Tag Archives: Home Selling

5 Factors That Influence a Home’s Value

Housing Questions“While Sellers always hope to get top dollar for their home, several factors will enter into what a buyer is actually willing to pay for it.  Calculating the right listing price is complex and requires evaluation of the multiple homes for comparison as well as an analysis of the current market condition and recent selling trends.  Recently ‘US News and World Report’ interviewed a number of real estate professionals to gain a better insight into the process.”

Denise Buck & Ed Johnson – DC Metro Realty Team

1. Location. The classic real estate refrain says, “location, location, location.” Location includes factors such as the price of recent nearby transactions, the quality of local schools and whether the area has a strong sense of community. “Buyers increasingly value community in the community where they’re buying,” says Amy Anderson, an agent with Davidson Realty, Inc. in St. Augustine, Florida. “They come to me not looking for a house for four years, but focusing much more on the community, the activities and the school district.”

As Americans scale back their dependence on automobiles, some homebuyers seek out communities that don’t require cars to get around. One resource is WalkScore.com, which rates neighborhoods throughout the U.S. based on access to public transit and proximity to grocery stores, parks and more.” I think walkability has become more important in many markets, especially amongst millennials,” says Ken Wilson, president of the Appraisal Institute, a professional association for real estate appraisers, and founder of Wilson Realty Advisors in Dallas. “You’re also finding empty nesters that are looking into properties that have walkability.”

But as Zillow.com chief economist Stan Humphries points out, location encompasses many other considerations. “Does it have a view? Is it a waterfront home?” he asks. “What’s it next to? Is it near retail establishments? Or a highway?”

2. Size and layout. While homebuyers used to swoon over ample square footage, many have fallen out of love with the McMansion. “I think people realize when they buy a 3,300-square-foot house, they’re not getting what they thought they were,” Anderson says. “There’s more upkeep and a lot more involved with taking care of these huge houses.”

Layout is a key factor because an open-concept design can look much more spacious than a boxy space of the same size. The number of bedrooms also influences a home’s value, so think twice before putting up a wall and subdividing one room into two. “Adding a bedroom will take away value,” Humphries says. “Fewer but larger bedrooms tend to boost value.”

3. Age and condition. Historic homes (assuming they’re livable and well-maintained) and new homes are typically more valuable than homes built somewhere in the middle. “Generally, as a home gets older, it becomes less valuable,” Humphries says. “Then there’s a U-shape where, at some point, homes become so old that they have historical significance. A home that’s built in 1910 is probably more valuable than one built in 1970.”

Age aside, condition matters too. “Someone will pay $15,000 more for a well-kept house that’s move-in ready than they will for a house that needs $5,000 worth of work,” Anderson says.

4. Upgrades. Renovations play into a home’s value, but if your home is considered “over improved” compared with other properties in the neighborhood, it can actually hurt the property’s value. “You want it to be common for the neighborhood or subdivision,” Wilson says. “It wouldn’t hurt to visit neighbors’ homes or visit a home via an open house to see what people are marketing [before undertaking big improvements].” You could also hire an appraiser to prepare a feasibility analysis that will help you determine the impact of renovations on your home’s value.

Unless you live in an area where granite countertops and built-in wine fridges are the norm, Humphries says you might be better off saving the money and choosing more basic finishes. “It’s harder to recoup [your investment] if you guild the lily, if you will, on granite this and chrome that in your kitchen,” he says. “You’re spending a lot of money on something that might have a lot of personal taste attached to it.”

However, you should keep records of repairs and upgrades to show potential buyers that the home has been well-maintained.

5. Negative events. If your property has issues like mold or experienced a fire or was the site of a violent crime, it could be a harder sell – and command a lower price. “Nowadays, people are very concerned if there was a fire, prior mold damage or even if there were some sort of death or crime at the property,” Wilson says. Federal law requires the disclosure of all known lead-based paints, but state laws vary in whether the seller must disclose issues related to natural disasters or crimes committed on the property.

