It certainly can be confusing when you see a home listed at $799,000 – $850,000. The reason listing agents do this is to get more exposure for their listing. If the home was priced at $825,000, buyers searching for homes up to $800,000 would miss it. The same would apply for some one searching for homes at $850,000 and up. The value range listing would show up in both of these searches. A single price of $825,000 would appear in neither.

Here are some frequently cited reasons for buying a house:

• You need a tax break. The mortgage interest deduction can make home ownership very appealing.
• You are not counting on price appreciation in the short term.
• You can afford the monthly payments.
• You plan to stay in the house long enough for the appreciation to cover your transaction costs. The costs of buying and selling a home include real estate commissions, lender fees and closing costs that can amount to more than 8 percent of the sales price.
• You prefer to be an owner rather than a renter.
• You can handle the maintenance expenses and headaches.
• You are not greatly concerned by short-term dips in home values.

Any points you or the seller pay to purchase your home loan are deductible for that year. Property taxes and interest are deductible every year.

However, while other home-buying costs (closing costs in particular) are not immediately tax-deductible, they can be figured into the adjusted cost basis of your home when you sell (any significant home improvements also can be calculated into your basis). These fees would include title insurance, loan-application fee, credit report, appraisal fee, service fee, settlement or closing fees, attorney’s fee, document preparation fee and recording fees. Points paid when you refinance an existing mortgage must be deducted ratably over the life of the new loan.

Today a vacation home can be purchased for investment purposes, as well as enjoyment. And yes, there are tax benefits.

Some people buy a vacation home with the idea of turning it into a permanent retirement home down the road, which puts them ahead on their payments. Another benefit is the interest and property taxes are tax deductible, which helps offset the cost of paying for a second home. A vacation home also can be depreciated if you live in it fewer than 14 days a year, or 10 percent of the rented days – whichever is greater.

Your Content Goes HereHere are some ways to save money on taxes:

• Mortgage interest on loans up to $1 million is completely deductible for the year in which you pay it to buy, build or improve your principal residence and a second home.
• Points, or loan origination fees, also are deductible.
• Most homeowners, except the wealthy and those living in high-priced markets, no longer need to worry about capital gains taxes. The exemption has been raised to $500,000 for married couples and $250,000 for single owners. It can be taken every two years. Homeowners should always keep all receipts of permanent home improvements and mortgage closing costs. If you do have to pay capital gains taxes, these costs can be added to your adjusted cost basis. Consult your tax adviser for more information.

Resources:
“Tax Information for First-Time Homeowners,” IRS Publication 530, and “Selling Your Home,” IRS Publication 523.

Call (800) TAX-FORM to order or download from irs.gov

Homeowners association fees are considered personal living expenses and are not tax-deductible. If, however, an association has a special assessment to make one or more capital improvements, condo owners may be able to add the expense to their cost basis. (Cost basis is a term for the money an owner spends for permanent improvements throughout their time in the home and is used to reduce eventual capital gains taxes when the property is sold.) For example, if the association puts a new roof on a building, the expense could be considered part of a condo owner’s cost basis. Overall improvements to common areas, such as the installation of a swimming pool, need to be considered on a case-by-case basis but most can be included in the cost basis of any owner who can show their home directly benefits from the work.
To find out more about how the IRS views condo association fees, look online to IRS Publication 17, “Your Federal Income Tax,” which includes a section on condos. Or order a copy by calling (800) TAX-FORM.

San Diego city and county governments offer Mortgage Credit Certificate (MCC) programs, which allow first-time home buyers to take advantage of a special federal income tax write-off, which makes qualifying for a mortgage loan easier.
Requirements vary from program to program. People wanting to apply should contact Charman Wilson at West End Mortgage or their local housing or community development office. Charman’s number is 619-787-4008.
Here is a list of four general requirements to keep in mind:

• Most credits may be claimed only on your owner-occupied principal residence.
• There are maximum income limits, which vary by locality and family size.
• You must be a first-time home buyer, which means you must not have had any kind of ownership interest in a principal residence during the past three years. This restriction may be waived, however, if you are buying property within certain target areas.
• Allocations must be available. A local MCC program may decline new applications when it runs out of funds.

Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate, on average 1.5 percent of the property’s current market value. These annual local assessments, by county or local authorities, help pay for public services and are calculated using a variety of formulas.

Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.

Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income taxes.

Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers’ ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have a professional inspect the property to their satisfaction.  Normally, you have 17 days to complete your due diligence and remove contingencies. Before this time, you can pull out of escrow for almost any reason without risking your deposit. On Day 17, Monty will contact you and make sure you are ready to move forward.  After this, you cannot pull out of the transaction without risking your deposit. The purchase contract must include the seller’s responsibilities, such as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.

While a typical buyer may look at five to 10 homes before making an offer, an investor who makes bargain buys usually goes through many more. Most experts agree it takes a lot of determination to find a real “bargain.” There are a number of ways to buy a bargain property:

• Buy a fixer-upper in a transitional neighborhood, improve it and keep it or resell at a higher price
• Buy a foreclosure property (after doing your research carefully)
• Buy a house due to be torn down and move it to a new lot
• Buy a partial interest in a piece of real estate, such as part of a tenants-in-common partnership
• Buy a leftover house in a new-home development

A low-ball offer is a term used to describe an offer on a house that is substantially less than the asking price.

