The first consideration before listing your home

Selling a home in today's market requires more than just listing it...you need to meet buyers where they are. With home prices at record highs and mortgage rates around 6.5%, many buyers simply don't have the funds left for renovations or repairs after closing. That's why preparing your home before listing is crucial to achieving the best possible price, a quick sale, and a smooth transaction.

One of the biggest benefits of preparing your home is financial. Homes that are clean, updated, and in great condition often sell at a higher price. Buyers are willing to pay a premium for a home that's move-in ready, especially since they likely won't have the budget for post-purchase improvements. Addressing cosmetic issues or minor repairs before listing helps you avoid buyers nitpicking during negotiations, allowing you to keep more money in your pocket.

Time is another major factor. Homes that are well-prepared tend to sell faster. When your home looks its best, it attracts more attention from serious buyers, making it less likely to sit on the market. A home that lingers too long may eventually require price reductions, cutting into your profit. Preparing your home upfront ensures you're setting yourself up for success from day one.

Buyers also form opinions quickly, often within minutes of stepping inside a home. A staged, clean, and well-maintained property makes a strong first impression, creating an emotional connection that motivates offers. Plus, addressing potential issues before the inspection can prevent last-minute surprises that might delay or derail the sale.

In today's competitive market, a well-prepared home also appeals to a broader pool of buyers. Neutral d�cor and a fresh, polished look allow buyers to envision themselves in the space, making it easier for them to say yes. This broader appeal not only helps your home sell faster but also reduces the likelihood of complicated contingencies.

Preparing your home may take some extra time and effort, but the payoff is worth it. To maximize your home's value and ensure a smooth sale, schedule a pre-listing prep consultation with your real estate agent. They can guide you on which updates will deliver the highest return and help position your home to attract today's buyers. A little preparation now can make all the difference when it's time to sell.

Buy First Before You Sell Your Home

Selling your current home before buying a new one can feel like a delicate balancing act. The challenges of juggling showings, deadlines, and temporary housing often add unnecessary stress to an already overwhelming process. But what if you could buy your new home before selling your current one? Thanks to recent changes in underwriting guidelines, this is now a reality for many sellers. 

The "Buy Before You Sell" program offers a solution to common pain points: 

• No Contingency Offers: Offers contingent on selling your current home are often less attractive to sellers. With this program, you can make competitive, contingency-free offers.
• Less Disruption at Home: Avoid inconvenient showings and the need to keep your home meticulously staged while balancing daily family life.
• Time to Secure a Better Offer: Without the pressure of deadlines, you can hold out for a strong offer on your current home rather than settling for less.
• Freedom to Find Your Dream Home: You don't have to rush to buy a home that isn't the right fit just because time is running out.
• Avoid Lease-Back Clauses - Skip the complications of negotiating lease-back agreements with buyers.
• No Temporary Housing or Double Moves - Eliminate the hassle of renting or finding short-term housing and avoid moving twice.
• Easier Home Staging - Once you've moved out, you can neutralize your home's d�cor, making it more appealing to a broader range of buyers.
• Quicker Sales and Higher Prices - Vacant homes not only sell faster but often for higher prices when presented neutrally.

The "Buy Before You Sell" program provides significant advantages to sellers: 

• Access to Home Equity - Sellers can unlock some of their current home's equity to fund the purchase of their new home.
• Debt Flexibility - Lenders may exclude your current mortgage payment from debt calculations when underwriting the new loan, which can make qualifying for your next home easier.
• More Time and Control - The program gives you the freedom to manage your timeline, reducing stress and allowing for well-thought-out decisions.

A Stress-Free Transition 

This approach not only relieves the financial and logistical pressures of selling but also gives you the flexibility to make the best decisions for your family. It ensures that you're not compromising on your next home or your selling price and allows for a smoother, more comfortable transition into your new space. 

If you're planning to sell your current home and buy a new one, ask your real estate agent or trusted lender about the "Buy Before You Sell" program. It could be the key to a stress-free, seamless move.

If you need a recommendation for a trusted mortgage lender who can help you buy before you sell, give me a call.  And of course, we will be happy to provide you with a complimentary market analysis so you'll know how much equity you have available.

An ADU as an option to affordability

As home prices and mortgage rates rise, buyers are looking for innovative ways to make homeownership more manageable. One option gaining popularity is the Accessory Dwelling Unit (ADU).

An ADU is an independent living space, often resembling a small apartment or efficiency, located on the same property as a single-family home. It can be attached to the main house, like a basement or garage conversion, or it can stand alone as a detached structure. While not widely known, ADUs offer unique financial and lifestyle benefits that could make homeownership more affordable.

The most significant advantage of an ADU is the potential to generate rental income. By renting out the ADU, buyers can offset their monthly mortgage payments, making homeownership much more attainable.

This can be particularly helpful for first-time buyers or those with moderate incomes who may otherwise struggle to afford a home. Even beyond rental income, ADUs serve as a long-term investment, adding value to the property and increasing its appeal for future buyers.

ADUs aren't just for young buyers, though�they're a versatile solution for various lifestyles. Retirees, for example, can generate extra income by renting out the ADU or even maximize their financial potential by moving into the ADU themselves and leasing out the main house.

Families can use ADUs to keep aging parents close while maintaining privacy, and empty-nesters who love to travel can rent out both the main house and ADU seasonally, creating an additional income stream.

While there are challenges to adding an ADU, such as navigating zoning regulations or securing financing, the rewards can far outweigh the initial effort. An ADU can make your property more affordable, generate passive income, and become a valuable investment over time.

If this idea sparks your interest, talk to your real estate agent to explore whether an ADU could work for you. It's a creative and practical solution that could open the door to homeownership in today's competitive market.

Rising Homeowner's Insurance Affecting Affordability

For homeowners with mortgages, rising insurance premiums pose a unique and unavoidable challenge. Unlike those who own their homes outright, mortgage holders are required by their lenders to maintain adequate homeowners insurance. This ensures that the lender's investment in the property is protected in the event of a disaster, but it leaves homeowners with little choice but to absorb the increasing costs.

Between 2020 and 2023, insurance premiums surged by about 20%, and in some high-risk areas, the increases are even steeper. For many, this spike has strained household budgets, adding to the already heavy financial burden of rising interest rates, property taxes, and maintenance costs.

Several factors contribute to these rising costs:

• Climate Change: The increasing frequency and severity of natural disasters, such as hurricanes and wildfires, have resulted in higher claims, prompting insurers to raise premiums or withdraw from high-risk markets.
• Construction Costs: Between 2020 and 2023, construction input prices rose by 37.7%, with machinery costs increasing by 12% from 2022 to 2023, leading to more expensive claims for insurers.
• Regulatory Challenges: In some states, regulatory environments have hindered insurers' ability to adjust rates in line with escalating risks, causing some companies to exit these markets.

Unfortunately, dropping coverage isn't an option for mortgage holders. If a homeowner fails to maintain adequate insurance, the lender may purchase a policy on their behalf�often at a much higher cost�adding it to the homeowner's monthly mortgage payment. This arrangement, known as "force-placed insurance," typically provides less coverage at a premium rate, compounding the financial strain.

What Can Homeowners Do?

Homeowners feeling the squeeze have several strategies to mitigate the impact of rising insurance costs:

• Shop Around: Compare policies from multiple insurers to find the most competitive rates.
• Bundle Policies: Many companies offer discounts for bundling home and auto insurance.
• Increase Deductibles: Opting for a higher deductible can lower monthly premiums, though it means paying more out-of-pocket for claims.
• Explore State Programs: In some states, government-backed insurance programs may offer affordable options for high-risk homeowners.

