Homeowner Tax Deductions: Real Estate’s Ace in the Hole

Sure, even the idea of homeownership is appealing for all of the traditional emotional and lifestyle reasons. Having proprietary control over your family’s center of operations is a goal for most local residents—just as most of us would consider it a necessary evil if professional obligations make frequent moves unavoidable. Travel may be broadening, but most rolling stones (no matter how moss-less) eventually hanker to settle down.

But aside from the lifestyle aspects, another major advantage to settling down and owning your home gets its turn in the limelight at least once a year. This advantage is anything other than abstract. The time of year is April 15, when the concrete financial benefits are tallied up in the very welcome form of homeowner’s tax deductions.

Tax advice is not my specialty—for that, you should always defer to your qualified financial advisor, whose full time job it is to do all that’s humanly possible to keep track of the ever-changing Federal Tax Code. But even non-specialists know that some of the most beneficial provisions in the Code’s 75,000 pages do relate to the range of significant homeowner tax deductions.

In the National Association of Realtors’ periodical houselogic, writer Dona DeZube recently surveyed some of the major ones—tax tips that deserve to be investigated by any  homeowner who will soon be charting out their own mid-April strategies.

The list was headed by the most obvious one, the mortgage interest deduction, which applies to interest paid on a loan secured by the place you live in. That doesn’t have to be a house—it could also be a trailer or a boat. As long as you sleep and cook in it, if it also has toilet facilities, interest paid for its purchase falls into the category.

Likewise, there is the prepaid interest deduction. Prepaid interest (aka “points”) you pay in when you take out a mortgage or refi can usually be deducted in the year it is originated. An exception is when you refinance and use the proceeds for other than home improvements, in which case the deduction is spread out over the life of the loan. If you refinance again, it gets a little more complicated (may be time to ring up that qualified advisor again).

Another hefty deduction is the one for property taxes you have paid. If your mortgage lender required you to insure repayment through private mortgage insurance (PMI), if your income is less than a set amount, the premiums may be fully deductible (otherwise, a reduced deduction will apply). Even more complicated rules apply to government insurance premiums (qualified advisor time).

More homeowner tax deductions can be applicable, too, with varying degrees of complication—particularly those which relate to vacation homes. And there are also tax credits for things like energy-efficient home systems.

The bottom line - deductibility of many aspects of homeownership can be a major reason why April 15 causes many renters to do some serious examination of their residential futures. I’m here to help with any of your own real estate plans!    

Mystery of The 184 Things A Real Estate Agent Does For Clients 

As its name clearly implies, The 184 Things a Real Estate Agent Does for You is an exhaustive list of the actions a real estate agent is called upon to perform on behalf of a client. It is an authentic real estate Golden Oldie.
     Whenever someone wonders aloud what it is that real estate agents do to earn their commissions, many of us agents have the option of digging around in a drawer for a wrinkled printout of The 184 Things. If there were a Real Estate Hall of Fame, The 184 Things would be sure to have its own spot-lighted exhibit…or even an interactive video display (so the kids could push colored buttons that would seem to make the list interactive).
     Since the list is 184 items long, it’s a good bet that, given the option, very few of our clients would have read the whole thing (if they had, they’d probably be so exhausted they might  reconsider selling their house at all).
     Actually, the truth is real estate agents don’t perform all 184 in the course of any single home buying or selling transaction. Some items refer to specific kinds of deals; some others aren’t always necessary. But they’re all authentic, and for most transactions, we really do execute on a lot more than half of them. To give you the flavor, they are actions like “Verify legal description,” “Confirm lot size via owner’s copy of certified survey, if available,” “Prepare detailed list of property’s ‘inclusions & conveyances’…,” and so on.
     Like so many other epochal historical events, the birth of The 184 Things seems shrouded in mystery. You might think that the reason is because it happened so long ago—but 2006 isn’t really that long ago. Perhaps the mists of time haven’t actually had a chance to fully enshroud the event…so maybe simple confusion is responsible. Most historical citations credit its origin to a 2006 House of Representatives Financial Services Sub-Committee hearing, during which the president-elect of the NAR presented the Things at the conclusion of her testimony. This could have happened after some House member made the innocent mistake of asking what real estate agents do to earn their commissions…but the actual exchange that provoked the list has been lost for all time.

