Fannie Mae Changes Guides on Gift Funds

Lately, I’ve been getting quite a few questions from homebuyers about the major changes to Fannie Mae (FNMA).  For starters, allow me to define Fannie Mae: Fannie Mae is a government-sponsored enterprise that primarily buys mortgages from lenders for cash or pools them and sells them as mortgage-backed securities to investors on the open market. 

So what’s changing about FNMA?  Like most industries, nothing stays the same for long—and real estate is no exception.  There are many changes coming along that will affect homebuyers in 2014 and one of those is a new FNMA rule with gift down payments.

In the past, most homebuyers have not had the opportunity to use 100% “gift funds” (a financial gift from a spouse or other blood relative, even one’s employer) for their down payment.  So many used the 3% down Conventional (97 LTV) or 3.5% down FHA option, 100% gift (96.5 LTV) options when purchasing a home or they would use a conventional loan with 5% down. But because of major changes to the real estate market, FNMA is now allowing homebuyers to use gift funds to make their 5% down payment on a conventional loan, making the 5% (95 LTV) option much more attainable, particularly for first-time home buyers.

So what does this mean for homebuyers exactly?  A whole lot of opportunity.  In order to get an understanding of this change, I talked with Jim Griffiths, a Mortgage Advisor at Stonegate Mortgage.

“There really is no downside to this change for borrowers,” explains Jim.  “While the 3% down option went away, this allows more home buyers access to conventional lending programs.  It’s perfect for first-time homebuyers who may not have had enough time to save up enough of their own cash reserves to make a down payment.  They can really use this to their advantage.”

The table below will help homebuyers further understand this change and see the minimum borrower contribution requirements for transactions that contain gifts:

As Griffiths stated, with this change, homebuyers are putting more skin in the game, not to mention more investment in the market.  The message here is that investors want to see more “skin in the game” even though it may be 100% gifted funds. 

“Bottom line, if someone can help you with your 5% down payment, you now have that option,” says Griffiths.  “Conventional lending provides a much less expensive option from a mortgage insurance perspective, which lowers the overall monthly payment.  In the long run, it can also be cheaper than an FHA loan. My recommendation is that if it’s available, take advantage of it.”

If you would like to take advantage of this new loan opportunity and begin the home buying process, please contact me today to schedule a private consultation.

Phone: 913.568.7355

Email: tohlde@kw.com

Website: www.toddohlde.com 

Or, if you have more questions regarding the new Fannie Mae guides, or if you want to inquire about qualifying for a home loan, please contact Jim Griffiths:

Phone: 913.951.3786

Email: jgriffiths@stonegatemtg.com

Website: Jim Griffiths

Want more tips and breaking news about the housing market? Stay posted on my Facebook page or contact me.

10 Steps to Choosing and Purchasing Your Home (PART 2)

Be sure to check out PART 1 here!

So you are ready to buy a home.  It’s a big decision and there’s a lot to learn.  But with these 10 quick steps, choosing and purchasing your home will be easier and more seamless than ever before. This guide provides 10 key steps, information and tools in order for you to find, purchase and finance a home that meets your needs and preferences.

 

In a previous blog, I discussed the first 5 steps in helping you choose and purchase your home.  You can read that blog here.  Now, it’s time to discuss the last 5 steps so you can finalize that home purchase and get to the celebrating!

STEP 6:  Obtain a Mortgage

Securing a mortgage is oftentimes more complex and more expensive than a consumer may realize.  That’s why it’s important to be organized and find a competent mortgage loan officer.  Your ABR (Accredited Buyer’s Representative) has already helped other buyers work through the mortgage application process and can also provide valuable assistance.

