The Jessica Miller Team - Blog

Seven Steps Every New Homeowner Should Take

Keller williams real estate E-mail User — Sun, 30 May 2010 21:54:18 GMT

7 Smart Steps Every New Homeowner Should Take

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By Amy Fontinelle

Investopedia.com

Turning the key in a lock that no landlord has access to, reading in a hammock in your own backyard and painting your dining room bright red - what could be more exciting than making the leap from renter to first-time homeowner? Getting swept up in all the excitement is a wonderful feeling, but some first-time homeowners lose their heads and make mistakes that can jeopardize everything they've worked so hard to earn.

Don't be one of those people: take a few moments to ponder these seven practical concerns that will help ensure that your first home becomes the place of luxury and financial freedom you've anticipated.

1. Don't Overspend on Furniture and Remodeling
You've just handed over a large portion of your life savings for a down payment, closing costs and moving expenses. Money is tight for most first-time homeowners - not only are their savings depleted, their monthly expenses are often higher as well, thanks to the many new expenses that come with home ownership, such as water and trash bills, and extra insurance.

Everyone wants to personalize a new home and upgrade what may have been temporary apartment furniture for something nicer, but don't go on a massive spending spree to improve everything all at once. Just as important as getting your first home is staying in it, and as nice as solid maple kitchen cabinets might be, they aren't worth jeopardizing your new status as a homeowner over. Give yourself time to adjust to the expenses of home ownership and rebuild your savings - the cabinets will still be waiting for you when you can more comfortably afford them.

2. Don't Ignore Important Maintenance Items
One of the new expenses that accompanies home ownership is making repairs. There is no landlord to call if your roof is leaking or your toilet is clogged (on the plus side, there is also no rent increase notice taped to your door on a random Friday afternoon when you were looking forward to a nice weekend). While you should exercise restraint in purchasing the nonessentials, you shouldn't neglect any problem that puts you in danger or could get worse over time, turning relatively small problem into a much larger and costlier one.

3. Hire Qualified Contractors
Don't try to save money by making improvements and repairs yourself that you aren't qualified to make. This may seem to contradict the first point slightly, but it really doesn't. Your home is both the place where you live and an investment, and it deserves the same level of care and attention you would give to anything you value highly. There's nothing wrong with painting the walls yourself, but if there's no wiring for an electric opener in your garage, don't cut a hole in the wall and start playing with copper. Hiring professionals to do work you don't know how to do is the best way to keep your home in top condition and avoid injuring - or even killing - yourself.

4. Get Help With Your Tax Return
Even if you hate the thought of spending money on an accountant when you normally do your returns yourself, and even if you're already feeling broke from buying that house, hiring an accountant to make sure you complete your return correctly and maximize your refund is a good idea. Home ownership significantly changes most people's tax situations and the deductions they are eligible to claim. Just getting your taxes professionally done for one year can give you a template to use in future years if you want to continue doing your taxes yourself. And remember, tax preparation expenses are tax deductible, so whatever your marginal tax rate is, think of that as a discount on the cost of the service.

5. Keep Receipts for Home Improvements
When you sell your home, you can use these costs to increase your home's basis, which can help you to maximize your tax-free earnings on the sale of your home. In 2008, you could have earned up to $250,000 tax free from the sale of your home if it was your primary residence and you had lived there for at least two of five years before you sold it. This assumes that you owned the home alone - if you owned it jointly with a spouse, you could each have gotten the $250,000 exemption.

Let's say you purchased your home for $150,000 and were able to sell it for $450,000. You've also made $20,000 in home improvements over the years you've lived in the home. If you haven't saved your receipts, your basis in the home, or the amount you originally paid for your investment, is $150,000. You take your $250,000 exemption on the proceeds and are left with $50,000 of taxable income on the sale of your home. However, if you saved all $20,000 of your receipts, your basis would be $170,000 and you would only pay taxes on $30,000. That's a huge savings: in this case, it would be $5,000 if your marginal tax rate is 25%.

