The Best Times to Buy or Sell a House

The Best Times to Buy or Sell a House

Many of the nation’s largest home builders surprised analysts by reporting a profit in the quarter that just ended. Home sales continue to rise nationwide, compared with 2011, and home prices also are up. Prices rose 4.6% in August compared with a year ago — the largest year-over-year increase in more than six years.

All of this good news has been widely reported, so many Americans are thinking more about wading back into the real estate market, both as buyers and as sellers. But how many people know there are best times to buy and sell houses?

Here are some timing tips from real estate agents that can save home buyers and sellers a lot of money:

The best month to make an offer on a house is January. Fewer buyers are willing to house-hunt during cold, nasty weather, so there’s less competition and few, if any, bidding wars. Sellers also tend to be more motivated than they will be in the spring, when there are more buyers. Why? They may have just received their credit card bills that reflect Christmas spending and may be feeling financially insecure. And their decision to try to sell their houses in the winter means they’re willing to risk listing during a time of the year when properties tend not show particularly well.

The best day of the month to make an offer on a house is the first Tuesday. Why early in the month? Because the homeowner just wrote a mortgage check for a house he no longer wants – or needs to sell — and he doesn’t want to write another one. Why Tuesday? Because by Tuesday he’s starting to worry that he won’t get any offers from house hunters who saw the house the weekend before.

The best time of the year to sell a house is the spring. Buyers come out of the woodwork during the spring, and with tax refund checks in the bank, spring buyers more often pay full price. In fact, sales peak in the spring, helping to explain why about 60% of those who move do so in the summer. Tip within a tip: Don’t price your house with a zero at the end. Studies show that people perceive a precise price, such as $282,284, as lower than rounded ones, such as $280,000, even when the rounded prices are actually lower. Real-life sales show that one zero at the end of an asking price lowers the final sale price by .72% and two zeros lower it by .73%. That may not sound like much, but it can add up to thousands of dollars.

The best day of the week to list your house for sale is Thursday. This is more true during a sellers market, but if you list your house for sale on a Thursday, it will be available right away for weekend showings and by Saturday — the most important day of the real-estate week — your house will have shown only two days. That’s important because the fewer days on market, the better chance the home will attract a full-price offer. Even if your house doesn’t sell by the next Saturday, it will still show only nine days on market, benefiting from the psychological advantage of a single-digit number.

The best time to stop renting and buy a house is when it costs less to buy than to rent. Makes sense, but how do you figure that out? Find two similar houses – one for sale and one for rent – and divide the asking price by the annual rent. The difference is called the rent ratio. During the 1970s, 1980s and 1990s, the nationwide rent ratio stayed between 10 and 14, then rose to nearly 19 in 2006, when the housing market topped out. (The rent ratio neared 35 in San Francisco and San Jose in 2006.) A rent ratio of 20 or more usually means that it costs considerably more to own than rent after you factor in the mortgage, taxes, insurance, repairs and other expenses. It makes financial sense to buy when the rent ratio is a lot closer to 10 than to 20.

Read more: http://moneyland.time.com/2012/10/10/the-best-time-to-buy-or-sell-a-house/#ixzz29ZY56FkC

What to do This Year: Rent or Buy a Home?

What to Do This Year: Rent or Buy a Home?

Today is a tempting time to buy a home with interest rates and prices at their lowest levels in years. Deciding whether to buy or rent can be complicated, and potential homebuyers have a lot to consider this summer. As part of National Homeownership Month, the American Bankers Association came up with these key questions to help shoppers make wise financial choices when considering buying a home.
1. How much can you afford to put down? Can you afford the monthly payment?
A mortgage down payment of 5 to 20 percent of the selling price is typical, but can vary depending on the situation. The size of the down payment will impact the monthly cost. Assess your financial health, determine how large of a down payment you can afford and consider if you can then afford the monthly cost.
2. What other debt do you have? Consider all of your current and expected financial obligations and ensure you are able to make all the payments. Aim to keep total rent or mortgage payments plus other credit obligations fewer than 35 to 40 percent of your monthly income. If you can’t keep payments below that, you may be better off renting for a while or searching for a more affordable home.
3. What is my credit score? Can I qualify for a good interest rate? A high credit score indicates strong creditworthiness, which qualifies you for better interest rates on a mortgage. Maxing out your credit lines and paying bills late will lower your credit score, and the impact of a credit score on interest rates can be significant. For instance, a borrower with a score of 760 could pay nearly 2 percentage points less in interest than someone with a score of 620. That equates to over $3,000 less in mortgage payments each year. If your credit score is low, you may want to delay buying a home and take steps to raise your score.
4. How much will taxes, monthly maintenance or other fees cost? Owning a home means you will have to pay real estate taxes and other costs like insurance and maintenance. However, owning a home can bring tax savings at the end of the year. Remember to factor in these costs and incentives. Renters have neither these costs, nor tax advantages.
5. How many years will I stay here? Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your house where renters do not. Yet, renters have greater flexibility to move as they don’t have to worry about finding new tenants.
For more information, visit http://www.aba.com/ ^[2].

