Something truly wonderful about homeownership.

Have you ever heard that old joke about boats?  That the two best days in the life of a boat owner are the day you buy it and the day you sell it. The joke is of course, many boat owners can’t wait to get rid of it.  

In a different way you could almost say that about houses too. The day you buy it is a day to celebrate and the day you sell it, well, there’s plenty to celebrate then too. It’s largely because of that wonderful thing called the Capital Gains Exemption.  

You probably know what that is, but just in case, let’s talk about it. The Capital Gains Exemption helps millions of homeowners keep a huge amount of profit when they sell. It says that if you are single and sell your home, you will pay no taxes on the profit up to $250,000. So, buy your house for $100,000 and years later sell it for $350,000 – no taxes. If you’re married it’s double that. No taxes on up to $500,000. Buy a place for $400,000 and later sell it for $900,000 – no taxes. It’s just incredible.  

Now, if you’ve owned property for decades you might remember the old capital gains rule. The one that said to get the exemption you had to sell one place and then buy another one really quickly. That’s the way it used to be, but it’s not that way anymore.  

Now what if you sell your house and make more than the $250,000 profit if you’re single? And more than the $500,000 profit if you’re married? One word – congratulations! Anyone who makes a profit like that in today’s market – well done. But if you do exceed those caps, you can possible pull them back by counting up all the improvements you’ve made. New deck, new kitchen, maybe even a new roof. They might count against your profit and bring it back down under the caps.  

Now, full disclosure here. I am not an accountant and I am not a tax attorney. This is just general information. Definitely talk to a financial or legal professional to find out where you stand.  

But what a great benefit. It helps retirees. It helps people trading up or trading down. If you sell and you have even a little profit, it helps you too. You don’t have to pay taxes on that amount either. It’s just one more way that homeownership can help you grow wealth over time.  

Back to that joke about boats. I know, the best days when you own a house certainly include the day you buy it and the day you sell it. But let’s not forget all those days in between. The best moments of our lives often happen at home. It’s where you live that life. Where you build those memories. And where you know you belong.  

So that boat analogy only goes so far. But I would agree that the day you sell your house can be a great one, thanks to way America supports homeownership with benefits like the Capital Gains Exception.

Show  Me  the  Money:  How  Much  Cash  You’ll  Need  to  Bring  to  the Closing Table.

Let’s  start  low  and  then  build  up.  First  of  all,  if  you  qualify  for  a  VA  loan,  they  allow  a  zero  down  payment.  If  you’re  a  veteran  or  an  active  duty  service  member,  you  need  to  know  that.  Also,  if  you’re  buying  a  home  in  a  rural  area,  ask  your  REALTOR  about  the  Department  of  Agriculture  program.  Yep,  the  USDA  has  a  zero  down  home  loan  program  for  people  buying  out  in  the  country.

Now  if  neither  of  those  programs  work  for  you  then  you’ll  have  to  come  up  with  some  cash  when  you  buy  a  house.  But, you do not need a 20% down  payment.  If  you’re  a  qualified  buyer  you  can  find  a  good  safe  mortgage  which  requires  as  little  as  3%  down.  And  again,  this  is  not  some  sub-prime  back  alley  mortgage,  this  is  a  high  quality  home  loan.  So that’s a  good  starting  point.

Now,  how  do  you  get  the  money?  Well  course  people  who  sell  one  house  and  buy  another,  they  just  take  the  profit  from  the  first  place  and  buy  the  second  one.  But  if  you’re  a  first  time  home  buyer  you  don’t  have  that  ability.  So  for  you  there  are  basically  four  ways  to  get  your  down  payment  ready  to  go.

First,  save  it.  Just  sock  away  all  the  money  you  can  and  try  to  temporarily  stop  spending  on  things  you  don’t  really  need.  Plenty  of  people  have  given  up  vacations  or  expensive  dinners  in  order  to  conserve  their  down  payment  money.  You  can  too.  It  helps  by  the  way  to  have  your  money  put  in  your  savings  account  automatically  –  direct  deposit.  You  never  see  it  so  you  won’t  be  apt  to  dip  into  it.

