Real Estate Information Archive

To follow up from my previous post about FHA mortgage limit changes this year, there are some additional mortgage changes to know in 2014. Buyers who are looking to purchase a new Home need to be aware of current changes in mortgage rules in order to choose the loan that is best for them.

One of the biggest changes involves FHA loan limits. The maximum amount of an FHA loan decreased from $729,750 to $625,000 beginning January 1, 2014. A number of counties across the country saw significant decreases, as the loan limits are based upon median home prices in a given area. The expiration of credits given by the Housing and Economic Reform Act of 2008 has resulted in the agency now approving 115% of the median Home Price in a given area as opposed to 125% previously.

The Consumer Financial Protection Bureau (CFPB) now requires lenders to follow an “ability to repay” mandate when approving loans. This new regulation requires that lenders follow a precise set of guidelines when it comes to calculating income, debt and assets. In doing so, they are granting what the government deems to be a “qualified mortgage” in an effort to reduce the number of foreclosures that take place in the future.

Self-employed workers face even more difficulty when it comes to obtaining a “qualified mortgage” than others will. That’s because the new rules make it more difficult for people without a W-2 form to prove their debt-to-income ratio than it is for others. This is true even for those who have extremely high credit scores and a high net worth. It seems that the government is concerned that tax write-offs will reduce the amount of taxable income a person earns, thereby making income statements less accurate than W2 forms.

Some positive mortgage changes stem with new caps placed on loan origination fees. Those who obtain a qualified mortgage are limited to no more than three percent of the loan amount for points and fees charged by the lenders. Unfortunately, there is no cap on origination fees for consumers who do not obtain a qualified mortgage.

As always, buyers should check with their lender to find out about specific changes that are mandatory by a particular institution.

Winterizing your Home is as crucial to your comfort and peace of mind over the long, cold months of the year as is winterizing your wardrobe for the change of seasons. You most likely don't wear the same clothes over the winter as you do during the spring, summer or fall. So, it would behoove you to treat your home as a second skin, so to speak, and cover it accordingly.

There are also a variety of practical, prudent and proactive reasons why home winterization is in your best interest, not the least of which is to reduce your heating costs, as well as save yourself from preventable property damage.

Here are some simple suggestions to prepare your home for Old Man Winter:

• Cover drafty baseboard cracks with caulk
• Make sure doors and windows seal tightly to prevent air leakage
• Install sweeps to exterior, basement and attic entries
• Cover edges of windows with weather-stripping tape
• Remove window-mounted air-conditioning units
• Check heating system and change the filter
• Insure water pipes are properly insulated
• Clear gutters of clogs to prevent water damage to shingles

And finally, while the addition of insulation to your attic and the underside of your home can be an expensive project, it can also be incredibly rewarding over the winter.

It is fine to buy a lottery ticket now and then. It is fine to take a chance on a football pool. One risk you don't want to take, however, is on your Home insurance. Most claims are going to be for broken windows and other minor issues. The real value of home insurance is against catastrophic loss. It loses that value if the coverage does not keep pace with the replacement cost of the home.

How can homeowners be assured that they are paying for sufficient coverage? Doesn't the policy increase automatically? The convenience of insurance payments going into escrow to be paid by the lending institution may render the level of coverage invisible to the average home owner. It is even possible for owners of newly constructed homes to be underinsured if the cost of construction has recently risen. Remember that lending institutions insist on coverage to balance their loss in case of fire, not yours. The wise homeowner makes it their business to keep track of their coverage, no matter who submits the premium.

There is a solution to the possible deficit in coverage. The type of home insurance you want to arrange is called Guaranteed Replacement Cost. This insures that in the event your home is completely destroyed, the cost of reconstruction will be covered in its entirety.

Have you considered the value of the contents of your home? A complete inventory of your possessions is an important component of the insurance process. The cost of electronics could be very significant if you have to replace everything you have amassed over time all at once. Furniture, artwork, musical instruments and jewelry all total more than you might imagine. Before you negotiate home insurance, make sure everything you own has been cataloged and documented. Take photos and file them electronically as well as the receipts to prove ownership and value in case of loss.

To make sure your home insurance coverage grows with the value of your belongings, perform an annual review. Discuss the results with your insurance agent. They will help you navigate your insurance options and even help you find lower rates when possible. Don't forget bundling discounts that save money.

