WATSON STEWART HOMES LLC can provide information on the following:
- Home Price Appreciation
- Condos and Home Associations
- Improving Real Estate
- Insurance
- Taxes
- Financing
Home Price Appreciation
Improving Property Value
The value of a property can be affected by various factors, such as market conditions, the property’s condition, specific home improvements, and neighborhood stability and safety. In particular, the greatest rise in home prices occurs when the economy is strong and the number of home sales is increasing. Specific home improvements, such as remodeling a bathroom, adding a bathroom or a master bedroom suite, or upgrading landscaping, can increase the value above the cost of the improvements. However, quality pays and well-planned and well-executed remodeling jobs are good investments, while bad work seldom enhances value or livability. The safety and security of a neighborhood can also affect property values, so living in an area with low crime rates and an organized community watch program can enhance property values.
Increasing the Value of Your Property
Specific home improvements, such as remodeling a kitchen, adding a bathroom, finishing a basement, or upgrading landscaping, can increase the value of a property above the cost of the improvements themselves. However, quality pays, and a bad remodeling job will do little to boost your property value. Living in an area where other homeowners are upgrading their homes can also help pull up your property value. It is important to measure the cost of any improvements against the overall values in your neighborhood to avoid over-improving the neighborhood, which may not necessarily recover your costs or boost your property value significantly.
Buying a Bigger Home to Increase Profit
Before deciding between adding on to an existing home or moving up in the market to a bigger house, consider factors such as how much money is available to remodel the current house, how much additional space is required, whether the foundation supports a second floor or if the lot has room to expand on the ground level, what local zoning and building ordinances permit, how much equity already exists in the property, and whether there are affordable properties for sale that would satisfy housing needs. Ultimately, the decision should be based on individual needs, the extent of work involved, and what will add the most value.
Determining the Value of Your Home
The standard methods for determining a home’s value are a comparative market analysis and an appraisal. A comparative market analysis is an informal estimate of value based on comparable sales in the neighborhood and can be provided by a real estate agent or researched by the homeowner. An appraisal, which costs $200 to $300, is a certified appraiser’s opinion of the value of a home at any given time and is required by lenders as part of the loan application process. Appraisers review numerous factors including recent comparable sales, location, square footage, and construction quality.
Market Value vs. Appraised Value
The appraised value of a house is a certified appraiser’s opinion of the worth of a home at a given point in time, which is required by lenders as part of the loan application process. Market value is what price the house will bring at a given point in time and is estimated through a comparative market analysis based on sales of comparable properties. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.
Condos and Home Associations
Are condos a good investment?
Condominiums have been a good investment despite economic downturns and association-related problems. In fact, condos have appreciated more in recent years than when they were first introduced in the 1970s and 80s. Elected volunteers who serve on association boards are better trained to handle complex budget and legal issues, while many boards take measures to avoid litigation that can hurt resale value.
What kinds of rules and regulations do Associations regulate?
Condo associations regulate common property and have the authority to enforce reasonable rules on its use. Homeowner associations can restrict smoking in indoor common spaces, while restrictions on outdoor spaces would likely depend on local laws. The Federal Fair Housing Act provides protection against discrimination against people with disabilities, including the refusal to make reasonable modifications to buildings that aren’t accessible to the disabled.
What fees can I expect to pay a home association?
Condominium owners pay a fee, usually monthly, to cover the costs of managing and maintaining all common areas. They may also pay extra assessments for major maintenance projects, which must be voted on by the association board or all owners. The cost of monthly fees and the rules regarding special assessments vary from association to association.
Are homeowner association fees tax deductible?
Homeowners association fees are not tax-deductible as they are considered personal living expenses. However, if 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, which is used to reduce eventual capital gains taxes when the property is sold. Overall improvements to common areas can be included in the cost basis of any owner who can show their home directly benefits from the work.
Real Estate Improvement
Government Programs for Rehabilitation
The U.S. Department of Housing and Urban Development offers the Section 203(K) rehabilitation loan program, which provides financing for major structural rehabilitation of one- to four-unit houses older than one year. The program is usually offered as a combination loan for purchasing and rehabilitating fixer-upper properties or for refinancing a temporary loan for the same purpose. The program can also be used as a rehabilitation-only loan. Plans and specifications for the proposed work must be submitted for architectural review and cost estimation. Mortgage proceeds are advanced periodically during the rehabilitation period to finance the construction costs. The U.S. Department of Veterans Affairs offers loans for buying, building, improving, or refinancing a home, while the Federal Housing Administration offers the Title 1 FHA loan program.