At any rate, despite the House hearing being often credited as the point of origin for The 184 Things, there are problems with that story. The House archives’ transcript of the hearing shows a written Attachment that has 180 Things—not 184! But that’s not the only mystery, because the Attachment has a footnote, which seems to credit the Orlando Regional Realtor Association. It’s only after you consult the ORRA’s web site that you come upon what may be the original list, with all 184. If they ever do build a Real Estate Hall of Fame, it could be a reason to put it in Florida…

I don't need to do each one of The 184 Things every time I set about helping a client buy or sell their home - but it's certain I do an awful lot of them. My own list is simply one with all of the things that need to be done - and turns out to be different for every client and every property. The first item is always the same, though-and it's all yours: call me!

 

 

Foreclosure Listings are Bargains Worth Investigating

It is entirely possible to think of a residence that’s been the subject of a foreclosure as the real estate equivalent of a cute, cuddly orphaned kitten or puppy—one that deserves to be adopted by a loving family. You can think of the bank as the temporary animal shelter. With a little tender care, the adopted foreclosure can resume its place in the neighborhood, and all is well…

Or, a foreclosure can be the real estate equivalent of a snarling mutt that turns out to be a menace to anyone who comes near it…with the possible exception of a wild animal trainer (the real estate equivalent would be a remodeling contractor—one with lots of time on his hands).

For anyone who might consider checking out the local foreclosure listings in 2016, the paramount skill will be the ability to make sure any property they pursue is one of that first kind of ‘orphans.’ That’s because of the fact that the kind of quality protections that are taken for granted in a regular residential real estate transaction are not in force.

Since banks are under no obligation to disclose information about a foreclosure’s flaws, it is always a true ‘buyer beware’ situation. No matter what the time pressure might be, it’s imperative to make a physical investigation of any foreclosure offering as early as possible. The more thorough the inspection, the more confidence you will have that any budget forecast accounts for all the expenditures you are likely to encounter in the course of turning a foreclosed property into a move-in ready residence.

The good news is that despite the reality that the local real estate market has tightened up a good deal since the days of the real estate meltdown, foreclosure properties are still coming onto the market. Since would-be bargain hunters are no longer intimidated by the fear of falling housing values, timing becomes important. With sharp-eyed competitors regularly on the lookout for promising foreclosure listings, it’s important to be alerted to new opportunities as soon as possible. In this regard, there is also another ‘buyer beware’ situation—this one having to do with some of the online dedicated “foreclosure” websites. Avoid any that wind up providing outdated and/or endlessly repeated ‘bargains’—for fees billed in advance. If you decide to try them out, see if they offer a free trial. You will quickly find out if you are being directed toward wild goose chases instead of what’s been advertised.

A better way to start is to give me a call as I have sold hundreds of foreclosure properties to  bargain-minded buyers. If you wish, I will be happy to include local foreclosure listings along with other new entries as they come onto the market—as well as to offer the kind of prudent advice and guidance that helps turn ‘orphans’ into family-friendly residences. A foreclosure may not be for everybody—but the rewards for those who are able to take advantage of them can be substantial!

Talk of Local “Property Values” Requires Further Explanation

Every local homeowner knows that the state of local property values is important. But regardless of how important property values are, it’s also true that the term itself is hard to pin down. It’s more elusive than most of us assume—it literally means different things to different people.

One of the odd things about the English language (or any language, I imagine) is how it can convey an impression of being more specific than is actually the case. For example, if you say, “This year there’s been more rain than usual” everyone thinks they know what you mean—which is probably not that since January 1, 2015 until today rainfall has totaled more than the annual average. What you mean is that since the end of summer (or perhaps since October) it’s been rainy. The difference in that example isn’t all that important. But when it comes to local “property values,” delving into what is meant is more worthwhile.

The term means subtly different things to different people (or even to the same person, depending on their intentions). To most homeowners, for instance, if you say that local property values have been on the rise, their first interpretation is likely to be that their home can now be sold for more than before—in other words, they equate ‘property values’ with ‘market values.’ They don’t mean that it has now become a better place for their family to live in: that would be its ‘use value’ or ‘utility value’—a different thing altogether.