The Top 10 Real Estate Tax Deductions for Homeowners

The Top 10 Real Estate Tax Deductions for Homeowners

As the time to file income taxes approaches, we need 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.
Thanks to the efforts of many real estate industry groups including the National Association of REALTORS® ^[2], many of the tax benefits that homeowners enjoy–which were on the chopping block over the past few months–have been protected and extended through the 2013 tax season.
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
The mortgage interest deduction has always been the most-beloved tax benefit of home buyers in the U.S. New homeowners’ monthly mortgage payments are made up almost entirely by interest for the first few years. Their ability to deduct that interest can result in a healthy reduction in tax liability. Affordability for first-time home buyers is directly linked to their ability to deduct the interest on their mortgage.
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 (over $400,000), the current deductions holds 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 a home can also be a tax deduction. On loans with balances of up to $100,000, the interest is tax-deductible for a homeowner who uses the loan to make improvements to the home such as adding square footage, upgrading the components of the home, or repairing damage from a natural disaster. Maintenance items like changing the carpet and painting a home are usually not included as capital improvement projects.
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 MIP or just MI), can be a few dollars to hundreds of dollars per month, and it is a large portion of many homeowners’ mortgage payments.
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-$109,000 and those above that level do not qualify. The extension of this tax deduction in 2013 was one of many last-second saves by real estate industry advocates.
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, often called origination fees, are usually percentage-based fees which a lender charges to originate a loan. A one 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 the points that they 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 the building materials used for energy efficiency upgrades to their home. This is actually a tax credit, one which is applied as a direct reduction of how much tax you owe, not just a reduction in your taxable income.
10 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, and many other items qualify for the energy efficiency credit. There are also 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 that 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. Of course, there are some requirements to escaping the capital gains tax on this profit.
The home must be a primary residence. This means that you must have lived in the home, as your primary residence, for two of the past five years. You could rent it out for years one, three, and five, while living in it for years two and four. In this way, 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.
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 the home can be significant, and those in themselves 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 significantly.
8. Home Office Deduction
The home office tax deduction is often cited as a deduction that increases your likelihood of being audited. While the raw numbers might add some credibility to that perception, it’s really the way a home office is deducted that gets some taxpayers into audit purgatory.
This deduction, when used correctly, is just as safe as any other. Homeowners deduct a percentage of their mortgage, utilities, and repair bills in direct proportion to the amount of their home that is dedicated office space.
There are a few hard and fast rules to live by when deducting the costs of your home office. The home office must be your principal place of business (the primary office location where you get the majority of your work done). It needs to be exclusively used for business (it can’t be your kitchen by day and office by night). You need to be realistic with its size and use (unless you enjoy audits).
9. Property Tax Deduction
New homeowners often don’t know that their property taxes are deductible. 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 be careful to 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/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 was created when short sales were becoming a new and growing part of the real estate market. An underwater homeowner might convince their lender to agree to a short sale of their home at $100,000, even though they owe $150,000 on their mortgage. While the lender forgives the extra $50,000 owed after the short sale, the government views it as $50,000 in taxable income (a gift from the lender to the borrower).
The Debt Forgiveness Act temporarily relieved the taxpayer of that burden, but was set to expire this year. Through much effort, it was extended along with many other homeowner tax relief measures this year and homeowners can continue to claim this tax relief in 2013.
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 advisor.

