How to Choose a Mortgage Lender

September 16th, 2018

When it comes to selecting a mortgage lender, it pays to shop around and talk to at least three lenders for comparison purposes in what each can offer in terms of interest rates and specifics of the loan.  Another option to consider is to work with a mortgage broker who can obtain quotes from multiple lenders that match your needs as detailed in your mortgage application.

Prior to committing to a specific lender, ask what type of loans that they offer. Lenders will seek to secure personal information from you along with what you are looking for in terms of a mortgage.  Ask the lender to explain the pros and cons of fixed-rate loans, adjustable-rate loans, interest-only loans and negative-amortization loans.  Determine which are the most popular loans offered and why buyers prefer these particular mortgages. You should also determine how much in total will you be paying over the life of the loan. Also, ask what type of mortgage would the lender recommend in your specific situation.

If the interest rate quoted is adjustable, determine its adjustment frequency, maximum annual adjustment, highest rate (CAP), index and margin.  If points are quoted, each point equates to 1% of the loan amount. Points basically lower the interest rate meaning the more points you pay, the lower the interest rate. Lenders may also charge origination fees in addition to points so be sure to ask.

It should be noted that the costs of a loan include not only fees that go to the lender but also costs related to third-party vendors or fees such as the appraisal, credit report, lender’s title policy, inspection reports, escrow and recording fees. An estimate of these fees constitutes the loan estimate which lenders are required to provide buyers when an application has been completed. As part of the loan application, the following information is required: name of borrower, social security number, property address, estimated value of the property, loan amount and income.  Take note of the quoted interest rate, monthly payments, lender and processing fees, closing costs and down payment requirement.

It should be noted that interest rates fluctuate and change daily. If you believe that interest rates will be going up, you should look to lock in the rate with the lender. Prior to doing this, ask the lender if there is any charge to lock in the rate and how long will the rate be locked-in.  The alternative is to pay the rate which is quoted on the day your loan funds.

In some states, prepayment penalties are no longer allowed so be sure to ask if there are any charges or penalties for prepaying the loan. If penalties could result, it is important to determine how much is the penalty, what are the terms of the prepayment and would the prepayment penalty apply if you refinanced the loan with the lender at a later date.

Average loan processing takes between 21-45 days. It is important that your closing date on your purchase agreement is in line with the loan processing time frame.  If the lender is not able to close on or before the closing date outlined in the agreement, the buyer would have to ask for an extension to allow the needed time for the lender to fund the loan. The seller would have to agree to this extension. Additionally, if accepted by the seller, the purchase agreement would need to to be amended to reflect the new close date and the buyer and seller would have to initial the change.  Ask the lender what could possibly delay a closing in your situation and how long after the loan application has been approved will the loan fund.

Should you have an interest in buying or selling real estate in South Florida and not currently working with an agent, please contact me at JayKenney@SFPropertyTeam.com or via cell at (954) 547-9483.

Home Improvement Projects That Will Net The Most Return on Investment

August 19th, 2018

Whether you are selling or renovating a home, there is value in knowing which home improvement projects will bring you the most return on investment (ROI). Particularly, if you are thinking about selling your home, it makes sense to do as much as you can to enhance its value.

While most homeowners believe that upgrades which improve the look of their home will generate results, improving your home’s efficiency may actually make a bigger difference.  According to a remodeling.com survey, homeowners can recoup 110% of the costs of attic insulation which is just one of many upgrades that improve efficiency. Upgrading HVAC, water heaters and windows will provide a positive ROI when the time comes to sell.

If a seller has limited budget to only renovate one room, the kitchen is the one, Kitchens are generally the focal point of every home and an upgraded kitchen will always be well received.  It is important to note that you don’t need to spend a lot of money to enhance the look of your kitchen.  A minor remodeling which includes painting, switching out cabinet doors/hardware, installing new stainless steel appliances and upgrading counter tops can provide an 87% ROI.

