Blog | Morgan McDonald

10 AWESOME Tax Breaks When You Own a Home

Posted by Ryan Fitzgerald on Sunday, January 15th, 2017 at 11:48am.

This article is for informational purposes only. If you're seeking tax advice please consult with a tax advisor.

When you decided to own a home as opposed to renting one, you were getting started on the road to creating an investment. To assist homeowners such as yourself with the strain caused by paying high mortgages, the US government has created numerous tax deductions specifically designed to lower the payments you’ll have to make during tax season. Now that you qualify for them, your next step should be to learn as much about them as possible.

We’re sure that up until recently, you’ve probably only been claiming standard deductions on your taxes. Now that you’re a homeowner, you’ll learn to itemize the extra tax write-offs you’ll be claiming. To add some even better news to the mix, all of the donations you make to various charities, along with the taxes you pay to your state, will provide you with even more tax deduction opportunities. Below, we’ve listed 10 tax breaks that you should know about now that you own a home. They are:

Mortgage Interest

One of the most common tax breaks available to homeowners is the deduction of interest paid on a mortgage. Huge tax breaks come in the form of deducting mortgage interest for most people. Interest incurred on up to $1 million of debt obtained by acquiring and/or improving a home can be deducted.

Around January, you should receive a form 1098 from your lender that lists all interest paid on your mortgage the prior year. This information will be used on Schedule A as your deduction amount. It’s important to make sure that any and all interest that was paid since the day you purchased the home until the last day of that exact month is listed on a form 1098. The amount should be printed on the settlement sheet. In the event you find that it’s not listed, it can still be deducted. The US government will pay 25% of the interest on your behalf if you're a part of the 25% tax bracket.

Points

In order to obtain your mortgage when buying a house, lenders may require you to pay what is known as “points”. These “points” are typically a certain percent of the total loan. In order for the points to be considered deductible as interest, there are a few requirements that need to be met:

1. It's a secured loan by your home.

2. The points you are required to pay our common for your area.

3. The cash amount that was paid as a down payment was equal to the points.

Here’s an example:

For a $300,000 mortgage, you paid a total of 2 points (2%). If you contributed a minimum of $6000 (2% of $300,000 = $6000) towards the deal, the 2 points can be deducted.

*The points can be deducted in your taxes even in the event that the seller actually pays for them as a stipulation in the deal. Remember, this amount should be printed on your 1098 form.

Property Taxes

Local property taxes can be deducted each year also. If you use an escrow account to pay your taxes, this amount may be listed on a form sent to you by your lender. You might find the amount listed in your checkbook registry or in your personal records if you pay your municipality directly. It’s possible that you might’ve reimbursed the seller for prepaid real estate taxes the year you purchased your home from them.

In this case, the amount you reimbursed them for will also be shown on your settlement sheet. You want to make sure to add this amount to get a deduction for real estate taxes. Keep in mind, escrow account payments cannot be deducted as real estate taxes. The deposit you made/make will be applied to future tax payments. Only the amount paid during the actual year can be deducted as real estate tax.

Mortgage Insurance

If a buyer makes a down payment for under 20% of the homes total cost, they usually incur premiums on their mortgage insurance. This is an extra charge used to protect the lender in the event the buyer can’t repay their loan. Buyers can now deduct these mortgage insurance premiums on all mortgages that were issued during or after 2007.

On tax returns listed as “Married - Filing Separate”, the deduction decreases more and more as the adjusted gross income rises above $50,000. The same thing happens on all other tax returns where the adjusted gross income rises above $100,000.

*This doesn’t apply to anyone who’s paying for mortgage insurance prior to 2007.

Tax & Penalty-Free IRA Payouts

There is a penalty of 10% for individuals who make “pre-age” withdrawals from their IRAs. To encourage home buying, this penalty does not apply to first-time homeowners who make withdrawals from their IRAs to use as down payments. However, the penalty is still imposed on individuals who make withdrawals from their 401(k) plans.

You’re allowed to withdraw up to $10,000 from your IRA in order to purchase or build your first home for you and/or any of your loved ones at any age completely penalty free. The only downside is, the $10,000 limit is for your entire lifetime. It is not on an annual basis. Each spouse and a married couple can take advantage of the $10,000 limit for a total of $20,000 together. The only stipulation is that within 120 days after its withdrawal, the money must be used to buy or start construction on your first house.

Here’s a great tip that you don’t want to overlook:

To qualify as a “first-time buyer”, it doesn’t have to be your actual first time buying a home. As long as you haven’t owned a home within the span of 2 years, when you do purchase one, you are considered a first-time buyer all over again. Now even though that may sound great, it does still have its drawbacks. You should only use IRA money as an almost last resort because it’ll still be taxed in your tax bracket. What this means is that federal and state taxes could claim up to 40% or more of that $10,000 you needed for a down payment. That’s not good at all.

This makes a Roth IRA a better option when saving to purchase a first home. Any and all contributions made to a can be withdrawn not only penalty-free but tax-free as well anytime you like. The money can be used for any reason you deem necessary. After 5 years of an open Roth IRA account, up to $10,000 of additional earnings can be withdrawn as well penalty and tax-free for a home purchase.

Home Improvements

It’s a good idea to make sure you keep all records along with receipts for any and every improvement made to the home. No matter how minor or major they are, they will come in handy later.

These expenses aren’t deductible at the current moment but will be included in the purchasing price when tax season comes around to determine the value of your home. Even though almost all profits made from home sales are currently tax-free, the IRS can still potentially request part of your profits once the home is sold. Keeping track of your calls basis will help reduce any possible tax bills.

