Should I Offer More Than the List Price on a Home?

Should I Offer More Than the List Price on a Home?

QUESTION: My agent is suggesting that I make an offer on a home that is more than the asking price. I am being told that there are other interested buyers. Right now I am not entirely comfortable with this situation. I don’t know if I am being told this because it is true, or is it [for the real estate agent] to have a higher commission?

ANSWER: Before we discuss the pros and cons of making an offer above the list price, I want to talk about your relationship with your REALTOR®. Your buyer’s agent should be someone you trust completely to represent your interests — not your agent’s. Before you go any deeper into the process of buying a home, you need to feel confident that you have a reliable, professional REALTOR® working for you. You should talk this through with your REALTOR® and explain your discomfort. If you’re not satisfied with the explanation about whether you’re in a multiple offer situation, you have a couple of options:

• Read your buyer-agent agreement to see how you can end the contract and find another agent.
• Discuss this issue with the agent’s broker. The broker should be able to help you and your agent communicate better or, alternatively, find another agent who will be a better representative for your interests.

Most REALTORS® will never push a client to make a higher offer for a home unless they’re sure the buyers can afford to pay more and that the home is worthy of multiple offers. REALTORS® who don’t serve their clients well rarely last long in the business because real estate depends on the reputation of the agent. REALTORS® build their business on the basis of referrals, so one unhappy client can hurt their ability to work with other clients in the future.

A second reason that a REALTOR® is unlikely to lie about multiple potential buyers and push you into making an offer above the list price is that the home may not appraise for the sales price. At that point, if the deal falls through, the REALTOR® will have wasted a lot of time.

It’s possible from your question that you believe that the listing agent, not your agent, is the one who’s going after a bigger commission by pretending that there are competing offers. If this is the case, your REALTOR® needs to find out the truth from that agent or the agent’s broker. Most REALTORS® do their best to establish good relations with other agents since their paths are likely to cross again.

As far as your personal decision about whether to make an offer above list price, there are three important considerations:

• First, you must be completely comfortable with the monthly mortgage payments at a particular price point. Before you make a higher offer you need to find out what the impact would be on your monthly payments and whether that would still be an affordable payment.
• Second, you need to decide how much you want that particular house. Sometimes buyers get caught up in the competition and don’t realize that they’re spending more than they want for a house.
• Third, if you do decide to make an above-asking-price offer, consult with your REALTOR® about how to handle the appraisal contingency. Should the home appraise for less than the sales price, you might have to come up with extra cash or lose the property depending on how your contract is written.

Clearly, you need to establish a relationship of mutual trust with your REALTOR® before you make any significant decisions.

10 Ways to Save on Your Gas Bills

10 Ways to Save on Your Gas Bills

The Department of Energy shows you how

Make the most of your energy dollar. Just follow these simple guidelines and enjoy lower gas bills this season.

1. Set your thermostat as low as is comfortable in the winter. For each degree you raise your thermostat setting, your fuel bill climbs 3 percent. So dress accordinglyconsider slipping into a sweater before you crank up the temperature.
2. Clean or replace filters on furnaces once a month or as needed. A simple task like this and those in No. 3 could improve your systems' energy efficiency by 10 percent.
3. Clean warm-air registers, baseboard heaters, and radiators as needed; make sure they're not blocked by furniture, carpeting, or drapes.
4. Bleed trapped air from hot-water radiators once or twice a season; if in doubt about how to perform this task, call a professional.
5. Place heat-resistant radiator reflectors between exterior walls and the radiators.
6. Use kitchen, bath, and other ventilating fans wisely; in just 1 hour, these fans can pull out a houseful of warmed air. Turn fans off as soon as they have done the job. Try to keep the humidity level between 30 percent and 60 percent.
7. During the heating season, keep the draperies and shades on your south-facing windows open during the day to allow sunlight to enter your home and closed at night to reduce the chill you may feel from cold windows. During the cooling season, keep the window coverings closed during the day to prevent solar gain.
8. Close an unoccupied room that is isolated from the rest of the house, such as in a corner, and turn down the thermostat or turn off the heating for that room or zone. Some programmable thermostats now come with temperature zoning options However, do not turn the heating off if it adversely affects the rest of your system. For example, if you heat your house with a heat pump, do not close the ventsclosing the vents could harm the heat pump.
9. Consider installing double-pane windows with protective coating that reflects heat back into your home during winter. If such a retrofit is not in your budget, cover your windows with clear plastic film. At a typical cost of $4 to $6 per window, the film creates an insulating air pocket between the plastic and the window, reducing heat loss through windows by between 25 percent and 50 percent.
10. Caulk and weather strip around exterior seams, cracks and openings. Pay extra attention around windows and at points where various exterior materials like wood, brick and vinyl siding meet. And on the inside, caulking and weather-stripping around windows and door frames will cut down on drafts.