One of the first things to think about when you are selling your Home is curb appeal. That is the magic that draws all eyes to your home when potential buyers are passing by. You want them to stop and take a long hard look as they slow down to pick up a flyer. Curb appeal is that critical element that brings your home to the front of the line. Here are a few tips to make sure your home invites them back:

An attractive entryway – Repainting or replacing the front door with a splash of color is like an engraved invitation that says, "Come on in." The path leading to the door and the lighting above or to the side both add attractive details that welcome visitors. Make sure the doorknob and hardware are painted or polished to complete the package.

Pristine yard – Whether your home has a carefully manicured lawn or desert landscaping, the key is a neat, trim exterior with no weeds, debris, or clutter of any kind. Nothing says "fixer–upper" like needless mess. Since many buyers enjoy creating their own gardens, many sellers find that potted plants provide a finished look to complete a positive vision without making permanent changes to the landscape.

Repair and update – Simple hardware replacements can bring a house forward in time by years. Shiny upgrades are inexpensive, attractive and send a message that the home has been well–maintained. Make sure all minor repairs are completed before you sell your home.

Add artistic flair – Fountains, bird baths and wind chimes all work to make the exterior pleasant and attractive. These are the finishing touches that make houses feel look unique and homey.

Shutters and accent trim – Shutters help control light and ventilation, as well as providing a measure of added security. They add another level of visual interest that stands apart from the rest of the neighborhood.

Gutters and downspouts – Replacing these and any fascia that are bent or peeling creates a visual frame around the front of the house that looks new.

When you think you are ready to list your home, take a few photos from different angles to help you spot details you might have missed. Be prepared to make more small changes your real estate agent may suggest to ready the home. In today's market, curb appeal is more important than ever before to help you get your asking price quickly.

As you navigate through the process of Buying a Home, you will find that one of the more critical components is the home inspection. To understand the value of home inspections, buyers and sellers should both be aware of what they do and do not include. While there may be some variation from state to state, home inspections typically do not look for asbestos, radon gas, lead paint, toxic mold, or pest control. If the buyer has concerns, professionals specifically licensed for each must address these issues. The focus of the typical inspection is three-fold: structural, mechanical and electrical condition of the house. The goal is not a complete laundry list of necessary repairs, nor an appraisal of worth. It is an unbiased evaluation of the home’s condition.

Step One

The process begins with a visual examination of the front of the home from a distance sufficient to view the entire exterior surface. Starting at the top and systematically moving down the wall, the inspector will review the roof, the chimney, gutters, fascia and soffits. Next, he will look at windows, doors, porches, decks and all of the structural details down to the ground. He will consider the grade or slope of the surrounding ground, inspect flowerbeds, walkways and driveways. Moving closer to the building, he will continue the home inspection by investigating details that caught his attention. Repeating the process with each wall, he will work his way around the house.

Step Two

Inside the house, he will continue the home inspection starting at the lowest level and moving up. The review starts with the floor, moves up the walls and across the ceiling. Then he will check each appliance in the room. He will open each door and inspect closets and storage areas before moving to the next room. He will look at floors, heating sources, electrical panels, outlets and switches. He will look for water damage including stains and sagging. He will check all plumbing fixtures and visible pipes.

Step Three

The home inspection will follow a checklist to insure that it is complete. Then the inspector will provide a formal report of his findings. It will then be up to the buyer to accept the property as it is, request repairs, request reduction of price to cover repairs, or decline the property. Your real estate agent will work with you to help you with your negotiation and decision.

For decades, Home ownership in the United States has been partially subsidized by the tax savings associated with owning a home. Many homeowners qualify for certain tax deductions and tax credits that make home ownership more affordable.  In order to utilize certain deductions, a homeowner must itemize their tax deductions. But almost everyone is eligible to benefit from one or more of the tax benefits of home ownership. Here are a few to consider as of the date of this article:

1. Property Taxes Deduction: In many areas, property taxes can be one of the most significant costs of homeownership. Therefore, the ability to deduct residential property taxes from taxable income is an incredible savings. A property tax deduction is essentially a tax-deductible tax, so that the homeowner does not pay income tax on money that was used to pay property taxes. This particular deduction may only be used for the period of time the homeowner actually owns the home. Back taxes paid as part of the purchase arrangement may not be deducted. But anything going to the Seller on the settlement statement for property taxes the seller paid in advance can be deducted. Homeowners can only deduct the amount of property tax actually paid to their local municipality for the tax year. However, if the property taxes are held in escrow for paying taxes at a later time, the deduction cannot be taken until such time as the money is paid out of the escrow account to the taxing authority. Many local assessments for improvements or other city/county fees that one may find on their property tax bill are not deductible. Also, if any (typically partial) refund of the property tax occurs, the amount of the deduction is generally reduced by the amount of the refund.


