Top Ten Tax Deductions for Owning Your Home

Your home shelters you from the elements, but it is also a valuable tax shelter.

Your home provides many tax benefits -- from the time you buy it right on through when you decide to sell. Here's a summary of the tax benefits of home ownership; you can get details by visiting the IRS website at www.irs.gov.

1. Mortgage Interest
Joint tax filers can deduct all the interest on a maximum of $1 million in mortgage debt secured by a first and second home. The maximums are halved for married taxpayers filing separately.
2. Points
Your mortgage lender will charge you a variety of fees, notably what are called "points." You can fully deduct points associated with a home purchase mortgage. You cannot deduct a mortgage broker's commission.
3. Equity Loan Interest
You may be able to deduct some of the interest you pay on a home equity loan or line of credit. However, the IRS places a limit on the amount of debt you can treat as home equity debt for this deduction.
4. Home Improvement Loan Interest
If you take out a loan to make substantial home improvements, you can deduct the interest on this loan. There is no dollar limit on this deduction. However, the work must be a "capital improvement" rather than ordinary repairs.
5. Property Taxes
Often referred to as "real estate taxes," property taxes are fully deductible from your income.
6. Home Office Deduction
If you use a portion of your home exclusively for business purposes, you may be able to deduct home costs related to that portion, such as a percentage of your insurance and repair costs, and depreciation.
7. Selling Costs and Capital Improvements
If you decide to sell your home, you'll be able to reduce your taxable capital gain by the amount of your selling costs.
Real estate broker's commissions, title insurance, legal fees, advertising costs, administrative costs, and inspection fees are all considered selling costs.
8. Capital Gains Exclusion
This is a true tax shelter for those who are treating home buying as an investment. Thanks to the Taxpayer Relief Act of 1997, many home sellers no longer suffer a taxable gain. Married taxpayers who file jointly now get to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal residence for two of the prior five years. Single folks and married taxpayers who file separately get to keep up to $250,000 apiece tax free -- including single people who own a home jointly.
9. Moving Costs
If you move because you got a new job, you may be able to deduct some of your moving costs. To qualify for these deductions you must meet all requirements, which get more and more complicated as you read on:
10. Mortgage Tax Credit
A home-buying program called mortgage credit certificate (MCC) allows low-income first time homebuyers to benefit from a mortgage interest tax credit of up to 20% of the mortgage interest payments made on a home (the amount of the credit varies by jurisdiction).

Source: NOLO.com

NAR Welcomes Tougher Mortgage Guidelines

The NATIONAL ASSOCIATION OF REALTORS® welcomed proposed guidelines Tuesday from five federal financial regulatory agencies on specialty mortgage products that allow consumers to defer repayment of the home mortgage principal and interest.

“The guidelines appear to be consistent with NAR's view that specialty mortgages are not appropriate for everyone. Home buyers should consult a REALTOR® to learn more about different financing options, their implications over time and what types of mortgages might work best for them,” says NAR President Thomas M. Stevens, senior vice president of NRT Inc., from Vienna, Va. “While specialty mortgage products have helped many borrowers finance the American dream of home ownership, NAR wants to help borrowers understand the risks before they take out an interest-only or payment-option adjustable-rate mortgage.”

While the agencies recognize that innovative mortgage products can benefit some consumers, they are concerned that non-traditional mortgages are being offered to sub-prime and other borrowers who may not fully understand the risks that come with these products. The five federal agencies also expressed concerns that these mortgage products present important risks that must be managed.

Do Your Homework First brochure is part of an NAR’s consumer education campaign addressing specialty loans and abusive lending practices.

—NAR

Rich Families Foresee Higher Home Values

A new survey from PNC Financial Services Group Inc. reveals that 65 percent of the wealthy home owners expect the value of their primary homes to grow by at least 10 percent over the next five years, 31 percent anticipate an increase of more than 20 percent, and only 7 percent believe a decline will occur.

Wealthy homeowners in Florida were the most optimistic, with half expecting an increase in home value of more than 20 percent; while those in New England were most cautious, with 18 percent forecasting a decline.

Buyers who were looking at real estate as a way to get rich quick are likely to be disappointed as the housing market slows.