Originally published in US News and World Report, by Susan Johnston

5 of the Most Profitable Renovations

Home Renovations“Quite often we are contacted by homeowners to consult on what they should, or shouldn’t do to their homes.  Small upgrades can be done just because you want to make your house feel more like ‘home’.  Larger ones should be carefully considered, so that you spend your money wisely.”

Denise Buck & Ed Johnson – DC Metro Realty Team

From 2009 to 2011, Census data indicates homeowners spent a combined total of nearly $360 billion on home improvements, with a median cost of $3,200 per venture. When deciding on a home renovation project, most homeowners search for one that will increase both the visual aesthetic and the value of the property.

Some renovations, of course, add more value to a home than others. Everyone has different tastes, but some features such as higher quality materials generally offer a higher return. The key is finding a project that offers the most future benefits, while also being a feature you can enjoy. Some of the more common remodels that do not fit the bill are home office renovations, with an average cost of $28,000. According to Bankrate, home offices only bring in around a 49 percent return when you sell your home.  The same applies for sunroom additions. Priced at over $73,000, sunrooms only recuperate around 52 percent of that back when you sell. While you may enjoy your new sunroom or home office, you have to ask yourself if that current enjoyment is more important to you than future profitability.

1. Steel Door for Entryway

This renovation heightens the curb appeal of your home and also comes with a low price tag. Although a small project, this minor improvement ranked number one on The National Association of Realtors list of remodels that pay off. According to their cost versus value report, this renovation comes with an investment cost of $1,162 and you can get around 97 percent ($1,122) of that cost back when you resell.  Steel doors are also said to increase energy efficiency and durability and they are more secure than other types of entry doors.

2. Garage Door Replacement

Also increasing security, garage door replacements come with a price tag of between $1,500 and $2,800. You can expect to get back around 83 percent of your investment cost. When prospective buyers first walk up to your home, features like a new garage door are more likely to entice them. When the outside is up to par, it leads buyers to believe the inside is in good shape as well. An old garage door is often unattractive. Older models also may not offer the insulation that newer models provide so your new door may save on your heating and air conditioning costs.

3. Kitchen Remodels

The Census bureau reports the median cost of a kitchen remodel at $5,000. In 2011, Americans took on 3.7 million kitchen remodels.  These kitchen adventures can, however, become pricey in terms of up-front investment cost. Many remodels exceed the $100,000 price point. A major kitchen remodel generally returns around 80 percent of its investment costs at resale. This, however, varies significantly based on the project, your home’s value, and your location. As with any project, the way it looks in the end has a large impact on its return.

For Sale by Owner suggests that you stay with the theme of your home and turn to an expert designer for advice when needed. On the same token, modern kitchens with the newest features are usually a big hit. Back splashes, granite and marble materials, stainless steel, and energy efficient appliances are, in many cases, attractive to buyers as long as the design matches the rest of your home.

The quality of the work also has an impact on your return, and your personal satisfaction with the remodel. The last thing you want is any leaks, misplaced appliances, or malfunctions. Its essential that you work with a contractor you can trust will produce excellent work.

4. Wood Deck Addition

Ideal for cookout, gatherings, and outdoor conversation, a deck can benefit you both now and when you sell. When potential buyers see a new deck out back, it often brings about thoughts of the activities they can do out back at their new house. A deck also increases the amount of living space you have for a low price tag. According to data published on House Logic, the average cost of construction for a two-story, 2000 square foot home is $85 per square foot. With a deck, however, you’re looking at a cost of around $35 per square foot — $50 per square foot less.

With a price tag of just under $10,000 for a pressure-treated wood deck, you can expect to get back around 87 percent of your investment cost for the addition. This cost represents a 16 foot by 20 foot sized deck. A composite deck in the same size costs upward of $15,000, and offers just over 74 percent of this cost back at sale.

