Patti Stanley, Florida Keys Real Estate Agent

How to Avoid Overpricing

Home sellers are often tempted to overprice their properties in order to ‘test the market’ and then ‘negotiate down’ to get the most money. But this strategy is counter productive. It can actually scare away qualified buyers and cause your home to linger on the market, and eventually expose you to lowball bargain hunters. The best strategy is to price a home competitively from the start.

First check comparable sales in your area. Not only will buyers know the true market value of your home, but appraisers will too, and they play a big role in how much money the buyer’s lender will approve. Most home buyers do their initial house hunting online and price is the first thing they check. Make sure your home is priced competitively and looks good in your photos. When in doubt, go low. A lower priced home invites multiple offers and gives you room to negotiate for more money. Ask your Realtor to help you find your home’s true market value.


Important Papers

On closing day, you are ecstatic to finally be the proud owner of your new home, but what do you do with the huge pile of papers that you collected in the process? It’s important to store all of your papers in a safe place, but there are a few that you might need to use more often, so be sure to file these in a more accessible spot: Deed: This is your proof that you own your property. Riders: These are amendments to the sales contract. Truth in Lending statement: Summary of your mortgage, including your percentage rate. Insurance: Have contact and coverage information available, for whenever you need to make a claim or review your policy. HUD-1 Settlement Statement: This is an itemized list of your closing costs, and important to have on hand when you pay taxes each year. Be sure to ask your lender and Realtor about any other papers you should keep close at hand.

Tax Benefits of Home Ownership

Uncle Sam helps you in three ways when you own your home.

When buying your own home, most of the expenses are not tax deductible. But there is one exception that is worth finding. The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment. In addition, if the day you purchase is on any day other than the first of the month, you will likely pay a charge for "daily interest" between the day of closing and the end of the month. Look on line 901 of your HUD settlement statement.

Much more importantly, the IRS says that, in most cases, loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them. Look at lines 801 and 802 of your settlement statement and see if you hit the jackpot. This is a particularly unusual deduction because you get the benefit even if the seller paid your closing costs. And because origination fees of 1% and more are common, this can amount to a lot of cash.

In general, you can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid. In the early years of a loan, most of your monthly payment is interest, so this can really add up. If you are in a 28% federal tax bracket, this can have the effect of lowering your borrowing costs by almost a third, depending on which state you live in. This is truly nothing more than a subsidy to home owners, and it's a very popular deduction.

In addition, you can always deduct interest on an additional $100,000 of mortgage debt, which can be used for any purpose. This is called the "Home Equity Loan" exception, and it allows you to tap into your home equity for any purpose. This gives home owners the ability to do what is called "debt-shifting." For example, if you live in an apartment and have a credit card balance of $10,000 at 18% interest, none of that interest would be deductible. But if you bought a house, obtained a home equity loan for $10,000 and paid off the credit card, then ALL of the interest expense becomes automatically deductible. Furthermore, the rate on the home equity loan is likely to be around prime plus one or two, usually much lower than credit card rates. This same technique works with any and all personal debt, from car loans to consolidation loans - with only one hitch. In every home equity loan, you have pledged your house as collateral for the loan. If you fail to pay the payments as agreed, you could lose your house to foreclosure. So be careful in using this technique.

This is the best. Here's how it works: If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of that house and pay no federal income tax whatsoever, assuming you are married. Singles get up to $250,000 tax free.