A Call for Broader Solutions

While individual strategies can help, the broader affordability crisis requires systemic solutions. Climate change mitigation, regulatory reforms to stabilize insurance markets, and efforts to control construction costs are all critical to easing the financial burden on homeowners.

If you're buying a home or already dealing with the strain of rising insurance costs, reach out to your insurance agent or lender to review your options, stay compliant with mortgage requirements, and safeguard your home and financial well-being.

A second opinion is a prudent choice

Getting pre-approved for a mortgage is a vital step in the homebuying process. While many buyers rely on online calculators or their first pre-approval offer, these tools and initial approvals might not always provide the best options. If you're serious about making a smart financial decision, seeking a second opinion from a trusted mortgage officer is a step worth taking. 

Why a Second Opinion Matters 

Your first pre-approval might feel like a green light to move forward, but it's important to remember that not all lenders offer the same terms. A second opinion could uncover better interest rates, saving you thousands of dollars over the life of your loan. Additionally, it might provide access to unique loan programs tailored to your financial needs or even reveal ways to reduce upfront fees. 

Benefits Beyond the Numbers 

Working with a second mortgage officer can also lead to better service. A recommended professional often offers personalized guidance, quicker closing times, and local market-specific expertise. These advantages not only ease the stress of buying a home but can also make you a stronger contender in competitive markets. 

Flexibility and Peace of Mind 

Sometimes, a second lender may offer greater flexibility with credit scores or loan terms. This can be especially valuable if your financial situation isn't straightforward. Ultimately, knowing you've explored all your options gives you confidence that you've secured the best deal possible. 

Addressing Concerns About Credit Scores

Many buyers worry that seeking a second opinion could negatively impact their credit score due to an additional inquiry. However, credit bureaus treat multiple mortgage inquiries within a short time frame�usually 14-45 days�as a single inquiry, so your score is unlikely to be affected. Additionally, the costs associated with getting a second opinion are often minimal or negligible, especially when compared to the potential savings from better rates, lower fees, or improved loan terms. Taking this step is a low-risk, high-reward move that ensures you're making the most informed financial decision.

Take the Next Step 

Choosing the right mortgage is just as important as choosing the right home. Don't settle for the first pre-approval without ensuring it's the best fit for you. Ask your real estate agent for a recommendation of a trusted mortgage officer who can provide you with a thorough and professional second opinion. It's a simple step that could make a significant difference in your home buying journey!

Thoughtful Questions Can Guide Your Decision

When interviewing real estate agents to sell your home, asking the right questions is key to finding an agent who will best meet your needs. The process of selling a home can be complex, and the right agent will not only have the experience and market knowledge but also the right approach to guide you through every step.

By asking insightful questions, you can gauge an agent's expertise, communication style, and understanding of your goals, ultimately helping you choose someone who will work tirelessly to achieve the best possible outcome for you.

Here are 25 common questions homeowners often ask when interviewing a real estate agent to sell their home:

1. What is your experience in real estate, and how long have you been working in this area?
2. How many homes have you sold in the past year?
3. What is your average sale-to-list price ratio?
4. How familiar are you with my neighborhood?
5. How do you determine the listing price for a home?
6. What are the current market trends, and how will they impact my home's sale?
7. Can you provide references from past clients?
8. What is your marketing strategy to sell my home?
9. Do you use professional photography, staging, or virtual tours?
10. Will you host open houses? If so, how many and when?
11. How will you keep me updated throughout the selling process?
12. What online platforms and social media channels will you use to promote my home?
13. What do you think are the unique selling points of my home?
14. How do you handle multiple offers?
15. What is your strategy for negotiating the best price for my home?
16. What is your commission rate, and what services does that include?
17. Are there any additional fees I should be aware of?
18. What steps do I need to take to prepare my home for sale?
19. How long do you expect it will take to sell my home?
20. What challenges do you anticipate in selling my home?
21. Can you provide a comparative market analysis (CMA) for my home?
22. How do you handle a situation where my home isn't getting offers?
23. What happens if I'm not satisfied with your service? Can I cancel the contract?
24. Do you work alone, or do you have a team?
25. What sets you apart from other agents? Why should I choose you?

Answers to these questions will help homeowners understand an agent's expertise, marketing approach, negotiation skills, and overall fit with their needs.  For more information, download our Sellers Guide.

Avoiding tax when you sell your home

In the past, many homeowners didn't give much thought to keeping detailed records of home improvements. With capital gains exclusion thresholds of $250,000 for single filers and $500,000 for married couples, most homeowners didn't come close to exceeding these limits when selling their homes.

As a result, they often overlooked the importance of tracking and documenting their expenditures on property improvements. However, the landscape has shifted significantly in the last decade.

The rapid appreciation of home values has pushed many homeowners into a position where they might exceed the capital gains exclusion threshold and owe taxes on their profit. By understanding what qualifies as a capital improvement and maintaining accurate records, homeowners can increase their adjusted basis, thereby reducing their taxable gain when selling their property.

What Counts as Capital Improvements?

Capital improvements are expenditures that add value to your home, prolong its useful life, or adapt it to new uses. These are not limited to big-ticket items like kitchen remodels or room additions, installing energy-efficient windows, replacing a roof, or upgrading HVAC systems.

Even landscaping improvements, building a deck, or adding a fence can qualify, as well as replacing a faucet, adding a video doorbell or other smart devices in the home. The key is that these improvements must be permanent and add to the property's value.

Why Keeping Records Matters

Every dollar spent on a capital improvement adds to the cost basis of your home. The cost basis is used to calculate your capital gain, which is the difference between your home's net sale price and its adjusted basis (original purchase price plus improvements). By increasing your cost basis, you can reduce the taxable portion of your profit, potentially saving thousands of dollars in capital gains taxes.

To maximize these benefits, it's crucial to keep receipts, invoices, and other documentation for all qualifying expenditures. Create a folder�physical or digital�to organize these records and ensure they're readily available when it comes time to sell your home.

Why This Matters Now

In the last decade, home prices have appreciated at an unprecedented pace. Inventories are smaller and demand is high causing the prices to increase. This rapid growth means more homeowners may find themselves exceeding the capital gains exclusion thresholds.

By properly documenting capital improvements, homeowners can mitigate their tax burden and retain more of their hard-earned equity. As home prices continue to rise, understanding and utilizing these strategies has never been more important.

For more information, consult your tax professional and download our Homeowners Tax Guide or IRS Publication 523.

Homeownership is more about its future value

When it comes to housing, the debate between owning and renting often boils down to finances. While renting may offer short-term flexibility, homeownership provides significant financial benefits that renters miss out on. From appreciation to building equity and increasing your wealth, owning a home is an investment in your future.

One of the most compelling financial reasons to own a home is appreciation. Over time, real estate tends to increase in value, allowing homeowners to build wealth simply by holding onto their property. This appreciation means that what you buy today could be worth significantly more in the future, boosting your financial portfolio.

Equity building is another powerful advantage of homeownership. Each mortgage payment you make reduces your loan balance, effectively transferring more of the property's value to you. Unlike rent, which disappears into a landlord's pocket, your mortgage payments help you own more of your home every month.

Early payments may be interest-heavy, but over time, a larger portion goes toward the principal. This gradual payoff increases your ownership stake and creates a form of forced savings that builds wealth over the long term.

Homeowners can deduct mortgage interest and property taxes, but many currently take advantage of the higher standard deduction introduced by the Tax Cuts and Jobs Act of 2017 instead of itemizing. However, future changes to tax laws�such as an increased limit on property tax deductions�could make itemizing more beneficial for homeowners. These savings can make owning a home even more affordable than renting.

A fixed-rate mortgage offers payment stability, a stark contrast to rising rents in competitive markets. While rent increases can strain your budget, a fixed mortgage ensures predictable housing costs, giving you long-term financial security. This stability is a significant financial advantage, especially for families planning for the future.

