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The second edition of the National Association of Home Builders/ First American Improving Markets Index (IMI), released recently, shows 23 individual housing markets now qualifying as “improving” under the new gauge’s parameters. This is nearly double the 12 housing markets that made the list last month.
The index reveals metropolitan areas that have shown improvement for at least six months in housing permits, employment and housing prices. The following metros were listed in October: Continue reading →
In today’s down market, many homeowners are reluctant to pour more money into their homes. Before deciding whether to replace a roof or merely patch it, homeowner’s should consider the tax implications.
Home improvements — a new bathroom or kitchen, for example — can increase the value of a home and reduce any taxes due on the profit earned from its sale.
Home repairs provide no immediate tax benefits to a homeowner. They are not tax deductible and they are not added to the home’s basis (cost), for tax purposes. As far as taxes go, they are a nonevent. Thus, a homeowner who patches a leaky roof gets not tax benefits.
Home improvements are very different, though. The cost of an improvement is not deductible, but it is added to the home’s basis for tax purposes. For example, the cost of adding a new roof to a home is added to its tax basis. This reduces any taxable gain when the home is sold.
Of course, a substantial amount of gain is usually tax free, anyway, under the home sale tax exclusion: $250,000 for single homeowners and $500,000 for married owners filing jointly. But homeowners with substantial equity can still benefit from an increased tax basis in their homes.
For example, if Joe and Jane purchased their home in 1990 for $250,000 and it is now worthy $1 million, they will have a $750,000 gain. A full $500,000 of this amount is tax-free because Joe and Jane are a married couple and qualify for the tax exclusion.
But this leaves $250,000 subject to taxation. If Joe and Jan had spent $250,000 adding improvements to their home, they would have no taxable gain. This is because the $250,000 is added to the home’s original $250,000 basis, providing an adjusted tax basis of $500,000.
As a result, their gain on the sale would only be $500,000, not $750,000; and this entire gain would be tax-free because of the $500,000 exclusion.
So how do you tell the difference between an improvement and a repair? Here’s the basic rule provided by the Internal Revenue Service: A repair keeps a homeowner’s property in good operating condition but it does not:
In contrast, an improvement adds to the value of a homeowner’s property, prolongs its life, or adapts it to new uses.
The problem with this definition is that virtually all repairs increase both the value and useful life of the property being repaired. The key difference between a repair and an improvement is that a repair merely returns property to more-or-less the state it was in before it stopped working properly. The property is not substantially more valuable, long-lived, or useful than it was before the need for the repair arose.
In contrast, an improvement makes property substantially more valuable and/or long-lived or useful than it was before the improvement.
You need to compare the situation before and after you made the expenditure involved. Have you just returned your property to the state it was in before the need for the repair arose? Or, have you made it much better?
If the answer to the first question is “yes,” you’ve repaired the home. If the answer to the second question is “yes,” it’s a home improvement.
Good examples of repairs include repainting a home, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows. Examples of improvements include adding a deck to a home, a new bathroom, installing a new heating system, or putting on a new roof.
Buyers only get one first look at a property, and they don’t want to use their imagination. They assume the house they see is as good as it’s going to get. If you want your home to sell, step out of your comfort zone and think like a buyer. Here are three ways to help you turn your house into the home of someone else’s dreams. We’ve broken down each category into low-cost, “Basic” tips and tricks, and an “All-Out” blow-the-budget transformation. How far you take it is up to you.
Clean
No one likes a ditty house, and your what “lived in” is to you might be someone else’s “messy.” When in doubt, clean. It’s the least expensive way to improve your home’s initial appeal, and it’s a good way to get a jump-start on your move.
Basic: The first thing you need to do is de-clutter. If your moving company offers storage, this is the time to use it. Extra furniture, oddball art, pots and pans that don’t fit in the kitchen—it all needs to go. Don’t go overboard—your house should still look like a home. It just needs to be airy enough for a buyer to put his or her mental imprint on it. Your hackey sack collection from college won’t help. Next up is a good, solid scrubbing. Spend a weekend washing the floors, baseboards, and bathrooms. Be sure to get the tops of cabinets and corners behind furniture. Clean every piece of glass in the building. Too many people ruin a pristine home with spotty mirrors and doors. Don’t forget the outside of the house. Hose down your exterior walls and driveway, trim the lawn and hedges, and remove any trash cans and clutter from sight. If your neighbors are less-than-tidy, you might want to offer them some free help, as well. And while you’re cleaning the garage, wash your cars, too. They make an impression.
