Real Estate Information Archive

Occasionally, when dealing with close relatives who might also become heirs, signing a note and handling the paperwork properly may seem like a needless effort but it could mean the difference in being able to take a legitimate interest deduction. Home mortgage interest is deductible only if the loan is a secured debt which involves the buyer signing an instrument like a mortgage or deed of trust that makes the ownership of the home security for the debt. That instrument must then be recorded or otherwise perfected according to state or local law and the home, in case of default, must be able to satisfy the debt.

In a family situation, a parent, grandparent or other relative may decide to loan a buyer the money to purchase a home because they have it available and it isn’t earning much in certificates of deposit. They offer to loan it for a rate equal to what a conventional lender is charging but without the fees. While it may appear to be a win-win situation, there could be problems if things are not done correctly.

Even if the borrower makes the payments, they are not entitled to an interest deduction unless three criteria are met: 1) sign a debt instrument specifying the terms 2) securing and record the debt properly and 3) the home is sufficient collateral for the loan. It would be prudent to consult with an attorney before you sign the final settlement papers to be comfortable that both buyer and the lender-relative are complying with IRS regulations. For more information, see IRS Publication 936 – Home Mortgage Interest.

There seems to have been an accepted progression for homeowners going from starter home, to gradually moving into one’s dream home, then, downsizing after becoming an empty nester and finally, into a retirement home. However, Marianne Cusato’s 2016 Aging-in-Place Report indicates that many older Americans don’t plan on following that pattern.

61% of homeowners above the age of 55 intend on staying in their homes indefinitely. 2/3 of them believe that the home’s layout will serve their needs without having to make aging-related improvements. Some of the reasons being cited for staying in place are:

66% say their home is conveniently located

38% say they live close to their family

68% say they feel independent in their home

54% say they are familiar with their neighborhood

66% say the feel safe in their home Typical renovations that might be considered for their current home are things like grab bars in the tub or shower, shower seats, taller toilets, handheld showerheads and additional handrails on stairways.

It seems that the report’s conclusion is that regardless of a homeowner’s age, they want to thrive in their home. The same emotional reasons that causes a person to want to buy a home are the things that cause them to hold onto them if is practical.

There is a common body of knowledge among real estate professionals that indicates that the longer a home is on the market, the lower the price will be. Many sellers discount this belief in the beginning because they feel confident their home will sell quickly. Lowering the price is the most obvious thing that can be done to encourage buyers but it might be good to look at what builders do. Builders offer a variety of incentives such as upgrades, seller-paid closing costs, interest rate buy downs, washers, dryers, refrigerators or big screen TVs. Interestingly, much of the resale market doesn’t employ these techniques.

According to the latest NAR Home Buyers and Sellers Profile, 64% of sellers did not offer any incentives at all. 21% of sellers offer a home warranty. 16% of sellers offered assistance with closing costs and 6% offered credit toward remodeling or repairs.  The attached chart indicates that while 80% of sellers were not willing to offer incentives in the beginning of their marketing period, as weeks passes and their home hasn’t sold, closer to half did add incentives. The ideal outcome is to maximize proceeds in the shortest time possible with the fewest unexpected issues. This involves having a firm understanding of current, local market conditions and crafting a marketing plan that will insure results.

There is so much at stake, the value of a trusted real estate professional is essential. Call DeHanas Real Estate for all of your residental property sales and property management needs at 301-870-1717.

Don DeHanas, Broker/owner of DeHanas Real Estate Services in Waldorf, recently announced the affiliation of Tonga Turner to the team. "Tonga is highly enthusiastic and detail oriented making her the perfect well-rounded real estate professional" says DeHanas. "We are excited she has joined our family team"!

Integrity, honesty and partnership are the three major foundations on which Tonga Turner’s real estate career has been built on. "Real estate is more than just, renting, selling or buying a home, it’s an important decision. Even if you are a seasoned homebuyer or seller, or looking to make your very first purchase", says Turner, who adds, "and I'll be here to guide you every step of the way".

From working with 3 major fortune 500 companies as a top business executive, to brokering major corporate deals in the private sector, Tonga’s job has always been to put the client first. If you are looking for a seasoned negotiator that is always working to achieve the best possible result for you and your family, then give Tonga Turner a call. Providing superior, quality real estate concierge services for today’s professionals.  Tonga truely is working to make real estate dreams come true.

DeHanas Real Estate Services is locally owned and operated, specializing in residential property sales, Bank-owned home sales, short sales, investment property and Property Management.

• “It’s impossible to get low down payment loans.” – FACT! FHA down payments are 3.5% and VA is 0%. In some areas, there may be some 0% down payment USDA loans available. FNMA and Freddie Mac have 3% down payment programs.

• “It takes perfect credit to get a loan.” - FACT! There is a relationship of better rates to better credit but many issues on a credit report can be explained or corrected. The way to know for sure is to speak to a reliable lender.

• “If I’ve had a bankruptcy or Foreclosure, I can’t qualify.” - FACT! Credit history following a bankruptcy or foreclosure is very important and there can be extenuating circumstances. It only takes a few moments with a reliable lending professional to find out if your individual situation will allow you to qualify for a new mortgage. Will I Ever Be Able to Buy a House After Bankruptcy?

• “Getting pre-approved is expensive.” - FACT! Usually, the only expense to getting pre-approved is the cost of the credit report which could be around $35. The advantage is that you will know that you qualify for a particular mortgage amount.

• “I should wait to qualify until I find a home.” - FACT! It can take weeks to qualify for a mortgage especially if there are issues that need to be corrected. The best interest rates are only available for the highest credit scores. It is to your advantage to start the qualifying process early in your home search.

