How to Sell Your Home in 30 Days!!

If you’re interested in using the flurry of first time home buyers in the market to get you out of your current home, there is still time, but you must act fast. You could be eligible for up to a $6500 tax credit for selling an existing home if you have lived in that home for at least 3 of the last 5 years. Your buyer could be eligible for a tax credit of up to $8,000. The catch?? The contracts must be signed by April 30th.

So with that in mind, how do you sell a home in 30 days or less? The answer is just three simple steps…

First, make it look beautiful. For most, this does not have to be an expensive proposition, but it does require a bit of sweat to accomplish. A thorough, very deep cleaning is in order before your home foes on the market – inside and out. Wash those windows that you have neglected for a year, weed the shrub beds, trim the shrubs and lay down a fresh layer of mulch. Cut the grass and edge the curbs (yes even in the winter months or when the grass is just beginning to come back to life). Scrub the grout in tile floors in halls, kitchens and baths. Scrub the grout in showers. If you have glass shower doors, get them squeaky clean. Dust all of the places that have been ignored. Clean out the closets. The list goes on and on – it’s all the stuff that we all avoid. Now is the time to get it done. For a final touch, look through each room and identify furniture that is seldom used, and then remove it. Your house will sparkle and will look extra large at the end of this step.

Step two, determine the right price for your home. Don’t be greedy – greed and speed do not mix. What you are seeking is a fair price for the current condition of your home. If the interior of your home looks like it was comletely remodelled in 2010, then the top price of the market may be quickly achievable. To elaborate, these homes should have wood floors, marble counters, stainless steel appliances, trendy colors, no wall paper, decorative lighting, etc etc. Most homes do not look like this. If your home has some of these things but not all, it is going to fall in line with the average home. If your home is in need of major repairs, you may still be able to sell it quickly, you just need to discount the price by an amount roughly equal to the cost of performing these repairs. Your best bet at determining this price is to consult with a REALTOR who can present recent sales figures and help you determine the right price for a quick sale.

The third step is intense marketing. Just as you are finding this information on the internet, about 80% of home buyers now start their search on the internet. Your home needs to be advertised on all of the major real estate portals – REALTOR.com, Zillow.com, Trulia.com, Homes.com, Yahoo.com, Google.com, major real estate brokerage sites, your local newspaper’s web site, TV station web sites. Even some retailers have home search web sites. You need to be everywhere at once. For the best presentation, your listing with these sites should be chock full of photos. Interenet consumers want to see what your home looks like. A minimum of 25 pictures is recommended. Think carefully about a virtual tour as well.

Combining all three of these WILL yield a fast sale of your existing home, particularly if it is priced in the range of the first time home buyer. Over the past six months, my average time on market for 3 bedroom, 2 bath homes is 10-14 days. These homes have been located in both Dallas and the suburbs of Plano, Richardson, and Little Elm.

NOW is a great time to be in the real estate market. The next month will see an extraordinary number of sales. Hopefully you will be one of them!!

Tax Season Is Upon US

OK, so this isn’t my favorite time of year. It seems that as much as I pay in taxes, rarely do I see one of those refund checks. But in the spirit of helping others, here are a few items that might just help you receive a refund on your 2009 taxes. At a minimum, maybe these ideas will help you reduce the amount that you owe. As with all tax related issues, I strongly encourage you to consult with a CPA or tax professional to make sure that these tips apply to your particular situation.

Trulia.com has just posted a great blog entry that covers the following five tips:

  1. 2009-2010 First Time Home Buyer Tax Credit
  2. 2009-10 Move-Up Buyer Tax Credit
  3. Energy Efficient Housing Tax Credits
  4. Private Mortgage Insurance Deduction
  5. The Mortgage Forgiveness Debt Relief Act

 

And if you need to expand that list with a few more ideas, Kiplinger.com offers these:

Source: Kiplinger

Acquisition debt. See Mortgage interest.

