Homebuying Mistakes by Generation

Make sure you check out these “Observations”.  They may help save you time and money!  DawnHomebuying Mistakes by Generation

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Want a Vacation Home? Check the Tax Laws First

Interesting issues to delve into before buying a home.  Smart tax planning up front will save many headaches down the road. – Dawn

The Tax Cuts and Jobs Act of 2017 is changing how buyers pay for that oceanfront condominium or ski chalet

Want a Vacation Home? Check the Tax Laws First
ILLUSTRATION: CHRIS GASH

Thinking about buying that oceanfront condominium or ski chalet? If you are shopping for a vacation home, bear in mind that the new tax laws may have an impact on how you choose to pay for that property.

The Tax Cuts and Jobs Act of 2017, passed by Congress in December and effective on Jan. 1, made some significant changes that may affect owners or purchasers of luxury homes.

The new rules limit deductions of mortgage interest and property taxes. They also limit the deductibility of interest on home-equity loans, home-equity lines of credit (Helocs) and second mortgages—loans that some homeowners use to tap the equity on their primary residences to pay for vacation homes.

While the new tax provisions don’t entirely eliminate the deduction of interest on Helocs, they limit it to situations where the proceeds are used to buy, build or substantially improve the home that secures the loan. So if vacation-home buyers use Helocs on their primary residences to purchase vacation homes, they can’t deduct the interest on the Helocs, according to the Internal Revenue Service.

Andy Weiser, a real-estate broker with Better Homes and Gardens Real Estate Florida 1st, in Fort Lauderdale, Fla., says that in the past, many of his clients from the New York area would take out a Heloc on their primary residences to pay cash for an oceanfront condominium.

Things have changed. “Heloc purchases have pretty much dried up since the beginning of the year,” says Mr. Weiser, whose clients typically purchase units that range from $600,000 to $1.2 million.

Of course, mortgage-interest rates—even those on a Heloc—remain historically low, so many homeowners, particularly affluent ones, may feel comfortable using a Heloc for a vacation-home purchase even if the interest is not deductible. For some, that may even be preferable to liquidating a portfolio to finance the purchase.

If you’re planning to purchase a vacation home, there are various ways to finance your purchase. Here are some things to consider.

• Pay cash. If you have the funds available, paying cash is a quick and easy way to finance a vacation home. It also gives buyers a competitive edge in many cases because there’s no mortgage contingency and, hence, no added risk to the seller that the deal will fall through. And, if you later decide to renovate your new vacation home and want to use a Heloc to pay for those costs, your interest would be deductible as long as the Heloc is secured by the vacation home, and total mortgage indebtedness on the vacation and primary homes doesn’t exceed $750,000, according to Edward N. Cooper, director-in-charge of tax services at Berkowitz Pollack Brant Advisors and Accountants.

• Mortgage the vacation home. According to Rick Bechtel, executive vice president and head of U.S. mortgage banking at TD Bank in Cherry Hill, N.J., many vacation-home buyers are applying for first mortgages to finance their purchases. At TD, there is no interest-rate difference between a mortgage on a primary or vacation home, as long as the vacation home isn’t rented out. But the underwriting guidelines—the down payment required, loan-to-value ratio and credit score—are tougher for vacation homes, Mr. Bechtel said.

For example, while TD requires a down payment of at least 10% on a jumbo loan securing a primary residence, a borrower needs a minimum of 15% for a vacation home.


• Consult experts in vacation-home financing.
 Before making your purchase, consult with a financial adviser and mortgage lender with expertise in financing vacation homes. Vacation-home buyers are in many cases high-net-worth individuals with complex financial situations, so they should check with an accountant or other financial adviser to ensure that they are structuring the deal the best way.

Posted in Buyers, Buying a Home, Income Tax, Investment Properties, Investors - Investment Income, IRS, Lenders & Loans, New Homes, Property Taxes, Real Estate - Sellers & Buyers, REALTOR®, Second Homes, Tax Basis, Tax Reform | Tagged , , , , , , , , , , | Leave a comment

What People Would Sacrifice to Buy a Home

What would you sacrifice? – Dawn

DAILY REAL ESTATE NEWS | THURSDAY, MAY 24, 2018

Home buyers are willing to make extreme sacrifices and even give up some basic rights to get a chance at homeownership or help with their down payment, a new survey shows. In exchange for a 10 percent down payment, would-be buyers said they’d forgo their dream car, vacations, and even their right to vote.

Twenty-two percent of 1,000 buyers recently surveyed said they’d be willing to give up the right to vote in exchange for a 10 percent down payment they would not need to pay back, according to Unison Home Ownership Investors and Atomik Research’s The Value of Owning a Home survey. Millennials (26 percent) are more likely than Gen X (20 percent) and baby boomers (7 percent) to be willing to give up their right to vote. Men are more likely than women to give up their driver’s license—14 percent versus 9 percent, respectively.

