granted, there are tasks where a pro is invaluable. Personally, I have years of DIY experience, but I still won’t touch electrical work with a 10-foot insulated pole.
Nevertheless, going DIY is the ultimate money-saving tool. You’ll also get tons of satisfaction and enjoyment from creating a better home environment, and from learning home improvement skills that’ll last a lifetime.
Here’s a rundown of some top money-saving projects, using cost and return-on-investment figures from “Remodeling” magazine’s annual “Cost vs. Value Report.”
But before we get to that, let’s swat aside some concerns. Or go straight to the projects.
What If You Don’t Have the Skills?
Sorry, not buying it. How-to tutorials are everywhere. Check out YouTube for video instructions on everything from taking out a toilet to tiling your shower stall. In addition:
That’s the trade-off. Your time (and labor) is going to stand in for cash out of your pocket. If you truly don’t have the time, then DIY probably isn’t for you.
The next best move is to BIY your project — buy-it-yourself. With a BIY project, you do the research, shopping, and purchasing of materials and save the contractor’s markup. You need to work closely with your professional to make sure you agree on what stuff you’ll be buying, and what is still the contractor’s responsibility.
The Best Money-Saving Projects With Great ROI
A 12-foot-by-16-foot wood deck addition is a straightforward project, especially if you keep the design simple (rectangular) and use concrete piers instead of poured concrete footings (check your local codes). Even a set of simple stairs can be tricky, so take your time with measurements. If you botch your first attempt, know you’re in good company, and try again.
“Cost vs. Value Report”
You can probably build a 12-foot-by-16-foot DIY deck in three to four days over two weekends. If you’re using poured footings instead of precast piers, you’ll need to wait two or three days for the concrete to cure. Having a buddy definitely helps move things along, but might cost you extra for pizza and beer.
Minor Bathroom Facelift
A typical guest bathroom is about 5 feet by 7 feet, so let’s bring that up-to-date by installing a new tub, toilet, ceramic tile floor and shower surround, updating the shower valve, and adding a new vanity, sink, and counter. Spruce it all up with moisture-proof vinyl wallpaper.
You’ll do everything but the plumbing connections, so add $380 for a pro plumber (four hours at $95 per hour).
Installing ceramic tile is one of the more challenging — and rewarding — DIY projects. Study those tutorials first, and get the right tools. Rent an electric tile saw for $50 to $75 per day; but note that you can buy an acceptable tile saw at a home improvement center for less than $100.
Plan for six to eight days of work, spread over however long you can stand to be without your bathroom. You’ll need the better part of two days for the tile alone, and a day to let the tile adhesive set.
Entry Door Replacement
No other project gives as much return as a new steel entry replacement door. Not only is it a cost-effective project with one of the highest returns in the Cost vs. Value Report, but you get the added benefit of sprucing up your curb appeal.
Know your door parts (jambs, threshold, stops) before digging in. You’ll be putting in a pre-hung door that includes jambs, so the old stuff has to come out. If you can, preserve the old casing (trim) that goes around the door. Otherwise, plan to buy new casing.
This is a good one to have a buddy or spouse lend a hand. It’ll take six to eight hours if it’s your first time. Remember the three-legged mantra of door installation: Plumb, level, square.
Related: Choosing an Exterior Door
Garage Door Replacement
Tired of looking at that big blank billboard every time you pull into your driveway? Change out your old garage door for a spiffy new steel model and the whole neighborhood will thank you. Save some cash by keeping the same motorized opener.
A steel garage door comes in four panels that are relatively lightweight but awkward — get a friend to lend a hand and you’ll have this project done in a day.
Vinyl Window Replacement
If you want to replace four or more windows, or a second-story window, then hire the work out. Being up on a ladder with an object as bulky as a window is no place for a non-professional. Pros bring scaffolding, which takes time to set up but ultimately makes the work faster and safer.
Replacing one, two, or maybe three first-story windows is a good DIY job. Anything more and the pros will get the job done with better efficiency in terms of time and hassle.
If you’ve measured your rough opening correctly and bought the right window, then one window should take you three to four hours. You’ll get faster with subsequent windows.
