Category Archives: For Sellers

May: The Best Month to Sell Your Home

Just as TV shows have a prime time, so does the real estate market. And that time is now.

Spring is busy ticking off the season’s milestones: We’re watching the cherry blossoms, celebrating Mother’s Day, and tossing graduation caps. Another item you may want to add to your list? Putting your home up for sale — specifically in May, when homes often sell faster, and for a bit more than the national average.

But why is May the best time to sell a house? Read on to find out why it’s such a magical month for home sales.

may real estate

1. The timing aligns with the new school year

If they intend to move, families really want to close on a new home before the end of summer. Why? Changing school districts after the school year starts is no picnic for anyone. If you take the month of May to search for a home, you can be closed in July or August, which gives you a little time to settle in before school.

2. Buyers are getting serious

When the spring housing season begins, typically right after Presidents Day in mid-February, many buyers feel as if they have plenty of time to find their perfect home and perfectly time their summer move. So they might bid more aggressively and offer less than asking price. If no sellers bite, though, by the time May rolls around, these same buyers may relent to submitting more competitive offers in the hopes of finally sealing the deal.

Remember, though, that May is typically a seller’s market. When buyers are just starting to look at this point, they are excited and have not experienced the agony of defeat by being outbid once, twice, or three times — at which point deal fatigue sets in. After missing several deals, buyers begin to feel as if they are settling and then begin to think that it would be better to just wait. As we move into late June and early July, in addition to being weary of looking, buyers make house hunting less of a focus for this year and more of one for next year.

3. The weather is beautiful

People normally discuss the weather for two reasons: When there’s a huge weather event or natural disaster, such as a hurricane or tornado, or when they have nothing else to talk about. But there’s actually a third reason: Weather plays an important role for home sellers and their open houses. Lovely weather also means lovely homes. Your home will look its best in the spring as flowers start blooming and the lawn is green.

4. People haven’t left yet for summer vacation

If you’re selling to a clientele that typically “summers” elsewhere (lucky ducks!), you need to catch them while they’re still around. The wealthier buyers are back in the city in May. But if you wait until July to list your home, you’ve lost those buyers to the Hamptons until after Labor Day.

sold

5. Tax refunds are burning a hole in buyers’ pockets

Scraping up money for a down payment and closing costs can be quite a formidable undertaking. After filing your taxes, you have a clearer picture of your financial situation. So when you get that big refund from Uncle Sam (if you’re lucky), you might be in a better financial situation to buy. Or if you owe, you at least have that expense out of the way. And sellers take note: You might want to use your tax refund to make repairs and get the home ready to sell.

6. The mood is just right

Just as Goldilocks had to have everything “just right,” home selling has its sweet spot too. In May, most people are home from the spring break vacations they took in April, schools are still in session, taxes have been paid (or extensions filed!), flowers are in bloom, and everything looks fresh and new. Everyone is in the home-buying mood.

Staging Your Home for a Quick Sale

When real estate agents talk about staging your home, they’re referring to a method of decorating that is designed to showcase the home’s best assets, impress buyers and sell quickly for the highest possible price.

Because not all sellers stage their homes, especially homes in lower price ranges, you’ll be at an advantage if you do. Read on to find out how.

Why Home Staging Is Important
Although staging is optional, it really shouldn’t be. When you’re dealing with such a significant financial transaction, you don’t want to be lazy and settle for a lower selling price or a longer marketing period than you have to.

Relative to the amount of time and money involved, staging may be one of the most lucrative projects you ever undertake. Potential buyers aren’t just looking for a structure to inhabit – they’re looking to fulfill their dreams and improve their lifestyles. Staging helps sell those dreams and creates a more emotional purchase that can generate more money for the seller.

Home staging is also beneficial because potential buyers don’t want to see work that needs to be done upon moving into the home. For every problem they see, they’ll deduct its cost from their offering price. If they see too many problems, they’ll pass altogether.

home staging

Staging How To
While there are plenty of room-specific staging tips, if you’re on a limited budget, it’s best to focus on big-picture improvements and on the areas that will make the biggest difference in your home’s selling price.

