18 minute read
Home Selling Steps
MAY 2021 MARKET NEWSLETTER
EASTERN PLUMAS & SIERRA COUNTIES
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Beckwourth, Chilcoot, Clio, Graeagle-Blairsden, Loyalton, Portola & Golf Course Communities of Whitehawk, Grizzly Ranch & Nakoma
The home selling process can seem like a Herculean job. But your agent and the rest of your expert and emotional support network will help you deal. Here’s your birds-eye view of the 11 main steps to selling a house.
• Step 1: Decide to sell your house. • Step 2: Research the market. • Step 3: Select an agent. • Step 4: Price your home. • Step 5: Prepare your home. • Step 6: Market your home. • Step 7: Be ready for home showings. • Step 8: Entertain offers. • Step 9: Negotiate with the buyer. • Step 10: Have your home inspected. • Step 11: Close the deal.
• You can depend on a REALTOR® to help you every step of the way!
A REALTOR® is a broker or agent who belongs to the National Association of REALTORS® (NAR), the largest trade group in the country. (Full disclosure: NAR publishes HouseLogic.com). A REALTOR® commits to following a strict Code of Ethics intended to protect buyers and sellers; for example, REALTORS® pledge themselves to protect and promote the interests of their client. Agents and brokers who are not NAR members can’t call themselves REALTORS®. There are more than 1 million REALTORS® in the United States. All agents of Dickson Realty are REALTORS®.
MAY 2021 MARKET NEWSLETTER
EASTERN PLUMAS & SIERRA COUNTIES
Beckwourth, Chilcoot, Clio, Graeagle-Blairsden, Loyalton, Portola & Golf Course Communities of Whitehawk, Grizzly Ranch & Nakoma
How much is my house worth?
What you paid doesn't matter
You may have a dollar figure in mind— perhaps based on what you paid originally, plus a little extra. Because homes appreciate, right? Maybe yes, maybe no. While a hefty increase in value is nice in theory, “ultimately, it's up to the market.”
Think of it this way: Would you buy a banana for $1 if those same bananas were on sale down the block for 69 cents? Of course not! And, of course, a home ain't no banana.
No matter what you paid for your home, market values fluctuate—both up and down. This can work for you or against you. But all that matters on the open market is what buyers are willing to pay now.
Use all your tools: Comps, AVMs, and your Realtor®
The best way to get a handle on your home's sales price are the prices of similarly sized homes in your neighborhood— otherwise known as “comparables," or “comps." For example, if a house near yours with the same square footage and numbers of bedrooms and bathrooms, and in similar condition, sold for $230,000 within the past three months, you can bet your own price will be in that ballpark.
For a quick snapshot, several websites (including this one) offer automated valuation models, or AVMs, where you type in your address and then get a price based on an algorithm that factors in comps in your area. But AVMs are just a starting point.
“No one has actually put eyes on your house, so an AVM can’t really give you an accurate price.” That's why you need your Realtor to visit your home, so they can factor in your home's unique strengths and weaknesses along with comps to come to a better estimate.
How To Price a House To Sell Like Hotcakes
By Angela Colley
Wondering "how much is my house worth?" Putting a price tag on a home you're trying to sell is a tricky thing. For one, it's your home, crammed full of memories, hopes, and dreams—and all that stuff can cloud your thinking and lead you toward the wrong price. There are consequences: Shoot too high, and your home could languish on the market for months and maybe not sell at all. Price it too low and you could bilk yourself out of a whole lot of dough. That's why we're here to guide you through this tough but critical decision; read on to pinpoint a price that's just right.
MAY 2021 MARKET NEWSLETTER
EASTERN PLUMAS & SIERRA COUNTIES
Beckwourth, Chilcoot, Clio, Graeagle-Blairsden, Loyalton, Portola & Golf Course Communities of Whitehawk, Grizzly Ranch & Nakoma
you’ll be able to see a price range for yourself, so you won't feel like you're just having to blindly trust your Realtor.
Factor in upgrades with a grain (or two) of salt
Yep, you poured $10,000 into your brand-new chef's kitchen, or $15,000 to install an in-ground swimming pool. Sweet! So, it stands to reason that you'd make that money back when you sell, right? Well, not quite. Surveys by the National Association of Realtors® show that your return on investment for home improvements depends on what kind of renovation you've pulled off— and how much prospective buyers want it in your area. Refinishing hardwood floors, for instance, will reap a 100% return, paying for itself. Convert a basement to a living area, and you'll recoup only 69% of those costs. The harsh truth: Not everyone is going to fall head over heels with your five-seat built-in hot tub. So do your research and find out what those upgrades will really get you.