If your bathroom needs updating, this is another room where updates would make a big impact. Next to kitchens, bathrooms are the number two selling point in most homes. Studies have shown a minor bathroom remodel can provide a 102% ROI. Minor improvements could include re-grouting tile, removing and replacing caulk around the shower tub and toilet areas. Switching out the vanity, mirror and light fixtures can go a long way to enhance the look of a bathroom.

One of the least expensive updates with the best ROI that you can do is painting. Painting an interior can produce a 109% ROI. It is important to note that when selling a home, the color of paint selected should appeal to as many people as possible.

Flooring which may not always be an inexpensive update will make a big impact on buyers. Many buyers place a premium on hardwood floors which could add 2.5% to a home’s sale price. For maximum efficiency, focus on replacing floors in public areas including kitchens, dining and living rooms while opting for less costly alternatives such as carpet in the bedrooms.

With regards to exterior projects that net the most ROI, landscaping enhancement will provide the best return when you sell.  It is important to note that the curb appeal of the home will be greatly enhanced by adding plants and/or shrubs, using fresh mulch, trimming shrubs, keeping the grass cut/edged and putting planters with colorful plants at the front entrance way. These investments create value and most data shows that you will get more than a 100% return for money spent on landscaping.

One cannot underestimate the value that comes from projects that enhance curb appeal. First impressions come from what buyers see when the car pulls up to the front of the home. Major changes to the home’s exterior do not have to be costly. Curb appeal can be improved by power washing the home’s exterior, painting the front door, switching out the light fixtures and enhancing/maintaining the landscaping as outlined above.

Should you have an interest in buying or selling real estate in South Florida and not currently working with an agent, please do not hesitate to contact me st (954) 547-9483 or via email at JayKenney@SFPropertyTeam.com.

STAGING A HOME FOR SALE

July 19th, 2018

Staging a home is a method of decorating designed to showcase the key features of the home so it is best positioned to attract buyers. Successful staging is key to selling a home quickly and at the best price.  Home sellers spend an average of $1,800 to stage a home but costs can range from a few hundred dollars to several thousand.  The seller generally pays for the staging. However, real estate agents will pay for staging services (or a portion of the cost) in some cases.

According to the National Association of Realtors (NAR), for every $100 invested in staging, the potential return is $400. A staged home will sell for 17% more on average than a non-staged home, and 95% of staged homes sell in 11 days or less which statistically is 87% faster than non-staged homes. Additional NAR findings include:

*62% of seller’s agents believe that staging a home decreases the amount of time a home spends on the market.

50% of staged homes saw a 1-10% increase in dollar value offers from buyers.

77% of buyer’s agents believe that staging made it easier for buyers to visualize the home as their own.

The best rooms to stage to attract the most buyers are the living room, dining room, master bedroom and kitchen. The following will provide a few tips for staging and styling your home:

In the living room, symmetrical seating arrangements work the best. Pull your furniture off the walls and use pairs of (sofas, chairs and lamps) to create an inviting conversation area. The dining room is often a blind spot in decorating a home.  A large dining room table when not is use can look uninviting. With staged properties, always set tables and bar areas so the buyer can envision sitting at the table enjoying dinner with family and friends.  Buyers are attracted to homes that have a good flow. You can create circulation by replacing square or rectangular dining room tables with round ones. Cutting the corners adds room to maneuver and creates  flow to the home. The master bedroom should appeal to everyone with a clean and tailored look free of personal items. Remove features that are too gender-specific. Paint the walls a neutral color and use bedding that matches. Closets can be a key factor for buyers so be sure closets are presented in the best light. Remove all excess clothing with goal to have 20-30% open space in each closet to give the impression of spaciousness.

In closing, set up every room to show off how it can be best used by the new buyer. All clutter has to go even if you to rent a storage space off-site to store your items until you move. Clean clutter from your closets, cabinets and garage as buyers will be looking at all the storage space in the home.

