Real Estate Information

How much work should you do to your home before selling?

As a seller, you have several options when making that decision.  One option is to do relatively little and sell the property in it's "as is" condition. Another is to invest time, effort and money into fixing the property up before you sell. A third option is to do a combination of the first two approaches.

In making your decision, keep in mind that in general buyers pay more for homes that are in move-in condition. Most buyers would prefer to buy a turnkey listing that doesn't need a lot of work. A home in great condition will usually attract more buyers than one that doesn't show well and needs a lot of work.

But there is a market for fixer-upper properties, although it is more limited. Fixer buyers will pay more for fixers that have a big upside potential. Fixer listings sell at a discount when compared to listings that are in move-in condition.

1. Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.

2. Develop your home wish list. Then, prioritize the features on your list.

3. Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.

4. Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.

5. Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.

6. Determine your mortgage qualifications. How large of mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.

7. Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.

IS THIS A GOOD TIME TO INVEST IN REAL ESTATE?

Yes, it is, and for a number of reasons. For one thing, housing prices are declining just about nationwide. Plus, mortgage rates are at a serious low. Rates on a 30-year, fixed-rate mortgage are at a level we won't see again in our lifetime. Finally, if you buy before December 1, you'll get an $8,000 tax credit if you're a first-time buyer. For all those reasons, there's really never been a better time to go shopping for real estate

Buying a house covers a lot of ground--including legal, financial and emotional considerations. To not educate yourself and learn from the mistakes of others only sets you up to be at best disappointed and at worst finding yourself living in the wrong house. We have listed some of the most prevalent--and potentially dangerous and expensive--mistakes made by first time home buyers.

• Running before walking. This is easy to do once the decision to buy a home has been made. It means rushing off looking at homes, surfing the web or calling on advertisements before doing some up-front preparation. Not spending time doing this preparation, though, can be a disaster.

   

• Over-buying the first time. Being "house poor" is a very uncomfortable existence. A large and beautiful home with little or no furniture tends to be empty and cold. A life where almost every dime of your earnings goes to the support of your house wears thin very quickly and is a frequent cause of family stress. Pushing yourself right up to--or beyond--your limits leaves you highly exposed when the inevitable changes to the national or your personal economy occur. Leave yourself some breathing room!

   

• Finding out too late that you have no representation. This can be a real nasty surprise when you assume that the Agent with whom you are working represents you when they actually represent--and owe complete allegiance to--the seller. How does this happen? By not taking the time to investigate and familiarize yourself with the laws regarding Agency. Or, by rushing out to look at homes, whether in person or on the Internet, and contacting the Agent who has the house advertised (who will be the listing Agent and will absolutely represent the seller). Another pitfall occurs when you try to represent yourself in the purchase of a home, thinking that you will save money. This may be the case, but it is just as--or more--likely that you will run into a savvy seller who is looking to keep the commission savings in their pocket rather than give it to you. In addition, without representation and the use of a Comparative Market Analysis, how do you determine a realistic selling price for a property?

   

• Not comparing mortgages. There are far too many variables--type of mortgage, term, lender and amount of points to mention a few--not to investigate all of your options. Don't simply accept the first plan presented to you, whether it is from a mortgage broker, an Agent or on the recommendation of a friend or relative. Spend time comparing to get the most advantageous plan for your requirements and financial situation.

   

• Not getting mortgage preapproval. In the past it may have been different, but starting in the year 2000, prequalification and preapprovals are a necessary part of the home buying process. Not only will it give you an exact price range for your purchase, preapproval will add a great deal of strength to your offer.

   

• Waiting for the "perfect" home. Many first time buyers make the mistake that they will, if they look around long enough, find a home that has a full 100% of their needs and wants. With the thousands of variables available in housing, including location, style, size, amenities and condition, this is almost always an unrealistic goal. There are two potential problems with this strategy: First, these buyers pass by homes that meet 90% or more of their requirements only to eventually give up (often purchasing homes with less of their requirements because they are worn out!) and second, while they are waiting for the "perfect" home, housing market prices (and often mortgage rates) continue to rise, adding expense to their purchase. Instead, it makes sense to determine the most important of your needs and the most desired of your wants and selecting a home that meets the majority of them.

   

Before you decide to sell your home, there are some things you can do to prepare for a successful & speedy sell.

Go visit new construction homes in your area.  What you will find are homes that are uncluttered.  These homes appear as though "anyone" could live there. They are anonymous.  What you won't find are photos on the wall and someone else's personality.

Your home should be "anonymous", because you want buyers to imagine it as their potential home. When a potential buyer sees your family photos hanging on the wall, it puts your own brand on the home and they find it difficult to imagine this being their home.

Put away family photos, sports trophies, collectible items, knick-knacks, and souvenirs. Put them in a box. Rent a storage area for a few months and put the box in the storage unit.

FSBO – For Sale, But Onerous

Twelve percent of sellers who knew the buyer thought that getting the price right was the hardest task. Among FSBO sellers who didn’t know the buyer, 16 percent found it difficult to sell within the time planned, 15 percent found fixing up the home arduous, and 12 percent found it difficult to get the price right.

(Exerps from NAR, April 2009)

Raleigh - One of the Healthiest Housing Markets for 2009

Raleigh has been named the 6th strongest residential real estate market in the country lead only by 5 cities in Texas according to a recent report by Hanley Wood Market Intelligence. Raleigh, like most of the other leading markets, is a great place to live and avoided the huge run-up in home prices that preceded the market downturn in other parts of the nation.

