Should Rent Your Home Instead of Sell?

A simple decision to rent your current home instead of selling it when moving to a new home could have far reaching consequences.
If you have a considerable gain, in a principal residence and you rent it for more than three years, it can lose the principal residence status and the profit must be recognized.
Section 121 provides the exclusion of capital gain on a principal residence if you own and use it as such for two out of the last five years.  This would allow a temporary rental for up to three years before the exclusion is lost.
Let’s assume there is a $100,000 gain in your principal residence.  If it qualifies for the exclusion, no tax would be owed. If the property had been converted to a rental so that it didn’t qualify any longer, the gain would be taxed at the current 20% long-term capital gains rate and it may incur a 3.8% surcharge for higher tax brackets.  At least $20,000 in taxes could be avoided by selling it with the principal residence exclusion.
Depreciation, a tax benefit of income property, is determined by the improvement value at the time of purchase or at the conversion to a rental whichever is less.  If the seller sold the home and took the exclusion and then, bought an identical home for the same price, he would be able to have 60% more cost recovery and avoid long term capital gains tax.

It is always recommended that homeowners considering such a conversion get advice from their tax professional as to how this will specifically affect their individual situation.

Planning a Garage Sale?

A well-planned garage or yard sale can make room in your home, get rid of unused items and make some money but it needs some planning to be successful.

• Start early to research and plan
• Promotion is key
• Display items attractively
• Price items right
• Organize checkout

Saturdays are generally the best day but there may be some exceptions.  Experienced garage-salers believe that a well-planned one-day event will do as well as a multi-day event.  Serious purchasers will look for the “new” sale and most people don’t come back multiple days.
Advertise in local newspapers and free online classified sites like craigslist.  If several families are going together for the sale, mention that in the ad; it will be a big draw.  Mention your bigger-ticket items like furniture, equipment and baby items.
Garage sale signs can be purchased or made at Staples, Fedex Office or Kwik Signs.  Signs need large lettering so they’re easy to read while people are driving. Most important info: Garage or Yard Sale, address, date and time.  Directional signs are also important.  Balloons and streamers to attract attention to the signs are very helpful.
Consider using the service Square so that you can take credit cards.  The cost is 2.75% per swipe and can be done on your smartphone or iPad.  You’ll need to sign up at least two weeks in advance to receive your reader.
Unless you’re having an estate sale, keep your home locked.  You don’t want people wandering through your home while you’re outside.  If you start to accumulate a lot of money, take some of it inside.  Don’t discuss how much money you’ve made during the sale or how successful it has been.
People will want to bargain; it’s the nature of the game.  Consider this strategy: less negotiations early in the sale and possibly, more toward the end of the sale.

Paying Off That Mortgage

0% financing has induced car buyers into taking the plunge because it doesn’t cost anything to use someone else’s money.  While mortgage rates are not at zero, they’re close enough that many buyers are applying similar logic.
Qualified mortgage interest is deductible on taxpayers' returns subject to the maximum acquisition debt of one million dollars.  For the fortunate homeowners who have paid off their mortgage, their acquisition debt was reduced to zero and only the interest on a maximum home equity debt of $100,000 is deductible.
If you have to pay interest, deductible interest is preferable because it reduces your actual cost.
Consider the following example of a taxpayer with a $500,000 debt-free home.  If they did an 80% cash-out refinance of $400,000, $100,000 would be considered home equity debt and the interest on that would be deductible on their income tax.  The other $300,000 of debt is considered personal debt and the interest is not deductible.
However, because the rates are currently so low, the loss of deductibility of the interest doesn’t have as much impact as if the rates were higher.  The key is to have a good purpose for the money that would offset the actual cost of the interest.
Paying off a higher rate debt such as credit cards, student loans, possibly, business debt could all have significantly higher interest rates.  Refinancing a home and eliminating debts like these could be a big savings.
All lenders are not the same.  Call for a recommendation of a trusted mortgage professional.