These include the exterior and entryway (both heavily impact a buyers’ first impressions), the living room, kitchens and bathrooms, the master bedroom and outdoor living space, such as a back patio. The following techniques can and should be employed in as many rooms of the house as you can afford and have time for:

Clean
In the kitchen, potential buyers love to see new appliances that come with the home, but if you can’t do that, make the ones you have spotless. No one wants to see splattered spaghetti sauce, films of grease or piles of crumbs in their potential new home. Likewise, make sure your bathroom sparkles, from the corners of the tub to the sink drain to that spot behind the toilet you don’t think anyone can see. Your goal should be to make everything look new.

Declutter
There are two major problems with clutter. One is that it distracts buyers from your home’s features. The other is that it makes it seem like the home doesn’t have enough storage space. Put away knickknacks. Keep in mind that buyers will be interested in your closet space, so tossing everything into the closet to hide it away may not be the best strategy.

Depersonalize
Buyers need to be able to envision themselves in your home, so remove all the family photos, items with family members’ names on them and refrigerator art. Also make sure to put away all the toys and anything else that is highly indicative of the home’s current inhabitants.

Remove Odors
Pets, kids, what you ate for dinner last night, a mildew-covered bathroom and many other conditions can make your home smell. You are probably immune to your home’s smell, so you’ll need to have a friend or neighbor help you out with this one. Inexpensive tricks for ridding a home of odors and giving it an inviting aroma include baking cinnamon-coated apples in the oven, burning vanilla-scented candles, or throwing some slice-and-bake cookies in the oven. It’s also a good idea to grind half a lemon in the garbage disposal to remove sink odors. While you could use a spray to deodorize your home, it might give it a cheap, institutional bathroom smell, which is hardly the image you’re going for. If you’re a smoker and you normally smoke indoors, start limiting your smoking to outside the home and take extra steps to deodorize indoors. Finally, don’t forget to take out the trash.

Define Rooms
Make sure each room has a single, defined purpose. Also make sure that every space within every room has a purpose so that buyers will see how to maximize the home’s square footage. If you have a finished attic, make it an office. A finished basement can become an entertainment room, and a junk room can be transformed into a guest bedroom. Even if the buyer won’t want to use the room for the same purpose, the important thing is for them to see that every inch of the home is usable space. This includes alcoves, window seats, corners, breakfast nooks and so on.

Wallpaper/Paint
It is unlikely that a potential buyer will like your wallpaper. Your best bet is to tear it down and paint the walls instead. Don’t even think about painting over the wallpaper – it will look shabby and send red flags for the buyer about all the work he or she will have to do later.

Custom paint colors are the same way. You may love your orange bathroom, but people’s tastes in colors are very specific and highly personal. While you might think that white walls would be ideal because they create a blank slate that allows buyers to envision their own décor and gives them an easy starting point, it’s actually better to paint your home with warm, neutral colors that appeal to the masses and project the homey image you’re trying to sell.

Flooring
No one wants to live with dirty, stained carpet, especially when someone else made it that way. Linoleum is passé and looks cheap. Though pricey, hardwood floors add value and elegance to a home. They are also low-maintenance, provide great long-term value and are perfect for buyers with allergies. In other words, they appeal to almost everyone, and if not, they’re easily carpeted over by the buyer and preserved for the next owner.

In kitchens and bathrooms, go with ceramic tile or stone if you can afford it. If not, use high-quality vinyl tiles that mimic their more expensive counterparts. If you can’t afford to do that, stick to common areas like the living room, dining room and kitchen. Bathrooms should make the cut too because they have relatively little floor area and therefore won’t be too expensive to upgrade.

Lighting
Take advantage of your home’s natural light. Open all curtains and blinds when showing your home. Add supplemental lighting where necessary. Outdated or broken light fixtures can be cheaply and easily replaced. If you think your existing fixtures are fine, make sure to dust them, clean off any grime and empty out the dead bugs.

Furniture
Make sure furniture is the right size for the room, and don’t clutter a room with too much furniture. Furniture that’s too big will make a room look small, while too little or too small furniture can make a space feel cold. Don’t use cheap college furniture, either. You don’t have to pay a lot of money to switch out your existing furniture and you may even be able to rent it, but the furniture should look nice, new, expensive and inviting. You’ll also want to arrange the furniture in a way that makes each room feel spacious yet homey. In the living room, for example, seating should be set up in a way that creates a gathering area around the fireplace.

