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Washington Report: Capital Gains Takes on Change

by Allison Simson & Joyce Nenninger

Question:  Allison, I heard that Congress recently changed some of the capital gains laws.  What have you heard?

Answer: Hardly anybody noticed it, but Congress tucked away a valuable bit of holiday cheer for real estate when it passed its final tax bill of the year.

It was the first substantive change in years to the generous capital gains rules governing sales of principal homes.

According to Kenneth Harney, most homeowners and real estate professionals can recite these rules in their sleep: Married, joint-filing sellers of houses can exclude up to $500,000 of gain, and single-filing sellers can take up to $250,000 … provided they've used the property as a principal residence for a cumulative two of the previous five years.

But what happens when a married home owner dies? Does the surviving spouse still qualify for the full $500,000 -- or does she or he only get to exclude $250,000?

The answer from the IRS has been this: you only get the full $500,000 if you sell during the tax year in which you were married and filing a joint return. Otherwise, the tax code sees you as single, and then you're limited to $250,000.

In other words, if your wife or husband died in June of 2007, you can only claim the full $500,000 benefit if you sell before December 31, 2007.

After that, as long as you remain unmarried, you're capped at the $250,000 limit for single taxpayers.

As a practical matter, most surviving spouses inherit their husband's or wife's share of the property at what's known as a "stepped up" tax basis, with no capital gains tax liability at the current market value.

But here's the problem: Some surviving spouses complain that they feel rushed into sales by the current tax rules. This is especially true for people who've lost their loved ones during the final few months of the year.

With everything else going on, they don't want the additional pressure of having to make the decision to sell the family home quickly. They want more time. Fair enough.

Well, now they've got it. Legislation signed into law before the holiday recess gives surviving spouses two full years to qualify for the $500,000 exclusion -- even though technically they're single.

And who says Congress doesn't have a heart?

Since your tax professional may not be familiar with this yet, here's the official citation: The bill is H.R.3648. The capital gains change is in Section 7.

 

 

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

Benefits of working with someone locally versus working with an Internet lender?

by Allison Simson & Joyce Nenninger
Question: Our goal for this next year is to buy a home in Summit County. We want to get some information on financing and are considering using an Internet lender. What would be the benefits of working with someone locally versus working with an Internet lender?
 
Answer: There are numerous advantages when using a local mortgage lender as compared to a mortgage lender obtained over the Internet.
 
Customer service is the number one advantage. A local mortgage lender is familiar with the properties in their area, whereas an Internet lender may have limited knowledge of the requirements associated with a resort area.
 
With a local lender the borrowers will have an individual who is personally working on their loan application, as every borrower's needs and financial situations are unique. The borrower also has a contact person to check the status of their application and to answer any questions they may have. Plus they will be able to speak directly with a local lender without having to play phone tag or leaving messages in voice mail that can be associated with the larger mortgage corporations. This can be frustrating to the borrowers.
 
The lender is responsible for ordering the appraisal on the property, which should be from a local appraiser. This is very important. A local appraiser is familiar with the area and the values of the properties and any changes in the area that can affect those values.
 
When purchasing a condominium unit, local lenders will be familiar with the condominium projects in the area and will know if the project meets the lender's requirements.
 
There is also the working relationship with the local title companies, surveyors and insurance companies to meet the state's requirements to provide each borrower with clear title to the property. There are several steps that must be completed to take a borrower from application to approval to the closing date. Working with the local mortgage lenders, title companies, appraisers and surveyors makes all these steps come together. You have the advantage of the individuals familiar not only with the area but also the requirements of each purchase contract.
 
Purchasing a home whether it's your first home, vacation home or a rental property can be stressful, working with your local professionals can make this process a lot easier.
 
 
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

Benefits to hiring an interior decorator to "Stage" your home.

by Allison Simson & Joyce Nenninger
Question: Our Realtor has suggested that we hire an interior decorator to “stage” our home. Is there any benefit in this?
 