Neighborhood or House? How to Set Your Priorities

Neighborhood or House? How to Set Your Priorities

In a perfect world, every buyer could afford the house of their dreams in a neighborhood they adore. In reality, most buyers need to compromise on something when they buy a home, particularly their first home.

A REALTOR® can give you expert advice on home values and often can show you homes in communities that you didn’t know about or that you hadn’t considered. In the end, though, you need to set your priorities so you can decide which home to buy.

Start With a List

At the first buyer consultation, your REALTOR® should ask you to make a list of everything you’re looking for in a home — including such things as the number of bedrooms and baths, the placement of the kitchen, the size of the yard, and your preferred location near a particular school, your job, your favorite restaurants or public transportation.

If you’re buying with a spouse or partner, you should each make a separate list and then compare notes. Avid watchers of HGTV programs know that both partners rarely agree on every feature, so step two is to talk about which features are mandatory and which are optional.

As soon as you’ve met with a lender and established your comfort level with a budget you can start matching your wish list with what’s actually available in your area.

Which Comes First, the Community or the Property?

If, like most buyers, you’re not finding the perfect home in your ideal neighborhood, you’ll have to decide whether it’s more important to be in a particular location or a particular size and type of home.

If you decide that location matters more but you can’t afford to buy in your preferred area, you have several options:

• Look for a smaller home or a smaller lot. If you can live in two bedrooms instead of three, or forgo a large back yard, you may find something affordable.
• Switch to a different home type. If single-family homes in the area are too pricey, you might find a town home with similar living space that’s less costly. You can consider a condominium, but don’t forget to factor in the condo association fees to see how that fits into your budget.
• Look for a home in less-than-perfect condition. While you need to be careful about how much cash is required to renovate a property, a home that needs some minor repairs or has flaws that you can live with for a few years can be affordable. You can also look into financing renovations with an FHA 203k loan.
• Rent a little longer while you save for a home. If you can take on a second job to build up a larger down payment, this could be a good decision, but be aware that home prices could rise more before you’re ready to buy and could still be out-of-reach.
• Look for a lease-to-own arrangement.  Some homeowners may be willing to negotiate a lease-purchase agreement so that some of your rent is credited as a down payment.

If you decide that the type of home is more important than a particular neighborhood, you should work with a REALTOR® with expertise in your local market who can help you identify other communities where you might find affordable homes. An experienced REALTOR® not only can show you different locations but can also talk to you about why some communities have higher home values than others, such as being near commuter routes or a having a reputation for excellent schools. It’s important to make an educated decision about where you buy a home so that you maximize your potential for continued property value.

What You Should Know About the Appraisal Process

What You Should Know About the Appraisal Process

When you and your Realtor® wrote your purchase offer for a home, you most likely made your offer contingent on several items, including financing, a home inspection and an appraisal. If your loan is locked in and your prospective home passed its inspection with ease, then you’ve only got one challenge left: the appraisal.

Mortgage lenders require an appraisal on your home before they’ll provide a loan for the simple reason that the property is the underlying asset that serves as collateral for the loan. If for some reason you run into financial difficulties and lose your home to foreclosure, your lender would need to sell the property to repay the loan. A lender will only approve a loan for a property that appraises for the full sales price of the home — or more.

Appraisal Basics

Your lender will choose an appraiser to evaluate your home and you’ll pay the appraiser’s fee, typically $300 or $400. New rules by the Consumer Financial Protection Bureau that went into effect in January require your lender to give you a copy of your appraisal as soon as the mortgage company receives it, or at least three days before your closing. You can waive that right, but it makes sense for you to see it so you have time to review it and understand the information your lender is using to determine how much to lend.

