REAL ESTATE TAX TIPS FOR HOME SELLERS

The IRS has recently posted a helpful list of Real Estate Tax Tips on their website to keep in mind when selling a home. It includes:

1. A home owner is qualified to exclude the gain from income if he/she has owned and used the home as their main home for 2 out of 5 years prior to the date of the sale.

2. A home owner may be able to exclude up to $250,000 (for single return) or $550,000 (for joint return) from the gain on the sale of their main home.  There is no need to report the sale on the tax return if they can exclude all of the gain.

However, if the gain cannot be excluded, it will be taxable.

3. A home owner cannot deduct a loss from the sale of their main home.

4. If a home owner bought a home in 2008 and received a first-time home buyer credit, he/she must use the purchased property as their main home for a period of 15 years.  The credit must be paid back over a period of 15 years.  If the purchased property ceases to be the main residence within 15 years, then the owner must repay the unpaid portion of the home buyer credit.

If the first-time home buyer credit was claimed in 2009 or 2010, then the credit is not required to be paid unless the purchase property ceases to be the principal residence of the owner within 36 months from the purchase date of the property.

The repayment must be made whether there was a gain or a loss on the sale of the property.

5. Worksheets are available on http://www.irs.gov/pub/irs-pdf/p523.pdf  to help the home seller figure their income, gain or loss, exclusion and taxable gain on the sale of their home.

6. For any change in address, inform IRS and the US Postal Service.  Form 8822 (Change of Address) is available on IRS website.

For a more detailed explanation on preparing tax returns for home sellers, please refer to http://www.irs.gov/pub/irs-pdf/p523.pdf.

Back to School - Back to Stress - Hopefully Not!!!

BBQ Tips

Looking forward to the long weekend ahead of you? What activities do you have lined up? Maybe you can consider a little get together BBQ with families and friends.  It should be fun!   But before you light up that grill, here are some tips to help you enjoy the BBQ while keeping it healthy:

1. Don't Cook Cold Meat 
Make sure that your meat is in room temperature before cooking.  It prevents burning the surface of your meat while at the same time cooking the middle.

2. Thin Meat is Right Meat
When your meat is thin, heat can travel faster to the middle of your meat without burning the outside. If you have thick steaks, you can start them off the grill to set the flavor and then 
finish them in the oven to make sure that the whole meat is cooked. 

3. Add Alcohol on your Marinade
According to a study, marinating beef in red wine for about six hours before grilling will decrease the amount of carcinogens - 40% fewer than beef that was not marinated in alcohol.

4. The Heat is On 
Use high heat when grilling beef, turn the other side as soon as you see little pearls of blood accumulate on top of your steak.  This is approximately 4-6 minutes per side for a 1 inch thick 
steak.

5. Be Healthy
You can also grill sweet potatoes, onions and even corn. Turn on the other side when you see the grilled part is coal black. Your vegetable inside will be sweet and smoky once you scraped off the black part.  Adding vegetables on your menu will balanced out the fats you consume from your steak.

6. Use Hardwood Charcoal
It burns hotter. Wait until the flames have died down before cooking so as not to burn your meat.


7. Clean Your BBQ Grill
Take care of your BBQ Grill! Make sure to clean it before and after use. You can use a long handled stiff wire brush. You can scour the grate with a ball of crumpled aluminum foil held in 
tongs.

Let's enjoy the sun while it lasts. Have fun on your BBQ and stay healthy!

London Interbank Offered Rate (LIBOR) Scandal

According to Reuters, the US Justice Department is building criminal cases against various financial institutions and their employees in relation to the London Interbank Offered Rate or LIBOR scandal.

The London Interbank Offered Rate (LIBOR), the European Interbank Offered Rate (EURIBOR) and the Tokyo Interbank Offered Rate (TIBOR) are set through a process whereby each day about 40 banks submit their interest rates at which they are willing to lend, to the respective trade organizations in their regions. Once the high and low bids are discarded, the rates of the two middle quartiles are arithmetically averaged. This process is repeated about 150 times to determine the final rates each day and extends to 10 currencies and across 15 time zones. The interbank offered rates serve as a reference for the pricing
of financial products worth $350 trillion that include floating rate mortgages, savings accounts, interest rate swaps, other OTC derivatives, student loans, corporate loans and credit cards. (Source: http://www.forbes.com/sites/investopedia/2012/07/26/the-libor-scandal/)

LIBOR rate provides great impact on mortgage borrowers' interest rates. For example, when Libor increases, associated interest rates and monthly loan can also go up. When it goes down, the adjustable-rate loans can also go down. For more explanation about LIBOR, please go to http://video.cnbc.com/gallery/?video=3000026495&play=1.

