EXIT Realty Consultants' Blog

It’s no surprise that owning a home automatically opts you into a new realm of tax advantages. In fact, in a recent survey of people who bought homes in 2012, 79 percent said the mortgage interest and property tax deductions were "extremely important" factors to their decision to become homeowners in the first place.  

But these two deductions are just the tip of the iceberg of all the real estate-related tax guidelines, advantages and disadvantages.  Because others get less press, it can be relatively easy for an individual American taxpayer to unwittingly trigger tax liabilities they might have been able to minimize or plan for, or to unwittingly trigger tax perks and fail to claim them.

This is why its essential to touch base with your tax pro before any and every real estate move you make, no matter how minor you think it might be. Sometimes planning and timing makes a major difference to the financial impact of a real estate-related tax; other times, just knowing the size and scope of the tax implications will impact the real estate decision you make.

Here is a short list of real estate moves that trigger surprising tax issues, pro and con:

1.  Refinancing.  American homeowners have been on a refinancing spree this year, spurred by continually low interest rates and a new resurgence in home values and equity. When you refinance into a lower interest rate mortgage than you previously had, the focus tends to be on the fact that your monthly payment is lower or that you can pay your home loan off faster with the same payment every month.  

What many fail to calculate for is that the tax deduction based on your mortgage interest is the largest tax perk of home ownership. Most homeowners are eligible to deduct 100% of the interest they pay on a mortgage up to $1 million on their primary residence.

Sales of residential properties are back to the highs experienced at the expiration of the Home Buyers Tax Credit in April 2010. One of the reasons for this surge in purchasing is that young adults may again be entering the market.

Over the last few years, many young adults stayed on the sidelines (some in their parents’ homes) while waiting for the overall economy and the housing market to stabilize. This group represents a pent-up purchasing demand which is now coming to market.

Last summer, the Joint Center for Housing Studies at Harvard University released a study which addressed this demographic:

“Surveys consistently find that the overwhelming majority of young adults plan to own a home in the future, but many would-be buyers have stayed on the sidelines waiting for the job outlook to improve and house prices to stop falling. But as markets tighten, these fence-sitters may begin to take advantage of today’s lower home prices and unusually low mortgage rates.”

It seems this is beginning to take place. The Census Bureau recently reported that annual household formations are almost back to boom time numbers:

Freddie Mac is projecting 1,250,000 new household formations in 2013.

These new households will be divided between purchases and rentals. However, we must realize this group believes strongly in homeownership. Here are three examples:

It will be interesting to follow this trend as prices rise and interest rates inch upward.

Arguably, the most important factor a lender looks at when someone wants to make a real estate purchase is someone's credit (Fico) score. The higher a potential home buyer's Fico score is, the better interest rate they will be able to get from a lender. I've been asked in the past by people what the minimum credit score is in order for them to buy a house and I told them it depends on the type of loan they get. Usually, lenders can better educate buyers regarding this topic, however, I recommend that all potential buyers strive to have a minimum credit score of 620 or higher. Anything under 620 is considered subprime and rates for a mortgage could increase dramatically. 

So how does one get their credit score over 620?

First, everyone should check their credit score and credit report once a year to make sure there are no errors. Mistakes on a credit report are more common than people think and with the increasing number of identy thefts each year, it is a good idea in general to see what is on your credit report. Typically, a person get get 1 free credit report every year, but they don't get to see their credit score. If you want to see your credit score, you generally have to pay for it. Your credit score and credit report can be obtained from one of the three major credit bureaus: Experian, Transunion, and Equifax. Fixing any mistakes on your credit score can improve the Fico score dramatically, depending on the mistakes that are found, if any.

The second most important thing a person can do is make sure they pay their bills on time. If you have difficulty with this, set up payment reminders or automatic payments through your bank via online banking.

Please follow the link below for some interesting information on the current state of the Real Estate market and the economy going forward. 

www.dsnews.com/articles/firm-forecasts-job-relocation-surge-by-former-underwater-homeowners-2013-02-22

Many people don't realize how the Real Estate market affects a variety of other fields and the overall economy as a whole. Aside from the obvious job fields affected such as Realtors, banks and mortgage brokerages, and real estate attorneys, it also affects manufacturing, home retail chains, construction, and a variety of other businesses not directly associated with real estate. Home ownership is usually the largest investment that the average person will make. When the market goes down and people have negative equity in their house, they are unable to relocate or take on new careers in different cities or states because of their inability to sell their homes. If they shortsell, their credit is ruined and they can't buy another property for a minimum of 2 years unless they have cash or a hardmoney lender who will let them borrow money at extremely high interest rates. If they foreclose, it's even worse. Many people don't have a choice but to stay where they are and wait until things turn around. 

It has been 7 years since the real estate bubble burst. On average, most people only live in their houses for 7 years before they upgrade, downsize, or just relocate. This, in combination with all these underwater borrowers finally able to break even or go back into the black with their home equity, is a potential perfect storm for a major rebound in home sales and home price increases. Now is the time to strap in and enjoy the ride. Rates are low and prices are starting to go up. We may not see another opportunity like this for several years to come.

