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Mistakes Sellers Make

  • Basing the asking price on needs or emotion rather than market value. Many times sellers base their pricing on how much they paid for or invested in their home. This can be an expensive mistake. If your home is not priced competitively, buyers will reject it in favor of other larger homes for the same price. At the same time, the buyers who should be looking at your house will not see it because it is priced over their heads. The result is increased market time, and even when the price is eventually lowered, the buyers are wary because “nobody wants to buy real estate that nobody else wants”. The result is low priced offers and an unwillingness to negotiate. Every seller wants to realize as much money as possible from the sale, but a listing priced too high often eventually sells for less than market value. An accurate market evaluation is the first step in determining a competitive listing price.
  • Failing to “Showcase” the home. A property that is not clean or well maintained is a red flag for the buyer. It is an indication that there may be hidden defects that will result in increased cost of ownership. Sellers who fail to make necessary repairs, who don’t “spruce up” the house inside and out, and fail to keep it clean and neat, chase away buyers as fast as REALTORS® can bring them. Buyers are poor judges of the cost of repairs, and always build in a large margin for error when offering on such a property. Sellers are always better off doing the work themselves ahead of time.
  • Over-improving the home prior to selling. Sellers often unwittingly spend thousands of dollars doing the wrong upgrades to their home prior to attempting to sell in the mistaken belief that they will recoup this cost. If you are upgrading your home for your personal enjoyment – fine. But if you are thinking of selling, you should be aware that only certain upgrades to real estate are cost effective. Always consult with your REALTOR® BEFORE committing to upgrading your home.
  • Choosing the wrong REALTOR® or choosing for the wrong reasons. Many homeowners list with the real estate agent who tells them the highest price. You need to choose an experienced agent with the best marketing plan to sell your home. In the real estate business, an agent with many successfully closed transactions usually costs the same as someone who is inexperienced. That experience could mean a higher price at the negotiating table, selling in less time, and with a minimum amount of hassles.
  • Using the “Hard Sell” during showings. Buying a home is an emotional decision. Buyers like to “try on” a house and see if it is comfortable for them. It is difficult for them to do if you follow them around pointing out every improvement that you made. Good REALTORS® let the buyers discover the home on their own, pointing out only features they are sure are important to them. Overselling loses many sales. If buyers think they are paying for features that are not particularly important to them personally, they will reject the home in favor of a less expensive home without the features.
  • Failing to take the first offer seriously. Often sellers believe that the first offer received will be one of many to come. There is a tendency to not take it seriously, and to hold out for a higher price. This is especially true if the offer comes in soon after the home is placed on the market. Experienced REALTORS® know that more often than not the first buyer ends up being the best buyer, and many, many sellers have had to accept far less money than the initial offer later in the selling process. Real estate is most saleable early in the marketing period, and the amount buyers are willing to pay diminishes with the length of time a property has been on the market. Many sellers would give anything to find that prospective buyer who made the first, and ONLY, offer.
  • Not knowing your rights and obligations. The contract you sign to sell your property is a complex and legally binding document. An improperly written contract can allow the purchaser to void the sale, or cost you thousands of unnecessary dollars. Have an experienced REALTOR® who knows the “ins and outs” fully explain the contract you are about to sign.
  • Failure to effectively market the property. Good marketing opens the door that exposes real estate to the marketplace. It means distinguishing your home from hundreds of others on the market. It also means selling the benefits, as well as the features. The right REALTOR® will employ a wide variety of marketing activities, emphasizing the ones believed to work best for your home.
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How Do I know if I Qualify for an FHA Loan?

FHA loans have long been a valuable resource for Americans who want to fulfill their goal of homeownership but who don’t have the benefit of a lengthy credit history and equity.

If you’re hoping to buy a home in the near future but want to explore all of your options in terms of financing, this article is for you.

Today we’re going to talk about FHA loans and how to know if you qualify for one.

What are FHA loans?