While the financial benefits are compelling, owning a home also offers practical and emotional advantages. The ability to customize your living space, establish roots in a community, and build generational wealth makes homeownership an appealing choice. These perks enhance the financial rewards, creating a lifestyle that renting rarely matches.

Owning a home is more than just a place to live�it's an investment in your financial future. With appreciation, equity building, and tax benefits working in your favor, homeownership offers a path to long-term wealth and stability. When paired with emotional and lifestyle benefits, it's clear why owning a home is often better than renting.

To see a personal projection of how homeownership could benefit you financially, check out our Rent vs. Own analysis.  We'd love to get together to talk about it with you.

Strategies to WIN in Multiple Offer Scenarios

Understanding Mortgage Fraud Red Flags

During crises, whether natural or personal, the risk of scams and fraud increases. While many organizations can assist you with financial difficulties or foreclosure, it's crucial to ensure you're dealing with a reputable entity before proceeding.

Always research any unsolicited offers for help. Protect yourself by asking questions, thoroughly reviewing provided materials, and avoiding solicitations that demand upfront payments.

• A company/person asks for a fee in advance to work with your mortgage company to modify, refinance or reinstate your mortgage.
• A company/person guarantees they can stop foreclosures or get your loan modified.
• A company/person advises you to stop paying your mortgage company and pay them instead.
• A company pressures you to sign over the deed to your home or sign any paperwork that you haven't had a chance to read, and you don't fully understand.
• A company other than your mortgage company claims to offer "government-approved" or "official government" loan modifications.
• A company/person you don't know asks you to release personal financial information online or over the phone.

Here are some common predatory scams and other potential traps to watch out for:

• "Call spoofing" scams: Caller ID or phone "spoofing" occurs when a caller deliberately falsifies the information transmitted to your caller ID in an effort to disguise their identity while pretending to be someone else ... often in order to get you to share your personal information over the phone. Learn more.
• Foreclosure rescue fraud: In this scheme, someone may offer false promises of being able to save your home from foreclosure or guarantee a loan modification with a reduced mortgage payment. Learn more.
• Title scams: When someone offers to give you a loan or fast cash in exchange for taking over your mortgage and title. They may allow you to remain in your home as a renter and promise you that you can buy the home back once you are on your feet, but once the deed is transferred, there's no guarantee that you'll ever own the home again.
• Post-disaster insurance scams: In the wake of a disaster, someone may offer you money immediately in exchange for money you will get later from the insurance company. You end up getting much less from the individual than the insurance company actually would have paid you or your home repair contractors directly.

If you suspect you are a victim of mortgage fraud or spoofing scams against your home, you should contact the Federal Trade Commission (FTC), your local police department, and the FBI's Internet Crime Complaint Center (IC3), or call 1-888-995-HOPE (4673) to report it immediately.

A unique opportunity for homebuyers this spring

The spring season presents a unique opportunity for savvy homebuyers to get ahead in the market. While many are waiting on the sidelines for rates to drop, those who act now can reap significant benefits.

Recent market trends show that inventory levels and new listings have increased, offering a wider selection of homes for buyers. This temporary lull in competition means you have more negotiating power and time to find your perfect home without the pressure of bidding wars.

By purchasing now, you're not just securing a home; you're making a smart investment. Even if current mortgage rates are slightly higher, you're locking in today's home prices before they potentially rise more. Remember, you can always refinance when rates decrease, but you can't go back in time to buy at today's prices.

Moreover, by acting now, you'll be settled into your new home while others are still waiting and watching. You'll have the advantage of enjoying your space, building equity, and potentially benefiting from any market upswings.

Don't let this opportunity pass you by. The best time to buy a home is when you're ready, and the current market conditions are favorable for those willing to make a move. Secure your future today and get ahead of the crowd ... your dream home is waiting!

While the seasonal trends in real estate are important to consider, recent market developments have added another layer of complexity to the homebuying landscape.

In late August and early September, we saw a sudden improvement in mortgage rates, which prompted many buyers who had been waiting on the sidelines to re-enter the market. This surge in activity was immediate and significant, demonstrating the pent-up demand that exists among potential homebuyers.

September brought some positive news, with Realtor.com's "Monthly Housing Market Trends Report" showing increased inventory levels and more new listings year-over-year. However, this optimism was short-lived. October saw a sharp decline in new listings month-over-month, and the average time homes spent on the market increased to nearly two months ... the slowest October in five years.

The spike in rates during October caused many buyers to retreat once again. As a result, market activity slowed considerably, with homes staying on the market longer and inventory levels rising.

These recent fluctuations underscore the importance of being prepared and ready to act when market conditions are favorable. While waiting for the perfect moment, you might miss out on opportunities. Remember, you can always refinance your mortgage in the future if rates improve, but you can't go back in time to purchase at today's prices if they continue to rise.

For those considering buying a home, it's crucial to work with a knowledgeable real estate professional who can help you navigate these market dynamics and identify the best opportunities, regardless of the season or current rate environment.

Download the Homeownership Today report that presents a case that acting now may be better than waiting.

How Temporary Buydowns Can Benefit Homebuyers

As a homebuyer in today's fluctuating market, you might be hesitant to commit until interest rates stabilize. However, a temporary buydown could be your secret weapon for making homeownership more affordable now while keeping your options open for the future.

How Temporary Buydowns Work to Your Advantage

A temporary buydown, like a 2/1 buydown, lowers your interest rate for the first two years of your mortgage. This means lower monthly payments when you need them most ... right after purchasing your home.

The Hidden Benefit: Potential Refund on Early Payoff

Here's an exciting feature many buyers don't know about: If you sell your home before the buydown period ends, you may be entitled to have the unused portion of the buydown applied to your loan principal. This means you don't lose out on the benefits you've paid for, even if your situation changes.

Flexibility in a Changing Rate Environment

If interest rates continue to drop, you can still take advantage by refinancing. The temporary buydown gives you lower payments now, and you might even get a bonus reduction in your loan balance if you refinance early.

To illustrate how a 2/1 buydown works and its potential benefits, let's consider a practical example:

• Home purchase price: $400,000
• Down payment: 10% ($40,000)
• Loan amount: $360,000
• Loan term: 30 years
• Current mortgage rate: 7.04%
• Buydown cost: $8,406

Year 1: Maximum Savings

• Buydown rate: 5.04% (2% lower than the standard rate)
• Monthly savings: $463.40

Year 2: Continued Benefits

• Buydown rate: 6.04% (1% lower than the standard rate)
• Monthly savings: $237.12

The Refinance Opportunity

Suppose rates drop after the first year, prompting our homeowner to refinance. Here's where the unique advantage of a temporary buydown comes into play:

Unearned buydown fee: $2,845.44

Benefit: This amount is applied to reduce the principal balance of the existing mortgage

This example demonstrates how a 2/1 buydown can provide immediate savings and flexibility. Even if market conditions change and refinancing becomes attractive, the homeowner doesn't lose out on their initial investment in the buydown. The unused portion of the buydown fee effectively becomes a bonus principal payment, further enhancing the benefits of refinancing.

By understanding these mechanics, homebuyers can make informed decisions about whether a temporary buydown aligns with their short-term affordability needs and long-term financial strategy.

While this feature of the unused portion of the buydown applied to your loan principal is common, it's crucial to verify the specific terms with your lender. Every loan agreement can be different, so always discuss the details of your buydown and refinancing options with your mortgage professional.

By using a temporary buydown, you can make your dream home more affordable today while keeping the flexibility to benefit from future rate drops. It's a smart way to enter the market with confidence in these uncertain times.