6. Don't Confuse a Repair With an Improvement
Unfortunately, not all home expenses are treated equally for the purpose of determining your home's basis. The IRS considers repairs to be part and parcel of home ownership -something that preserves the home's original value, but does not enhance its value. This may not always seem true. For example, if you bought a foreclosure and had to fix a lot of broken stuff, the home is obviously worth more after you fix those items, but the IRS doesn't care - you did get a discount on the purchase price because of those unmade repairs, after all. It's only improvements, like replacing the roof or adding central air conditioning, which will help decrease your future tax bill when you sell your home.

For gray areas (like remodeling your bathroom because you had to bust open the wall to repair some old, failed plumbing), consult IRS Publication 530 and/or your accountant. And on a non-tax-related note, don't trick yourself into thinking it's OK to spend money on something because it's a necessary "repair" when in truth it's really a fun improvement. That isn't good for your finances.

7. Get Properly Insured
Your mortgage lender requires you not only to purchase homeowners insurance, but also to purchase enough to fully replace the property in the event of a total loss. But that's not the only insurance coverage you need as a homeowner. If you share your home with anyone who relies on your income to help pay the mortgage, whether it's a girlfriend or a child, you'll need life insurance with that person named as a beneficiary so he or she won't lose the house if you die unexpectedly. Similarly, you'll want to have disability-income insurance to replace your income if you become so disabled that you can't work.

Also, once you own a home, you have more to lose in the event of a lawsuit, so you'll want to make sure you have excellent car insurance coverage. If you are self-employed as a sole proprietor, you may want to consider forming a corporation for greater legal protection of your assets. You may also want to purchase an umbrella policy that picks up where your other policies leave off. If you are found at fault in a car accident with a judgment of $1 million against you and your car insurance only covers the first $250,000, an umbrella policy can pick up the rest of the slack. These policies are usually issued in the millions.

With the great freedom of owning your own home comes great responsibilities. You must manage your finances well enough to keep the home and maintain the home's condition well enough to protect your investment and keep your family safe. Don't let the excitement of being a new homeowner lead you to bad decisions or oversights that jeopardize your financial or physical security.

5 Things You Need To Know for Buying a Home

Keller williams real estate E-mail User — Fri, 28 May 2010 22:32:51 GMT

Tips for Buying Your First Home

5 Essential Things You Need for Home Buying

By Elizabeth Weintraub, About.com Guide

Sometimes home buyers make buying their first home a lot more difficult than it needs toI have written a ton of articles about the home buying path and gone into excrutiating detail about every single step involved in buying a home. It dawned on me that buyers really need a basic overview. Especially for first-time home buyers who aren't familiar with the process.

Bear in mind that the steps in the process can vary from state to state, depending on local custom. However, when you strip away all of the crap, which may or may not happen to you, there are really only 5 basic steps to buying a home. You can do these 5 steps in any order you want.

Hire an Agent

Because I am an agent, I believe in hiring a buyer's agent first. But you don't have to if you prefer to go to open houses and look through a mumbo jumbo of homes online. Mostly, an agent will save you time.

An agent can send you listings directly from MLS that fit your parameters, and you won't waste time looking at active short contingent listings that are under contract.
Agents often know of new listings coming up that are not yet on the market.
You can waste the agent's gas and not your own when you tour homes.
Some agents will preview homes for you.
An agent can generally spot overpriced listings and advise you accordingly.

Find a Home to Buy

Buying a home can be an overwhelming process and emotionally draining. Finding the right home is not always an easy task. I advise buyers to look at a maximum of 7 homes at a time because any more than that will make a buyer's head spin.

Most buyers conduct a lot of research online before ever stepping foot in a home. Buyers spend an average of 6 to 8 weeks, according to the National Association of REALTORS, trying to figure out where they want to live. But once the neighborhood is selected, most buyers end up buying a home after 2 or 3 home tours.

Get a Loan

It's not always necessary to have a mortgage broker or bank in your back pocket before buying a home, but it's smarter to get loan preapproval in advance. This way you know for certain how much home to buy.

I once bought a home without financing in place when I made the offer. I was just lucky. Many sellers won't look at an offer if the seller doesn't have assurance that the buyer can get a loan.

