7 Factors to Consider When Searching for the Perfect Neighborhood

Good restaurants aren’t the only amenities worth looking for in a neighborhood.

You can remodel a home, but there are some things about a neighborhood you can’t change. And many neighborhood factors can add value to your home. Here are some of the best features to look for:

Nearby Services
If restaurants, a grocery store, post office, bank and other retail services are within walking distance of your home, chances are you’ll use them more often. A short drive to them isn’t so bad either, but walking or biking out to lunch can make a home much more marketable. Police and fire services should also be nearby.

Walkability
A walkable neighborhood helps your health, the environment, finances and the community. The average resident of a walkable neighborhood weighs 6 – 10 pounds less than someone who lives in a sprawling neighborhood, according to Walk Score—an app that measures walkability.

Not driving a car lowers a household’s expenses, and for every 10 minutes a person spends in a daily car commute, they spend 10 percent less time in community activities, Walk Score says.

A truly walkable neighborhood can have a town center or public space nearby with enough people for businesses to flourish and public transit to run frequently. It may have affordable housing located near businesses, plenty of public parks, buildings close to the street and parking lots in the back to encourage pedestrians. It might also be close to schools and workplaces so people can walk from home. Lastly, its streets may be designed for bicyclists, pedestrians and transit.

Dog Parks
Parks and green space are beneficial to everyone, but dog owners specifically need parks and walking trails to exercise their pets. Look for a clean dog park within walking distance of the home you want to buy. See if the dogs are well trained and get along, which can make going to the dog park more enjoyable.

Planned Improvements
Check with the city’s Planning Department to see what improvements are planned for the neighborhood and when they’re scheduled to be completed. Is a four-story apartment complex planned for an empty lot near your home? Will streets be widened? Are certain retailers coming soon?

Mature Trees
Trees can cut a home’s cooling bill in half in the summer and can block wind in the winter to reduce heating by 20 – 50 percent. A healthy, mature tree can add $1,000 – $10,000 to the value of a home, according to the Council of Tree and Landscape Appraisers. Large, healthy trees can be worth preserving and can add to the aesthetics of a neighborhood.

Source: rismedia.com

Housing in 2018: Where Are Home Values Headed?

Analysts are expecting even higher home prices in 2018 than originally projected, according to new research.

Zillow’s 2017 Q4 Home Price Expectations Survey reveals experts are anticipating a 4.1 percent hike in the new year, up from the 3 percent they forecasted a year ago. Over 100 experts, including economists, participated in the survey.

Their reasoning? Home-building has not panned out as planned—yet.

“The American labor market is stronger than it’s been in decades, and Americans, particularly young Americans, are increasingly feeling confident enough to buy homes,” says Aaron Terrazas, senior economist at Zillow. “Home-building has not kept pace with this surge in demand and remains well below historical norms. We don’t expect that these demand-supply imbalances will fundamentally shift in 2018. Demand will continue to grow and, though supply should increase somewhat, we still won’t build enough new homes to meet this demand, contributing to higher prices.”

Less than 20 percent of experts forecast home-building to pick up next year, the survey shows. Approximately 313,000 new homes were on the market in October, representing 4.9 months supply, according to the U.S. Census Bureau. Entry-level homes, especially, are scarce—down 20.4 percent year-over-year over the summer, reports Trulia.

Additionally, experts foresee increasing mortgage rates, with the 30-year, fixed rate ranging anywhere from 4.28 to 4.70 percent. Currently, the 30-year averages 3.90 percent, according to Freddie Mac.

“Higher mortgage rates will eat into buyers’ budgets, putting even more price pressure on the most affordable homes for sale,” Terrazas says. “Unless there is a fundamental shift in the number and type of homes for sale, this is the new normal of the American housing market.”

One factor in the health of the housing market is the homeownership rate; experts predict it, too, will rise, though slightly, to 64 percent. The homeownership rate has improved twice thus far this year, up to 63.9 percent in third quarter, according to the Census.

Beyond 2018, analysts are divided.

“Our most optimistic group of experts projects average annual home value appreciation of almost 5 percent annually through the five-year period ending in 2022, while the most pessimistic group expects an average annual rate of just 1.4 percent,” says Terry Loebs, founder of Pulsenomics, which conducted the survey in conjunction with Zillow. “I don’t foresee a stronger consensus emerging until we have greater clarity concerning tax reform and the pace of entry-level home building.”

For more information, please visit www.zillow.com.

Source: rismedia.com ~ By: Suzanne De Vita

 

What Is Your Property Really Worth?

Question. Over the years, I have been involved in questions dealing with the value of certain property. This has involved such diverse issues as appealing the County’s assessment for tax purposes, obtaining a refinance mortgage to avoid private mortgage insurance, and recently challenging an IRS valuation of property we just inherited.

Is there a way to determine what our property is really worth. We have often obtained different appraisals on the same property, and would like to determine our true net worth. How do the appraisal prices work?

Answer. The most commonly used method to determine the value of one’s property is to obtain an independent appraisal from an experienced appraiser. However, appraising market value of real estate is an art — and not a science. And at best, it is an inexact art. My own experience with appraisals and appraisers has led me to question the validity of a number of appraisals.

It should be understood that an appraisal is an estimate and an opinion of value. The appraisal will not determine or establish the value of your property, but it can only estimate what that value is. The Supreme Court of the United States has defined fair market value as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.”

All too often, however, the appraiser does not understand — or even know — the neighborhood, and brings to bear his or her subconscious prejudices while considering the value of your house. This is even worse now since lenders often have to rely on appraisers who are not even in the locality of the property.