An appraisal is based on information that’s similar to the information Realtors® use for a comparative market analysis, including the specifics of your house such as square feet, number of bedrooms, number of bathrooms, the location and age of the property and interior improvements. These facts about your home will be compared to other homes that the appraiser considers comparable to come up with your home value.

You and your Realtor® should review the report to see which homes were chosen for comparison purposes, and to make sure the appraisal includes accurate information and takes into account intangible things that can add value to a home, such as location within a sought-after school district or near a transportation hub.

Appraisal Value to Buyers

It’s important to recognize that an appraisal isn’t meant to derail your real estate deal. In fact, it can function as a consumer protection for a buyer. If your appraisal comes in higher than the price you’re paying for the home, then you benefit immediately because you’ll have more home equity in the property than you thought. For example, if you’re paying $200,000 for a home and the appraiser says it’s worth $225,000, you instantly have gained $25,000 in equity.

If the appraisal comes in lower than the sales price, you and the seller will need to abide by the contract you and your Realtors® have negotiated. If your contract is contingent on an appraisal, one option you have is to withdraw your offer and have your earnest money deposit returned. The appraisal has saved you from paying too much for the home.

If you prefer to buy the home anyway or have waived the appraisal contingency to make your offer more attractive to the sellers, you have a few other options:

• Challenge the appraisal with documentation from your Realtor®
• Pay for a second appraisal, which may or may not come in higher
• Come up with extra cash to make up the difference between the appraised value and your purchase price
• Renegotiate the contract, if the seller is willing
• Ask the seller to finance the gap between the appraisal and the sales price

Your Realtor® can advise you about the appraisal process and help you decide how to handle a low appraisal to match your interests.

Is a Bridge Loan an Option for Repeat Home Buyers?

Is a Bridge Loan an Option for Repeat Home Buyers?

Most buyers try to time the purchase of their next home and the sale of their current home so they can coordinate nearly simultaneous settlements, but the reality is that sometimes one end of the chain of transactions happens faster or slower than expected.

A Realtor® can help you decide whether to place your home on the market before or after you start searching for your next home, but many buyers end up needing to finance more than one home for a few days or weeks or even a few months.

Sell Your Home First?

If your budget is tight and you’re more concerned about your ability to sell your home than about finding one to buy, then it may be best to finalize the sale of your home before you make an offer on another property. The risk is that you may have to move into temporary housing in between homes, but you may be able to negotiate with your buyers to rent back your home until you can move into your next residence.

Financing Options for Repeat Buyers

If you decide to go ahead and buy a home before selling your current home, you can discuss your financial choices with a lender. Buyers with the cash for a down payment and enough income to make the payments on two homes at once may qualify for a regular mortgage on their new home, but if you lack the funds for this you may have to look into an alternative. Some possibilities include:

• Bridge loan: Bridge loans, sometimes called wrap or gap financing, are short-term temporary loans that provide financing by wrapping the payments for your current home and your next home into one loan. However, these loans are pretty rare and in order to qualify you must have excellent credit, a low debt-to-income ratio, and significant home equity. Typically you can only finance up to 80 percent of the combined value of both homes. So, if you’re selling a home for $200,000 and buying one for $350,000, you can only borrow $440,000 — and you’d have to have the other $110,000 either in home equity or a down payment or combination of the two. Once your home sells, you would pay off the bridge loan and then apply for a new mortgage, but this means you would be paying closing costs twice.
• Take cash out of your current home: If you have enough equity (at least 20 percent in your home), you may qualify for a home equity loan or line of credit that you can use to make the down payment or the initial payments on your new home’s mortgage. However, you must apply for the home equity loan before you list your current home for sale. In addition, you must be able to qualify for the payments on the home equity loan, your current home loan and your next mortgage. Another option could be a cash-out refinance in which you refinance your current home for more than the loan balance to take out the equity for a down payment. You’d have to refinance before putting your home on the market, however, and the closing costs are higher on a refinance compared to a home equity loan.
• Borrow money: If you know you’re going to sell your home for a profit, you may be able to borrow money for your down payment as long as you know you can repay the loan. You might be able to take out a personal loan from a bank, borrow from a relative or borrow from your 401(k), but before you do this, make sure you understand the consequences if your home sale doesn’t allow you to repay the loan quickly.

