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Did You Rent Your Home vs Selling It or Losing It?

by Pat Argo

   

Temporary Rental2.pngSome homeowners, who were not able to sell during the recession, chose to rent their homes instead. In some cases, they didn't need to sell their home at the depressed prices and opted to rent it until the market recovered.

It's a valid strategy but there are time restrictions that could have serious tax implications for some homeowners.

The section 121 exclusion for gain in a principal residence requires that the home is owned and used as a main home for at least two years during the five year period ending on the date of the sale. This allows a homeowner to rent their home for up to three years and still have some part of the exclusion available.

The sale of a home with a $200,000 gain that qualifies as a principal residence would result in no tax being paid by the owner. Comparably, a rental property with the same gain could have a $30,000 or higher tax liability depending on the length of ownership and tax brackets of the investor.

The housing market has dramatically improved in the last year. If you have a gain in a home that has been your principal residence and it has been rented less than three years, you might want to consider selling it while you qualify for the exclusion.

If you are considering a sale on your principal residence that has been rented, consult with your tax professional for advice on your specific situation. For additional information, see IRS Publication 523.

Waiting To Buy ?

by Pat Argo

Waiting periods.pngIt's estimated that 10% of the homes sold in 2013 will be to buyers who lost a home in the past five years. Approximately 500,000 buyers who may have thought they wouldn't own a home anytime in the near future will be homeowners again.

It's estimated that several million of these previous homeowners will purchase again in the next eight years. This kind of activity will contribute significantly to the housing recovery.

Some people thought that the housing crisis would cause a shift in values placed on owning a home but the boomerang buyers definitely don't support that theory. Having a home of your own, where you can raise your family, share with your friends and feel safe and secure is still part of the American Dream.

The rising rents, increasing prices and low, low mortgage rates are also influencing buyers into the market. In many cases, it is cheaper to own that to rent.

All new buyers, including those who have experienced foreclosures or bankruptcies, must have good credit history and the ability to repay the loan. It just may not take as long to reestablish the credit as some would-be buyers might have thought.

Read more about Bidding Wars This Spring, Spring's Wild Card and Boomerang Buyers.

Are You Still Doing the RENT Rat Race?

by Pat Argo

How much evidence is needed to make a decision to get out of the rent race and become a homeowner?

Compare your rent with a mortgage payment on a similar size property. If you want a larger home than your current one, use the rent that property would require instead of what you're currently paying. If it's considerably cheaper, you may not need any further encouragement.

By the time you consider the principal reduction, appreciation and tax savings, your monthly cost of housing could be much less than the rent you're paying.

The principal reduction included in each payment is like a forced savings account that increases as your mortgage balance decreases. Your equity in the property will also grow due to appreciation.   The equity is part of your net worth and an investment in your family's future.

The income tax savings can be an additional financial consideration if the combined interest and property taxes exceed the allowable standard deduction.

Trends are showing that both tenants and homeowners are staying in their homes longer. It's been said that whether you rent or own, you're paying for the home. Do you really want to buy the home for your landlord? Check out your numbers on a Rent vs. Own.

Prices are still right for first homes and rates are sneaking up. Let's talk this week about what it would take for you to buy your own home!

FHA is Changing! Here is What YOU need to Know!

by Pat Argo

The 3.5% down payment on FHA loans could be more expensive for buyers than expected. Beginning April 1, 2013, the mortgage insurance premium will go up by .1% to 1.35% which may not even be noticeable to most would-be homeowners.

The staggering increase will occur on 6/3/2013 when FHA's policy on the duration of the required mortgage insurance will be increased for the life of the mortgage. It basically doubles the amount of total MIP if the loan is paid to term.

 Example: Purchase Price $175,000 
with 3.5% down payment at 4% mortgage rate on 30 year term

 

Current

After 6/3/13

MIP duration

78% of original loan

Life of mortgage

Cumulative premium

$20,838.24

$42,447.93

Currently, the MIP is required for approximately 9 years 9 months with normal amortization. The new program would require the MIP for the life of the loan. In this example, the initial monthly MIP is $196.88 which decreases based on amortization.

There are buyers that qualify on income and credit who may not have the necessary additional down payment required for 80% and 90% conventional loans. The 3.5% FHA program has provided a great vehicle to get into a home with a minimum amount of cash.

For homeowners that expect to stay in their home for ten years or less, the new changes might not have much financial impact. Homeowners who expect to be in their home long term can refinance with a conventional loan without mortgage insurance once the equity has increased due to amortization and appreciation.