There are three methods used by appraisers. First, the cost approach. Under this method, the cost of reproducing the building is added to the value of the land, and a discount is applied for depreciation and deterioration that the buildings might have suffered.

A second approach is known as the capitalization of income. Since this is generally used in considering income-producing property, and is complicated and controversial, this column will not enter into a discussion of this approach.

The third formula is known as the market comparison. Here, the appraiser must consider the value of comparable properties, and once again, this is a highly subjective task. For example, your next door neighbor’s house recently sold for $410,000. Your house looks identical to your neighbor’s from the outside.

But inside your house there are major differences. You have a finished basement; your neighbor does not. You have wall-to-wall carpets; your neighbor does not. You have recently installed a very modern kitchen; your neighbor’s kitchen is from the l940’s.

Needless to say, unless the appraiser actually visits and inspects both houses, the comparable method may adversely affect you.

Nevertheless, this market comparison method is widely utilized by appraisers in determining property values for mortgage lenders.

This does not mean to imply that you must take the appraisal without question. Here are some tips in dealing with your appraiser:

1. Insist on obtaining a written report from the appraiser. Obtain the appraiser’s name and address, and inquire as to the methods used to determine the value of your property.

2. If the appraisal was obtained by a mortgage lender, appeal that appraisal through that lender. Advise the lender you are dissatisfied with the value placed on the property, and that you will insist on a second appraisal being done, by an appraiser of your selection.

3. Although it may be considerably more expensive for you, it may be worth your effort to hire your own appraiser. While they have to give you an objective, independent market value determination, you certainly have the right to obtain your own evaluation as to the worth of your property.

Several years ago, the United States Tax Court was called upon to determine — for estate tax purposes — the value of certain property located in New York city. The Court concluded that a 19 percent discount from market value should be applied to the property because the decedent owned a small percentage of the property and could not — by himself — exercise full control over the property. Furthermore, the Court discounted another 26 percent because of market conditions in New York in the late l980s. (Barudin v. Commissioner, T.C. Memo. 1996-395). Thus, each property is different, and you — and your appraiser — should be completely familiar with all of the factors to be considered when determining the market value of your property.

Incidentally, there is a legal provision contained in the Equal Credit Opportunity Act of 1991 that should utilized by every mortgage borrower in this country. In Section 701(e) of the Act, Congress made it clear that every creditor “shall promptly furnish an applicant, upon written request by the applicant made within a reasonable period of time of the application, a copy of the appraisal report used in connection with the applicant’s application for a loan that is or would have been secured by a lien on residential property.” The law does permit the creditor to require the applicant to reimburse it for the cost of the appraisal.

It is strongly recommended that everyone request and obtain a copy of the appraisal report from the mortgage lender.

There are, of course, on-line websites that attempt to project — or perhaps predict is a better word — the value of your house. While all these are helpful, I would not rely solely on what you see on the internet.

Source: realtytimes.com  ~ By: Benny Kass

How Much Commute Is Too Much Commute?

Rising home prices send buyers further out of the city in search of an affordable home – or more home than they can swing closer to where they had rather be. It’s an age-old tale and one that forces buyers to accept a cringe-worry tradeoff for a home of their own: a longer commute.

Currently, the average commute is around 26 minutes, but anyone in Los Angeles or New York or Dallas or Chicago or any one of the dozens of cities across the country with a lengthy commute would scoff at that number.

WNYC’s cool commuter map allows you put your cursor on different cities and areas throughout the country and see its average commute time, like the 60.5-minute average in Sonoma County, CA and the 18.3-minute average for North Canaan, CT. Overflow Data’s similar interactive map uses census data of the average commute times throughout the U.S. “Zoom in on a state, or check out the range within each state,” said Lifehacker. “Commutes are worst along the East coast; L.A. traffic still isn’t as bad as New York subways. And the worst commutes of all are in Pike County, PA, a three-hour drive from New York.”

According to Census Bureau data, commutes have increased by 20 percent since they first started tracking them in 1980. The combination of continued urban sprawl and rising home prices will likely cause this number to jump even further over the next few years. The good news is that remote work and flexible schedules are also on the rise. “The number of telecommuting workers has increased 115% in a decade, according to a new report from Global Workplace Analytics and FlexJobs,” said CNN: Money. “That translates to 3.9 million workers, or almost 3% of the total U.S. workforce, working from home at least half the time in 2015, an increase from 1.8 million in 2005.” Negotiating some flexibility into your schedule or new job offer could reduce the number of days you have to drive to work and make a longer commute easier to deal with.

How much is too much?

The question of “How much commute is too much commute?” is one that each individual has to answer for themselves. Twenty minutes each way may not seem like a big deal, but what if it creeps past 30? And what if you’re considering becoming a “super commuter,” defined as someone who commutes three hours per day, like nearly four million American workers do? “That works out to more than a full month out of the year commuting,” said the Washington Post. “Imagine spending the entire month of August – 24 hours of every day – stuck in your car or riding the bus.”

Chances are you’ll go through the five stages of grief – denial, anger, bargaining, depression, and, finally, acceptance when weighing the advantages of owning a home against the disadvantages of never being there. But the acceptance here can take two roads: In one, you realize you don’t want to spend so much time in the car and ask your Realtor to start looking into areas that are closer in; the other requires you to resign yourself to this new reality of a daily date with a packed freeway, a grande mocha, and endless morning radio shtick.