Walls and Ceilings
Cracks in the walls or ceiling are a red flag to buyers as they may indicate foundation problems. If your home does have foundation problems, you will need to either fix them or alert potential buyers to the problem. That said, a fix would be better in terms of getting the home sold. If the foundation only looks bad, but has been deemed sound by an inspector, repair the cracks so you don’t scare off buyers for no good reason.

Exterior
Your home’s exterior will be the first impression buyers get and may even determine their interest in viewing the inside. Make sure your lawn, hedges, trees and other plants are well-maintained and neatly pruned and eliminate any weeds. To brighten windows, wash them well, and consider adding flower boxes to brighten them up further. If you can, power wash your home’s exterior – it can make it look almost freshly painted but with less effort and expense. Make sure the sidewalk leading up to the house is clear and clean, and purchase new doormats for the front and back doors. If you have a pool, showcase it by making sure it’s crystal clear. Creating some sort of outdoor living space in the backyard, such as a deck or patio with outdoor furniture, is another way to use the exterior of your home to its greatest advantage.

Last Touches
Just before any open house or showing, make sure that your staging efforts go the full mile with a few last-minute touches that will make the home seem warm and inviting. These include fresh flowers, letting fresh air into the house for at least ten minutes beforehand so it isn’t stuffy, adding a pleasant scent as discussed earlier, and putting new, plush, nicely folded towels in the bathrooms.

Bottom Line
Even if you have plenty of cash, don’t put too much money into the staging process. You want to emphasize the home’s best features, but keep in mind that what sells the home and what will make the home usable for the buyer are not necessarily the same thing. Overall, to get the most bang for your buck, your home staging efforts should be designed to appeal to the widest possible range of buyers. The more people willing to submit purchase offers for your home, the higher the selling price will be.

Tax Implications of Selling a Home

Selling your home can be an exciting and challenging experience, particularly if you’re attempting to simultaneous settle on one house and purchase another.

home selling tax

The numbers spinning through your head at this point include principal and interest payments, closing costs, down payment funds and moving costs. Unless you happen to be making this move right around April 15, when federal income taxes are on everyone’s mind, you may not have given much thought to taxes on the sale of your home. In most cases, that’s okay, because for the vast majority of people no taxes are due on a home sale.

Taxes and Home Sellers

Federal tax law allows home sellers a tax exclusion on the capital gains from the sale as long as they meet certain criteria, the most important of which is that the home must be the primary residence for at least two of the previous five years. Single taxpayers can exclude a profit of up to $250,000, and married taxpayers who file joint returns can exclude a profit of up to $500,000.  You can use this exclusion more than once in your lifetime as long as you haven’t taken the exclusion within the past two years for another house.

The Internal Revenue Service spells out certain circumstances in which you can take the exclusion on your profit, even if you don’t meet the two-year requirement. If you couldn’t live in the house because you’re divorced or your spouse died, or if you were deployed overseas by the military or by the U.S. Foreign Service, you may still be able to qualify for the full exclusion.

A partial exclusion may be possible if you sold your house before two years of residency due to a job loss or transfer, illness or because of other unforeseen circumstances, such as a divorce or multiple births from a single pregnancy.

Consult with a tax professional to determine your eligibility for the exclusion.

Calculating Your Tax Bill

If you’re certain that you’re not required to pay taxes on the sale of your home because you meet the exclusion eligibility requirements, then you aren’t required to report the sale of your home on your federal tax return.

If you do have to pay taxes, you and your tax professional will need to calculate the adjusted basis of the house. The adjusted basis is the original price of your home, plus capital improvements, minus any depreciation. Capital improvements mean things like adding a deck or finishing a basement or remodeling your kitchen, not routine maintenance. Depreciation refers to tax credits you took such as for a home office, a first-time home buyer tax credit, or a credit for energy-efficient improvements.

Your taxes will be based on the calculation of the sales price of the home, minus deductible closing costs, minus your basis. Some examples of deductible closing costs include the real estate broker’s commission, title insurance, legal fees, administrative costs and any inspection fees paid by you instead of the buyer. If you made any home improvements specifically in order to sell your home, such as new landscaping or repairs or replacing the carpet in some rooms, you can deduct those costs – as long as you did them within 90 days before the sale.