Leave some wiggle room
Most buyers love to negotiate when you’re trying to sell your house. So, it helps to “let them win one.” Instead of starting out with the absolute lowest price you can afford to go, add a bit of a cushion. How much? You might round off your asking price in $5,000 increments. So if you know you want $347,000 for your house, you can play it safe and round up to $350,000.
Also keep in mind that many first-time buyers may have a hard time coming up with cash for closing in addition to their down payment, even if their finances are good and they're qualified for a loan. Offering to cover closing costs— while sticking to a higher asking price—might help seal the deal.
Price with Internet browsing in mind
Once you find yourself a ballpark price you're happy with, it's time to fine-tune it. Keep shoppers' online search parameters firmly in mind—small differences in your price can spell a big difference in your exposure.
“Home buyers typically fill out a Web form that has a minimum price and maximum price." “If you’re a dollar outside of that range it is going to be like your house didn’t exist—they’ll never see it." In other words: Price your home at $300,000, and you could miss out on a whole lot of people who are searching in the $250,000–$299,999 price range. So, if you're on the cusp, consider rounding down to capture more eyeballs. Remember what we said about padding? It cuts both ways.
Test the waters with a soft rollout
While choosing a price can be scary, consider this one small loophole: Some brokerages offer a “soft" rollout plan in which they highlight the house as “coming soon" online, without officially listing the house in a multiple listing service. That buys you time to test the market, see if people will click at that price—then adjust accordingly without having to officially lower or raise your price on the record.
When you need expert guidance in pricing your home for sale, contact Dickson Realty’s Portola Office. Their REALTORSÒ are always prepared with the latest comps and accurate market information. Dickson is able to help you “price right” to achieve the maximum benefit from the sale of your home. Office Info: Phone: (530) 832-1700 Email: portolainfo@dicksonrealty.com
MAY 2021 MARKET NEWSLETTER
EASTERN PLUMAS & SIERRA COUNTIES
Beckwourth, Chilcoot, Clio, Graeagle-Blairsden, Loyalton, Portola & Golf Course Communities of Whitehawk, Grizzly Ranch & Nakoma Home Office Tax Deduction: 2 Very Different Ways to Claim It
One way lets you deduct home office expenses easily; the other is harder, but might mean a bigger deduction.
If you're self-employed and work from home, you may be able to save some bucks at tax time by using the home office tax deduction. You have two choices on how to claim it, and those choices depend on your preference for time savings or money savings.
Home Office Deductions: Choose the Simple or Complicated Way
1. The complicated way. Fill out IRS Form 8829 — all 44 lines of it. Figure the proportion of your home's overall space devoted to your office and then calculate how much of your overall home expenses went toward your home office. Lots of math happening here.
An example: If your home office takes up 300 square feet in a 3,000-square foot house, you're using 10% of your home for your work. So, you can take 10% of costs like utilities, homeowners insurance, homeowners association fees, security, and general repairs and maintenance. Pro Tip: Not sure how big your house is? Check the documents you got when you bought your home — there's probably a detailed rendering. Or measure it. Or check your property tax bill.
2. The simplified way. Take $5 multiplied by your home office's square footage up to 300 square feet or $1,500 maximum deduction and, boom, you're done. You won't have to keep track of your actual expenses. Very little math happening here.
If you take the simpler math option, you may not be able to deduct as much as you can with the regular method. You can't depreciate your home office, for example. So consider the value of your time against potential tax savings if you believe you're eligible for more than the $1,500 cap.
Here are some other things you need to know.
What Counts As A Home Office For Tax Deduction?
A room or defined area of your home you use just for business. It can't double as your craft room or home gym. Also, that space must be your principal place of business, or the place where you see customers.
Pro Tip: If you use your home as the sole location of your business and store your inventory there, the place where you store your products does not have to be just for business. Let's say you run a business selling jewelry from a room in your basement.
If you store your jewelry inventory in another part of the basement that is separate and identifiable, you can deduct that space even if you use the rest of the basement as a man cave, home gym, or guest room.
MAY 2021 MARKET NEWSLETTER
EASTERN PLUMAS & SIERRA COUNTIES
Beckwourth, Chilcoot, Clio, Graeagle-Blairsden, Loyalton, Portola & Golf Course Communities of Whitehawk, Grizzly Ranch & Nakoma Home Deductions When You Travel for Work
You don't have to do all your work from home to take the home office deduction. If you're a freelance journalist, you probably spend a lot of time outside of your office interviewing people. As long as your home office is essential to your business, and you spend substantial time there, doing your writing or other work, you're good.