On the other hand, to a lender, a home’s ‘property value’ usually means its current market value. To an investor, ‘property value’ could well mean its ‘future value’ or its ‘liquidation value’…which could be different numbers depending on whether the speaker is imagining a forced liquidation or an orderly liquidation. The upshot is that “property values” is one of those precise-sounding terms that’s a lot more slippery than it seems.

Especially when it comes to major transactions like the purchase and sale of local real estate, it’s a good idea to be as precise as possible. In that regard, more useful are terms like “asking price” or “selling price.” They describe actual numerical values in a particular currency at a specific time. Although it’s certainly not bad news if we hear that local property values are likely to keep rising in the new year, that needs a lot more detail to be very meaningful (give me some neighborhood comps, thank you very much). And since we’re on the subject: anytime you are ready to investigate the current state of our local real estate market, I hope you’ll decide to give me a call! 

In Search of the Most Accurate Real Estate Listings

Have you ever wondered about the way local real estate listings appear on your screen when you search for houses for sale through one of the search engines? If you have already found a local Realtor’s^® website (like this one!), it’s easy to search the local listings right from that site without bothering further. You’ll come up with the most current accurate information because it represents direct updated information from the local multiple listing service.

But whenever you go searching for local listings through Google, Bing, or any of the other search engines (there are scads of them), you will see that what comes up will be quite different. You may find individual house listings, alternating with real estate agency home pages, mixed in with aggregators like Zillow and real estate magazine ads. Depending upon which search engine and the way you phrase your inquiry, you might actually come up with an interesting listing…or one that’s peculiarly inappropriate—like a listing from another town or state—or one that’s been out of date for months.

There are reasons for such disorder. They have to do with a historical scramble that has been going on ever since computers and the web started making house-hunting something you could do from your own living room. The logical first stage came about rapidly, as local realtors everywhere started putting their listings on their websites, then working out the technical details to allow the whole area’s MLS listings to appear.

Then came the original aggregators: Trulia, Zillow, Realtor.com—the deep-pocketed media companies that worked out ways to combine web data from all over to make listings into one gigantic national database. Except for house-hunters who weren’t set on moving to a particular area, the advantage to nationalizing the listings did not really go to the consumer—it went to the aggregators (also called ‘syndicators’). Since they could offer their information to a nation-sized audience, they could afford nation-sized advertising budgets to attract more views. Since they got more views, the search engines automatically found them to be ‘more popular’ than mere local agency sites, so their listings moved to the top of the search engine results pages.

It was a self-perpetuating cycle, especially once the aggregators started selling ‘spaces’ for local listings back to my colleagues, who were watching their own sites lose out in the race to attract web searchers. The aggregators were actually charging real estate agents to place their own listings on the aggregators’ pages! Realtors did not see the humor in this—and there are some ongoing legal challenges to illustrate their lack of appreciation.

The reason that this makes a difference to you is that the original purpose of the big aggregators was to make searching easier for you, the local homeowner or listing searcher. One problem is that keeping listing data current and error-free has always been a problem for anyone with a nation-wide database to administer. Another is that data from other sources (like Craigslist ads) has been known to appear mixed in with verified listings. Since their authenticity is a sometimes thing, that can be downright misleading.

The upshot is that for serious house hunters, the best place to look for local listings is right here, on a site like mine—where I have a daily local connection with the properties that appear. Then, when you find the homes that look like they could be what you are looking for, all that’s left is to give me a call!     

Features Designed to Inspire Luxury Home Buyers   

When it comes to selling luxury homes, you really can’t pigeonhole who the ‘typical’ buyer is likely to be. The 9% of buyers that make up the pool of ‘affluent’ prospects are themselves pretty much profile-proof—and the dollar value that 9% represents fluctuates substantially from one end of the country to the other. On the other hand, it is possible to take advantage of features that are growing in popularity with today’s luxury home buyers.

Realtytimes researchers found that affluent buyers are increasingly attracted to features that belong in the smart-home technology category. Smart thermostats that owners control right from their smartphones, wireless homes security camera arrays, and fully tricked-out home theaters are draws. To qualify at the high end, an entertainment center really should be controlled by a single device. Let’s face it: no matter how fancy a home theater might be, if three or four remote controls are visible, they’re certain to draw scowls!