You may also be able to deduct moving costs from your tax bill if you’re moving at least 50 miles because of a job change.

While these are potential tax implications of selling your home, you should always consult a tax professional to make sure you are meeting current IRS requirements.

5 Tips to Secure a Successful Short Sale

Short sales have become the only way out for some sellers who owe more on their mortgages than their houses are worth. For struggling borrowers, it’s a chance to avoid foreclosure.

While helpful, short sales can be stressful, time-consuming and may lead to harsh consequences if not done properly.

Many sellers think the biggest challenge they face in a short sale is persuading the lender to take a haircut and allow the property to sell for less than the mortgage balance. That’s only the first step.

Here are five tips you must know when short selling your home.

Choose an agent experienced in short sales

If you needed heart surgery, would you put your life in the hands of a surgeon whose first surgery would be on you? Probably not.

The same applies to your financial life. Hire a real estate agent experienced in short sales.

Ads of real estate agents who claim to be short-sale specialists are widespread these days. But some of these agents have closed only a handful of short-sale deals. Many have taken short-sale courses and are certified in selling distressed properties. That’s not enough; certifications help, but nothing counts more than experience.

Interview agents, ask how many short sales they’ve closed and ask to talk to some of their clients.

A short sale is a time-consuming transaction and can take months to close. You want an agent who will stay on top of the game until the deal is closed.

Understand potential consequences of short sale

Underwater sellers are so anxious to get rid of their mortgage payments, they often don’t think about what comes after the sale. Then, months or even years later, they receive a collection letter for the difference between what the house sold for and what was owed on the mortgage.

Laws vary by state, but many states allow lenders to go after that balance once a short sale or foreclosure is completed. That’s why it’s crucial for borrowers to understand whether the lender agrees to waive the deficiency, or the balance that will be left on the loan after the sale. This needs to be discussed verbally and represented in documents. It shouldn’t come as a surprise.

One way to avoid a deficiency judgment is to do the short sale through the Home Affordable Foreclosure Alternatives program, or HAFA. Lenders who approve short sales through this federal program have to release the borrower from a potential deficiency judgment.

Lenders are not obligated to approve HAFA short sales. They may choose to do the short sale based on their own internal rules and the guidelines set by loan investors. In that case, it’s really up to the lender to decide whether it will pursue the deficiency against the borrower.

You can negotiate your way out of deficiency

When negotiating a short sale, many lenders don’t voluntarily offer to release you of liability on the remaining balance of your loan – at least not for free. But you can ask to negotiate a waiver.

Some lenders may ask you to sign a promissory note for at least a small portion of the balance, usually cents on the dollar, or they may ask for a lump sum. Sellers often are outraged when first presented this settlement offer; they sometimes forget they actually borrowed that money.

In many cases, it is usually worth paying upfront to avoid future headaches. There is a price attached to the waiver of deficiency, but most of them are very tiny.

Talk to an attorney

Real estate agents who are experienced in short sales can coordinate the transaction with the bank and tell you what to expect of the process, but remember they are not lawyers.

Most of the people who do short sales are doing it through the Realtors or people who claim to be short-sales specialists. But there are many issues that borrowers need to discuss that cannot be discussed with a short-sale specialist.

Those issues range from potential tax implications to protecting other assets the borrower may own if the lender tries to collect the balance of the loan in the future.

If you don’t understand the contract you are signing or the potential consequences of a short sale, you should consult with a lawyer.

Keep up with HOA payments

If you are thinking about short selling your home, don’t stop paying your homeowners association dues. The fees can turn into a snowball and kill the sale, even if the buyer is willing to pay for the delinquent dues at closing.

In short sales, there are a few problems that money cannot fix. In a regular sale or even with foreclosures, the seller or the bank pays any past dues owed to the HOA at closing so the buyer gets clear title of the property. But in a short sale, the seller’s lender wants to get every penny out of the transaction.

Plus, you want to make sure the association is able to maintain the common areas so your house is sellable. A short-sale property needs to be maintained. The power needs to be on; the grass needs to be cut. You don’t want your home to look like a foreclosure.

