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All Dollars Not Equal: Division of Assets

The division of assets between the spouses is an important decision to finalize a divorce.  The exercise looks relatively simple: assign a value for each of the assets and divide them based on a mutual agreement between the parties.

The challenge is to make a fair division which requires an analysis to determine their value after they’rezaby- converted to cash.

Assume the two major assets in the example, a retirement account and the equity in the home, are equal at $100,000.  It might seem logical to give the home to one spouse and the retirement account to the other.  However, if the person receiving the home decides to sell the home, the net proceeds could be considerably less than the spouse receiving the retirement account.

Let’s pretend that the spouse with the home negotiates a lower price of $475,000 due to current market conditions.  The former couple had owned the home for many years and refinanced several times, pulling money out of the home each time.  When the remaining spouse sells the home, there could be a considerable gain that was never recognized.

As a single person, he or she is now only entitled to $250,000 exclusion and would have to pay tax on the excess gain.  After paying the sales costs, outstanding mortgage balance and the taxes due on the gain, the remaining spouse would have net proceeds of $24,375 compared to the $100,000 that the former spouse received in the settlement.

The message in an example like this is to examine and consider the potential expenses that may be involved with converting the assets to cash after the divorce. Obviously, expert tax advice is valuable in making such decisions.  divorce.png

Tax Consequences When Renting Out a Primary Residence

Some homeowners, who were not able to sell during the recession, chose to rent their homes instead.  In some cases, they didn’t need to sell their home at the depressed prices and opted to rent it until the market recovered.image

It’s a valid strategy but there are time restrictions that could have serious tax implications for some homeowners.

The section 121 exclusion for gain in a principal residence requires that the home is owned and used as a main home for at least two years during the five year period ending on the date of the sale.  This allows a homeowner to rent their home for up to three years and still have some part of the exclusion available.

The sale of a home with a $200,000 gain that qualifies as a principal residence would result in no tax being paid by the owner.  Comparably, a rental property with the same gain could have a $30,000 or higher tax liability depending on the length of ownership and tax brackets of the investor.

The housing market has dramatically improved in the last year.  If you have a gain in a home that has been your principal residence and it has been rented less than three years, you might want to consider selling it while you qualify for the exclusion.

If you are considering a sale on your principal residence that has been rented, consult with your tax professional for advice on your specific situation.  For additional information, see IRS Publication 523.

Before You List Your Home For Sale

Today’s market presents some very unique opportunities for buyers. With affordability near record highs and interest rates near record lows, many homeowners are making the decision to move up or on. Here a few simple tips to take into consideration when listing your home for sale.

1. Curb Appeal: Buyers make snap judgments about each home they view. These judgments are drawn largely from first impressions. Be sure your home has impressive curb appeal. Fresh flowers and mulched beds, along with trimmed hedges and grass are a must. If your home needs a fresh coat of paint, now is the time. And even if your paint or siding is in good repair, consider painting your front door an eye-catching color, such as red or blue.

2. Inspection: An inspection can make or break a deal. Even after they’ve fallen in love with your house, a buyer may decide foundation issues or faulty electrical are too much of a headache. The benefits of having an inspection done prior to listing can be two-fold. First, your buyers will be aware of what repairs are needed before they make an offer. Second, you can choose to address these repairs and therefore have them removed from the scenario altogether.

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By |March 10th, 2011|Categories: Sellers|0 Comments

Pricing a Home to Sell

The most popular real estate slogan has always been “location, location, location.” Well, folks, there’s a new slogan in town, and his name is “price, price, price.” You can have the most fabulous Malibu beach house, but if you are overpriced, you won’t sell in today’s market.

How do you know where to price your house? How do you know that your real estate agent has priced accurately to sell?

Here are a few tips to steer you in the right direction.

Appraisals: Your real estate agent or brokerage will have a list of local appraisers. You can also visit The Appraisal Institute online at appraisalinstitute.org. Simply click on “find an appraiser”. An appraisal costs just a few hundred dollars, but it affords you a clear idea of the amount for which a buyer can be approved.

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By |March 1st, 2011|Categories: Sellers|0 Comments

Keep Your Energy Bill Low While Selling Your Home

Whether you are moving into a new home, getting ready to sell yours or a vacant home, keeping energy costs down is desirable to both buyers and sellers.