In 2008, USA Today reported that some American borrowers with Adjustable Rate Mortgage went up because the LIBOR rate increased.  For consumers, you can find out if your loan is linked to LIBOR by reading your terms on your loan agreement. However, not all adjustable rates are tied to LIBOR, some are based from prime rate.

Brian Murray, a partner at the law firm Murray Frank has filed a lawsuit on behalf of investors in Alaska, Wyoming, North Dakota and about 20 other states accusing banks of manipulating the London Interbank Offered Rate through an opaque setting process.  Given the wide reach of LIBOR, once the allegations are proven, this incident could be the largest financial fraud in history!

The case over the alleged rate fixing has been pending in court for 16 months. Some banks accused of rate fixing are Barclays, Citigroup Inc. and Bank of America Corp.  According to Times, the LIBOR case could be tried in court for years, however it may only end up in settlements instead of punishment.

What To Do After the Move

We can read a lot of articles on what to do before the move, but, there are limited articles talking about what you have to do once you move into your new home. So, here are some tips that will help you settle down to your new surroundings.

1.  Make sure that all utilities are already set up and ready for use.

2.  Make sure that ALL appliances and electronics are not damaged from the transfer. If something was broken during transit then you can claim damages from your insurance company (if you've taken one)

3. If you have child(ren), consider working on the children's rooms first. Moving to a new place may disrupt your child's routine. The sooner they can settle into their new home; the sooner they'll feel comfortable in the new place they're going to live in.

4. Register your children to their new school. The earlier you register them for school; the faster for them to settle in.

5. Obtain a new driver's license and plates for your vehicles.

6. Register to vote.

7. Make sure that all mails from your old home will be forwarded to your new address.

8. Find new health care professionals (i.e. doctor, dentist and veterinarian) in your new local area.

9. Set up new accounts with banks close to your home. It's always easier to have your branch of account near you. For the reason that, in case something goes wrong, you can immediately communicate it with the bank and if they need you to appear in person, you can quickly pass by the bank to settle the problem.

10. Moving into a new neighborhood means new neighbors. Take time to introduce you and your family to your new neighbors. They might be able to share some tips and tricks about your new community that might come in handy in the future.

11. Also help your kids join sports leagues or sign up for their favorite hobbies. Gaining new friends will be easier if they are part of a group.

It will take time for you and your family to become accustomed to the new surroundings and new people in your neighborhood. But give it time, you’ll eventually get used to your new environment.  Just follow the tips above and you'll be fine. If you need help in moving into your new home, please don't hesitate to contact me.

Is Home Ownership Still Possible for the Millennial Generation?

Bound by student loan debt and looking at unemployment situation n the US, many millennial (those in their 20s and early 30s) - the traditional 1st time home buyers, wonder if they can still afford to purchase their own home.

In May, Alaska has reported unemployment rate of 7%. (Source: Bureau of Labor Statistics)

With the mortgage rates and home prices at record lows,the millennial generation are excited to buy their very first home! Only to find out that their dream of buying a home is out of the question if they are still paying off their student loan debts.

If you belong to the Millennial generation with student loan debts and buying a home is your goal, then you can start with these three steps:

1. Cut debts. Reduce or eliminate all debts including student loans. When a lender reviews your loan application, they will look at the following factors if you can qualify for a mortgage loan. 

  a. Income
  b. Debt
  c. Credit
  d. Employment
  e. Property or collateral
  f. Financial resources used for closing costs

Most lenders want to make sure that you will be able to meet your monthly mortgage payment (including taxes, insurance and all other fees) With all factors combined, this should not exceed 28% of your gross monthly income (before-tax). After that, they will factor in your existing debts, the total of your mortgage payments and existing debt should be under 36% of your before-tax monthly income.