For buyers to avoid these increases, they will need to act now to get the FHA commitment issued prior to these change dates.

Time Flys! Grab Your Best Buy Today!

by Pat Argo

 

As the market shifts from a buyer's market, it's good to know how to improve your chances to have the seller accept your offer.

Once you decide on a home, don't waste time; write an offer and submit it as soon as possible. Competing with another buyer happens more frequently than you'd expect. Multiple offers are a seller's advantage but here are some tips to level the playing field:

  • Realistic offer - don't give the impression you're trying to "steal" the property. Submit comparable sales that justify your offer.
  • Pre-approval letter - this satisfies seller's biggest concern that an unqualified buyer will unnecessarily take the home off the market and the seller will lose other opportunities.
  • More earnest money - it shows you're serious and makes the seller feel like the contract will actually close.
  • Minimize contingencies - from a seller's standpoint, each contingency is one more reason why the sale won't go through. They feel the home is "off the market" and they're in limbo.
  • Shorten inspection period - as your agent, I can help you set a reasonable date but let the seller know you're willing to close prior to that if possible.
  • Write a personal letter to the seller telling them why you want their home - this can be the emotional connection to the seller that makes the difference in you getting the home.
A seller wants to feel confident that the offer they accept will actually close so they can plan for their next move. Following tips like these can definitely affect negotiations and help put together an offer that is more likely to be accepted.

Never Too Early To Think About Retirement

by Pat Argo

Maybe you're not ready to move into it but that doesn't mean that you shouldn't take advantage of the present opportunities to acquire the home you want to live in during retirement. The combination of the low interest rates, reduced prices and lower competition may never be this good again in our lifetimes.

The rental market is strong and a tenant could pay for your retirement home. The cash flows are attractive and the yield is bound to be stronger than what you're currently earning. Even if you don't retire to this home, it could be a placeholder to control the costs of the home you do move into.

One thought would be to finance it with a 15 year loan that will have a lower rate than that of a 30 year loan and it will obviously amortize in half the time. Even if you don't have the home paid for by the time you retire, your equity will be larger.

Ideally, if you sell your current home when your move into this retirement home, you may be able to take up to $500,000 of tax-free gain for a married couple. That profit could be used to fund your retirement.

With home prices and mortgage rates certain to rise, this may be one of the best decisions you can make. We want to be your personal source of real estate information and we're committed to helping from purchase to sale and all the years in between. Let me know if you would like to receive free email Home Alerts for your Retirement or any other homes!  Or I am always just a phone call away 321-537-4721.

Competing with Cash Buyers

by Pat Argo

It's not fair! 29% of all sales made in June and July were cash. How does a buyer who needs a mortgage compete with a cash buyer?

You've been looking for a home for months after thinking about it for years. You've found the home you want and meets your family's needs. You write a contract... but before it's even presented to the seller, another offer, maybe even two comes in. With all the homes on the market, you'd think you wouldn't have to deal with multiple offers but you'd be surprised how many times it does happen.

There are some proven strategies that can minimize the advantage of an all-cash buyer.

  1. Get pre-approved and submit the letter from the lender with the offer
  2. If there are credit problems, get busy on resolving them NOW!
  3. Move fast to minimize competing with other offers
  4. Submit larger than normal earnest money to show your sincerity
  5. Be flexible about closing and possession
  6. Avoid unnecessary contingencies in the contract
  7. Write a letter emotionalizing why you want the home

FYI: A Bank Owned property will not be as flexible and they do require pre-approval and/or proof of funds before even seeing your contract!

 

How Can I Know If My Home Is Priced Right?

by Pat Argo, CRS

     The Real Estate Market is still changing daily. With times like these, it is frequently hard for a Seller to know how to price a home for a sale where you can get the most money. Is price the only thing? How much will it cost to make my house saleable and financable?

     Maybe your house has already been on the market with one or more agents... an "Expired" or "Failed" Listing to those in the field! I would like to share this quick and very informative video from Jay Papasan, one of the Keller Williams officers, every seller should review about pricing in this market. Do you want it Listed... or Sold? Jay authored and co-authored a number of great books in the field, including The Millionaire Real Estate Investor. 

     Enjoy!  Call (321-537-4721), email or text me...  if you have questions. Or just want to chat! Feel free to share it as well as my information anytime.

http://www.youtube.com/watch?v=TUJeJYHj-cE

Still Heating Up in Brevard

by Pat Argo, CRS

     Well... Summer is in it's last few weeks. It does not seem to be cooling down temperature wise nor housing wise. I typically take some time off in July since my youngest daughter Stacey, my Daddy (dec.) & I all celebrate our birthdays with special fun of some sort. This has been the hottest & driest summer I recall. Winter was a bit out of kilter as well.