Kitchen tech—of the kind that marries function with fashion—continues to gain in popularity. Bringing professional-level tools into domestic kitchens is a goal being incorporated in more and more top kitchen appliance offerings. On the leading edge: ovens with high-performance steam generators as well as blast chillers with touch-sensitive, intuitive user interfaces. All are designed “to create the kitchen that’s right”—one to match a buyer’s “level of culinary daring.” Digital Interiors found that 94% of such buyers “would sacrifice 1,00 square feet of living space for more technology…”—but keep in mind that most researchers find that, with few exceptions, 3,500 square feet is the non-urban baseline for qualifying in this market. 

Selling luxury homes used to begin with location, location, location. But that may be undergoing a subtle shift. In Luxurydefined, one leading point is made that traditionally prominent ZIP codes are “no longer the defining baseline” for luxury homes. Newly included are areas where there is a “slower perceived tempo of life”—which fits in with the emerging interest in homes with ‘experiential’ features (like meditation gardens or outdoor showers).

 Few local luxury homes have those particular features, but being turnkey-ready is another matter. Brand new homes qualify automatically, but as has always been the case, existing residences that compete with other high-end homes in the local market can be expected to do best when they qualify as one of the ‘just bring your toothbrush’ properties.

Affluent prospects may be well-heeled, but they are also increasingly attentive to energy-efficient features. Some new homes designed with the luxury market in the crosshairs boast of ‘super-efficient’ floorplans built to consume 50% less energy than typical new homes. The draw is not entirely economical, either. That’s evidenced in how the current dip in energy costs hasn’t resulted in a proportional tapering in demand for homes reflecting conscious living (features reflecting environmental awareness and sustainability).

Luxury home owners, like their prospective buyers, have a pretty clear idea of what they demand when it comes to selling their properties. First and foremost: an agent with comprehensive knowledge of the local market—and experience with luxury homes. According to Money magazine, sales at the high end are growing faster than in any other market segment…which is another way of pointing out that if you are looking to get into a luxury home, now is a pretty good time to give me a call!

Elderly Housing Wider than Ever Before

As we residents age, we grow wiser—at least we hope we will. If we take good care of ourselves, are lucky enough to have inherited good genes, and have some luck, too, we hope to be able to stay physically and mentally active long past many of the birthdays that used to mark old age—or even “advanced old age.”

But if wisdom does actually accrue along the way, even the spryest seniors eventually begin to consider whether it might not be a good idea to explore some of today’s alternative post-retirement residential directions. Advil or not, the most physically active seniors will tell you the morning after a full round of golf or a couple of sets of tennis: ouch! Even copious amounts of positive thinking can’t match the persuasive power of aching joints and muscles. Some accommodations to Father Time are going to be called for…

It turns out that on this front, there is a lot of good news developing out there. Probably because the massive wave of Baby Boomers is sweeping into traditional retirement age, more and more residential options are opening up. Local residents approaching retirement have more choices than ever before. Some of the major headings include—    

·       Staying with family. This used to be the hands-down leading choice when infirmity was at hand: moving in with care-taking relatives (or the reverse). This can be a terrific solution when the family situation fits and doesn’t create unworkable demands on family members.

·       Roommates. Sometimes sharing living quarters is an alternative that isn’t given much consideration, but a homeowner who could use help with daily living chores can choose to share their home in exchange for help with shopping, cooking, cleaning, etc.

·       Board-and-Care Homes are usually small-scale: residences that provide room and board and varying degrees of daily activity support.

·       Congregate Housing caters to seniors able to take care of themselves; providing meals, communal activities, and/or housekeeping services. Retirement Communities can add resort-level facilities and activities into the mix.

·       Assisted Living residences—all the way to full Nursing Homes—provide levels of care from minimal all the way to skilled nursing support.

·       Continuing Care Retirement Communities—are designed to meet the reality that residence and assistance needs change over time. CCRCs consist of separate apartment-style or condominium units as well as full assisted-living facilities. Residents can move from one to the other if more independent living becomes impractical. Residents pay an entrance fee and monthly charges (they can be hefty)—but CCRCs have the advantage of allowing residents to remain in a familiar community at junctures when a greater dislocation would be much more stressful.

Of course, many local seniors are not about to even consider moving away from the area, choosing instead to simply look into downsizing—or switching to a more [knee-friendly] stairless neighborhood home. For those and other real estate endeavors, I’m here to help!