Great Energy Credits

If you make energy-saving home improvements, you may qualify for what is known as “energy tax credit”. The special tax credits can be worth up to $500. Says they actually reduce your tax bill dollar for dollar, these tax credits tend to be more valuable than a typical tax deduction.

Things such as energy-efficient skylights, central air conditioners, furnaces, exterior doors and windows, water heaters, boilers, and even insulation systems can allow you to qualify for energy tax credits up to 10% of their costs.

More expensive and efficient energy equipment such as solar powered generators can qualify you for even better energy tax credits worth up to 30% of their costs. Good news is there is no dollar limit on these credits.

Tax-Free Profit on Sale of Home

The current tax law provides homeowners with another benefit of actually owning a home. In the event that certain requirements are met, a huge amount of profit can potentially be rendered tax-free. For example:

· Up to $250,000 can be considered tax-free for a person who is single and resided in the house for at least 2 of the 5 previous years before its sale.

· Up to $500,000 can be considered tax-free profit for individuals who are married and found a joint return. If the home was owned by one or both of the spouses, considered as a primary residence, and lived in for at least 2 of the 5 previous years prior to its sale by both spouses they will qualify for the tax-free profit.

For the most part, profit isn’t usually taxed. In the event, you take a loss on the sale, you can’t write the loss off as a deduction.

This tax exclusion can be used multiple times. As long as you meet all of the requirements and haven’t used the exclusion in the last 2 years on a different property, you’re good to go. Profits exceeding $250,000/$500,000 is reported as a capital gain on Schedule D form.

There are exceptions to the rule where even if you don’t reside in the house for 2 out of the 5 years prior to its sale, you can still qualify for the tax-free profit. If unforeseen circumstances such as having triplets or quadruplets, health conditions, employment situations, divorce, etc. cause you to sell your home early, you may qualify for what’s known as a partial exclusion.

In simple terms, a partial exclusion means that as opposed to you getting the full $250,000/$500,000 exclude her from taxes, only a part of it will be considered tax-free. If you meet one of the exceptions and have resided in the house for at least one of the 5 previous years prior to its sale, 50% of the profit will be tax-free. Partial exclusion for tax-free profit would be $125,000 for the qualifying single individual and $250,000 for the qualifying married couple.

Home Equity Loans

After building up enough equity in your home, you can use it as collateral for borrowing additional money to use as you see fit. You can deduct the interest charged on a home equity debt as mortgage interest up to $100,000 regardless of how you plan to use the money.

A lot of Real Estate Investors will use this strategy as a way to build their portfolio. They use the equity in their own home to purchase another income producing property.

Adjusting Your Withholding At Work

You can collect all of the savings immediately by making adjustments to your federal income tax withholdings at your place of employment. This is highly recommended for individuals who will become itemizers for the 1st time due to the size of their mortgage interest created by their home. The proper form (W–4) can be obtained from your employer and/or by visiting www.irs.gov.

This article is for informational purposes only. It should not be considered tax advice. If you're seeking tax advice please consult with a tax advisor.

March 7, 2017

10 Improvements that Increase Home Value

By Rebecca Ward, February 22, 2017 , Published by 2-10 Home Warranty

Top Projects to Increase Your Home Equity

Every year, American homeowners invest countless dollars on targeted home improvements that increase property value. At the same time, others spend thousands of dollars on upgrades that offer very little return. Before you take out a loan or spend your savings on a home project, learn which improvements actually boost property value.

Function vs. Aesthetics

To add real value to your home, focus on projects that offer double impact. For example, don’t just target upgrades that make your home more beautiful. Instead, look for projects that make your home more functional and/or energy efficient. The following upgrades are great options for boosting your home’s resale value.

Door and windows: These can add some real value to a home; however, you will need to opt for energy-efficient varieties, which bring tax benefits and lower utility bills.
Attic bedroom: Any time you are able to turn a useless room into something functional, your home will become more valuable.
Steel security doors: This simple upgrade consistently offers the highest investment return of any home improvement project in the upscale or midrange category.
Kitchen: The heart of any home, the kitchen offers all sorts of upgrade possibilities. Even the smallest improvements and additions can add value to your property.
Decks: In addition to enhancing the beauty of your property, a deck will also extend your home’s living space.
Siding: Cost-effective and attractive, exterior siding improves a home’s beauty and durability.
Basement: Increase your overall living space by transforming your basement into a spare room or office. You can also turn it into an apartment to create actual revenue.
Bathroom: Like kitchens, bathrooms offer all sorts of opportunities for upgrades. New hardware, counter tops and low-flow toilets can add to your home’s resale value.
Backup power generator: Since they can restore power during an outage, even small, compact generators can bring instant value to a house.
Additions: These are certain to add value to a property. That said, they can also price your home above the local market.

Be Wary of Swimming Pools

While they may bring hours of backyard fun, swimming pools are usually bad investments when it comes to increasing home value. Typically costing between $20,000 and $50,000 to install, in-ground swimming pools bring very little return. Often called money-pits, these features can cost approximately $2,000 a year to maintain and hundreds more to heat and insure. Over time, wear, tear and cracking can bring up to $10,000 in resurfacing costs.

The National Association of Realtors’ National Center for Real Estate Research estimates that an in-ground pool can add about 8 percent to a property’s resale value. That said, this can vary wildly, depending on its location in the United States. When you factor in the installation and maintenance costs, this investment doesn’t make much sense. Above ground pools can be even worse, despite costing much less. In fact, the Center for Real Estate Research says these eyesores can actually result in a 2 percent lower asking price.

2/15/2017

Home Selling tactics when the most money is your goal.

So you think you’ve conjured up the perfect strategy to sell your home to cinch the most money. You’ll utilize a few of the commonly referred to home selling tactics that homeowners nationwide attempt to employ when it comes time to sell a home. Perfect…you think. Yet, is it really the best way to achieve your end goal of being able to beef up your bank account?