A Collaborative Approach to Streamline Property Sales

The Multiple Listing Service, through its collaborative approach, has streamlined property sales and increased efficiency beyond what individual agents or companies could achieve independently. This cooperative system enables more transactions to be completed in less time, benefiting both real estate professionals and their clients.

These comprehensive databases, maintained by real estate professionals, provide a centralized platform for property listings, creating a more efficient and transparent marketplace. By facilitating the sharing of information between real estate agents, MLSs have become an indispensable tool in the home buying and selling process.

For buyers, MLSs offer unparalleled access to available properties in their desired area. Through their real estate agent, buyers can easily search for homes that meet their specific criteria, including price range, location, size, and amenities. This streamlined approach saves time and energy, allowing buyers to focus on properties that truly match their needs and preferences.

Sellers benefit from the extensive exposure an MLS provides for their property. When a home is listed on an MLS, it becomes visible to a vast network of real estate professionals and potential buyers. This increased visibility often leads to faster sales and potentially higher offers, as more interested parties become aware of the property.

The MLS system also promotes fair competition among real estate agents, which ultimately benefits both buyers and sellers. By consolidating listings from various brokers and agencies, MLSs create a level playing field where properties can be evaluated based on their merits rather than the size or influence of the listing agency. This transparency helps ensure that buyers have access to all available options and that sellers' properties receive equal consideration.

Another advantage of MLSs is the accuracy and reliability of the information they provide. Real estate professionals are required to adhere to strict guidelines when submitting listings, ensuring that the data is up-to-date and comprehensive. This reliability gives buyers confidence in the information they're using to make decisions and helps sellers present their properties in the best possible light.

MLSs also facilitate cooperation between real estate professionals, which can lead to smoother transactions for both buyers and sellers. MLSs encourage agents to work together to close deals, resulting in a more efficient process for all parties involved.

For sellers, the MLS system often translates to reduced time on the market. The widespread exposure and efficient matching of properties to potential buyers can accelerate the selling process, helping homeowners move on to their next chapter more quickly. Additionally, the competitive nature of the MLS can sometimes drive-up prices, potentially resulting in better offers for sellers.

Multiple Listing Services offer numerous benefits to both buyers and sellers in the real estate market. By providing a centralized, accurate, and comprehensive database of property listings, MLSs streamline the home buying and selling process, increase exposure for sellers, and offer buyers a wealth of options. This powerful tool continues to shape the real estate industry, making transactions more efficient and transparent for all involved parties.

Options for When a Home Doesn't Appraise

When a home appraises for less than the sales contract price, it can create challenges for both buyers and sellers. However, there are several options available to move forward with the transaction.

One of the most common solutions is to renegotiate the sales price based on the appraisal results. In this scenario, the seller may agree to lower the price to match the appraised value, allowing the deal to proceed without requiring additional funds from the buyer.

Alternatively, both parties could meet in the middle by agreeing to split the difference between the appraised value and the contract price. For example, if there's a $20,000 gap, each party could cover $10,000.

If the seller is unwilling to reduce the price, the buyer has options to make up the difference. One approach is for the buyer to bring additional funds to closing to cover the gap between the appraised value and the contract price. This would increase their down payment but allow the sale to proceed at the agreed-upon price.

In some cases, challenging the appraisal might be appropriate. The buyer can request a second appraisal or a "re-review" of the original appraisal from their lender, especially if there were factual errors in the initial report. If time allows, waiting for a comparable home to sell at a similar price and then requesting a new appraisal might yield a higher value.

The presence of an appraisal contingency in the contract provides important protections for buyers. With this contingency in place, buyers can typically renegotiate the price or terminate the contract without penalty if the appraisal comes in low. However, buyers should be cautious about waiving appraisal contingencies, as this could leave them obligated to cover any shortfall or risk losing their earnest money deposit.

In rare cases, more unconventional approaches might be considered. For instance, a seller might offer a rent-to-own scenario where the buyer rents the property until they can satisfy the difference between the sale price and appraisal. Additionally, seller financing could be an option where the seller offers to finance the gap amount privately outside of the main mortgage but with complete disclosure.

Ultimately, when faced with a low appraisal, open communication between all parties is crucial. Buyers and sellers should work closely with their real estate agents and lenders to explore the best solution for their specific situation. While a low appraisal can be a hurdle, it doesn't necessarily mean the end of the transaction; with flexibility and creativity, many deals can still move forward successfully.

How to change a second home to a primary home & why

The tax benefits of owning both a first and second home can be significant, with the IRS allowing taxpayers to deduct interest and property taxes on both properties as itemized deductions on their tax returns, albeit with certain limitations. Interest deductions are limited to the amount of debt incurred to buy, build, or improve the first and/or second home, with a maximum cap of $750,000. Property taxes, falling under the limitation of state and local taxes as set forth in the TCJA of 2017, are capped at $10,000 per year.

However, while second homes enjoy these benefits, they do not qualify for the Section 121 exclusion sale of principal residence rules. These rules only apply to a taxpayer's principal residence, allowing couples filing jointly to exclude up to $500,000 of capital gain from the sale of their primary home, and single filers up to $250,000 of gain, provided they have owned and used the property as their principal residence for two out of the five preceding years.

Taxpayers considering selling their second home, which wouldn't qualify for the exclusion, may explore changing its status to their principal residence. This entails owning and using the property as their principal residence for two years, along with careful documentation and planning to qualify for the exclusion. Indicators of a principal residence include making the second home the preferred mailing address for various documents, ensuring all family members reside there most of the time, having utilities in the homeowner's name, and updating addresses with relevant entities.

Changing the status of the second home to the principal residence can be beneficial to avoid recognizing gain on the sale. However, it's crucial to consult with a tax advisor to determine eligibility and ensure proper documentation and support for the change. This guidance will help navigate the process effectively and maximize tax benefits for the homeowner.

Homeowner Strategies to Minimize Gain & Maximize Proceeds

The gain on the sale of your home is determined by the price you sell the home, less selling expenses, less the price you paid for it, plus the capital improvements made during the time you owned the property.

IRS and accounting use the term "basis" to describe your cost in the home.  It is a dynamic number that changes over time based on capital improvements that are made and capital losses that are incurred.  What is called the tax basis may better be referred to as cost basis.  It is the taxpayer's cost in the property used to determine the tax on the gain of the sale.

The calculation begins with the purchase price of the property plus certain capitalized acquisition costs that were owed by the seller but were paid when purchased.  Examples would include real estate taxes owed through the day before the sale date, back interest owed by the seller, and charges for repairs that were the seller's responsibility.  Capital improvements made to the property during ownership will increase the basis.

Capital improvements must either materially add value to the home, appreciably prolong the useful life of the property, or adapt a portion of the property to a new use.  IRS Publication 523 has a section on figuring the gain or loss on a personal residence. 

Some of the following may be considered capital improvements: landscaping, driveway, fence, swimming pool, new roof not covered by insurance, replacement of HVAC equipment and appliances.  Maintenance and repairs to a person's home is not a capital expenditure. 

If the owner purchased a home for $350,000 and during that time spent $110,000 on qualified improvements, the cost basis of the property would be $460,000.

If cost recovery had been taken on the home when it was used as a rental property, even though it is now considered a principal residence, the total amount of the depreciation lowers the basis in the property.

 

Purchase Price	$350,000
Plus Capital Improvements	$110,000
Adjusted Basis	$460,000
Sales Price	$650,000
Less Selling Costs	$31,000
Net Selling Price	$619,000
Less Adjusted Basis	$460,000
Capital Gain	$159,000

In the example above, if the taxpayer owned and used the home as their principal residence for two out of the last five years and had not taken an exclusion on another home during the two years prior to the current sale and didn't acquire the home through a 1031 exchange during the past five years, the gain qualifies for an exclusion and no tax paid.  Single taxpayers and married taxpayers filing separately can exclude up to $250,000 of gain from the sale of a principal residence.  Married taxpayers filing jointly can exclude up to $500,000 of gain from the sale.