Boats as homes. A boat that has eating, sleeping and sanitary facilities can qualify as a first or second home, so you can deduct mortgage interest paid on the loan secured by the boat to buy it. However, if you are subject to the alternative minimum tax, this write-off is not allowed.

Cancelled debt on foreclosure or short sale. Generally, when a debt is canceled or forgiven, the borrower is considered to have received taxable income equal to the amount of the canceled debt. However, through 2012, up to $2 million of debt discharged on a mortgage on a principal residence — in a foreclosure, for example, or short sale — can be tax-free.

Casualty loss. If your home was damaged or destroyed — by fire or storm, for example — you may be able to get financial help from Uncle Sam by deducting a casualty loss on your return. Your deduction is generally the total of your unreimbursed loss reduced by $500 and further reduced by 10% of your adjusted gross income. However, for 2009, the 10% squeeze does not apply to any losses that occurred in federally declared disaster areas.

Depreciation on home. Profit due to depreciation claimed on your residence before May 7, 1997 — because you had a home office, for example, or at one time rented out the property — qualifies for the rule that lets you treat $250,000 of home sale profit as tax-free income. (The limit is $500,000 if you’re married and file a joint return.) Profit due to depreciation after May 6, 1997, is taxed at 25%, unless you’re in a lower tax bracket, in which case that rate applies.

Discharged debt. See Cancelled debt on foreclosure or short sale.

D.C. first-time homebuyer credit. If you bought a home in the nation’s capital during 2009, you may be eligible for a $5,000 tax credit. It doesn’t really have to be your first home … just a home you purchased in the District of Columbia after not owning one in D.C. for at least one year. It doesn’t matter if you have owned a home elsewhere. This break phases out as income exceeds $70,000 on single returns and $110,000 on married filing jointly returns. See first-time homebuyer credit.

Energy credits. You can earn a 2009 tax credit for installing energy-saving home improvements such as new doors, new windows, energy-efficient furnaces, heat pumps, hot water heaters, air conditioners, etc. The credit is 30% of the cost of installing such energy savers, up to a top credit of $1,500. For windows and doors, the credit is based on the cost of the materials; for furnaces and air conditioners and the like, you can count the cost of installation, too. A bigger credit is available for more ambitious projects – like solar hot-water heating systems, geothermal heat pumps and, yes, even residential wind energy systems. Start generating your own power and Uncle Sam will rebate 30% of the full cost of your system…with no dollar cap.

First-time homebuyer credit. If you bought a home in 2009, you may qualify for either an $8,000 or $6,500 home buyer credit. And, you don’t really have to be a first-time home buyer to qualify for either credit. To qualify for the $8,000 credit you (and your spouse if married) must not have owned a home in the three years leading up to the purchase of your new home. The credit is 10% of the purchase price of the home, up to a maximum credit of $8,000. For purchases after November 6, 2009, no credit is allowed for homes that cost more than $800,000. (There’s no price cap for purchases earlier in the year.)

To qualify for the $6,500 credit, you must be a long-time homeowner, defined as owing and living in the same principal residence for five of the eight years leading up to the purchase of your new home. The credit is 10% of the purchase price of the home, up to a maximum credit of $6,500. For purchases after November 6, 2009, no credit is allowed for homes that cost more than $800,000. (Again, there’s no price cap for purchases earlier in the year.)

Unlike a first-time home buyer credit available in 2008 – which had to be paid back over 15 years by adding $500 in each of those years to the taxpayer’s tax bill – the 2009 credit does not have to be paid back, as long as you live in the principal residence for at least three years.

Foreclosure. See Cancelled debt on foreclosure or short sale.

Home-equity debt. Interest on up to $100,000 of debt secured by your first or second home — using a second mortgage, say, or home equity line of credit — can be deducted, regardless of how the money is used. The use of home-equity debt gives homeowners an opportunity to skirt the rules that generally block the deduction of debt used to buy automobiles, for example, or pay for vacations.