7 Tips for Keeping Your Financial Fitness Resolution

7 Tips for Keeping Your Financial Fitness Resolution

The New Year is a great time to get yourself pointed in the right direction financially. “Making small improvements at the beginning of the year is a lot easier than trying to play catch-up,” says financial planner Rick Rodgers, author of “The New Three-Legged Stool: A Tax Efficient Approach To Retirement Planning.”
“Just as you would embark on an exercise program to lose weight and get physically fit, there are simple steps you can take that will lead to being financially healthy and fit.” Here are Rodgers’ seven tips for improving your financial life in 2013.
• Review your credit report—Borrowing money isn’t the only reason to check your credit. Employers check credit reports and so do insurance companies. Your credit score can have a profound effect on the amount you pay for auto and homeowners insurance—and perhaps on health and life insurance in the not-too-distant future. Order your free credit report at AnnualCreditReport.com.
• Set up an Automatic Savings Plan (ASP)—If your employer doesn’t offer this through payroll deduction you can set one up through your bank or brokerage account. Simply have a certain amount of money withdrawn from your checking or savings account each month and deposited into your investment account. That way, you save it before you ever have a chance to spend it. Try to increase the amount you invest at least once a year.
• Establish a cash flow plan—Business owners know you can’t control what you don’t track. Take the time to forecast your income and expenses for the year, and put it in writing. Then adjust those numbers to reach your goals, such as paying down debt or replacing a car. Track your progress on a regular basis by holding a monthly family finance meeting to review the plan.
• Pay off your credit cards—It’s especially important to take action on debt in 2013. Cash doesn’t earn much interest sitting in a deposit account (less than 1 percent) and even “low interest” credit cards charge 10 to 12 percent. So if you’re sitting on any extra savings, consider using it to pay down credit card debt. Your cash flow plan should include a schedule to eliminate credit card debt as quickly as possible.
• Shop your insurance—Insurance agents are often paid commission based on premium levels, so they have no incentive for finding existing customers lower premiums. However, there is a huge incentive for a competing agent to find you the lowest premium in order to win your business. Make note of the coverage levels you have for your homeowner’s and auto policies and use them to comparison shop. Look at ways to save on your health insurance coverage, too, such as switching to a high-deductible plan and opening a Health Savings Account.
• Write an estate plan—At a minimum you need to have a valid will, power-of-attorney (POA) for your finances and health-care decisions, and a living will (Advanced Healthcare Directive in some states). Decide who will be your personal representative in the event you become incapacitated (POA) or at your death (executor). If you have minor children, choose who will raise them in your absence and establish a testamentary trust for their finances.
• Meet with a financial adviser—An adviser is to financial planning as a personal trainer is to an exercise program. Allow yourself to be held accountable by a third party who will push you to help yourself. Good advisers will help you develop a budget, look at your debts, tax situation, retirement and college savings, estate planning and insurance. You don’t have to be a high-net-worth individual to seek the assistance of a financial adviser. Go to the National Association of Personal Financial Advisors (NAPFA) and search for one in your area.

Don’t just make a vague resolution to save money. According to Psychology Today, of the millions of American’s who make a New Years resolution, 40 percent have already failed by Jan. 31. Let 2013 be the year you make lasting changes to improve your financial life.

How to Make an Offer on a Home

How to Make an Offer on a Home

While much attention is paid to the offering price of a home, a proposal to buy includes both the price and terms.

In some cases, terms can represent thousands of dollars in additional value for buyers — or additional costs. Terms are extremely important and should be carefully reviewed.

How Much?

You sometimes hear that the amount of your offer should be a certain  percent below the seller’s asking price or an amount less than you’re really willing to pay. In practice, the offer depends on the basic laws of supply and demand: If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes more. If demand is weak, then offers below the asking price may be in order.

How Do You Make an Offer?

The process of making offers varies around the country. In a typical situation, you will complete an offer sheet that the REALTOR® will present to the owner and the owner’s representative. The owner, in turn, may accept the offer, reject it or make a counter-offer.

Because counter-offers are common (any change in an offer can be considered a counter-offer), it’s important for buyers to remain in close contact with REALTORS® during the negotiation process so that any proposed changes can be quickly reviewed.

How Many Inspections?

A number of inspections are common in residential realty transactions. They include checks for termites, surveys to determine boundaries, appraisals to determine value for lenders, title reviews and structural inspections.

