Prepare your home for a sale

by Dan Krell
DanKrell.com
© 2013

Home for sale

It may be an exciting year, especially if you’re planning to sell your home. If you’re like most home sellers, you’ve got some work to do to prepare your home before it goes on the market. So, let’s get to it…

One of the most important things to do before you list your home is to declutter. Decluttering can be an overwhelming endeavor because of a commonly held misconception that the goal is to make your home immaculate. Rather, the underlying principle to decluttering is to remove items from rooms to give a more spacious feel; you decide what items get thrown out, donated, or kept in storage. So as not to get overwhelmed, plan the decluttering; rather than trying to complete the activity in one weekend, try decluttering one room (or even one part of a room) per day.

After the decluttering, you’re often left with items that need to be thrown out. However, some items require precautions and/or special disposal: some items may need to be recycled; some may need special handling; while some may need to be hauled to a processing facility. The county or municipality may offer special pick up for some items that cannot be disposed of by the regular trash collection. If you’re unsure about the disposal of certain items, call your local “Department of Waste Services,” (like my local Montgomery County Division of Solid Waste Services) which can offer guidance and information for local disposal/recycle procedures, facility locations and hours.

“Neutralize” your home to provide a vision to home buyers how they can live in the home. Although you’ve spent years giving your home a personal touch; items such as trophies, awards, diplomas, family and personal photos should be removed because they can distract home buyers’ attention from the home itself.

Home buyers should feel at ease when viewing your home. Having too much and/or over-sized furniture can make an otherwise large room feel cramped. Eclectic furniture collections and furniture that is wrongly placed can not only make a room look awkward, but can also give people an unsettling feeling.

Does your home need staging? Home staging is a way to create a “vision” for home buyers by adding a modern flair. Some home sellers stage every room, while some only stage featured rooms to be focal points of the home. Although home staging can be expensive, it doesn’t have to be. Sometimes having an extra lamp or removing a painting from a wall can make the difference between shabby and chic. If your furniture is out of date or in poor condition, consider a short term furniture rental for that featured room.

Although we’ve talked about your home’s interior – don’t neglect the exterior of your home. Home buyers’ initial opinions are created as they approach your home; no matter how nice your home looks on the inside, it may not matter if home buyers never make it inside. Simple landscaping can make a lawn appear “manicured.” Make sure that the home’s siding is clean and in good condition.

Your real estate agent should be able to provide guidance to prepare your home for sale. If home staging is a goal, many agents either work with a home stager or have been certified for home staging. You can also research home staging by visiting The International Association of Home Staging Professionals website (IAHSP.com).

More news and articles on “the Blog”
Protected by Copyscape Web Plagiarism Detector
This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

Consider rescheduling closing instead of a post-settlement occupancy

Home sellers and buyers look forward to closing day, when the deed to the home transfers; and in a perfect world, everyone moves on with their life. However, there are times when the seller asks to stay in the home after settlement. Ideally, a post-settlement occupancy can be avoided by adjusting the settlement date to accommodate the extra days needed to stay in the home. But alas, the world is not perfect and sometimes a post-settlement occupancy is quickly arranged. Whether you’re the home seller or the buyer, make certain you understand the post-settlement occupancy agreement: what you’re getting into, as well as your risk and liability.

Typically, when someone “rents” a home, a standard lease is used; but since the post-settlement duration is usually very short, the post-settlement occupancy agreement is mistakenly an afterthought to the home sales contract. Here in Maryland, there may be various forms that are specifically used in a particular region for this purpose; such as the one that is used here locally.  Just like the sales contract, the post-settlement occupancy agreement contains terms and conditions, including duration and fee collected.

Additionally, a deposit is collected in case there are damages to the home during the post-settlement occupancy. The buyer usually has a walkthrough prior to the settlement, as well as at the end of the post-settlement occupancy to ensure that there is no damage and the home is conveyed in the condition that is expected.

Unfortunately, the risk of loss and liability to the home during a post-settlement occupancy can be vague. Even if the post-settlement occupancy agreement specifies who is responsible for such loss, there may be additional considerations.

moving dayIt is usually expected that the seller repair any damage they caused during their post-settlement occupancy. But what about damage or loss caused by a fire or an extreme weather event (such as a tornado or a hurricane)?

Even if the post-settlement occupancy agreement is specific about risk of loss and liability, your insurance company might have a different view of risk of loss and liability in a post-settlement occupancy arrangement. Any insurance carried by the home seller may limit or exclude coverage from such damage/loss that occurs during the post-settlement occupancy. Furthermore, the buyer’s home owner’s policy may have exclusions and/or limitations for coverage if the home is vacant or occupied by anyone other than the policy holder. Consult with your insurance company.