Use Your Separate Structures for Home Deductions
Separate structures on your property, like a detached garage you've converted to an office or studio, are eligible for the home office deduction.
Unlike an office inside your home, a separate structure doesn't have to be your main place of business to qualify for a deduction. That's because the IRS believes your family is less likely to use a separate structure as a parttime play area or den, says Mark Luscombe, principal analyst for tax and consulting at CCH.
Home Office Deductions for In-Home Care Providers
Why, yes. We're glad you asked. If you provide in-home daycare services for children, the elderly, or disabled persons as a licensed or authorized business, you don't have to use the space exclusively for the daycare business to take the home office deduction.
You calculate your deduction by dividing the number of hours you used your home workspace to provide daycare services during the year by the total number of hours during the year.
For example, if you do daycare 40 hours a week for 50 weeks a year, that's 2,000 hours a year, divided by the 8,760 hours in a regular year equals 22.8%. So, you could take 22.8% of the ($1,500 maximum deduction — $5 per square foot times 300 square feet maximum) simplified deduction for your daycare workspace.
Home Deductions for Remote Employees Although freelancers can realize tax benefits, full-time remote employees who use their home exclusively and regularly for business can't. The benefit for remote workers was excised in the Tax Code revamp enacted by Congress in late 2017.
Home Office Deduction: Don't Forget Depreciation
Depreciation is based on the idea that everything — even a home — wears out eventually. Here's how to figure out home office depreciation: 1. Add the home's purchase price to the cost of improvements. 2. Subtract the value of the land it sits on. 3. Multiply that cost basis by the percentage of your home used for work. This gives you the tax basis for your home office. 4. Divide by 39 years (this is the standard number required by the tax law.) For example: • Purchase price: $100,000 • Value of land: $25,000 • Cost basis: $75,000, plus cost of improvements you’ve made • Tax basis: $75,000 x 10% = $7,500 • Depreciation deduction: $7,500/39 years*
For a crash course on depreciation, tax to a tax pro or read IRS Publication 946. If you opt for reading the IRS pub, make a large pot of coffee.
Pro Tip: Depreciation deductions on your home office may increase the amount of profit on a home sale that's subject to taxes. Most taxpayers don't owe income tax on up to $250,000 of profit if you're a single filer, $500,000 for joint filers. Talk to a tax professional on how depreciation deductions affect your tax liability when you sell.
This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.
MAY 2021 MARKET NEWSLETTER
EASTERN PLUMAS & SIERRA COUNTIES
Beckwourth, Chilcoot, Clio, Graeagle-Blairsden, Loyalton, Portola & Golf Course Communities of Whitehawk, Grizzly Ranch & Nakoma
How Long to Keep Tax Records and More: A Checklist
Note: In light of COVID-19 crisis, the IRS has extended the income tax payment and filing deadline for individual and business returns from April 15, 2021, until May 17, 2021. This relief does not apply to estimated tax payments for tax year 2021 that are due on April 15, 2021. You don’t need to file additional forms to qualify for this extension.
Unless you live in a Hollywood Hills mansion, you probably don't have space to store years of tax and insurance paperwork, warranties, and repair receipts related to your home. But you need that paperwork if you need to prove you deserve the tax deductions you took, to file an insurance claim, or to figure out if your busted oven is still under warranty. To help you organize your piles of papers, we've created a handy checklist of how long to keep tax records.
First, a little background on IRS rules, which informed some of our charts:
• The IRS says you should keep tax returns and the paperwork supporting them for at least three years after you file the return -- the amount of time the IRS has to audit you. So that’s how long we advise. • Check with your state about state income tax records. Most states make you keep them as long as the federal government does — three years. But Montana wants you to keep them for five years. And Ohio recommends you hang on to them 10 years. Yes, an entire decade.
The IRS can also ask for records up to six years after a filing if they suspect someone failed to report 25% or more of their gross income. And the agency never closes the door on an audit if it suspects fraud. Just sayin'.
This article provides general information about tax laws and consequences, but isn’t intended to be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.
