SARASOTA SALES FIGURES FOR MARCH

Property sales top 1,000 in Sarasota County 

Property sales in Sarasota County for March 2014 topped 1,000 for the first time since May 2013, repeating a spring sales surge witnessed in the past few years. In addition, distressed sales remained far below the levels experienced four years ago indications of a strong market returning to historic norms.

Median sale prices for single family homes and condos also continued to reflect a stable market, with no signs of wild price swings. Single family prices have been remarkably even for the past12 months, while condo prices have also stabilized.

March 2014 closed sales were at 1,050, up 33 percent from February’s figure of 787, but down slightly from last March, when they were at 1,057. The breakdown was 698 single family and 352 condos. To put those numbers in perspective, at the low end of the past decade, monthly sales were in the mid-300s.

Once again, short sales were in short supply during March. Only 51 of the total 1,050 sales in March 2014 were short sales, compared to more than 200 short sales in June 2010 at the low point of the market. Foreclosures remain a concern as there were 183 bank sales of foreclosed homes and condos in March. Sarasota County saw year-over-year median sales prices reflecting near mirror images from last year this time. The median sale price for single family homes was at $189,472, slightly below last March’s figure of $190,000. Condo sale prices were at $170,900, just above last March’s figure of $165,000.

From April 2013 through March 2014, there has been a steady pattern of median sales prices in the single family category, fluctuating between $180,000 and $195,000 in that time period. Condo prices have fluctuated between $159,000 and $182,000. The median sale price for the 12-months ending in March, which moderates monthly swings, was $188,000 for single family homes, about 20 percent higher than the previous 12-month period. For condos, it was $166,529, up 9.2 percent over the previous 12-month period.  Pending sales maintained a high level in March from the previous several months, and economists consider pending sales to be a good indicator of potential future closed sales. If experts are again correct, we could see another very strong period of March, April and May sales, as we did in 2013. Pending sales topped 1,200 after hitting 1,030 last month, hitting a level not seen for three years.

Inventory levels dropped in March 2014 to 4,810 after topping 5,000 in February, which was the first time since May 2011 – almost three years ago. The low point in the recent market was in July 2013 at 3,747, far lower than the current level.

“This spring has seen very robust sales, just like last year at this time,” said Sarasota Association of Realtors® President Peter Crowley. “Agents have been extremely busy and buyers are actively investing in our local market. It’s a great time for our local real estate industry, and judging by the pending sales figures, April and May should also put up great numbers.”

 

A Lower Payment is Your Choice

Mortgage acquired 250.png94% of purchasers last year opted for a fixed-rate mortgage at some of the lowest rates in home buying history. Yet, some of them will pay more in interest than necessary based on the time they’ll own the home.

If a person only plans to be in the home a few years, the adjustable-rate can offer significant savings.

Not only is the interest rate on the adjustable-rate lower than the fixed in the initial period, amortization on a lower interest rate amortizes faster than a higher interest rate.

In the example shown below, a $200,000 mortgage for 30 years is compared using a 4.25% fixed-rate to a 3.25% 5/1 FHA adjustable rate. The first five years of the ARM generates a $113.47 a month savings which accumulates to $6,808.20. In addition, due to faster amortization on lower interest rate loans, the unpaid balance at the end of five years will be $3,001 lower on the ARM for a total savings of $9,801.

Assuming the adjustable-rate mortgage was to escalate the maximum allowed at each period, the breakeven would occur in 8 years and 6 months. If a person were to sell the home prior to this point, the ARM would provide a lower cost of housing for the homeowner.

For some people, the uncertainty of how the interest rate may change is not acceptable. On the other hand, for the risk tolerant individual who may be more confident in financial matters or who may know when they’ll be moving next, the ARM can be a smart choice.

To make projections using your individual numbers, see the Adjustable Rate Comparison.

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An Exchange Means More to Reinvest

Section 1031 exchange for rental and investment real estate is a tool that allows investors to move the gain from one property to another without immediate income tax consequences.

An instant benefit is to postpone the tax due which gives the investor a larger amount of proceeds to invest. In the example shown, the investor has 21% more proceeds to invest and grow over time than if he had paid the taxes due instead of exchanging.

A legitimate long-term goal might be to make qualified exchanges from one property to another until the investor dies. The heirs would then receive a stepped-up basis on the property based on the market value at the time of the decedent’s death and possibly avoiding taxes altogether.

There are specific requirements to be met in order for the exchange to qualify. For more information on exchanges, see IRS publication 544. In addition to enlisting the services of a real estate professional familiar with investment property, seek the help of Qualified Intermediary to facilitate the intricacies of the exchange. Your real estate agent can help you locate one.

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Is the Window Closing?

iStock_000011016597Small 250.jpgWith interest rates lower than they’ve been in over 40 years, it may be difficult to think of a “window of opportunity” closing. However, it isn’t difficult to understand that it may very probably cost more to live in a home in the near future due to rising interest rates and prices.

Zillow recently reported results from a nationwide study that home values are expected to appreciate by 4.5% through the end of the year. Coupled with Freddie Mac’s projection that rates are going up, the cost of housing for buyers by the end of the year will be higher than it is now.

While uncertainty of the future can stagnate some people, the fear of loss can be much more devastating when a person realizes that the amount they pay to live and enjoy a home could have been considerably lower had they acted when prices and mortgage rates were lower.

The following example considers a $250,000 purchase today with a FHA mortgage compared to what it might be at the end of the year with a higher price and interest rate as discussed earlier. The net effect is that it will cost $191.87 more each month to live in the very same home based on the cost of waiting to buy.