     The Housing Inventory is rising but most prices are not. However I have enjoyed several sales over the past 3 months as well as rentals placed. One was a cash buyer transferred in from Alabama who called me, asking for my help... since 3 other agents just coudn't find time to work with him! I found him a joy to work with and we found him a great Titusvillage home in wonderful condition for only $150,000.!! His sons are excited about starting school here soon!

     Rates are down! Financing is the most affordable I've seen since I started in 1973!  4.5% +/- In fact, I can remember one client jumping at a house some years ago simply because it was an area he liked, and the owner would finance it at 5%, back when rates were over 8%. Unfortunately for many lower end buyers, the foreclosed or short sale houses available just do not qualify for the FHA home loans without repairs and/or financial help. News from Realtor.com announces that rural financing is back this week! Thousands of Rural Home Buyers Aided by Passage of Housing Funding... Realtor.org This may help out for some of these houses. I do have a nice pre-approved couple looking for a home with 1+ acre, zoned for horses for $90,000 or less. Please let me know if you hear about one that might work!

     Enough for today and I promise to be more regular with my blogging. I do participate in several... plus I still need time to sell homes and enjoy life! Make it an awesome month! Laughing

   

 

Making Your Home Affordable

by Pat Argo

     Earlier this year I attended the National SFR Course which deals with helping people who are in distress with their properties/home and/or loans. I have completed all the course work requirements for this designation. It was a great course that was extremely informative! This course was sponsored by the Florida Chapter of CRS (Certified Residential Specialist) a pprofessional group of Realtors devoted to education and professionalism, of which I am a former Florida State President as well as current District 2 Vice-President. They did a fantastic job of explaining some of the important facts.  

       I wanted to include a few of the links and sites, including my own, that we learned about an with anyone you know that may be getting into or currently are in distress with their home or loansto encourage them to not just ignore the situation. It will not just go away! It does not cost anything to explore their options. The materials there as well are really dynamic and the easy to understand videos are extremely helpful.

     Many times people do reach out for help but run into schemes that just consume their money and waste their time. Don't let your family and friends become a victim. 

Visit the Making Home Affordable Website at http://www.makinghomeaffordable.gov/.

It is a wealth of info for anyone you know that may be eligible for loan modification programs and Alternative programs.

 And how about a link to some of their great videos that can walk anyone that is in distress through the important steps and answer most questions!

 There are 9 YouTube videos that are extremely helpful.

My favorites are Your Graceful Exit”, (Watch this one FIRST!),  

 “Your TO DO List for Permanent Loan Modification.”

 And “Avoid Foreclosure: Know your Options”

After you see one of them, it is easy to just click on the drop down link at the top to review any or all 9 of these links sponsored by the Making Home Affordable site including one in Spanish if needed.

http://www.youtube.com/watch?v=XbPaLHFHL7A

 http://www.youtube.com/watch?v=IQ0aCq6kaYg

 http://www.youtube.com/watch?v=-pqBtoh0Q6A&feature=channel

     I hope you find this information helpful. Feel free to tell anyone you would like to share it with! And I can offered my years of experience in helping anyone sell whether it is a normal sale, short sale or foreclosure, or even finding a good tenant while they are working in another area, or for investments they own or buy.

     I've been able to help 2 families purchase their first homes in the last 2 months for a bit under $100,000. One was told he could not buy over $50,000 and them waited many, many months for an agent to get back to him about a short sale offer he'd placed, before he called me from one of my ads.  (He still hasn't heard from that agent!)

     Where there is a will, there may be a way. It takes a bit of work and commitment on the part of all that are involved. But I rarely take "No" for an answer, until I have tried and tried again. My years of experience in all kinds of markets has taught me many times that we just may not have seen the right path! Many only see the easy, well marked trail to a successful purchase or sale. Please keep me in mind when you hear of someone with real estste problems or concerns. My best clients are sent to me by those who have used me before and their friends and families. 

Displaying blog entries 1-10 of 12

Contact Information

Photo of Pat Argo, Broker Assoc, CRS, GRI, RECS, SFR, S Real Estate
Pat Argo, Broker Assoc, CRS, GRI, RECS, SFR, S
Keller Williams Realty of Brevard
6905 N Wickham Road #405
Melbourne FL 32940
Cell/Text: 321-537-4721
Office: 321-259-1170
Fax: 321-435-3124