Monthly Archives: January 2014

TAX BREAKS FOR HOMEOWNERS

31 Friday Jan 2014

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Congratulations, homeowner!  In addition to the pride of owning your own property, there are many subsidiary benefits, including TAX benefits.  With April 15th fast approaching, let’s take a look at some of these.  You want to be sure that you don’t miss any of them if they apply to you.

One huge benefit is the mortgage interest deduction.  Basically, the interest you pay on your mortgage is fully deductible from your taxes.  In the first years of your mortgage, most of what you are paying is interest, so this benefit can be huge!  Your mortgage company will send you a statement showing the exact amount you paid in nterest in 2013, and you can use this information to save a bundle on your taxes.

And, if you purchased your home this year, your closing costs may also be tax deductible – even if all or a portion of them were paid by the seller.  As with all of these deductions, be sure to consult your tax professional about the proper way to claim the benefit and the appropriate amount.

Here are some smaller, but still significant tax savings that are good for your 2013 taxes but which may *not* be available in 2014 (unless Congress decides to extend them), so be sure to take advantage of them this tax season if at all possible.

  • Energy-Efficiency Upgrades.  This is a tax credit, which reduces what you owe dollar for dollar. The types of upgrades that meet the criteria include new exterior windows, insulation, exterior doors, and roofing.  The tax credit is capped at $500 (less in some cases), but you’re likely to save even more in the long run – by having lower utility bills. 
  • Debt Forgiveness.  If you sold your home in a short sale or foreclosure last year, your lender likely forgave at least a portion of your mortgage debt.  The Mortgage Debt Forgiveness Act will save you from having to pay taxes on at least some of the debt forgiveness.  (Without the Act, the debt forgiveness would count as income).   
  • PMI Deduction.  Private mortgage insurance, or PMI, is sometimes required by lenders for homebuyers who make a down payment of less than 20 percent. PMI protects the lender in the event the borrower stops paying on the loan. PMI premiums were deductible from your taxes in 2012 and 2013.

While Congress has allowed the above deductions to expire for 2014, and must reinstate them if they are to apply in the future, the capital gain deduction stands.  Homeowners who have owned and occupied their homes for at least two of the past five years do not have to pay taxes on the gain. The amount of you can gain (tax-free) from such sales varies, depending on your marital status. Married people can earn up to $500,000 on a sale without paying tax on the earnings, and single people can earn up to $250,000 without paying any federal tax.

One more benefit to mention: the Home Office Deduction has been simplified for 2013.  If you have a home office, rather than using a 43-line form (as required in years past), the new method allows home-based workers to simply claim $5 per sq. ft. for up to 300 sq. ft. For example, if your home office is a 10×10 ft. room (100 sq. feet), that’s $500 you can deduct.  Keep in mind – the basic requirements for claiming the home office deduction haven’t changed. Your home office still must be used exclusively for business purposes and on a regular basis.

Whether you have a single-family home, townhouse, or condo, there are tax benefits available to you, but it’s tough to take advantage of them if you don’t know all the details.  Seek help from a good accountant or tax advisor.   

Mary Anne Walser is a licensed attorney and full-time REALTOR, serving buyers and sellers in all areas of Metro Atlanta. Her knowledge of residential real estate and her legal expertise allow her to offer great value to her clients. Mary Anne serves on the Committee that drafts and reviews the contracts utilized by all REALTORS in the State of Georgia. In addition, she is a member of the Atlanta Board of Realtors, the Georgia Association of Realtors, the State Bar of Georgia and the Georgia Association of Women Lawyers. Contact Mary Anne at 404-277-3527, or via email: maryannesellshomes@gmail.com.

 

WHAT TO LOOK FOR IN A CLOSING ATTORNEY

13 Monday Jan 2014

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We have all heard the closing horror stories.  The closing that took eight hours.  Or even worse, the parties that waited eight hours only to be told to come back the following day or even week.  The closings that never happened.

If the agents, parties, lenders, and attorneys have done their jobs, there should be no such horror tales.  By the time closing approaches, all problems should be resolved.  While all parties could have a part in a closing nightmare, typically any delays or problems are associated with the buyer’s loan; the closing is when the lender funds the transaction.  Problems arise when the buyer has failed to supply all required documents, if the lender’s underwriting department isn’t on the ball, or if there are problems with title to the property.

Choosing the right lender is one element of this puzzle.  But the other important consideration is the CLOSING ATTORNEY.  A good closing attorney will work out any problems they can ahead of time, and let the parties know promptly if the lender is indicating that there are any problems with funding.  So how do we choose the closing attorney?