Guide to Having Good Neighbors

A good neighbor might be characterized as someone who’ll look after your home when you’re out of town by picking up your mail and watering your plants.  You’d most likely reciprocate for anyone who’d be so generous toward you.
In some cases, you might only be able to name one or two of your neighbors who would step up to that level of service.   Wouldn’t it be nice if more people on your street would be happy to make that offer?
The solution may just start with being a better neighbor first.  The following suggestions go a long way to improving your neighborhood and making new friends at the same time.

• Meet your neighbors and exchange phone numbers and email addresses.  Agree with each other that you’ll let them know if you see something strange going on at their home. 
• Slow down when driving through the neighborhood; it will make it safer and everyone will appreciate it. 
• Control your dog: keep it on a leash; pick up after it; don’t let it bark too much.
• Don’t park in front of your neighbor’s home.
• Notify your immediate neighbors when you’re having remodeling done and ask them to let you know if any of the contractors cause damage to their property.
• Let your neighbors know when you’re having a party and that there will be more cars on the street than usual.
• Maintain your home and yard so that it adds to the beauty of the neighborhood.
• Put your garbage out for collection on the correct day and bring the containers back in promptly.

In reality, it is fairly obvious; you just have to think of the things that you’d want from your neighbors.  Be friendly; don’t be noisy; offer a helping hand when available and respect each other’s boundaries.  Having a sense of community and that you all share the neighborhood can be underlying principles that will guide your behavior.
A good neighbor would be aware of suspicious activity and would call their neighbors and the police if warranted.  This might be something you can discuss with your neighbors.  Click here for a template to record your immediate neighbor’s contact information and keep readily available if needed.

Christmas Tree Safety

Fresh holiday trees are beautiful, smell great and really add to the spirit of the season.  Following some proven safety tips might help you avoid a disaster and keep the Grinch away.

• Select a tree with fresh green needles that don’t fall off when touched or when the trunk is tapped on the ground.
• When trees are cut too early, they have a greater risk of drying out and can become more dangerous especially with electrical lights.
• Cut 1” to 2” off the base of the tree before placing it in the stand to facilitate it drawing water to the limbs and quills.
• Trees require water similar to cut flowers or they’ll dry out. Tree stands should hold at least one gallon of water and it should be checked every day.  A six foot tree could use up to a gallon of water every two days.
• Position the tree a minimum of three feet or further from heat source like fireplaces, space heaters, heat vents or candles.  Do not allow the tree to block an exit.
• Lights should be labeled from an independent testing laboratory and intended for indoor use.
• Follow manufacturer’s recommendations for how many strings of lights can be connected to each other.
• Turn off all tree lights when you go to bed or leave the home.
• If the tree becomes dry and begins shedding needles, it can be a fire hazard and should be removed from the home.  Even if the holidays are not over, it is not worth the risk to keep it in your home.
• After the gifts have been opened, don’t return the paper and boxes under the tree.
• Remove the tree as soon as possible after the holidays.
• Trees should never be burned in a fireplace.  The trees will burn very hot and quickly when they are dry and could spread outside of the fireplace which could cause an unfriendly fire.
• Check to see if there is a recycling program for holiday trees in your community.

The National Fire Protection Association reports that “one of every three home Christmas tree fires are caused by electrical failures and a heat source too close to the tree causes roughly one in every six of the fires.” 

Listing Your Home? Choose an Agent Wisely

A list of talking points can be very valuable to guide the conversation with an agent that will lead to a decision to have he or she represent you in the sale of your home.  If you haven’t been through the process before or it has been a while, the answers to these questions can reveal things about the experience and where-with-all of your candidate.
Even if you only intend to interview one agent and maybe they are a trusted friend, it is appropriate to understand how different issues will be handled.  Professionals should not feel challenged to discuss these important concerns.