Structural inspections are particularly important. During these examinations, an inspector comes to the property to determine if there are material physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such inspections for a single-family home often require two or three hours, and buyers should attend. This is an opportunity to examine the property’s mechanics and structure, ask questions and learn far more about the property than is possible with an informal walk-through.

Five Home Improvement Resolutions You Can Afford

Five Home Improvement Resolutions You Can Afford

As we embrace a new year and a fresh start, many of us look around at what feels like a barren house now that all the holiday décor is packed away.

If you’re getting the itch to spruce up your home but don’t have much money to spend, fear not. There are quite a few things you can do that will make a significant impact without depleting your wallet. And, keep in mind, any home improvements you make won’t only be for your benefit, but will ultimately help lure potential buyers if and when you decide to sell.

Some of the enhancement projects to consider include:

1. Painting. Nothing changes the look of a room more dramatically than color. If you’re tired of the color you have in a room, you can go for a dramatic change. Or if your walls are just a little dingy, nothing brightens them up like a clean coat of paint. Find a color that makes you happy but remember, if you plan on selling in the near future, neutral colors are best.
2. Replace your faucets. New, modern, sleek faucets in the kitchen or bathroom can add just that extra touch the room is crying out for — like a bit of bling.
3. Think hardware. Like faucets, changing out hardware on your cabinets can change the look of the room and give it a different feel. You can introduce a metal or different texture, opt for contrast to the cabinet color, or add a bit of whimsy — it’s up to you.
4. Freshen up the floors. If your carpets are looking a little on the worn, soiled side, you have a choice to make. You can get them professionally cleaned, which sometimes does the trick if they’re not too old. Or, you can go for new carpet — or other flooring like tile or wood. Aside from paint, nothing brightens up a room like new carpet or flooring.
5. A dramatic touch. If you just want to bring an elegant, refined look to your home — and do something that might attract future buyers — consider crown molding or a kitchen backsplash. Both are fairly easy and inexpensive but add a new dimension and depth to the room.

Do You Buy or Sell First When You’re Ready to Move?

Do You Buy or Sell First When You’re Ready to Move?

Homeowners who decide they’re ready to become move-up buyers face a chicken-or-egg dilemma: Should they sell their current home first and then buy another, or buy a new one and then sell? The answer depends on several factors, including your local market conditions, your financing options and your feelings about potentially moving twice if you sell your home before your next residence is available.

Market Conditions

Before you blithely assume that your real estate market is a buyer’s market or a seller’s market, you need to realize that you must be very specific about the market for your particular neighborhood, the style of home you own, and the price range for your property. In addition, you need to assess the availability of homes that meet your criteria. You’ll need to work with a knowledgeable, professional REALTOR® who can talk to you about how quickly homes that are similar to yours are selling and for how much. On the buying side, you should do some preview shopping to get an idea of what you want and how easy it is to find it. For example, if you must live in a particular, popular school district, you may want to consider buying a home first so that you’re sure you have a place you want.

Financial Options

In an ideal world, everyone would have the funds to pay cash for their next home, but the reality is that most people need the equity from the sale of their current home for the down payment on the next house. One option is to sell your home and then negotiate to rent it back from your buyers, but remember THAT you’ll need to pay them for the rental. Also, lenders will limit the rent-back term to a maximum of 60 days because a rental lasting longer than that would be considered an investment property.

Alternatively, you can temporarily live with friends or family or in a short-term rental while you’re between homes. In that case, you might need to pay for a storage facility for your possessions.

A drawback to selling your home first is that you may be unable to find a home to buy, or you may feel rushed into taking a place that doesn’t meet your expectations.

If you can qualify for the mortgage loan on both your current home and the next home, you can access the equity in your current home with a line of credit. You’ll need to take out the line of credit before you put your home on the market and then you can pay it back at settlement.

You may also be able to borrow money for a down payment from relatives that you can repay after your home sells.

Some lenders also offer bridge loans for transitioning homeowners as long as they have excellent credit and sufficient equity in their current home. A lender can help you evaluate your options.

Risk Aversion and a Plan B

You’ll have to ask yourself what scares you most: selling first and having nowhere to live or buying first and being stuck with two mortgage payments. The answer depends on your finances and your local market, but in either case you should have a back-up plan to deal with the worst case scenario — either another source of income for those mortgage payments or an identified place to live for a few weeks or months while you shop for a home.