"But, in general, established wealthy Americans haven't been speculative buyers, and they remain solidly confident in the long-term value of their real estate holdings," says Nicholas Buss, research director of PNC's real estate division.

Source: (WSJ) Hagerty, James R.

Delinquencies & Foreclosures Rise in 3Q

More home owners were late on their mortgage payments during the third quarter of this year than in the previous three months, according to a report by the Mortgage Bankers Association.

The rate of home loan delinquencies rose to 4.44 percent during the third quarter from 4.34 percent in the previous three months, but was down from 4.54 percent a year ago. Also, the rate of homes entering the foreclosure process rose to 0.41 percent, up from 0.40 percent in the third quarter of last year.

MBA warns that the effects of hurricanes Katrina, Rita, and Wilma will be reflected over at least the next few quarters. Although the group expects delinquencies and foreclosures to rise, the improving economy is likely to offset the increase.

"At the end of the day, the most important criteria are job growth and real income growth," says MBA Chief Economist Doug Duncan.

Source: Los Angeles Times (12/15/05)

Noise Control Becoming Big on Home Front

Noise Control Becoming Big on Home Front

Almost 80 percent of homeowners say their daily life is disrupted by superfluous noise, yet only 20 percent have some form of noise control in place within their homes. That's creating a niche for some companies.

Companies have developed products to stifle sounds between rooms. The products can cut by well more than half the amount of noise that transmits through walls. That's especially important as more homeowners set up home offices and need quiet to concentrate.

Ideally, noise control is made part of the initial planning of the home, because it can be difficult to retrofit existing spaces for noise control. Key steps--such as adding more insulation--should be taken in the early phases of construction.

Source: Belleville News-Democrat (IL) (12/17/05)

Do Open Houses Sell Homes?

Open Houses Encourage Looky-Loos

Real estate practitioners don't hold open houses just to generate buyers; they want to satisfy the curiosity of neighbors and other visitors, because practitioners know they'll spread the word to others.

Practitioners also say neighbors use open houses to get decorating and remodeling tips and ideas about how to price their own property for sale.

Just as importantly, practitioners use the events to meet possible new clients. In the end, open houses rarely lead to sales, but they open the door for practitioners to be be successful by building future business.

Source: Los Angeles Times (12/18/05); Brenoff, Ann

Staging Your Home To Sell!

Home staging can easily increase the selling price of your home by $10,000 to $50,000 with minimal investment.
Referred to as "the dream weavers of the real estate world" (Forbes, 2002), "House Fluffers" can take a home and turn it into another house entirely— often in a matter of days!

Decorating your house to sell, also called Home Staging or House Fluffing, will help you sell in record time and get top dollar for your home.

Higher inventory of homes means that houses for sale tend to sit for longer periods— house hunters can afford to take their time and be more demanding about what they buy.

When buyers have time and selection on their side, they can be very picky. Obviously, the homes that show the best will sell faster and for more money.

Take the case of a house in Toronto in 2003 that was listed appropriately at $599,900. In 5 days they had 10 bids and the final price was driven up to $725,500, proving that while people may shop with logic, they buy on emotion. This would not have happened in a house that hadn't been home staged, or decorated to sell.

What's especially intriguing is the possibilities that can open up in your life when you have a sudden cash windfall from selling your home for way more than you imagined. You could put the money into the next bigger house, but some clients use it instead to take time off work and try something new.

"I couldn't have imagined that just moving our furniture and art around would get us three offers after we sat on the market for 6 weeks! Our agent wanted us to drop our price significantly, but thanks to your house fluffing we got 98% of our original price!" John W.

Bottom line... the home staging process can make a huge difference in the outcome when you put your home on the market.

Article Source: Debra Gould
www.debragould.com

Decorating for the Ultimate Design

You can find loads of information about home furnishings and decorating for your home. Once you have chosen a house or apartment to live in, one of the first things that you will want to do is to begin to furnish and personalize it. One of the easiest ways of personalizing your home is through furniture upholstery and other soft furnishings.

When it comes to home decorating, in these financially challenging times, you can find ways to save money without sacrificing style. The best ideas don't have to cost a lot of time or money and can often be done with existing furniture and items found around the house.