How to obtain a mortgage:

• Apply for a loan: Your ABR can help you understand the pre-application steps, the information your lender needs, the decisions you will have to make at application, the application costs and the application legal requirements.
• Closing costs and The Truth In Lending Statement: Mortgage costs include appraisal and points (a fee based on the amount of the loan).  Depending on the loan, you may also be required to pay for mortgage insurance.  To help you see everything you’re paying for the length of the mortgage, you will receive a Truth in Lending Statement, which is a good-faith estimate of all of the costs associated with the mortgage.
• Application and lender requirements:  Includes social security number, date of birth, photo identification card, paycheck, W-2 or 1099 tax form, employers, accounts, current assets, liabilities, current and previous addresses, sales contract.
• Special situations:  Lenders may require additional information if you are: self-employed, compensated on a commissioned basis, separated or divorced, social security/pension/disability/any form of public assistance benefits considered as income, bankruptcy/foreclosure or any judgments against you in the past 7 years, Department of Veterans Affairs (VA) Loan Application. 
• Other considerations: Be sure to consider points and rate options and keep in mind that your financial position must be the same at closing as it was when you were approved (don’t buy a new car or purchase anything major!).
• Obtain homeowners insurance:  Before closing, your mortgage will require you to obtain homeowners insurance.  Costs and coverage will vary.
• Escrow accounts:  Decide if you want to pay your property taxes and homeowners insurance policy on your own or if you would rather wrap them into your monthly mortgage payments. 

STEP 7:  Prepare for Closing Day

Many important details must fall in place before you close on your home.  Your ABR will help you stay on track.  The most important details include:

• Completing a home inspection
• Requesting an attorney review
• Finalizing your mortgage
• Getting ready to move
• Attending a final walk-through
• Preparing to pay closing costs

STEP 8:  Close

The actual, legal transfer of ownership is called closing or settlement.  Participants of the closing usually include:

• You, the buyer
• The seller
• The closing agent, the title insurance representative and the escrow agent (one person may fill all these roles)
• The real estate agents
• Attorneys for the buyer and seller

During the meeting, you’ll sign many documents including:

• The closing statement
• The mortgage papers
• A Truth in Lending Statement
• Any additional documents required in your state

Be prepared to provide your payment of closing costs, proof of insurance and approval of inspections, too!

STEP 9: Move

You found your home!  The contract has been signed!  The closing date is set!  Now it’s time to move.  Be sure to plan for the moving day well in advance with these helpful tips:

• Determine cost of moving:  Many people are surprised by the variety of expenses associated with moving, including packing materials, utility connections, insurance, cost of movers, truck rental, etc.  You can eliminate or reduce these costs by investigating moving companies, estimating moving costs and making a moving checklist.
• Moving coverage:  Before you select a mover to help you, confirm that the company is insured and provides coverage for your belongings.  Three of the most common forms of insurance coverage are basic liability, declared value protection or actual cash value and replacement value.
• Packing tips:

o   Begin packing as early as possible

o   When packing, go room by room

o   Make a list of what’s in each box

o   Label all boxes by room

o   Cushion the bottom and sides of boxes

o   Pack heavy items in smaller boxes

o   Packed boxes should not exceed 30 lbs

o   Fill you washer/dryer with clothes, linens and light items

o   Wrap and secure cords

o   Use rope or elastic to secure doors and drawers

o   Let the children help!

Take a look at an online moving checklist to help guide you too!

STEP 10:  Celebrate!

Congratulations!  You’ve worked hard to achieve your dream of homeownership.  I would like to wish you many years of happiness in your home.  Cheers!

Want to learn more?  You can receive your own home buyer’s toolkit at www.toddohlde.com.  Click on Contact Me to send me an email and request your copy.  All you have to do is provide me with your home address.  It’s as easy as that! 

10 Steps to Choosing and Purchasing Your Home (PART 1)

So you are ready to buy a home.  It’s a big decision and there’s a lot to learn.  But with these 10 quick steps, choosing and purchasing your home will be easier and more seamless than ever before. This guide provides 10 key steps, information and tools in order for you to find, purchase and finance a home that meets your needs and preferences. 

Below are the first 5 steps to get you started.  Stay tuned for PART 2 where I will unveil the next 5 steps to keep in mind when choosing and purchasing a home! 