Second,  plenty  of  first  time  home  buyers  get  the  down  payment  from  their  parents.  But  it  has  to  be  a  gift,  not  a  loan.  Lenders  won’t  allow  you  to  barrow  the  down  payment.  Your  parents  will  have  to  give  you  the  money.  It  happens  all  the  time  all  across  America.

Third,  if  you  have  an  IRA  or  a  401K  you  might  be  able  to  withdraw  money  for  a  down  payment.  Talk  to  your  accountant  about  this  one.  You  need  try  at  least  to  avoid  penalties  for  early  withdraw.  So  talk  to  a  financial  pro  about  whether  that’s  a  smart  move  for  you  or  not.

The  forth  way  to  come  up  with  a  down  payment,  your  city  or  state  might  have  a  program  that  provides  down  payment  assistance.  Again,  talk  to  your  REALTOR  about  what  programs  are  in  your  area.  You  might  qualify,  you  might  not.  Many  people  are  surprised  that  they  can  be  making  a  pretty  good  amount  of  money  and  still  get  down  payment  assistance.

On  last  thought.  I  talked  a  lot  about  how  to  get  into  a  house  with  a  low  down  payment.  But  if  you  can,  you  should  know,  it’s  almost  always  better  to  put  down  more.  Put  down  as  much  as  you  can.  Your  monthly  payments  will  be  less,  you’ll  walk  into  the  place  with  more  equity.  And  if  prices  were  to  drop,  you’ll  have  more  protection  against  going  under  water.  So  more  is  better.  And  if  you  just  don’t  have  more,  that’s  okay.  Remember,  you  do  not  need  20%.  If  all  you  have  is  3%,  3.5%,  or  5%,  don’t  give  up.  Because  the  home  you  want  could  be  within  your  reach.

It’s All About You

In past blogs I’ve talked about everyone involved in every transaction you do.  From the REALTOR, to the Lender, to the Inspector, the Appraisers, the Stagers, and on and on. There’s a lot, but I wanted to talk about the one person I haven’t talked about yet.  That is – Y-O-U! That’s right, you.  There wouldn’t even be a deal if you weren’t there.  The fact is, in every real estate transaction, it’s all about you. Whether you’re the buyer or the seller, it’s your deal.  It’s not just because you’re buying or selling a house, and it’s not just because you’re the client.  It’s also because every decision in the transaction is yours to make.   Now everyone involved plays a huge role, but for the most part, everybody else’s role is about giving you information, so you can make those decisions based on fact.

Let’s look at that, starting with the REALTOR.  If you’re buying, you’re REALTOR will show you homes you can afford in the areas you want to live.  They’ll tell you which prices are high, which are low, and which are right on the money.  They’ll discuss the condition, the features, and the pros and cons of each house.  They’ll examine the comparable properties nearby, what’s sold, for how much, and what did not sell.  That’s solid data, which helps you decide which house to buy.

If you’re selling, it’s the same drill.  Your REALTOR will give you data about the market.  About comparable home sales, about today’s buyers, and about your house, what’s good and what’s not so good.  What you can do to make it appeal to more buyers and how much to list your house for.  Again, solid data, which will help you decide exactly how to sell your house.  That’s just the beginning, your REALTOR will continue to provide solid information and market data throughout the entire transaction.  But again, every decision is yours.

The same dynamic happens with every other member of your team as well.  The Stager says they can either rearrange your existing furniture or bring in brand new rented furniture to make your house shine.  The decision is yours.

The home Inspector says the place needs a new roof, as the buyer you’ll decide whether to fight for it.  If you’re the seller, you’ll decide whether to pay for it.

The Lender tells you that if you pay a few points you can buy down the interest rate.  The decision is yours.

It even happens at the closing table, the title company will ask you if you want your profits wired into your bank account or whether you want a check.  The decision is yours, but do you really want to walk around with $100,000 check in your pocket?  It’s not a great idea, but still, the decision is yours.

You’re the boss and that’s exactly why it’s so great to have your very own real estate dream team.  They will provide information, data, and the facts and figures involved so that every decision you make in the biggest transaction of your life will be based on cold, hard facts.  And that is a dream come true.

Leave the Landlord Behind: How owning a home of your own can help transform your life.