To see what the cost might be for your price range, use this Cost of Waiting to Buy spreadsheet.

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6 STAGING PITGALLS SELLERS

SHOULD AVOID

 

In many cases, staging will determine how easily a home will sell, but luckily, it’s one of the few factors that your clients have control over. With a little guidance from their great agent (read: you!) any smart homeowner can get their home picture perfect and buyer ready.

Of course, we’re not talking about major renovations here—just deep-cleaning, uncluttering, and maybe a fresh coat of paint. As agents know, the point of staging is to remove anything that will distract a buyer from all the great things the home has to offer. But for some sellers, it’s easy to go overboard if they’re not careful. Here are a few of the biggest pitfalls we’ve seen when sellers over-stage a home and how agents can help them avoid these missteps.

1. Don’t be dull

Are you selling a hotel room? No? Then a home shouldn’t look like a hotel! The purpose of staging is not to make the home boring and bland. The goal of staging is to get the potential buyer to feel that the home looks nice all the time, so it should feel like real—but incredibly neat!—people live there. As agents, we typically prefer boring over cluttered and crazy, but remember, a few spots of color photograph well and will stand out in listing photos. Simple touches add subtle interest, like a red throw pillow or a turquoise fruit bowl—just don’t go too wild.

2. Selling with smell

When you’re listing a home where sellers are living, sometimes it can be tough to keep a listing in tip-top shape for spur of the moment showings. Of course, no one wants a home to smell like last night’s beef stroganoff when a potential buyer arrives. But many sellers overcompensate with potpourri and air fresheners. Beware of overwhelming a serious buyer with seriously strong scents. A home should smell fresh and clean, but not heavily perfumed. A seller’s best bet is to invest in a deep clean to remove lingering smells and avoid cooking anything too potent during the list time.

3. The sound of music

Ditch the tunes. Mood music backfires more often than not. Sellers won’t be able to guess the buyer’s musical tastes, and it can make some buyers feel like they’re being manipulated.

4. The elephant graveyard

Sometimes it’s necessary for the homeowners to move out before the house sells. But too many sellers take their best furniture and possessions with them to their new home, leaving only the most run-down furniture behind. In a sparsely furnished house, it’s even more important that the pieces left behind are tasteful and add to the ambiance of the home. The old sectional sofa sitting forlornly in an empty living room will just make the house feel abandoned. The house should be well furnished or completely empty. Not somewhere in between.

5. Wasting money on the wrong renovations

Many sellers undertake huge projects right before they sell. Perhaps the bathroom is outdated, and they’ve always wanted to fix it up. But it’s hard for sellers to guess which renovations will provide the greatest return on the investment. Small touches like new cabinet hardware or new light fixtures might go a long way toward making the home feel up to date, without doing a major renovation costing tens of thousands of dollars. Sellers should depend on their savvy agent to help figure out how much updating is needed so the home will sell easily in the current market.

6. Remove clutter, don’t just move it around

Agents say this to virtually every client: When it comes to selling a home, less is more. An uncluttered home makes listing photos more attractive, which translates to more showings, and it makes the house feel open and airy. But it rarely works to try to hide the clutter. A serious buyer will want to look under the hood, kick the tires a little. That means they’ll explore the basement, open up your closets, and even look under your sink. So it’s important to that agents stress the importance of getting rid of or storing extra belongings. It might seem like a lot of work, but it will make it easier to move out once the seller gets the offer they’ve been waiting for.

 

Looking for the Largest Deduction

Standard Itemized.pngIRS allows taxpayers the option to take the standard deduction or the itemized deduction. The astute taxpayer will compare to see which one will result in the greatest deduction and the election can be made each year.

The 2013 standard deduction for a married couple filing jointly is $12,200 and $6,100 for a single taxpayer. It doesn’t require any proof of actual expense and has no requirement for home ownership.

Items that can be included on Schedule A for itemized deductions include:

  • Certain taxes paid for state and local income tax, general sales tax, real estate property taxes, personal property taxes or other taxes paid
  • Qualified home mortgage interest, investment interest or possibly, mortgage insurance premiums
  • Charitable contributions
  • Casualty or theft losses
  • Medical and dental expenses that exceed 7.5% of adjusted gross income if born before 1/2/49 or 10% if born after 1/2/49
  • Job expenses and other miscellaneous deductions that exceed 2% of adjusted gross income

A non-homeowner taxpayer who has been taking the standard deduction needs to consider that it isn’t just the ability to deduct the mortgage interest and property taxes.

While the standard deduction might be the obvious choice for a non-homeowner, the combination of the mortgage interest and the property taxes plus other allowable deductions not recognized previously such as charitable contributions, now makes taking the itemized deductions significantly more advantageous.

What’s the Point?

Prepaid interest, sometimes called “points”, is generally tax deductible when a person pays them in connection with buying, building or improving their principal residence. When points are paid on a refinance, they are not a current deduction but have to be taken prorata over the life of the mortgage.DEDUCTIBILITY.png

For instance, if $3,000 in points were paid on refinancing a 30 year mortgage, a deduction of $100 per year is allowed. When the loan is paid off or replaced by refinancing again or the home is sold and the mortgage paid off from the proceeds, the balance of any un-deducted points may be taken in that tax year.

Your tax professional needs to be made aware of any of these situations so that he or she can accurately reflect the deductions in your return. Currently, the most common situation is homeowners may be refinancing their home for the second, third or even, fourth time. If there are points that have not been completely deducted, they need to be treated in the year of refinancing.

For more information, see points in IRS Publication 936; there is a section on Refinancing in this publication. For advice considering your specific situation, contact your tax professional.