Another consideration is that the buyer’s mortgage company may have restrictions about a post-settlement occupancy. The mortgage note may specify that the home be “owner occupied;” which means that the home is not to be rented. A post-settlement occupancy by the seller may infringe on the terms and conditions of the mortgage note. Consult with your mortgage company.

Even if your real estate agent is able to explain the post-settlement occupancy agreement to you, there are considerations other than what is written on the form – you should consult with your attorney before entering into such an agreement.

Due diligence is required before entering into a post-settlement occupancy agreement. Consult with your agent about rescheduling settlement, if possible. Additionally, consult your attorney, insurance agent, as well as your mortgage company to make certain you understand the terms and conditions of the agreement, as well as your liability and risk of loss.

Original published at https://dankrell.com/blog/2012/11/08/consider-rescheduling-closing-instead-of-a-post-settlement-occupancy/

By Dan Krell

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.
Google+

Medicare tax on real estate transactions

medicare taxAs pundits and commentators speculate about the Supreme Court’s opinion on the Patient Protection and Affordable Care Act of 2010 (PPACA), the National Association of Realtors® (NAR) reminds us that the 3.8% tax on unearned income imposed by PPACA is not a transfer tax. This is a tax collected on “unearned income” is to be applied to the Medicare Trust Fund (e.g. a medicare tax).

Although the new tax is not a transfer tax, it could apply to your home sale. Unlike transfer taxes, which are collected by state and local governments when real property is transferred between individuals; the “Medicare tax” is not calculated on the sale price nor is not applied to the proceeds from every real estate transaction. Rather, the tax provision kicks in when specific thresholds are met.

Incidentally, even though a real estate transaction may meet the threshold to be taxed under the new Medicare tax; it’s not the only “unearned income” that may be taxed under this provision. According to the NAR “Medicare tax faq”, “Unearned income is the income that an individual derives from investing his/her capital. It includes capital gains, rents, dividends and interest income. It also comes from some investments in active businesses if the investor is not an active participant in the business. The portion of unearned income that is subject both to income tax and the new Medicare tax is the amount of income derived from these sources, reduced by any expenses associated with earning that income. (Hence the term “net” investment income.)”

real estate - doctor officeTo clarify, Henry Paula explains the Medicare tax in his January 2011 article (Planning for affluent taxpayers under the 2010 healthcare reform. The CPA Journal, 81(1), 46-47); “Under the Patient Protection and Affordable Care Act (ACA) …there is a new 3.8% tax imposed on the net investment income of certain individuals, estates, and trusts considered to be high earners.”…“For tax years beginning after Dec 31, 2012, a 3.8% tax, called the Unearned Income Medicare Contribution, will be imposed on the lesser of net investment income or an individual’s modified adjusted gross income in excess of: $250,000 if married filing jointly, $125,000 if married filing separately, or $200,000 if filing single.” Mr. Paula summarizes, “The 3.8% tax will affect taxpayers with business activity income from activities that are passive for the particular taxpayer and generate net investment income that, when combined with other income, is in excess of the thresholds…”

The NAR gives this example (from the Medicare tax faq), “If AGI for a single individual is $275,000, then the excess over $200,000 would be $75,000 ($275,000 minus $200,000). Assume that this individual’s net investment income is $60,000. The new 3.8% tax applies to the smaller amount. In this example, $60,000 of net investment income is less than the $75,000 excess over the threshold. Thus, in this example, the 3.8% tax is applied to the $60,000… If this single individual had AGI [of] $275,000 and net investment income of $90,000, then the new tax would be imposed on the smaller amount: the $75,000 of excess over $200,000.”

Aside from the anticipation of the Supreme Court opinion, the new Medicare tax will begin in 2013. If you’re planning a home sale, consult your CPA, financial planner, and any other tax specialist to determine if (and how) the new Medicare tax applies to your situation.

Original located at https://dankrell.com/blog/2012/04/05/medicare-tax-on-real-estate-transactions-and-other-unearned-income/

By Dan Krell

More news and articles on “the Blog”
This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

Coping with the stress of the real estate transaction

Unless you are under the care of a psychiatrist prescribing you Valium, “stress free” is not something that comes to mind when describing real estate. According to the American Institute of Stress (stress.org), stress is subjective and can originate from negative and positive experiences.

On the “Holmes-Rahe Social Readjustment Rating Scale” otherwise known as the Holmes and Rahe Stress Scale (Holmes & Rahe 1967), having a mortgage over $10,000 rates 31 (just above being foreclosed upon) and moving is rated as 20. This commonly used stress scale (which rates life events to determine risk of illness) is cumulative, so the rating for buying a home is at least 51. Your stress level obviously increases when you add in other life stressors such as (but not limited to): getting divorced (73); getting married (50); having a baby (39); changing careers (36).