MAY 2021 MARKET NEWSLETTER
EASTERN PLUMAS & SIERRA COUNTIES
Beckwourth, Chilcoot, Clio, Graeagle-Blairsden, Loyalton, Portola & Golf Course Communities of Whitehawk, Grizzly Ranch & Nakoma
Home Sale Records
Document
Home sale closing documents, including closing statement Deed to the house Builder's warranty or service contract for new home Community/condo association covenants, codes, restrictions (CC&Rs) Receipts for capital improvements Mortgage payoff statements (certificate of satisfaction or lien release)
How Long to Keep It
As long as you own the property + 3 years
As long as you own the property Until the warranty period ends
As long as you own the property
As long as you own the property + 3 years Forever, just in case a lender says, "Hey, you still owe us money."
Why you need these docs: You use home sale closing documents and receipts for capital improvements records to calculate and document your profit (gain) when you sell your home. Your deed and mortgage payoff statements prove you own your home and have paid off your mortgage, respectively. Your builder’s warranty or contract is important if you file a claim. And sooner or later you’ll need to check the CC&R rules in your condo or community association.
Annual Tax Deductions*
Document
Property tax payment (tax bill + canceled check or bank statement showing check was cashed) Year-end mortgage statements
Tax returns
How Long to Keep It
3 years after the due date of the return showing the deduction 3 years after the due date of the return showing the deduction 3 years from the date you file your return or 2 years from the date you paid the tax, whichever is later
Why you need these docs: To document you’re eligible for a deduction or tax credit. *These deductions are relevant if you itemize. The standard deduction has been increased, which means fewer people will itemize than have in the past.
Insurance and Warranties
Document
Home repair receipts Inventory of household possessions Homeowners insurance policies Service contracts and warranties
How Long to Keep It
Until warranty expires Forever (Remember to make updates.) Until you receive the next year's policy As long as you have the item being warrantied
Why you need these docs: To file a claim or see what your policy or warranty covers.
MAY 2021 MARKET NEWSLETTER
EASTERN PLUMAS & SIERRA COUNTIES
Beckwourth, Chilcoot, Clio, Graeagle-Blairsden, Loyalton, Portola & Golf Course Communities of Whitehawk, Grizzly Ranch & Nakoma Investment (Landlord) Real Estate Deductions Document How Long to Keep It
Appraisal or valuation used to calculate depreciation Receipts for capital expenses, such as an addition or improvements Receipts for repairs and other expenses As long as you own the property + 3 years
As long as you own the property + 3 years
Landlord's insurance payment receipt (canceled check or bank statement showing check was cashed) Landlord's insurance policy Partnership or LLC agreements for real estate investments Landlord insurance receipts (canceled check or bank statement showing check was cashed) Section 1031 (like-kind exchange) sale records for both your old and new properties, including HUD-1 settlement sheet 3 years after the due date showing the deduction
Until you receive the next year's policy As long as the partnership or LLC exists
3 years after you deduct the expense
As long as you own the property + 3 years
Why you need these docs: For the most part, to prove your eligibility to deduct the expense. You’ll also need receipts for capital expenditures to calculate your profit (gain) or loss when you sell the property. Landlord’s insurance and partnership agreements are important references.
Miscellaneous Records
Document
Wills and property trusts Date-of-death home value record for inherited home, and any rules for heirs' use of home Original owners' purchase documents (sales contract, deed) for home given to you as a gift Divorce decree with home sale clause Employment records for live-in help (W-2s, W4s, pay and benefits statements)
How Long to Keep It
Until updated
As long as you or spouse owns the home + 3 years
As long as you or spouse owns the home + 3 years
As long as you or spouse owns the home + 3 years 4 years after you make (or owe) payroll tax payments
Why you need these docs: Most are needed to calculate capital gains when you sell.
Organizing Your Home Records
Because paper, such as receipts, fades with time and takes up space, consider scanning and storing your documents on a flash drive, an external hard drive, or a cloud-based remote server. Even better, save your documents to at least two of these places. Or, you can consider an app such as Smart Receipts, which is available via Google Play and Mac App Store. Smart Receipts lets you track your finances, including receipts, for yourself or your employer. You can choose from default data types including dates, price, tax, receipt categories, comments, and payment methods. Digital copies are OK with the IRS as long as they’re identical to the originals and contain all the accurate information that was in the original receipts. You must be able to produce a hard copy if the IRS asks for one. Tip: Tax season and year’s end are good times to purge files and toss what you no longer need; that's often when the spirit of organization moves us. When you do finally toss out your home-related paperwork, use a shredder. Throwing away intact documents with personal financial information puts you at risk for identity theft. Dickson Portola Team