Many people thinking of viewing your home will likely do a quick drive-by first and could determine on the spot if it is even worth a look inside. It is key that your home make a good first impression. Make sure the exterior is clean by power washing the siding, driveway and walkway. Keep the lawn mowed, bushes trimmed and trees pruned away from the house. Keep the gardens free of weeds, mulched and edged. Spruce up the front entrance with potted flowering plants and be sure the front door has a fresh coat of paint and the house numbers are easily visible from the street.

If you have any questions on staging or have an interest in buying/selling a home in South Florida and not working with a real estate agent, please do not hesitate to contact me at jaykenney@SFPropertyTeam.com or (954) 547-9483. I would welcome the opportunity to work with you.

How to Correctly Set a Sale Price for Your Home

June 21st, 2018

Every Seller wants to secure the maximum price on the most advantageous terms during the timeframe when the home is being marketed. Several factors including current local market data, the mortgage market as well as the location and general condition of the home will determine the sale price of a home.

Making the decision to sell your home is a major event and determining the approximate price range and/or list price for the home is not to be considered without much thought and research. It cannot be emphasized enough of the importance of pricing the home correctly. Many owners feel that they can ask for more than the home is worth to test the market with the option to lower the price if the home does not sell.  Although, this is a common practice; in most cases, the home takes longer to sell and at a price below which it could have sold if the home had been properly priced from the outset.

Once you have made the decision to sell, you should consider how quickly you want to sell and whether you want to work with a real estate agent to help you reach your goals for selling. Experienced real estate agents are active in the local market and can provide a wealth of knowledge in pricing, marketing, negotiation and closing the deal.

A good starting point for determining what your home is worth is to look at what’s happening in your local market. If you are working with a real estate agent, he or she will provide a Comparative Market Analysis (CMA) which is a compilation of recent comparable sales from your area. The CMA takes into consideration home details, days on the market and final sales price. Comparative homes used for the CMA should ideally be located within 1/4 to 1/2 of a mile from your home, have been listed within the last 3 months and be roughly the same age and have square footage within 10% of your home. You may also consider hiring an independent appraiser for a few hundred dollars to provide a fair market value of your home.

Another consideration is to review expired listings from your area to gain insights on pricing your home to sell. Compare original list prices of recently sold homes with their final sales prices and determine how many price reductions were needed to sell the home.

As stated earlier, it is important not to overprice the home which will keep away potential buyers leaving you with a property that isn’t selling and accumulating carrying costs as the home sits on the market.  Knowledgeable agents and buyers often won’t bid on a substantially overpriced home. By the time price reductions have been made, many potential buyers will have bought other homes decreasing demand for the new properly priced home.  It is important to note that if the seller is able to find a buyer willing to pay more than fair market value, an appraisal required by the buyer’s lender most likely will not support the sale price. The buyer will generally walk away from the deal unless the seller lowers the sales price as the lender will not provided financing above their appraised value.

Sellers should have always have a contingency plan in place in the event that the home does not generate offers at the established sales price. By so doing, the contingency plan can be implemented at the appropriate time without delay and further discussion.  If you are working with a real estate agent, listen to your agent’s pricing strategy. It’s their job to know what works and doesn’t with regards to pricing. Pricing a home is not a static procedure. Many factors come into play when buying or selling a home and not all of them can be anticipated.  You need to be flexible and able to react quickly to changing conditions to secure the best price within the shortest timeframe with least amount of aggravation.

If you have an interest in buying or selling real estate in South Florida and not currently working with a real estate agent, please do not hesitate to contact me at (954) 547-9483 or via email at JayKenney@SFPropertyTeam.com.

HOW ARE FLORIDA PROPERTY TAXES CALCULATED?

May 28th, 2018

Property taxes are taxes that are usually assessed by municipalities to raise operating revenue for the city or town. Local governments receive much of this funding through these taxes. These rates are assessed at the local level and can vary by county, and they are based on the value of the property.  Property taxes are usually levied on any piece of privately owned real estate from empty lots to houses based on the assessed value of the property.