Forty-four percent said they’d be willing to give up their dream car, and 38 percent would give up vacationing for the next five years.

Homeownership status may even affect relationships, the survey found. Fifty-eight percent of respondents said they’d be more likely to date or marry someone who already owned a home at the time their relationship began, according to the survey. Homeowners may be more attractive to aspiring buyers. Millennials (58 percent), Gen X (59 percent), and baby boomers (56 percent) admit preference toward engaging in a relationship with a current homeowner.

To overcome the down payment barrier, more consumers are showing openness toward crowdfunding. Twenty-six percent of respondents surveyed said they’d consider crowdfunding a down payment, and 29 percent would use an equity investment or homeownership investment. Read more about buyers using crowdfunding to secure a home.

Source: “The Value of Owning a Home,” Unison Home Ownership Investors (May 24, 2018) [Log-in required.]

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3 Pros, 3 Cons of Buying New Construction

In my career, when helping my clients through a new home purchase, I would suggest they have an independent property inspector make the final walk through with us prior to signing off acceptance of the final build-out. Many seller reps were not pleased but would allow it.  Peace of mind goes a long way to making sure your buyers are protected in new homes too so having a professional inspection is definitely worth it.  This is a great article giving you several examples. – Dawn
DAILY REAL ESTATE NEWS | TUESDAY, MAY 22, 2018

Many house hunters are under the mistaken impression that new construction is flawless, a perception that may be challenging to wrestle with if your seller’s home is surrounded by brand-new development. In reality, there can be just as many inspection issues with new builds as there are with resale properties. If you’re working with clients who are interested in purchasing new, it’s important to manage their expectations and let them know that no home—no matter what age—is perfect. On the other hand, new homes do have some advantages because they’re not worn. Here are three pros and three cons of new construction.

Pros

  1. Less wear and tear. Buyers of new construction can expect fewer imperfections in the product, says Terrylynn Fisher, CRS, GRI, a professional stager and associate broker with Dudum Real Estate Group in Walnut Creek, Calif. Scratched floors and cracks in walls, for example, are more commonplace in resale homes than new ones. Finishes and design flourishes in new homes may also be brighter and more colorful because they are untouched.
  2. Built-in technology. While many homeowners have been slow to adopt smart-home technology, developers are jumping on the bandwagon more quickly and incorporating smart features into their projects, says Sce Pike, founder and CEO of Portland, Ore.-based software company IOTAS. Smart door locks and thermostats are among the most popular products developers request, but some are eyeing more comprehensive packages that include smart humidity sensors and the ability to control access to a home remotely, Pike adds.
  3. It’s a blank canvas. Buyers may feel more like they are designing a home specifically for them when starting from scratch with a brand-new home, which can be a big psychological motivator in a purchase decision, Fisher says. Though resale buyers, too, have the opportunity to make a home their own, they may not feel complete ownership of its style because they’re either adding to, morphing, or covering up the previous owner’s sense of style, says Christine Rae, founder of the Certified Staging Professionals International Business Training Academy.

Cons

  1. Flaws due to building shortcuts. Builders may take shortcuts in the construction process to cut costs, and that can result in blemishes in the home. Fisher says one of her buyers recently bought a new home and discovered about six aesthetic problems that were caused during construction, including an unsightly gap at the top of a shower that made the framing behind the wall visible. “It was like a bad flip that appeared beautiful on the outside,” she says. “You’re going to have a more substantial house in an older home because it’s had owners that have cared for it.”
  2. Style over functionality. Builders are hyperfocused on open floor plans, as it’s a top priority for today’s buyers. But that often requires sacrificing storage space, Rae says. To achieve a truly open space, builders often have to decrease the size of closets and other areas of the home designed for storage. That can be problematic for meeting the needs of buyers who envision purchasing a long-term residence.
  3. Incomplete curb appeal. Many builders put all of their effort—and investment—into the front of the house so it looks good to potential buyers driving by. But they’ll sometimes leave the backyard unattended to, Fisher says. Many new-home buyers may have to assume all the costs of backyard landscaping, including planting grass or laying sod, as well as planting trees and other shrubbery. This can be a huge expense, too.

—Graham Wood, REALTOR® Magazine

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Visual Impact of an Interest Rate Increase

Interest rate impack

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GIVING YOUR HOUSE A ROUTINE PHYSICAL

You get your teeth checked and cleaned and when you remember to do it, go to the doc for a physical. You regularly take your car in for maintenance checks and don’t give it a second thought. But what about your house? It sits unflinchingly sheltering you, and you seem to pay attention to it only when something leaks, the power goes out in the middle of a program on TV, or a toilet backs up.