1. Tell me about your experience and training.

2. Do you work real estate full-time?

3. Are you a REALTOR® and a member of MLS?

4. What is the average price of the homes you have sold and how many did you sell last year?

5. Which neighborhoods do you primarily work?

6. How many homes have you sold in my neighborhood?

7. What is your list price to sales price ratio?

8. How many buyers and sellers are you currently working with?

9. Tell me about the positives and negatives of my home?

10. Describe your marketing plan for my home and if you will use outside professionals.

11. Specifically address Internet exposure, open houses and showings.

12. Describe how you’ll keep me informed all along the way.

13. Will I work directly with you or with team members?

14. Can you provide me with three recent references?

You might have noticed that price was not in the list of talking points.  The seller sets the price but the market and the buyer determine the value.  The agent can advise you about the proper range that will insure activity and ultimately affect your final proceeds.  The advice should be based on facts that are available to all agents as well as the prospective buyers and the appraisers.
The decision to list a home with a particular agent and company should never be based on the listing price suggested by the prospective agent.

Homeowner Taxpayer

IRS allows taxpayers the option to take the standard deduction or the itemized deduction.  The astute taxpayer will compare to see which one will result in the greatest deduction and the election can be made each year.
The 2013 standard deduction for a married couple filing jointly is $12,200 and $6,100 for a single taxpayer.  It doesn’t require any proof of actual expense and has no requirement for home ownership.
Items that can be included on Schedule A for itemized deductions include:

• Certain taxes paid for state and local income tax, general sales tax, real estate property taxes, personal property taxes or other taxes paid
• Qualified home mortgage interest, investment interest or possibly, mortgage insurance premiums
• Charitable contributions
• Casualty or theft losses
• Medical and dental expenses that exceed 7.5% of adjusted gross income if born before 1/2/49 or 10% if born after 1/2/49
• Job expenses and other miscellaneous deductions that exceed 2% of adjusted gross income

A non-homeowner taxpayer who has been taking the standard deduction needs to consider that it isn’t just the ability to deduct the mortgage interest and property taxes.
While the standard deduction might be the obvious choice for a non-homeowner, the combination of the mortgage interest and the property taxes plus other allowable deductions not recognized previously such as charitable contributions, now makes taking the itemized deductions significantly more advantageous.

Protecting Your Home in Winter Weather

Below is information from State Auto about how to protect your home from Ice Dams and Freezing Pipes.

 

As if slippery sidewalks and snow-covered cars aren’t

bad enough during the winter, you face another potential

headache: ruined carpets and water damage to your ceilings

and walls from leaks caused by ice dams or bursting

pipes. You may be able to avoid the resulting aggravation

and expense by taking basic steps right now to prevent this

kind of damage.

Ice Dams

An ice dam is an accumulation of ice at the lower edge of

a sloped roof, usually at the gutter. Once an ice dam forms,

the potential damage can be serious. Take these steps now

to avoid trouble later:

 

• Keep the attic well-ventilated. The colder the attic, the

less melting and refreezing on the roof.

• Keep the attic floor well insulated to minimize the amount

of heat rising through the attic from within the house.K-950-E (0213)

Freezing Pipes

Frozen water in pipes can cause water pressure buildup

between the ice blockage and the closed faucet at the end

of a pipe, which leads to pipes bursting at their weakest

point. To keep water in pipes from freezing, take the following

steps:

• Fit exposed pipes with insulation sleeves or wrapping to

slow the heat transfer.

• Seal cracks and holes in outside walls and foundations

near water pipes with caulking.

• Keep a slow trickle of water flowing through faucets

connected to pipes that run through an unheated or

unprotected space.

Keep these in mind to reduce your severe winter weather risk.

Holiday Safety Tips: Ladder Safety

 
The following information is taken from Traveler's website where it features different tips on how to stay safe this Holiday Season.


https://www.travelers.com/prepare-prevent/holiday-safety.aspx

 

Ladder Safety 

Ladder safety should start before even stepping foot on one. The improper use of a ladder, or using an object other than a ladder to reach an item, can result in serious injury due to over – reaching or falling. Statistics suggest that workers are more likely to abuse and misuse ladders rather than use them correctly in the workplace.

There are a number of factors that must be considered when working with ladders, and following key practices of ladder safety can help prevent a potential injury.