When selling a home it’s important to use a strategy that indeed works. Know the facts of selling a home.

So what are the tactics employed to corral the most money? Do they work? … let’s find out.

Price my home higher to leave room to negotiate

Did you know that a vast majority of homeowners believe that this is the way to sell a home? – the best tactic.

Let’s take a look at Rebecca and Brad who were ready to list their home for sale. They knew they wanted to sell their home for $825,000 so they decided that it’s best to pad the price a little bit to give them a little cushion. They’ll add another $30,000 onto $825,000 and list their home on the market, day one, at $855,000. They assumed all Buyers try to lowball a home Seller, so this way, they’ll be one step ahead of any prospective home Buyer they both think. They’re so astute!

How did this play out for Rebecca and Brad? Well, weeks passed and no bites on their home. They were forced to reduce their home’s price by week four, but they still wanted to keep some wiggle room. They dropped the price to $838,000 and by six weeks on the market, with no interested Buyers they reduced to the $825,000 – which should have been the initial list price. And they finally sold their home for $818,000.

How does this strategy fail?

You want the most money for your home, right? Pricing your home higher than its true value, means you can miss out on being seen by the well-qualified home Buyer within your home’s true price range. Buyers who are looking at homes priced at $825,000 won’t even see your home priced $30,000 above its true value, because they’re approved to buy a home for $825,000 and are viewing homes priced up to $825,000.

And, Buyers who are qualified to buy a home at $855,000 are going to be interested in homes listed for sale that are larger and have more desired upgrades than your home, priced to leave room for negotiation. Why would they pay $855,000 for your home when they could buy a home for $855,000 that has more square footage, and updated Kitchen, plus other updates?

The last resulting effect of this strategy is that after a home is on the market for so long, it can often taint your home’s image. Buyers wonder why your home was on the market for so long and will want to pay less for your home.

If a home is selling in a Seller’s market, a home priced right can also incite a selling frenzy when interested Buyers will often offer a home Seller more for their home so they don’t lose the home when inventory is low and Buyer’s are competing tooth and nail when homes come new to the market. Even when not a Seller’s market, a well priced home sells, compared to a home that is priced too high

Not divulging all that is known about my home

Oh, this is a good tactic, you think. Just hide that little defect as nobody needs to know about it. What can it hurt?

As a single dad, Duke needed every last penny to care for himself and his two young children. Times were tough as a dad caring for his children. He was taking a new career opportunity that was out of state and had to sell his home for the most money. The mold and termite issues he discovered last month will just be his little secret. Oh he felt bad in not revealing, but how much can it really hurt?

Unfortunately, putting this strategy into action with the first Buyer, Duke found out the hard way what the Buyer thought of the surprise find.

How does this strategy fail?

Is not divulging, a little white lie or a full fledge lie? Keeping defects from any prospective Buyer that can affect your home’s value will likely be revealed upon the Buyer’s home inspection anyway, which is then just ammunition for a price reduction request. Don’t give a Buyer the chance to further reduce the price that they’ll pay for your home. Believe me…Buyer’s love to request all kinds of credits and price reductions after a home inspection. And the reduction they request is seemingly always more than what it could have been had they had knowledge of the defect prior to presenting their offer. This way, you’ll know and they’ll know the list price reflects the known defects – allowing you to save more money than waiting for an inspection discovery that will end up costing you more.

Let’s say the home inspector didn’t catch the termites and the Buyer goes ahead and purchases your home only to later discover termites. They won’t be happy and if it shows that they’ve been there a long time, the Buyers may feel you hid it from them. Do you think they’d have any problem in contacting an Attorney to see their recourse? You don’t want to mess with that horror, I’m sure. This strategy will net you less money. Confess up, ahead of time.

Laws can vary by state, yet typically you need to disclose anything about your home that will affect its value.

Not a strategy that’s ever recommended. It’s always important to divulge all that you know about your have even if you think it means you’ll receive less for the sale of your home.

Pay the Real Estate Agent a lower commission

Brilliant you think! Real Estate Agents don’t really do too much do they? Why not get a Real Estate Agent who will sell a home for less money. Oh, yes….this will work good too.

Now that they’re in retirement, the kids have all moved out with families of their own while Robert and Patricia decide it’s time to downsize. Plus, living on a fixed income certainly makes them keenly aware of how they spend their money and they really need to sell their home; what better reason to offer the Real Estate Agent they hire a reduced commission. They’ll just hold firmly and insist. That’ll work. They’re sure the Real Estate Agent will understand and easily accept any reduction that they ask for regarding the commission to be paid.

Robert and Patricia discovered what happens when they hired one of the five Real Estate Agents interviewed who accepted their request to sell their home for a reduced commission.

How does this strategy fail?

Ever hear of you pay for what you get? How easy was it for Robert and Patricia to get the Real Estate Agent to reduce his/her commission? Easy? If so, how easy will it be for a Buyer to get your Real Estate Agent to get you to reduce the price of the home you’re selling? Can you see it now? Your Real Estate Agent will say, “Sure, Robert and Patricia really need to sell their home, so I’m sure they’ll accept less money”. What? Why is your Real Estate Agent revealing such private information about your need to sell your home? This is definitely a no-no when trying to corral the most money for a home.

How hard is this Real Estate Agent going to work for you when they know they’re working for a reduced pay. I learned at a very young age that you get what you pay for and the same holds true when you hire a Real Estate Agent on a budget. Don’t expect them to work their tail off for you. They will be pulling punches however for their recent customer, Enzo, who is paying a full commission. I imagine it might be a bit harder for you to get ahold of your Real Estate Agent too, as he/she is likely tied up with Enzo.

