E-Newsletter Archive

April 2004

Birds, Not Bears Attracting birds to a feeder in your yard can be fun, but attracting bears is not. Take advantage of any second story deck railings and make stealing bird seed less of an option for a passing bear. Use a specialty bird feeder extension that mounts to your deck railing. Hang the bird feeder from the hook and swing it out over the ground, a story below. This works great. One, it keeps droppings and seed husks off my deck. Two, the cats have never been able to harm a bird with the feeder out of range. And three, no bears. (Never put out suet--lesson learned.) The prettiest bird at my feeder this year was a chartreuse Evening Grosbeak. Enjoy the birds that visit your home.

Spruce it up to sell Some sellers wonder if it's worth the effort to fix their homes up for sale, particularly in a hot market where almost every listing that comes on the market sells. more Pre-approval vs. pre-qualification Is pre-approval a general endorsement by a bank? more Who are the winners and losers under the new tax law? The Taxpayer Relief Act of 1997 significantly changed the federal tax laws regarding the sale of a principal residence. more From the Heart of SnowProperty As I sit and write this, the last Sunday in March, I'm enjoying the warm sun and listening to one of the first "cheeseburger birds" of the season. At about 5000 feet, my crocuses are already over and so far only one daffodil is blooming. more

Spruce it up to sell

Some sellers wonder if it's worth the effort to fix their homes up for sale, particularly in a hot market where almost every listing that comes on the market sells.

Most Real Estate Agent®s will tell you that the listings that sell the fastest and for the most money are the ones that are in the best condition. Even in a hot market, buyers pay a premium for homes they can move right into.

In most cases, however, it's not recommended that you do a major renovation of a home simply for the purpose of making it more salable. The reason for this is that, in most cases, you can't immediately recoup a major renovation investment. Your money should be spent on giving your home an economical cosmetic facelift

For example, let's say you have an older kitchen. Rather than gut the kitchen and spend $40,000 to $50,000 on a completely new kitchen, it makes more sense economically to paint, replace the floor covering and change the countertops. This, and a general cleanup, is usually all it takes to give a tired-looking kitchen a fresh new look.

First impressions are very important in the home sale process, so you should pay attention to how your home looks from the street. If you are on a limited budget, concentrate your efforts on sprucing up the front and entry of your home first. Your home should look inviting and well maintained, so clean up the yard, plant new sod if the lawn is dead, fix leaning fence posts and paint the front door.

FIRST-TIME SELLER TIP: Most homes are packed with too much furniture and too many personal possessions after years of ownership. Get rid of anything you no longer want or need before you put your home on the market. Your home will appear bigger and tidier, which will make it more appealing to buyers. And it doesn't make sense to pay to move things you no longer want.

Sellers who have outgrown their homes are wise to rent storage space for possessions they want to keep that don't fit comfortably in the home. Avoid the temptation to simply stuff things in closets or the garage. This will defeat your purpose. Your aim is to present your home as a desirable place to live. If every inch of storage space is stuffed with your possessions, your home will appear to be too small and without adequate storage space.

Buyers appreciate a clean, tidy interior, so remove clutter from the countertops in the kitchen and bathrooms. A home office is an attractive feature, but not if the desk is covered with papers. Clean up your home office so that buyers get the impression that it's a comfortable place in which to work. Every room in your home should look like it serves its intended purpose well.

Make the most of all the available living space in and around your home. Many people cannot visualize how a space will look, so you're wise to leave nothing to the imagination. For example, if you have a deck, set up outdoor furniture to show buyers that you have an area suitable for outdoor entertaining. A room in the basement might be made into an exercise or hobby room with minimal effort.

THE CLOSING: Have your home, including the windows, professionally cleaned. Be sure to keep your home clean and tidy during the marketing period. Bright interiors are appealing, so leave the lights on during showings, even though it may seem like a waste of money.

Pre-approval vs. pre-qualification

Inman News

Is pre-approval a general endorsement by a bank?

No, when you are pre-approved, it is for a specific loan program from a specific lender. Not all lenders offer all loan programs. You may need to get approved with a different lender or for a different loan program with the same lender, depending on your financing options at the time you buy a house. Check with the agent or broker who helped you gain loan pre-approval before you write an offer. If you think you will need to get re-approved for a loan, make sure to allow enough time for this in the purchase contract.

Is the pre-qualification a guarantee that I will get the loan?

No. The lender or mortgage broker is under no obligation to grant you a loan. Most pre-qualification letters state that a buyer appears to be qualified for a certain loan amount. There is usually a disclaimer to protect the lender or broker in case you fail to qualify. Before a lender will actually loan money, you must complete a loan application.