Popular first-time buyer loans are FHA loans because the minimum down payment requirement is much less than a conventional loan. However, if you are thinking about buying foreclosures, for example, conventional buyers tend to get priority with REO banks.

You can ask your agent for a referral to a mortgage broker or check with your own bank / credit union. Compare the types of mortgages available to you and your GFE.

Negotiate the Offer

Buyers sometimes make the mistake of comparing the sales price of a home to other homes they have seen. It's a mistake to compare sales prices among homes for sale. That's because sellers can ask any price they want. It doesn't mean the home will sell at that price.

An agent can provide comparable sales and examine the pending sales. Comparable sales are similar type homes in the same condition and location that have sold within the past 3 months. Pending sales will become the comparable sales by the time your home closes.

You may need to pay over list price in a seller's market, especially if many buyers are vying for the same inventory. Your agent can give you a reasonable price range and help to manage your expectations. An good buyer's agent knows there is always more to an offer than its price, but price is paramount.

Do a Home Inspection

In some states, a home inspection is conducted before buyers make a purchase offer. In other states, a home inspection is a contract contingency. A contract contingency means a buyer has the right to cancel the contract. You might not want to be locked in to buying a home that has a faulty foundation, for example.

Sellers are generally not required to make repairs if problems are discovered during a home inspection. A home inspection is for the buyer's edification. However, sometimes when a buyer gives a Request for Repair to the seller, rather than blow the deal, the seller will often agree to make a repair.

Great Photo Tips to Help Market Your Home

Keller williams real estate E-mail User — Thu, 27 May 2010 22:41:02 GMT

Photo Tricks to Sell Your Home

By Alison Rogers |

One of the great things about selling real estate is that the landscape changes. As an agent, you’re always adapting and learning new tips and tricks.

That’s why I was surprised and pleased to see a blog post from Larry Lohrman, who is a real estate photography guru, talking about photography in the context of the new Realtor.com iPhone app.

Well, of course it makes sense that our photography of properties should change as the way potential buyers view those photos changes, but I hadn’t really thought about it.

So I caught up with Larry, the author of the Learn Real Estate Photography and Real Estate Photographer Stimulus Package e-books, via phone to his home base in Oregon. He noted that in this slower market, good photography can give a seller an edge. “Market times are very long, and in any given submarket, the inventory is huge,” Lohrman said. “So I think the real issue is how you stand out among the competition. To me, one of the best ways to stand out is photography.”

Here are five of his top current photography tips:

Consider where your photos are going. “In almost every real estate site, when a buyer searches, they get about 25 thumbnails, and that thumbnail is the primary exterior. So I recommend that you spend ten times as much time in choosing that exterior photo than you do the rest of the shots, because that’s the hook that will get buyers to look at the rest of the photos.On Realtor.com, with the four-photo layout, you have to have front exterior photos in the top left because that’s where people look first, then you have to think about the three other strongest photos of the home,” Lohrman said. (Bonus tip: On Realtor.com, he thinks landscape shots — short wide rectangles look stronger than portrait shots– tall skinny ones. )
Think about the strongest points of the home. If you’re a photographer, make sure that you talk to the listing Realtor about this. “The Realtor may know what the buyers are really psyched about,” Lohrman notes. Secondary exterior shots, especially, should be of a home’s very strongest point. “Usually it’s a deck or a patio, or a wonderful backyard,” Lohrman says.
Time of day matters. “Early in the morning or at twilight are the best for exterior shots,” Lohrman says. “However, when you’re shooting, you rarely have the latitude to choose. If I had the latitude, the sweet spot is half an hour before sunset to half an hour after; you do the exterior shot with all the interior lights turned on. That can look really nice.” He adds that since it’s such a specific demand on a real estate photographer’s time, you might pay extra for it: “Many real estate photographers have a package where they come back and do a twilight shot.”
Get your shots straight. “The number one mistake that Realtors and real estate photographers make is that their verticals are not completely vertical, so it looks like the room is going to fall in,” Lohrman says. “If you use a wide-angle lens and shoot up or down, it can look like the walls are converging instead of parallel.”
Remember that great photography is no substitute for a great price. “Everyone thinks that their home is worth what it was in 2006 at the peak of the market,” Lohrman says. “So the first step is price. If you’re overpriced by one hundred thousand dollars, it doesn’t matter what kind of photography you have.”