All-Out: If you have money to spend, install space-saving storage solutions in the garage, kitchen, and bathroom to reduce clutter. Consider paying a service to do the deep cleaning you’re bound to miss. Rent a pressure washer for the driveway or (if it’s a real mess and you’re feeling generous), repave.
Fix
Part of the joy of buying a new home is starting with a clean slate. No one wants to buy an existing to-do list of nagging little fix-its. Making small fixes now can put the buyer’s mind at ease.
Basic: Focus on inexpensive, highly-visible problems. Doorbells, window glass, cabinet handles, and holes in walls are all easy to spot and cheap to fix.
All-Out: Take aim at long-term maintenance projects, such as pool pumps, water heaters, and air conditioning servicing. Buyers probably won’t notice these on their own, but your agent can call attention to these facts to help reduce worries about long-term costs.
Brighten
Buyers like to see what they’re viewing. Good lighting, vivid color, and a few visual cues can go a long way toward making your home a memorable one.
Basic: Repaint interior walls, particularly those in the bathroom, kitchen, and extremely bright areas. White walls are particularly important, as they get dingy quickly. Replace traditional incandescent light bulbs with compact fluorescents, which put brighter lights in your existing sockets while saving money. Tie back curtains to let in the maximum amount of sun, which makes a house look more inviting than artificial light. Spruce up empty or colorless zones with potted plants. They add character to a room, but are obviously disposable if a buyer dislikes them. Repaint your front door, mailbox, and any street numbers.
All-Out: Repainting the entire interior if it’s been more than a few years since the last paint job. Install additional lighting in cabinets and closets. Add new cabinet doors and counter tops.
What Not to Do
While you can certainly overspend on any of the above suggestions, their value is well-established. Making a home cleaner, better-functioning, and more attractive is a no-brainer. However, some improvements can go too far, and actually hurt your investment. As a general rule, don’t build for the sake of building. Bigger isn’t always better, and if you take a project too far, you risk going in a direction the buyer will have to undo. For example, adding an extra bedroom might seem like a great investment, but a retired couple may prefer to use that space to install a pool in the back yard. Upgrade the home you have, but don’t try to make it something else.
With foreclosure rescue scams widespread as more homeowners fall behind on mortgage payments, be smart if you seek help.
A record high 2.8 million properties were hit with foreclosure notices in 2009, putting even more Americans at risk of facing foreclosure rescue scams. Homeowners who fall behind on mortgage payments need to tread carefully when seeking assistance, since foreclosure rescue scams come in many guises. A day spent researching legitimate options, from a mortgage modification or principal forbearance to a short sale or deed-in-lieu, could keep you from becoming a scam victim. Continue reading →
Your first home purchase is exciting, but it can also be stressful. Here are some tips to limit the trauma and help you find the home of your dreams the first time around.
1. Set your budget
The most important step in selecting a home is knowing how much you can spend. If you already use an electronic budgeting system, you’re ahead of the game. If not, track your expenses for the past several months to a year. Try to quantify the “gray areas” of cash withdrawals that disappear on small purchases. Now add up your current rent and other related expenses. If you’ve been saving money toward your down payment, note that, as well. Finally, ask yourself where you can tighten your belt with your existing discretionary purchases. This is the maximum amount you could pay per month.
Now ask yourself if this is reasonable, given your current savings and possible expenses. Only you know the answer to that. When you’ve arrived at a comfortable number, write it down, and save your calculations. You’ll take this to the bank when you apply for loan pre-approval. For now, you have an estimated payment you can use while shopping online.
2. Set your Criteria
A home is the biggest purchase you’ll probably ever make. Stay focused and don’t let emotion guide you. If you have one child and no plans for more, four bedrooms are probably a waste. Write down a list of must-haves, nice-to-haves, and can’t haves before you start visiting homes. You’ll save time, help your agent work more productively, and keep yourself from getting carried away—into the wrong house.
Important criteria include:
Age of house
Number of bedrooms and bathrooms
Size of lot / yard
School district requirements
Type of street (Are busy streets OK, or do you want a cul de sac? Do you need to be near a bus or light rail line?)
Type of home (Single-story? Mutli-level? Are there any dominant architectural styles in your area that you refuse to buy?)
Central heating and cooling
Expensive additions, such as in-ground pools
3. Make a list of Homes
After you’ve made this list, search online and find several representative homes. If you have time and you’re fairly local, drive by a few of them to get a feel for the neighborhoods. Write down your impressions. This will help you understand home much of a home’s description is fact versus fluff, and give your real estate agent a good idea of your likes and dislikes.
