Selling Your House on Your Own Could Cost You In Hunterdon and Somerset County

Selling Your House on Your Own Could Cost You In Hunterdon and Somerset County

In this extremely hot real estate market, some homeowners might consider selling their homes on their own which is known as a For Sale by Owner (FSBO). They rationalize that they don’t need a real estate agent and believe that they can save the fee for the services a real estate agent offers.

However, a study by Collateral Analytics reveals that FSBOs don’t actually save anything, and in some cases may be costing themselves more, by not listing with an agent.

In the study, they analyzed home sales in a variety of markets. The data showed that:

“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.” (emphasis added)

Why would FSBOs net less money than if they had used an agent?

The study makes several suggestions:

  • “There could be systematic bias on the buyer side as well. FSBO sales might attract more strategic buyers than MLS sales, particularly buyers who rationalize lower-priced bids with the logic that the seller is “saving” a traditional commission. Such buyers might specifically search for and target sellers who are not getting representational assistance from agents.” In other words, ‘bargain lookers’ might shop FSBOs more often.
  • “Experienced agents are experts at ‘staging’ homes for sale” which could bring more money for the home.
  • “Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.” If more buyers see a home, the greater the chances are that there could be a bidding war for the property.

Conclusions from the study:

  1. FSBOs achieve prices significantly lower than those from similar properties sold by Realtors using the MLS.
  2. The data suggests the average price was near 6% lower for FSBO sales of similar properties.

Bottom Line

As Dave Ramsey, America’s trusted voice on money, explains:

“Research has shown that, between mistakes, lack of negotiating skills, pricing errors and general exposure on the market, you’ll cost yourself more than the real estate commission…You’ll come out slightly better and with a lot less hassle if you use a top-shelf agent.”

 


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3 Ways the GOP Tax Plan Would Affect Homeowners in Hunterdon and Somerset Counties

3 Ways the GOP Tax Plan Would Affect Homeowners in Hunterdon and Somerset Counties

Under the GOP’s final tax bill, millions of Americans will lose the tax benefits they enjoy from owning their homes

Reposted from fool.com

The GOP tax plan would bring big sweeping changes to tax rates, tax brackets, and tax deductions. Some of the biggest changes would affect America’s 80 million homeowners, thanks to lower limits on how much mortgage interest and property taxes can be deducted and whether interest on certain types of housing-related loans can be deducted at all.

Here are the three biggest changes homeowners should know about in the GOP’s tax plan.

1. Big changes in how much (and what types) of mortgage interest you can deduct

As it stands today, mortgage interest gets preferential treatment from the IRS. Currently, Americans can deduct mortgage interest on up to $1 million of indebtedness incurred to purchase their home. The average filer who uses this deduction saves approximately $1,900 on their taxes, according to data from the Joint Committee on Taxation.

Under the new tax plan, the deduction would be limited to $750,000 of indebtedness starting with the 2018 tax year. However, filers who have mortgages issued before the Dec. 15, 2017, cutoff would be grandfathered in, and will still be able to deduct interest on up to $1 million of mortgage-related indebtedness.

The proposed tax bill would also eliminate a common way for homeowners to use home equity loans to score tax-deductible financing. Interest paid on home equity loans that aren’t considered home acquisition debt will no longer be tax deductible under the GOP tax plan. Currently, homeowners can deduct interest on up to $100,000 of such indebtedness.

In the past, Americans have used their home equity to get low, tax-deductible interest rates on large purchases, even if they weren’t housing related. For example, one might use a home equity line of credit (HELOC) to purchase a luxury recreational vehicle at a cost of $100,000. Thus, the homeowner scores a lower interest rate (HELOCs are one of the least expensive ways to borrow money) and get the ability to deduct the interest from their taxes. The GOP tax plan closes this “loophole” for using home equity as a cheap source of consumer financing.

2. A new limit on property tax deductions

Deductions will change in a big way should the GOP plan pass. For homeowners who live in states with high income and property taxes, a cap on deductions could bite at tax time. Whether or not state and local taxes (SALT) should be deductible has been a hot button issue in this year’s tax debate.

The GOP’s final bill allows taxpayers to deduct only up to $10,000 of state and local property taxes ($5,000 for married taxpayers filing a separate return). Under current tax law, there is no limit on how much state or local taxes can be deducted from your federal taxes.

The state and local tax deduction is important because it is frequently one of homeowners’ largest deductions outside mortgage interest. In many cases, this deduction helps push homeowners over the standard deduction, thus making it advantageous to itemize to deduct more than they would be able to if they elected for the standard deduction.

3. Fewer homeowners will itemize to save money

As it stands today, the mortgage interest tax deduction primarily benefits people who incur substantial mortgage interest on a residence in a state or municipality with relatively high income and property taxes. That’s because the mortgage interest tax deduction only matters if your total deductions exceed the standard deduction.

Under the GOP plan, fewer homeowners may find it worthwhile to itemize to claim their deductions. That’s because the standard deduction will nearly double to $12,000 for individuals and $24,000 for married individuals who file a joint return in the 2018 tax year.

Year Married Filing Jointly Single
2017 $12,700 $6,350
Proposed for 2018 $24,000 $12,000

Data source: IRS, GOP tax plan.

Estimates by Zillow suggest that many homeowners will simply stop itemizing if the tax bill is passed. The real estate listing website found that roughly 44% of American homes are worth enough that it makes sense for homeowners to itemize their deductions to write off mortgage interest and property taxes. Under the proposed tax plan, that proportion drops to 14.4%.

The effect is most pronounced in areas that have a combination of high housing prices and state and local taxes. In Los Angeles County, Zillow estimates that 94% of homes are priced high enough that it makes sense for homeowners to itemize under current tax law. Under the GOP plan, that proportion falls to 48% of homes there.

Notably, Zillow points out that its analysis assumes homeowners are in the first year of a 30-year mortgage, when the interest payments are largest as a percentage of their monthly payments. Homeowners who have paid on the same mortgage for several years or who use a lower APR 15-year mortgage would be even less likely to itemize.

The $6,318 tax bonus millions of Americans completely overlook
Taxes can be confusing and downright miserable. But a handful of “tax tricks” could help millions of Americans save thousands of dollars. That’s free money you could be leaving on the table. For example: the IRS believes that a full 20% of eligible Americans miss out on a tax break worth up to $6,318… each year!

 


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USAA members and their families can receive a substantial reduction on their next real estate transaction.