FHA loans are issued by private mortgage lenders across the country, just like regular mortgages. The difference, however, is that an FHA loan is “guaranteed” by the federal government.

Lenders decide your borrowing eligibility, and how much you can borrow, by determining risk. If you don’t have a sizable down payment (oftentimes 20% or more) and you have a low credit score, most mortgage lenders will see you as a risky person to lend to.

When you get an FHA loan, however, the federal government assumes some of that risk, allowing you to secure the loan anyway.

This means you can buy a home with a low credit score, a smaller than usual down payment, and save on some closing costs.

How do I qualify for an FHA Loan?

To find out if you qualify for an FHA loan, you’ll head to the same place as a traditional mortgage–a mortgage lender. Oftentimes, you can simply call or visit the website of lenders to get the process started.

As with all things, it’s a good idea to shop around for a mortgage lender. Their offerings will be largely similar, but there might be minor differences that make one better than another for your particular circumstances.

Down payment requirements

To secure an FHA loan, you will need to make a down payment of at least 3.5%. However, this low down payment comes with a price. You’ll typically be required to pay private mortgage insurance (PMI) fees on top of your accruing interest for your loan.

Credit score requirements

While you can often secure a mortgage with a lower credit score through an FHA loan, there are still some requirements. To secure a loan with the lowest possible down payment (3.5%), you’ll need a credit score of 580 or above.

Previous homeowners and FHA loans

A common misconception about FHA loans is that they are only for first-time homeowners. However, you can still qualify for an FHA loan if you’ve owned a home before as long as it has been three years since you’ve had a foreclosure or two years since filing for bankruptcy.

If you meet these three conditions, you should be able to secure an FHA loan through a traditional mortgage lender.

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How To: Setting Up a Home Office

Working from home is a job benefit many dream of. However, despite what some may think working from home is not all fun and games. While it may make for an easier commute it also can make for more distractions that keep you from your work. Learn how you can create an office in your home that is a productivity oasis.

Function before form. It may be tempting to run out and buy all the beautiful office supplies and knick knacks, but before you do plan out the function of your office first. Create a list of must-have items. Will you need a printer, file cabinet or shelves for your reference binders? Perhaps a fax machine, large whiteboard or a sprawling desk with plenty of elbow room. Knowing what you need on hand to create the most efficient work environment will give you the ability to sit down and productively work without running out to get supplies or inventing workarounds. You will also want to invest in a good ergonomic chair since you will be spending so much of your time sitting in it. Your back will thank you.

Location. The location of your home office in your house may be more important than you think. Choosing a quiet secluded room with lots of light will create an ideal working environment. If you have children or a partner that will be home during the day you will want the room in a place where they will not have to tiptoe around like if you, for example, set up shop in the dining room. Creating some “do not disturb” signs may be a good idea to further set boundaries with your family.

Organize. Set yourself up for success off the bat by developing an organization system that works best for your home office. Since home offices tend to be set up in smaller rooms of a house make the most of your space by organizing vertically as well horizontally. Neatly manage and label cords when you set up any electrical equipment. Keep the items you use daily within easy reach so you don’t need to jump up and down all day to dig through your cabinets.

Inspire. This is your home office, after all, and not a cubicle so don’t be afraid to add personality to work your space. Pick up posters with uplifting quotes or imagery or a cork board to pin inspiration and goals. Paint your office a color that uplifts and inspires you. A calm blue paired with a vibrant yellow can help boost your focus and alertness. Setting up a home office is an exciting house project, especially when you will have the opportunity to work from home. While it’s tempting to make your new office one that is visually appealing don’t forget to keep function at the forefront of your planning process. In the end, you’ll have the best of both worlds and may even be more productive for it!

