Salt Lake Realtor – January 2018 by Mills Publishing Inc.

Salt Lake

REALTOR

slrealtors.com

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January 2018

Meet Adam Kirkham p. 16

What the New Tax Law Means to REALTORS® p. 22

Downpayments Shrink p. 18

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Watch the 2018 Salt Lake Housing Forecast

Table of Contents

event live at www.slrealtors.com.

Features 10 Holiday Social 12 The Importance of Using

Pre-Inspection Agreements

Brad McLeese

january 26th | 9:30am

housing forecast

018 2018 2018 2018 2018 2018

16 Adam Kirkham, President of the Salt Lake Board of Realtors®

18 First-time Home Buyers are

Making Low Downpayments

Scholastica (Gay) Cororaton

2018 2018

22 The Tax Cuts and Jobs Act – What

it Means for Homeowners and Real Estate Professionals The National Association of Realtors®

Columns 7 The Human Touch Wins Over Automation

Adam Kirkham – President’s Message

Departments 8 Happenings 8 In the News 26 Housing Watch

28 Realtor® Connections 28 On the Move

On the Cover: Photo: © gregepperson / iStock Illustration left: Kelley Anderson

This Magazine is Self-Supporting Salt Lake Realtor® Magazine is self-supporting. The advertisers in this magazine pay for all production and distribution costs. Help support this magazine by advertising. For advertising rates, please contact Mills Publishing at 801.467.9419. The paper used in Salt Lake Realtor® Magazine comes from trees in managed timberlands. These trees are planted and grown specifically to make paper and do not come from parks or wilderness areas. In addition, a portion of this magazine is printed from recycled paper.

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January 2018 volume 78 number 1 The Salt Lake REALTOR® (ISSN 2153 2141) is published monthly by Mills Publishing, located at 772 E. 3300 South, Suite 200 Salt Lake City, Utah 84106. Periodicals Postage Paid at Salt Lake City, UT. POSTMASTER: Send address changes to: The Salt Lake REALTOR,® 772 E. 3300 South, Suite 200 Salt Lake City, Utah 84106-4618.

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President Adam Kirkham Summit Sotheby’s International First Vice President Scott Robbins Coldwell Banker Residential

Scott Colemere Colemere Realty Associates Kimberly Farber-Bowen IMPOWER Real Estate Brian Gottfredson Coldwell Banker Residential Tony Ketterling Equity Real Estate

Second Vice President Alicia Holdaway Equity Real Estate

Mike Morgan Realtypath

Treasurer Matthew Ulrich Ulrich Realtors®

Mary Olsen Utah Key Real Estate Jodie Osofsky Utah Key Real Estate

Past President Troy Peterson Equity Real Estate

Steve A. Perry Realtypath Sophie Reece Berkshire Hathaway

Directors Cheryl Acker Utah Key Real Estate

Michael Rowe Berkshire Hathaway

Advertising information may be obtained by calling (801) 467-9419 or by visiting www.millspub.com

Managing Editor Dave Anderton Publisher Mills Publishing, Inc. www.millspub.com President Dan Miller Art Director Jackie Medina Graphic Design Ken Magleby Patrick Witmer Sales Staff Paula Bell Karen Malan Paul Nicholas

Office Administrator Cynthia Bell Snow Office Assistant Jessica Snow Administrative Assistant KellieAnn Halvorsen

Salt Lake Board: (801) 542-8840 e-mail: dave@saltlakeboard.com Web Site: www.slrealtors.com The Salt Lake Board of REALTORS® is pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the nation. We encourage and support the affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status, or national origin. The Salt Lake REALTOR® is the monthly magazine of the Salt Lake Board of REALTORS®. Opinions expressed by writers and persons quoted in articles are their own and do not necessarily reflect positions of the Salt Lake Board of REALTORS®. Permission will be granted in most cases, upon written request, to reprint or reproduce articles and photographs in this issue, provided proper credit is given to The Salt Lake REALTOR®, as well as to any writers and photographers whose names appear with the articles and photographs. While unsolicited original manuscripts and photographs related to the real estate profession are welcome, no payment is made for their use in the publication. Views and opinions expressed in the editorial and advertising content of the The Salt Lake REALTOR® are not necessarily endorsed by the Salt Lake Board of REALTORS®. However, advertisers do make publication of this magazine possible, so consideration of products and services listed is greatly appreciated.