Category Archives: For Sellers

May: The Best Month to Sell Your Home

Just as TV shows have a prime time, so does the real estate market. And that time is now.

Spring is busy ticking off the season’s milestones: We’re watching the cherry blossoms, celebrating Mother’s Day, and tossing graduation caps. Another item you may want to add to your list? Putting your home up for sale — specifically in May, when homes often sell faster, and for a bit more than the national average.

But why is May the best time to sell a house? Read on to find out why it’s such a magical month for home sales.

may real estate

1. The timing aligns with the new school year

If they intend to move, families really want to close on a new home before the end of summer. Why? Changing school districts after the school year starts is no picnic for anyone. If you take the month of May to search for a home, you can be closed in July or August, which gives you a little time to settle in before school.

2. Buyers are getting serious

When the spring housing season begins, typically right after Presidents Day in mid-February, many buyers feel as if they have plenty of time to find their perfect home and perfectly time their summer move. So they might bid more aggressively and offer less than asking price. If no sellers bite, though, by the time May rolls around, these same buyers may relent to submitting more competitive offers in the hopes of finally sealing the deal.

Remember, though, that May is typically a seller’s market. When buyers are just starting to look at this point, they are excited and have not experienced the agony of defeat by being outbid once, twice, or three times — at which point deal fatigue sets in. After missing several deals, buyers begin to feel as if they are settling and then begin to think that it would be better to just wait. As we move into late June and early July, in addition to being weary of looking, buyers make house hunting less of a focus for this year and more of one for next year.

3. The weather is beautiful

People normally discuss the weather for two reasons: When there’s a huge weather event or natural disaster, such as a hurricane or tornado, or when they have nothing else to talk about. But there’s actually a third reason: Weather plays an important role for home sellers and their open houses. Lovely weather also means lovely homes. Your home will look its best in the spring as flowers start blooming and the lawn is green.

4. People haven’t left yet for summer vacation

If you’re selling to a clientele that typically “summers” elsewhere (lucky ducks!), you need to catch them while they’re still around. The wealthier buyers are back in the city in May. But if you wait until July to list your home, you’ve lost those buyers to the Hamptons until after Labor Day.

sold

5. Tax refunds are burning a hole in buyers’ pockets

Scraping up money for a down payment and closing costs can be quite a formidable undertaking. After filing your taxes, you have a clearer picture of your financial situation. So when you get that big refund from Uncle Sam (if you’re lucky), you might be in a better financial situation to buy. Or if you owe, you at least have that expense out of the way. And sellers take note: You might want to use your tax refund to make repairs and get the home ready to sell.

6. The mood is just right

Just as Goldilocks had to have everything “just right,” home selling has its sweet spot too. In May, most people are home from the spring break vacations they took in April, schools are still in session, taxes have been paid (or extensions filed!), flowers are in bloom, and everything looks fresh and new. Everyone is in the home-buying mood.

Staging Your Home for a Quick Sale

When real estate agents talk about staging your home, they’re referring to a method of decorating that is designed to showcase the home’s best assets, impress buyers and sell quickly for the highest possible price.

Because not all sellers stage their homes, especially homes in lower price ranges, you’ll be at an advantage if you do. Read on to find out how.

Why Home Staging Is Important
Although staging is optional, it really shouldn’t be. When you’re dealing with such a significant financial transaction, you don’t want to be lazy and settle for a lower selling price or a longer marketing period than you have to.

Relative to the amount of time and money involved, staging may be one of the most lucrative projects you ever undertake. Potential buyers aren’t just looking for a structure to inhabit – they’re looking to fulfill their dreams and improve their lifestyles. Staging helps sell those dreams and creates a more emotional purchase that can generate more money for the seller.

Home staging is also beneficial because potential buyers don’t want to see work that needs to be done upon moving into the home. For every problem they see, they’ll deduct its cost from their offering price. If they see too many problems, they’ll pass altogether.

home staging

Staging How To
While there are plenty of room-specific staging tips, if you’re on a limited budget, it’s best to focus on big-picture improvements and on the areas that will make the biggest difference in your home’s selling price.