5. Go Energy Efficient

According to recent Census data, nearly one out of every four renovations are designed for energy efficiency. Before taking on an energy saving remodeling project, US News suggests you perform an “energy audit.” This means that you examine your home for areas of improvement.

A common find is windows, doors, or an attic that need sealing, which will save you money on your energy bills.  Maybe you have really old windows and you want to go ahead and just replace them all. Is it really cold upstairs? US News also indicates that around 50 percent of U.S. homes are under-insulated, so insulating upstairs may be a project you want to take on. Heating ducts may need attention or you may have an old hot water heater.

If you are really looking to make your house energy friendly, adding an alternate energy source, such as a wind turbine, will not only save you money on energy costs, it will also provide you with tax benefits. These tax benefits generally provide 30 percent of your investment cost back as a one-time tax credit on your return.

Originally posted by Erika Rawes in Personal Finance of Wal St CheatSheet

Quick Fixes Before You Sell Your Home

Curb Appeal“When you’re going to put your home on the Market, it pays to put a little time into sprucing it up a bit.  There are so many little things that go unnoticed around your home, even though you walk by them every day.  We can help you with this, and most of these don’t cost much, but have a big pay off in buyer appeal.”

Denise Buck & Ed Johnson – Dc Metro Realty Team

If you are selling your home, nothing matters more than making a good first impression. Get potential buyers to stop and notice your property by amping up its curb appeal. With a few inexpensive fixes, you can help your home stand out.

If you are selling your home, nothing matters more than making a good first impression. Get potential buyers to stop and notice your home by amping up its curb appeal. With a few inexpensive fixes, you can help your home stand out.

The #1 thing to keep in mind: Make sure your home looks well cared for. Achieving a fresh, modern look doesn’t have to be difficult or expensive. 

Spend a Little, Change a Lot

1. If your house numbers are weathered, buy new ones in a style that matches your home’s character. Or paint the old ones to give them new definition.

2. Has your mailbox seen better days? Paint it for a fresh pop of color or swap it out for a new one. You’ll notice an instant difference.

3. If the lighting fixtures near your front door scream “dated,” look for some trendy, inexpensive replacements that are available at most hardware stores.

4. If the hardware on your doors, windows and other areas has been painted over, is getting rusty or is coming unhinged, repair or replace it.

5. Want to take your home’s exterior from drab to fab? Add plants, whether they’re in window boxes, containers or a garden, their color and lushness can transform your house into something special.

6. If you’re lucky enough to have a porch, show it off with comfortable furniture, like a glider or Adirondack chair, to add a friendly, welcoming touch.

Common-Sense Fixes

1. Repair anything that is chipped, peeling or cracked, including garage doors, fences, gutters, sidewalks and more. Sand, patch and repaint as needed.

2. Wash your windows. Simple enough, right? It’s amazing how appealing cleanliness can be! Plus, natural light is a major selling point.

3. Pick up debris on your lawn and edge the grass. A manicured edge shows you care about the details. Prune bushes and trees to maintain their shape. 

4. Remove weeds growing between the cracks in your driveway. While you’re at it, seal the cracks and clean up any oil spills, too!

5. For night showings, put your outdoor lights on a timer to warmly welcomebuyers. If you can, install a spotlight and aim it at a tree or an especially nice feature of your house.

Originally published in American Home Shield Newsletter

How to: Clean Baseboards

how-to-clean-baseboards“One of my least favorite household cleaning chores…Baseboards.  You really have to get down on your hands and knees to get this one done.  And when you stop and look at all the baseboards you have in the house it seems a bit overwhelming.  This article not only shows you to clean them properly but also how to make it not quite so daunting of a task.”