OFFICIAL PUBLICATION OF THE SALT LAKE BOARD OF REALTORS ® REALTOR® is a registered mark which identifies a professional in real estate who subscribes to a strict Code of Ethics as a member of the NATIONAL ASSOCIATION OF REALTORS®. October 2005

The Human Touch Wins Over Automation

y daughter Rose, who is 5 asked me recently what I was going to be president of. And I told her the Salt Lake Board of Realtors®. “What do you do?” she asked. “I help make decisions, I run some meetings. I help raise money to help people run for government that will help keep the American Dream alive.” She looked at me and said, “It sounds boring.” But then I looked at her and explained, “Rose I help kids and mommies and daddies buy a home so they can be safe and warm just like we are.” And then she hugged me and said, “Thank you daddy.” Then she said, “Can you tell President Trump to stopping being a meany on the tweeter?” In 2004 I got my license. My brother, Ryan Kirkham, handed me the classifieds. Yes the paper classifieds and told me to get to work. I called and called owners asking them if I could help them sell their home. It was hard work. Finally after 30 or 40 calls Shane Obryan answered. I did my speal and Shane said, “Sure why not come meet me at my house in Kearns.” I helped him sell his home, but it was my first home sale as a Realtor®. That was more than a decade ago. So much has changed. Think of the changes in the real estate profession driven by technology and our market. You’ve got to be on your game in this fast changing industry. One little mistake on a date or a letter can make all the difference. A couple years back I was working with a client helping them buy a home. If they found the right home they were going to list their home. So we found a home and made an offer to find out there was a competing offer. So I asked the listing agent if I could come present the offer and he said sure. I asked him a bunch of questions and then I asked, “Can you tell me who I’m competing against?” And he said, “Yes, it’s me.” GREAT. I told my client and they said, “Good luck and by the way if this offer doesn’t’ work out we have decided to not buy any other home or sell our house.” Never before has there been more to know and do for our clients as there is today. Never before has it been this technical. Just take a look at the real estate purchase contract. There are disclosures, time clauses, multiple offer situations, and on and on. Never before have we seen so many disrupters trying to crack the code of buying and selling real estate with the click of a button. Too many to count anymore, right? However, what they are missing is all of the stuff between the signing and closing. These outsiders or disrupters have failed to do their homework. They missed that field trip of walking in our shoes: learning to negotiate, becoming a legal expert, family counselor, therapist, tax expert, and loan connoisseur. They have failed to consider the human experience of telling a family they owe more than their house is worth. Or, of telling a first-time buyer they missed out on their dream bungalow for the fifth time. Never has there been a time when the Realtor® was needed more than now. Especially needed is the professional Realtor®, who gives more value and offers the human touch to the biggest financial transaction a person will make in their lifetime.

Adam Kirkham President January 2018 | Salt Lake Realtor ® | 7

Happenings

Adam Kirkham president

In the News

Scott Robbins first vice president

©Stephen Coburn / Adobe Stock

More Construction Workers Needed Alicia Holdaway second vice president

Matt Ulrich treasurer

New Executive Committee

Troy Peterson past president

The Salt Lake Board of Realtors® has announced its 2018 Executive Committee: Adam Kirkham, president; Scott Robbins, first vice president; Alicia Holdaway, second vice president; Matt Ulrich, treasurer, and Troy Peterson, past president. The Executive Committee leads the 16-member Board of Directors in implementing policy for the association.

Beware of Wire Scams An elderly Payson couple were scammed out of $91,000 days before Christmas when they wired a down payment on their dream home to what they believed was a title company. The couple wired the money after they received an email from their Realtor® that instructed them to send the money. However, the email was a fake. The National Association of Realtors® warns Realtors® and their clients to never trust wiring instructions sent via email. Cyber criminals are hacking email accounts and sending emails with fake wiring instructions. The emails are sophisticated and convincing. Always independently confirm wiring instructions in person or by a telephone call to a trusted and verified phone number.