Knowing how to calculate your property tax expense is important in knowing whether you can afford a particular home.

To calculate the property tax, use the following steps:

1.       Find the assessed value of the property being taxed. When it comes to real estate, property taxes are almost always based on the value of the land. The more valuable the land, the higher the property taxes. Property values are usually determined by a local or county assessor. To find the value of your residence, you can contact your local assessor’s office.

2.       Add the value of the land and any improvements to determine the total value. The value of a piece of land is generally determined by two factors: the value of the land itself, and the value of whatever is built on that land. To find the total value of your property, you will need to add these two values together. Generally, the local assessor can provide both values.

3.       Find the current local government’s tax rate. Property tax is generally assessed as some percentage of the property’s current value. Many municipalities in Florida apply the tax rate “per mill”, or per $1K in assessed value.

4.       Find the property tax rates for other local agencies. The local government isn’t the only organization that relies on property tax revenues. Other organizations (i.e. public-school districts) that serve the local community often require their share of taxes.

5.       When you know all the different property taxes that you will have to pay, add them up to get one total property tax rate.

6.       Take your property tax rate and multiply it by the value of the property. This will give you the money that you owe in property taxes.

All legal Florida residents are eligible for a Homestead Exemption on their homes, condos, coops and certain mobile home lots if they qualify. Generally, the Florida Homestead Exemption reduces the taxable value of real property by up to $25K for individuals or $50K for married couples. It’s an ad valorem tax exemption provided by Florida law for qualified residents who own and reside in the residence as their primary home.

Property taxes in Florida are among the highest in the country; although, there are several exemptions which can reduce the financial liability. In addition, if your home is worth at least $75K, you will receive an additional $25K deduction from your assessed value, although that additional deduction will not apply to school levies. Once you establish the basic Homestead Exemptions, there are other exemptions you may qualify for if you are over 65 yeas old, have a disability, are a widow or widower or if you are a veteran.

Homestead Exemptions must be filed with the county property appraiser by March 1st of the tax year for which the exemption is sought.

To qualify for a Homestead Exemption, as of January 1st of the tax year in question, you must have either legal or beneficial title to the property for which you are seeking an exemption, and the property must be the permanent residence of either yourself or someone who is legally or naturally dependent on you.  In determining whether the property is your permanent residence, the property appraiser may consider a number of factors such as the existence of a formal declaration of domicile, whether your children are registered in school, your place of employment, the address you are registered to vote, the address on your driver license and vehicle registration, the address on your federal income tax return and bank statements and proof of payment for the utilities of said property.

Most Floridians have determined that the most valuable benefit of the Homestead Exemption is not the $50K exemption but the 3% cap on the annual increases in the assessment of their homesteaded property. This cap known as the “Save Our Homes Amendment” limits the increase to 3% or a percent change in the Consumer Price Index (CPI) whichever is less. The cap goes into effect beginning the year after a Homestead Exemption is granted.

It should be noted that under the recently approved tax cuts, you can no longer claim an itemized deduction for an unlimited amount of personal state and local income and property taxes. For 2018 – 2025 itemized deductions for personal state and local income taxes (or sales taxes if you choose that option) are limited to a combined total of $10K.

Should you have any questions on anything covered in this blog or have an interest in buying or selling real estate in the South Florida area and are not currently working with an agent, please do not hesitate to contact me at (954) 547-9483 or via email atJaykenney@SFPropertyTeam.com.

Is It Time to Buy My Vacation Dream Home?

April 23rd, 2018

According to the National Association of Realtors, following a slow recovery post financial crisis, prices of vacation properties are back to where they were in 2006. The median sales price of a vacation home rose by 4.2% in 2016 to $200K following a 28% gain as the housing recovery gained steam in 2015. The economy continues to strengthen, interest rates despite recent increases are still at historically low levels and consumer confidence is back.