• Inspect a ladder for cracks, loose rungs, slivers and sharp edges prior to every use. If the ladder appears to be in poor condition, do not use it.
• Use caution while carrying or moving ladders.
• Practice team lifting if the ladder is too long or heavy for one person to move.
• Ladders should be carried horizontally rather than vertically, unless it is lightweight or under eight feet tall.
• Ensure ladders are set on firm ground and against a solid support during use.
• When using a non-self-supporting ladder, which must lean against a wall or other support, be sure to position it at such an angle that the horizontal distance from the top support to the foot of the ladder is about 1/4 the working length of the ladder.
• Always completely open the step ladder and make certain it is stable before using it.
• Make note of the maximum intended load and manufacturer's rated capacity when selecting and using ladders.
• Do not stand higher than the second step from the top.
• Never stand or sit on the top step.
• Do not use metal ladders near electrical exposures.

 

Tomorrow we will look at holiday theft.

Thinking About Refinancing Your Home?

Most people are familiar with the various reasons a homeowner refinances their home which generally result in two major benefits: saving interest and building equity.
There is however another reason to refinance which may not be as common which is to remove a person from the loan. In the case of a divorce, when one party wants to keep the home and the other party wants their equity out of the home, it is possible for the remaining party to refinance the home. If the equity is sufficient to justify it and the remaining owner can qualify for the new loan, the refinance can provide the proceeds to buy out the other spouse.
Refinancing to remove a person from the loan could also involve a situation where two or more heirs jointly own a property and have differing opinions on when to sell. The same situation could apply to a rental property with multiple owners and the refinance would provide a way to buy out a partner.
Sometimes, it’s not about taking cash out of the home to buy out the other party. If a person’s name is on the mortgage, they’re responsible if it goes to default. One party may be willing to deed the home to the other party but it doesn’t necessarily relieve them of the liability of the mortgage they originated.
Many times, once a person has made their mind to move on, they’ll take the fastest and easiest way out. Removing a person from the deed or a mortgage is a reason to consider obtaining legal advice to protect your interests. Refinance Analysis calculator.
Reasons to Refinance

1. Lower the rate
2. Shorten the term
3. Take cash out of the equity
4. Combine loans
5. Remove a person from a loan

Homeowners At A Young Age

Fannie Mae, in a recently released study, states that consumer attitudes continue to be favorable about homeownership, particularly with the younger generations, ages 18 to 34. Slightly over half of them think that owning makes more sense than renting when comparing the financial and lifestyle benefits.

90% of aspiring owners expect to purchase a home someday and slightly over half think they’ll do it within five years. The primary challenges are having sufficient savings and the difficulty of getting a mortgage today. Younger renters see renting as a temporary stepping stone toward homeownership.

Homeowners are far more likely than renters to be “very positive” about their housing experience. Some of the benefits identified are:

• Having control over what you do with your living space 
• Having a sense of privacy and security 
• Having a good place for your family or to raise your children 
• Having the best investment plan 
• Living in a nicer home 
• Building up wealth 
• Saving for retirement 
• Living in a place where you and your family feel safe 
• Feeling engaged in your community

To satisfy a buyer’s doubts about qualifying for a mortgage, make an appointment with a trusted mortgage professional. If you’d like a recommendation at no cost or obligation, please contact me at kexcell@triplettcompanies.com.  Check out this Rent vs. Own to see the real cost of owning a home.

For more information about the Fannie Mae survey in presentation form, Click Here.

REFUSING TO RENEW A POLICY AND POLICY CANCELLATION

Insurance companies agree to insure clients against unexpected occurrences in return for a sum of money called a premium.

Occasionally, insurance companies divest themselves of current clients by either:

      a.  refusing to renew the current insurance policy, or

      b.  cancelling the current insurance coverage for a client. 

Such actions are normally taken against clients an insurance company deems “bad risks.”  A bad risk client is usually a client who has either submitted too many claims in a given time period or who has submitted a very large claim (in comparison to the premium that has been collected by the insurance company).  Of course, fraudulent claims made by a client, if discovered, will lead to an immediate cancellation of an insurance policy followed by legal action against the client. 

If an insurance company refuses to renew its insurance coverage for a client, normally your insurance agent can find another insurance carrier to insure you.   However, when a client is “cancelled” by an insurance carrier, it is more difficult to find a new insurance carrier.