A lender can discuss these financial options with you, but you should also rely on your Realtor®’s market expertise to help you decide whether to sell or buy first.

Self-Employed? The Mortgage Rule You Need to Know

Self-Employed? The Mortgage Rule You Need to Know

When applying for a mortgage, lenders will classify you as a wage earner employee or self-employed. Furthermore, if you also own a business or a percentage of a business, you might be considered self-employed even though you are a W-2 wage earner. If this is you, here’s what you’ll need to know to complete a mortgage application.

To start with, here are the income classifications for lending:

• Employee: Individual is a W-2 wage earner and receives a paycheck. Taxes are withheld from the paycheck.
• Self-employed: This includes everything else — a sole proprietorship, any business entity where income is derived or lost (including all affiliated corporations), and income derived from real estate or dividend income.

Where the Two Worlds Intersect

Bona fide employees who also have an ownership interest in the company can actually be considered self-employed. For example, if you’re a W-2 wage earner employee and you also have more than a 25 percent ownership interest in the company that employs you, this would earmark you as‘self-employed for the purposes of completing a mortgage application. If you happen to be a W-2 wage earner, but you have a percentage of ownership in another business, you would be considered both an employee and self-employed.

Business Ownership and Getting a Home Loan

Your federal income tax returns are required for the purposes of documenting your ability to repay when securing a new mortgage. On your tax returns, as a sole proprietor you file a Schedule C, and this income carries over to Schedule A. Most sole proprietors don’t have separate business entities, so corporate returns are not required as it is 100 percent ownership. However, things are different when you have an ownership interest in a company.

1. Schedule E identifies whether there is additional business income and/or that you are an owner in an additional business.
2. If an additional business is present on the return, the mortgage lender will require a K-1 to determine the percentage of ownership.

Mortgage Tip: If you own 24 percent of a business, you are not considered self-employed for the purposes of the loan application, and the lender will not need to obtain the corporate income tax returns. However, if you own 25 percent or more of a business — whether it’s your current employer or another business entity, as identified on the K-1 — then, yes, you’ll need to provide additional income tax returns for the entity in addition to your personal tax returns for obtaining the mortgage.

Why All Income Examination Matters

An ability-to-repay analysis is required on all mortgage loans. Simply providing W-2s, pay stubs and personal tax returns is not enough if you have more than a 25 percent business ownership interest in another company. If you’re receiving additional income from another business, and that income is tied to your personal tax returns necessary for securing that mortgage, it becomes necessary for the lender to have the additional tax returns because they support your reported income and subsequent ability to repay. Lenders are required to average your income in most cases during the past 24 months (including the business income) and that averaged income or loss will be used on the application in accordance with obtaining the new mortgage.

A financial word to the wise for the self-employed: You don’t need to provide the additional tax returns if you are a small minority share owner in a company.

Plasma TV: Pros and Cons

Plasma TV: Pros and Cons

Contributed By Dave Donovan

When it comes to HDTVs, today’s consumers have a few different technologies to choose from, and one of the most popular is plasma. Although plasma video displays were actually developed in the 60s, it wasn’t until the early 2000s until televisions utilizing the technology became available to the public. Today, plasma televisions are among the most common HDTVs found in American homes.

Of course, with different technologies to choose from when it comes to making your choice for the type of high definition television you want for your home, it is important to consider both the pros and cons each type offers. In this article, we’ll take a look at the pros and cons of plasma video displays so you can make the best possible decision when it comes time for you to purchase a new television.

The Pros of Plasma Displays

Large, Thin Displays

Plasma televisions are among the thinnest sets available on the market. This allows you to enjoy a large screen in your living room without it taking up a huge chunk of real estate in the room.

Aspect Ratio

All plasma televisions are made utilizing the standard 16x9 widescreen aspect ratio. This allows you to enjoy your favorite movies in the aspect ratio intended by the director and without the picture being cropped short.

No Glare Screen

Remember the glare you used to get on your glass-screened CRT television? With a plasma television, glare is no longer an issue so you can enjoy a great looking picture from practically anywhere in the room.

Beautiful Blacks

Among all of the current high definition displays, plasma offers unbeatable blacks and a gorgeous range of colors for bright, rich visuals.