If you have always dreamed of having a vacation home to enjoy, rent out as an investment property or have as your retirement home; there may be no better time to begin a search for your dream vacation property. Buying that dream vacation home requires a lot of work and it is always best to work with a real estate professional who can help guide you along the way. Even before establishing a relationship with a real estate professional, you should start to consider some key factors:

  1. What are your real estate goals? Why do you want to buy a second home? How will it be used? Will it be used primarily as a vacation home, investment property or a combination of both? Do you ultimately plan to retire there later in life? You should also consider what type of vacation home will work for you? Do you prefer a single-family home or condominium? How many bedrooms and bathrooms will you need? Are you looking for a turn key property or are you open to renovations?
  2. What is your budget? How do you plan to pay for this vacation home? If financing is an option, consult with a mortgage broker to help determine what type of mortgage you are able to qualify for. Take in to consideration the other costs associated with owning a second home such as real estate taxes, insurance, utility costs and general maintenance. Always budget for any unexpected repairs, such as a plumbing or roofing issue.
  3. Where do you want your vacation home? Location is one of the main factors that needs to be considered. It will determine where you spend your time, which amenities you’ll enjoy and what the weather will be. Consider how far your vacation home will be from your primary residence. Most prefer a vacation home within a 2-3-hour drive so you’re able to spend as much time there as you like. Also, have a good knowledge of the area where your vacation home is located. Visit the area  several times at different periods of the year to gain a complete picture of the area. No matter how good an area may look; there may be issues (i.e. hurricanes, floods, forest fires, mud slides etc.). It is important to identify these risks and insure your new home from them, if required.
  4. Who will look after the home when you are not there? It is important that your vacation home be monitored to ensure that a potential plumbing issue, leak, or break-in does not go weeks without remedy. To mitigate against such issues, install a security system or security cameras. With current technology, you can sync motion sensor cameras located throughout the interior and exterior of the home directly to your smart phone. If you plan to be away for an extended period of time, you should consider hiring a property manager who would check on the property on a regular basis. Additionally, having a friend in the neighborhood keep an eye on the property while you are away can help mitigate potential risks to your home.
  5. Do you plan to rent out your vacation home? Renting out your vacation home is a good way to subsidize the mortgage but there are several factors to consider:

     a) Be conservative with rental income expectations. Do not depend on rental income to cover all the expenses associated with the cost of owning a vacation home. It is important to buy a vacation home that can be rented at a frequency you need to cover expenses. That means choosing a community that allows vacation rentals and then making sure you’re set up to take advantage of the rental potential from furnishing the unit to having a plan for marketing and dealing with tenants.

    b) Finding, vetting, and negotiating with renters is work. Many prefer to use a real estate professional or other service to qualify the right tenant. Such services generally cost a designated percentage of the rent.

    c) Determine the time it is available for your use versus the time it is rented. For maximum rental income, owners may have to offer their properties during the peak summer or winter season which may be when they want to use the property.

    d) Renters can be demanding. Be prepared to have to deal with the unexpected complaints whether it be the A/C is not working to a clogged toilet or noisy neighbors. 

    6. Is resale value important? Owning a vacation home can be a good investment if you do your homework and research. However, vacation homes do not always increase in value. When there have been large natural, man-made or financial disasters, investors get spooked and sell their investments. This is what happened in 2008 – 2009. Too many vacation homes flooded the market and the price of these homes fell. Many homeowners were unable to recoup the cost of what they paid for the home which caused many homes to go into foreclosure or to be sold as short sales.  It should be noted that the longer you hold onto a vacation home, the better chance of making money on the property.

Should you have any questions about buying a vacation home in the South Florida area and are not currently working with a real estate professional please don’t hesitate to call me directly at 954-547-9483 or you may contact me via email at jaykenney@sfpropertyteam.com .

WHAT YOU NEED TO KNOW ABOUT SECURING A MORTGAGE

March 24th, 2018

Obtaining a mortgage can be one of the more stressful events of one’s life. The mortgage process requires organization, patience, and lots of paperwork.