2. Increase your credit score. Lenders want to know what risk they will be exposing themselves if they loan the money to you.  They want to see how much you owe, how often you borrow, if you pay your bills on time and if you are living within your means.  Late payments can hurt your credit score, low credit score can make it harder and more expensive for you to obtain a loan. So, make sure that you settle all your obligations on time.

3. Save on down payment. Once you've cleared all your debts, start saving for a down payment. The amount of down payment you need to save depends on what type of loan you want to take. If you are applying for an FHA loan, the minimum down payment will be 3.5% of the purchase price. While conventional loans may require to pay for 10% - 20% down payment.

If you decide to buy your home while you still have your student loans to pay for, Barbara Corcoran, co-founder The Corcoran Group advised, "See how much debt you are comfortable living with, I would suggest you go on a trial run.  Add up your student loan PLUS what you WOULD have to pay if you were to take on a mortgage and try living on the expenses for 6 months and see if you could live with it. If you are comfortable living with it, then go ahead, if not, then wait for a while before buying your first home".

If you need help on figuring out if you qualify to purchase your dream home, please don't hesitate to call me.  Check out www.anchoragehomedeals.com for a list of homes suited for first time home buyers.

Common Mistakes To Avoid When Renting Out Your Property

Mortgage rates are at its historically low these days. Some home owners take advantage of the low mortgage rates to invest in real estate and use it as a rental property to generate additional income.  When they rent out their property, someone else is paying for their mortgage while they earn extra money from the difference in mortgage and rent.  Renting out properties is a great way to earn additional income but it can also be a nightmare if you don't know how to manage it. If you want to have a smooth rental business, make sure to avoid these common landlord mistakes when you rent out your home:

1. Being Lax About Screening
Finding the right tenant is always the key to having a successful landlord tenant relationship.  Always set your guidelines of who you do and don't want to rent to. Make sure they fill out the application form with the correct information. This way you'll get an idea of what type of person your prospective tenant is.  Use a national credit check company to run their application. You must check for credit, employment and rental history. Ideally, they must pass all 3, but 2 out of 3 will suffice. It is an automatic denial if they have any criminal or eviction record.

2. Not Having Correct Documentation
Having a signed lease agreement is always a smart thing to do. The agreement will serve as a guideline for the tenants to follow in renting the property. The document will cover topics such as late payments, pet policies, vandalism and so on...

Realtors or an attorney can help you create a rental agreement in accordance to the state rules and your preferences.

3. Discriminating Against Prospective Tenants
Familiarize yourself with fair housing rules. The Human Rights Commission is very strict on discrimination when it comes to housing.  The Fair Housing Act prohibits the discrimination in the sale, rental and financing of dwellings and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability). (Source: www.hud.gov)

If you want to turn down a renter's application, use a credit or background check to support your decision.

4. Forgetting to Prepare Your Home
Home staging is always important, whether you want to sell your home or have it rented out.  If you want to get top dollar on your investment, then better make sure that your property is move-in ready and in tip top shape.  Fix everything that needs to be fixed.  Paint the walls and ceilings. Also make sure that your flooring
is nice and clean. Preparing your home makes the home more marketable to prospective tenants and easier to rent out.  The state of the home will always say something about the personality of the owner. If the house looks shabby, then it will reflect on the landlord.  The house that's going to be rented out must always be move-in ready.  Renters will NOT make any improvements on the property that they are going to rent.

5. Forgetting To Buy Correct Insurance
Even if you have homeowners insurance, it will not offer full coverage if your home is being rented out full time.  By getting a landlord insurance, you can protect yourself from damages, accidents and financial losses on your rental property.  The landlord insurance will not cover the loss in renter's possession in case of damages, so it is better to require your renters to purchase a renters insurance.

NOW is the best time to invest in Real Estate! Rental demand has increased in the past few years. Rent is one of the best way to build your wealth. While someone is paying off your mortgage, your property is appreciating. It may not be evident now, but wait for a few more years while the market stabilizes then you'll see the increase in value of your property.  Properties have always gone up over the long term. 

According to NAR (National Association of Realtors), Investors have reported in many cases a positive cash flow converting properties to rental units.  The continued trend of rising rents increases the value of home ownership.

If you are on the look out for properties that you would like to rent out, always consider the location and the state of the property.  For a list of properties, visit www.anchoragehomedeals.com.  If you have a question, please don't hesitate to contact me.