• “All lenders are the same.” - FACT! Reliable lending professionals will explain the entire process before collecting fees, quote fees up-front, have competitive products, do what is necessary to get the loan approved and close at the locked rate and terms. Ask for recommendations from recent borrowers.

• “Adjustable Rate Mortgages are more expensive than fixed rate mortgages.” - FACT! Adjustable Rate Mortgages can be less expensive than fixed rate mortgages if the buyer’s circumstances warrant it. If a buyer is only going to be in a home for a few years before selling, it can be determined if an ARM loan will result in the lowest way to finance the property. There are many variables and you need to be aware of them before deciding which type of loan to finance your home purchase.

Buyers and Sellers need solid information to make good decisions. Call us with your questions or to get a recommendation of a reliable lender who can give you the real facts.

DeHanas Real Estate Announces the affiliation of Holly Huseman!

Holly has been a Charles County Native for 32+ years! Seventeen of those years have been in Real Estate exclusively Property Management and as a Realtor with Southern Maryland Association of Realtors (SMAR). Before arriving with the DeHanas Team, she helped expand and grow another Real Estate Company. Now she looks forward to this new adventure approaching! Aside from work, Holly is a mother of two, a fifteen year old daughter and an eleven year old son. "I look forward to helping my County, your families and working with my new family at DeHanas Real Estate!" says Holly.

DeHanas Real Estate is locally owned and operated specializing in all aspects of residential home sales and Property Management. Their office is conveniently located in St Charles Town Plaza in Waldorf. 

During the Great Recession, some homeowners elected to rent their home rather than sell it for less than it was worth. IRS tax code allows for a temporary rental of a principal residence without losing the exclusion of capital gain based on some specific time limits. During the five year period ending on the date of the sale, the taxpayer must have:

• Owned the home for at least two years

• Lived in the home as their main home for at least two years

• Ownership and use do not have to be continuous nor occur at the same time If a home has been rented for more than three years, the owner will not have lived in it for two of the last five years.

So the challenge for homeowners with gain in a rented principal residence that they don’t want to have to recognize is to sell and close the transaction prior to the crucial date. Assume a person was selling a property which had been rented for 2 ½ years but had previously been their home for over two years. To qualify for the exclusion of capital gain, the home needs to be ready to sell, priced correctly, sold and closed within six months. All of the gain may not qualify for the exclusion if depreciation has been taken for the period that it was rented. Depreciation is recaptured at a 25% tax rate. A $200,000 gain in a home could have a $30,000 tax liability. Minimizing or eliminating unnecessary taxes is a legitimate concern and timing is important. Selling a home for the most money is one thing; maximizing your proceeds is another. For more information, see IRS publication 523 and an example on the IRS website and consult a tax professional.

Mortgage approval isn’t final until it’s funded.  Things can change prior to the loan being closed that can affect a pre-approval such as changes in the borrowers’ financial situation or possibly, factors beyond their control like interest rate changes. Good advice to buyers is to do nothing that can affect your credit report until the loan closes. Opening new credit cards, taking on new debt for a car or furniture or changing jobs could affect the lender’s decision if they believe you may no longer be able to repay the loan.  

The benefits of buyer’s pre-approval are definitive: it saves time, money and removes the uncertainty of knowing whether the buyer is qualified. The direct benefits include: Amount the buyer can borrow - decreases as interest rates rise Looking at “Right” homes - price, size, amenities, location Find the best loan - rate, term, type Uncover credit issues early - time to cure possible problems  Bargaining power - price, terms, & timing  Close quicker - verifications have been made It is a very common practice for mortgage lenders to require income and bank verifications and to re-run the borrowers’ credit one final time just prior to closing. Mortgage approval isn’t final until it’s funded.

Most people think they’ll have a house payment and a car payment for the rest of their lives but it doesn’t have to be with a plan and a little discipline. The plan is to make additional principal contributions to a fixed rate mortgage to shorten the term and save tens of thousands in interest. If a person were to make an additional $100 payment each month applied to principal on a $175,000 mortgage, it would shorten the loan by five years six months. If the person were to make $200 a month additional payments, it would shorten the loan by 9 years. $459 additional payment would shorten it to 15 years. If a person does make a decision to regularly pre-pay their mortgage, it will be their responsibility to verify that the lender is applying the money to the principal each time as opposed to being placed in the reserve account for taxes and insurance.

In today’s market, a savings account pays around 0.5% or less. Even with the low mortgage rates available, there is still a considerable savings. People who might need the funds in the near future should carefully consider this option due to the difficulty to access equity easily from one’s home. Make your own projections using the Equity Accelerator.

Homeownership, part of the American Dream: a home of your own where you can feel safe, raise your family, share with your friends and enjoy life. The benefits are easily recognizable but maintenance is just a real and should be considered. Property taxes and insurance are two of the largest expenses homeowners have aside from their mortgage interest. But, as any homeowner knows, there will be occasional expenses for repairing toilets, faucets, windows and other things. There are also the significantly larger expenses that arise like replacing a water heater or HVAC unit. And don’t overlook the periodic maintenance like painting or floor coverings.

Financial experts suggest that homeowners save one to four percent of the home’s value per year for repairs and maintenance. Two to eight thousand dollars a year may sound like more than you’ll need but the cost of an air conditioning unit can easily be $6,000. Some homeowners purchase home warranties to avoid the unexpected costs. An annual premium instead of an unexpected large expenditure. Coverage varies from company to company and are not intended to cover existing conditions. The alternative to not saving for these anticipated expenditures means that a homeowner might have to put it on a credit card at a very high interest rate or get a home improvement loan.

Appreciation is a distinct benefit of home ownership and deferred maintenance can limit the value as well as lengthen the market time when it sells.