The dangers of long commutes

Before you pull the trigger on a house with a 45-minute commute each way, there are a few things you’ll want to ask yourself:

How much will this actually change your life? If you’re buying a new home for your family but you never see them because you’ll be leaving for work at the crack of dawn and getting home after the kids go to bed, is it worth it? The fact that townhomes are currently the “fastest-growing segment of the single-family housing construction market,” according to the National Association of Home Builders, is important to note. “They made up about 12.4% of all new construction in the single-family home market last year, according to U.S. Census Bureau data,” proving that many homebuyers are seeking out attached residences that are often well-located for their needs and more affordable than single-family homes in the city.

How much time can you really see yourself spending behind the wheel before you lose it? Are you able to zone out and enjoy the ride, or are we talking potential road rage situation?

Have you considered the added costs? More gas, tolls, and wear and tear on your car can add to your bottom line and chip away at the savings you thought you’d enjoy with a home out in the suburbs.

What about the cost to your mental health? It’s not just about road rage. You may think you can adapt to anything, but commuting can be a serious buzzkill. “In happiness studies, commuting consistently ranks at or near the bottom of human activities,” said Smartasset. “The biggest offender is commuting alone in a car. It makes us feel more isolated and powerless, and cuts into our time for community engagement, exercise and sleep.” Nobel laureate Daniel Kahneman and economist Alan Krueger did a study with 900 Texas women and found that, “People hate their commutes more than just about any other activity in their lives,” said the Washington Post. “The morning commute came in dead-last in terms of positive emotions, behind work, child care, and home chores.” Higher rates of divorce and depression have also been linked to long commutes.

Have you thought about the effect on your body? Longer commutes have been linked to everything from high cholesterol, high blood pressure, and obesity to back and neck issues.

Source: Realtytimes.com ~ By: JAYMI NACIRI

Don’t Wait: Buying Will Cost More in Just One Year

Are you on the fence about owning a home? It may be better to buy now than wait.

The nation’s median home value is expected to grow by $6,275 to $208,975 just one year from today, according to Zillow, adding on to the already considerable funds homebuyers need now to own a home. The average homebuyer, in fact, has to add $105 more each month to their down payment savings (assuming a 20 percent down payment on a median-priced home) over the next year, or $1,260 total, to keep up with the rise in values.

In other words: It costs more to hold off.

“Sky-high rents and rising home prices are putting first-time buyers in a bit of a catch-22,” says Dr. Svenja Gudell, chief economist at Zillow. “Buying now with a low down payment can be riskier, and the offer may not be considered as competitive by the seller; however, a renter who saves for another year to reach a larger down payment may find that the home they love today is outside their budget a year from now. For those considering buying in the next year, getting into the market today may make more financial sense than they think.”

Homebuyers in hotter markets have to contribute even more to their savings if they wait. In San Jose, Calif., the average homebuyer has to add $599 more each month to their savings to purchase a median-priced home ($1,088,434) with 20 percent down ($1,088,434); in Seattle, Wash., the average homebuyer has to add $394 more each month to their savings to purchase a median-priced home ($479,451) with 20 percent down.

In other markets:

San Diego, Calif.
Additional Down Payment Savings Per Month: $267
Expected Median Home Value (Sept. 2018): $569,906

Riverside, Calif.
Additional Down Payment Savings Per Month: $266
Expected Median Home Value (Sept. 2018): $348,949

Sacramento, Calif.
Additional Down Payment Savings Per Month: $246
Expected Median Home Value (Sept. 2018): $388,336

Las Vegas, Nev.
Additional Down Payment Savings Per Month: $229
Expected Median Home Value (Sept. 2018): $247,331

Portland, Ore.
Additional Down Payment Savings Per Month: $227
Expected Median Home Value (Sept. 2018): $383,348

Boston, Mass.
Additional Down Payment Savings Per Month: $206
Expected Median Home Value (Sept. 2018): $443,047

San Francisco, Calif.
Additional Down Payment Savings Per Month: $192
Expected Median Home Value (Sept. 2018): $876,938

Denver, Colo.
Additional Down Payment Savings Per Month: $181
Expected Median Home Value (Sept. 2018): $383,667

Source: rismedia.com ~ By: Suzanne De Vita

Who Owns the Home When Two Names are on the Mortgage?

We shed some light on buying a home as a couple so you’re not in the dark when it’s time to sign on the dotted lines.

When couples start a new journey as homeowners, questions can linger as to whose name (or names) should be listed on the mortgage and title. Many couples want a 50/50 split, indicating equal ownership to the asset, but sometimes that isn’t the best financial decision. Plus, with more than one person on the loan, the legalities of who owns the home can get tricky. A home is often the largest purchase a couple or an individual will make in their lifetime, so ownership can have big financial implications for the future.

Title vs. mortgage

For starters, it’s important to note the difference between a mortgage and a title. A property title and a mortgage are not interchangeable terms.

In short, a mortgage is an agreement to pay back the loan amount borrowed to buy a home. A title refers to the rights of ownership to the property. Many people assume that as a couple, both names are listed on both documents as 50/50 owners, but they don’t have to be. Listing both names might not make the most sense for you.

Making sense of mortgages

For many, mortgages are a staple of homeownership. According to the Zillow Group Consumer Housing Trends Report 2017, more than three-quarters (76 percent) of American households who bought a home last year obtained a mortgage to do so.

When a couple applies jointly for a mortgage, lenders don’t use an average of both borrowers’ FICO scores. Instead, each borrower has three FICO scores from the three credit-reporting agencies, and lenders review those scores to acquire the mid-value for each borrower. Then, lenders use the lower score for the joint loan application. This is perhaps the biggest downside of a joint mortgage if you have stronger credit than your co-borrower.

So, if you or your partner has poor credit, consider applying alone to keep that low score from driving your interest rate up. However, a single income could cause you to qualify for a lower amount on the loan.