Based on population trends and job growth - along with home prices - the top 75 housing markets managed to hold the line on home values.

The report sites the area's multiple universites and an annual job rate increase of 1.9 percent through the third quarter of 2008. It continues "With a population of more than 1 million, it also has one of the highest rates of population growth of any top metro market in the country over the last five years: nearly 5 percent annually.

Though the price of a median home here, $221,900, is above the national average, it is well below other cities in the mid-Atlantic and Northeast. With a glut of national builders in the market, locals ... have experimented with different looks and styles to keep sales alive."

Among 27 major cities in a nationwide survey, a January 27 Wall Street Journal article reports that the Raleigh area has the second lowest decline in homes prices. Its decline of 2.5% is just above the 1.8% decline in Dallas and far better than the 26.8% decline in Las Vegas and 23.5% decline in Miami.

Area sellers who take a slight cut in home values here may reap the benefit of deeper cuts when they purchase in other parts of the country. Locally, they may experience a lower purchase price after they've sold their current home. Savy sellers will negoitate acceptable offers on their current homes so they can bargain for a new purchase.

With mortgage rates at a 50 year low, NAR's affordability index has risen 17% from 2007 figures indicating that households earning the national median income have 131% of the income needed to buy the national median-priced house. With home sales down to a ten year low, successful sellers are competitive with prices, home condition and incentives.

This is a great time to take advantage of home ownership while rates are low, prices are competitive and buyer's incentives are high.

The 2008 National Association of Realtors Profile of Home Buyers and Sellers has just been released and shows that nationally, first-time buyers have risen in market share and plan to own their homes longer than buyers in the past.

The NAR report reiterates the local sentiment that first-time buyers are more flexible to enter the market without concern of selling an existing house as well as having the benefits of low home prices, plentiful supply and affordable interest rates.

Forbes Magazine has named Raleigh #5 on the country's list of recession-proof cities. "Stable home prices and growth across the different sectors of its economy has kept Raleigh strong," states the April '08 edition. With a median home price increase of 4%, Raleigh continues better off than most of the nation where the real estate bubble has bursted.

Among the fastest growing North Carolina town's, Wake County's Rolesville ranked #1; Holly Springs, #3; Knightdale, #4; Wake Forest, #5; and Fuquay-Varina, #6.

The Raleigh-Durham housing market is one of a handful of metropolitan areas nationwide to post a price median increase over the last year" reports the April 26 Raleigh News and Observer.

Buyer conditions are favorable while 42% of MLS listings showed a reduction in price compared to last year's rate of 32%.

Homes that are repaired, staged well and priced in the more active range under $500,000 continue to get the most activity as sellers position their homes above competitors.

The April 26 Raleigh News and Observer reports that The Triangle region continues to add jobs, but at a slower rate than previous years. The NC Employment Security Commission released its report in April stating that Raleigh's new jobs were a 3.6% increase over a year ago with the Triangle accounting for more than half the state's job creation over the past year.

The Raleigh/Cary real estate market has just been forecast as the #2 strongest market in the country by Veros Real Estate Solutions, a California company that has covered the nation's residential real estate market for five years. The Triangle market is the only one of the top five areas not in the Midwest.

Homes priced near or below the average market value in the $200's continue to move steadily without major concessions. As in all markets, location is the key factor.

"North Carolina is insulated but not immune from recession" reports the 1/30/08 Raleigh News and Observer. It further states that "Right now, North Carolina is better positioned than most of the country, and the Triangle is in better shape than the state."

"With an economy rooted in state government, three major universities and a booming tech sector, the Triangle is buffered against housing downturns, credit problems and energy prices that roil other regions," says a senior economist at Wachovia Bank.

Growth continues along the new outer loop, I540, as accessibilty to rural areas is made easier. To the East, Knightdale, Wendell and Zebulon offer more for the money and to the South and Southwest, Fuquay-Varina and Holly Springs offer a variety of price ranges.

While Wake County new home prices continue to increase, neighboring counties, while still lower, are taking up the price gaps that Wake has left behind. Johnston County offers a wide range of new contruction in the $200-$300K range on larger lots than more urban Wake and has become more easily accessible with new bypasses.

(Exerpts taken from Realty Times Market Conditions)

Representing Your Best Interest

For more information on how to avoid mistakes when selling, download our free report called "Avoiding the Top Ten Biggest Selling Mistakes". This report is offered to all guests.

Click Here to Download this guide today

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the tax credit?
   First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
2. What is the definition of a first-time home buyer?
   The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
   
   For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
3. How is the amount of the tax credit determined?
   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
4. Are there any income limits for claiming the tax credit?
   The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
5. What is "modified adjusted gross income"?
   Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
   
   To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
   Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
7. Can you give me an example of how the partial tax credit is determined?
   Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
   
   Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
   
   Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
   The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
9. How do I claim the tax credit? Do I need to complete a form or application?
   Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
10. What types of homes will qualify for the tax credit?
    Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
11. I read that the tax credit is "refundable." What does that mean?
    The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
    
    For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
    Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
    Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.
    
    In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
    No. You can claim only one.
16. I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
17. Is a tax credit the same as a tax deduction?
    No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
    
    A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
    
18. I bought a home in 2008. Do I qualify for this credit?
    No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit.
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19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
    Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
    
    Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
    
    Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.
    
20. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
    Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
    
    Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
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21. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
    Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.