Tuesday, June 27, 2023

The Top 5 Benefits of Owning a Home

Purchasing a home can feel like an overwhelming project, but the long-term advantages of homeownership make it a smart investment to secure your future where the benefits extend beyond simply having a place to live.

Building equity is one of the most significant advantages of owning a home. As you make mortgage payments, your equity increases, and over time, your home can become a valuable asset to use the equity to finance home improvements, pay for college tuition, or even as a down payment on a second home.

Two factors determine equity; the home going up in value and the unpaid balance of the mortgage being paid down.  Appreciation is the increase in value expressed in an annual amount.  Homes have averaged 4% nationally for the past 50 years.  Amortization is the systematic principal reduction that occurs with each house payment made.

Another advantage of buying a house is the stability of housing costs. With a fixed-rate mortgage, your monthly principal and interest payments remain the same for the life of the loan, giving you predictable and stable housing costs. This can help in your financial planning.

Control over your living space is also a significant benefit of owning a home. You can make changes and improvements to your home to suit your needs and preferences without having to get permission from a landlord. This can help you create a space that truly feels like your own and can contribute to your overall sense of well-being and satisfaction.

Finally, homeownership also offers several tax benefits that can contribute to long-term financial savings. You may benefit from itemizing deductions for interest and property taxes that would exceed a person's normal standard deduction.  Regardless of which deduction a homeowner takes, additional tax advantages apply to home ownership like an exclusion of up to $500,000 of capital gain for married, filing jointly taxpayers and $250,000 for single filers who meet the occupancy and use requirement.  

The long-term advantages of buying a house are significant, including building equity, stable housing costs, potential appreciation, control over your living space, and tax benefits. Although the process of purchasing a home can seem overwhelming, the benefits of homeownership make it worth considering. Ensure that you do your research, get pre-approved for a mortgage, and work with a qualified real estate agent to find the right home for your needs and budget.

For more information, download our Buyers Guide and Homeowners Tax Guide.

Tuesday, June 20, 2023

Talking Points to Identify an Agent

Having a list of talking points prepared before meeting with a real estate agent can be incredibly valuable in guiding the conversation and helping you make an informed decision about who will represent you in the sale of your home. Whether you're a first-time seller or it has been a while since you last sold a property, asking these questions can reveal important information about the experience and expertise of your candidate.

Even if you already have a trusted friend who is a real estate agent, it's still appropriate to understand how different issues will be handled. A true professional should not feel challenged to discuss these important concerns.

  1. Tell me about your experience and training.
  2. Do you work in real estate full-time?
  3. Are you a REALTOR� and a member of MLS?
  4. What is the average price of the homes you have sold and how many did you sell last year?
  5. Which neighborhoods do you primarily work?
  6. How many homes have you sold in my neighborhood?
  7. What is your list price to sales price ratio?
  8. How many buyers and sellers are you currently working with?
  9. Tell me about the positives and negatives of my home.
  10. How will market preparation and staging affect my sales?
  11. Describe your marketing plan for my home and if you will use outside professionals.
  12. Specifically address Internet exposure, open houses, and showings.
  13. Describe how you'll keep me informed all along the way.
  14. Will I work directly with you or with team members?
  15. Can you provide me with three recent references?

It's important to note that price was not included in the list of talking points. As the seller, you ultimately set the price, but the market and the buyer will determine the value. The agent can advise you about the proper range that will ensure activity and ultimately affect your final proceeds. This advice should be based on facts that are available to all agents as well as prospective buyers and appraisers.

In other words, the decision to list your home with a particular agent and company should never be based on the listing price suggested by a prospective agent. Trust a reputable agent to provide sound advice and guidance throughout the selling process.  You may find more helpful information in our Sellers Guide.

Tuesday, June 13, 2023

Protect Your Belongings with a Home Inventory

As a homeowner, you've likely invested a significant amount of time and money into furnishing and decorating your home with items that are important to you. Unfortunately, unexpected events like natural disasters or burglaries can result in the loss or damage of these belongings.

That's why it's important to create a home inventory to document everything you own. This can help ensure that you're properly insured and can help speed up the recovery process if the worst were to happen. Here's how to construct a home inventory.

First, gather your supplies. You'll need a camera, a notebook, and a computer or storage device to keep track of your inventory.

Next, start in one room of your house and systematically go through all your belongings, one item at a time, focusing on the more expensive items. Take a photo of each item and make a note of its make and model, serial number (if applicable), and the date and location of purchase. Don't forget to include the purchase price or current value of the item as well.

If you're using video, the image and description are on one medium.  It's helpful to have someone assist so that one person can shoot the video while the other is holding the object and describing it.

It's important to be as detailed as possible when creating your inventory. This means opening drawers, cabinets, and closets to take photos of everything inside. Be sure to also take photos of any valuable items that may not be stored in your home, such as jewelry or collectibles.

Once you've completed your inventory, make sure to store it in a safe place. This could be a secure digital file, or a physical copy kept in a safe or off-site location.

Having a home inventory can make the claims process easier and less stressful. It can also help ensure that you're properly insured and can help you recover quickly from a loss. In the case of theft or burglary, this kind of detailed report can be helpful to the police in recovering your property.  So, take the time to create a home inventory and protect your belongings today.

Download a Home Inventory to help you with the process.

Tuesday, June 6, 2023

Avoid Taxes by Keeping Track of Improvements

Keeping track of capital improvements to your home can help you avoid taxes later down the road when you sell it.

Some homeowners don't even consider such a thing because they are aware of the capital gain exclusion of up to $500,000 for married homeowners and $250,000 for single filers.  Possibly, the gain in a past sale didn't exhaust the limit that has remained the same since 1997.

Today, homes are much more expensive and appreciation in the past few years has been exceptionally high.  It is now possible and maybe more likely, based on the price of the home, for a homeowner to have gains more than these limits.

A $250,000 home in 1997 based on an annual appreciation of 4% would be worth almost $700,000 today.  Capital improvements made to a home raise the basis, or cost, of the home which will affect the gain on the sale.

Improvements must add value to your home, prolong its useful life or adapt it to new uses.  Repairs, not considered improvements, are routine in nature to maintain the value and keep the property in an ordinary, operating condition.

The addition of decks, pools, fences, and permanent landscaping add value to a home as well as new floor covering, counter-tops and other updates.  Replacing a roof, appliances or heating and cooling systems would be considered to extend the useful life of the home.  Completing an unfinished basement or converting a garage to living space are common examples of adapting a portion of the home to a new use.

Other items that can raise the basis in your home are special assessments for local improvements like sidewalks or curbs and money spent to restore damage from casualty losses not covered by insurance.

There can be multiple ways to create a capital improvement register.  Homeowners could use a spreadsheet where they record the date, description, and the amount of each improvement while they own the home.  It is also necessary to keep receipts for the expenditures and cancelled checks for proof.

Just keeping the receipts and cancelled checks would be helpful and could be sorted through by yourself or an accountant at the time of filing the tax return after the sale of the home.  Since most banks don't return cancelled checks any longer and the sale could be years after you've closed an account, it would be prudent to acquire a 'substitute check" which is a paper copy of the canceled check.  Another option that may be available through your bank is to download a picture of the cancelled check.

For more information on Capital Gains and Section 121 Capital Gain Exclusion, download IRS Publication 523 and our Homeowners Tax Guide which includes a capital gains register.