Senate Takes a Stab at Tax Reform

I’m not trying to make a political statement or weigh in on this article. Politics and religion should be discussed at a political forum or among friends in agreement. I don’t agree with the following Tax Plan because of it’s immediate and long range negative effects it has on real estate and home ownership. Any plan that effects home ownership and the “American Dream” negatively is hard to comprehend. Read this eye opening article below and see where you stand. I know you can’t make every American happy. But when you hurt the large majority it only makes life more difficult and our Country less likeable.

Earlier this week the Senate jumped into the fray, releasing its own proposal for tax reform. The Senate’s proposal  creates significant headwinds for homeowners and homebuyers, while providing only a temporary cut for middle class homeowners.

What Stays the Same?

Like the House bill, the Senate chose to change the definition for capital gains so that a home seller must have lived in their home for at least five of the prior 8 years. This change would affect 12% to 22% of home sellers, locking in some inventory and potentially changing the trade-up purchase process.

The Senate also proposed to eliminate personal exemptions as the House did, but they chose to increase the child credit to $2000 per child. This latter change is more generous than the House’s $1,600 credit per child and $300 for each parent.

Pouring SALT in the Wound

Unlike the House bill, the Senate chose to eliminate all state and local taxes (SALT) including state and local income and sales taxes as well as state and local real estate taxes. This change will make it more difficult for homeowners to itemize their mortgage interest and when they do, they will face a much lower benefit from home ownership. In a perverse way, only those who can afford very expensive homes will be able to benefit from the real estate provisions of the tax code.

Tax Reform - Standard Deduction vs Itemize on a Home Purchase in Illinois

The generous $24,000 standard deduction for couples who are renter or owners provides little support for renters who move to ownership nor does it guarantee that tax cuts today will be utilized to boost housing affordability in the future. Worse, when this provision expires in 8 years, both groups will be worse off.

Time Does Not Heal All Wounds

Most forecasts are for home prices and mortgage rates to rise in the coming years. The chart below shows how the proposals from the House and Senate compare with current law. The orange bars depict the difference between the Senate proposal and current law. A home buying family of four with an income of $100,000 or less would see a gain, while upper-middle income buyers would face a tax hike. However, in 5 years1 that tax cut would disappear for nearly all middle-income home buyers as mortgage rates and prices rise (red bars). Finally, after 8 years, the tax cuts and enhanced standard deduction both expire letting virtually no buyers benefit under the plan (dark blue bars).

Chart Comparing Tax Plans for a Family of Four Over Time: Current vs Proposed

The Senate’s proposal reflects many new changes, but retains many facets of the House proposal. While some changes help middle class homeowners today, it appears that the changes quickly wear out and are worse in the future.

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Factors Most Influential on Home Values

In today’s  real estate world Buyers have become wiser, researching important facts not only about the houses they’re interested in but also about the communities where the homes are located. Essential that real estate professionals show their value by keenly understanding the factors influencing home values in order to help and influence those research-savvy clients.

Study these four factors in your market:

  1. Location. This is nothing new; everyone knows location is extremely influential on home values. But it might be underutilized in the marketing listings. A great location is something sellers can capitalize on today more than ever, whether it’s a city, neighborhood, proximity to amenities, or the view according to most Agents
  2. Community statistics. School district performance, crime rates, walkability, and the number of establishments such as convenience stores and restaurants are factors that can influence home values, Agents agree, also influencing home buyers.
  3. Home updates. Improvements and renovations can have a dramatic effect on a home’s value. Take a look at comparable properties in the area to understand which updates will give your clients the most bang for their buck. Changes in flooring, wall paints, doors, and even added rooms will add to the home value and appeal to buyers.
  4. The neighborhood. “Home values are volatile, professionals agree. “Always do your dose of monitoring neighboring home prices. This way you can properly put a tag price on your own not only for profitable margins but also to be competitive with other homes for sale.”

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Porches Are Making a Comeback

Daily Real Estate News

More new homes are coming equipped with front porches. Sixty-five percent of new single-family homes started in 2016 included a porch, according to a Census data analysis from the National Association of Home Builders. It’s only the second time since tracking began that new single-family homes with porches have moved back above 65 percent. For comparison, in 2005, 54 percent of new homes had porches.

Certain regions of the U.S. are showing higher preference for porches. For example, the East-South-Central region of the U.S. had the highest share of new homes started in 2016 with porches at 86 percent.

Positioning of porches have gone through a number of architectural changes. Front to back, side to side, etc.  Front porches on new homes tend to be more common than side porches. Also, most new home porches are open rather than screened.

The average size of a front porch on a new home is about 60 square feet. The materials used often tend to be concrete and treated wood. However, some regions—like the Mountain and Pacific areas of the U.S.—tend to favor redwood over treated wood for their front porches.