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Tax Reform for Real Estate

2017 Tax Reform
 
Thanks to KCM
1.  Mortgage Interest Deduction
There was concern that the mortgage interest deduction (MID) would be eliminated. That didn’t happen.
However, the bill has made the following changes:
  •  Reduces limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17 (from the existing $1,000,000). Current loans up to $1 million are grandfathered.
  • Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount refinanced.
  • Repeals deduction for interest paid on home equity debt through 12/31/25.
  • Interest is still deductible on home equity loans if proceeds are used to substantially improve the residence.
  • Interest remains deductible on second homes, but subject to the limits.
2.  State and Local Taxes (SALT)
There was concern that the state and local tax deduction (which includes property taxes) would be eliminated. That didn’t happen. The final bill allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes.
3.  Exclusion of gain on sale of a principal residence
There was concern that owners would now need to live in their house for at least 5 out of the last 8 years to claim this exemption. Under the former tax framework, a typical owner, who has lived in their house for at least 2 years out of the last 5 years, would pay nothing in capital gain taxes if they sell the house. No change. The new code will remain the same as the old.
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The most thorough analysis of how tax reform will affect the housing market has come from Capital Economics. Here are some highlights:
  • The tax bill could raise the net costs of buying. But, given most households will see an overall tax cut, and potential buyers are likely to put that saving towards their home, we doubt it will have a significant detrimental impact on the housing market.
  •  Most households stretch themselves when buying a home, and to the extent that the new code will cut taxes for most households, the overall change could be positive for the housing market.
  • The impact on expensive homes could be more detrimental, with a limit on the mortgage interest deduction raising taxes for those that itemize.
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Calculated Risk‘s Bill McBride weighed in on the subject. Here are some highlights:
  • The impact of reducing the MID from a maximum of $1 million in mortgage debt to $750 thousand in mortgage debt will have very little impact on the housing market.
  •  State and local taxes (SALT) will have an impact on housing in some areas. Some people might choose to live in one state over another (if they have a choice), based on taxation. This could impact demand in certain states – especially for the middle and upper-middle class homeowners.
  • The corporate tax cuts (and other tax cuts) will mostly benefit the wealthy, and this will be a positive for high end real estate.
  •  There will be some negative impact based on SALT, but overall the impact of these policy changes on housing will be minimal.
Here is his full analysis: A few comments: Housing and Policy
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Mark Zandi of Moody’s Analytics had a more negative opinion. Here are the highlights:
  • House prices suffer under the tax plan. The tax law changes significantly reduce the value of the mortgage interest deduction, or MID, and property tax deductions, which are capitalized in current house prices.
  • Higher mortgage rates that result from the higher budget deficits and debt under the plans will weaken housing demand.
  • The hit to national house prices is estimated to be near 4% at the peak of their impact in summer 2019. That is, national house prices will be approximately 4% lower than they would have been if there were no tax legislation.
  • The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.
  • The impact on the broader national economy of the higher stock prices and lower house prices is largely a wash.
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How Tax Reform Impacts Homeowners in Each State
This site, run by NAR, hopefully will be updated now that the tax reform bill has become law. It gives you state-by-state data on tax deductions, capital gains exemptions, and the potential impact on housing prices from the 2017 tax reform framework. You can download information for your state by clicking their map.
Which Places Pay the Most in Property Taxes?
This site gives you an interactive map where you can find the median property taxes by county.
Reforming the mortgage interest deduction: A chance for fairness for American taxpayers?
This article gives the argument for why the changes made sense. We are not saying we agree so please don’t attack us for the content. We just want you to better understand the other side, so you are prepared for those conversations.
And remember…
Some people will overreact to any change. In the current political environment, reactions from both sides may be even more passionate.
In the end, Jason Furman, a Harvard Kennedy School economist, may be proven correct:
“Nothing in my experience suggests that the views people have about the tax cuts – whether justified or not – will change after they start actually being affected by them.”
It is our job to remain objective and report the facts. As we say at KCM:
“It’s not good news. It’s not bad news. I’m just reporting THE news.”

Forbes Tax Reform Report