These include the exterior and entryway (both heavily impact a buyers’ first impressions), the living room, kitchens and bathrooms, the master bedroom and outdoor living space, such as a back patio. The following techniques can and should be employed in as many rooms of the house as you can afford and have time for:

Clean
In the kitchen, potential buyers love to see new appliances that come with the home, but if you can’t do that, make the ones you have spotless. No one wants to see splattered spaghetti sauce, films of grease or piles of crumbs in their potential new home. Likewise, make sure your bathroom sparkles, from the corners of the tub to the sink drain to that spot behind the toilet you don’t think anyone can see. Your goal should be to make everything look new.

Declutter
There are two major problems with clutter. One is that it distracts buyers from your home’s features. The other is that it makes it seem like the home doesn’t have enough storage space. Put away knickknacks. Keep in mind that buyers will be interested in your closet space, so tossing everything into the closet to hide it away may not be the best strategy.

Depersonalize
Buyers need to be able to envision themselves in your home, so remove all the family photos, items with family members’ names on them and refrigerator art. Also make sure to put away all the toys and anything else that is highly indicative of the home’s current inhabitants.

Remove Odors
Pets, kids, what you ate for dinner last night, a mildew-covered bathroom and many other conditions can make your home smell. You are probably immune to your home’s smell, so you’ll need to have a friend or neighbor help you out with this one. Inexpensive tricks for ridding a home of odors and giving it an inviting aroma include baking cinnamon-coated apples in the oven, burning vanilla-scented candles, or throwing some slice-and-bake cookies in the oven. It’s also a good idea to grind half a lemon in the garbage disposal to remove sink odors. While you could use a spray to deodorize your home, it might give it a cheap, institutional bathroom smell, which is hardly the image you’re going for. If you’re a smoker and you normally smoke indoors, start limiting your smoking to outside the home and take extra steps to deodorize indoors. Finally, don’t forget to take out the trash.

Define Rooms
Make sure each room has a single, defined purpose. Also make sure that every space within every room has a purpose so that buyers will see how to maximize the home’s square footage. If you have a finished attic, make it an office. A finished basement can become an entertainment room, and a junk room can be transformed into a guest bedroom. Even if the buyer won’t want to use the room for the same purpose, the important thing is for them to see that every inch of the home is usable space. This includes alcoves, window seats, corners, breakfast nooks and so on.

Wallpaper/Paint
It is unlikely that a potential buyer will like your wallpaper. Your best bet is to tear it down and paint the walls instead. Don’t even think about painting over the wallpaper – it will look shabby and send red flags for the buyer about all the work he or she will have to do later.

Custom paint colors are the same way. You may love your orange bathroom, but people’s tastes in colors are very specific and highly personal. While you might think that white walls would be ideal because they create a blank slate that allows buyers to envision their own décor and gives them an easy starting point, it’s actually better to paint your home with warm, neutral colors that appeal to the masses and project the homey image you’re trying to sell.

Flooring
No one wants to live with dirty, stained carpet, especially when someone else made it that way. Linoleum is passé and looks cheap. Though pricey, hardwood floors add value and elegance to a home. They are also low-maintenance, provide great long-term value and are perfect for buyers with allergies. In other words, they appeal to almost everyone, and if not, they’re easily carpeted over by the buyer and preserved for the next owner.

In kitchens and bathrooms, go with ceramic tile or stone if you can afford it. If not, use high-quality vinyl tiles that mimic their more expensive counterparts. If you can’t afford to do that, stick to common areas like the living room, dining room and kitchen. Bathrooms should make the cut too because they have relatively little floor area and therefore won’t be too expensive to upgrade.

Lighting
Take advantage of your home’s natural light. Open all curtains and blinds when showing your home. Add supplemental lighting where necessary. Outdated or broken light fixtures can be cheaply and easily replaced. If you think your existing fixtures are fine, make sure to dust them, clean off any grime and empty out the dead bugs.

Furniture
Make sure furniture is the right size for the room, and don’t clutter a room with too much furniture. Furniture that’s too big will make a room look small, while too little or too small furniture can make a space feel cold. Don’t use cheap college furniture, either. You don’t have to pay a lot of money to switch out your existing furniture and you may even be able to rent it, but the furniture should look nice, new, expensive and inviting. You’ll also want to arrange the furniture in a way that makes each room feel spacious yet homey. In the living room, for example, seating should be set up in a way that creates a gathering area around the fireplace.