Home-office deduction. You can deduct the costs of a home office that you use exclusively and regularly for business. This includes depreciation, utilities and insurance for the office portion of your home. To qualify for the tax break you must either meet with clients there regularly, or the home office must be your principal place of business (unless it is not attached to your house).

Home-sale exclusion. Up to $250,000 of profit from the sale of your home can be tax free; $500,000 if you are married an file a joint return. To qualify, you must own and live in the house for periods totaling two years out of the five years leading up to the sale. A reduced exclusion is available if you fail the two-year test due to unforeseen circumstances such as a move resulting from a job change, for example, or divorce. You can use this exclusion any number of times but no more frequently than once every two years.

IRA payouts for first-time homebuyers. You can withdraw as much as $10,000 from a traditional IRA early (before age 59½) without penalty if the money is used to buy the first home for yourself, a child or grandchild, or your parents or grandparents. Although the payout avoids the normal 10% early-withdrawal penalty, it is taxed. If a Roth IRA is involved it is taxed as income. See Roth IRA payouts for first-time homebuyers.

Loan prepayment penalties. If your lender charges you a penalty for prepaying your mortgage early, the charge is deductible as mortgage interest.

Mortgage interest. You can deduct interest on up to $1.1 million of loans used to buy or build or improve your first or second home and secured by the property. Up to $1 million of such debt is called acquisition debt, which must be used to acquire or improve the property, and up to $100,000 more is called home equity debt, which can be used for any purpose.

Mortgage interest credit. If you received a mortgage credit certificate from a state or local governmental agency, you can claim a tax credit of up to $2,000 of mortgage interest paid.

Moving expenses. If a move is connected with taking a new job that is at least 50 miles farther from your old home than your old job was, you can deduct travel and lodging expenses for you and your family and the cost of moving your household goods. If you drive your own car, you can deduct 24 cents a mile for 2009 moves. (For 2010, the standard mileage rate for moving is 16.5 cents a mile.) If you moved to take your first job, the 50-mile test applies to the distance between your old home and your new job. The deduction is allowed even if you do not itemize deductions.

Parsonage allowance. For members of the clergy, the value of a home provided by the church is a tax-free fringe benefit. A housing allowance is also tax-free.

Points. Points you pay to get a mortgage for your principal residence are generally fully deductible in the year paid, even if you persuade the seller to pay your points for you. They are not deductible if paid as part of a refinancing; in that case, you deduct the points over the life of the loan.

Presidentially declared disaster. If your home was damaged or destroyed in an area that the President declared a disaster area, special rules apply to the casualty loss deduction. For one thing, for 2009 losses the law waives the requirement that you reduce your loss by an amount equal to 10% of your adjusted gross income to arrive at the deduction. And, you may choose to deduct your loss in the year it occurred or the previous year, whichever is more advantageous.

Property taxes. See Real estate taxes.

Real estate taxes. You can deduct state and local real estate taxes paid during the year on any number of personal residences you own. If you choose to claim the standard deduction rather than itemize deductions, you can add $500 if single or $1,000 if married filing jointly to the regular standard deduction amount if you paid at least that much in state and local real estate taxes. (If you own rental properties, real estate taxes on them are deducted on Schedule E where you report rental income.)

Real estate taxes when you buy a home. If you bought a home during the year, check to see if the seller had prepaid property taxes for a period you actually owned the home. If so, include that amount in your property tax deduction for the year . . .even if you did not reimburse the seller.

Recreational vehicle. If your RV has cooking, sleeping and sanitation facilities, interest on a loan used to buy it can qualify as deductible mortgage interest on a first or second home. If you are subject to the alternative minimum tax, interest on an RV loan is not deductible.

Refinancing points. Generally, points paid when refinancing are deducted over the term of the loan. But if you refinanced a loan that you previously refinanced, you can deduct in full the as-yet-undeducted points remaining on the prior loan. There’s a catch, however: If you refinanced with the same lender, the remaining points must be amortized over the term of the new loan.