The Cons of Plasma Displays

Power Hungry

Plasma displays require a lot of energy to power the display’s receptors so this type of HDTV is one of the more power hungry on the market.

Limited Lifespan

The display of a plasma television will gradually fade over time. In fact, most plasma televisions will have a noticeable color saturation loss and lose their brightness after about 30,000 hours of use. After 60,000 hours of use, the display will be practically unwatchable. Since plasma televisions do not feature a bulb that can be replaced to fix this problem, the set will be rendered useless and therefore have to be replaced.

Susceptible to Burn-In

Plasma displays are susceptible to having images burned into the screen when the same image is left on the screen for a long period of time. This is one reason why many gaming console manufacturers do not recommend using their consoles to be played on plasma televisions. Newer models include a feature called “white wash” which helps to reduce the potential for burn-in but using this feature does diminish the lifespan of the set. 

Fragile

Plasma displays are very fragile and can be prone to damage when being shipped. This can also pose a problem when used in a home where small children reside.

Walk-Through Tips for Home Buyers

Walk-Through Tips for Home Buyers

One of the most exciting days during the home buying process is your walk-through, usually scheduled on the day before your settlement. Just like it sounds, a “walk-through” takes place when you and your buyer’s agent explore your home-to-be and check to make sure it’s in the condition specified in your contract.

Chances are, this is the first time you’ve been back in the property for a few weeks and the first time you’ve seen it without the sellers’ possessions in place — unless you bought a vacant home. Hopefully, you’ll still feel enthusiastic about your new home, but no matter how exhilarated you are and eager to move in, you should take your time on the walk-through and carefully check on every room.

When to Schedule Your Walk-Through

Typically your walk-through should take place within 24 hours of your closing so that you see the property at the last possible moment. You don’t want to do the final check too soon and then discover damage from a storm that hit the day before your settlement. Once you sign the settlement documents any damage becomes your responsibility, even if it occurred before you officially owned the property.

If your contract states that the seller is to make repairs, it’s best to schedule two walk-throughs. The first one should take place a week or so before your settlement date so that you can review requested repairs. If you’re not satisfied or the seller hasn’t provided requested receipts and contact information for the contractors, this will give you time to negotiate a solution to the problem so that your settlement won’t be delayed. You should still have your final walk-through just before the closing.

What to Expect on Your Walk-Through

Some buyers are disappointed when they see the condition of the property after the sellers have vacated the home. Most contracts state that the property needs to be “broom clean.” Many people have different standards for cleanliness and broom clean means just that — swept up but not necessarily deep-cleaned.

Regardless of the cleanliness of the home, there are certain steps to take during the walk-through:

§  Bring your home inspection report, a copy of your contract and the seller’s property condition disclosure form so you can check on specific flagged items.

§  Check for items that the sellers agreed in the contract to convey to the buyers, such as window treatments or fireplace tools. Remember that these items have to be identified in writing, not just in a oral agreement.

§  Check for items the sellers left behind that you don’t want. If the sellers don’t want their basement bookcases, that doesn’t mean you have to keep them. Check your contract to see if the shelves were mentioned. If not, it’s the sellers’ responsibility, not yours, to remove them.

§  Test all the appliances to make sure they still work.

§  Turn on the heat and air conditioning for a few minutes to see if they’re operable.

§  Bring an inexpensive electrical tester from a hardware store to make sure all the outlets work.

What to Do If You Find a Problem

If you find that the sellers have not followed through on the contract promises or you find a new issue that you want them to address, consider whether the problem is worth disrupting your settlement. For instance, if there’s a light bulb that’s burned out in the refrigerator, you can easily take care of that yourself. Even something a little more costly may be something you should think about handling on your own in the interest of settling on time.

However, if you’re uncertain of the extent of a problem, such as a newly discovered leak under the bathroom sink that the sellers hid during your home inspection, you and your buyer’s agent should contact the seller’s agent and negotiate a solution to the problem. If you find the seller is unwilling to pay for a plumber, think about the cost to you in delaying your closing or in legal fees. Your REALTOR® can help you determine which issues are worth pursuing and which you can resolve on your own.