Before committing to co-borrowing, think about doing some scenario evaluation with a lender to figure out which would make more financial sense for you and your family.

True ownership

If you decide only one name on the mortgage makes the most sense, but you’re concerned about your share of ownership of the home, don’t worry. Both names can be on the title of the home without being on the mortgage. Generally, it’s best to add a spouse or partner to the title of the home at the time of closing if you want to avoid extra steps and potential hassle. Your lender could refuse to allow you to add another person — many mortgages have a clause requiring a mortgage to be paid in full if you want to make changes. On the bright side, some lenders may waive it to add a family member.

In the event you opt for two names on the title and only one on the mortgage, both of you are owners.

The person who signed the mortgage, however, is the one obligated to pay off the loan. If you’re not on the mortgage, you aren’t held responsible by the lending institution for ensuring the loan is paid.

Not on mortgage or title

Not being on either the mortgage or the title can put you in quite the predicament regarding homeownership rights. Legally, you have no ownership of the home if you aren’t listed on the title. If things go sour with the relationship, you have no rights to the home or any equity.

To be safe, the general rule of home ownership comes down to whose names are listed on the title of the home, not the mortgage.

Source: zillow.com ~ BY BRITTAN JENKINS

How To Get The Biggest Tax Break When You Sell Your Home

Well, the time has finally arrived. After more than 22 years, we have begun the process to sell our home.  Our three daughters have all established themselves in New York and Boston and a multi-bedroom house seems way too large for the two of us.

We have begun the exhausting and time-consuming task of de-cluttering 22 years of life.  We followed the approach of many – which is, if you have closet space you might as well fill it.  And fill it we did.

There is an important financial aspect regarding selling a home that you have lived in for many years that deals with an issue in the tax code.  It is a valuable tax break available to sellers of a personal residence, whether house, condo or co-op.  It allows for exclusion – meaning you pay no taxes to the Internal Revenue Service – for certain amount of capital gains on the sale.

The exclusion which currently is capped at $500,000 for married couples who file jointly and $250,000 for singles and married couples who file separate returns.  As we are married and file a joint return so we will be able to exclude $500,000 in gains from the taxman.

How do you claim this exclusion? It all starts with the original cost of your home.  This is known as cost basis.  What can be added to the original cost basis are any home improvements as well as the costs incurred when buying or selling the home such as real estate commissions.

This is where good record-keeping comes in handy.  When you improved your home by adding new windows or undertook a large addition, these amounts get added to the original cost basis.  In our case, we undertook two large renovations which will be able to offset potential gains from the sale price.

If you are able to sell your home in excess of this cost basis plus the additions, normally these gains would be subject to taxes on the profit.  This profit would be taxed as a long-term capital gain tax, which for high-income sellers could be as high as 23.8% federal tax, as well as additional state taxes.

Now this is where the benefit comes in for exclusion.  A married couple filing jointly can exclude up to half million dollars of profit from any capital gains tax. A valuable tax break indeed.

To qualify for this tax break, the seller must have lived and owned the property for two out of last five years that ends on the day of the sale.  Not consecutive years, just two of the last five years.  In addition, sellers can only claim an exclusion every two years.

We have begun determining not just the original cost basis of our home, but all of the money that we added to the property in improvements over the last 22 years.  It’s a good idea to create a file that documents these home improvements as they occur so the task is easier when the time comes for them to sell.

Hopefully you have sold your home for more than you paid for it. And, if like many who are selling after 15 to 30 years, the likelihood is that you will have a capital gain from the sale of your home.

How do you determine the cost basis?  And what costs are allowed to be included in this calculation?

The IRS has specific guidelines and worksheets to assist you.  Publication 523- Selling your Home provides insights to determine your tax implications for your filing.

The following are some of the improvements that can be included to your cost basis:

Additions: Bedroom, bathroom, deck, garage, porch, patio.

Lawn and grounds:  Landscaping, driveway, walkway, fence, retaining wall, swimming pool.

Systems:  Heating, central air conditioning, furnace, duct work, central humidifier, central vacuum, air or water filtration, wiring, security system, lawn sprinklers.

Exterior:  Storm windows and doors, new roof, new siding, satellite dish.

Plumbing:  Septic system, water heater, soft water system, filtration system.

Insulation:  Attic, walls, floors, pipes and duct work.

Interior:  Built-in appliances, kitchen modernization, flooring, wall-to-wall carpeting, fireplace.

It’s helpful to begin to itemize all these improvements before you decide to sell your home.  These improvements that were completed over the years should be included in your cost basis before you file your tax returns.

If you would like to view what the tax collectors say on the subject, click here: IRS Guidelines. 

Source:  forbes.com ~ By: Larry Light 

5 Questions To Ask Your Estate Planner After The New Tax Law

An estate plan is like a car or a house: It needs regular maintenance to function as intended. Yet unlike your car or home, external events can create the need for adjustments. Among such events is legislation like the tax bill Congress passed in late December.

So this is an important time to schedule a meeting with your estate planner and be certain your plan is up-to-date. Even if your estate plan won’t be affected by the new tax law, it’s smart to confer with your estate planner periodically to be certain your current wishes are reflected in your estate planning documents.

During this checkup, you may find that your plan no longer meets all of your needs because of changes in your life and the lives of your heirs. Or you may find that your plan didn’t cover your needs from the get-go. In my experience, many clients leave their estate planner’s office with a thick folder of documents and fail to read them carefully or discuss them in detail with their planner before signing.