Maintenance Costs
Experts recommend budgeting 1% of the purchase price of a house annually for maintenance chores, such as repairing gutters, caulking windows, sealing driveways, and other upkeep. Newer homes usually require less maintenance than older homes, but it also depends on the level of maintenance the property received over the years.
Repairs Before Putting a Home on the Market
Making minor and major repairs before putting a home on the market is recommended for selling at top dollar. Most purchase contracts include an inspection clause that allows buyers to back out if numerous defects are found or negotiate their repair. It is important not to overspend on pre-sale repairs, especially if there are few houses on the market, but making such repairs may be the only way to sell a home in a down market.
Neighbor Problems
A cluttered landscape next door can detract from the positive aspects of a home, but it may not reduce its actual value. Local laws and zoning ordinances, available at public libraries or City Hall, can address issues such as junk vehicle ordinances, parking ordinances, and noise-control ordinances. Before involving the authorities, homeowners can give their neighbors a copy of the pertinent ordinance to give them a chance to correct the problem.
Insurance
Types of Insurance
A standard homeowners policy covers damage caused by fire, lightning, wind, storms, hail, explosions, riots, aircraft wrecks, vehicle crashes, smoke, vandalism, theft, breaking glass, falling objects, the weight of snow or sleet, collapsing buildings, freezing of plumbing fixtures, electrical damage, and water damage from plumbing, heating, or air conditioning systems. Floods, earthquakes, war, and nuclear accidents are typically not covered, but additional coverage can be added, such as flood and earthquake insurance and workers’ compensation for servants or contractors.
Experts recommend homeowners obtain insurance equal to the full replacement value of the home, with the option to increase coverage beyond the depreciated value of personal items such as furniture with a replacement-cost endorsement. An inflation rider can also increase coverage as the home increases in value.
Guaranteed Replacement Cost Insurance
Guaranteed replacement cost insurance is a comprehensive policy that covers the complete costs of replacing a destroyed house, with complete coverage being more explicit and limits on policies being less common.
Taxes
Property Taxes
Property taxes on real estate are fully deductible against income taxes, including those levied by state and local governments and school districts. These annual local assessments are calculated using a variety of formulas and help pay for public services.
Mortgage Interest and Property Taxes
Mortgage interest and property taxes are deductible on a second home if you itemize, and the mortgage interest deduction allows you to completely deduct the interest on your home loan for the year in which you paid it. However, you must itemize deductions in order to do this, and the total deductions must exceed the IRS’s standard deduction.
Impound Account
An impound account is a trust account established by the lender to hold money to pay for real estate taxes and mortgage and homeowners insurance premiums as they are received each month.
Points and Tax Breaks
Buyers can deduct points for the year in which they are paid only, and points paid when you refinance an existing mortgage must be deducted by rate over the life of the new loan. First-time homebuyers may be eligible for Mortgage Credit Certificate programs, which allow them to take advantage of a special federal income tax write-off, making it easier to qualify for a mortgage loan.
Home Improvements
Spending on permanent home improvements can be added to the home’s cost basis, reducing capital gains when it comes time to sell. While the 1997 tax changes virtually eliminate the capital gains tax for most homeowners, it is still worthwhile to save all receipts for permanent home improvements.
Financing
Determining When to Refinance
Deciding when to refinance depends on several factors, including how long you plan to stay in your home, the costs of refinancing, and how far along you are in paying off your current mortgage. If you plan to sell your home soon or if you are more than halfway through paying off your current mortgage, refinancing may not be worth the cost. However, if you plan to own your home for at least five years, refinancing can help you save on your monthly payment.
No-Cost Loans
Some lenders advertise “no-cost” loans, which means that borrowers don’t have to pay upfront fees or closing costs. However, these loans usually come with a higher interest rate in exchange for the waived costs. It’s important to be aware of the other fees involved in these loans.
Bankruptcy and Refinancing
Refinancing after bankruptcy may be difficult, but it’s possible. If you’re considering bankruptcy, it’s best to talk to your lender first and explain your situation. If you’ve been making your payments on time, your lender may be willing to refinance your loan.
Home Buying Costs and Tax Deductions
Points paid by you or the seller to purchase your home loan are deductible for the year in which they are paid. Property taxes and interest are deductible every year. Other home-buying costs, such as closing costs, are not immediately tax-deductible but can be figured into the adjusted cost basis of your home when you sell it. Significant home improvements can also be calculated into the adjusted cost basis of your home.
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