Is there anything official about a pre-qualification?

No, loan pre-qualification is an informal process. After a review of your financial status, a loan agent or broker will issue a letter stating that if the information provided is accurate you should be able to qualify for a loan of a certain amount. Often, these letters are form letters. Even if a pre-qualification letter is personalized, it usually contains disclaimers to protect the loan agent. Consequently, some Real Estate Agent®s feel that pre-qualification letters are worth little more than the paper they're written on.

Who are the winners and losers under the new tax law?

The Taxpayer Relief Act of 1997 significantly changed the federal tax laws regarding the sale of a principal residence.

For tax purposes, a principal residence is your primary dwelling. Before this bill took effect on May 7, 1997, homeowners could defer paying any capital gain tax on the sale of their primary residence if they bought a new home within two years. Also, the replacement residence had to be at least equal in cost to the old residence. This provision was referred to as the "rollover" residence replacement rule.

The old tax law also included a provision that allowed homeowners 55 and older to exclude up to $125,000 of capital gain on the sale of their primary residence if they had occupied the property for at least three of the five years preceding the sale. Both the "rollover" residence replacement rule and the once-in-a-lifetime $125,000 exclusion have been replaced by a simpler tax law.

The new Taxpayer Relief Act of 1997 grants a $500,000 capital gain exclusion to couples, and a $250,000 exclusion to single tax filers, who sell their primary residence after May 6, 1997. To qualify for the exclusion, the seller must have occupied the property for two of the five years preceding the sale. There is no limit on how many times you can take the exclusion, but it can be taken no more than once in two years.

For example, you could buy a home for $200,000 and sell it five years later for $400,000 and pay no capital gains tax because you qualify for a $250,000 gain exclusion. This amounts to $200,000 of tax-free profits. You could then buy another $200,000 primary residence, sell it two years later for $400,000, and again pay no capital gains tax because you would be entitled to take the exclusion again.

Homeowners who have previously taken a one-time $125,000 gain exclusion on a home sale will be entitled to take the exclusion provided under the new law as long as they meet the two-year residency requirement.

The new tax law also reduces the capital gains tax rate, but it requires that assets be held for a longer period of time than was previously the case. Under the new law, the capital gains tax rate will drop from 28 to 20 percent for taxpayers who sell a capital asset, like a primary residence, after July 28, 1997. But, the holding requirement increases from twelve months to eighteen months. For individuals in the 15 percent tax bracket, a 10 percent capital gains rate will now apply.

REPEAT-BUYER TIP: Although the new tax law is expected to benefit most homeowners, it doesn't bring relief to all homeowners. Some, who have owned their primary residences for decades, may find that they would have paid less tax under the old law.

However, the new law gives most repeat homebuyers more options. For example, it's no longer necessary to buy a replacement home within two years of selling in order to get a capital gain tax-break. You aren't forced to buy a principal residence of equal or greater value in order to qualify for the new capital gain exclusion. You don't have to buy another home at all. You are still entitled to the $500,000 couples (or $250,000 singles) exclusion. And, you can take the exclusion repeatedly as long as you take it no more frequently than once every two years.

THE CLOSING: The new tax law also allows penalty-free IRA withdrawals for the purchase of a first home.

Dian Hymer is author of "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

Copyright 1998 Dian Hymer Distributed by Inman News Features

From the Heart of SnowProperty

As I sit and write this, the last Sunday in March, I'm enjoying the warm sun and listening to one of the first "cheeseburger birds" of the season. At about 5000 feet, my crocuses are already over and so far only one daffodil is blooming. I'm lucky enough to have a quiet moment in which to hear a small flock of geese flying high overhead. March has been a glorious stretch of perfect spring days in the Sierra. I still have about a foot of snow in my garden and other exposed areas. Why is that, I wonder? But with tiny leaves appearing on my birch tree (which greatly dislikes winters here), it is impossible to ignore a definite change in seasons. The black oaks have not yet unfurled any leaves. They're smart, for surely we have not seen the last flakes of the winter season. But I have seen that the spring season is now upon us and our real estate market is gearing up for another great year of record-setting proportions. The inventory of homes currently listed is low, as is still normal for this time of year. Just ask the serious buyers out there who can't find what they're looking for. It is a wonderful time for a property to come on the market. And as has been the case at least since I moved here, if a home is priced in the ballpark, don't expect it to still be available the next time you look at it. But as for me, I haven't yet said good-bye to winter. I'll be here, doing my snow dance, just waiting for the moment when I can pop on the x-country skis and trek out into the woods with my faithful dogs.