Top Spring Landscaping Tips

Top Spring Landscaping Tips

Every year like clockwork, winter comes to a close and the cold and dreary climate gives way to the burgeoning spring season and the promise of new growth. Of course, this also signals the perfect time for a thorough spring cleaning. But this goes beyond clearing out the attic or getting rid of last season’s old clothes. The outside of the home is just as in need of some annual TLC as is the inside; no area more so than the yard or garden.

Yes, the winter months can wreak havoc on a yard or garden and all but ruin the beautiful landscaping that defined it before the chilly weather set in. These areas can look the worse for wear after a long winter and may even appear beyond saving. But rolling up the shirtsleeves and getting to work on yard beautification is the best way for anyone – man or woman – to start anew and get into the spring spirit.

Here are some basic tips for turning a yard in recovery into a spring sensation.

Clear the debris

Winter storms can wreak havoc on a yard in the form of fallen branches and piles of leaves. The best remedy is to set aside a good chunk of time in which to clear all tree debris from the yard. Once that is taken care of, then it’s time to get down to the business of pulling the weeds that have likely cropped up during the winter months. Once this is complete, homeowners should then plan on spending 10-15 minutes one time per week maintaining a weed-free yard.

Fertilize, fertilize, fertilize

There’s no way around it, those who want to ensure a thriving lawn or garden are going to need to fertilize. That means everything: grass, flowers, shrubs – the works. The good news is that there is nothing about this process that needs to be complicated. In fact, there are a number of different fertilizers available from home-supply stores geared for a number of different purposes and a number of lawn and garden types. Terf builder is one popular option for those who want to give their lawns a fighting chance to thrive. Plus, there are organic weed killers on the market that can make the aforementioned weed hunting a breeze.

Tip: those growing food — such as herbs, fruits and vegetables — should use only organic fertilizers containing no pesticides.

Don’t shy away from mulch

It can be depressing to gaze upon a limp garden ravaged by the effects of a cold winter. But there’s no reason to lose hope because mulch can save the day. Just one layer of this stuff on a flower bed can bring the plants roaring back to life. Professional landscapers suggest applying four inches of mulch over the top soil, which will help retain moisture and prevent growth of those pesky weeds.

Tip: pull mulch away from the base of the plant, as this will help protect the bulb.

Maintain a functional irrigation system

Whether working with a complex in-ground sprinkler system or a simple garden hose, it’s best to test the equipment at the dawn of the spring season. Those with sprinklers will want to ensure the unit’s pump and tank are in good working order, as a couple winter months without use may compromise their functionality.

By following these simple guidelines, even the least green-thumbed of homeowners should be able to bring their yards and gardens back from the brink of winter extinction.

The Top 10 Real Estate Tax Deductions for 2013

The Top 10 Real Estate Tax Deductions for 2013

As the time to file income taxes approaches, it’s time to take a new look at the changing tax landscape for homeowners. The dynamic atmosphere in Washington, D.C. has a different effect each year on which tax breaks are proposed, rescinded, changed and extended for taxpayers who own a home.

Many of the tax benefits homeowners enjoy have been protected and extended through the 2013 tax season butthey will expire next year if Congress doesn’t act.

Disclaimer – This is only an informational summary of current tax issues in the news. If you need tax advice, please contact a tax attorney or CPA

1.  Mortgage Interest Deduction

Homeowners who itemize their deductions can deduct the interest paid on a mortgage with a balance of up to $1 million. While there is some movement to limit the total itemized deductions for taxpayers with higher incomes (more than $400,000), the current deductions hold for all tax brackets. Americans save around $100 million every year by deducting mortgage interest on their tax returns

2.  Home Improvement Loan Interest Deduction

The interest on home equity loans used for capital improvements to your home may be tax deductible. On loans with balances of up to $100,000, the interest is tax-deductible for a homeowner who uses the loan to make improvements such as adding square footage, upgrading the components of the home or repairing damage from a natural disaster. Maintenance tasks, like changing the carpet and painting a home, usually don’t count.

3.  Private Mortgage Insurance (PMI) Deduction

Homeowners who make a down payment of less than 20 percent are usually paying some sort of Private Mortgage Insurance. PMI (sometimes abbreviated as MIP or just MI) can be just a few to hundreds of dollars per month.