If you're still unsure of what might look best in your home, you may want to use an interior designer. Designers work in one of two ways. For an hourly fee, he or she can provide a plan and obtain competitive bids from retailers. Or the designer can buy your furnishings at wholesale and charge you the retail price. You may pay no more, yet save time and get a look that is uniquely yours.

To begin the process of home furnishings and decorating most online furniture stores feature the best possible prices on quality brand name furniture! At most online furniture stores you will be delighted by their attention to detail and white glove customer service. Leather furniture works well with any design style. Several construction types are available including all leather, partial leather and simulated leather.

Comfortable seating furniture does more to make a room appear inviting than any other furnishing. An ottoman in the living room is conducive to comfort as it can be used with an upholstered chair for lounging. All the furniture in a home should be shod with smooth metal disks so that it can be moved easily.

The beauty of a piece of furniture depends upon good design, good color, and interesting texture. With all the poorly designed furniture in the shops it is indeed an achievement to avoid it. Home furnishings and decorating should have the charm of variety. The ideal finish for furniture is a lustrous, eggshell, semi-gloss rubbed to a soft glow.

About The Author:

Roger King is a successful author and publisher of http://www.1st-home-decor.com. Home furnishing and decorating to showcase your homes.

Article Source: Roger King

Make Your Profits When You Buy!

Every investor wants to pay as little as possible for single family rental homes. Have you ever stopped to think why you should negotiate for the lowest possible purchase price? Yes, I know every real estate guru talks about no money down or little money down as the correct approach to investing. Yes, but why?

Let's say a home you are interested in buying has a true market value of $100,000. If the owner was financially distressed you might be able to buy that home for $80,000. The moment the deal closed you would seem to have a free and clear equity in the home of $20,000.

If course, you could not put that $20,000 in you pocket to spend on something else. But you could turn around and sell the home and be left with a portion of the $20,000. There would be selling costs, so it all would not be profit.

Suppose you wanted to take your profit as soon as possible so you put the home on the market, but it took six months to find a buyer. Your six mortgage payments would eat up some of the $20,000 along with other normal selling costs. Even so, chances are you would still have a nice profit and all because you negotiated a below market purchase price.

What if you decide to find a tenant and rent the home for a couple of years? Oops! During those years the local economy falters and real estate in your area actually goes down in value by about 10%. That means your property is now worth about $90,000. Since you paid $80,000 you are still in a comfortable position… and all because you were smart enough to buy below market.

What if you find a house you would like to own, but the seller will only lower his asking price by a few thousand dollars. You need a little better deal to have a profitable investment. As part of your offer ask the seller to pay for your non-recurring purchase cost. Those expenses would include pre-paid interest, taxes, insurance impounds and so forth.

Lenders will allow 2% to 3% in seller-paid costs on a conventional loan. That means that you would be paying less cash out of pocket, or even no out of pocket costs if it were 100% financing.

The seller would pay those costs out of the proceeds of the sale. It's a painless expense for the seller since those expenditures are all items on a closing statement and the seller does not have to write a check for those costs.

This tactic is the same as getting a discount on the purchase price. Remember, as an investor your goal is to buy below full value and this is one little way to do that.

Now I must make a confession. For the last couple of years I've been able to buy nice homes in nice areas for full value and still make a fat profit. In my area prices had been climbing by 20% to 35% yearly. I could find a motivated seller, give them $1,000 to cover moving costs and buy their home by taking over the payments. Within 12 to 18 months I was able to sell that home and cash out for a profit of from $30,000 to $90,000.

Yes, it was an exciting time, but very risky. By paying full value there was no room for error. If values had plunged I would have been in a tight spot. So... the best practice is to always make your profit when you buy. You do that by buying 20% to 30% below market value.

Article Source: Mark Walters

Mark Walters is a real estate investor who shares his experience with others.

A Simple Real Estate Formula

It was a simple real estate formula. The ads ran in our small-town newspaper for years before I realized exactly what was going on. They were always the same: A house for sale with 5% down and payments of 1% of the purchase price. Maybe a three bedroom home for $90,000, for example, with $4,500 down and $900 per month payments.