STEP 1:  Find a Qualified Buyer’s Representative

How often do you purchase real estate?  Once, twice, three times in your lifetime?  So you can hardly be expected to know all the ins and outs of such a major transaction complicated by so many details.  That’s when a qualified buyer’s representative comes in handy.

What is a buyer’s representative?  A buyer’s representative (also known as a buyer’s agent) is an advocate for the buyer--not the seller--in a real estate transaction. 

Why should you use a buyer’s representative?  A buyer’s representative can provide the expertise you need throughout the entire transaction, greatly improving your buying experience and potential results.  Plus, retaining a buyer’s representative seldom adds any expense to your transaction! 

Why choose an Accredited Buyer’s Representative?  A REALTOR with the ABR designation has completed Accredited Buyer’s Representative training, specialized education offered by the Real Estate Buyer’s Agent Council (REBAC).  REALTORS with the ABR designation understand the special needs of buyers.  They have additional knowledge and experience that takes them a step beyond an agent who only concentrates on listing property for sellers. 

What issues should you discuss?  After narrowing down your favorite ABR agents, be sure to ask some questions.  This will help you make your final decision.  Topic questions include experience and credentials, references, knowledge, representation, services provided, compensation, finding properties, personal support, negotiating, financing and related service providers. 

 Once you’ve found your ABR, you can discuss compensation (usually commission to the buyer’s agent) and then you may begin working as a team! 

STEP 2:  Assess Your Credit and Finances

Financial considerations and preparations are central to any home purchase.  In addition to helping you make better decisions about what you can afford in a home, a buyer who already has financing in place is in a better negotiating position when it’s time to make an offer. 

Assessing your credit card and finances can be broken down into 6 steps.  Be sure to check off each step before you purchase a home:

• Determine credit status
• Select a lender
• Determine interest rates and duration
• Pre-qualify for a mortgage and get pre-approved before you find your home
• Determine how much you can affordOffer down payment and mortgage insurance

STEP 3:  Asses Your Wants and Needs in a Home

Deciding what you truly want, need and can afford in a home can be challenging.  But your ABR can play a key role in helping you sort out your options.  The following preferences should be discussed with your ABR before you purchase a home:

• Basic criteria (i.e. ideal price, total square footage, type of home, number of bedrooms, number of garages, number of bathrooms, etc.)
• Other home preferences (i.e. age of home, style of home, energy efficiency, floor plans, high priority home features, specialty rooms, storage needs, etc.)
• Location (preferred areas/communities, commuting considerations, proximity to desirable features, views, etc.)
• Lot characteristics (size and shape, landscaping considerations, home orientation)
• Life at home: Take children, pets, live-in parents and others into consideration  
• Trade-offs: If you can’t find what you want, how much are you willing to invest to pay for improvements? Are you willing to consider other neighborhoods that offer better affordability?
• Resale: How long do you plan to live in this home?

STEP 4:  Search for Your Home

Your ABR can direct you to helpful sources of information for evaluating neighborhoods (although due to Federal Fair Housing Laws, they can’t tell you everything you want to know).  When evaluating a neighborhood, keep the following in mind:

• Neighborhood Profile: Research population density and level of commercial development
• Household Data: Family type, average household income and homeowner education level/occupation
• Crime Rate
• Quality of Schools
• Amenities (i.e. shopping, transportation, parks and recreation, restaurants, nightlife, etc.)

After selecting a neighborhood, it’s time to view houses!  You can view homes on your own (at Open Houses, for example) or with help.  Remember that your ABR will help you refine your search if you can’t find what you’re looking for.  To get started, I suggest searching my website on the Home Search page to find your next home.  Another great resource is REALTOR.com.  This site provides online information on millions of properties, neighborhoods and other topics.

STEP 5:  Negotiate Terms

You found your home.  Now it’s time to make an offer.  Lucky for you, your ABR can provide valuable assistance on this regard--counseling you on market conditions, price ranges and negotiation strategies.  