If your mortgage was originated after Jan 1, 2007, and you have PMI, it can be a tax deduction. The deduction is phased out, 10 percent per $1,000, for taxpayers who have an adjusted gross income between $100,000 and $109,000 and those above that level do not qualify. This deduction won’t be available next year unless Congress renews it for 2014.

4. Mortgage Points/Origination Deduction

Homeowners who paid points on their home purchase or refinance can often deduct those points on their tax returns. Points, also called origination fees, are usually percentage-based fees a lender charges to originate a loan. A 1 percent fee on a $100,000 loan would be one point, or $1,000.

On a home purchase loan, taxpayers can deduct the entirety of points paid in the same year. On a refinance loan, the points must be deducted as an amortization over the life of the loan. Many taxpayers forget about this amortized benefit over time, so it’s important to keep good records on the deduction of points on a refinance.

5. Energy Efficiency Upgrades/Repairs Deduction

Homeowners can deduct the cost of building materials used for energy efficiency upgrades to their home. This is actually a tax credit applied as a direct reduction of how much tax you owe, not just a reduction in your taxable income.

Ten percent of the total bill for energy-efficient materials can be used as a tax credit, up to a maximum $500 credit. Insulation, doors, new roofs, water heaters and other items qualify for the energy efficiency credit. There are individual limits for certain items, such as $150 for furnaces, $200 for windows and $300 for air conditioners and heat pumps.

6. Profit on Sale of Real Estate Deduction

If you’ve sold a home in the past year, you’re likely aware individuals can claim up to $250,000 of profit from the sale tax-free and married couples can claim up to $500,000 tax-free. The home must be a primary residence, meaning you must have lived in the home for two of the past five years. A homeowner could potentially claim this tax break on multiple homes within a fairly short time frame, but each tax-free sale must occur at least two years apart from the previous tax-free transaction.

Also new for 2013 isn’t a deduction, but a tax enacted by the Obama administration. Some individuals—those with an AGI more than $200,000—may be subject to a 3.8 percent tax on some income from interest, dividends, rents and capital gains.

7. Real Estate Selling Cost Deduction

For those lucky folks whose profits on the sale of their home might exceed the $250k/$500k limits, there are still some ways to reduce the tax burden. The costs of selling a home can be claimed as tax deductions.

By adding up all of the fees paid at closing, capital improvements made to the home while you owned it, money spent to make repairs to damaged property and marketing costs necessary to sell the home, you can add a significant figure to the cost basis of your home. This basically raises the original price you paid for the home. Your cost basis begins with the original price of the home, and then adds in the improvement and selling costs.  When the new cost basis price is compared to your selling price, it reduces your potentially taxable profit on the home.

8. Home Office Deduction

Starting for the 2013 tax year, tax filers who work at home can use the IRS’ new simplified option for deducting home office expenses. With this form, you can get a $5 deduction for each sq. foot used as an office, with a maximum of 300 sq. feet. The office must be the primary office location where you get the majority of your work done, and it needs to be used exclusively for business (it can’t be in your bedroom). You should be realistic with its size and use—start stretching the truth and you could increase your risk of being audited.

9. Property Tax Deduction

While it may sound strange to have a tax-deductible tax, the overall effect is that you don’t pay income tax on money that was spent on property taxes.

Homeowners should only deduct the amount of property tax actually paid to their local municipality for the year. This is not necessarily the amount you paid to your escrow account, and should not include any other city or county fees that might potentially be on the same bill as your property taxes.

10. Loan Forgiveness Deduction

The Mortgage Debt Forgiveness Relief Act of 2007 made forgiven debt on some mortgages not taxable. For example, a homeowner makes a short sale of their primary home at $100,000, but they owe $150,000 on their mortgage. The lender forgives the extra $50,000 owed, but the government views it as $50,000 in taxable income as a gift from the lender to the borrower. The Mortgage Debt Forgiveness Act temporarily relieved the taxpayer of that burden, up to $2 million, or $1 million if filing separately. The act applies to primary home sales made from 2007 through 2013, but it will expire next year if Congress doesn’t act. 

IRS-suggested disclaimer: To the extent that this message or any attachment concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  This message was written to support the promotion or marketing of the transactions or matters addressed herein, and the taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax adviser.