Picking a Real Estate Agent through Facebook

According to a joint study released by Google and the National Association of Realtors, 2 of 3 people searching for a prospective real estate professional research them“extensively online prior to working with them". And, that number is probably increasing every day. Are social media channels such as Facebook really a good place to gather information about an agent before using them? If so, what should you look for? There is a plethora of information on any subject available on social media sites such as Facebook. A recent study by the Pew Research Center revealed that 63% of Americans now even get their news from Facebook (up from 47% in 2013). It is no different for both buyers and sellers of real estate. Yes, Facebook is a good place to gather information about the housing market and “checkout” an agent you are considering hiring to help buy or sell a home.

What should you be looking for in an agent’s Facebook presence?

You want an agent that cares more about you and your family than they care about bragging about themselves. One way to determine this is to look at what they post on their Facebook page. Are they more interested in ‘hawking’ a listing or bragging about their accomplishments or are they trying to post insightful information that will help you make the best decision for you and your family? At a recent real estate conference, Guy Kawasaki, an executive fellow at the Haas School of Business at U.C. Berkeley, gave the following advice to the Realtors in attendance:

“Value comes in the form of information and assistance. You want to establish a position where people see - through your social media efforts - that you know what you’re doing and are helpful…The point is to make yourself useful and valuable. To build credibility; to build trust…”

You should look for an agent that follows that advice!

 

Source: The KCM Crew/Keeping Current Matters/10292015

Why You Should Hire A Professional When Buying A Home!

Many people wonder whether they should hire a real estate professional to assist them in buying their dream home or if they should first try to go it on their own. In today’s market: you need an experienced professional!

You Need an Expert Guide if you are Traveling a Dangerous Path

The field of real estate is loaded with land mines. You need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a home that is priced appropriately and ready for you to move in to can be tricky. An agent listens to your wants and needs, and can sift out the homes that do not fit within the parameters of your “dream home”. A great agent will also have relationships with mortgage professionals and other experts that you will need in securing your dream home.

You Need a Skilled Negotiator

In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step of the way – from the original offer, to the possible renegotiation of that offer after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes. Realize that when an agent is negotiating their commission with you, they are negotiating their own salary; the salary that keeps a roof over their family’s head; the salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family? If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal.

Bottom Line

Famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money.

Source: Keeping Current Matters/The KCM Crew/October 27, 2015

Buying A Home Can Be SCARY… Until You Know The FACTS!

Some Highlights:

• 36% of Americans think they need a 20% down payment to buy a home. 44% of Millennials who purchased a home this year have put down less than 10%.
• 71% of loan applications were approved last month
• The average credit score of approved loans was 723 in September (the lowest recorded score since Ellie Mae began tracking in August 2011).

Source: Keeping Current Matters/The KCM Crew/10-23-2015

YOU DON'T NEED YOUR OLD DEED

Question: We recently read about a possible scam operation, whereby a company advises homeowners that to protect themselves -- and their valuable home -- they have to spend a lot of money to get a certified copy of their deed. We own our house and obviously want to protect this large investment. How do we determine which company is legitimate and which is not. Answer: The simple answer is that you do not need a certified copy of your deed. In fact, once the deed to your houseis recorded into your names, you really do not even need the deed at all.