When you meet with a professional for a thorough evaluation and possible updating, you might ask some key question to assure your plan documents fully support your interests and those of your heirs, including these five:

1. Will the new federal law affect my estate tax picture?

Estate tax is the tax that estates pay governments upon death; when it applies, there’s less left for your heirs. The federal government exempts a certain amount of an estate’s value from this tax and Congress just doubled that amount, known as the exemption. The new law eliminated tax on estates for many wealthy families.

There will no longer be any federal tax on estates valued between $5.6 million and $11.2 million. Previously, the limit was $5.6 million. By exempting estates between $5.6 million and $11.2 million ($22.4 million for married couples), Congress gave substantial relief to all but the wealthiest families, since only about 5,000 estates per year are estimated to be above the new limit. So unless you’re rich (but not ultra-rich), the doubling of the exemption shouldn’t  affect your estate plan.

2. What does the new tax law mean by the exemption limit for married couples?

This can be confusing, since couples general die one spouse at a time. The exemption limit for couples refers to portability — the ability of a spouse to avoid estate tax on amounts inherited from the other spouse that were within the exemption limits. The new law preserves portability, which was introduced in a revision of tax rules by Congress in 2012.

To assure that exemption limits from the estate of a deceased spouse are portable, estate planning documents of the surviving spouse must correctly invoke portability, using the right language. Otherwise, the estates of these spouses might be forced to create something known as a bypass trust — a costly, time-consuming route that can have the effect of reducing the amounts that heirs ultimately receive.

3. Will the new federal law affect my state estate tax?

There are 15 states that still have some form of estate tax: Minnesota, Iowa, Nebraska, Washington, Oregon, Kentucky, Tennessee, Pennsylvania, New Jersey, Massachusetts, Rhode Island, Connecticut, Delaware, Maryland and the District of Columbia.

Some of these states yoke their exemption limits to the federal limits, so the federal increase will automatically trigger the same increase in those states. But some of these states have no such linkage, so their exemption limits will remain the same, assuming their legislatures don’t act to change them. (Some states have limits under $1 million.)

Detailed, state-by-state information on estate tax can be found on the Tax Foundation website.

4. Are my estate documents customized to fulfill my wishes and avoid unintended consequences?

Outcomes directly contrary to your intentions can result when documents aren’t specific enough because boilerplate, off-the-shelf documents were used without being customized to your situation. It’s not uncommon for this to happen with financial powers of attorney (POA), which direct how your finances are to be managed if you’re incapacitated and unable to make decisions.

Without specific provisions to assure your wishes are carried out, vague or overly general POAs — which don’t include specific provisions of wishes, limits and prohibitions — might allow the agent managing these finances (often, the person’s spouse) to:

Legally make gifts to whomever they wish and change beneficiaries on financial accounts — 401(k)s, IRAs, life insurance policies and annuities  In some cases, agent spouses have made gifts to themselves or their grown children from their first marriages or have designated these grown children as account beneficiaries without express permission.

Discontinue existing financial support for an aging parent or a disabled child

Manage the incapacitated individual’s assets in ways that person never would, such as taking risks that jeopardize the inheritance of heirs listed in the incapacitated person’s will

To prevent such negative outcomes, ask your estate planner to assure that your POA is specific enough.

5. How soon should I come in for another review of my estate plan?

Many experts advise doing a review every three years, and/or after major life changes, including: your divorce or the divorce of a grown child; the birth of a grandchild; your receipt of a significant inheritance; the sale of your business; your retirement; newly developed disabilities or chronic illnesses or a death in your family.

An estate plan should change with changing circumstances. By attending to this, you can show your loved ones that you cared about outcomes affecting them after you’re gone.

Source: forbes.com ~ By David Robinson, Next Avenue Contributor

Here are four housing predictions for 2018

Entry level home prices could increase up to 11%.

2017 is now officially over and 2018 has begun. As the year comes into full swing, many experts continue to give their predictions for the housing market during the new year.

American Enterprise Institute’s Center on Housing Markets and Finance Co-director Edward Pinto gave four points he expects to see from the housing market in 2018.

Many of his predictions, including low inventory and rising home prices, are shared by other housing experts. However, Pinto forecasted home prices will increase at a faster rate in 2018, while other experts expect they will slow down.

1. The historically tight supply of single-family homes will tighten further in 2018 after hitting a record low in November 2017: On December 21, 2017, the National Association of Realtors announced that November 2017 remaining inventory of existing homes for sale hit a record low of 3.4 months, eclipsing the prior record of 3.5 months reached in both January 2005 and January 2017. Expect new lows to be recorded for December 2017 and January 2018. January is projected to come in at around three months.  This tight supply trend has been going on for more than five years.

2. The national home price boom that began in mid-2012, will continue, and given the unprecedented low levels of inventory, will even accelerate further: Expect year-over-year increases of 6.25% to 6.75%, up from about 6% to 6.5% in 2017. The substantial reduction in the utilization of the mortgage interest deduction and commensurate reduction in subsidies, will somewhat reduce upward pressure on home prices. Without the tax act, the prediction for 2018 home price increase would have been even higher: 6.75% to 7.25%.

3. First-time buyers will face even higher home price gains for entry level homes: Expect year-over-year gains for the bottom third of homes to come in at 10.5% to 11% for 2018, December 2018 over December 2017 based on 16 tiered HPI from CoreLogic Case Shiller. At current levels of wage growth, this boom in entry level home prices is ultimately unsustainable.

4. First-time buyers will continue take on even more leverage in an effort to keep up with the out-sized home price gains on entry level homes: The AEI First-Time Buyer National Mortgage Risk Index is expected to rise to 17.1% for September 2018 agency origination’s, up from to 16.4% for September 2017. Risk scores above 12% have a high risk of default under severe economic stress.