So if you don’t have your Real Estate Agent gung-ho about selling your home, do you really think they’re trying to get you top dollar? Makes sense, doesn’t it?

Another consideration is regarding other Real Estate Agents whom may be representing prospective Buyers when your own Real Estate Agent is not. For example, the Buyer’s Real Estate Agent finds 3 homes for the Buyer to see (3 the magical number it takes for Buyer’s to find and choose from, as home buying TV Shows swear by, right?! If only it were that easy.) If two of the homes are paying the typical full commission, and your home is nestled in amongst the others, yet your home has a glaring red sign that tells the Real Estate Agent that they’d make less money selling your home. Do they really want to show their Buyer your home? Oh but wait…that’s unethical you think for the Real Estate Agent to consider not showing the Buyer your home. Sure it is, but don’t think for a moment that this scenario doesn’t play out or what if the the Real Estate Agent is struggling financially and needs money desperately to care for their ill child? Desperation leads people to do desperate things. Would you really want to test this?

Sell my home by myself

I can do this! How hard can it be to sell a home? I’ll just put a sign in the front yard and the Buyers will come. Oh, and I’ll advertise on the FSBO (For Sale By Owner) site. There will be lines up the driveway, I’m sure! And, a BIG “And”…I won’t have to pay that gosh awful Real Estate commission at all. Love the idea of selling a home by myself! I can do this.

This is exactly what Ivy and Matthew had thought – both successful business people having careers of their own that affords them the luxury lifestyle. However, Matthew, feels that with his intellect and vast business experience that he’ll be able to take care of selling their home. They want to build their own custom dream home that they’ve always dreamed of and can now afford.

Sometimes it’s the smartest people that think they’re fully capable of selling a home themselves. Like mentioned above, plop a sign in the yard and they will come.

Overwhelmed with all the needed know-how to sell a home, Ivy and Matthew, discovered a whole new appreciation for Real Estate Agents.

How does this strategy fail?

Are you a Real Estate expert? No matter the homeowner’s intellect, selling homes requires certain traits, skill sets and experience to have success at selling homes. Homeowners who are not skilled as a Real Estate Agent, will not have the ability to sell their home for the most money for a number of reasons.

They don’t know the ins and outs of the local market, what Buyers look for in a home, how their home compares to recently sold homes, how would adjustments be made when comparing their home to a nearby sold neighbor’s home, would they be able to recoup 100% of the recent remodeled rooms, how do they price their home for sale setting aside their emotional attachment, how do you write a Real Estate contract and do they understand all the terms, what should they be looking for in a Buyer’s offer, can the Buyer afford their home and how would they know … I could go on and on.

Historically, homes sold by owners who are not skilled, licensed Real Estate Agents will have a hard time achieving the end goal of selling their home for the most money. It’s just a fact.

Waiting to time the market

There’s too much uncertainty with the Real Estate market right now with the elections front and center, not knowing what the new President’s policies will reveal and their effect. Let’s do a wait and see. Or maybe we’ll just wait until the upcoming season when home’s typically sell better. They do right…sell better in the season that’s fast approaching? Yes, that’s what we’ll do. We’ll wait.

Alex and Emily were going to be planning to start a family and understand that they’re going to need the additional space, plus they were hoping to find something closer to the beach as they really are beach lovers. You really can’t blame them as the south Florida beaches are gorgeous!

It was a tough pill to swallow, when Alex and Emily discovered what happens when they waited to sell a home; they were kicking themselves as home prices in their neighborhood had declined over the months that they were waiting to figure out when they’d sell. Would they recommend this to others? Absolutely not, Emily repeatedly told anyone who would listen.

How does this strategy fail?

Gambling can be risky. Who knows what tomorrow will bring. Trying to time the market could put you in a rough spot should something happen while you’re waiting for possibly better days, the bottom could drop out, so to speak. Will things get better? Will things become worse? Will you corral more money if you wait to time it just right? When is that next week, next month, next year…when?

Why wait to see what happens? It’s best to make the decision to sell when it’s right for you. When it’s in your plans and you know how it will affect you and your financial well being, then go forward with your plans, don’t wait just to see if something better happens. If everything seems to be lined up right, then go forward. Sell your home.

In a Nutshell

Now that we’ve carefully gone over these 5 tactics, I’m confident that you’re likely having a clearer understanding of what it takes to corral the most money for the home you want to sell.

Know that:

Pricing a home is critical
Revealing all you know about your home is a must
You pay for what you get
Do you really want to venture into the unknown of selling a home by yourself
And lastly, timing most anything in life never seems to work out.

With this in mind, be sure to carefully choose the Realtor to sell your home. You’ll be glad you did.

1/30/2017

How to Prepare Your Home for an Appraisal

By Jamie Birdwell-Branson on 11 Jul 2016

What you need to know about the process, from a veteran certified appraiser.

Getting your home appraised can often be a nerve-wracking experience. Your home and your handy work will be on display to be judged and valued so that you can move forward with selling your home.

But it doesn’t have to be a stressful experience. With the right tools, tricks and savvy, the appraisal process can not only go smoothly, it can also help you make a giant financial leap toward a future in a new home.

Do your homework

“Just like anything else — for example, if you’re going to select a doctor, dentist, or lawyer — you do your homework to find out the appraiser’s market knowledge of the area,” says Orange County (FL) Property Appraiser Rick Singh.

Ideally, your appraiser will be a local who knows the area well and who has been around long enough to see changes in the market. It’s also crucial to hire an appraiser who is state certified.

Check your maintenance

Whether it’s a loose shingle, chipped paint or dirty carpet, be sure to take care of it before the appraiser comes. Anything obvious that needs work could potentially eat away at your home’s value.