For more detail regarding an insurance policy non renewal or an insurance policy cancellation, contact either Andrea Shearer, Tessa Everman, or Burton Heginger at Triplett Companies at phone number 515/232-5240. 

Insurance Premiums

The cost of personal home and auto insurance is on the rise.  For the past several years, many insurance companies have collected less money from the insurance premiums being paid by clients than they have paid out in client claims.

Insurance premium rates are a function of both the individual and group costs and claims environment.

A portion of the insurance premiums collected by an insurance company are set aside and invested.   When a claim is incurred by an insured, monies are removed from the pool to pay the claim.  If an insurance company incurs more claims than the insurance premium funds it has collected and invested, it will be forced to raise the rates it charges for its insurance.

Of course, insurance premium increases must be approved in advance by the state regulatory body overseeing insurance companies.   But, in the past few years (2010-2012), many national insurance companies have incurred losses in excess of their set aside, invested premium funds.  Hence, many insurance companies are asking their state regulatory body for increased insurance premiums.

If you have experienced an increase in insurance premiums, please do call 515/232-5240 and ask for Andrea Shearer, Tessa Everman, or Burton Heginger at Triplett Companies for advice and help reducing your current premium.

FRIVOLOUS INSURANCE CLAIMS

Insurance companies agree to insure clients against their monetary losses incurred due to unexpected occurrences.

Any claims for unexpected occurrences that trigger an insurance claim should be carefully considered in an effort to determine whether such an insurance claim might be considered “frivolous” by an insurance company.

An insurance company may consider an insurance claim to be frivolous if the insured claim is not much more than the estimated cost to either repair or replace the insured damage. 

For example a $600 dollar insurance claim for which the client will only receive $100 in insurance benefits because of a $500 deductible might not be in the best, long run interests of the insured. 

When submitting any insurance claim, be certain to consider the long run impact such a claim will have on future insurability. 

As soon as a client is involved in an unexpected, insured occurrence, it is wise to discuss that occurrence in detail with your insurance agent.

For more information, contact either Andrea Shearer, Tessa Everman, or Burton Heginger at Triplett Companies at phone number 515/232-5240. 

Home Buyer/Seller

One of the most common reasons buyers want to deal directly with the seller is because they feel they can save the commission. It’s a valid consideration but interestingly, it’s the same reason the seller isn’t employing an agent.
Both parties cannot save the commission. The buyer feels they have earned it because they’ve had to find the home, determine its value and negotiate with the seller. They had to arrange their own financing, title and inspections.
The seller equally feels that they have earned the commission because they too have had to research value, financing and title work.  They have incurred all of the marketing expenses and have invested hours upon hours to be available to show the property, hold open houses and answer inquiries. 
There is certainly value in all of the things that buyers and sellers are willing to do.  However, only one person can save the commission assuming the buyer and seller can reach a written agreement.
The Profile of Home Buyers and Sellers survey reports that 14% of sales were For-Sale-by-Owners in 2003 and 2004 compared to just 9% in 2012. The trend shows that agent-assisted sales rose to 88% in 2012 from 82% in 2004.
The three most difficult tasks identified by for-sale-by-owners is attracting potential buyers, getting the price right and understanding and performing the paperwork. When surveyed, sellers most value the home selling in an anticipated time frame and for an expected amount.
Experienced, third-party advocates helping buyers and sellers is a valuable contribution to the transaction which may determine whose commission it is.

Buyer's Market

As the market shifts from a buyer's market, it's good to know how to improve your chances to have the seller accept your offer.

Once you decide on a home, don't waste time; write an offer and submit it as soon as possible. Competing with another buyer happens more frequently than you'd expect. Multiple offers are a seller's advantage but here are some tips to level the playing field:

• Realistic offer - don't give the impression you're trying to "steal" the property. Submit comparable sales that justify your offer.
• Pre-approval letter - this satisfies seller's biggest concern that an unqualified buyer will unnecessarily take the home off the market and the seller will lose other opportunities.
• More earnest money - it shows you're serious and makes the seller feel like the contract will actually close.
• Minimize contingencies - from a seller's standpoint, each contingency is one more reason why the sale won't go through. They feel the home is "off the market" and they're in limbo.
• Shorten inspection period - your agent can help you set a reasonable date but let the seller know you're willing to close prior to that if possible.
• Write a personal letter to the seller telling them why you want their home - this can be the emotional connection to the seller that makes the difference in you getting the home.