Source: housingwire.com ~ By Kelsey Ramirez

Comprehensive NAR Report on the Tax Cut Bill and Homeowners

Source: NAR

The National Association of REALTORS® (NAR) worked throughout the tax reform process to preserve the existing tax benefits of homeownership and real estate investment, as well to ensure as many real estate professionals as possible would benefit from proposed tax cuts. Many of the changes reflected in the final bill were the result of the engagement of NAR and its members, not only in the last three months, but over several years.

Introduction

While NAR remains concerned that the overall structure of the final bill diminishes the tax benefits of homeownership and will cause adverse impacts in some markets, the advocacy of NAR members, as well as consumers, helped NAR to gain some important improvements throughout the legislative process. The final legislation will benefit many homeowners, homebuyers, real estate investors, and NAR members as a result.

The final bill includes some big successes. NAR efforts helped save the exclusion for capital gains on the sale of a home and preserved the like-kind exchange for real property. Many agents and brokers who earn income as independent contractors or from pass-through businesses will see a significant deduction on that business income.

As a result of the changes made throughout the legislative process, NAR is now projecting slower growth in home prices of 1-3% in 2018 as low inventories continue to spur price gains. However, some local markets, particularly in high cost, higher tax areas, will likely see price declines as a result of the legislation’s new restrictions on mortgage interest and state and local taxes.

The following is a summary of provisions of interest to NAR and its members. NAR will be providing ongoing updates and guidance to members in the coming weeks, as well as working with Congress and the Administration to address additional concerns through future legislation and rulemaking. Lawmakers have already signaled a desire to fine tune elements of The Tax Cuts and Jobs Act as well as address additional tax provisions not included in this legislation in 2018, and REALTORS® will need to continue to be engaged in the process.

The examples provided are for illustrative purposes and based on a preliminary reading of the final legislation as of December 20, 2017. Individuals should consult a tax professional about their own personal situation.

All individual provisions are generally effective after December 31, 2017 for the 2018 tax filing year and expire on December 31, 2025 unless otherwise noted. The provisions do not affect tax filings for 2017 unless noted.

Major Provisions Affecting Current and Prospective Homeowners

Tax Rate Reductions

  • The new law provides generally lower tax rates for all individual tax filers. While this does not mean that every American will pay lower taxes under these changes, many will. The total size of the tax cut from the rate reductions equals more than $1.2 trillion over ten years.
  • The tax rate schedule retains seven brackets with slightly lower marginal rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
  • The final bill retains the current-law maximum rates on net capital gains (generally, 15% maximum rate but 20% for those in the highest tax bracket; 25% rate on “recapture” of depreciation from real property).

Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts and Jobs Act (2018 Tax Year) Single Filer

Current Law Tax Cuts and Jobs Act
10% $0-$9,525 10% $0 – $9,525
15% $9,525 – $38,700 12% $9,525 – $38,700
25% $38,700 – $93,700 22% $38,700 – $82,500
28% $93,700 – $195,450 24% $82,500 – $157,500
33% $195,450 – $424,950 32% $157,500 – $200,000
35% $424,950 – $426,700 35% $200,000 – $500,000
39.6% $426,700+ 37% $500,000

Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts and Jobs Act (2018 Tax Year) Married Filing Jointly

Current Law Tax Cuts and Jobs Act
10% $0 – $19,050 10% $0 – $19,050
15% $19,050 – $77,400 12% $19,050 – $77,400
25% $77,400 – $156,150 22% $77,400 – $165,000
28% $156,150 – $237,950 24% $165,000 – $315,000
33% $237,950 – $424,950 32% $315,000 – $400,000
35% $424,950 – $480,050 35% $400,000 – $600,000
39.6% $480,050+ 37% $600,000+

Exclusion of Gain on Sale of a Principal Residence

  • The final bill retains current law. A significant victory in the final bill that NAR achieved.
  • The Senate-passed bill would have changed the amount of time a homeowner must live in their home to qualify for the capital gains exclusion from 2 out of the past 5 years to 5 out of the past 8 years. The House bill would have made this same change as well as phased out the exclusion for taxpayers with incomes above $250,000 single/$500,000 married.

Mortgage Interest Deduction

  • The final bill reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap. Neither limit is indexed for inflation.
  • Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.
  • The final bill repeals the deduction for interest paid on home equity debt through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence.
  • Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits.
  • The House-passed bill would have capped the mortgage interest limit at $500,000 and eliminated the deduction for second homes.

Deduction for State and Local Taxes

  • The final bill allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes. This $10,000 limit applies for both single and married filers and is not indexed for inflation.
  • The final bill also specifically precludes the deduction of 2018 state and local income taxes prepaid in 2017.
  • When House and Senate bills were first introduced, the deduction for state and local taxes would have been completely eliminated. The House and Senate passed bills would have allowed property taxes to be deducted up to $10,000. The final bill, while less beneficial than current law, represents a significant improvement over the original proposals.

Standard Deduction

  • The final bill provides a standard deduction of $12,000 for single individuals and $24,000 for joint returns. The new standard deduction is indexed for inflation.
  • By doubling the standard deduction, Congress has greatly reduced the value of the mortgage interest and property tax deductions as tax incentives for homeownership.Congressional estimates indicate that only 5-8% of filers will now be eligible to claim these deductions by itemizing, meaning there will be no tax differential between renting and owning for more than 90% of taxpayers.

Repeal of Personal Exemptions

  • Under the prior law, tax filers could deduct $4,150 in 2018 for the filer and his or her spouse, if any, and for each dependent. These exemptions have been repealed in the new law.
  • This change alone greatly mitigates (and in some cases entirely eliminates) the positive aspects of the higher standard deduction.