When a friend started doing the same thing he explained the process to me. It was a way to get a great return on capital, and it was the opposite of buying with no money down. There is no down payment at all when you buy, because you buy for cash.

The Simple Real Estate Formula

You probably know that when you buy for cash, you can often get a much better price. With no financing contingencies in the offer, and the promise of a faster closing, sellers are willing to sell for less. You can offer $95,000, for example, on a house that might be worth $108,000. If you can't get it for less than, say, $99,000, you walk away - there are always other opportunities.

Once you buy the house, you put few thousand into high-return repairs and improvements. These might include paint, carpet, and maybe asphalt for a dirt driveway. For our example, we'll say you spend $5,000. Let's suppose the house is worth $116,000 now. You're ready for the next important step in this real estate formula.

You put it up for sale, targeting buyers who can't get financing easily. You provide the financing. Because you are making it easy for the buyer, you can get more than the $116,000 value for the home - and do it without paying a realtor's commission. Let's say you sell it for 123,000. The buyer needs a down payment of just 5%, or $6,150, and makes monthly payments of $1230 per month. You charge higher interest than the going rates at the banks, of course.

This is a win-win situation. Your buyer is able to buy a home instead of renting, and you get a capital gain of perhaps $16,000 after expenses, plus good interest. Your total rate of return will often be over 20%!

In our town, the first to do this consistently were a father and son team of lawyers. They saved money by doing their own foreclosures when necessary. Once they foreclosed, they raised the price and sold the home all over again.

They made millions. Did you know that if you can get an average return of 18% on your money, you'll turn $75,000 into more than one million dollars in about fifteen years? That's the power of a good real estate formula.

Steve Gillman

Homeowner Associations "What's in It For You?"

Alabama Real Estate

•Acknowledge your ownership and take control of your property. There may be restrictions that you may not agree with some don’t make any sense. The only way to change them is to be an active participant in the process. Voting only takes place on items listed on the monthly agenda the board members and the management company set the agenda.

•Yearly elections of new board members. In the covenants you will find how many board members and for how long board members are allowed to serve. In most communities you are limited to 2 or 3 successive terms with half or a third of the board changing each year. Some areas allow the same board members to be re-elected continuously with out changing (these little kingdoms are where the problems are the most evident).

•Committees are another way to have your voice heard. The board is not always easy to be elected into you may find the process is similar to being a politician in local elections others are begging for home owners to participate. HOA’s are always in need of committee members and leaders to help spread the work, with amenities such as pool, tennis courts, playgrounds, common areas, and social functions these all need committees and committee leaders. These are good places to get your foot in the door to have your voice heard and listened to in regards to how the community is handled.

•Management companies can be the most helpful and useful to HOA’s. The better ones have experience in all areas of land, building, and amenities management and help direct the part time inexperienced board to knowledgeable decisions. When you are dealing with an inexperienced management company or a small one person manager the problems can get out of hand real fast. They normally don’t have the contractors support and are not available when you really need them. Also smaller operations don’t have the full time accounting departments to keep the books straight which can be dangerous if the board is not keeping track of the funds.

•Foreclosures have been out of hand in some communities. Non payment of association dues or fees has been the number one reason of foreclosures in condo and townhouse communities across the country. Families have lost there properties for $600.00 in over due payments, the real problem is $15,000 in added fees the management companies an attorneys are allowed to tack on which pushes the property in to foreclosure. I have interview many management companies and found that when they reference how their attorneys can speed up the collection process by foreclosure I show them the door. These are the people you don’t want anywhere near your community. They because of the tactics they use will drive down values of each individual property and are of no benefit to the home owner or the HOA.

Be active in your community protect your property and family from unscrupulous management companies, HOA board members, attorneys and investors who have their own agenda when it comes to your property.

Article Source - Bill Carey

Bill Carey has over 30 years in real estate sales, investments, and home building offers a unique perspective to the buying and selling process of residential real estate

Home: Asset Or Debt Trap

Alabama Real Estate

Are you using the equity from your home to purchase everyday things? This is a dangerous trend growing more popular every month as millions of Americans tap into the value of their home to fund a lifestyle.