Personally I find porches to be a PLUS. Porches tend to make folks more happy. Sitting or lounging on a porch generally can be most relaxing. Especially when the porch overlooks your backyard.  Front porches also can be uplifting as well. Gives you an opportunity to tune into your neighborhood. Passer byes who don’t have a porch subconsciously are envious of your position wishing they too had their own.

 

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4 Things You Really Wish Your Sellers Knew

There are a few things that pop up in the course of transactions that you wish sellers already knew that lessens the chance of having to discuss so that you could avoid having some awkward conversations with them. Real estate pros chime in at realtor.com® with some of the top things they wish sellers knew about selling a home, including:

Your home decor isn’t always perfect for selling.

“While your home may be beautifully decorated, it still looks like your home, not the buyer’s,” Teresa Stephenson, vice president of a residential brokerage at Platinum Properties in New York, told realtor.com®. Clutter, in particular, can make a home feel cramped. “You don’t have to pay to have your home staged, but if you don’t buy into the concept that ‘less is more,’ you’ll pay when it comes time to sell,” Stephenson adds.

Stop being so secretive with your agent.

Sellers need to disclose any problems with the property, like a broken air conditioner, leaky faucets, water damage, or termite infestation. “Don’t keep any of your home’s flaws from your agent because you are scared it might hurt your sale,” says Karen Elmir, founder and CEO of the Elmir Group in Miami. The listing agent is on the homeowner’s side, but she must be aware of what needs to be fixed or what could become an issue in a transaction going forward.

Remodeling doesn’t guarantee a price uptick.

While remodeling projects may enhance a property, the projects homeowners take on are never a guarantee of payback at resale. “An ROI, or return, on a home’s upgrades does not necessarily increase value,” says Michael Kelczewski, a real estate pro with Brandywine Fine Properties Sotheby’s International Realty in Delaware and Maryland. The payback will greatly depend on what type of home improvement was completed.

Be ready to fix some things.

Sellers may have to spend a few bucks to get their home ready to sell. For example, they may need to “replace the trim the dogs scratched up,” says Katie Messenger, a real estate pro with Bello Dimora Real Estate Network in Kentucky and Cincinnati. “Clean the scuff marks off the walls. Power-wash the algae off the vinyl siding. To you, it’s totally normal because you’ve lived with these issues for years. To buyers, these will look like expensive repairs, which means they’ll have to lowball you, or not make an offer at all, because your house ‘needs a lot of work.’”

Well you’ve heard from the pros. Now you can hear it from me. I preach the same ideas to my clients.  I concur with the pros on all fronts. I take things a step further. I recommend Sellers conduct inspections, make repairs, a through cleaning, stage their home that favors most all buyers  before listing the property. When it comes time to negotiate the focus will be on Price and Terms and not who will fix this or that. I know from experience this formula WORKS!

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5 Things Buyers Should Never Compromise On

Sure, compromise between the buyer and seller is part of the game when getting to closing. But there are some things buyers should never acquiesce—or they’ll likely regret their home purchase. Realtor.com® recently asked real estate professionals to weigh in on some of the top items their clients regret about the home they bought

1. The floor plan. It’s difficult and expensive to reconfigure a home’s floor plan.  A home that does not fit your buyers’ minimum criteria in terms of number of rooms and the flow of the main living areas, should cross it off their list. You can change a layout to make it an open floor plan, but it’s a lot more difficult to change the bedroom and bathroom count. In the long run, you could end up having a lot of problems and taking on a really big financial undertaking.

2. The school district. Even buyers who don’t have children—but wish to one day—should carefully consider their neighborhood’s school district. Encourage buyers to visit the school district’s website to get a map of its exact boundaries. I will advertise a property as being near such-and-such school area but not necessarily specify the district, which can be very confusing. When discussing schools with my clients I give them access to resources that will aide them in selecting the “right school” that may fits their needs.

3. The neighbors. Buyers should be cognizant of the condition of neighboring homes, as it can affect their future resale value. You can’t change the house in front of you or to the side of you or move the people out. And then there’s the barking dog that won’t quit. Another case of “buyer be ware”.

4. The budget. Tell your clients to consider the expenses beyond just the list price. For example, they’ll want to factor in monthly mortgage payments, potential homeowner association dues, utility costs, and real estate taxes. A lender’s pre-approval will tell buyers how much house they can afford, but there other factors determine whether they’ll be financially comfortable. They may be able to purchase a bigger and better home at the expense of not having any food on the table. A good loan officer and or a good real estate agent will explain the realities of home ownership. It’s their duty to do so especially with first time home buyers.

5. The commute. Buyers should make sure they are comfortable with the time it takes to get to work. They should drive the route between the home and their office at the time they’ll be commuting.  Sometimes buyers are so infatuated with the home they end up losing a proper perspective of the big picture. Long commutes means less time spent in your “infatuation”.

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