8 | Salt Lake Realtor ® | January 2018

The following is NAR Chief Economist Lawrence Yun’s reaction to the U.S. Bureau of Labor Statistics report on December employment conditions: “The job market continues to improve, but at a decelerating pace. The year 2017 ended with 2.1 million net new job additions, a very solid rate. However, the gains had been 2.6 million, 2.9 million, and 2.5 million in the three preceding years. More jobs and more income for households definitely attest to the rising housing demand. As to the supply of homes, construction workers are needed. In 2017, a net 190,000 new workers were employed in the construction industry, and that also marks a decelerating trend, as the prior three years averaged 284,000 annual additions. With the unemployment rate in the construction industry having fallen from over 20 percent in 2010 to 5.9 percent at the year-end of 2017, there could be a little growth to home construction despite the on-going housing shortage. There needs to be serious consideration in allowing temporary work visas until American trade schools can adequately crank out much needed, domestic skilled construction workers.”

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Holiday Social

he Salt Lake Board of RealtorsÂŽ held its annual Holiday Social and Directors Inauguration in December at the Little America Hotel in downtown Salt Lake City. Adam Kirkham was sworn in as the 2018 president of the association. Two new directors are joining the Board of Directors this year: Sophie Reece of Berkshire Hathaway Home Services, and Tony Ketterling, Equity Real Estate.

10 | Salt Lake Realtor ÂŽ | January 2018

Photos: Kent Shelton, Dave Anderton

January 2018 | Salt Lake Realtor Â® | 11

©highwaystarz / Adobe Stock

The Importance of Using Pre-Inspection Agreements By Brad McLeese

fter you have a signed purchase offer and before the day of your buyer’s home inspection should be the signing of a preinspection agreement. As an agent, you should know real estate transactions live or die around documentation and your engagement with a home inspector should not be an exception to this golden rule. With this in mind, there are two primary reasons why pre-inspection agreements should be signed prior to the inspection.

Reason No. 1 - Protection for your client Your inspector’s insurance policy will more than likely have a condition for coverage which requires the inspector to have the buyer sign an agreement before inspection services are

12 | Salt Lake Realtor ® | January 2018

performed. Not having an inspection agreement signed before the inspection means you can count on your buyer not being protected by the inspector’s insurance company. Additionally, as an agent with a contractual engagement with the buyer, and possibly with the seller as well, it makes sense you would not want the inspector in the middle of the transaction without a written contract outlining their role in the transaction. Setting proper expectations means your setting your client up to be happy with the service they receive and not setting proper expectations with the buyer means you’re setting your client up to be unhappy with the inspection.

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Reason No. 2 - Setting proper expectations When seeking a reasonable expectation of your buyer’s inspection, the first question that needs to be addressed is the standard by which the home should be judged. Setting your buyer’s expectation means we set the framework for the relationship. Not having a framework for the business relationship between the buyer and the inspector means there is no standard for whether or not your buyer is receiving the service you expect them to receive and opens the door for the client to demand almost anything from you and the inspector. To the contrary, rarely would a buyer take issue with an agent facilitating the signing of an inspection agreement and more times than not your likelihood of the buyer being happy with the inspector’s service increases exponentially. Home inspections have become so much a part of the home-buying process that pursuing a signed inspection contract or agreement will add greatly to that framework for consistency with all the other facets of the home buying process. Making pre-inspection agreements a priority Bringing it all together, the true purpose of a properly written contractual document is to define expectations, reduce likelihood for disappointment by the client and to provide a resolution method should a conflict arise. The minimum of what should be in your

14 | Salt Lake Realtor ® | January 2018

inspection agreement would be the following elements: 1) Name of parties involved including the buyer and inspector. Your buyer should be the client regardless of who pays for the inspection or how it is approved. 2) Address which identifies premises for which the inspection will be performed. 3) The scope of inspection should be defined which is typically either International Association of Home Inspectors (InterNACHI) or American Society of Home Inspectors (ASHI). 4) Outline of how to resolve difference should they occur. This would usually entail the involvement of mediation or arbitration. And lastly, 5) Listing of any exclusions or times not inspected such as water softeners, cable, phone, internet, etc. While not required by state laws, signed agreements can be advantageous to all parties including, most importantly, you and your client because they establish the standards of practice and are a critical condition for your inspector’s insurance coverage. Most of you are getting inspection agreements signed but the question remains are you getting the inspection agreement signed before the inspection 100 percent of the time. If not, know that by not getting an agreement signed before the inspection you are putting your client’s financial interest and overall level of satisfaction at risk. Brad McLeese works for HomeGuard Inspections and is an affiliate member of the Salt Lake Board of Realtors®.