How do I start to negotiate?  First, your ABR will perform a comparative market analysis (CMA) on the property. This will give you a better sense of whether the seller’s listing price is higher or lower compared to other properties.  Other negotiation considerations include if you’re an all-cash buyer, if you are pre-approved for a mortgage and if you do not have to sell your current home before you can complete the purchase.

How do I make an offer?  An offer must be a written contract.  Your ABR will help you use a standard form that is up-to-date with changing real estate laws.  Your ABR will also help you structure your offer and negotiation strategy.  Purchasing offers contain a lot of information.  Keep in mind that the more you demand, the less favorably the sellers may look on your offer.

What about contingencies?  A contingency is a term that must be met for an offer to become a binding contract.  They always weaken the offer, but some are considered normal.  Common purchase offer contingencies include approval of agreed-upon third-party inspections, obtaining specific financing terms, securing a specific job or selling your current home.

What about earnest money?  Earnest money is a cash deposit you make when submitting your written offer on a property to show your “good faith”. 

What are seller disclosures?  Many areas require sellers to disclose any known material defects.  Be sure to ask just in case.  Read and understand all documents.

What if there are multiple offers?  Don’t panic and immediately withdraw your offer.  It is quite possible that you have submitted the winning bid.  Stay involved for at least one round of negotiations, but also establish your maximum price.

What can a seller’s response be?  A seller’s response will either be:

• Accept:  You will have a binding contract as soon as you are notified of the offer’s acceptance.
• Reject:  You are released of any obligation.  The sellers cannot change their minds.
• Counteroffer:  A seller may present a written counteroffer that includes the changes they want to make.  You are free to accept, reject or make a counteroffer to their counteroffer. 
• These 5 steps will help you choose and buy your new home.  But wait!  There are 5 more steps to the home-buying process coming up next in PART 2 of this blog series.  Stay tuned for the next 5 steps including obtaining a mortgage, preparing for closing day, closing, moving and (of course) celebrating!

To receive your own home buyer’s toolkit or to schedule a private consultation to begin your search, visit www.toddohlde.com and click on the Contact Me page.  I look forward to hearing from you! 

Kansas City Radon Levels on the Rise—What Should You Do?

There’s no denying it—the weather in Kansas City has been out of control.  One week we’re boasting 80 degree weather and the next, there’s a blizzard.  But something that we may not have noted is the severe drought that the KC metro region is currently experiencing.  As a matter of fact, we are about to enter month 21 of a large Midwestern drought.  What does that mean for you?  Radon problems.

What is radon?

Radon is a silent (and odorless) gas that can leak into homes from the natural decay of uranium present in all different types of soil.  Radon contains cancer-causing alpha particles that are drawn from parched soil through drought-driven cracks in home foundations.  The US Environmental Protection Agency has linked indoor radon to 20,000 lung-cancer deaths annually. 

Is radon in my home?

You are breathing in radon right now.  And we’ve all been breathing it in since we were born.  It’s a natural process that our bodies have learned to cope with.  It’s when we breathe in too much radon over a long period of time that we need to be weary of.  The homes with the highest levels of radon:

• Have fractures in the foundation, which allows gases to travel through underground channels
• Leave windows open often
• Utilize attic fans
• Have high traffic in and out of the home
• Are geographically located where droughts are prevalent 

Other factors that could affect the circulation of radon gas include:

• Soils and basement footings that shift
• New furnace
• New air conditioning system
• Altered plumbing
• Improved insulation
• Structural additions to a home 

Kansas City radon levels

So if radon levels rise when a drought occurs, why is Kansas City experiencing such high levels?  After all, there’s plenty of wet snow on the ground!  As a matter of fact, despite the snow piles that have taken over the city, no handful of wet-weather events can cancel scientists’ predictions on the drought and radon levels in Kansas City. 