The reason why buying a home may rate so high on the Stress Scale is that, unlike other transactions, buying (and selling) a home is a large emotional investment! Gordon Gekko, from Oliver Stone’s Wall Street, was on to something when he said, “don’t get emotional [over stock], it clouds your judgment.” Emotions often become amplified when stress increases and can interfere with judgment.

Although most real estate agents don’t understand stress (what it is or how it’s reduced), it does not stop them from lecturing and blogging about “reducing stress” during the home buying or selling process. Being prepared and dividing the buying/selling process into segments is common advice and makes sense. This guidance often helps buyers and sellers feel a sense of “control” by understanding what to expect. However, the wonderful thing about real estate is that every transaction presents a new set of personalities, conditions, and (sometimes) problems. Reactions among buyers and sellers, as well as real estate agents, vary depending on their personalities and life circumstances. So no matter how much you plan, prepare, and visualize what it may be like, stress can be produced just by going through the process (created by both positive and negative feelings).

For some, being prepared is enough to help them anticipate and deal with most circumstances that may arise; while for others, the act of preparation may actually increase stress. Emotional factors, often based on needs and fears, can play a key role in your stress levels. Sometimes your needs are beyond your control and can increase your stress level, such as the need to stick to stringent timelines. And sometimes your needs can adapt and change which can mitigates your stress, such as finding the “perfect home.”

Fears about the outcome of the transaction can increase your stress, especially if you’re a first time home buyer. Common buyer fears include mortgage approvals and rising interest rates; sometimes buyers fear that the home inspection may reveal problems with the home. Common home seller fears include the home buyer’s qualifications and the ability to consummate the sale.

Good real estate agents know how to address the needs and fears of the real estate transaction to keep stress levels in check. Regardless, some people may turn to self help, “pop” or common stress reduction techniques (such as meditation); and if the stress is overwhelming, it wouldn’t hurt consulting with your physician or a qualified mental health professional – especially if you’re already stressed by your job, family and other life stress.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Permission to use this article is by written consent only.

By Dan Krell
Copyright © 2010

Summer-ize your home to attract buyers

Summer-ize your home to attract buyers

by Dan Krell © 2009.

www.DanKrell.com

You might think that the weather is warming up more than the real estate market, but lo-and-behold the spring market is experiencing increased activity! If you’re planning to put your home on the market, or if it is already listed for sale, you probably know that preparing your home to sell means de-cluttering and fixing those little items you’ve been putting off for some time. No matter how much preparation you do, don’t forget to summerize to make your home more appealing to home buyers.

Summerizing your home means paying attention to the items that are noticeable during the warmer months of the year; such as the curb appeal and the interior comfort. There is nothing worse than making excuses during your open house about the unkempt lawn or a broken air conditioning unit. Neglecting these items can be a deterrent to buyers or (worse yet) even make your home appear to buyers as if you are selling a distressed property.

There’s more to curb appeal than just keeping your lawn mowed! Basic curb appeal considerations include the home’s landscaping, grading, siding, deck, driveway and sidewalks.

Simple landscaping can make your lawn appear well manicured; but imagine what a professionally landscaped yard can do! Trees properly trimmed away from the home will allow your home to be seen from the street as well as not be “crowded” by overhanging limbs. Neatly trimmed and properly placed shrubs and flower beds will not only look beautiful, it will enhance your home’s façade!

Heavy summer storms can wreak havoc on poorly graded yards, which can allow water to seep into your basement. Ensure that the grading around your home diverts water away from the foundation.

Clean and properly painted siding (including facia boards and window trim) is often overlooked by home owners. If the entire exterior does not need painting, look for the areas that appear to be peeling or bare. Facia boards and window trim are often made of untreated wood and typically need more attention (even if your siding is made of artificial materials). If your home has algae or mold growing on the siding, consider having the siding power washed; power washing can not only clean the siding, but may return the new home “glow.”

Don’t let a faded or splintered deck turn away home buyers; consider adding it your power wash list. Power washing your deck and patio can give them a fresh look. You might consider staining or sealing your deck and patio to give the new home owner the possibility of a few years of care free use.

Cracked sidewalks and driveway are not only unsightly, they can also be a trip hazard. Repairing and/or sealing the walkways and driveway can not only increase safety – it can add to the appearance of your home. A newly sealed asphalt driveway can add contrast to accent the exterior of your home.

Let’s face it, air conditioning that does not keep your home cool is a buyer deterrent- especially in the hot summer months. If you don’t service your air conditioning system on a regular basis, you should consider doing so before listing your home.

Summerizing your home will not only attract home buyers, it shows pride of ownership providing incentive for home buyers bring you an offer.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of April 27, 2009. Copyright © 2009 Dan Krell