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16 | Salt Lake Realtor Â® | January 2018

Adam Kirkham President of the Salt Lake Board of Realtors® Branch Broker Summit Sotheby’s International Realty Salt Lake City office Age: 39 Wife: Leslee Children: One boy and three girls Education: Bachelor’s of Science and Arts in Biology and French How did you get into real estate? Family business. It was supposed to be college job. From 1999 to 2005 I was the yard sign installer. I also photographed homes and managed the website. When did you earn your real estate license? 2005 How long did it take you to make your first commission? 60 days What is your goal as President? My goal is to make it personal. I want to motivate our professionals to interact with their clients, brokers and each other on a face-to-face personal level. The only interaction we have sometimes is a text message. I think there is a happy medium. When in doubt, agents should pick up the phone and communicate. I’ve seen a lot of deals go sideways because of lack of communication.

What has selling real estate taught you about life? It’s taught me how to be open to making compromises in life. It’s taught me to look for win-win situations. Favorite movie: Moneyball starring Brad Pitt Favorite social media platform: Twitter Secret to being a successful agent? I’m still learning that one. Advice to new Realtors®? Treat it like a business, create a budget and business plan for 24 months. Most people that I’ve worked with in the business give up too early. It takes time for people to consider you as their real estate professional. Most agents give it a year and that usually isn’t enough. First home sold: It was the Taj Mahal in my mind. The home was in Kearns and sold for $95,000. I was so proud that the seller had trusted me to be his agent. It was a very successful transaction. I found the home in the newspaper. It was a “for sale by owner.” Hobbies: basketball and hiking, traveling Favorite destination place: New York City Thoughts on millennials: I relate to a lot of the stereotypes. I’m married to one. I think they are more open to their feelings and emotions. What does 2018 hold for the real estate profession? I expect a continued increase in home values and sales. I feel like affordable housing will be a hard product to find.

Image licensed by Ingram Image

January 2018 | Salt Lake Realtor ® | 17

First-time Home Buyers are Making Low Downpayments Making a home purchase more affordable will require either a deceleration in price growth, an acceleration in income growth, or expanding downpayment assistance programs so to help buyers make a higher downpayment and lower monthly costs. By Scholastica (Gay) Cororaton

mong first-time buyers who purchased a property through a mortgage in December 2016 through November 2017, 61 percent, on average, made a zero to six percent downpayment, according to the November 2017 REALTORS® Confidence Index Survey. The share of firsttime buyers who made a zero to six percent downpayment decreased from an average of 70 percent in the 12 months ended June 2010, to a low of 60 percent in mid-2014, then rose in 2014– 2015 to 63 percent, but the share appears to have slightly edged down in 2016 and 2017. In December 2015, Fannie Mae and Freddie Mac started accepting mortgage applications

18 | Salt Lake Realtor ® | January 2018

with as little as 3 percent downpayment to ease the access to credit for first-time buyers. So why has the share of first-time buyers who obtained low downpayment mortgages not budged up significantly even with these low downpayment conventional financing programs? One reason may be related to the trade-off between a lower downpayment and monthly outlays: a lower downpayment means lower upfront cash outlay, but this also means making higher monthly payments because of the higher interest payments and mortgage insurance premiums. The author’s calculations show that a 25-34-year-old headed household with median

household income of $60,932 in 2016 who intends to purchase a $187,040 property with a 3.5 percent or 5 percent downpayment will pay about $1,500 for principal, interests, taxes, mortgage insurance, and maintenance (PITIM) or nearly 30 percent of income on housing cost, a threshold for cost-burdened households. With a 20 percent downpayment, the monthly PITIM declines to $1,138, or 23 percent of income, because of lower interest payments and zero payments for mortgage insurance, making the mortgage more affordable. On the other hand, the downpayment sharply increases from $6,546 to $37,408. The 20 percent downpayment will be hard to meet, given that the average savings of non-homeowners was only $5,200 in 2016, according to the Federal Reserve Boardâ&#x20AC;&#x2122;s 2016 Survey of Consumer Finances. Thus, making a home purchase more affordable will require either a deceleration in price growth, an acceleration in income growth, or expanding downpayment assistance programs so to help buyers make a higher downpayment and lower monthly costs. Household income has grown at a modest pace, rising by about 20 percent since 2012, while home prices have increased by roughly