Typically, when a consumer buys a house, he/she goes to a settlement attorney or title company. The settlement officer has the responsibility of gathering in all of the sales proceeds, making sure that the buyer signs the loan papers and the settlement statement(called a HUD-1). (Note: as of October 3rd, the HUD-1 and the final Truth in Lending statement have been replaced by a new document known simply as "closing disclosure"). The seller provides the settlement company with the names and loan numbers of all existing loans, and signs the deed and other related documents which are required in order to record the deed into the buyer's name. When settlement has been completed, the deed and the loan papers are sent to the recorder of deeds in the jurisdiction where the property is located. These documents are recorded, and then sent back to the settlement attorney. The recorded loan documents are then returned to the mortgage lender and the deed and the title insurance policy is sent to the buyer. It is a good idea to keep all of your settlement documents, especially the HUD-1 settlement statement. When you go to sell the property, and if you have made more than the $250,000/500,000 exclusion of gain currently allowed under the tax laws, the settlement statement will come in handy to justify various settlement expenses so as to reduce your overall profit. You should also get a copy of the deed of trust (the mortgage document) and the promissory note which you signed at settlement. Hopefully, you will never need these documents, but should the lender send you a letter stating you are in default on your loan obligations, it is always a good idea to refer back to these documents. They spell out what the lender can and cannot do, and the process by which you can be determined to be in default.

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The title insurance policy is also a very important document. In the event someone suddenly raises an issue against or about your property, you may be able to file a claim with the title insurance company that issued the policy. For example, an old mortgage was never released from land records, and shows up when you go to sell your house. There usually are specific time limitations spelled out in the title policy which require you to file the claim within a certain number of days after you learn about the problem. The policy will also explain what is covered and what issues are not insured. Another document you should get at settlement is the survey. This is known as a house location survey, and will give you a general picture of where your property lines are. If, for example, your neighbor's fence encroaches on your property, -- or vice versa -- the survey should depict this and you should be advised of this issue when you are at the settlement table. There is a concept known as "adverse possession". Many states provide that if you are on someone else's property for a period of time, and this encroachment is "open, notorious and hostile", you will ultimately own the property if you seek court approval. One Judge defined adverse possession as follows:

"the person claiming the property by adverse possession must unfurl his flag on the land and keep it flying so that the owner may see, if he wishes, that an enemy has invaded his domain and planted the flag of conquest."

State laws differ, and you should consult your own attorney for more details should you be involved in such a situation. For example, in the District of Columbia and in the Commonwealth of Virginia, the statutory limit is 15 years. In Maryland. 20 years are required before you can claim title by adverse possession. But what about the deed to your property? Once it has been recorded, you should never need it again. When you go to sell the property (or refinance your current mortgage) the settlement attorney (or escrow company) will conduct a title search which should show you own the property. You do not have to give the deed to anyone. If you are concerned about ownership, here are two suggestions: first, go to the office of the recorder of deeds in the jurisdiction where your property is located, and ask to confirm you own the property. A helpful clerk may even be able to provide you with a copy. In fact, many jurisdictions (such as the District of Columbia) have web sites whereby you can search all transactions going back a number of years, and for a nominal charge, print up a copy. Alternatively, you can ask your attorney to run a title search just to confirm that you are, in fact, the lawful owner of your property. Under no circumstances, however, should you waste your money with any company that offers you a certified true copy of your deed. It is absolutely unnecessary.

Source: RealtyTimes/Benny L. Kass/06 October 2015

Do You Really Think Your Landlord Pays for Repairs?

A recent article that appeared on Nasdaq.com addressed the issue of whether it is best to buy or rent in today’s real estate environment. The article was very fair in discussing both options. However, there was one portion of the article that we questioned. One of the experts was quoted as saying:

“For some people, the choice is very clear: Buying a home can be more costly, given the cost of the purchase itself, plus taxes and insurance, plus maintenance and repairs.”

This argument is often made in defense of renting. However, we don’t believe it makes logical sense. They claim that, as a renter, you won’t have the expenses of “taxes and insurance, plus maintenance and repairs”. Do they really believe that the landlord pays all those expenses for their tenants? The vast majority of landlords own rentable real estate as a form of investment. As any other investor would, they expect to make a return on that investment (ROI) - otherwise known as profit. In order to make a profit, the landlord needs to include EVERY expense they incur into the rent…AND THEN ADD A PROFIT MARGIN!! We think it is incorrect to advise a prospective renter that they won’t have the same expenses that a homeowner would have. They just pay those expenses to a landlord with a “premium” built in.