Ed Johnson & Denise Buck – DC Metro Realty Team

You can spend hours washing the floor, dusting the furniture, and vacuuming the nooks and crannies in any given room, but so long as its baseboards are dirty, they are going to attract attention and create an overall impression of shabbiness and neglect. It’s by no means difficult to clean baseboards; this is not one of the great housekeeping challenges that you will face in life. Indeed, the trickiest bit is overcoming inertia. So if you’re actually reading this, the hard part is over! 

MATERIALS AND TOOLS 
– Vacuum (with brush attachment or duster) 
– Sponge 
– Dish soap, vinegar, or wood cleaner 
– Cotton swabs 
– Dryer sheets 

Rather than set out to clean the baseboards in every single room of your house all at once, make an agreement with yourself: Each and every time you break out the sponge and plastic gloves, you will clean the baseboards thoroughly in one room only. That way, the task of cleaning baseboards never becomes overwhelming. Also, remember that baseboards accumulate the dust and dirt that housework stirs up. Save the baseboards for last—don’t waste effort cleaning the same thing twice. 


STEP 1 
Begin the process by removing as much dust and dirt as you can from the area. If your vacuum has a brush attachment, use it to suction along the length of the baseboards, paying special attention to the crevice where the trim meets the floor. In lieu of a vacuum, you can rely on a duster to do a decent job of freeing up debris, which you can then corral and remove with a broom and dustpan. 

STEP 2 
Once you’ve removed all loose dirt and dust, you can begin to address stains and stuck-on grime. (Particularly in the kitchen, baseboards are the notorious hosts of unidentifiable splatters.) Dip a sponge into a mixture of warm water and dish soap (vinegar works well too), then go about scrubbing any marks that you can find. Note that if the baseboards in the room you are cleaning are stained, not painted, it may be preferable to use a cleaning solution formulated specifically for that application. 

STEP 3 
As you’re already crouched over cleaning the baseboards, you might as well do as good a job as possible. For those hard-to-reach spots—the crevice between the trim and flooring, for example, or around any imperfections that appear on the wood surface—use a cotton swab dipped in the cleaner. 

STEP 4 
Protect the baseboards’ newly acquired cleanliness by rubbing them with a fresh dryer sheet. Not only will this leave a fresh laundry scent that lasts a few days, but also—and more importantly—the sheet’s anti-static properties actually repel dust. Perhaps it sounds like overkill, but going this one step further can really pay off. 

Unless you live in a fraternity house, you’re unlikely to find that your baseboards need to be cleaned weekly. In the grand scheme of housekeeping, baseboards are rather low maintenance. If you’re like me, you probably notice baseboards only when they are not clean. So if on each occasion that you clean, you live up to the promise of doing the baseboards in one room only, you may never notice them again!

By Bob Vila – originally appearing on BobVila.com

Know How the Sq Ft Were Measured

Measuring the home“It is amazing all the misunderstandings that occur when buyers are comparing homes on the internet.  You wouldn’t think that comparing the size of two homes would be a difficult task.  They have the Square Footage in the listing, right? However, there are several things to be aware of when reading those listing to make sure you are interpreting the numbers correctly.”

Denise Buck & Ed Johnson – DC Metro Realty Team

In an attempt to compare homes, one of the common denominators has been price per square foot. It seems like a fairly, straight forward method but there are differences in the way homes are measured.

The first assumption that has to be made is that the comparable homes are similar in size, location, condition and amenities. Obviously, a variance in any of these things affects the price per square foot which will not give you a fair comparison.

The second critical area is that the square footage is correct. The three most common sources for the square footage are from the builder or original plans, an appraisal or the tax assessor. The problem is that none of sources are infallible and errors can always be made.

Still another issue that causes confusion is what is included in measuring square footage. It is commonly accepted to measure the outside of the dwelling but then, do you include porches and patios? Do you give any value for the garage, storage or other areas that are not covered by air-conditioning?

Then, there’s the subject of basements. Many local areas don’t include anything below the grade in the square footage calculation but almost everyone agrees that the finish of the basement area could add significant value to the property.