According to the Kansas City Star, KC is one of the nation’s hottest spots for indoor radon levels above what federal authorities consider safe.  Between 33% and 45% of Kansas City homes show radon levels higher than 4 picocuries per liter (the average home tests at a safe 1.3 pCi/L). 

Preventing & testing radon levels

How can you prevent high levels of radon in your home?  It’s actually quite simple!  First and foremost, it’s important to note that you should test your home approximately every 2 years.  The best time to test for radon is in the winter, when a home is sealed up and the furnaces are churning (so why not do it today?). 

In addition to bi-annual testing, the Kansas and Missouri governments are taking action to fight off the chances of radon sickness.  A bill introduced this year in the Kansas Legislature will make radon testing mandatory for every home sale.  This bill will also allow the state to compare the reported levels to health problems diagnosed in residents.  Currently, Missouri is not introducing a bill to require radon testing. 

So how much is this going to cost me?

A DIY radon testing kit can be purchased for less than $10 at your local home improvement store.  Once you have purchased a kit, you may need an additional $10-$30 for lab tests.  If you’d like professional advice, most services cost around $100-$200 in the Kansas City area.  If you decide to hire a professional, look for companies certified by the state of Kansas for radon inspection (Missouri does not have this requirement). 

If you find that your home has over 4 pCi/L, it is time to shop for a mitigation piping system.  These pipes, including installation, will run at about $700-$1,400.  Always remember—it’s better to be safe than sorry!

Your Home Should Go Green with an Energy Audit this St. Patrick’s Day

With St. Patrick’s Day right around the corner, it’s the perfect time to celebrate everything green in your community (and no, I’m not talking about shamrocks and green beer).  I am talking about all of the green initiatives—such as energy efficient buildings and homes.

Is your home “going green” this St. Patrick’s Day?  If so, there is a process you should be aware of—it’s known as the energy audit process.

What is an energy audit? 

An energy audit is the correlation between how much energy your home is currently using and how much it should be using.  Energy audits, which can be provided by certified energy auditors, provide the best cost/benefit analysis for every savings opportunity identified.  At the end of the energy audit process, you will receive a report that highlights any problems or opportunities for you to start saving energy.  From there, you can check out recommendations and further actions in order to turn your home into the green machine it needs to be! 

What does an energy audit solve? 

An energy audit is the only way to make sure that if you spend money on home improvements that you spend it in areas that will truly give you back value on your dollar.  The entire energy audit process answers important questions such as:

• What is causing the energy loss? 
• Is there anything dangerous or unhealthy in the home?
• Where are the potential health issues?
• What are the long-term building performance and durability issues?
• What times will be the most cost-effective to improve the home?

What types of problems will an energy audit find?

Energy audits find many different problems in the home such as:

• High energy bills
• Air leaks
• Inefficient windows
• Missing insulation
• Inefficient cooling/heating equipment
• Poorly insulated ducts
• Mold and mildew
• High humidity and water damage
• Dust
• Hot/cold rooms
• Insulation
• Air leaks
• Medical costs by reducing:
• Indoor allergens
• Dust
• Mold
• Mildew
• Pests
• Reduce reliance on foreign natural gas and other fuels

The future of energy efficiency

Team Ohlde recently spoke with Barry Dicker of Decent Energy, an energy auditor in Kansas.  According to Barry, the real estate industry may change due to process like energy audits.  A new appendix has been written in regards to the appraisal process.  Appraisers now have the ability to value the energy efficiency of homes.  Unfortunately, only 5% of appraisers are actually trained to apply this appendix.  The team at Decent Energy, however, has experienced higher values in homes that have gone through the energy audit process. 