Also, keep a list of maintenance work that has been done on the home. Have a running list of what you have fixed and upgraded in your home as well as the amount of money you have spent.

Maximize curb appeal

When you’re getting your home appraised, remember that your house should look like the nicest one on the block.

“Landscaping plays so much into making a good first impression,” Singh says. “And remember that a first impression is a lasting impression. Make sure [your yard] is tidy and up-to-date. Trim or replace dead plants, and make sure it’s nice and green.”

Ensure appliances work

Do you have a dishwasher that only works when you give it a little kick, or a refrigerator that doesn’t keep your food as cool as it used to? These malfunctioning big-ticket items in a home could be a huge disadvantage to your home’s appraisal value.

Show pride in ownership

Although your home isn’t necessarily valued on the interior decor, it doesn’t hurt to show that it’s well cared for.

This doesn’t necessarily mean you have to trade in your T.J.Maxx finds for a pricey interior makeover, but make sure your home is neat, tidy, and exhibits that you generally have an interest in keeping your home looking its best.

Know your neighborhood

Before you get your home appraised, be sure you know what comparable nearby homes are going for, because that can be a huge predictor of your home’s value.

Also, inform your appraiser of any extraordinary circumstances, like if someone in your neighborhood had to sell their home quickly. Sellers may have to lower the price of their home to get out in a timely fashion in the event of death or job relocation in another state.

It’s extremely important that both you and your appraiser are knowledgeable about your neighborhood to get as accurate a value as possible.

Understand that cost does not equal value

When you make improvements to your home, you hope that everything you’re upgrading will increase your property value — but this isn’t always the case.

“Sellers may think, ‘I spent $60,000 on my home and $20,000 on the pool, so the home should be worth $80,000 more.’ However, the market may say it’s only worth $5,000 more. Find out what the economic investment is, because the rate of return is so important,” Singh says.

If you’re not satisfied, reach out

If you’re dissatisfied with the appraisal value, Singh advises contacting the appraiser about your concerns. Make sure you have data to back up your claims when you call to voice your opinion.

“You can always get a second appraisal,” Singh notes. “If you really think something was done incorrectly, voice your concern to the appraisal board as a last resort. All appraisers are licensed, and they don’t want to jeopardize their license. However, I often recommend going back to the appraiser and showing [him or her] the facts.”

1/26/2017

The Renovations That Will Pay Off the Most for Your Home in 2017

By Judy Dutton | Jan 11, 2017

New year, new home improvement projects? Whether you’re dying to update your kitchen, add a half-bath, or kick back on a brand-new deck, it pays off big-time knowing just what kind of return on investment your dream renovation might deliver. And you’re in luck, because Remodeling magazine has just released its annual Cost vs. Value report, which analyzes what you’ll pay for various upgrades—and how much you’ll recoup on that investment when you sell your home.

For this much-read report (which, by the way, is celebrating its 30th anniversary), researchers scrutinized 29 popular home improvements in 99 markets nationwide, polling contractors on how much they charge for these jobs as well as real estate agents on how much they think these features boost a home’s market price. From there, they divided each project’s upfront cost by the home’s resale value; the resulting percentage gives you a sense of how well each particular reno “investment” pays off.

There wasn’t a lot of change between the 2017 report and its 2016 predecessor, with most projects retaining their value.

But what is noteworthy is that the value of pricier projects rose significantly over last year, says Craig Webb, editor of Remodeling. He believes this indicates that the housing market is healthier and more bullish than ever.

“When the market is hot, Realtors® are more likely to give value to more expensive renovation projects, because they expect that the market will stay hot and people will pay the price,” he explains. “When the market is cool, Realtors tend to put less value on those big-dollar projects, because they have concerns about whether the house will get sold in any state.”

Still, the perennial chart toppers for ROI are the cheapest to pull off. This year (as last), the No.1 finisher was installing loose-fill fiberglass insulation in the attic. Not exactly sexy, but boy, is it cost-effective! In fact, this is the only project that regularly pays back more than you invest, with an average 107.7% ROI.

Next up is replacing a run-of-the-mill entry door with an attractive yet tough steel replacement at 90.7%, followed by manufactured stone veneer at 89.4%. Glamorous, no. Valuable, very.

Yet homeowners all need to come to grips with the fact that most renovations won’t pay them back in full. On average, in 2017, you can expect to get back 64% on every dollar you plow into home improvements (same as last year).

Plus, your returns will vary widely by project—and sorry to bring your expectations down another notch, but the payoff on big, alluring, “HGTV-ready” renovations isn’t so great. Adding a bathroom, for instance, will bring only a 53.9% ROI when you sell; a master suite, 64.8%.

Top renovation trends nationwide

Remodeling’s report also points to broader renovation trends that seem to be catching on nationwide. One definitely worth watching is energy efficiency—including simple jobs like adding insulation.

“We added [the category of] attic insulation only last year, and we were surprised at how well it did,” Webb says. Similar projects are installing better-insulated windows and doors.

One new category this year speaks to another hot trend: universal design, which ensures that a home’s features can be used just as easily by the elderly and disabled as anyone else. That means things like grip bars in showers, lever-style doorknobs, and wider, wheelchair-friendly doors. A universally designed bathroom, for instance, reaps a respectable 68.4% ROI.

“This is the first year we’ve included universal design, and it’s truly a rising category,” says Webb. “It’s based on a growing desire to age in place and a greater awareness of people with disabilities.”

Last but not least, the 2017 data suggest that “curb appeal” projects (such as new doors and exterior siding) generate higher returns than improvements done on a home’s interior. In other words, it really isn’t what’s on the inside that counts. If you’re trying to sell, pretty up the outside and it’ll pay off in spades.