Walls and Ceilings
Cracks in the walls or ceiling are a red flag to buyers as they may indicate foundation problems. If your home does have foundation problems, you will need to either fix them or alert potential buyers to the problem. That said, a fix would be better in terms of getting the home sold. If the foundation only looks bad, but has been deemed sound by an inspector, repair the cracks so you don’t scare off buyers for no good reason.

Exterior
Your home’s exterior will be the first impression buyers get and may even determine their interest in viewing the inside. Make sure your lawn, hedges, trees and other plants are well-maintained and neatly pruned and eliminate any weeds. To brighten windows, wash them well, and consider adding flower boxes to brighten them up further. If you can, power wash your home’s exterior – it can make it look almost freshly painted but with less effort and expense. Make sure the sidewalk leading up to the house is clear and clean, and purchase new doormats for the front and back doors. If you have a pool, showcase it by making sure it’s crystal clear. Creating some sort of outdoor living space in the backyard, such as a deck or patio with outdoor furniture, is another way to use the exterior of your home to its greatest advantage.

Last Touches
Just before any open house or showing, make sure that your staging efforts go the full mile with a few last-minute touches that will make the home seem warm and inviting. These include fresh flowers, letting fresh air into the house for at least ten minutes beforehand so it isn’t stuffy, adding a pleasant scent as discussed earlier, and putting new, plush, nicely folded towels in the bathrooms.

Bottom Line
Even if you have plenty of cash, don’t put too much money into the staging process. You want to emphasize the home’s best features, but keep in mind that what sells the home and what will make the home usable for the buyer are not necessarily the same thing. Overall, to get the most bang for your buck, your home staging efforts should be designed to appeal to the widest possible range of buyers. The more people willing to submit purchase offers for your home, the higher the selling price will be.

Tax Implications of Selling a Home

Selling your home can be an exciting and challenging experience, particularly if you’re attempting to simultaneous settle on one house and purchase another.

home selling tax

The numbers spinning through your head at this point include principal and interest payments, closing costs, down payment funds and moving costs. Unless you happen to be making this move right around April 15, when federal income taxes are on everyone’s mind, you may not have given much thought to taxes on the sale of your home. In most cases, that’s okay, because for the vast majority of people no taxes are due on a home sale.

Taxes and Home Sellers

Federal tax law allows home sellers a tax exclusion on the capital gains from the sale as long as they meet certain criteria, the most important of which is that the home must be the primary residence for at least two of the previous five years. Single taxpayers can exclude a profit of up to $250,000, and married taxpayers who file joint returns can exclude a profit of up to $500,000.  You can use this exclusion more than once in your lifetime as long as you haven’t taken the exclusion within the past two years for another house.

The Internal Revenue Service spells out certain circumstances in which you can take the exclusion on your profit, even if you don’t meet the two-year requirement. If you couldn’t live in the house because you’re divorced or your spouse died, or if you were deployed overseas by the military or by the U.S. Foreign Service, you may still be able to qualify for the full exclusion.

A partial exclusion may be possible if you sold your house before two years of residency due to a job loss or transfer, illness or because of other unforeseen circumstances, such as a divorce or multiple births from a single pregnancy.

Consult with a tax professional to determine your eligibility for the exclusion.

Calculating Your Tax Bill

If you’re certain that you’re not required to pay taxes on the sale of your home because you meet the exclusion eligibility requirements, then you aren’t required to report the sale of your home on your federal tax return.

If you do have to pay taxes, you and your tax professional will need to calculate the adjusted basis of the house. The adjusted basis is the original price of your home, plus capital improvements, minus any depreciation. Capital improvements mean things like adding a deck or finishing a basement or remodeling your kitchen, not routine maintenance. Depreciation refers to tax credits you took such as for a home office, a first-time home buyer tax credit, or a credit for energy-efficient improvements.

Your taxes will be based on the calculation of the sales price of the home, minus deductible closing costs, minus your basis. Some examples of deductible closing costs include the real estate broker’s commission, title insurance, legal fees, administrative costs and any inspection fees paid by you instead of the buyer. If you made any home improvements specifically in order to sell your home, such as new landscaping or repairs or replacing the carpet in some rooms, you can deduct those costs – as long as you did them within 90 days before the sale.