Accurate square footage matters because it is used to value homes that both buyers and sellers base their decisions upon.

Let’s say that an appraiser measures a home with 2,800 square feet and values it at $275,000 making the price per square foot to be $98.21. If the assessor reports there are 2,650 square feet in the dwelling and the owner believes based on the builder, there is 2,975 square feet, you can see the challenge.

If the property sold for the $275,000, based on the assessor’s measurements, it sold for $103.77 per square foot and by the owner’s measurements, it sold for $92.44 per square foot. Depending on which price per square foot was used for a comparable, valuing another property with similar square footage could have a $30,000 difference.

The solution to the dilemma is to dig a little deeper into where the numbers come from and not to take the square footage at “face value”. It is important to recognize that there are differences in the way square footage is handled.

Factors that Influence Your Home’s Value

ForSale“Often times, Sellers will wonder why their home isn’t selling as fast as the one down the street did.  Sometimes it’s just timing…the right buyer was looking at the right time and found the perfect home.  The following article identifies the key factors. But at the end of the day pricing it too high will completely negate all of the items below, so be sure to let us help you price it right to begin to begin with.”

Denise Buck & Ed Johnson – DC Metro Realty Team

While home sellers hope to get top dollar for their property – and some have an inflated idea of what to expect – establishing a home’s value can be a complex, multifaceted process. Do home renovations really pay off? And which is more valuable: a three-bedroom or a four-bedroom with the same square footage? We talked to real estate insiders to find out.  

1. Location. The classic real estate refrain says, “location, location, location.” Location includes factors such as the price of recent nearby transactions, the quality of local schools and whether the area has a strong sense of community. “Buyers increasingly value community in the community where they’re buying,” says Amy Anderson, an agent with Davidson Realty, Inc. in St. Augustine, Florida. “They come to me not looking for a house for four years, but focusing much more on the community, the activities and the school district.”

As Americans scale back their dependence on automobiles, some homebuyers seek out communities that don’t require cars to get around. One resource is WalkScore.com, which rates neighborhoods throughout the U.S. based on access to public transit and proximity to grocery stores, parks and more.” I think walkability has become more important in many markets, especially amongst millennials,” says Ken Wilson, president of the Appraisal Institute, a professional association for real estate appraisers, and founder of Wilson Realty Advisors in Dallas. “You’re also finding empty nesters that are looking into properties that have walkability.”

But as Zillow.com chief economist Stan Humphries points out, location encompasses many other considerations. “Does it have a view? Is it a waterfront home?” he asks. “What’s it next to? Is it near retail establishments? Or a highway?”

2. Size and layout. While homebuyers used to swoon over ample square footage, many have fallen out of love with the McMansion. “I think people realize when they buy a 3,300-square-foot house, they’re not getting what they thought they were,” Anderson says. “There’s more upkeep and a lot more involved with taking care of these huge houses.”

Layout is a key factor because an open-concept design can look much more spacious than a boxy space of the same size. The number of bedrooms also influences a home’s value, so think twice before putting up a wall and subdividing one room into two. “Adding a bedroom will take away value,” Humphries says. “Fewer but larger bedrooms tend to boost value.”

3. Age and condition. Historic homes (assuming they’re livable and well-maintained) and new homes are typically more valuable than homes built somewhere in the middle. “Generally, as a home gets older, it becomes less valuable,” Humphries says. “Then there’s a U-shape where, at some point, homes become so old that they have historical significance. A home that’s built in 1910 is probably more valuable than one built in 1970.”

Age aside, condition matters too. “Someone will pay $15,000 more for a well-kept house that’s move-in ready than they will for a house that needs $5,000 worth of work,” Anderson says.