Let’s start with your monthly expenses. When you rent a place you pay the landlord every month. Assuming you’re on a lease, that rent check stays the same for about one year. Then it usually increases. Fortune magazine predicted that in 2018 rents would rise around 8%. That would turn a $1000 monthly rent into a $1080 monthly rent. Now this year might not be as bad as that, but in most areas a 3 to 5% increase is expected in 2019. So if you keep on renting you’ll need to budget for those annual rent increases.

Now compare that with having a mortgage. If you get a 30 year fixed rate mortgage, the payment will stay the same year after year. Now just think about that. If your mortgage is $1000 a month this year, it will stay right there. Next year, and the year after that, and the year after that. It will stay right there for 30 years. Now you probably won’t be living there for 30 years but if you are, three decades from now your monthly mortgage payment will still be $1000.

Next, let’s look at your taxes. When you rent you typically don’t itemize deductions. You probably just take the standard deduction. Which is fine but that changes when you buy a place. As a homeowner you get two big deductions that renters don’t. One is your mortgage interest, that could add up to thousands of dollars in deductions. The other is your property taxes, which could easily hit a thousand, maybe more. So every year you could get a bigger tax refund or if you adjust your withholding you could have more spending money every month.  Now again, renters don’t get those deductions. But of course you might be thinking renters also don’t have to pay property taxes. That’s true, but in most cases those property taxes are reflected in the amount rent the landlord charges.

Now moving on from the money, let’s look at what you can do with the place. When you rent you can only do what the lease allows. Generally you can paint the place any color you want but might have to repaint it back (to white for instance) when you leave. Now for other changes which could be anything from a new light switch to a ceiling fan to a new fridge or anything else, you’ll need to ask the landlord. Maybe you’ll get it, maybe not. Whatever you do, you need to the landlord’s permission.

Now compare that with owning the place. When you own it you can do anything you want.  Anything. Now the changes you make will have to be done according to code, that’s a safety issue, and according to zoning laws (you can’t put a zoo in your backyard). Also, if you have a condo association or homeowners association, you’ll have to follow those rules too. But, paint it, remodel it, change it, make it all yours. You can do all of that with a place you own. It’s yours, so have fun!

Those are just a few of the changes you’ll experience when you make the jump from renting to owning. Other things will happen too but they’ll take more time. Like the way you gradually build wealth because over time real estate values generally grow. And every month you’re paying down that mortgage. So in the long run you’re building equity and that may well become the greatest source of wealth in your life.

So when the time is right and you can comfortably afford to buy and own a home, you can look forward to all things I’ve talked about here. If you decide to make that jump, then I say – welcome home.

Five Things You Should Put In Storage While Selling Your Home

When your home Five Things is on the market but you are still living there, you can’t very well make it a model show home.  Still, there are a few things you should think about putting in storage while your home is for sale in order to make it as appealing as possible to buyers.  Here are the top five things you should consider putting out of sight.

Excess Family Photos

Buyers want to picture themselves in the house, and a slew of family photos hung all over the place can make that difficult.  If all they can see is you and your family, they won’t be able to easily envision their own family there.

Your Liquor Cabinet

A nice wine rack or a few bottles displayed near the wet bar are fine, but if you keep a lot of liquor in the house put it somewhere out of sight.  While it may seem illogical, buyers who share different lifestyle views might be put off by it.

Your Pet’s Toys

Chewed up tennis balls, smelly stuffed animals, and half-digested bones are part of life with a dog, but people coming to see your house will find it unattractive.  It will also tell them your pet has the run of the house, and they will wonder what damage might have been done.

Signs Of Repairs

Put away the plunger and similar items when you are selling.  It will prevent buyers from wondering if something is wrong with the plumbing, even if you only keep it around as a precaution.

Anything That Clutters A Room

So the extra bedroom is used as an office/exercise room/guest bedroom?  Versatility is great, but all that stuff in there will just look like there isn’t enough space in the house for everything you—or a buyer—needs.  Get rid of the exercise equipment and the desk, and leave the guest bed.  Extra bedrooms are more of a selling point than an office or exercise room.

It might be annoying to have to put some of your personal items away while you sell your home, but it can mean a faster sale and a larger profit.  Buyers need to see a home as a place where they can live, not the place where you live.