To minimize the associated stress, the following will outline a few steps to get you on the right road to ensuring the loan process goes smoothly:

1.     Find Out Your Current Credit History and Score. You can request a free copy of your credit report once per year at www.annualcreditreport.com Be sure to review your report to ensure that there are no errors such as incorrect addresses, phone numbers, or accounts. You can contact the credit bureaus directly and ask them to correct the errors. Many mortgage programs will require a 620 or higher credit score to qualify for a loan. Although, FHA loans are available to individuals with credit scores as low as 580; it should be noted a 580 credit score doesn’t necessarily mean you will automatically qualify. Lenders look at more than just your credit score such as your credit history over the last 12 months. It is important that your credit score be as high as it possibly can be. If you have high credit card balances, pay them below 15% of the credit limit. Dispute negative account information with the credit bureaus.

2.     Buy What You Can Afford.  Your debt to income ratio or DTI is the amount of monthly debt payments you have compared to your monthly income. Most mortgagors will allow a minimum DTI of 41%. When people buy homes, they often “stretch” to make their initial monthly payments thinking that their income will go up over time making payments easier to make. I am sure you are familiar with the term “live within your means”. You can move up to more expensive home after your income rises. A good rule of thumb is that your monthly debt obligations, including the house payment, should not exceed 36% of your pre-tax income.

3.     Organize Your Documents. Lenders will require income verification and asset documentation in addition to your credit history. Income verification includes: W-2 forms, tax returns, and employment paycheck stubs. Asset documentation will include bank statements, investment reports, real estate holdings and contracts etc.

4.     Determine the Type and Amount of Mortgage You Qualify For. There are many types of mortgages to choose from and you should consult with a lending professional who will review your income, expenses and financial goals to determine what type of mortgage is best for you. The lending professional can also review how the new tax changes could impact the amount you pay. For instance, it used to be that you could deduct mortgage interest on your mortgage for home loans valued up to $1M. As a result of the new tax law, that limit has been lowered to $750K. The new tax law will also limit the extent to which you can claim property taxes. Beginning in 2018, your total state and local tax deductions maxes out at $10K. As with the mortgage interest deduction, your state and local deduction should be of no concern if you are not planning to itemize deductions on your tax returns.

5.     Get Loan Quotes from Several Mortgage Lenders. Securing quotes from several lenders will help you negotiate a better deal. Not every lender will give you the same mortgage rate or closing costs. Therefore, shopping multiple lenders is very important. It is advisable to secure 3-4 loan offers.

6.     Determine How Much of Down Payment May be Required. Conventional loans typically require a 5-20% down payment. However, there are many government programs that will allow you to put down less than 5% down. FHA loans require just a 3.5% down payment if you have at least a 580 credit score while VA loans and USDA loans require no down payment at all.

In closing, between the time you apply for a mortgage and the time you close on the loan, do not make any major purchases or apply for new credit. When you apply for the mortgage, the lender looks at your credit report and your credit score. Shortly prior to closing, the lender will review your credit again. If there have been any substantial changes, the lender may delay or torpedo your mortgage closing.

Should you have any questions regarding the mortgage process or are interested in purchasing or selling real estate in the South Florida area and are not currently working with a real estate  professional, please contact me via email at jaykenney@SFPropertyTeam.comor at (954) 547-9483.

Where Are Interest Rates Heading In 2018?

February 22nd, 2018

Interest rates on nearly all financial products from mortgages to credit cards to personal loans will rise slowly in 2018 as the economy continues to improve and strengthen.

The general consensus among mortgage rate forecasters is that mortgage rates will go up in 2018. Most agencies are forecasting 30-year fixed rates in the mid 4% range. It should come as no surprise that high interest rates are coming. Interest rates usually rise when the economy is doing well. The economy has made a near full recovery since the housing downturn of 2009-2010. Unemployment is at record low levels; the stock market is breaking new records and housing prices are rising.