4. Upgrades. Renovations play into a home’s value, but if your home is considered “over improved” compared with other properties in the neighborhood, it can actually hurt the property’s value. “You want it to be common for the neighborhood or subdivision,” Wilson says. “It wouldn’t hurt to visit neighbors’ homes or visit a home via an open house to see what people are marketing [before undertaking big improvements].” You could also hire an appraiser to prepare a feasibility analysis that will help you determine the impact of renovations on your home’s value.

Unless you live in an area where granite countertops and built-in wine fridges are the norm, Humphries says you might be better off saving the money and choosing more basic finishes. “It’s harder to recoup [your investment] if you guild the lily, if you will, on granite this and chrome that in your kitchen,” he says. “You’re spending a lot of money on something that might have a lot of personal taste attached to it.”

However, you should keep records of repairs and upgrades to show potential buyers that the home has been well-maintained.

5. Negative events. If your property has issues like mold or experienced a fire or was the site of a violent crime, it could be a harder sell – and command a lower price. “Nowadays, people are very concerned if there was a fire, prior mold damage or even if there were some sort of death or crime at the property,” Wilson says. Federal law requires the disclosure of all known lead-based paints, but state laws vary in whether the seller must disclose issues related to natural disasters or crimes committed on the property.

The appeared on Yahoo Homes and was from US News & World Reports

By Susan Johnston July 15, 2014

Make Good Offers Better for the Seller

GoodBetterDirectional“We have always believed in making strong offers.  The cleaner the offer the better.  We have used all of these at various points, depending on the situation.  One of the keys to writing a strong offer is to know as much about what the Seller really wants and is important to them.  Don’t make a low ball offer blindly, thinking that the Seller will counter.  Many times that strategy can backfire and Seller considers you difficult and won’t want to even try to negotiate.  So Keep it simple and clean and you’ll get much better results.”

Denise Buck & Ed Johnson – DC Metro Realty Team

It’s disappointing, frustrating and sometimes, discouraging when you lose a home you want to buy.

One of the hardest lessons for today’s buyers is that writing an offer doesn’t mean that you’ll get the home or even a counter-offer. The low inventory affecting many of the housing markets requires a different strategy to give you the best chance to get the home you want.

  1. Make your best offer initially; you may not get a chance to accept a counter.
  2. Submit a written pre-approval letter from the lender.
  3. Increase earnest money above what is considered normal.
  4. Make a larger down payment.
  5. Eliminate unnecessary contingencies.
  6. Don’t ask for personal property not included in the listing agreement.
  7. Pay your own customary closing costs.
  8. Shorten the inspection period.
  9. Buy the home “as is” subject to inspections which still allows you to get your earnest money back if the inspections are unacceptable but doesn’t require the seller to make repairs.
  10. Write the seller a hand-written, personal letter telling them why you want their home; include a picture of your family.
  11. Offer to use the seller’s or listing agent’s preferred title company.
  12. If you can pay cash, do so and arrange financing after closing. Be prepared to show proof of available funds.
  13. Schedule the closing as soon as possible but let the seller know you can be flexible.
  14. Once you decide on a home, act with expedience.
  15. Ask your real estate professional if they have any other suggestions.

Think of making an offer like applying for a job. You want to make your best impression and show why you are the best choice. You won’t always know that there are multiple offers. Approach the process like the competition is doing their best to get the home.

7 Biggest Mistakes Made with Area Rugs

ARea RugsIt’s such a small thing, but it can make such a big impact.  Do it right and it adds just the right touch to a room.  Do it wrong and it sticks out and takes away from the room.  Just following a few simple tips might make the difference in your room.”

Denise Buck & Ed Johnson – DC Metro Realty Team

1. Choosing a rug that’s too small
Skimp on size, and your room will look smaller. “You need your rug to set boundaries, and ground your furniture,” says interior designer Danielle Oakey. “In a living room, your rug defines the conversation area, and it should be large enough so at least the front legs of the furniture are on it.”

“In the bedroom, you want to feel the rug on your feet when you get out of bed,” says interior designer Amber Lewis. “I like two feet to extend beyond the bed on each side.”