Answer: Originally popularized in California, staging helps homes sell quickly and for more money.
Staging concentrates not on changing the interior in terms of painting or adding carpeting, says Carole Talbott of home decorating company Visual Coordinations. These are things the buyers would most likely prefer to choose themselves. Rather staging depends on "selling the space."

When a home is staged, it's reorganized--first with the furniture, then artwork, and finally by accessories. The furnishings remain the same, except for well-worn pieces or those that break up the design. Many times accessories are used to add color to a room.

Stagers charge approximately $500 to $750 for a three-bedroom, two-bath home; Talbott advises owners to stage only the main living areas to avoid high costs.

Some staging advice for homeowners who want to go it alone: furniture should be kept away from walls by grouping at angles in the middle of the room; colors should be chosen from artwork and fabrics, and accessories should be chosen to accentuate them; collections should be kept together; and mirrors should be placed in locations where favorable scenery will reflect. To attract attention to the exterior, the front door should be the first thing painted or decorated.  
 
 
For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

How important is it for the Homeowner's association to have a capital reserve fund?

by Allison Simson & Joyce Nenninger
Question: I am thinking of buying a condominium in Summit County and want to find a property with low homeowner’s association dues. How important is it for the association to have a capital reserve fund?
 
Answer: Condominium buyers should be wary of associations that lack adequate reserves--money set aside to pay for emergency or major repairs--because they could be forced to pay special assessments to cover costs when the association cannot. Additionally, a future sale or refinancing could be denied based on the association's reserves; and it is difficult to find a buyer under such conditions.

Insufficient reserve funds can lead to declining property values, as educated buyers refrain from purchasing condos in the community, according to the Community Associations Institute, a national nonprofit organization that educates and provides resources to homeowner groups.

Annually, an association's board of directors is required to predict the next year's income and expenses--usually through a reserve analysis study. This report consists of a property evaluation--architectural and engineering--by qualified engineers. The engineers determine the useful life and repair costs of things like boilers, elevators, and roofs to determine how much money should be set aside each year to plan for future replacement.

The reserve funds are generally collected from the condo owners on a monthly or quarterly basis and deposited into Treasury bills or other secure government-insured funds. If a repair is necessary and the association needs to raise the money immediately, there are three steps it can take: increase the monthly assessment amount; impose special assessments, in which the owner immediately pays a fee based on the percentage interest he/she has in the association (sometimes amounting to hundreds of dollars); or get a loan.

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - [email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

Reverse Mortgages Wrong for Some Seniors

by Allison Simson & Joyce Nenninger

Question: I am interested in a reverse mortgage but am not sure that this is my best option. Do you have any information on reverse mortgages?

 

Answer: Although reverse mortgages are an ideal fit for many senior homeowners, they are not the best option for all of them.

A reverse mortgage would not be in the best interest of someone who intends to make a move in the foreseeable future, the AARP and other sources note. Reverse loans usually come with stiff upfront fees and closing costs of up to 10 percent of the loan amount, which are distributed over the life of the loan. Owners who sell their homes quickly will also lose their equity quickly.

Reverse mortgages may not be suitable for seniors who want to leave a free-and-clear property behind as a legacy to their heirs. At the same time, some experts say elderly homeowners should consider a reverse loan as a way to meet living expenses or settle medical bills while they are alive, without worrying about what will happen when they die. Their offspring still can keep the property by paying off the reverse mortgage with funds from the estate or with their own money, or by taking out a new mortgage.

Experts warn that reverse loans may not be the solution for the youngest seniors, because longer life expectancy qualifies borrowers for less money, or for those in the midst of a temporary financial emergency, who might be better off taking out a home equity line instead.

Finally, another alternative, such as selling the property and using the proceeds to downsize into a smaller house or to rent, might make sense for some seniors.

For answers to your real estate questions, call Allison at 970-468-6800 or 1-800-262-8442. Email - Info[email protected] or visit their web site at www.SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.   

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Summit Real Estate
The Bright Choice
330 Dillon Ridge Way, Suite 10
Dillon CO 80435
970-468-6800
800-262-8442
Fax: 970-468-2195

Allison Simson, Owner/Broker, is a licensed Colorado Real Estate Broker