Record keeping is important for you to substantiate the capital improvements when it comes time to calculate the gain.  While IRS does allow you to reconstruct the expenses, it is much better to keep track of them in a contemporaneous manner with dates, receipts, and possibly, pictures for the more expensive improvements.

For more information, download our Homeowners Tax Guide.

Living the Dream: The Value of Homeownership

Owning a home has long been considered a fundamental part of the American dream. It represents far more than just having a place to live�it embodies values, aspirations, and a sense of security. Here's why homeownership is widely regarded as a key component of the American dream:

Stability and Roots: Owning a home provides a sense of stability and roots in a community. It allows individuals and families to establish themselves, put down roots, and create a sense of belonging.

Wealth Building: Homeownership is often seen as a pathway to wealth building. By building equity over time, homeowners have the potential to accumulate wealth, establish financial security, and pass down assets to future generations.

Personalization and Pride: Homeownership grants the freedom to personalize and customize a space according to personal taste and style. It offers a sense of pride and accomplishment, as homeowners can create a place that truly reflects their identity and values.

Community and Social Connections: Homeownership fosters a sense of community and social connections. Neighbors become more than just acquaintances; they become friends, creating a supportive network that enhances the overall quality of life.

Stability for Future Generations: Homeownership provides a stable environment for future generations. It offers the opportunity to create lasting memories, build family traditions, and provide a secure foundation for children and grandchildren.

Financial Benefits: Homeownership can provide various financial benefits, including potential tax advantages and the opportunity to build credit and establish a solid financial history.

Sense of Achievement: Achieving homeownership is often viewed as a significant milestone and a symbol of personal achievement. It represents hard work, dedication, and the fulfillment of a long-held dream.

Control and Independence: Homeownership brings a sense of control and independence. Homeowners have the freedom to make decisions about their property, from renovations and improvements to landscaping and design choices.

Long-Term Investment: Real estate has historically been a reliable long-term investment. Homeownership allows individuals to build wealth over time while enjoying the benefits of a place to call their own.

Emotional Well-being: Owning a home can contribute to emotional well-being and overall happiness. It provides a sense of security, pride, and a place to create lasting memories with loved ones.

Homeownership represents a significant part of the American dream, encapsulating aspirations for stability, financial security, personalization, and a sense of community. It symbolizes the pursuit of a better future, a place to call home, and the realization of one's own piece of the American dream.

For more information, download Homeownership Today!

How to get a lower rate and a lower price

Are you in the market for a new home and wondering which mortgage option is right for you? While the world of home financing offers a surplus of choices, one option often overlooked is the Adjustable Rate Mortgage, or ARM. If you're in a market where interest rates are trending lower, an ARM could be the key to significant savings and financial flexibility.

The problem is simple, while you're waiting for interest rates to come down, the price of homes are still going up.  Any savings from the lower interest rate could more than be offset by the increase in purchase price due to appreciation.  Buying at today's prices with an interim loan might be the answer.

Picture this: You've found your dream home, and it's time to secure financing. An ARM often starts with a lower initial interest rate than a fixed-rate mortgage. This means your monthly payments will be more manageable from day one, allowing you to allocate your budget wisely.

In a market where interest rates are on a downward slope, ARMs can lead to even lower monthly payments. If rates continue to decline, your mortgage payments could shrink, leaving more money in your pocket.

If you anticipate selling or refinancing your home within a few years, an ARM can be a strategic choice. The lower initial rates and shorter fixed-rate periods align with your shorter-term ownership plans, offering cost savings during your stay.

Imagine paying less interest over the life of your mortgage. In a declining rate environment, an ARM can translate into lower overall interest expenses compared to a fixed-rate mortgage, assuming the rates stay favorable.

One of the unique features of ARMs are the rate caps. These caps limit how much your interest rate can adjust during each period, offering a safeguard against sudden and steep rate hikes. Your financial peace of mind is protected.

A lower initial interest rate can boost your borrowing power. With an ARM, you may qualify for a larger loan amount or consider a property that might have been just out of reach with a fixed-rate mortgage.

Lower initial monthly payments with an ARM can free up funds that you can redirect towards paying down your mortgage faster. This could help you build equity in your home more rapidly.

Life is full of surprises, and an ARM provides you with flexibility. As market conditions change, you have the option to adapt your mortgage to your financial goals. You can choose to refinance, lock in a fixed rate, or ride the wave of lower rates.

While ARMs offer exciting benefits in a declining rate environment, they are not without risks. If interest rates rise, your monthly payments could increase, potentially impacting your budget. Therefore, it's crucial to assess your financial situation, future plans, and risk tolerance carefully.

When the market is trending toward lower interest rates, an Adjustable Rate Mortgage can be a valuable tool for savvy homebuyers especially when the price of homes are still going up. It's all about seizing the opportunity for savings, financial flexibility, and homeownership that aligns perfectly with your goals and lifestyle. Explore your options, consult with a trusted mortgage professional, and make an informed decision that leads you to your dream home with your financial well-being in mind.

Home selling strategies for downsizing seniors

Downsizing can be a significant life transition for any age person, but especially for seniors who may have lived in this last home for some time. Follow these suggestions to make the downsizing process smoother and less stressful.

• Start Early: Begin the downsizing process well in advance of your planned move. Give yourself plenty of time to make decisions and avoid feeling rushed.
• Assess Your Needs: Evaluate your current and future needs in terms of space, accessibility, and location. Consider factors like health, mobility, and proximity to family and healthcare facilities.
• Create a Plan: Develop a comprehensive downsizing plan that outlines your goals, priorities, and a timeline for each task. Having a plan will keep you organized and focused.
• Declutter: Go through your belongings room by room and decide what to keep, donate, sell, or discard. Be realistic about what you truly need and use regularly.
• Seek Professional Help: Consider hiring a professional organizer, downsizing specialist, or real estate agent experienced in working with seniors. They can offer guidance and support throughout the process.
• Embrace Technology: Digitize important documents and photographs to reduce paper clutter. Consider using digital tools to keep track of your possessions.
• Measure Your New Space: Obtain floor plans or measurements of your new home to ensure your furniture and belongings will fit comfortably. This can help you decide what to bring and what to leave behind.
• Prioritize Sentimental Items: While downsizing often involves letting go of sentimental possessions, choose a few cherished items to keep and display in your new space. Consider passing down heirlooms to family members.
• Hold an Estate Sale or Auction: If you have valuable items that you no longer need, consider selling them through an estate sale or auction to help fund your downsizing efforts.
• Stay Positive: Downsizing can be emotionally challenging, but it also offers the opportunity for a fresh start and simplified living. Focus on the benefits of your new home and lifestyle.

Remember that downsizing is a personal journey, and it's essential to approach it with patience and a positive mindset. Don't hesitate to seek support from family and friends, and don't be too hard on yourself during this process.

For more information download our guide Downsizing Your Home.

Should You Install Artificial Turf in Your Yard?

Who wouldn't want to reside in a beautiful neighborhood adorned with meticulously manicured lawns? While some homeowners relish the thought of working on their yards, others may not share the same enthusiasm. If you've ever contemplated the idea of installing artificial turf, also known as fake grass, as a part of your landscape, it's essential to consider both its advantages and drawbacks.

Let's Begin with the Advantages:

Modern advancements in artificial turf technology have rendered it nearly indistinguishable from real grass, offering an evergreen and perpetually lush appearance to your landscape.

One of the most significant perks of artificial turf is the elimination of the need for regular mowing and trimming. This translates to potential cost savings by reducing monthly expenses associated with professional yard maintenance.

Artificial lawns are highly durable and can endure for up to two decades with minimal upkeep.