Finding an energy auditor near you

So you’re ready for the energy audit process.  Who should you contact?  Lucky for you, I have three local KS and MO contacts that would provide a great starting point to bring your home the energy efficiency it needs:

1.  Home Green Home Energy Audits (EnergyAuditsKC.com)

Home Green Home Energy Audits is a premier energy auditor for the Greater Kansas City metropolitan area including Raytown, Lee’s Summit, Independence, Blue Springs, Belton and Raymore in both Missouri and Kansas.  Home Green Home Energy Audits provides guaranteed prices complete with insulating services, weatherization, door and window replacement, plumbing, heating and air, remodeling and more.  Home Green Home Energy Audits charges about $400 for homes under 4000 square feet and approximately $600 for homes over 4000 square feet. 

2.  The Hayes Company

The Hayes Company, located at 1000 East 11^th Street in Kansas City, MO provides insulation and home performance solutions throughout the greater KC metro area.  A home energy evaluation from The Hayes Company ranges from a free estimate to a $150 walkthrough (with a blower-door test) to a full-on $400 energy assessment.  The $400 assessment includes a pre-test and computer analysis that calculates the savings in dollar amounts for each improvement recommended. 

3.  Decent Energy

Decent Energy, based out of Leawood, Kansas, serves both eastern Kansas and western Missouri commercial and residential energy audits.  Decent Energy works as an independent auditor and therefore, works with the homeowner to find the best contractors after the audit has been conducted.  The Decent Energy service includes a 13-month process of discussing homeowner comfort issues, visual inspection, measurements, assessment of safety zone issues and air leakage analysis with a blower-door tool.  In addition, the team at Decent Energy retests the home after the improvements have been made.  Decent Energy starts its service with a $550 baseline and then upcharges for additional furnaces (rather than pricing by square foot).  

The Top 10 Remodeling Projects with the Highest Cost Recouped in Kansas City

If you’ve got a fixer-upper or just want to make some improvements on your home, there are some areas that you should focus on first.  Always take into consideration which remodeling projects will get you the highest rate of return.  The higher the cost recouped, the better your remodeling investment was!

So which remodeling projects tend to have the highest cost recouped here in Kansas City?  We took at look at the Remodeling 2013 Cost vs. Value Report which gave us an in-depth look at what homeowners from KC should focus on when it comes to remodeling. 

The top 10 remodeling projects with the highest cost recouped in Kansas City are:

1.  Entry Door Replacement (steel):  This remodeling project includes removing existing 3-0/6-8 entry door and jambs and replacing them with a new 2-gauge steel unit, including clear dual-pane half glass panel, jambs, and aluminum threshold with composite stop.  It also includes replacing the existing locket with a new bored-lock.

• Cost: $1,201
• Resale value: $913
• Cost recouped: 76.0%

2.  Deck Addition (wood):  Adding a deck to a home includes adding a 16-by-20 foot deck using pressure-treated joists supported by 4x4 posts anchored to concrete piers.  This remodeling project includes installation of pressure-treated deck boards in a linear pattern, built-in benches and planters, stairs (3), and a complete railing system to include wood posts, railings and balusters. 

• Cost: $10,152
• Resale value: $7,231
• Cost recouped: 71.2%

3.  Deck Addition (Composite): Add a 16-by-20-foot deck using pressure-treated joists supported by 4x4 posts anchored to concrete piers. Install composite deck material in a simple linear pattern. Include a built-in bench and planter of the same decking material. Include stairs, assuming three steps to grade. Provide a complete railing using a matching system made of the same composite as the decking material. 

• Cost: $16,026
• Resale value: $11,356
• Cost recouped: 70.9%

4.  Garage Door Replacement:  A garage door replacement includes removing and disposing the existing 16x17 foot garage door and tracks.  Then, install a new 4-section garage door on a heavy-duty galvanized steel track (but reuse the existing motorized opener).  The new door is usually high tensile strength steel and foam insulated to minimum R-12 with thermal seals between pinch-resistant panels.  Windows in top panel are ½ inch insulated glass.  Hardware includes galvanized steel hinges and ball-bearing urethane rollers.  