Source: Keeping Current Matters/The KCM Crew/10-15-2015

4 Reasons to Buy BEFORE Winter Hits

It's that time of year; the seasons are changing and with them bring thoughts of the upcoming holidays, family get-togethers, and planning for a new year. Those who are on the fence about whether now is the right time to buy don't have to look much farther to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released recently projects appreciation in home values over the next five years to be between 10.5% (most pessimistic) and 25.5% (most optimistic). The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have softened recently, most experts predict that they will begin to rise later this year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will be up almost a full percentage point by the end of next year. An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren’t? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

SHOULD YOU RENT YOUR HOME TO OTHERS?

With rental prices rising, you may be wondering if now's the time to become a landlord. There are advantages to renting your current home while you purchase another to live in. The advantage to renting your home is that you're likely paying a homestead mortgage interest rate, which will make it easier to make a profit than if you purchased rental property with a mortgage at a higher interest rate. As you've owned your home, it's likely appreciated in value, allowing your home to compete well in the rental market so you can use profits to put back into the home to keep it rentable. Assuming you're current on your mortgage, have the credit scores to buy another home, and have saved enough cash for a down payment, now may be the ideal time to add a rental investment to your portfolio. Real estate has always served as a hedge against inflation and against other investments, so the first thing to do is find out how rents compare to home prices in your area. Your real estate professional can provide you with market comparables that show you how much homes are renting for per square foot and how quickly they rent, as well as for what prices comparable homes are selling. If the rental income is enough to cover your mortgage, you're in good shape, but there are other expenses to consider, such as income taxes, advertising, listing and management fees, and maintenance. For income tax purposes, your current mortgage isn't considered a cost of doing business that you can deduct like office supplies or equipment purchases. You'll pay taxes on this gross amount, less repairs and management fees, if any. On the bright side, if you sell the property within five years and you've occupied the home two of those five years, you'll likely pay no capital gains at all up to $250,000 for an individual or $500,000 for a couple. To qualify for a mortgage on another home, your lender follows a typical multiple home formula. Even though you may have your home rented, plan to deduct approximately 20% of rental income from your "investment." Why? Most homes have a period where they are not rented while they're on the market, which means no rental income. Your lender wants to make sure you can handle periods when your home isn't rented. When you turn your home into a rental, it's no longer a homestead, but an enterprise. Tax laws require you to make a profit within three years of launching an enterprise, or otherwise you won't be able to take deductions associated with it. Also, expect to pay more in property taxes as you will also lose the homestead deduction rate, since you'll be applying for the homestead deduction on your new home. On the other hand, one of the best ways to build equity is to have someone else pay your mortgage for you. The longer you own your home and the longer it's rented, the more the amortization tables turn in your favor. Every loan payment is made of principal and interest. The longer you own your home, the larger the percentage that goes toward reducing principal. Based on the purchase price of your home, you can deduct "depreciation" from your income every year you rent it, but this amount decreases with time. You can also deduct some maintenance and improvement expenses which are not available to homesteaders. See your tax professional for more information. There are other pros and cons of becoming a landlord. You'll be dealing with people who don't respect your home as much as you do and could cause damages. They may skip out without paying the final month's rent. You'll have two homes to maintain, and could get broken plumbing or appliance calls in the middle of the night. On the bright side, renters of single-family homes tend to be older, more responsible and remain occupants longer. Also many losses are tax-deductible to landlords. Ask your real estate professional or someone else that you know who owns rental property for more insights. They'll be able to share real-life property management situations and costs that may help you to decide if this is the right step for you.