Many manufacturers incorporate recycled materials like tires and plastic bottles into their synthetic grass, contributing to a reduction in your environmental footprint.

Artificial turf conserves water, requiring only periodic watering for surface cleaning. In regions with consistent rainfall, this may even become unnecessary, making it an ideal solution for drought-prone climates. Additionally, artificial grass eliminates the risk of groundwater pollution since it doesn't require fertilizers. It also reduces air and noise pollution by eliminating the need for gas-powered lawnmowers and trimmers.

Now, Consider the Drawbacks:

Artificial grass can come with a substantial initial cost.

Being synthetic, it can absorb heat, potentially making it uncomfortably warm under bare feet in direct sunlight.

Accidental pet waste may pass through the turf, with solids being removable, but odors could linger. However, these odors can typically be eliminated using a vinegar and water solution.

Small debris that can't be removed with a leaf blower, such as mulch chips and tiny branches, may require a specialized artificial grass sweeper or turf rake for thorough cleaning.

Before deciding on artificial turf for your yard, carefully weigh these pros and cons to determine if it aligns with your needs, preferences, and budget.

Transform your home into a showstopper with the power of staging!

Imagine looking around your home and wondering how you can make it shine during those crucial showings. The answer is simple: staging! It's a powerful tool that can transform your property and raise its appeal.

Your online listing photos serve as the initial showcase for potential buyers. Staging plays a crucial role in enhancing these images, making them more captivating and inviting. It sets the stage, quite literally, for a positive first impression. When buyers scroll through your listing, professionally staged rooms catch their eye, drawing them into the story your home tells.

Staging isn't just about creating a visually pleasing environment; it's about sparking an emotional connection. A well-staged home exudes warmth and welcome, making it easier for buyers to picture themselves living there. It's a canvas upon which they can paint their own future, creating an emotional bond with the space that lingers long after the showing ends.

The numbers don't lie. According to the National Association of Realtors (NAR), 23% of buyer's agents report that staging can increase the dollar value offered by 1-5% compared to non-staged homes. In essence, staging is an investment that yields a tangible return. It's a strategic move to maximize your property's market value and, ultimately, your selling price.

Staging has another subtle yet impactful benefit. It redirects attention away from any outdated or minor repair needs that you may not have had the resources to address before listing. Instead of fixating on imperfections, buyers are drawn to the positive aspects of your home. It's about showcasing its potential and best features, ensuring they shine brightly.

To reap the full benefits of staging, timing is key. Ideally, it should be implemented before your home hits the market. The moment you decide to sell, consider reaching out to us. We can seamlessly incorporate staging into your selling timeline, ensuring your home stands out and captures the hearts of potential buyers right from the start. Don't underestimate the impact of this transformative process�it's the secret weapon in your arsenal to sell your home swiftly and at an optimal price.

Discovering Tax Credits That Enhance Homeowner Benefits

Owning a home not only provides a sense of stability and pride but also opens doors to potential tax benefits. As a homeowner, understanding tax credits can significantly impact your financial well-being. Let's delve into some key tax credits and deductions available to homeowners and how they can help you maximize savings.

If you've made energy-efficient improvements to your home in the past year, you may qualify for the Residential Energy Efficiency Property Credit. This credit allows you to claim a percentage of the cost of qualifying energy-efficient upgrades, such as solar panels, energy-efficient windows, and HVAC systems, up to certain limits. Not only do these upgrades help lower your utility bills, but they also contribute to a more sustainable future while providing tax savings.

Another valuable tax credit available to homeowners is the Residential Renewable Energy Tax Credit. This credit applies to the installation of renewable energy systems, such as solar panels, geothermal heat pumps, and small wind turbines. Homeowners can claim a percentage of the cost of these systems as a credit on their federal income tax return, reducing their tax liability dollar for dollar.

For homeowners looking to make their homes more accessible and accommodating, the Disabled Access Credit can provide financial assistance. This credit covers a portion of the expenses incurred when making eligible improvements to accommodate individuals with disabilities, such as installing ramps, widening doorways, and modifying bathrooms. By taking advantage of this credit, homeowners can improve the livability of their homes while reducing their tax burden.

As a homeowner, understanding and leveraging these tax credits can lead to significant savings and benefits. They can not only reduce your tax liability but also enhance the financial rewards of homeownership in lower maintenance costs. Be sure to notify your tax professional about the expenditure so they can explore all available options and maximize your savings.

Building a Case for Homeownership Today!

Over the last 60 years, the average sales price of homes has appreciated at a rate of 5.56% annually, according to the Federal Reserve Economic Data. During the same period, rent has increased at a rate of 3.88% annually which presents a compelling argument in favor of homeownership.

When the figures are analyzed, it becomes evident that homes have not only appreciated in value at a faster rate than the increase in rental costs, but they have also provided homeowners hedge against inflation and a substantial asset that builds equity over time.

In the report called "Building a Case for Homeownership Today!", the reader will discover the real cost of homeownership is most likely less than they are paying in rent because of the two powerful dynamics of amortization and appreciation that are not currently working in their favor.  As they continue to rent, the dynamics work in favor of their landlord.

The median homeowner has a net worth of $396,000 compared to approximately $10,400 for renters making the net worth of a homeowner 38 times the household wealth of a renter according to the latest data from the Federal Reserve Board Survey of Consumer Finance.

Another powerful comparison shows what is happening to the postponed buyer's funds for down payment during the delay in purchasing.  Even when the funds are invested in a certificate of deposit or in stocks, the increased proceeds are no where near what their equity would be had they been invested in a home.

Another revelation in this report puts mortgage rates in perspective.  Instead of the anomaly the market has seen for the past 10 years and even more so, in the past three years, the average fixed-rate mortgage rate for the past 52 years is 7.74%; less than the current 30-year fixed-rate mortgage rate.

The report also explains how homeowners can access their home's equity for a variety of purposes like education, medical expenses, investment, business opportunities, or other causes.

An interesting opportunity for owner-occupants is that they can purchase a two-, three-, or four-unit property with a minimum down payment on FHA and conventional loans.  The rent received on the investment units will be shown as income to help them qualify for the larger mortgage on a more expensive property.

In conclusion, the case for homeownership today extends far beyond the emotional and social dimensions�it's a solid financial decision. While high interest rates, affordability concerns, and soaring home prices may seem daunting, it's essential to recognize that the current environment still favors homebuyers.

Download the Building a Case for Homeownership Today! report either for yourself or for someone you know.  After looking at it, schedule an appointment with us to look at the specifics of your situation and give you the information you need.

Making Sense of Home Improvements: What Adds Value?

Before diving into renovation projects, it's important to understand which upgrades are likely to boost your home's value and which ones may not yield a significant return on investment. While certain improvements can enhance your home's appeal and attract potential buyers, others may fall short of expectations.

It's prudent to explore examples of home improvements that have the potential to increase your home's value, as well as situations where renovations may not have a substantial impact on its worth. By gaining insights into these factors, homeowners can make informed decisions and maximize their return on investment when upgrading their properties.

Home improvements that may increase the value of the home:

Hardwood floors ... Refinishing or updating to wood floors have good appeal and have a high return on the cost.

Kitchen Remodel - Updating the kitchen with modern appliances, countertops, and fixtures can increase the home's value by improving functionality and aesthetics.

Bathroom Update - Renovating bathrooms with new fixtures, tiles, and amenities can enhance the home's appeal, especially if it increases the number of bathrooms or improves their condition.

Curb Appeal - Enhancing curb appeal through landscaping, exterior painting, or updating the front door can make a positive first impression and increase the home's perceived value.

Energy-Efficient Upgrades - Adding energy-efficient features such as insulation, or windows can attract environmentally conscious buyers and reduce utility costs, thereby increasing the home's value.