2. Mortgage Interest Deduction: For many homeowners, the mortgage interest tax deduction is the most valuable tax deduction, and can be used to deduct interest paid on a mortgage of up to one million ($1,000,000.00). When a homeowner receives their first Form 1098 from their lender, they should know that its potential value is vast and to consult with a tax professional as to how best to take advantage of this benefit. This deduction is especially useful for most new homeowners, as the initial mortgage payments for new homeowners are primarily comprised of interest for the first several years, making for a larger deduction (until more of the payment is comprised of principal when there is less interest paid and less interest to deduct). Prepaid mortgage interest paid at closing may also add to the amount of this deduction.


3. Mortgage Insurance Premiums Deduction: Many home buyers whose initial down payment is less than 20% of the purchase price are required to pay private mortgage insurance or "PMI." This insurance can be a significant expense. Homeowners may generally deduct the premiums paid for such mortgage insurance for the current tax year on a primary residence and a non-rental second or vacation home. However, eligibility for this deduction is phased out based on income levels (check with your tax professional).


4. Points Deduction: If an owner paid discount points or "points" (or sometimes "loan discounts") to reduce the interest rate on borrowed funds as part of the purchase or refinance of a home, the cost of these points can be deductible in the year they were paid or over the life of the mortgage, depending on the type of loan and the unique qualities of the taxpayer.


5. Energy Credits: Some homeowners can receive a tax credit (either federal, state or local) for a portion of the cost of materials used for energy efficient upgrades to their residence (including doors, windows, furnaces and air conditioners, roofing materials, insulation, solar panels, water heaters, geo thermal heat pumps, fuel cells, wind turbines, and other energy efficient upgrades).


6. Home Office Deduction: Many home owners, who use a portion of their home for office purposes, may be able to claim a tax deduction for the pro-rata portion of costs related to the office space (e.g. repairs, mortgage, insurance, utilities, and depreciation). To utilize this deduction, the home office must be used exclusively and regularly as a place of business, a place to meet clients/patients for business purposes, a place of storage (e.g. for inventory or records used in the business), or a place where a majority of business work is done.


7. Gain on Sale Exclusion: Individuals can exclude up to $250,000 of gain from a primary residence from taxable income, and married couples can exclude up to $500,000 of gain. To qualify, the seller(s) must have lived in the home as a primary residence for two of the prior five years before the sale.


8. selling Costs Deduction: If the seller’s gain from the sale of a home does not qualify for the exclusion in #7 above, or the gain exceeds the maximum amount of the exclusion in #7, the costs associated with selling the home may also be available to reduce the tax burden of the seller. For example, the following costs may be deductible: title insurance, advertising and marketing expenses, broker fees, or repairs (if made within 90 days of the sale and with the intent to facilitate a sale).


9. Home Improvement Loan Interest Deduction: Interest on loans for home improvements may be deductible, provided the loan was used for a "capital improvement," such as building a deck, installing a new water heater system, or building a garage or otherwise expanding the size of the home. Many s1maller items, such as wallpaper, paint, carpet, etc. are not considered "capital improvements."


10. Construction Loan Interest Deduction: Interest on a loan used to construct a new principal residence or vacation home for personal use may be deductible for the first 24 months of the loan.


11. Loan Forgiveness Exclusion: As of the date of this article, the Mortgage Debt Forgiveness Relief Act of 2007 was extended to allow debt that is forgiven by lenders in short sale situations to be excluded from taxable income, rather than being taxed as debt forgiveness income.


12.  IRA Penalty Exemption: The ten (10) percent penalty for the early withdrawal of IRA funds can be avoided if the withdrawal of such funds is used toward the purchase of a home within 120 days of the withdrawal. This benefit is limited to a withdrawal of up to $10,000 in IRA funds for each spouse, and only if each spouse did not own a home within the two years prior to the new home purchase.