How to decide if you need to renovate

So if you’re now sitting there scratching your head wondering which upgrades to make, take a step back and ask yourself this question first: How long do you plan to live in your home?

“If you see yourself keeping the house for at least five years, you shouldn’t worry about value at all,” Webb says. The reason: Housing trends and fads can change dramatically in this amount of time, so what’s hot today could be passé all too soon. So if you plan to stay put, renovate however will make you happy, period.

If, on the other hand, you’re planning to sell in less than five years, “then looking at the return makes sense,” says Webb. Just keep in mind that tastes vary widely by location, so it’s important to pinpoint what’s hot in your area (which is why Remodeling breaks down its data into nine U.S. regions). For instance, composite decks may be big in the Midwest, whereas the South is gaga over new garage doors. As Webb points out, “Every one of the 29 projects had at least one market where the payback was over 100%. So every project got love somewhere.

Judy Dutton is a senior editor at realtor.com covering news and advice about home buying, selling, decorating, and everything in between (judy.dutton@move.com).

1/20/2017

HUD suspends FHA mortgage insurance premium cut

Just moments after President Trump was sworn in on Friday, the Department of Housing and Urban Development

announced it is indefinitely suspending the reduction of FHA mortgage insurance premiums, undoing a cut

announced by the Obama administration only a few weeks ago. The suspension is effective immediately.

Here is the Housingwire article http://www.housingwire.com/articles/39003-hud-suspends-fha-mortgage-insurance-premium-cut

FHA opens door to homeownership for more borrowers

Federal agency says premium cut will save borrowers $500 a year on average

Published 1/9/2016

by Teke Wiggin InmanStaff Writer

Low- to moderate-income homebuyers will get a boost in 2017, with the Federal Housing Administration (FHA) set to cut mortgage insurance premiums later this month.

The move “will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA,” said National Association of Realtors President William E. Brown in a statement.

Annual premiums going down

The FHA will reduce the annual mortgage insurance premium most FHA borrowers pay by a quarter of a percentage point starting January 27. Annual premiums will drop to 0.6 percent from 0.85 percent, according to NAR.

“Every time we cut the cost of mortgage insurance it means more borrowers meet the debt-to-income ratio required to purchase a home,” said Brown, explaining why the move should lead more aspiring homebuyers to pull the trigger.

The rate cut means new borrowers who take out mortgages insured by the FHA will save an average of $500 this year, according to HUD.

The action “comes at the right time for consumers who are facing higher credit costs as mortgage interest rates are increasing,” according to Julián Castro, the U.S. Housing and Urban Development (HUD) Secretary, which oversees the FHA.

Top 10 Reasons To Hire A Buyers Agent When Buying A House

Should I Hire A Buyers Agent When Buying A Home?

Top 10 Reasons To Hire A Buyers Agent When Buying A House

Buying a house is a very exciting time and one that buyers should prepare for. Whether it’s preparing to get a mortgage or shopping for houses, making a mistake when buying a house can lead to many future headaches.

Most houses that are being sold will have an agent representing the seller, which is frequently referred to as a listing agent or sellers agent. The listing agents main responsibility is to make sure the sellers best interests are being protected.

So how does a buyer make sure their best interests are being protected? Simple, hire a buyers agent. There are several reasons why it’s extremely important that when you’re buying a house that you hire a buyers agent.

Since a buyers agent is looking out for a buyers best interest, they’ll help ensure the buyer gets the best deal possible. Below are the top 10 reasons to hire a buyers agent when buying a house. Understanding these 10 reasons should make it clear that you need representation when buying a house.

1.) It’s Free To Hire A Buyers Agent

One of the most obvious reasons to hire a buyers agent when buying a house is that it’s free. There are very few circumstances where it costs money to hire a buyers agent.

One circumstance that can lead to a buyer potentially having to pay for a buyers agent is when purchasing a for sale by owner (FSBO) who is not willing to pay a commission to a buyers agent. It’s pretty rare that FSBOs aren’t willing to pay a buyers agent commission, but it can happen. Due to this, it’s important that if you’re considering the purchase of a FSBO that you’re aware of this possibility.

Since 99.9% of the time it’s free to hire a buyers agent, it’s an obvious reason why you should hire a professional to represent your best interests in the purchase of a house. It’s vital, however, that you don’t just hire any buyers agent. There are certain things you should expect from a real estate agent when buying a house.

It’s highly suggested as you think about hiring a buyers agent that you keep in mind they’re protecting your best interests during one of the biggest transactions you’ll ever take part in.

2.) A Buyers Agent Knows What To Look For When Viewing Houses

Whether you’re buying your first house or tenth, chances are you don’t physically look at houses on a daily basis. A successful buyers agent is physically looking at dozens of houses each and every week. Another excellent reason to hire a buyers agent when buying a house is because they know what to look for when viewing houses.

There are certain red flags to look for when buying a house, many of which you may not be aware of. An experienced buyers agent who looks at houses day in and day out will be able to identify potential problems within a house relatively easily.

Recently while selling a house in Brighton NY, there were potential structural issues with the foundation of the house that were not clear to the buyer. As the buyers representative, it was my job to point out the potential issues and suggest that they have it further evaluated by a structural professional. The buyers, needless to say, were thrilled that this was pointed out and they were made aware of this potential defect.

This is only one example of what an experienced buyers agent can identify within a house when viewing them. Other common things a buyers agent can identify include;

Pest/Insect Issues
Potential Mold Issues
Roofing Issues
Leaks
Age(s) Of Major Components (Furnace, Air Conditioning Unit, Etc…)

3.) A Buyers Agent Understands The Local Real Estate Market

Hire A Buyers Agent When Buying A House For Their Expert Advice!