Open Floor Plan - Removing walls to create an open floor plan can improve the flow of the home and make it feel more spacious, which may appeal to modern homebuyers and increase value.

Home improvements that may not affect value significantly:

Over-Personalized Upgrades - Home improvements that are highly customized to the homeowner's taste, such as extravagant or niche features, may not appeal to a broad range of buyers and may not recoup their cost.

Low-Quality Workmanship - Poor-quality renovations or DIY projects that are not executed professionally may detract from the home's value rather than adding to it.

Excessive Upgrades - Spending too much on renovations relative to the home's overall value for the neighborhood may not yield a commensurate increase in value.

Unpermitted Additions - Home improvements made without the necessary permits or that violate building codes may lead to complications during the selling process and may not add value to the home.

Overcapitalization - Investing in upgrades that exceed the anticipated resale value of the home for the neighborhood may result in diminishing returns and may not justify the expense.

While there are many powerful investment aspects of homeownership, not all the money spent on it will necessarily increase the value.  If the cost of some renovations won't be able to be recaptured in the sales price, homeowners should recognize that in advance of making them.  If they decide to move forward, they must realize that it was done for personal convenience or enjoyment. 

On the other hand, some improvements can satisfy convenience, enjoyment and return part or all the cost.  The latest Remodeling Impact Report done by the National Association of REALTORS� and the National Association of Remodeling Industry  can provide more insight into cost recovery.

Your real estate professional can provide guidance of a more specific nature.

Bridging Wealth Gaps: Homeownership's Stand Against Inflation

When exploring the benefits of homeownership, it's more than just having a place to call your own. Among its many advantages, homeownership stands as a formidable safeguard against inflation and a strong vehicle for long-term wealth accumulation. This article will delve into the dynamics of appreciation and amortization, explaining why owning a home can be one of the most impactful financial decisions you can make.

Inflation, the overall upward price movement of goods and services in an economy, erodes the purchasing power of money. In simpler terms, as inflation rises, each dollar you have buys a smaller percentage of a good or service.  The same inflation that is driving rising mortgage rates is putting upward pressure on home prices and rents.

Over the past sixty years, homes have appreciated in value at an annual appreciation rate of 5.56% according to the Federal Reserve Economic Data.  As a homeowner, you want to benefit from the appreciation.  Inflation for the same period averaged 3.7% (Bureau of Labor Statistics) making homes an effective hedge against inflation.

Real estate, unlike many other assets, is a tangible, real asset. History has shown that over the long term, the value of real assets tends to rise at a rate that at least matches, if not outpaces, inflation. So, as the price of goods and services increases, so does the value of real estate, making homeownership a strategic move against inflationary pressures.

With a fixed-rate mortgage, your monthly principal and interest payment remains constant. As a result, while other costs may rise due to inflation, your primary housing cost (if you exclude taxes and maintenance) remains stable, shielding you from the full impact of inflation.

Home appreciation refers to the increase in the home's value over time. Given the finite nature of land and the ever-growing demand for housing, especially in thriving areas, real estate often appreciates. This appreciation can result in substantial equity gains for homeowners, creating a form of 'forced savings' and making it a powerful tool for wealth accumulation.

Amortization has been considered the silent wealth builder. Each time you make a mortgage payment, a portion of that payment goes toward the loan's interest, and the balance pays down the principal, thus retiring your debt incrementally. This process means you're gradually building equity in the home with each payment. Over time, a larger portion of your payment goes towards the principal, accelerating your equity buildup.

Combined, appreciation and amortization can lead to significant wealth growth for homeowners. As the home's value rises and the mortgage balance decreases, homeowners often find themselves sitting on a substantial asset, which can be leveraged in various ways, from securing loans to planning retirement.

While the emotional and social benefits of homeownership are often celebrated, the financial benefits are equally compelling. In a world of economic uncertainties and inflationary pressures, owning a home emerges not just as a source of stability but also as a strategy for long-term financial prosperity. By understanding and leveraging the twin forces of appreciation and amortization, homeowners can pave a path to meaningful wealth accumulation even during periods of relatively high mortgage rates.

For more information, download an information guide on Building a Case for Homeownership Today.

Baby Boomers' Wave to Downsize

As the first groups of baby boomers gracefully rides the wave of aging, they are setting new trends in the housing market, giving birth to what experts fondly refer to as the "Silver Tsunami." This phenomenon is not merely about a change in address; it's a lifestyle transformation tailored to meet the unique needs of the golden years.

With approximately 10,000 people reaching the age of 65 every day, the United States is witnessing an unprecedented demographic shift. By 2030, all baby boomers will have passed this milestone. Among these remarkable statistics, the AARP's estimate stands out: a staggering 74% of total U.S. homeownership belongs to individuals over 50, with more than half of this demographic opting for downsizing their home as a strategic move.

The Silver Tsunami is, in essence, a testament to the demographic strength of the baby boomer generation. Born between 1946 and 1964, this generation has played a pivotal role in shaping American society at every stage of life. Now, as they embrace their senior years, they are reshaping the real estate landscape. Downsizing has become a prevailing trend among this generation.

One of the fundamental aspects of this is the desire for aging Americans to remain in their homes, a concept known as "aging in place." However, this doesn't necessarily mean staying in the same large family home that has seen decades of memories. Instead, it often involves downsizing to a more manageable, efficient, and accessible living space.

The statistics are a testament to the appeal of downsizing among this generation. AARP estimates that a whopping 74% of homeownership in the United States is held by individuals over the age of 50. Additionally, more than 51% of people in this age group have already made the move to downsize.

The reasons behind this paradigm shift are as diverse as the individuals making it happen. For some, it's about financial prudence ... reducing the costs and maintenance associated with larger homes. For others, it's the desire for a simpler, more manageable lifestyle that allows them to focus on experiences rather than possessions. Accessibility and health concerns also play a significant role, with many opting for homes that are designed to accommodate mobility challenges.

Downsizing is having a profound impact on the housing market. It's not just about the scaling down trend; it's also about the types of homes that are in high demand. Single-story residences, condos, and communities with amenities tailored to an active older population are experiencing increased interest. Builders and real estate developers are adapting to these evolving preferences, creating more accessible, age-friendly housing options.

It is not merely a demographic shift; it's a testament to the baby boomer generation's determination to embrace their golden years on their terms. Downsizing is just one facet of this multifaceted trend, and it's changing the way we think about aging and housing. As the silver wave continues to ripple through the real estate market, it's essential for homeowners and industry professionals alike to be aware of these evolving preferences.

One way to find out about your options is to determine the value of your current home and its equity to facilitate the change in housing.  Contact us to provide this service at no obligation as well as to inform you what is available to meet your wants and needs.

Keep more profits from home sales

In recent years, home values have soared, presenting an opportunity for homeowners with substantial equity to consider a unique tax benefit.

Section 121 in the IRS code allows for homeowners who meet certain requirements to exclude up to $500,000 of capital gain on the sale of their principal residence.  Single or married taxpayers filing separately can exclude up to $250,000 of capital gain.  Taxpayers must meet the following requirements:

• They must have owned and used the home as a principal residence during at least 2 out of the last 5 years.
• They should not have excluded gain from another home during the two years before the current sale.
• The property should not have been acquired through a 1031 exchange during the past five years.

Capital gain is determined as selling price, less sales costs, less basis in the property which is the purchase price paid for the home plus capital improvements made during the tenure.  Capital gains more than the exclusion amounts are taxed at the capital gains rate which varies between 0% and 20% depending on the taxpayers adjusted gross income in the year of the sale. 

Some exceptions for divorce, death of a spouse, or military service may apply.  For more information, see IRS Publication 523 and download our Homeowners Tax Guide.  It is always advisable to seek the counsel of your tax professional for your particular situation.