Goldman Sachs has said that it expects a tight U. S. labor market and more normal inflation picture will lead the Federal Reserve to hike interest rates four times in 2018. According to Goldman, the economy’s momentum will be helped by reconstruction following recent hurricanes as well as by the tax cuts.

There has been much discussion on the impact of the tax reform bill on the housing market. By increasing the standard deduction and reducing the mortgage interest deduction, the tax reform bill reduces some of the advantages of home ownership. On its own, this would reduce the incentives to own versus rent and on the margin lead to fewer home buyers. However, you also must consider the impact of higher after-tax incomes and general macroeconomic effects. Time will tell what the ultimate outcome will be but many experts believe that the direct input of the tax bill on housing markets will be relatively modest.

It is expected that the Federal Reserve will keep raising short-term interest rates because the central bank is focused on the falling unemployment rate and other indicators that show a tightening labor market. The Fed wants to stay ahead of any inflation that rising wages may generate and raise short term rates by a quarter of a percentage point 3-4 times during 2018.

The interest rate you pay on your home mortgage has a direct impact on your monthly housing payment. The higher the rate, the more your payment will be. That is why it is important to know where interest rates are heading when you decide to begin your home search.

Below is a chart created using Freddie Mac’s U. S. Economic & Housing Market Outlook. As you can see, interest rates are projected to increase over the course of the next 12 months. However, it is anticipated that rate increases will be gradual, allowing housing market activity to maintain momentum.

Depending on the amount of the loan you secure, a half a percent (.5%) increase in interest rate can increase your monthly payment significantly. According to CoreLogic’s Latest Home Price Index, national home prices have appreciated 7.0% from this time last year and are predicted to be 4.2% higher next year. If both predictions of home price and interest rate increases become reality, families will pay considerably more for their next home.

Bottom line is if you are thinking about buying a home, act now before prices and rates increase. Meet with a licensed real estate agent in your local market who can help determine what you can afford.

Should you have any questions concerning this blog or are looking to buy or sell residential real estate in South Florida and not currently working with an agent, please do not hesitate to contact me at 954-547-9483 or via email at: jaykenney@SFPropertyTeam.com.

How The New Tax Bill Will Impact Residential Real Estate Market

January 29th, 2018

In my November blog, I outlined the key components impacting the real estate market under each of the proposed House & Senate plans for tax reform. Since that time the tax reform bill has been signed into law and this blog will summarize what actually made it into the final bill relevant to real estate buyers and sellers.

The bill has been characterized as the most significant overhaul of the IRS Tax Code in more than thirty years. The administrations stated goals were to grow the economy, raise wages and promote economic development. While the corporate rate reduction and international reforms are permanent, the tax bill sunsets nearly all individual tax provisions at the end of 2025.

Some of the key changes in the new $1.5 Trillion Tax Bill include the following

  • Corporate tax rate has been reduced from 35% to 21%.
  • The multi-bracketed structure for individual tax rates has not changed but provides for slightly smaller reductions in tax rate paid.
  • The standard deduction has been increased from $6,350 and $12,700 to $12,000 and $24,000 for single filers and married couples, respectively.
  • The Estate Tax exemption has been raised from $5M to $10M.
  • The 1031 Exchanges have been retained but only for real property transfers. The preservation of 1031 tax-deferred exchanges for real property has been well received by the real estate industry.
  • Owners of pass-thru entities and sole proprietors are now able to deduct up to 20% of domestic qualified business income. This deduction expires on 12/31/2025. This favorable treatment of pass-thru income should encourage additional capital to enter the commercial real estate market.
  • State and local taxes will be capped at $10K for any combination of state, local income and property taxes. With Florida being a non-income tax state, we likely will see more people moving here, especially from the Northeast including New York and New Jersey where the $10K cap will be felt the most.
  • Mortgage interest on up to two personal residences can be deducted for mortgage debt originating after 12/15/2017 but only up to $750K in debt thru 2025. Any debt incurred prior to 12/15/2017 will be covered by the previous law. Even if refinanced later, the debt would continue to be covered by the previous law’s $1M cap.  With existing mortgages basically grandfathered in with the lower deduction applying to new loans may result in less people moving as there is less incentive to move.
  • Taxpayers cannot deduct interest on home equity debt thru 2025. The previous bill allowed deduction of interest payments up to $100K of home equity debt.
  • As with the previous bill, taxpayers can exclude up to $500K for couples or $250K for single filer from capital gains taxation when they sell their primary home provided they have lived in the home for at least two of the past five years.