How many times have you heard the saying "Your home is the best investment you'll ever make"? How many times have you also heard that your home will be the most valuable asset you will ever own?

Both of these are as true, if not truer, today than at any time in the past. Unfortunately, spend happy Americans are looking at their home as just another type of ATM, and they are visiting it way to often. These homeowners are using money borrowed against their house to finance expensive vacations, new vehicles, even daily visits to the corner coffee shop.

Our parents wouldn't think of buying furniture with money borrowed against their home. So why is this form of borrowing becoming so popular? Three events have converged to create this dangerous trend.

1. Low interest rates. The past two or three years have seen interest rates unheard of since the 1950's. These low rates encourage people to think they have basically free money to spend however they want to.

2. Real estate value increases. The Office of Federal Housing Enterprise Oversight (OFHEO) reports that their data shows market value of the average home increased nearly 13% in 2004. That is more than any time in the last 25 years. Some areas saw the value of homes double in less than 5 years.

This increase in value is perceived by some people as being a bonus - they didn't have to work for the money, so it doesn't cost them anything. They are right about it not costing them anything, except they forgot that when they borrow money it has to be paid back. That is when the true cost of the debt appears!

The U.S. Department of Commerce reports in 2003 nearly half of the $8 trillion in outstanding mortgage debt was in new mortgage originations. This doesn't mean home equity loans are necessarily bad ideas. Using equity in your home to remodel and make additions can result in solid returns. Even debt consolidation can be a good choice, provided you have solved the problem that caused the debt in the first place.

3. Ease of borrowing. Twenty years ago, lenders wouldn't think of giving you a loan, even against your home, if it would cause your equity to become less than 20%. Some insisted in a percentage closer to 50% equity. Those days are long over.

Today you can go online and find a lender willing to give you a loan equal to 125% the value of your house! If you have a credit of repayment, hold a job, and are still breathing you can probably find a lender willing to let you borrow against your home equity.

The risk created by the convergence of these three factors is the loss of your safety net. As people buy homes at the top end of their range and base mortgages on two incomes something has to give. This "something" has been their savings. Putting aside part of each paycheck has become the low priority in the pile of demands barraging a family's income.

Data released by the Employee Benefit Research Institute reports nearly 45% of all workers hold assets of less than $25,000 (excluding their home). Barely 67% of today's workers are currently saving money in a 401(k) or some investment program, according to a Thrivent Financial Survey.

Does any of this sound familiar to you? The looming debt of mortgage, college, and credit card can seem overwhelming. How can you tip your financial life back into favoring a secure future for yourself and family?

Here are five steps to escape the home equity debt trap.

1. Keep track of expenses. Keep a spending record of everything you spend for one month. The next month, do it again, and the next month too, until you see areas of spending you can cut back and use that money to fund your lifestyle goals, i.e. vacation, college, or a new lawn mower.

2. Create realistic debt reduction goals. List all of your debts with interest rates, outstanding balances and minimum payments. Create a plan to pay down the debt, preferably pay the same set amount each month no matter what the minimums are. Anything extra you pay should go to the smallest debt first. When a credit card is paid off, get rid of it. Perhaps a small reward like a special meal when a goal is reached will help keep you motivated.

3. Preserve your home equity. Having home equity untapped in your house can provide a level of reassurance. Making wise uses of this equity will help you to not exhaust it. When you do tap into your home equity, make sure it is not used to pay for daily living.

4. Pay as little debt interest as possible. Consolidation of debts into low, or no interest loans i.e. credit cards, is acceptable as long as no new debt is acquired and you are paying down your debts each month.

5. Start saving regularly. A fund of money for emergencies will help avoid debt when life throws you a problem. If you consider saving a "non-optional" bill each month, you will develop the find habit of saving. The result is a growing asset base.

The end result of taking these five steps? A minimal-debt life spent living in an affordable home of your own.

Roger Sorensen

Hello! Welcome to the Alabama real estate blog.

Welcome to the Alabama Real Estate Blog!

Welcome to the Alabama Real Estate Blog!

We hope that this blog will provide a central point for buyers and sellers of north Alabama real estate. Come back often for local articles and update into the world of real estate. This blog will provide a wide array of comments, articles and information on everything real estate.

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