Buying a Home? Don’t Forget to Ask These Questions!

 

Buying a home comes with a lot of responsibilities and liabilities. When you buy a home, you are stuck with it until after you sell it successfully. Because of this, you must take extra precaution and try to ask as many important questions as possible before you close a deal with the seller or broker. Below are the questions you shouldn’t forget to ask when buying a home.

Can You Have a Copy of the Home’s Sales History?

It is important to know about how many times the home has changed hands over the years as well as for much the home sold for each time. This will let you know about your prospective property’s value fluctuations which can help you sell the home and negotiate fairly in the future.

What is the Cost of Monthly and Annual Utility and Maintenance?

No one wants a home that racks up utility bills as though the owners are made of money. The water, power, and gas bills should be disclosed as well as annual maintenance cost for you to gauge if you can truly afford the home.

How Much is the Property Tax?

Although the home’s value is the primary determinant of the property tax, knowing how much the current owners are paying is a good way to determine future expenses on the property.

Does the House Have an Unusual History or Has It Been Involved in Any Crime?

Any history of suicide, murder, or death should be disclosed by the broker or seller. Unusual history like appearing in a magazine, commercial, or movie should be disclosed as well. A home appearing in public media may mean a future privacy breach and a negative history can make a home difficult to sell in the future.

When was the Roof Last Fixed or Replaced?

A roof replacement can cost upwards of $10,000. The future homeowner should know when a huge expense like this may be due.

Does the Area Around the Property Come with Parking Restrictions?

Whether or not the home has a garage, it is possible that future visitors may need to park outside of the property. When this happens, the last thing you want is for your guests’ vehicles to get towed away.

Are There On-Going Warranties for the Kitchen Appliances, Garage Door, the HVAC System, and More?

Replacing any of the above can easily cost thousands of dollars. Having the warranties can save a lot of money down the road.

Are There Renovations or Additions Made by Past and Current Owners?

Upgrades can cost a lot. It is best to know which contractors worked in the house before and what they did more so if planning future additions or renovations.

Are There Any Issues with Sewage or Broken Pipes?

Although you can hire a home inspector, it is best to know these issues beforehand more so that the cost of repairs for issues like this can be equivalent to a sizable amount.

Are There Past or Current Pest Infestations?

Getting rid of rodent or insect infestation can incur a lot of time and money. Something like this needs to be disclosed rather than find out when it is too late.

WRITTEN BY MICHAEL PORTER

Original Post 

Why Are People Buying Houses with Their Friends?

When we think about buying a home, we think about the traditional situations. You might buy a starter home on your own, or you could get married or start a family and then buy a home.

We tend to view homeownership as something we do alone or with a significant other, but there’s a new trend becoming increasingly popular, which is buying a house with your friends.

Millennials are the primary demographic starting mortgages with friends, and they’re often putting off getting married or having kids.

Co-buying houses with friends isn’t necessarily a positive reflection of the state of the housing market, though. Buying a house is increasingly unaffordable, even when it would have been much more attainable a few decades ago.

Why Co-Buying?

There is undoubtedly a housing crisis going on right now, and there is a significant shortage of inventory which isn’t showing signs of getting resolved any time soon. When people try to buy a home, they’re often priced out or beat out in bidding wars.

Millennials creatively solve the economic hurdles that might otherwise block them from homeownership with co-buying.

According to the National Association of Realtors (NAR), the number of buyers purchasing as unmarried couples has been rising throughout the pandemic. During the pandemic, a lot of people re-evaluated their living situation. Renters wanted more space, so they thought rather than getting a roommate and continuing to rent, why not buy.

Even before the pandemic, millennial homebuyers were in a tough situation. Saving for a down payment is difficult, particularly with student loan debt and rising living costs. Then, as soon as millennials got to that peak point where they’d normally be buying a home in 2020, a boom began that led to a historic inventory crisis.

Home prices have reached record highs, and starter homes were the biggest victim in the shortage of properties.

Alternatives to the Traditional Lifestyle

The millennial generation has cultivated a new normal, including waiting to get married and have kids. Marriage and birth rates continue to decline, and this generation isn’t settling down as early or in the way that previous generations did.

Still, homeownership remains important to millennials.

Buying a home on your own isn’t always possible with a single income, and around 40% of adults who aren’t in a couple make less money than their peers.

The solution?

Teaming up with a friend or a roommate to cut the price of a home by half. You can potentially buy a home even when you have less money saved.

You may also be able to cut costs in other ways if you take on a communal living model where you’re sharing household utilities and other living expenses.

The Logistics

If someone is considering co-buying with friends or roommates, economists say you should have a formal agreement that will outline the terms for various scenarios. These scenarios include buying out someone who wants to leave the situation or ending the arrangement altogether.

There are also downsides to buying with a friend or roommate. For example, if one of you has a lower credit score than the other, that will negatively affect your mortgage rates. Your friend can affect your credit score too. For example, if they fall behind on their payments, you’re going to be financially impacted.