To illustrate how the above-listed changes can affect the tax incentives of owning a home for a first-time buyer and a middle-income family of five, please see these examples:

Mortgage Credit Certificates (MCCs)

  • The final bill retains current law.
  • The House-passed legislation would have repealed MCCs.

Deduction for Medical Expenses

  • The final bill retains the deduction for medical expenses (including decreasing the 10% floor to 7.5% floor for 2018).
  • The House bill would have eliminated the deduction for medical expenses.

Child Credit

  • The final bill increases the child tax credit to $2,000 from $1,000 and keeps the age limit at 16 and younger. The income phase-out to claim the child credit was increased significantly from ($55,000 single/$110,000 married) under current law to $500,000 for all filers in the final bill.

Student Loan Interest Deduction

  • The final bill retains current law, allowing deductibility of student loan debt up to $2,500, subject to income phase-outs.
  • The House bill would have eliminated the deduction for interest on student loans.

Deduction for Casualty Losses

  • The final bill provides a deduction only if a loss is attributable to a presidentially-declared disaster.
  • The House bill would have eliminated the deduction for casualty losses with limited exceptions.

Moving Expenses

  • The final bill repeals moving expense deduction and exclusion, except for members of the Armed Forces.
  • The House-introduced bill would have eliminated the moving expense deduction for all filers, including military.
  • (Taxpayers) or $315,000 (for couples filing jointly), then the personal service restriction will not apply.
  • Above this level of income, the benefit of the 20% deduction is phased out over an income range of $50,000 for singles and an income range of $100,000 for couples[2].
  • For those with non-personal service income above these thresholds, the bill provides a second exception that may still allow a full or limited 20% deduction. This second exception (the wage and capital limit exception)places a limit on the deduction of the greater of:
    • 50% of the W-2 wages paid by the business, or
    • The total of 25% of the W-2 wages paid by the business plus 2.5% of the cost basis of the tangible depreciable property of the business at the end of the year.

Examples of How The New Law Will Affect the Tax Incentives of Owning a Home

Example 1 – First-Time Homebuyer. To illustrate how the changes to the standard deduction, repeal of personal exemptions, mortgage interest and state and local taxes might affect a first-time homebuyer, consider the example of Barbara Buyer. Barbara, an accountant making $58,000 per year, is single and currently rents an apartment. She also pays state income tax of $2,900 and makes charitable contributions of $2,088, but the total of these is lower than the standard deduction, so she claims the standard.

Barbara’s tax liability for 2018 under the prior law is as follows:

Salary income $58,000
Standard deduction ($ 6,500)
Personal exemption ($ 4,150)
Taxable income $47,350
Tax $ 7,491

Under the new law, Barbara would get a tax cut, computed as follows:

Salary income $58,000
Standard deduction ($12,000)
Personal exemption ($ – 0 -)
Taxable income $46,000
Tax $ 6,060

Tax Difference Under New Law. Even though Barbara would not get the benefit of the personal exemption under the new law, her higher standard deduction would more than make up for the loss. In addition, the lower tax rates of the new law would help deliver the total tax cut of $1,431 ($7,491 – $6,060) as compared with the prior law.

However, let’s take a look at what happens to Barbara if she were to purchase the condo that she likes costing $205,000. She takes out a 30-year fixed rate mortgage at 4% interest, putting down 3.5%. Assuming she buys early in 2018, her first-year mortgage interest would total $7,856 and she would pay real property taxes of $2,050.

As a first-time homeowner, her tax liability under the prior law would be computed as follows:

Salary income $58,000
Mortgage interest $ 7,856
Real property tax (1%) $ 2,050
State income tax (5%) $ 2,900
Charitable contributions (3.6% of income) $ 2,088
Total itemized deductions ($14,894)
Personal exemption ($ 4,150)
Taxable income $38,956
Tax $ 5,393

Note. Under the prior law, Barbara would lower her tax liability for 2018 by $2,098 ($7,491 – $5,393) by purchasing the condo. This is the financial effect of the prior law’s tax benefits of buying a home. This amount effectively lowers her monthly mortgage payment by $175 per month.

Now, let’s take a look at what her tax situation would be under the new law as a first-time homebuyer:

Salary income $58,000
Mortgage interest $ 7,856
Real property tax (1%) $ 2,050
State income tax (5%) $ 2,900
Charitable contributions (3.6% of income) $ 2,088
Total itemized deductions ($14,894)
Personal exemption ($ – 0 -)
Taxable income $43,106
Tax $ 5,423

Tax Difference Under New Law. Even though Barbara would still be able to claim all of her itemized deductions under the new law, she would lose the benefit of her personal exemption. This would mean that her taxes would actually go up under the new law by $30 ($5,393 – $5,423). But far worse, look at the tax differential between renting and owning a home. This difference, which was $2,098 under the prior law, has now shrunk to just $637 ($6,060 – $5,423), or $53 per month. In other words, under the prior law, Barbara was given a strong incentive to move into the ranks of those who own their home. The new law still offers her an incentive, but it is a shadow of what it was, and is unlikely to be very compelling.

Example 2 – Middle-Income Family of Five:

To illustrate how the changes to the standard deduction, repeal of personal exemptions, mortgage interest and state and local tax deductions, and increase in the child credit might affect middle-income family of five, consider the example of Steve and Melinda. Steve is a store manager making $55,000 per year, while Melinda is a school principal, earning $65,000. They have three children, ages 17, 14, and 9. Steve and Melinda recently relocated from another city, and while they are getting to know their new community, they are leasing a home. But they would like to purchase as soon as they identify which area is the best fit for their family. As renters, they pay state income tax on their salaries, totaling $6,000, and also make some charitable contributions equaling $3,120. Since these itemized deductions do not reach the level of the standard deduction, they do not itemize, but they expect to do so when they purchase their home.