Think about it. When homes are newly built, homebuilders make sure new owners receive a hefty amount of literature regarding maintenance not just covering the first year of the home’s life, but some great advice about home maintenance. Subsequent homeowners don’t get that orientation, however, and assume all is well when they sign on the dotted line. Think of not getting a home inspection like not checking your car for oil and 5 years and when something goes wrong claiming the car was a lemon.

Especially if you bought a house with experience, a home maintenance inspection should be included in your budget every 3-5 years. It can put to rest your concerns about your roof being compromised, your foundation crumbling, and your hot water heater being on its last legs — all BEFORE disaster strikes, often saving you much more than the cost of the inspection itself.

A home maintenance inspection also gives you a full picture of any below-the-radar repairs that need to be completed before you put your home up for sale. Full disclosure at the point of purchase is required by law (even suspicion of an impending disaster), so dealing with your home’s health preemptively is among the wisest decisions you can make.

Regardless of your intention to sell, however, it’s a prudent homeowner who opts to get their home a check-up. A home maintenance inspection is done by a licensed expert who checks out all the main systems of your home, including roofing, walls, foundation, HVAC, electrical and plumbing and offers you a detailed run-down on anything that might be starting to malfunction or is on it last gasp.

Home inspection experts admit many homeowners may not even notice a problem. But a good inspector can see signs that something is starting to go: small cracks, uneven wearing, or even just appliances such as water heaters and boilers reaching the eventual end of their lives. They can also remind you of the regular maintenance you should be doing on your house. It’s definitely a way to keep little problems from turning into big ones.

The inspector usually quietly walks through the home either with you along for the ride or meeting with you afterward. He or she will show you what was found and explain what each item means, offering you opportunities to ask questions or get clarifications. And, like a doctor who tells you to cut out the sugar and get more exercise at the end of a routine physical, the inspector will point out things you should be doing regularly to keep all of your home’s systems functioning in tiptop shape.

Within a week you’ll get a written report detailing everything the inspector found. That means mentally preparing yourself for a to-do list at the end of this process.

An advantage of a home maintenance inspection is that the inspector provides an unbiased opinion. They have no skin in the game, unlike asking a roofer or a contractor to tell you what needs to be done. That’s why if you do suspect something is in disrepair, it’s wise to call in a home maintenance inspector before a repair company. After all, a home inspector isn’t going to make any money off doing the repairs. Truth is all they try to offer.

Prices for home inspections vary depending on the area in which you live and size of the home, but the average range is $200–$400 — more if you include pool inspections or backyard structural advice (retaining walls, patio covers, etc.) Considering the fee for electrical, foundation, or roof repairs can be three to four times higher, that’s nothing to sneeze at.

Source: Realtor.com,TBWS

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Should Sellers Pay for Their Own Inspection?

From personal experience I see both sides of the question as to whether or not a seller should get a home inspections prior to listing their home for sale.  My personal opinion is that it will help significantly reduce potential issues down the road that might be found by the buyers and give both parties full disclosure of the property prior to closing an escrow. Ultimately this will help make the transaction smoother on both sides. Both seller knowing the condition and electing to fix it or just disclose it and buyers feeling more comfortable that the home is well taken care of.   IMHO… Dawn

For homeowners considering a move, some experts are recommending they get a home maintenance inspection before they list their home for sale. Such an inspection can provide a full picture of any repairs that need to be done before they become negotiating points in a transaction.

Pre-Listing Inspections Put Sellers in Control

Steve Wadlington, president of WIN Home Inspection, explains how sellers can avoid potential conflict with buyers and gain an edge in negotiations. Read more.

A home maintenance inspection is similar to a home inspection that is done by buyers, says Frank Lesh, president of the American Society of Home Inspectors. A licensed inspector can check on the main systems of the home, such as the roof, walls, foundation, HVAC, electrical, and plumbing.

“You might not even notice a problem [with your home],” says Lesh. An inspector may be able to spot small problems before they become bigger, more expensive problems. They can also advise clients on the regular maintenance tasks they should be doing on their home to keep everything in tip-top shape.

An inspector can walk homeowners around the property to show them any potential problems they spot. Homeowners will receive a report that details anything the inspector finds as well, which can serve as a to-do list to address, if they so wish.

“Every three to five years, you should have a home inspector come out and do a maintenance inspection,” advises Lesh. “Like changing your furnace filter, you should do it before it gets so bad [that it becomes] a problem. … A home inspector isn’t trying to sell you anything … and isn’t going to make any money off doing the repairs.”

The cost of a home maintenance inspection varies by the size of the home but can average $200 to $400.

Source: “What Is a Home Maintenance Inspection? A Health Checkup for Your House,” realtor.com® (May 8, 2018)

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