4. Find a Realtor®
Most home buyers select a licensed Realtor® to represent them, and they are almost always happy they did. Realtors® are real estate agents who subscribe to a strict code of ethics and are acknowledged experts in the field. A Realtor® knows your local market, and can help you through every step of the home buying process, from finding your dream home to negotiating the best possible terms, explaining everything along the way.
5. Bring a Camera
Your Realtor® will take you on a number of open houses, and your opinions can be lost in the blur. To keep things straight, bring a digital camera on your trips. Take a picture of the street nu,ber of each property, then photograph each room during your walk-through. Photograph a house even if you decide it’s wrong for you—there may be furnishings, construction tips, or other features you notice later that could come in handy when you find the right home.
Whether you’re buying your first home or refinancing your existing home, you have a host of financing options available. But before you start talking about points, fees, and closing costs, you need to decide whether to choose a fixed-rate or adjustable-rate mortgage.
Adjustable-rate mortgages (ARMs) earned a bad reputation leading up to the housing bust, and with good reason, but that was largely the fault of predatory lenders who oversold houses to underqualified buyers with artificially low initial payments. Still, ARMs are a bit of a gamble, and they are absolutely the wrong tool for homeowners trying to squeeze into the most house they can afford.
Interest rates are extremely low right now, so you shouldn’t expect an adjustable rate to go anywhere but up. For this reasons, most homebuyers will be more comfortable with fixed-rate mortgages that provide a predictable payment future–particularly for their primary residence. On the other hand, quick turnarounds can be different story. If you’re an experienced real estate investor looking to flip a house quickly, an ARM could save you some money while you hold the house. Smart Money Magazine has an excellent calculator on their Web site that helps explain the break points, but be warned–a calculator can’t predict market fluctuations. If you choose an ARM, be sure to work with a mortgage company you trust, and have a backup plan if the house doesn’t sell as quickly as you’d like.
Foreclosure counselors can make the difference between losing your home and keeping it. Here’s how they work and how to choose one.
If you’re facing foreclosure, your foreclosure counselor will be a key part of your foreclosure team. As you start looking for one, however, you need to know what exactly they do, what they don’t do, and how to choose one who’s legitimate and qualified.
What a foreclosure counselor does
• Reviews your finances
• Helps you establish a budget
• Explains your non-foreclosure options, such as loan modification, short sale or deed in lieu of foreclosure; helps you navigate the process with any chosen option
• Advocates on your behalf with lenders and loan servicers Continue reading →
Add attic insulation to lower heating and cooling costs by as much as $600 per year.
Save about $600 per year by boosting the amount of attic insulation from R-11 to R-49. Depending on the type of materials you use, figure on paying an insulation contractor about $1,500 to insulate an 800-square-foot attic, which pays back your investment in three years. You’ll spend about half that to do the job yourself.
Do you need more attic insulation?
A good, quick way to check if you need insulation is to look across your attic floor. If the existing insulation comes up just to the tops of the joists, then you probably need to add insulation. If you can’t see the joists and the insulation is well above the tops of the joists, you’re probably okay and you won’t recoup the cost of adding more. Continue reading →
Buyers only get one first look at a property, and they don’t want to use their imagination. They assume the house they see is as good as it’s going to get. If you want your home to sell, step out of your comfort zone and think like a buyer. Here are three ways to help you turn your house into the home of someone else’s dreams. We’ve broken down each category into low-cost, “Basic” tips and tricks, and an “All-Out” blow-the-budget transformation. How far you take it is up to you. Continue reading →
Ask detailed questions about their experience and skills to help you find the right agent for your home sale.
Working with the right real estate agent can mean the difference between getting prompt, expert representation and feeling like you’re going it alone when selling your home. Here are 10 questions to ask when you’re interviewing agents. Continue reading →
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By: Donna Fuscaldo
By: G. M. Filisko
By: Jeanne Huber
Buyers only get one first look at a property, and they don’t want to use their imagination. They assume the house they see is as good as it’s going to get. If you want your home to sell, step out of your comfort zone and think like a buyer. Here are three ways to help you turn your house into the home of someone else’s dreams. We’ve broken down each category into low-cost, “Basic” tips and tricks, and an “All-Out” blow-the-budget transformation. How far you take it is up to you.
By: G. M. Filisko
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