1.) Prices Are on the Rise

The latest Case Shiller Home Price Index revealed that home prices have appreciated 5.5% over the last year (in South Kingstown RI prices have appreciated about 15% in the last year). The Home Price Expectation Survey, which polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts, calls for continued appreciation over the next five years, projecting a 3% -3.5% increase in values for each of the next 5 years.

The Mortgage Bankers Association has predicted that, after reaching record lows in 2012, mortgage rates will creep up slowly in 2013 to 4.4%. Rates have already increased by 2/10 of a point (3.32 to 3.53) in the last two months.

Recently, Zillow reported that rents in the U.S. increased by 4.2% over the last year. Increases were 5% or more in many major metropolitan areas including Chicago, Boston, San Francisco, Detroit, Baltimore, Denver, San Jose and Charlotte.

Six regulators, including the Department of Housing and Urban Development, the Office of the Comptroller of the Currency and the Securities and Exchange Commission, are currently drafting the new Qualified Residential Mortgage (QRM) rule. They will decide on two major requirements for buyers looking to qualify for a mortgage: minimum down payment and minimum FICO score. Many experts believe the new rules will be more stringent than current requirements.

The dramatic increase in transactions caused many challenges to the process of buying or selling a home in 2012.

Slipping toward foreclosure can lead to feelings of anxiety, depression, and loss of self-esteem. Don’t give up. There are options available to help millions of homeowners rescue themselves from the brink. Since it is crucial to act before a foreclosure takes place, now is the most important time for you to review the following options and solutions.

As a Certified Distressed Property Expert (CDPE), I am trained in assessing all foreclosure alternatives and pursuing the best solution for your own financial situation.

1) Short Sale

A short sale allows the homeowner to avoid foreclosure, minimize financial damage and move on from a burdensome, unaffordable mortgage. In many cases, a short sale allows the borrower to qualify for a new mortgage in just 24 months, as opposed to five years or more after a foreclosure.

A trained real estate agent can negotiate a short sale with your lender if you have three qualifications. First, you must show some type of financial hardship. Second, you must have a monthly shortfall, meaning your monthly expenses are greater than your monthly income. Finally, you need to prove that your debts are greater than the value of your assets (certain investments, property, etc.).

2) Reinstatement

A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult for homeowners to achieve. The homeowner simply pays the total amount past due (including late fees) to the lender. This solution does not require the lender’s approval and will “reinstate” a mortgage up to the day before the foreclosure sale.

3) Forbearance or Repayment Plan

A forbearance or repayment plan involves negotiating with the mortgage company to allow the homeowner to repay back-payments over a period of time. The homeowner typically makes current mortgage payments in addition to a portion of the back-payments owed.

Continuation from 2013 New Year's Resolutions for Your Home part 1

6. Volunteer (support your community)

In a world that often seems topsy-turvy, a little altruism helps restore balance. You can volunteer your time and energy to help others, and at the same time help promote safety and preserve the value of your neighborhood.

Next: 7. Drink less (curb home water use)

Our houses are thirsty. The average household uses about 400 gallons of water each day, or almost $700 per year in water and sewer costs. Making a few simple changes, such as installing EPA-certified WaterSense products, could trim up to $200 from your annual water bill. Add to that energy savings from reduced costs to heat water, and your yearly savings could reach $300 or more per year.

Happy New Year!

2012 was a great year for real estate and 2013 looks to be even better. I found this blog on houselogic.com and absolutely loved it. Everyone has a new year’s resolution for themselves, why not have one for your home.

This time, it’s going to be different. A brand new year, brimming with possibilities and you’ve resolved to move through your house like a whirling tornado of can-do, fixing, painting, and organizing. This year, nothing will stop you.

Welcome to your home improvement New Year’s Resolutions.

Based on the most-common top-ten resolutions gathered by Time magazine, USA.gov, and other sources, we’ve put together an inspiring list of home management goals.

Ready for the New Year? Here it comes:

1. Lose weight (cut energy use)
2. Quit smoking (purify indoor air)
3. Get out of debt (budget for improvements)
4. Learn something new (educate yourself on home finances)
5. Get organized (de-clutter)
6. Volunteer (support your community)
7. Drink less (curb home water use)
8. Spend more time with the family (share home improvement projects)
9. Get fit (exercise your DIY skills)
10. Be less stressed (use maintenance-free materials)

Next: 1. Lose weight (cut energy use)

Your house is a glutton, gobbling energy like a starved elephant. Gain control by trimming energy use.

A good place to start is your HVAC ductwork. Ducts are notorious energy-wasters, leaking your heating and cooling air through holes and loose connections.

Sealing and insulating your ductwork can improve the efficiency of your heating and cooling system by as much as 20%, saving you $200 per year or more, according to Energy Star. You’ll make your home more comfortable, and a more-efficient system helps extend the life of your furnace, air conditioner, or heat pump.

Source: CNNMoney

1. Don't buy if you can't stay put.

If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.

2. Start by shoring up your credit.

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a small down payment.

5. Buy in a district with good schools.

In most areas, this advice applies even if you don't have school-age children. Reason: When it comes time to sell, you'll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent.

11 Great Reasons To…LIST YOUR HOME DURING THE HOLIDAYS!

1. People who look for a home during the holidays are more serious buyers.

2. Serious buyers have fewer houses to choose from during the Holidays and less competition mean more money for you.