You may also be able to deduct moving costs from your tax bill if you’re moving at least 50 miles because of a job change.

While these are potential tax implications of selling your home, you should always consult a tax professional to make sure you are meeting current IRS requirements.

5 Tips to Secure a Successful Short Sale

Short sales have become the only way out for some sellers who owe more on their mortgages than their houses are worth. For struggling borrowers, it’s a chance to avoid foreclosure.

While helpful, short sales can be stressful, time-consuming and may lead to harsh consequences if not done properly.

Many sellers think the biggest challenge they face in a short sale is persuading the lender to take a haircut and allow the property to sell for less than the mortgage balance. That’s only the first step.

Here are five tips you must know when short selling your home.

Choose an agent experienced in short sales

If you needed heart surgery, would you put your life in the hands of a surgeon whose first surgery would be on you? Probably not.

The same applies to your financial life. Hire a real estate agent experienced in short sales.

Ads of real estate agents who claim to be short-sale specialists are widespread these days. But some of these agents have closed only a handful of short-sale deals. Many have taken short-sale courses and are certified in selling distressed properties. That’s not enough; certifications help, but nothing counts more than experience.

Interview agents, ask how many short sales they’ve closed and ask to talk to some of their clients.

A short sale is a time-consuming transaction and can take months to close. You want an agent who will stay on top of the game until the deal is closed.

Understand potential consequences of short sale

Underwater sellers are so anxious to get rid of their mortgage payments, they often don’t think about what comes after the sale. Then, months or even years later, they receive a collection letter for the difference between what the house sold for and what was owed on the mortgage.

Laws vary by state, but many states allow lenders to go after that balance once a short sale or foreclosure is completed. That’s why it’s crucial for borrowers to understand whether the lender agrees to waive the deficiency, or the balance that will be left on the loan after the sale. This needs to be discussed verbally and represented in documents. It shouldn’t come as a surprise.

One way to avoid a deficiency judgment is to do the short sale through the Home Affordable Foreclosure Alternatives program, or HAFA. Lenders who approve short sales through this federal program have to release the borrower from a potential deficiency judgment.

Lenders are not obligated to approve HAFA short sales. They may choose to do the short sale based on their own internal rules and the guidelines set by loan investors. In that case, it’s really up to the lender to decide whether it will pursue the deficiency against the borrower.

You can negotiate your way out of deficiency

When negotiating a short sale, many lenders don’t voluntarily offer to release you of liability on the remaining balance of your loan – at least not for free. But you can ask to negotiate a waiver.

Some lenders may ask you to sign a promissory note for at least a small portion of the balance, usually cents on the dollar, or they may ask for a lump sum. Sellers often are outraged when first presented this settlement offer; they sometimes forget they actually borrowed that money.

In many cases, it is usually worth paying upfront to avoid future headaches. There is a price attached to the waiver of deficiency, but most of them are very tiny.

Talk to an attorney

Real estate agents who are experienced in short sales can coordinate the transaction with the bank and tell you what to expect of the process, but remember they are not lawyers.

Most of the people who do short sales are doing it through the Realtors or people who claim to be short-sales specialists. But there are many issues that borrowers need to discuss that cannot be discussed with a short-sale specialist.

Those issues range from potential tax implications to protecting other assets the borrower may own if the lender tries to collect the balance of the loan in the future.

If you don’t understand the contract you are signing or the potential consequences of a short sale, you should consult with a lawyer.

Keep up with HOA payments

If you are thinking about short selling your home, don’t stop paying your homeowners association dues. The fees can turn into a snowball and kill the sale, even if the buyer is willing to pay for the delinquent dues at closing.

In short sales, there are a few problems that money cannot fix. In a regular sale or even with foreclosures, the seller or the bank pays any past dues owed to the HOA at closing so the buyer gets clear title of the property. But in a short sale, the seller’s lender wants to get every penny out of the transaction.

Plus, you want to make sure the association is able to maintain the common areas so your house is sellable. A short-sale property needs to be maintained. The power needs to be on; the grass needs to be cut. You don’t want your home to look like a foreclosure.