Read more: http://www.houselogic.com/home-advice/home-improvement/diy-how-much-do-you-save/#ixzz3UxDsbD5Q
Original Article on House Logic
In the life of every home, repairs happen. Here are the top 10 most common repairs that, sooner or later, your house will require.
Congratulations on buying your first house. Now, you have to learn how to keep it in good repair. To be safe, you should set aside money every year — 1% to 3% of your home’s purchase price — for repairs and maintenance.
The good news is that most repairs are simple, inexpensive, and DIY-friendly. If you can fix stuff yourself, you’ll only pay for the cost of materials and save a bundle on these common repairs and replacements.
1. Replace Toilet Fill Valves
As a self-employed individual, you understand value and the need to meticulously watch and control expenses. That is especially true of taxes – one of the largest and most convoluted expenses you will incur. To survive and thrive, you must take advantage of all potential deductions – including the twelve listed below.
1. Retirement Plans – Not only are retirement plans a good idea; they are also usually the best tax advantage available to a self-employed person. The funds that you invest are tax-deductible and the growth is tax-deferred. Any qualified plan will suffice, including a 401(k), Simplified Employee Pension (SEP), or a Savings Incentive Match Plan for Employees (SIMPLE) IRA.
2. Self-Employment Tax – You effectively pay tax as an employer and an employee, therefore you may deduct the 50% component of your self-employment tax that an employer would typically pay for you.
3. Health Insurance Premiums – Your health insurance premiums, as well as those of your spouse and dependents, may be deducted if you meet one of a series of criteria listed in IRS Tax Tip 2013-43. Most qualify through showing a net profit from self-employment on Schedule C. This deduction does not apply if you are eligible for coverage under your spouse’s health plan.
4. Depreciation – Business-only equipment may be depreciated assuming the asset generates income and has a useful life of more than one year – otherwise it is treated as a business expense. Dual-use equipment such as a computer used for both work and home purposes requires special consideration – for details see IRS Publication 946, “How to Depreciate Property.”
5. Office Supplies – Items purchased solely for your business use that do not qualify for depreciation may be deducted as regular business expenses. Be sure to keep your receipts, and be prepared to defend and prove the business-only use.
6. Communications Expenses – Internet and phone provider expenses are deductible in the percentage they are used for business. Partitioned bills from the provider are helpful, otherwise you need separate forms of proof of the percentage of business use.
7. Interest – Interest on loans related purely to your business is deductible. Business credit cards are included, as they are a form of a short-term loan – but be sure to keep a strict line and never use your business credit card for personal expenses.
8. Home Office – The home office deduction is falling out of favor as it is considered a red flag for audits – but if you really meet the qualifications, you should take advantage. The space must be your principal place of business and must be used “regularly and exclusively” for business purposes. Details are available in IRS Publication 587, “Business Use of Your Home.”
9. Advertising and Promotion Costs – This covers items from literal media advertising expenses to business cards and brochures.
10. Mileage – You can claim business-related driving expenses at the standard mileage deduction (56 cents per mile for the 2014 tax year) or as the actual expenses including fuel, depreciation, licensing and repairs/maintenance. Be sure that business and personal use are clearly separated.
11. Other Travel Expenses – Business-related travel is 100% deductible while the meals and entertainment components are 50% deductible. The IRS has increased scrutiny looking for dual-purpose trips oriented toward pleasure instead of business, as well as unusually large meal/entertainment deductions. Keep excellent records and be prepared to defend borderline claims – if the expense claim is worth the risk.
12. Educational Expenses – Seminars, enhancement classes, professional dues and subscriptions, and other expenses related to furthering your business-related knowledge are deductible. However, make sure the educational expense is related to your line of work.
The first three items in the list are extremely important, as they are “above-the-line” deductions that directly reduce your taxable income and may be claimed without itemizing.
Make sure you keep excellent records to back up your claims, and do not hesitate to seek professional assistance if you need it. Self-reliance is an important part of being self-employed, but a side effect of that self-reliance is unusual stubbornness. Get any professional help that you need, because self-employment is stressful enough without the cloud of a potential IRS audit.
Your Real Estate Education
As your consultants, one of our main responsibilities is to educate you, our clients. You can start your real estate education here. We've compiled a number of interesting articles, videos, and other materials to set you on your way to becoming a real estate expert. Enjoy.