These tax benefits represent some of the biggest tax benefits of homeownership. Other tax benefits also exist. And the above analysis is an informational summary only and is not to be used, and is not intended to be used, as tax advice. When it comes to tax matters, a tax professional, Certified Public Accountant, or tax attorney should be consulted for the particular circumstances of each taxpayer, to ensure that no tax benefit opportunities are missed and to ensure compliance with law. 

HOMESTEAD TAX CREDITS - The state of Michigan has a homestead tax credit for owner occupied residences.  This amounts to approximately a 33% discount on your annual local and state property taxes.  There are deadlines for filing this paperwork however in order to get your tax savings.  There is also options to get more than one homestead credit though in most cases it is limited to just one per person/household.  CALL us to discuss your situation as they there are complex rules and regulations which vary by individual case.  

Interested in new listing updates?  Just click on the link above "Get Listing Updates" to receive new listings the day they come out automatically.  You can also contact us by using one of the options found after clicking on our home button above or call our office direct line at 734-996-0000 and ask for Tom Stachler.

New Changes in the State of Michigan Homestead Exemption Filing Dates

Good News.  The Michigan Association of Realtors was instrumental in helping get this signed yesterday. The former deadline date of May 1st for your homestead exemption and discount on property taxes for Michigan property has been changed.  

See the information below regarding your Michigan Property tax homestead exemption and tax discount.

Old Man Winter is sneaking up on us once again. He does this every year, and yet many of us find ourselves unprepared when he springs out from behind the bushes, drops the temperatures down into the Arctic range and unleashes a torrent of wind and snow. Beyond the discomfort that the cold can bring, winter can usher in a series of expenses – but there are ways to cut down on potentially expensive heating and repair bills.

So, for all of the procrastinators out there, here are some very simple, basic tips for preparing your Michigan Home for Old Man Winter’s inevitable onslaught:

• Seal as many of your house’s drafty areas as possible (screens, windows, doors, etc.) with weather stripping, plastic or caulk.
• Insulate your attic, preferably with about a foot of insulating material like fiberglass. Obviously, heat rises so a well insulated attic will keep your heat where it belongs: inside your living spaces.
• Ensure that your furnace is in tip-top condition. Have an HVAC technician check it over and replace the furnace filter. If your Michigan home is radiator heated, it’s recommended that you open the pipes slightly and bleed out some air. When water appears, close the valve.
• Make sure that all of your carbon monoxide and smoke detectors are functioning properly and have fresh batteries.
• Cover exposed pipes with insulating material or heat tape, and insulate electrical outlets against heat loss and air leaks.

Use these quick-and-easy tips to get started and like the proverbial snowball rolling down a hill, you’ll have your Michigan house winterized in no time. You’ll save money on heat and maybe even prevent your pipes from bursting during serious cold snaps.

Title Issue that Comes up When Buying a Foreclosure

"Covenant deeds are not illegal. With a warranty deed, the grantor is warranting title against all prior claims - even claims that arose prior to the grantor acquiring title to the property. With a covenant deed (or "deed C") the grantor's warranty is limited to claims arising from the actions of the grantor. You get a little more from a covenant deed that you would get through a quit claim deed. Bank/sellers` are never going to give someone a warranty deed, the battle is typically over whether the bank will give a covenant deed or only a quit claim deed.

If I was a buyer, I would push for the covenant deed and in all events make sure that I had good title insurance in place to protect me. Good title insurance from a reputable company is always important but particularly so if you are getting something less than a warranty deed. Purchasers need to keep in mind that there is title insurance out there these days that really doesn't protect the them because the exceptions to coverage are way too broad.

I usually review the title company's pre-committment policy and often with recommend that buyers taking covenant deeds (or quit claim deeds) should strongly consider having their real esate attorney look at the title commitment/policy before they close. This is even more important if the policy is coming from an affiliate of the seller/bank --or other title company that we may not be as familiar with."

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The more insulation we put into our attics, the less heat is lost and the snow on your roof can remain longer.  Sunny days can heat up darker shingles to help melt snow, but this can lead to ice dam problems and ceiling leaks too.  

With all the snow we have had this year, you might want to be proactive with winter roof care.  Get a roof snow scraper or rake/blade to pull some of the snow off your roof.  This is especially important in areas that might backup near flashings and then leak inside our Home.  

Check out this link to get more information on this topic.  The conditions are right for more of this to happen.  Of course, if you know someone looking for real estate services, please give them the URL of this website to get started.  

Have a great day!