Here is a look at Steve and Melinda’s tax liability for 2018, computed under the prior law:

Salary income $120,000
Standard deduction ($ 13,000)
Personal exemptions (5 x $4,150) ($ 20,750)
Taxable income $ 86,250
Tax before credits $ 12,870
Child tax credits (2 x $1,000 less $500 phase-out) ($  1,500)
Net Tax $ 11,370

Under the new law, Steve and Melinda, as renters, would get a tax cut, computed as follows:

Salary income $120,000
Standard deduction ($ 24,000)
Personal exemption ($ – 0 -)
Taxable income $ 96,000
Tax before credits $ 12,999
Child tax credits (2 x $2,000) ($   4,000)
Net Tax $ 8,999

Tax Difference Under New Law As Renters. Steve and Melinda lose the big benefit of the personal and dependency exemptions for the two adults and three children. And the increase in the standard deduction is not enough to make up for this loss. However, the big increase in the child credit for the two younger children and the lower tax rate are enough to deliver them a tax cut of $2,371 ($11,370 – $8,999) as compared with the prior law.

Let’s now consider how Steve and Melinda’s tax situation changes if they were homeowners, rather than renters. Assume they find an ideal home in a nice neighborhood that costs $425,000, and after offering a 10% down payment, Steve and Melinda take out a 30-year fixed mortgage at a 4% rate. Let’s say that their real property tax for the year totals $4,250, which is just 1% of the home’s value.

Here is how their 2018 tax liability would be computed as homeowners, under the prior law:

Salary income $120,000
Mortgage interest $ 15,189
Real property tax (1%) $  4,250
State income tax (5%) $  6,000
Charitable contributions (2.6% of income) $  3,120
Total itemized deductions ($ 28,559)
Personal exemptions (5 x $4,150) ($ 20,750)
Taxable income $ 70,691
Tax before credits $  9,651
Child tax credits (2 x $1,000 less $500 phase-out) ($  1,500)
Net Tax $  8,151

Note. Under the prior law, Steve and Melinda would lower their tax liability for 2018 by $3,219 ($11,370 – $8,151) by purchasing their home instead of renting. This is the financial effect of the prior law’s tax benefits of buying a home. This amount effectively lowers their monthly mortgage payment by over $268 per month.

Now, let’s take a look at what her tax situation would be under the new law as a home-owning family instead of renters:

Salary income $120,000
Mortgage interest $ 15,189
Real property tax (1%) $   4,250
State income tax (5%) (limited by $10,000 cap) $   5,750
Charitable contributions (2.6% of income) $   3,120
Total itemized deductions ($ 28,309)
Personal exemptions ($ – 0 -)
Taxable income $ 91,691
Tax before credits $ 12,051
Child tax credits (2 x $2,000) ($  4,000)
Net Tax $  8,051

Tax Difference Under New Law As Homeowners. For Steve and Melinda, most of their itemized deductions from the prior law are preserved by the new law. They are limited slightly ($250) by the $10,000 limit on the deduction of state and local taxes. However, they lose big by the repeal of the personal and dependency exemptions, which equal $20,750 for this family. Even so, Steve and Melinda receive a small tax cut of $100 ($8,151 – $8,050) under the new law, thanks to the much larger child credit and lower tax rate. But as renters, they received a tax cut of almost $2,400. Thus, buying a home becomes a net tax change of almost $2,300.

What happened? What happened is that the new law is taking away most of the tax benefits of owning a home. Under the prior law, this benefit was $3,219 for Steve and Melinda. But under the new law, they enjoy only a benefit of $948 ($8,999 – $8,051). This gives them a benefit of just $79 per month, which is obviously a far weaker incentive to own.

[1] Meaning one does not have to itemize deductions in order to claim it.

[2] This means that for single individuals, the benefit of the deduction would be fully phased out for taxable income levels above $207,500 and for married couples filing joint returns, the benefit of the deduction would be fully phased out for taxable income levels above $415,000.

[3] With the exception of some restrictions on the deductibility of entertainment expenses, the normal business expenses of real estate professionals were not changed by the bill.

[4] The new law provides single individuals with a $12,000 standard deduction.

[5] The prior law provided a tax credit of $1,000 for each child.

[6] The new law increases the standard deduction for married taxpayers filing a joint return to $24,000. Since this is higher than Andy and Emma’s itemized deductions, they will claim the higher standard deduction.

[7] The new law doubles the child tax credit to $2,000 per child.

[8] At this income level, Bobbie and Emil’s personal exemptions would be phased out.

[9] At this income level, Bobbie and Emil’s itemized deductions are reduced by 3% of the excess of their AGI ($445,000) over the 2018 phaseout threshold of $320,000, or by $3,750. $28,000 – $3,750 = $24,250.

[10] The new law repeals the itemized deduction phaseout (so-called “Pease” provision).

[11] These are made up of mortgage interest, state and local taxes, and charitable contributions.

[12] At this income level, David and Valerie’s personal exemptions would be phased out.

[13] At this income level, David and Valerie’s itemized deductions are reduced by 3% of the excess of their AGI ($450,000) over the 2018 phaseout threshold of $320,000, or by $3,900. $35,000 – $3,900 = $31,100.

[14] The new law repeals the itemized deduction phaseout (so-called “Pease” provision).

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