While any offer can be presented, a low-ball offer can sour a prospective sale and discourage the seller from negotiating at all. Unless the house is very overpriced, the offer will probably be rejected.

You should always do your homework about comparable prices in the neighborhood before making any offer. It also pays to know something about the seller’s motivation. A lower price with a speedy escrow, for example, may motivate a seller who must move, has another house under contract or must sell quickly for other reasons.

A home inspection is when a paid professional inspector — often a contractor or an engineer — inspects the home, searching for defects or other problems that might plague the owner later on. They usually represent the buyer and are paid by the buyer. The inspection usually takes place early in escrow after a purchase contract between a buyer and a seller has been signed. Monty makes a point of attending all home inspections in order to stay ahead of any issues during escrow.

While a home inspection is not mandatory, it is highly advisable to obtain one.  Consider it an added insurance policy.  The cost is normally between $350 and $450.  Many times, this expense is offset because the inspector usually identifies a laundry-list of minor problems which the seller often agrees to repair.

Monty James and his Pacific Coast Executive Realty team are able to offer several fine recommendations.  Contact us at (619) 922-1981 or email Monty at monty@pcerealty.com.

While not legally required, the answer is yes. Buying a home “as is” is a risky proposition. Major repairs on homes can amount to thousands of dollars. Plumbing, electrical and roof problems represent significant and complex systems that are expensive to fix.

Before making a choice between adding on to an existing home or buying a larger one, consider these questions:

• How much money is available, either from cash reserves or through a home improvement loan, to remodel your current house?
• How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level?
• Would the add-on make your home “overbuilt” for the neighborhood?
• What do local zoning and building ordinances permit?
• How much equity already exists in the property?
• Are there affordable properties for sale that would satisfy your changing housing needs?

Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value.

Home ownership offers tax benefits, as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property.

There are a number of economic considerations. Unlike renters, home owners who secure a fixed-rate loan can lock in their monthly housing costs and make prudent investment plans knowing these expenses will not increase substantially.

Home ownership is a highly leveraged investment that can yield substantial profit on a nominal front-end investment. However, such returns depend on home-price appreciation.

Home ownership is personally rewarding. You are now building your own equity instead of paying your landlord’s mortgage for him.

Home inspections, seller disclosure requirements and the agent’s experience will help. California law is very strict and requires the seller to complete a weighty stack of disclosures.
Sellers are also required to indicate any significant defects or malfunctions existing in the home’s major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides.
People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions.
It is important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents.
It is important to note that the home inspection and home warranty industries have grown significantly to accommodate increased demand from cautious buyers. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.

Closing costs are either paid by the home seller or home buyer. It often depends on local custom and what the buyer or seller negotiates. In San Diego, the seller customarily pays for most of the real estate closing costs (title insurance, Realtor fees, transfer taxes, HOA fees, home warranty, etc.).  Escrow fees are usually split evenly between the buyer and seller (this makes sense because the escrow company is a neutral, third party). Mortgage and loan fees are paid by the buyer.

Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless, these charges are rolled into the loan, they must be paid when the home is closed.

Studies show that the closing costs, which can average two to three percent of a total home purchase price, are often more costly than many buyers expect. But there are some ways to save:

• Negotiate with the seller to pay all or part of the closing costs. The lender must agree to this, as well as the seller.
• Get a no-point loan. The trade-off is a higher interest rate on the loan and many of these loans have pre-payment penalties. However, buyers who are short on cash and can qualify for a higher interest rate may find a no-point loan will significantly cut their closing costs.
• Get a no-fee loan. Commonly, these fees are wrapped into a higher interest rate, though it will save you on the amount of cash you need upfront.
• Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.
• Rent the property in which you are interested in, with an option to buy. That will give you more time to save for the upfront cash needed for the actual purchase.
• Shop around for the best loan deal. Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application.

Buying into a new-home community may seem riskier than purchasing a house in an established neighborhood.  However, any increase in home value depends upon the same factors: Quality of the neighborhood, growth in the local housing market and the state of the overall economy.

The appraised value of a house is a certified appraiser’s opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process –  fees range from $200 to $300.
Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.

Appraisers use several factors when estimating a home’s value, including the home’s size and square footage, the condition of the home, the neighborhood it is located in, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value. For detailed information on appraisal standards, go to www.appraisalinstitute.org.

The list price is a seller’s advertised price, a figure that the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is fair, be sure to consult comparable sales prices in the area.
The sales price is the amount of money you as a buyer would pay for a property.
The appraisal value is a certified appraiser’s estimate of the worth of a property and is based on comparable sales, the condition of the property and numerous other factors.

A comparative market analysis and an appraisal are the standard methods for determining a home’s value.
Monty James and his team at Pacific Coast Executive Realty will be happy to provide a comparative market analysis, an informal estimate of value, based on comparable sales in the neighborhood. You can also research this yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location.
An appraisal, which generally costs $300 to $400 to perform, is a certified appraiser’s opinion of the value of a home at any given time. Appraisers review numerous factors, including recent comparable sales, location, square footage and construction quality.

Buyers considering a foreclosure property should obtain as much information as possible from the lender, including the range of bids expected. Monty would be happy to assist you in acquiring this information.
It also is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property’s condition.
It also is possible to do your own cost comparison through researching comparable properties recorded at local county recorder’s and assessor’s offices, or through Internet sites specializing in property records.