HOME REPAIRS VS IMPROVEMENTS: NO CLEAR ANSWER

Homeowner Question: I am having trouble figuring out what constitutes an improvement and what is ordinary maintenance. Thinking ahead to selling my house in a few years when the market rebounds, I have been keeping accurate records so that I can deduct these costs to lower the capital gains. Recently, I remodeled a bathroom, replaced a deck, replaced and upgraded the spa filter and motor, replaced the front door with a fiberglass model guaranteed to last more than my lifetime, and replaced a roof and rain gutters. Which of these can I safely regard as improvements, and which are just maintenance? Answer: The line between repairs and improvements is fuzzy. The Court cases that have analyzed this issue are all over the place, with Judges deciding the exact same work going in opposite directions. If your property is a rental, then in most cases you want to call the work a repair. Repairs can be deducted as rental expenses in the year that you pay them, thereby reducing your rental income. But discuss this with your tax advisors or your accountant first. If this is your principal residence, however, while you obviously want to keep your house in good repair, the moneys you spend on ordinary maintenance provide no taxable benefits for you. Improvements, on the other hand, may be very valuable to you when you sell your house, since they increase the tax basis in your house. The higher the basis, the less tax you have to pay. Let's look at this example. In 1985, you bought your first house for $100,000, and sold it for $200,000 in l990. That same year, you bought another house for $200,000. Prior to l997, an important tax break for homeowners was called the "roll-over". Although you made a profit of $100,000 when you sold your first house, you did not have to pay any capital gains tax. Instead, the profit was "rolled-over" into the new house. The basis for tax purposes of the second property became $100,000. You now want to sell, and have listed your house for $700,000. You know that under the current law, since you are married and have lived in the house for two out of the five years before sale, you can exclude up to $500,000 of your gain. You do the numbers and think that because you bought the house for $200,000, and will sell it for $700,000, you are home free on any capital gains tax. Wrong: since you took advantage of the old "roll-over", your basis was $100,000, and when you sell it for $700,000, you will have made a profit of $600,000. While you can exclude up to $500,000 of this gain, you will have to pay capital gains tax on the $100,000 difference. Currently, the tax rate can be as high as 20 percent, so you will have to send a check to the IRS in the amount of $20,000. You may also have to pay the applicable state tax. For purposes of this discussion, I am not taking into consideration other expenses which you have paid, such as closing costs, real estate commissions, or legal fees. These expenses will, of course, reduce your overall tax obligation. How can you increase your tax basis? Here is where improvements play a vital role. Any work which you do to your house that adds to its value, prolongs its useful life or adapts it to new uses (such as "going green") will be considered an improvement and can be added to the tax basis of your property. Let's take your examples: remodeled your bathroom: since this clearly prolongs the useful life, it is an improvement; replaced a deck: this is a grey area. According to the IRS, "a repair keeps your property in good operating condition. It does not materially add to the value of your property or substantially prolong its life." (IRS Publication 527, "Residential Rental Property" (available free from www. IRS.gov/publications). Since you can claim that the new deck will increase your property's value, I would consider it an improvement. replaced and upgraded spa filter motor: although it sounds like a repair, since you upgraded the motor, I would consider this an improvement. replaced the front door: clearly an improvement, since the new door has a very long useful life. replaced roof and rain gutters: the IRS publication specifically addresses rain gutters, and states "fixing gutters" is a repair. But since you replaced your gutters, once again you are in a grey area. However, since you replaced the roof (which clearly is an improvement), and had to remove the gutters during this process, I would call the entire job an improvement. The IRS publication contains a list of "examples of improvements" but cautions: "Work you do (or have done) on your home that does not add much to either the value of the life of the property, but rather keeps the property in good condition, is considered a repair, not an improvement." If your profit will be less than the exclusion of gain ($500,000 for married couples; $225,000 for taxpayers filing a separate tax return), then it probably does not make a difference whether your work is a repair or an improvement. However, for those who bought and sold homes before l997, and used the "roll-over", and for those whose property values increased dramatically in the early part of this century, improvements will assist you in reducing your capital gains tax obligations to the IRS.

Source: Realty Times/Benny L. Kass/01 October 2015