Each and every real estate market is different. Real estate markets can differ from town to town and even neighborhood to neighborhood. It’s extremely important when buying a house that you understand the local market.

Since there are many reasons why real estate markets are different, another great reason to hire a buyers agent when buying a house is because they understand the intricacies of the local market. A buyers agent who understands the local real estate market can go a long way when the time comes to make an offer on a house.

It’s highly recommended as you hire a buyers agent that you make sure they have experience selling houses in the area. Hiring a real estate agent who doesn’t have an understanding of the local real estate market can cost you thousands of dollars should you make an offer that isn’t inline with local house values.

4.) A Buyers Agent Can Help Evaluate & Secure Financing

The world of real estate financing can be very confusing and complex. One thing to expect when you hire a buyers agent when buying a house is help with evaluating and securing the best financing for your circumstances.

A buyers agent can help you navigate through the various financing options and help you decide which type of mortgage is best. In addition to helping you understand the various options, a buyers agent will be able to help you secure financing through a mortgage broker.

It’s important to keep in mind as you’re securing financing that you strongly consider using a local mortgage company. Local mortgage companies understand what the process is for real estate transactions and also any local rules or regulations.

5.) A Buyers Agent Will Coordinate Showings

One of the most overlooked tasks that a buyers agent performs on a daily basis is the coordination of showings for buyers. Coordinating showings can be tricky and something that gets confusing.

A great reason to hire a buyers agent when buying a house is they’ll be responsible for coordinating viewings of potential properties. Depending on a buyers house search, it’s possible that a buyers agent is coordinating a large number of showings in several different towns at a variety of different times.

If you’re buying a house and have interest in a dozen properties, a buyers agent is responsible for making sure that you have the opportunity to view potential properties if they’re available. This may mean making a dozen phone calls, figuring out the best route for the showings, and making sure they provide you all of the pertinent information about the properties.

6.) A Buyers Agent Will Know How To Write Real Estate Contracts

Even if you’re buying your tenth house, it’s unlikely you’re familiar enough to navigate a real estate contract. When you hire a buyers agent when buying a house, you’re hiring a professional who knows the ins and outs of real estate contracts.

There are many parts to a real estate contract and having an experienced professional to guide you through the contract is vital. There are several real estate contingencies to consider including in a purchase offer, several deadlines that need to be set in a contract, and other important parts to within a real estate contract.

In addition to the important aspects within a real estate contract, an experienced buyers agent will know how to write a contract that presents you in the best possible way in the eyes of a seller. A real estate contract that is poorly written or a contract with missing or blank areas is a common reason why a purchase offer is rejected when buying a house.

7.) A Buyers Agent Will Have Access To Experienced Professionals Needed During A Transaction

Buyer Agents Will Have Access To Experienced Professionals

During the course of a real estate transaction there are several professionals that are needed. When you’re buying a house you’ll potentially need a mortgage originator, a home inspector, a real estate attorney, and a handful of other professionals.

When you hire a buyers agent when buying a house, you can expect they’ll have a pocketbook full of recommended professionals. An experienced buyers agent will have several mortgage companies, inspection companies, law firms, and other services that they can recommend to you.

It’s likely that the professionals a buyers agent recommends provide quality service and would also be looking out for your best interest during the purchase of a house. One of the best questions to ask when interviewing a buyers agent is whether they have a list of recommended service providers. An experienced buyers agent should be able to provide several recommendations for each respective professional category.

8.) A Buyers Agent Will Be Your Negotiator

One of the most frequently asked questions about buying a house relates to the amount that should be offered for a home. A huge benefit that you’ll receive when you hire a buyers agent is that they’re negotiating on your behalf.

Depending on the house you’re attempting to purchase and the current state of your local real estate market, having a top notch real estate negotiator can be critical.

For example, if you’re attempting to purchase an overpriced house, your buyers agent needs to know what it takes to purchase an overpriced house. This may include, but isn’t limited to completing a detailed comparative market analysis proving the house is overpriced or structuring the contract dates to appeal to the seller.

If you don’t hire a buyers agent, you’ll be required to do the negotiations by yourself. In the example of buying an overpriced house, there is a good chance that the majority of buyers don’t know how to make an offer on an overpriced house.

9.) A Buyers Agent Will Keep The Transaction On Schedule

Delays in real estate transactions happen, but this doesn’t mean that it’s acceptable. A delay in a real estate transaction is frustrating to all parties involved, especially for a buyer and a seller.

When you hire a buyers agent, you’re greatly improving the chances that your real estate transaction will stay on schedule. There are dozens of reasons why real estate closings are delayed, many of which can be avoided by hiring a top buyers agent.

A buyers agent is responsible for making sure that contract dates, such as a written mortgage commitment, are being met. Other culprits of closing delays include delays in appraisals being ordered or delays in an instrument survey being completed. An organized buyers agent will have a system in place that ensures these delays are avoided.

10.) A Buyers Agent Can Be Your Emotional Filter

Buying a house is very emotional and can potentially get the best of a buyer. Another great reason to hire a buyers agent when buying a house is they can act as an emotional filter.

Since a buyers agent isn’t emotionally attached to a specific property you may have interest in, they can help keep you from making an emotional and rash decision. Ultimately a buyer is the final decision maker, but a buyers agent can help a buyer weigh the PROs and CONs to potential properties while taking the emotion out of the decision.

Final Thoughts

There are many reasons to hire a buyers agent when buying a house and the top 10 reasons discussed above should make it clear, hire a buyers agent when buying a house!

There are very few, actually, no good reasons to not hire a buyers agent. When you hire a buyers agent, you’re hiring a professional to look out for your best interests during one of the largest purchases you’ll ever make.