A seller wants to feel confident that the offer they accept will actually close so they can plan for their next move. Following tips like these can definitely affect negotiations and help put together an offer that is more likely to be accepted.

How to: Seller Accept Your Offer

As the market shifts from a buyer's market, it's good to know how to improve your chances to have the seller accept your offer.

Once you decide on a home, don't waste time; write an offer and submit it as soon as possible. Competing with another buyer happens more frequently than you'd expect. Multiple offers are a seller's advantage but here are some tips to level the playing field:

• Realistic offer - don't give the impression you're trying to "steal" the property. Submit comparable sales that justify your offer.
• Pre-approval letter - this satisfies seller's biggest concern that an unqualified buyer will unnecessarily take the home off the market and the seller will lose other opportunities.
• More earnest money - it shows you're serious and makes the seller feel like the contract will actually close.
• Minimize contingencies - from a seller's standpoint, each contingency is one more reason why the sale won't go through. They feel the home is "off the market" and they're in limbo.
• Shorten inspection period - your agent can help you set a reasonable date but let the seller know you're willing to close prior to that if possible.
• Write a personal letter to the seller telling them why you want their home - this can be the emotional connection to the seller that makes the difference in you getting the home.

A seller wants to feel confident that the offer they accept will actually close so they can plan for their next move. Following tips like these can definitely affect negotiations and help put together an offer that is more likely to be accepted.

PROPERTY INSURANCE REPLACEMENT COST

“Replacement cost” insurance is a type of property insurance coverage that generally pays for the “depreciated” value of the damaged property.

 

Subsequently, the actual cost of restoring the property would most likely require additional funding from you to renew the property to its condition at the time of the loss.

 

If you find yourself in this situation, be sure to complete the repairs on the damaged property as soon as possible as most policies have a time limit for payout.  Also maintain accurate records regarding all expenditures incurred in the restoration of the property.

 

Contact your favorite insurance agent (Mike Carter, Andrea Shearer, or Tessa Everman) at the Triplett Companies (515/232-5240) today for additional insight and information regarding the “replacement cost” clause of your property insurance policy.

Home Insurance Premiums to Increase

The following short article was recently published in Bottom Line: Personal*

 

        “Home insurance premiums to rise for the third straight year, warns insurance

expert Robert Hunter**.  Insurers expect the increase for 2011 to average 2 per
cent to 3 per cent – more than double the 1 per cent rise in 2010.  State Farm and
Allstate, the two biggest insurers raised rates by more than 7 per cent last year and are expected to increase them again this years.  What to do:  Shop around – you can still find lower rates without sacrificing good service.”

 

      Contact your favorite insurance agent (Mike Carter, Andrea Shearer, or Tessa Everman) at the Triplett Companies (515/232-5240) today for a new price quote for your home insurance. 

Should You Become a Homeowner??

How much evidence is needed to make a decision to get out of the rent race and become a homeowner? Compare your rent with a mortgage payment on a similar size property. If you want a larger home than your current one, use the rent that property would require instead of what you're currently paying. If it's considerably cheaper, you may not need any further encouragement. By the time you consider the principal reduction, appreciation and tax savings, your monthly cost of housing could be much less than the rent you're paying. The principal reduction included in each payment is like a forced savings account that increases as your mortgage balance decreases. Your equity in the property will also grow due to appreciation. The equity is part of your net worth and an investment in your family's future. The income tax savings can be an additional financial consideration if the combined interest and property taxes exceed the allowable standard deduction. Trends are showing that both tenants and homeowners are staying in their homes longer. It's been said that whether you rent or own, you're paying for the home. Do you really want to buy the home for your landlord? Check out your numbers on a Rent vs. Own.