60 percent. A deceleration in home price appreciation will largely come if supply increases to meet household formation and replacement for housing demolitions or destroyed housing, which NAR Chief Economist Lawrence Yun estimates to be at 1.5 million units. Housing starts have more than doubled to an annual pace of 1.29 million units as of October 2017 (from a low of 490,000 in January 2009), but the pace has not been adequate to meet housing demand, as evidenced by the steep price growth. Downpayment assistance programs are another way to make a home purchase more affordable. One mechanism is through statefunded downpayment savings accounts, with states allowing contributions to and/or the interest earned on these accounts to be income tax deductible. Currently, Iowa, Minnesota and Mississippi, Colorado, Montana and Virginia provide implement these programs. Alabama, Louisiana, Michigan, Missouri, and Pennsylvania are also considering setting up these accounts. According to Adriann Murawski, NARâ&#x20AC;&#x2122;s state and local government affairs representative, NAR and its state counterparts have been actively promoting efforts to have more states provide funding for these accounts.

January 2018 | Salt Lake Realtor ÂŽ | 19

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More relaxed gifting standards within reasonable underwriting guidelines can also make a home purchase more affordable. For example, Fannie Mae allows all the downpayment for one-unit principal residence property mortgages with loan-to-value of greater than 80 percent (or downpayment of 19 percent or less) to come from eligible givers (persons related by blood or marriage, fiancé, fiancée, or domestic partner. Freddie Mac allows gifts/grants after the borrower puts in a 3 percent downpayment. The Federal Housing Administration allows the 3.5 percent downpayment to come from acceptable donors (relatives, employer, friend, charitable organization, government agency) for borrowers with credit score of at least 620. However, if credit score is between 580 and 619, the downpayment must be the borrower’s own money (required minimum investment). The builder, seller, or an associated entity to the transaction may not provide gifts. Reprinted from Realtor.org, January 2018, with permission of the National Association of Realtors®. Copyright 2018. All rights reserved.

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trekanphoto © / Adobe Stock

The Tax Cuts and Jobs Act - What it Means for Homeowners and Real Estate Professionals The new law provides generally lower tax rates for all individual tax filers. NAR efforts helped save the exclusion for capital gains on the sale of a home and preserved the like-kind exchange for real property. By The National Association of Realtors®

he National Association of Realtors® (NAR) worked throughout the tax reform process to preserve the existing tax benefits of homeownership and real estate investment, as well to ensure as many real estate professionals as possible would benefit from proposed tax cuts. Many of the changes reflected in the final bill were the result of the engagement of NAR and its members, not only in the last three months, but over several years. While NAR remains concerned that the overall structure of the final bill diminishes the tax

22 | Salt Lake Realtor ® | January 2018

benefits of homeownership and will cause adverse impacts in some markets, the advocacy of NAR members, as well as consumers, helped NAR to gain some important improvements throughout the legislative process. The final legislation will benefit many homeowners, homebuyers, real estate investors, and NAR members as a result. The final bill includes some big successes. NAR efforts helped save the exclusion for capital gains on the sale of a home and preserved the like-kind exchange for real property. Many agents and brokers who earn income as independent

contractors or from pass-through businesses will see a significant deduction on that business income. As a result of the changes made throughout the legislative process, NAR is now projecting slower growth in home prices of 1-3 percent in 2018 as low inventories continue to spur price gains. However, some local markets, particularly in high cost, higher tax areas, will likely see price declines as a result of the legislation’s new restrictions on mortgage interest and state and local taxes. The following is a summary of provisions of interest to NAR and its members. NAR will be providing ongoing updates and guidance to members in the coming weeks, as well as working with Congress and the Administration to address additional concerns through future legislation and rulemaking. Lawmakers have already signaled a desire to fine tune elements of The Tax Cuts and Jobs Act as well as address additional tax provisions not included in this legislation in 2018, and Realtors® will need to continue to be engaged in the process. The examples provided are for illustrative purposes and based on a preliminary reading of the final legislation as of December 20, 2017.

Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts and Jobs Act (2018 Tax Year) Single Filer

Individuals should consult a tax professional about their own personal situation. All individual provisions are generally effective after Dec. 31, 2017 for the 2018 tax filing year and expire on Dec. 31, 2025 unless otherwise noted. The provisions do not affect tax filings for 2017 unless noted. Major Provisions Affecting Current and Prospective Homeowners Tax Rate Reductions • The new law provides generally lower tax rates for all individual tax filers. While this does not mean that every American will pay lower taxes under these changes, many will. The total size of the tax cut from the rate reductions equals more than $1.2 trillion over ten years. • The tax rate schedule retains seven brackets with slightly lower marginal rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37%. • The final bill retains the current-law maximum rates on net capital gains (generally, 15% maximum rate but 20% for those in the highest tax bracket; 25% rate on “recapture” of depreciation from real property). (See graphs below)

Tax Brackets for Ordinary Income Under Current Law and the Tax Cuts and Jobs Act (2018 Tax Year) Married Filing Jointly

Current Law

Tax Cuts and Jobs Act

Current Law

Tax Cuts and Jobs Act

10%

$0-$9,525

10%

$0 - $9,525

10%

$0 - $19,050

10%

$0 - $19,050

15%

$9,525 $38,700

12%

$9,525 $38,700

15%

$19,050 - $77,400

12%

$19,050 $77,400

25%

$38,700 $93,700

22%

$38,700 $82,500

25%

$77,400 - $156,150

22%

$77,400 $165,000

28%

$93,700 $195,450

24%

$82,500 $157,500

28%

$156,150 - $237,950

24%

$165,000 $315,000

33%

$195,450 $424,950

32%

$157,500 $200,000

33%

$237,950 - $424,950

32%

$315,000 $400,000

35%

$424,950 $426,700

35%

$200,000 $500,000

35%

$424,950 - $480,050

35%

$400,000 $600,000

39.6%

$426,700+

37%

$500,000

39.6%

$480,050+

37%

$600,000+

January 2018 | Salt Lake Realtor ® | 23

Exclusion of Gain on Sale of a Principal Residence • The final bill retains current law. A significant victory in the final bill that NAR achieved. • The Senate-passed bill would have changed the amount of time a homeowner must live in their home to qualify for the capital gains exclusion from 2 out of the past 5 years to 5 out of the past 8 years. The House bill would have made this same change as well as phased out the exclusion for taxpayers with incomes above $250,000 single/$500,000 married. Mortgage Interest Deduction • The final bill reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap. Neither limit is indexed for inflation. • Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced. • The final bill repeals the deduction for interest paid on home equity debt through 12/31/25. Interest is still deductible on home equity loans (or second mortgages) if the proceeds are used to substantially improve the residence. • Interest remains deductible on second homes, but subject to the $1 million / $750,000 limits. • The House-passed bill would have capped the mortgage interest limit at $500,000 and eliminated the deduction for second homes. Deduction for State and Local Taxes • The final bill allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes. This $10,000 limit applies for both single and married filers and is not indexed for inflation. • The final bill also specifically precludes the deduction of 2018 state and local income taxes prepaid in 2017. • When House and Senate bills were first introduced, the deduction for state and local taxes would have been completely eliminated. The House and Senate passed bills would have allowed property taxes to be deducted up to $10,000. The final bill, while less beneficial than current law, represents a significant improvement over the original proposals. Standard Deduction • The final bill provides a standard deduction of $12,000 for single individuals and $24,000 for joint returns. The new standard deduction is indexed for inflation. • By doubling the standard deduction, Congress has