Other Top Home Buying Resources

Reasons Why Home Buyers Should Have Representation via Anita Clark
First Time Home Buyer Guide: The Home Buying Process Explained via Realty Times by Luke Skar
How To Avoid First Time Home Buyers Remorse via Xavier De Buck
How To Get The Best Mortgage Rates When Buying A House via Storify

Why Every Home Buyer Needs A Mortgage Pre-Qualification

Posted by Paul Sian on Thursday, December 29, 2016

Modified by Morgan McDonald on Wednesday, January 4, 2017

Just as you would not go shopping for groceries without cash in your purse/wallet or without knowing you have available credit on your credit card you should also not got shopping for a home without knowing if you have been pre-qualified or not for a mortgage. Just as no one wants to go to the store and find out their credit card has been declined or that they are short on cash to purchase their items, viewing homes to purchase without knowing if you can afford it can also lead to great disappointment. Thinking that you can get a pre-qualification at any time with enough time to make an offer and you could end up losing out on a house you really like and/or realizing you may have never been able to get pre-qualified for an amount to buy a particular house in the first place. Cash buyers keep note, while you may not need a pre-qualification since you have sufficient cash to purchase a home you still may be required to show that the cash is readily available.

What A Mortgage Pre-Qualification Can Tell You

Even if you have a great credit score that does not mean you should wait until the last minute to get a mortgage pre-qual. The mortgage pre-qual is the first thing you should get before you even look at the first home. A big issue you can run into when viewing homes is that you find a home that you really like, but you find out you can not qualify for an amount that is enough for the home you like. A mortgage pre-qual will let you know how much home you can afford and save you some stress down the line.

Pre-qualification is not just about your credit score but also factors in aspects like how much income you make in a year, what outstanding debts you may already have, your payment timeliness and more. So a great credit score alone does not guarantee that you will be able to buy the home that you think you can afford. By getting a pre-qualification ahead of time you know the actual amount of monthly payment you can borrow (which should include the insurance and property tax payments) along with the total loan dollar amount of the loan.

One of the aspects that many home buyers forget to consider is that in addition to a mortgage payment they also have to pay insurance and property taxes. Often times the total mortgage payment includes interest and principal payments as well as a portion of insurance and property tax amounts. So while you may be able to afford just the interest and principal the property tax and insurance payments could push you over your budget and you will not really know those amounts until you get a pre-qualification that factors in taxes and insurance.

How A Pre-qualification Gives You A Competitive Advantage Over Other Buyers

Depending on how well organized you are with all the financial documents needed from the mortgage lender you may be able to get a pre-qualification letter in 24 – 48 hour time frame and possibly less. If your documents are not organized then expect that time frame to take much longer. Meanwhile a home that you like could get an offer accepted at any time and as a result you miss out. If you submit an offer without including a mortgage pre-qualification the chances of your offer getting accepted when another offer has a pre-qualification letter is not good. Home sellers will want the certainty of knowing a buyer has been pre-qualified and will accept an offer that includes a pre-qualification letter over one that does not have one.

Most offers when submitted have a short expiration time attached to them. Home buyers are encouraged not to offer too short nor too long of a time frame for the seller to accept their offer. Even with the longer side of giving 24 hours for a seller to accept your offer still leaves you with hardly any time to see if a mortgage lender can pull a pre-qualification together. By having your pre-qualification ready before even you look at homes you put yourself in a better competitive position compared to those buyers who think they can do it quickly at the last minute.

Use A Mortgage Pre-Qualification To Guide You As To Where You Want To Be

So you did the smart thing and got your mortgage pre-qualification before shopping for a home but are disappointed since you were hoping to buy more home than the pre-qualification allows you. This in fact is a benefit since now you know what you are approved for you can discuss with your mortgage lender or a credit counselor what you can do to improve your financial situation. By holding off on buying a home until you have improved your financial situation and credit you should be able to afford more home later on.

Doing things like paying off credit cards, paying off car loans, getting rid of low limit department store charge cards, paying your bills on time, not opening new credit accounts all help to boost your financial situation and credit score. Additionally if you know you will be getting a raise or will be getting a new job with higher pay then that added income will also help you get a higher mortgage pre-qualification later on.

Be careful with the new job though as with certain jobs the lack of salary history can be more of a hindrance than help you. If you are in the same career path and just moving up in logical progression that can be positive. Always discuss with your mortgage lender how a job change will impact your mortgage pre-qualification. While a mortgage pre-qualification should not stop you from moving into a higher paying and better position you may have to hold off on buying a home to better establish your salary history. Once you have improved your financial and/or job situation then go back to the mortgage lender and ask them for an updated pre-qualification to see where you currently stand.

A word of caution, don’t try and overstretch to get a home at the highest price you can just because you were approved for that amount. Always factor in your monthly payment and your current lifestyle and living needs. If you end up getting deep into debt and cannot keep up with your house payments or house maintenance you will end up in a house poor situation which can cause much larger financial damage to you in a short amount of time.

Bottom Line

A mortgage pre-qualification gives you a competitive advantage against other home buyers when it is time to place an offer on a home you like. A mortgage pre-qualification also gives you a good guideline of how much home you can afford and it can be used to help you determine if you need to improve your finances and credit score in order to be able raise the pre-qualification amount. Since a pre-qualification can take some time by getting one before you begin your home shopping you can make sure you are ready to buy when you find the right house.

Rent or Buy: Either Way You’re Paying a Mortgage

Tuesday December 20th, 2016

There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage - either yours or your landlord’s.

As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.

Are you ready to put your housing cost to work for you?

Christina Boyle, Senior Vice President and Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

Bottom Line

Why not give yourself the gift of homeownership? Lock in your housing costs for the next 30 years and guarantee you are the one building wealth.