• Cost: $1,551
• Resale value: $1,048
• Cost recouped: 67.6%

5.   Entry Door Replacement (fiberglass): For this project, remove existing 3-0/6-8 entry door and jambs and replace with new fiberglass unit with simulated wood grain, stained same color both sides; dual-pane, decorative halfglass panel with zinc caming; PVC-wrapped exterior trim in color to match existing trim; 2.5-inch interior colonial or ranch casings in hardwood stained to match door. Replace existing lockset with mortise lock with lever handle and integrated deadbolt in oil-rubbed bronze or satin-nickel finish.

• Cost: $2,834
• Resale value: $1,853
• Cost recouped: 65.4%

6.  Window Replacement (vinyl): In this project, replace 10 existing 3x5 foot double-hung windows with insulated vinyl replacement windows. 

• Cost: $10,299
• Resale value: $6,718
• Cost recouped: 65.2%

7.  Window Replacement (wood): Replace 10 existing 3x5 foot double-hung windows with insulated vinyl replacement windows. 

• Cost: $11,193
• Resale value: $7,225
• Cost recouped: 64.6%

8.  Minor Kitchen Remodel: A minor kitchen remodel includes a 200-square-foot kitchen with 30 linear feet of cabinetry and countertops.  Replace front of cabinet boxes with new raised-panel wood doors and drawers, including new hardware.  Replace wall oven and cooktop with new energy-efficient models.  Replace laminate countertops and install mid-priced sink and faucet.  Repaint all trim, add wall covering and remove and replace resilient flooring. 

• Cost: $19,539
• Resale value: $12,474
• Cost recouped: 63.8%

9.  Siding Replacement (vinyl):  This project includes replacing 1,250 square feet of existing siding with new vinyl siding.  Include all 4/4 and 5/4 trim using either fiber-cement boards or cellular PVC.

• Cost: $12,142
• Resale value: $7,378
• Cost recouped: 60.8% 

10.   Attic Bedroom Remodel:  This project includes converting unfinished attic space into a 15-by-15 foot bedroom and a 5-by-7-foot bathroom with shower. It includes a 15-foot shed dormer, four new windows, and closet space under the eaves. Insulate and finish ceiling and walls along with carpeting the floor.  Extend existing HVAC to new space; provide electrical wiring and lighting to code, retain existing stairs, and add a rail and baluster around stairwell.

• Cost: $51,932
• Resale value: $31,314
• Cost recouped: 60.3%

Top 4 Things Homeowners Need to Know About The Fiscal Cliff

The fiscal cliff.  You may have heard of it and you may know what it is.  But how does the fiscal cliff affect homeowners and the real estate industry?  I have narrowed down the top 4 things homeowners need to know about the fiscal cliff in 2013:

1.  It’s all about the dates. 
There are some important dates that will affect you as a homeowner.  But what day is important and what day isn’t?  Here’s what you really need to remember:

• The bill was signed into law by President Obama on January 2, 2013. 
• Mortgage Cancellation Relief is extended for one year to January 1, 2014.
• Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012.  
• 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
• 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

2.  Pease Limitations
Pease Limitations reduce the value of itemized deductions and are permanently repealed for most taxpayers.  These will, however, be reinstituted for high income filers (individuals earning more than $250,000 and joint filers earning above $300,000).  The amount of adjusted gross income above the threshold is multiplied by 3 percent, however, the total amount of reduction cannot exceed 80% of the filer’s itemized deductions.

3.  Capital Gains
Capital Gains rate stays at 15% for those in the top rate of $400,000 (individual) and $450,000 (joint) return.  After that, any gains above those amounts will be taxed at 20%.  The $250,000/$500,000 exclusion for sale of principal residence remains in place.

4.  Estate Tax
The first $5 million dollars in individual estates and $10 million for family estates are now exempted from the estate tax.  After that the rate will be 40 percent, up from 35 percent.  The exemption amounts are indexed for inflation.

To learn more about the fiscal cliff, be sure to visit the following resources:

• Realtor.org
• Bonds.About.com
• Forbes.com