In Georgia, real estate purchase transactions must be conducted by a licensed attorney.  In some states, a title company can hold the closing without an attorney present, but here in Georgia you must use a licensed attorney, and that  attorney represents the buyer’s LENDER.  Therefore, typically the Buyer chooses the closing attorney, subject to approval by the Buyer’s lender.  However, a Seller, particularly one who is paying closing costs on behalf of the Buyer, can often negotiate to name the closing attorney.   Here’s what to look for if you are the Buyer or the Seller and need a closing attorney:

  • Choose an attorney who does closings often, regularly, and in the normal course of business.  I look for attorneys who have a full staff devoted only to closing real estate loans.  This doesn’t mean that the firm can’t or doesn’t also handle other legal work – just that they have a full and complete department specializing in real estate closings.  You don’t want the attorney’s office that only does closings once in a blue moon – closings are too specialized and too important to the parties.
  • I recommend that you also choose a closing attorney’s office that has been in business for a long time and which will BE In business for the foreseeable future.  You may not sell your home for seven years or longer.  What if at the time you go to sell the home you purchased you can’t find your title insurance policy or some other important document?  Or you need a legal affidavit relating to the closing?   If your closing attorney is around, they are invaluable in that instance.

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Realtor Panel convened by Morris Hardwick Schneider – our pre-meeting last week

Recently I was asked to serve on a panel of top producing agents.  The forum was a firm retreat for the largest real estate closing firm in the Southeast, Morris Hardwick Schneider.  I was honored to be asked and impressed that real estate closing attorneys cared enough to find out how they could be BETTER closing attorneys, from a Realtor’s point of view.  Look for a firm, similarly, who is focused on and cares about customer service.  It’ll pay off in piece of mind.  And will keep those horror stories at bay.

Mary Anne Walser is a licensed attorney and full time REALTOR, serving buyers and sellers in all areas of Metro Atlanta. Both her knowledge of residential real estate and her professional legal expertise offer great value to her clients. Mary Anne serves on the Committee that drafts and reviews the contracts utilized by all REALTORS in the State of Georgia. In addition, she is a member of the Atlanta Board of Realtors, the Georgia Association of Realtors, the State Bar of Georgia and the Georgia Association of Women Lawyers. Contact Mary Anne at 404-277-3527, or via email: maryannesellshomes@gmail.com.

INSPECTIONS 101: FROM THE SELLER’S POINT OF VIEW

08 Wednesday Jan 2014

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As the Seller, once you have an acceptable offer and have agreed to terms with a ready, willing and able Buyer, you are halfway – but not all the way – there.  There are still obstacles to overcome.  One, of course, is the appraisal.  Another is the Buyer’s loan approval.  Still another – and the one that you perhaps have the most control over – is the inspection.  In the standard Georgia contracts, Buyers may (and usually do) choose to ask for a due diligence period; and typically the Seller will agree to that.  The due diligence period is the time in which the Buyer does all their inspections – structural, electrical, plumbing, systems, etc.  Usually the Buyer will call in one inspector for a general inspection and if that inspector finds anything that needs further investigation, the Buyer will call in additional experts.  Typically, however, there is one inspector, one inspection, which results in a 20 to 30 page inspection report.  Don’t let the length of it scare you.  There is a lot of “fluff” in most inspection reports that give the Buyer information about maintenance of the home and other things.  The actual inspection items that need to be fixed can be distilled down to one “list”.  Some Buyers will ask the Seller to fix everything – others may decide that nothing is severe enough to ask the Seller to fix.  Usually, we see something in-between.

Inspection

During this “due diligence period” the Buyer can terminate the contract with no penalty for any reason or no reason at all.   Therefore, the Buyer has the upper hand (unless, of course, there were multiple bids and/or it is a “hot” property).   That’s why the Georgia due diligence provision is also called the “free look” provision.  So if you are happy with the contract in hand, as a Seller it behooves you to accommodate the Buyer if and where you can, and to make any repairs that are requested that you deem “reasonable.”

As the Seller, under the standard Georgia contract your obligation is to make the property available for inspection on the date and time scheduled.  All utilities must be operational.  The inspection will take between two and five hours, and it is customary for the Seller to leave during that period of time.  Your agent can guide you on this.  As long as the inspector is a licensed home inspector and we are familiar with him/her and/or the company, you can rest assured that it is safe to leave the inspector in your home.  If there is any doubt, the buyer’s agent or your agent can stay for the full inspection.

However, it is also customary for the listing agent NOT to be present.  The reason is that the buyer and inspector want freedom to discuss any and all problems they may find without interruption or argument.

If the Buyer does decide to ask for repairs, they must provide you, the Seller, with a copy of the inspection report and an “Amendment to Address Concerns” setting forth the precise repairs that they are requesting be made.  You can counteroffer the Buyer’s initial demands and negotiate something less than the original items asked for.  In addition, the parties may and often do agree on a monetary concession by the Seller in lieu of repairs. That may be preferable to you as a Seller because it eliminates any dispute over the quality of the repairs performed, and saves you from the possibility that the repairs may end up costing more than is originally calculated.

A good agent can guide you through all of this.  I typically will let my Sellers know what general amount they should “budget” for inspection repairs at the time we get the initial offer, so that they can better calculate their net proceeds from a given contract.  By necessity, this budget will be based on the items the Seller knows might need repair, and may include a cushion for the unforeseen.  With a little advance planning and good counsel, you can sail through the inspection and head on to closing.

(*Photo, courtesy of Cornerstone Inspection Group)