Even though there are many energy-efficient options these days, there are a growing number of energy-suckers.

You might be surprised to learn just how much that beautiful water feature costs to keep it running 24/7 year-round. Depending on where you live and the wattage needed, that fountain could cost an extra $30 per month.

If your house is on the market and sitting empty, that cost (without the enjoyment of usage) can really make you feel like you’re pouring money down the drain.

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By |February 25th, 2011|Categories: Sellers|0 Comments

How To Get Rid of Stuff

De-clutter and organize your home for peace of mind.

Take a minimalist model home approach to staging and your home will sell faster.

Get items out of the way to breeze through a home improvement.

Clean house for new spring beginning.

You’ve got plenty of reasons to get rid of stuff taking up space in your home, but what do you do with it all?

Consumer Reports says there are numerous ways to free up space and relieve your home of items you don’t need — cost free and in some cases with a small cash windfall.

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By |February 24th, 2011|Categories: Sellers|0 Comments

Making Your Home Picture Perfect

They say a picture is worth a thousand words. That’s why getting the right photos of your home are critical.

Before having your home photographed or, in some cases, videotaped, you’ll want to make sure that it’s in the best possible shape. But what exactly does that mean?

Getting your home ready for a photo shoot is not quite the same as getting it ready to have dinner guests. Yes, there are the same cleaning rituals such as dusting, and picking up items lying around the house. But making a home picture perfect is about creating an atmosphere that’s welcoming, interesting, and beckons viewers.

How is that done? Professional home photographers use the right equipment to get the job done. Wide angle lens to make the home look larger and show off adjacent rooms in a single photo are one good method. Early morning and late afternoon photo shoots make use of the best lighting times in the day.

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By |January 28th, 2011|Categories: Sellers|0 Comments

Staging for The Five Senses

Today’s sellers are on the hunt for creative ways to ramp up their marketing. It is a necessity in today’s tough market to have several tricks up your sleeve.

The idea is nothing new, but more and more sellers are beginning to discover the power of “staging.”

In today’s article, we will focus on staging for the five senses. Human beings are a sensory species. Our judgement and emotions are strongly influenced by what our senses tell us.

To harness the full power of staging, it’s time you covered the basics.

1. Sight: This one is pretty obvious! Your rooms should be tidy and uncluttered. Photos, trophies, and kids’ artwork should be replaced with simple, classic decor. A buyer needs to be able to imagine their own life in your home. If your budget allows, you may want to temporarily store outdated and oversized furniture. Rent new, modern pieces to create a simple and clean design.

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By |January 27th, 2011|Categories: Sellers|0 Comments

Kitchens That Sizzle Heat Up Buyer Interest

Most people know that location is, of course, vital in influencing a buyer’s decision to make an offer. Sellers also understand that kitchens and bathrooms are high on the list of areas to check out first. But what exactly makes a kitchen sizzle?

Designer, Susan Serra who specializes in kitchens, told Realtor Mag, that kitchens are being used for more purposes these days. They’re no longer enclosed by walls. In fact, the more open the kitchen is to other parts of the house, the greater chances it’s liked.

Kitchen walls started coming down a few decades ago. The lack of separation in the rooms in the home leads to great rooms and an easier ability to connect with family members in common spaces.

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By |January 14th, 2011|Categories: Sellers|0 Comments

Tips for Appraisals

Appraisals allow for homeowners and buyers to establish what is fair market value of a property. In addition, an appraisal allows a lender to know how much they can safely lend.

According to The Appraisal Institute, a global membership association of professional real estate appraisers, “Appraisals are especially important because they are an objective and unbiased source of information. Unlike others involved in real estate transactions, the appraiser is an independent professional who performs a service for a fee rather than for a commission.”

This process, however, can be trying and even frustrating. Recent declines in the housing markets have spawned scapegoats across the industry, including appraisers. And increased caution from lenders has slowed the buying process.

“Too many consumers in this struggling real estate market face problems with appraisals when attempting to buy or sell a home,” said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. “But rather than passively endure delays in closing a sale, homeowners and buyers can take proactive steps to avoid pitfalls.”

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By |January 13th, 2011|Categories: Sellers|0 Comments