2. Not trying layering
Why do people often choose a too-small rug? Tinier rug = tinier price. “We’re the layering queens,” says Lewis, about her design team. “Buy a neutral jute rug — which cleans up really well, even if you have stain-prone kids or pets — and place your patterned rug over it.”

3. Leaving your wall-to-wall carpeting bare
“Don’t be afraid to layer an area rug over carpet,” says Oakey. “It adds playfulness, and pulls together your room with the boundaries it needs.”

4. Choosing your rug last
If you’re decorating your room from scratch, choose the rug first. It’s the big, impactful piece that ties a room together, and if you wait until you’ve placed the final throw pillow, you could search for months before the perfect rug come around. (Though, you could go with something neutral until the rug gods grant you a better choice).

“When we’re designing room, we’ll choose the rug and then throw pillows, textiles for curtains, and more on the floor with it, and pick whatever goes with the rug best,” says Lewis.

5. Being afraid of pattern
Some contrast (read: a cute print) is necessary to create a happy space. “Brown walls, a brown couch, and a brown rug will make a room look flat and bland,” says Oakey.

6. Skipping the rug pad
A rug pad dispels slipping and sliding, and adds a layer of comfort underfoot — especially to a flat weave rug. “Rug tape is useless,” says Lewis. “It doesn’t work, and will ruin your hardwood floors with its stickiness.”

7. Missing out on a discount
“If you’re looking for a great price on unique, vintage rug, like a Persian one or Turkish kilim, try eBay,” says Oakey. “Same is true with Etsy — thrift stores often post there. I also like RugsUSA. They have a huge selection and always run sales.”

By Lauren Piro on Yahoo! Shine

Investment Property Exchanges Save $’s

Exchange 1031“Many of our clients become landlords by renting out their 1st home when buying a new one.  The following article provides some information on benefits of using a Section 1031 when buying and selling your rental or investment properties.”

DC Metro Realty Team – Denise Buck & Ed Johnson

 

Section 1031 exchange for rental and investment real estate is a tool that allows investors to move the gain from one property to another without immediate income tax consequences.

An instant benefit is to postpone the tax due which gives the investor a larger amount of proceeds to invest. In the example shown, the investor has 21% more proceeds to invest and grow over time than if he had paid the taxes due instead of exchanging.

A legitimate long-term goal might be to make qualified exchanges from one property to another until the investor dies. The heirs would then receive a stepped-up basis on the property based on the market value at the time of the decedent’s death and possibly avoiding taxes altogether.

There are specific requirements to be met in order for the exchange to qualify. For more information on exchanges, see IRS publication 544. In addition to enlisting the services of a real estate professional familiar with investment property, seek the help of Qualified Intermediary to facilitate the intricacies of the exchange. Your real estate agent can help you locate one.

 

Be sure to Deduct the Points you Paid

Deductibility“Always remember to take the proper deductions on your taxes when you have bought or refinanced your home.”

DC Metro Realty Team – Denise Buck & Ed Johnson

Prepaid interest, sometimes called “points”, is generally tax deductible when a person pays them in connection with buying, building or improving their principal residence. When points are paid on a refinance, they are not a current deduction but have to be taken prorata over the life of the mortgage.

For instance, if $3,000 in points were paid on refinancing a 30 year mortgage, a deduction of $100 per year is allowed. When the loan is paid off or replaced by refinancing again or the home is sold and the mortgage paid off from the proceeds, the balance of any un-deducted points may be taken in that tax year.

Your tax professional needs to be made aware of any of these situations so that he or she can accurately reflect the deductions in your return. Currently, the most common situation is homeowners may be refinancing their home for the second, third or even, fourth time. If there are points that have not been completely deducted, they need to be treated in the year of refinancing.

For more information, see points in IRS Publication 936; there is a section on Refinancing in this publication. For advice considering your specific situation, contact your tax professional.