There are a lot of details that you’re going to need to talk to a professional about, like inheritance issues and how shares are divided. You may not be comfortable having these conversations with a friend or someone who isn’t a family member or significant other.

Overall, it’s an interesting approach to homeownership at a time when it could otherwise feel unattainable but co-buying also isn’t without pitfalls.

WRITTEN BY ASHLEY SUTPHIN

Original Post

Getting Wall Street out of our houses

 

The Street is a major buyer of single-family housing — driving up prices. Here’s a way to get our houses back.

Friends,

Ask average Americans why they’re grumpy — why, for example, they don’t credit Joe Biden with a good economy — and lack of affordable housing comes high on the list.

An important but little understood reason home prices and rents have skyrocketed across America — causing so many young people, in particular, to feel frustrated with the economy — is Wall Street’s takeover of a growing segment of the housing market.

The biggest reason home prices and rents have soared in the U.S. is the lack of housing. Supply isn’t nearly meeting demand.

But here’s the thing: Americans aren’t just bidding against other Americans for houses. They’re also bidding against Wall Street investors — who account for a large and growing share of home sales.

Democrats in Congress are finally beginning to give this trend the attention it deserves.

Let me explain.

The Street’s appetite for housing began after the 2008 financial crisis, when many homes were in foreclosure — homeowners found they owed more on them than the homes were worth. As you recall, Wall Street created that crisis with excessive and risky lending, too often in the form of mortgages to people unable to pay them when they became due.

When the crisis pushed the economy into deep recession and millions of Americans lost their jobs, many additional homeowners were unable to pay up. They, too, discovered that they owed more on their homes than their homes were then worth.

The Street became a double predator — first causing a housing bubble, which burst. Then buying up many of the remains at fire-sale prices, and selling or renting them for fat profits.

The predation continues. America’s soaring demand for housing has made houses terrific investments — if you’ve got deep enough pockets to buy them.

Partly as a result, homeownership — a cornerstone of generational wealth in the United States, and a big part of the American dream — is increasingly out of reach of a large and growing number of Americans, especially young people.

All over America, hedge funds (in the form of corporations, partnerships, and real estate investment trusts that manage funds pooled from investors) have bought up modestly priced houses, frequently in neighborhoods with large Black and Latino populations, and converted the properties to rentals.

In one neighborhood in east Charlotte, North Carolina, Wall Street-backed investors bought half of the homes that sold in 2021 and 2022. On one block, all but one of the homes sold during these years went for cash to an investor that then rented it out.

By last March (the most recent data available), hedge funds accounted for 27 percent of all single-family home purchases in the United States.

Now for some good news.

Democrats have introduced a bill in both houses of Congress to ban hedge funds from buying and owning single-family homes in the United States.

It would require that these funds sell off all the single-family homes they own over a 10-year period and would eventually bar them from owning any single-family homes at all.

During the decade-long phaseout, the bill would impose stiff tax penalties, with the proceeds reserved for down-payment assistance for individuals and families looking to buy homes from corporate owners.

If signed into law, the legislation could potentially increase the supply of single-family homes available to individual buyers — thereby making housing more affordable.

I have no delusions that the bill will become law anytime soon. But along with many other pieces of legislation Democrats have introduced in this Congress, the bill provides a roadmap of where the country could be heading under the right leadership.

So many Americans I meet these days are cynical about the country. I understand their cynicism. But cynicism can be a self-fulfilling prophesy if it means giving up the fight for a more equitable society.

The captains of American industry and Wall Street would like nothing better than for the rest of us to give up that fight, so they can take it all.

I say we keep fighting. This bill is one reason.

BY: ROBERT REICH

Original Post

9 Federal Income Tax Breaks for Homeowners

Some of these deductions and credits are available to a wide swath of homeowners.

Buying and maintaining a home is expensive — and the cost just keeps climbing. Fortunately, Uncle Sam offers several tax breaks that can put more money back in a homeowner’s pocket.

Some of these deductions and credits can only be used by a small slice of homeowners nationwide. But others are available to a wider swath of folks.

Following are federal income tax breaks for homeowners that can ease the sting of homeownership costs.

1. Energy-efficient home improvement credit

If you have made specific energy-efficient improvements to your home, you might qualify for this tax credit. Qualifying expenses can include:

• Qualified energy efficiency improvements installed during the year
• Residential energy property expenses (such as new central air conditioners; natural gas, propane or oil water heaters; and natural gas, propane or oil furnaces and hot water boilers)
• Home energy audits

Through 2032, this credit is worth 30% of the cost of eligible property.

Most of the items we list in this story are tax deductions or exclusions, but this and the next one are tax credits. Credits are better than deductions because, while deductions reduce taxable income, tax credits reduce your tax bill dollar for dollar.

2. Residential clean energy credit

This tax credit is for homeowners who invest in renewable energy. Qualifying expenses can include:

• Solar electric panels
• Solar water heaters
• Wind turbines
• Geothermal heat pumps
• Fuel cells
• Battery storage technology

The residential clean energy credit is available now through 2032 and is worth 30% of the cost of qualifying new clean-energy property.