Rehabilitation credit. If your residence is certified by the government as a historic building, you can claim a tax credit for 20% of the cost of renovating it. The renovation must be substantial, and the expenses must be incurred within a 24-month period.

Reverse mortgage. Amounts received under a reverse mortgage — either a lump sum payment or periodic payments — are tax free. Interest that accrues on a reverse mortgage is not deductible until it is paid, and then only interest on up to $100,000 of debt can qualify.

Roth IRA payouts for first-time homebuyers. Because the rules for the Roth IRA allow you to withdraw contributions at any time without penalty, the Roth can be a powerful tool for saving for a first home. Say you and your spouse each put $5,000 a year into a Roth for five years. The entire $50,000 could be withdrawn tax- and penalty-free for a down payment and, because the accounts have been opened for at least five years, up to $10,000 of earnings can be withdrawn tax- and penalty-free if used to buy your first home.

Serial refinancers. If you refinanced in 2009 and paid off a home mortgage you acquired when refinancing to pay off an earlier mortgage, any as-yet-undeducted points on the previous refinancing may be deductible on your 2009 return. See Refinancing points.

Tax-free profit. See Home sale exclusion.

Tax-free profit on vacation home. Because Because you can use the home-sale exclusion repeatedly, it’s possible to make profit on a vacation home tax free. If you move into the place and live there for two of the five years prior to selling it, you can qualify to claim up to $250,000 of profit tax free (up to $500,000 if you are married and file a joint return).

Since 2008, however, the potential value of this break has been diluted. For vacation homes converted to principal residences after December 31, 2008, a portion of the gain will be taxed. The taxable part will be based on the ratio of the time after 2008 when the house was a second home or a rental to the total time you owned it. So if you have owned a vacation home for 18 years and make it your main residence in 2011 for two years before selling it, 10% of the gain would be taxed. The rest would still qualify for the exclusion of up to $500,000.

Tax-free rental income. If you rent out your home for 14 or fewer days during the year — when there’s a major sporting event or political convention in your hometown, for example — the rental income is tax-free, regardless of how much you make.

Vacation home. Mortgage interest on your second home is deductible, just as it is for your principal residence. Property taxes can be deducted on any number of homes. If you rent the place for 14 or fewer days during the year, the rental income is tax-free to you. If you rent it for more than 14 days a year, you must report the income, but also may claim deductions for rental expenses.

Fed’s Mortgage Purchase Near End

The Federal Reserve announced that it will end the purchase program of mortgage backed securities as scheduled this month. I give this three hips and a giant hooray! After providing about $1.25 trillion in economic support, ending this program will force the private sector markets to fill the gap that the Fed has left. And I have all of the confidence in the world that they will do so. However, they will likely not do so at the same returns that the Fed was seeking. Rather, I suspect, the private sector will demand greater yield on their investment than did the US Government.

So what does this mean to the “average Joe” trying to buy a home? I suspect it will mean slightly higher interest rates. If the secondary markets begin demanding a higher return, it is going to force mortgage originators to write at higher rates. I don’t think this rate will have to be dramatically higher, but could be in the range of 500 basis points (0.5 percent). That’s a tough pill to swallow if you’re right on the edge of taking out a loan. If you have the option, I would recommend locking a rate quickly.

For the broader market, I think this is a promising move, thus my cheers at the beginning of this post. If the Fed is willing to cease this program, it must have confidence that the private sector will step forward to continue the function. Lacking that confidence, the program would have been extended to ensure that credit markets remained liquid. I take this as a very positive sign that the mortgage markets are healing.

It will be very interesting to see what happens with the first time home buyer tax credit at the end of April. I can feel the demand that this program is generating in the market. Homes that are in the range of both size and price to be attractive to first time home buyers are seeing significantly more demand than larger, more expensive homes. So, a final word of encouragement to those who own small homes and have been thinking about moving up – do it now!