24 | Salt Lake Realtor ® | January 2018

greatly reduced the value of the mortgage interest and property tax deductions as tax incentives for homeownership. Congressional estimates indicate that only 5-8% of filers will now be eligible to claim these deductions by itemizing, meaning there will be no tax differential between renting and owning for more than 90% of taxpayers. Repeal of Personal Exemptions • Under the prior law, tax filers could deduct $4,150 in 2018 for the filer and his or her spouse, if any, and for each dependent. These exemptions have been repealed in the new law. • This change alone greatly mitigates (and in some cases entirely eliminates) the positive aspects of the higher standard deduction. Mortgage Credit Certificates (MCCs) • The final bill retains current law. • The House-passed legislation would have repealed MCCs. Deduction for Medical Expenses • The final bill retains the deduction for medical expenses (including decreasing the 10% floor to 7.5% floor for 2018). • The House bill would have eliminated the deduction for medical expenses. Child Credit • The final bill increases the child tax credit to $2,000 from $1,000 and keeps the age limit at 16 and younger. The income phase-out to claim the child credit was increased significantly from ($55,000 single/$110,000 married) under current law to $500,000 for all filers in the final bill. Student Loan Interest Deduction • The final bill retains current law, allowing deductibility of student loan debt up to $2,500, subject to income phase-outs. • The House bill would have eliminated the deduction for interest on student loans. Deduction for Casualty Losses • The final bill provides a deduction only if a loss is attributable to a presidentially-declared disaster. • The House bill would have eliminated the deduction for casualty losses with limited exceptions. Moving Expenses • The final bill repeals moving expense deduction and exclusion, except for members of the Armed Forces. • The House-introduced bill would have eliminated the moving expense deduction for all filers, including military. (continued on page 30)

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Housing Watch Salt Lake Home Sales Up 1% in November

alt Lake County home sales posted positive gains in November year-over year. Total sales (all housing types) increased 1 percent to 1,439 units sold, up from 1,418 units sold in November 2016. November was the second consecutive monthly increase of home sales on a year-over-year basis. The median price of homes sold in November in Salt Lake County increased to $302,000, up 13 percent year-over-year. The median cumulative days a house was on the market in Salt Lake County was 26 days, up from 18 days in November 2016. In Davis County, home prices increased 2 percent to a median price of $265,500. Home sales in November fell 7 percent in Davis County. Nationally, total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, jumped 3.8 percent higher than a year ago and are at

Salt Lake County Sales (all housing types) Year-Over-Year (Up 1%)

1,418

26 | Salt Lake Realtor ® | January 2018

1,439

their strongest pace since December 2006 (6.42 million), according to the National Association of Realtors®. Across the country, unsold inventory is at a 3.4-month supply at the current sales pace, which is down from 4.0 months a year ago. “The anticipated rise in mortgage rates in 2018 could further cut into affordability if these staggeringly low supply levels persist,” said NAR Chief Economist Lawrence Yun. “Price appreciation is too fast in a lot of markets right now. The increase in homebuilder optimism must translate to significantly more new construction in 2018 to help ease these acute inventory shortages.” First-time buyers were 29 percent of sales in November, which is down from 32 percent both in October and a year ago. NAR’s 2017 Profile of Home Buyers and Sellers – released earlier this year – revealed that the annual share of first-time buyers was 34 percent.

Salt Lake County Median Price (all housing types) Year-Over-Year (Up 13%)

$268,312

$302,000

2 - C OL OR

Salt Lake County

Median Days on Market (all housing types) Year-Over-Year (Up 44%) 26

Davis County

Median Price (all housing types) Year-Over-Year (Up 2%)

$259,250

Pending Sales (Up 10%)

1,368

1,246

Sales $

Salt Lake County

4 $265,500

Sales

Davis County Sales (all housing types) Year-Over-Year (Down 7%)

396

426

January 2018 | Salt Lake Realtor Â® | 27

REALTOR® Connections

On the Move

Dawn Stevens

Salt Lake Realtor® Attends Chinese Luxury Home Show Erin Olson, a Realtor® with Berkshire Hathaway Home Services (Cottonwood Heights office), recently attended the LPS Luxury Real Estate show in Shanghai, China. The event is by invitation only and is the leading luxury real estate exhibition in China’s commercial and financial capital. More than 200 luxury real estate companies presented unique estates to a discerning audience of Chinese luxury home buyers. Olson once lived in Shanghai for three years and worked in the fashion industry before entering the real estate profession. At the event, Olson was able to showcase many Salt Lake and Park City properties. “Their interest is really in California and Seattle, but there is a rising interest in Utah,” Olson said. “The Berkshire corporate team assisted in providing opportunities for me to make presentations in front of agents as well as speak to a local Chinese newspaper and TV station about Utah properties. I’m excited to develop the relationships that have been created and continue to promote Utah as one of the greatest places to live on earth!”