Smart Home Tech: Is It Real Property or Personal Belongings in a Home Sale?

Many of today's homeowners have accumulated multiple high-tech "smart" devices to make their home more convenient, economical, and fun to operate.  When they decide to sell the home, they need to make the listing agent completely aware of whether they will be included in the sale of the home. 

Some of these things easily meet the definition of real property because they are permanently installed like thermostats, doorbells, cameras, garage door openers, and pool equipment monitors.  A rule of thumb mentioned frequently is that if it were removed, the functionality would cease or if there would be evidence of where it had been, it is probably real property and is included in the sale.

Other devices like virtual assistants made by Amazon, Apple, or Google, may not specifically meet that criteria but they are needed to operate things like electrical switches and plugs, or lamps.  It becomes a grey area of whether it is real property when TV's, doorbells, garage door openers, and other devices are dependent on the virtual assistants.

Door locks, as well as some other devices, have a master code written on them that allows the new owner to reset the combination ensuring not only their safety but potential liability for the seller.  In some cases, the seller will need to do this using the app on their computer or phone while it is still connected to their home network.  It may be prudent to arrange a time for the seller to reset the devices in question for the buyers' convenience and security.

Smart home additions could easily be a selling point for potential buyers and sellers need to weigh the benefits of promoting the advantages of such and including those items in the sale of the home.

Make an inventory of what devices stay with the home and what needs to be done to reset them for the new owner.  This could be done at the time of listing the home and given to the listing agent at the same time the listing agreement is signed. Your listing agent will know how to handle it, but decisions must be made before the home is put on the market or it is shown to any prospective purchasers.

Leverage your home's equity into rental property

There can be many reasons homeowners aspire to have their home paid for.  They can include no mortgage payments, financial security, debt reduction, lower expenses, retirement planning, financial freedom, legacy planning, no risk of foreclosure, and reduced stress, just to name a few.

All those things have a cost attached to them which is the loss of the earning power which is tied up in an asset that only benefits the owner by appreciation.  In the past few years since the pandemic began, homeowners have experienced a dramatic increase in equity due to appreciation.

As an example, let's set up a comparison of how the yield on equity decreases as the property appreciates.  A homeowner has a debt-free home worth $400,000 that is expected to appreciate at 4% a year for the next five years. The future value of the home would be $486,661 and the owner would have earned a 4% return on his investment in the property.

In scenario #2, the homeowner refinances the property today for 80% of its value at 7% interest for 30-years.  At the end of the five years, the property is still worth $486,661 and his unpaid balance on the mortgage would be $338,874. The $80,000 equity would have grown to $147,787 earning him an annual return on investment of 13.06%.  The leverage of the borrowed funds caused the owner in this example to triple his yield.

Let's not forget the $320,000 cash out that the owner received when he refinanced the home.  If that was invested in rental real estate, he may be able to buy three to four more properties with 80% mortgages and increase his yield even more.

There is a lot more to a total analysis of a situation like this because rental properties have income and tax advantages that are not relative to a principal residence.  What is possible for the homeowner with this type of asset in their home, is to free up a major portion of the cash and reinvest it.

Having equity gives a homeowner many benefits including financial freedom and security, peace of mind, and the option to pull money out, tax free, to invest in rental property to increase their wealth position.

To learn more about rental property, download our Rental Income Properties and then, schedule a time when we can get together to explore options.  We can start with a Home Equity Review to see what kind of funds may be available based on the current value of your home and its unpaid balance and then talk about how rental property could help you with your financial goals.

Adapting to Life's New Chapters

All of us encounter major life events and they have the possibility of disrupting our lives temporarily, if not permanently.  The homes we live in may have met our needs originally but due to a change in our life, it may no longer be adequate or the best fit for us, which will require a move. The decision to change one's living situation often comes as a response to these pivotal moments, and the reasons behind such changes can be as diverse as the events themselves. 

The number of things that can influence these changes is numerous.  It may be the birth of a new child, or the ages of the children are getting such that you simply need more room. 

Marriages generally merge two households into one.  The possibilities are endless, but it could be two single people or two single parents each with children who need the right space to blend the families.

A promotion, transfer, or a new job could require a change in housing, or maybe just make it more convenient to move closer to where a person is working. 

Countless numbers of people have moved as a result of health issues.  It could be to get away from the altitude, or to a drier climate, or to a more rural area where life is simpler.  The death of a spouse can be the impetus for the move.

Empty nesters and retirees have the freedom to make changes to their housing that will better adapt to their new lifestyle.  The time may have come to seek a cozier, more manageable abode that suits the evolving needs of empty nesters.  It may or may not lead them to a new city or state, but it can certainly include a different size or style home than they have currently.

These are just a few examples of how major life events can set the stage for changes in housing. If you are considering a move for one of these reasons now, you will probably think about it at some point.  We can help you through today's market, talk about timing, and guide you through the decision-making process.

We want to be your trusted agent, ready to support you finding your dream home as you start this new chapter in your life. Take the first step, when the time is right, by connecting with us.

House-Hacking your way to multi-unit rentals

House-hacking refers to buying a multifamily property on an owner-occupied mortgage, living in one unit and renting the others.  If you're thinking about becoming a rental mogul, starting early is an advantage.  Not only will you have longer to accumulate a larger portfolio, but you can also increase the leverage on the first owner-occupied acquisitions. 

Leverage is the use of other people's money to finance an investment.  The higher the loan-to-value, the greater the leverage which can increase the yield.  The lower down payment gives the investor more leverage which can increase the return on their investment. 

FHA, VA, Fannie Mae, and Freddie Mac each have programs for buying owner-occupied two-to four-unit properties with the same minimal down payment required for a single-family home.  The advantage is that non-occupant investors must have a 20-25% down payment where the owner occupant is much less.

A qualified veteran could get into the first property with no down payment.  FHA only requires a 3.5% down payment.  And owner-occupants seeking to buy a multi-unit property with a conventional loan would need 5-10% down payment.

As an example, let's say there is a 2-unit property selling for $500,000.  A non-owner-occupant investor would need to make a minimum down payment of $100,000.  Whereas an equally qualified investor who was going to live in one of the units, would only be required to make a $17,500 down payment on an FHA loan or $25,000 to $50,000 on a conventional owner-occupied loan.

The difficulty is that there are not a lot of two-to-four-unit properties.  In some cases, they may be older properties in older neighborhoods.  With some searching, you might be able to find lots with the right zoning and get a builder involved.

It is certainly worth investigating to find out what is available in your area and surroundings.

Rental properties offer the investor an opportunity to borrow large loan-to-value mortgages at fixed interest rates for up to 30 years on appreciating assets with tax advantages and reasonable control that many other investments don't enjoy.

Some people consider rental properties the IDEAL investment with each letter in the acronym standing for a benefit it provides.  It provides income from the rent which many investments do not have.  Depreciation is a non-cash deduction from income that increases cash flow.  Equity buildup occurs as each payment is made by reducing the principal owed.  Appreciation happens over time as the value of the property increases.  L stands for leverage that was explained earlier in this article.

The key to making this work is to be an owner-occupant in one of the units.  After a reasonable period of time, you may be able to buy another four-unit as an owner-occupant before you need to start using a normal investor's down payment. 

In the meantime, you could have eight units that are increasing in value while the mortgage balance is decreasing with every payment made.  If there is sufficient equity in the properties by the time you're ready to buy more units, you may be able to take cash out of the existing ones to use for the down payments.

This can be a great way to turbocharge your net worth by becoming an owner and a real estate investor at the same time.  To learn more about rental properties, download the Rental Income Properties guide and/or contact me at  to schedule an appointment to meet to answer your questions and discuss the possibilities.