The lowdown on 10 great tax breaks

Keller williams real estate E-mail User — Tue, 25 May 2010 22:42:11 GMT

The lowdown on 10 great tax breaks
You may be somewhat aware that your home is a good source of tax breaks, but maybe you don’t realize just how many there are. April 15 will be here again before you know it, and many people will be scouring their lives for any potential tax breaks. You may not have to look far if you are a homeowner. A recent Realty Times article discusses the top 10 tax breaks you can get from your home.
Mortgage Loan Interest. This is one of the best tax breaks your home has to offer. In the early years of a loan, interest payments constitute a large portion of your mortgage payments. Mortgage interest on a maximum of $1 million in mortgage debt secured by a first and second home is tax-deductible. This level applies to joint filers; if you file single or separately, you get half of the deduction. Home equity loan interest is also deductible, but is limited to a much smaller amount.
Points. You can fully deduct points associated with a home purchase mortgage. You can also deduct refinanced mortgage points, but only when they are amortized over the life of the loan. If you refinance a second time, the balance of the old loan’s points from a refinanced loan provides an immediate write-off, as you begin to amortize the new points.
Home Improvement Loan Interest. Interest on a home improvement loan is also deductible, but is calculated differently from interest on your mortgage. You can deduct all of the interest on a home improvement loan if the work is a capital improvement (improvement that adds value to your home, adapts it to new uses, or prolongs its life) rather than repairs, maintenance or cosmetic. You can only get tax benefits from repair work when you sell your home, unless you get a home equity loan to make the repairs.
Property Taxes. Any property or real estate taxes are fully deductible. If you receive a city or state property tax refund, your federal property tax deduction will be reduced by the same amount.
Capital Gains Exclusion. Provisions in the Taxpayer Relief Act of 1997 allow married taxpayers who file jointly to retain up to $500,000 of profit on the sale of a home used as a principal residence for two of the prior five years tax-free. Again, the amount is halved for taxpayers who file separately or as a single. This tax breakcan be used as often as you qualify.
Selling Costs and Capital Improvements. When you sell your home, your taxable capital gains can be reduced by the amount of your selling costs, including title insurance, real estate commissions and legal, advertising and inspection fees. Decorating or repair costs, such as painting, planting landscaping or cleaning carpets, are also considered selling costs if they are incurred within 90 days of the sale and with the intention of making the home more sellable.
Moving Costs. If you have to move for a job, your moving costs may be at least partially deductible. You must, however, move within one year of starting your new job, move 50 miles farther from your old home than your old job was, and work full-time at the new job for 39 of 52 weeks following the move. Deductible costs include storing your household goods and travel and transportation costs.
Energy Tax Credits. Although not available this year, the Energy Policy Act of 2005 introduced tax credits for upgrading features of your home to energy-efficient models or materials. Up to $500 in 2006 and 2007 is available if you upgrade your heating and air conditioning, caulk leaks, add insulation, install energy-efficient windows or other improvements that combat energy waste. Certain qualified solar energy and fuel cell systems can earn you tax credits of up to $2,000. You can also earn a tax credit for purchasing a hybrid or other energy-efficient vehicle. Keep in mind, however, that some states offer rebates or tax credits that can reduce the federal credit.
Home Office Deductions. If you have a home office that is used exclusively for business, you could deduct a portion of the costs related to that portion of your home, including a percentage of your insurance and utility costs, among other things.
Mortgage Tax Credit. Qualifying low-income, first-time homebuyers can take advantage of Mortgage Credit Certificates (MCCs) that allow them a credit of up to 20 percent of the mortgage interest payments made on their home. The credit is available each year you live in the home purchased with the certificate, with the same loan. Instead of reducing your income, this credit is subtracted from the amount of income tax you owe.