Psychological Safety Makes Teams Successful According to business management consultant Ellen Reddick, teams that thrive in the workplace have created a “psychological safety” atmosphere of honesty, transparency, and mutual respect. Reddick cited a recent Google study named Project Aristotle that studied hundreds of business teams and analyzed years of data. The researchers discovered that psychological safety is the secret to building and maintaining successful teams. “People need a sense of security to do well at work,” Reddick said. “Building trust will allow you to develop meaningful relationships and cultivate an unspoken mutual understanding; your team can count on you to do what you say and say what you mean.”

28 | Salt Lake Realtor ® | January 2018

Dawn Stevens, a Realtor® with RealtyOne Group Signature, is the 2018 president of the Utah Chapter of the Council of Residential Specialists (CRS). Dawn is a seasoned professional with a diverse background. Prior to receiving her real estate license in 1999, Dawn was a real estate paralegal for 15 years, a title representative for three years and an escrow officer for FreddieMac’s designated counsel for five years. She was also awarded the 2016 ROG-Signature Sales Person of the Year, as well as the Platinum Hall of Fame Award by the Salt Lake Board of Realtors®. Dawn is eager to help all agents receive and maintain their CRS designation with the best possible education available. Summit Sotheby’s International Realty announced the release of their 18th edition of Collections Magazine. For this Winter edition, Summit Sotheby’s International Realty’s in-house marketing team produced hand-painted Utah area maps, an architecturally charged fashion editorial, and a breathtaking cover that seamlessly combined Utah’s diverse backdrops. Collections Magazine epitomizes the passion, professionalism, and integrity of Summit Sotheby’s International Realty, its sales associates, marketing department, transaction management team, and office staff. Each of the 132 pages was painstakingly designed with innovation and unprecedented exposure in mind. You can find the magazine at www.issue.com/ summitsothebys.

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Tax Cuts and Jobs Act (continued from page 24)

MAJOR PROVISIONS AFFECTING REAL ESTATE PROFESSIONALS Deduction for Qualified Business Income Because the new tax bill greatly decreases the tax rate for corporations (from the prior law’s 35 percent to just 21 percent), many members of Congress believed that the business income earned by sole proprietors, such as independent contractors, as well as by pass-through businesses, such as partnerships, limited liability companies (LLCs), and S corporations, should also receive tax rate reductions. In addition to lower marginal tax rates, the final bill provides a significant upfront (above the line) deduction of 20 percent

30 | Salt Lake Realtor ® | January 2018

for business income earned by many of these businesses, but with certain conditions. Specifically, the bill limits the 20 percent deduction to non-personal service businesses. Essentially, a personal service business is one involving the performance of services in the following fields: Health, Law, Consulting, Athletics, Financial Services, Brokerage Services (not real estate), and “Any business where the main asset of the business is the reputation or skill of one or more of its employees or owners.” It seems clear that most real estate agents and brokers will be considered in a personal service business and would thus not normally qualify for the 20 percent deduction. However, NAR was able to help secure a major exception (the personal service income exception) in the final bill that will make it possible for many real estate professionals to be able to take advantage of the deduction. • This exception provides that if the business owner has taxable income of less than $157,500 (for single taxpayers) or $315,000 (for couples filing jointly), then the personal service restriction will not apply. • Above this level of income, the benefit of the 20 percent deduction is phased out over an income range of $50,000 for singles and an income range of $100,000 for couples. • For those with non-personal service income above these thresholds, the bill provides a second exception that may still allow a full or limited 20% deduction. This second exception (the wage and capital limit exception)places a limit on the deduction of the greater of: • 50 percent of the W-2 wages paid by the business, or • The total of 25 percent of the W-2 wages paid by the business plus 2.5 percent of the cost basis of the tangible depreciable property of the business at the end of the year. Bottom Line: Independent contractors and pass-through business owners with personal service income, including real estate agents and brokers, with taxable income below the $157,500 or $315,000 thresholds may generally claim the full 20 percent deduction under the personal service income exception. Independent contractors and pass-through business owners with non-personal service income and total taxable income below these thresholds may also claim the full 20 percent qualified business income deduction. In addition, independent contractors (or other sole proprietors) with non-personal service incomes above these thresholds may also be able to claim a 20 percent deduction, but that deduction may be limited by the wage and capital limit exception.

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