The bottom line for these changes on real estate and how they will impact you and your housing options will depend on where you live, how much you spend (or can spend) on your home and how much the new provisions of the bill decreases (or increases) your overall tax burden.  With regards to Florida, the tax reform should have a positive effect on real estate if the economy improves generating increased employment and better wages which fuels real estate.

Should you have any questions on how the new tax bill may impact real estate in Florida or be interested in selling or buying in South Florida and not currently working with a real estate agent, please do not hesitate to contact me at 954-547-9483 or JayKenney@SFPropertyTeam.com

HOW TO MAKE YOUR DREAM OF BUYING A HOME COME TRUE

December 24th, 2017
If your goal for 2018 is to buy a home of your own, having the money for a down payment is often cited as the biggest challenge to homeownership. One way to enhance savings is to arrange automatic payments from your paycheck that would go into a separate savings account to be used exclusively for the down payment.
Another key consideration when buying a home is to ensure your credit history is clean. When you go to apply for a mortgage, lenders will want to see that you have been responsible in paying off all past debts, including credit cards, car loans and student loans. A better credit score equals a better mortgage interest rate which ultimately equals better buying power. To clean up your credit takes time, so plan ahead – usually a year to clean up your credit.
Credit bureaus recommend using no more than 30% of the total credit available to you. You also should determine if you are currently living within your means. To be able to save money for a down payment and paying down any debts to improve your credit score, you may very well need to lower your current spending in key areas such as traveling, new clothes and buying a new car. Living within a budget will go a long way towards putting you in a healthy financial position.
If you are buying your first home, chances are this is not your “dream home”. In reality, you may be one or two home purchases away from buying your “dream home”.  The key to finding the right first home purchase for you is to find a home that meets as many of the criteria that you would like in your “dream home” but is within your budget. When looking for home, keep an open mind with regard to the type of property (i.e.; home, condo or townhouse) that may be the best option for your budget to get you as close to what you’re looking for in your “dream home”.
Once you determine how much you can afford from a financial perspective you will need to decide upon the location of where you want to live. We all want to live in the best neighborhoods but your budget may not support that option. You can live in a slightly less desirable neighborhood but you shouldn’t live in a home you can’t afford.
Buying in a transitional neighborhood for your first home allows you to get into the market relatively cheaply and build some equity. The objective is to identify an area on the upswing which will allow for the potential from increased home values as the neighborhood transitions.
Another factor to consider when buying a home is to determine what you must have as opposed to what you would like to have. An extra bedroom would be a must have if needed for a new baby but would be nice to have as a home office or exercise room. Knowing your home must haves as opposed to nice-to haves help to prioritize your home search.
As previously stated, your first home isn’t likely to be your “dream home” but it can be a stepping stone if you buy smartly and build up equity by paying down the mortgage as fast as reasonably possible. You will then be in a position to move up to that “dream home” with infinity pool and chef’s kitchen or realize that your “dream home” is a less fancy home but one that you own outright.
If you have any questions on buying or selling property in South Florida and are not currently working with an agent, please do not hesitate to contact me via email at jkenney@SFPropertyTeam.com or at 954-543-9483.
Wishing the best of Holidays to all and may all your real estate goals come true in 2018!

 



 

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