3. Capital gains exclusion when selling your home

Selling your home opens the door to one of the most generous breaks in the entire U.S. tax code.

Single homeowners who sell and enjoy a capital gain — that is, profit earned from the sale — may qualify to exclude up to $250,000 of that gain from their income. That means they won’t owe federal income taxes on that profit.

If you are married and file a joint return with your spouse, the exclusion jumps to $500,000.

There are some rules you must follow to get this break. According to the IRS:

“You’re eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale.”

Other rules apply — such as that you generally are ineligible if you excluded the gain from the sale of another home during the two-year period prior to the sale of your current home.

For more, check out this page on the IRS website: IRS Topic No. 701, Sale of Your Home.

4. Net investment income exclusion when selling your home

The net investment income tax, which started in 2013, is a 3.8% tax that generally applies to income such as interest, dividends, capital gains, rental and royalty income, and non-qualified annuities.

Not everyone pays it, though; your income needs to be above a certain threshold, which is currently set at $250,000 for married couples filing jointly.

However, even for those who owe the tax, there is an exception for gains on the sale of a personal home. If such a gain is excluded from your gross income for regular income tax purposes, it also is excluded from your net investment income for the purpose of the 3.8% tax.

5. Exclusion for canceled mortgage debt

Debt forgiveness is a rose that often comes with a thorn — in the form of taxes you owe on the debt that has been canceled. This is because the IRS often considers a canceled debt to be taxable income.

However, passage of the Mortgage Forgiveness Debt Relief Act of 2007 “generally allows taxpayers to exclude income from the discharge of debt on their principal residence,” according to the IRS.

This relief applies to debt reduced through mortgage restructuring and mortgage debt forgiven in connection with a foreclosure. The provision was extended through 2025, and it allows up to $750,000 in forgiven debt to be excluded.

6. Deduction for mortgage interest

This tax break allows you to deduct from your taxes the interest you pay on a mortgage loan.

This break — and all that follow on this list — are what the IRS calls itemized deductions. That means you can take advantage of them only if you itemize your deductions as opposed to taking the standard deduction.

If you took out your loan on or before Dec. 15, 2017, you can deduct interest on a debt of up to $1 million. For homes purchased after that date, only interest applied to loan amounts of up to $750,000 can be deducted.

This deduction applies to interest on mortgages for first and second homes and refinanced mortgages. The IRS defines “home” pretty broadly — it even includes a boat house.

7. Deduction for home equity loan interest

Just as you can deduct the interest from a mortgage loan, if you itemize, you also can deduct the interest on a home equity loan or home equity line of credit.

However, for the interest to be deductible, the loan must be used to “buy, build or substantially improve your home that secures the loan,” according to the IRS.

So, you’re out of luck if you use a home equity loan to cover living expenses or pay off debts, for example.

8. Deduction for real estate property taxes

Those who itemize generally can deduct up to $10,000 of their state and local taxes, including real estate property taxes.

9. Medical expense deduction for home improvements

One last tax break for those who itemize: Some home improvements can be deducted as medical expenses if they meet certain criteria. According to the IRS:

“You can include in medical expenses amounts you pay for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent.”

Just note that this deduction only applies to the part of your medical and dental expenses that is more than 7.5% of your adjusted gross income. So, even if you itemize, you cannot deduct the full value of your medical expenses.

You can find more details in IRS Publication 502, Medical and Dental Expenses.

BY: Chris Kissell 

Original Post

 

Rates Right in Line With Long-Term Lows, But That Could Change on Friday

"Long-term" is a subjective measurement, but in this case, it refers to the the past 7 or 8 months.  Today's mortgage rates dropped to levels that--until 2 other recent days in late December--haven't been seen since May, 2023. In other words, we're effectively at 8 month lows today, even if those lows aren't very different from the lows in late December.

This week's precipitous drop came courtesy of factors other than the slate of economic data.  That's interesting because we'd been eagerly anticipating this week's econ data as a potential source of volatility.  Instead, it was a friendly update from the U.S. Treasury on its borrowing plans (something that can have a big, indirect impact on mortgage rates by altering the supply/demand equation in the Treasury market which then spills over into the mortgage market).

All of the above means that Friday morning's jobs report is our first significant opportunity to see a big move in rates that's driven by economic data.  As is always the case ahead of this report, the reaction could easily take rates quite a bit higher or lower.  It can also thread the needle and keep things fairly flat.  

The market is expecting the job count to drop to 180k from last month's 216k.  A lower number would likely keep low rates intact, and a much lower number would allow for new longer-term lows.  Conversely, a number over 200k would be more likely to put upward pressure on rates.  It's not uncommon for the actual number to come in roughly 100k away from the forecast level.  The farther from forecast, the likely we are to see the big reaction.

By: Matthew Graham

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