Buyers Tips
8 Reasons Why You Should Work With a Realtor
12 Questions to Ask When Choosing Your REALTOR
Does Moving Up Make Sense
Understanding Capital Gains in Real Estate
What is a Homestead Declaration
8 Reasons Why You Should Work With a REALTOR®
Not all real estate practitioners are REALTORS®. The term REALTOR® is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics. Here are five reasons why it pays to work with a REALTOR®.
1. Navigate a complicated process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multipage settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.
2. Information and opinions. REALTORS® can provide local community information on utilities, zoning, schools, and more. They’ll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
3. Help finding the best property out there. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR® to find all available properties.
4. Negotiating skills. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
5. Property marketing power. Real estate doesn’t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner’s contacts through previous clients, referrals, friends, and family. When a property is marketed with the help of a REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.
6. Someone who speaks the language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language.
7. Experience. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. Even if you have done it before, laws and regulations change. REALTORS®, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.
8. Objective voice. A home often symbolizes family, rest, and security — it’s not just four walls and a roof. Because of this, homebuying and selling can be an emotional undertaking. And for most people, a home is the biggest purchase they’ll every make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.
12 Questions to Ask When Choosing Your REALTOR®
Make sure you choose a REALTOR® who will provide top-notch service and meet your unique needs.
1. How long have you been in residential real estate sales? Is it your full-time job? While experience is no guarantee of skill, real estate — like many other professions — is mostly learned on the job.
2. What designations do you hold? Designations such as GRI and CRS®, which require that agents take additional, specialized real estate training, are held only by about one-quarter of real estate practitioners.
3. How many homes did you and your real estate brokerage sell last year? By asking this question, you’ll get a good idea of how much experience the practitioner has.
4. How many days did it take you to sell the average home? How did that compare to the overall market? The REALTOR® you interview should have these facts on hand, and be able to present market statistics from the local MLS to provide a comparison.
5. How close to the initial asking prices of the homes you sold were the final sale prices? This is one indication of how skilled the REALTOR® is at pricing homes and marketing to suitable buyers. Of course, other factors also may be at play, including an exceptionally hot or cool real estate market.
6. What types of specific marketing systems and approaches will you use to sell my home? You don’t want someone who’s going to put a For Sale sign in the yard and hope for the best. Look for someone who has aggressive and innovative approaches, and knows how to market your property competitively on the Internet. Buyers today want information fast, so it’s important that your REALTOR® is responsive.
7. Will you represent me exclusively, or will you represent both the buyer and the seller in the transaction? While it’s usually legal to represent both parties in a transaction, it’s important to understand where the practitioner’s obligations lie. Your REALTOR® should explain his or her agency relationship to you and describe the rights of each party.
8. Can you recommend service providers who can help me obtain a mortgage, make home repairs, and help with other things I need done? Because REALTORS® are immersed in the industry, they’re wonderful resources as you seek lenders, home improvement companies, and other home service providers. Practitioners should generally recommend more than one provider and let you know if they have any special relationship with or receive compensation from any of the providers.
9. What type of support and supervision does your brokerage office provide to you? Having resources such as in-house support staff, access to a real estate attorney, and assistance with technology can help an agent sell your home.
10. What’s your business philosophy? While there’s no right answer to this question, the response will help you assess what’s important to the agent and determine how closely the agent’s goals and business emphasis mesh with your own.
11. How will you keep me informed about the progress of my transaction? How frequently? Again, this is not a question with a correct answer, but how you judge the response will reflect your own desires. Do you want updates twice a week or do you prefer not to be bothered unless there’s a hot prospect? Do you prefer phone, e-mail, or a personal visit?
12. Could you please give me the names and phone numbers of your three most recent clients? Ask recent clients if they would work with this REALTOR® again. Find out whether they were pleased with the communication style, follow-up, and work ethic of the REALTOR®.
Does Moving Up Make Sense?
These questions will help you decide whether you’re ready for a home that’s larger or in a more desirable location. If you answer yes to most of the questions, it’s a sign that you may be ready to move.
1. Have you built substantial equity in your current home? Look at your annual mortgage statement or call your lender to find out. Usually, you don’t build up much equity in the first few years of your mortgage, as monthly payments are mostly interest, but if you’ve owned your home for five or more years, you may have significant, unrealized gains.
2. Has your income or financial situation improved? If you’re making more money, you may be able to afford higher mortgage payments and cover the costs of moving.
3. Have you outgrown your neighborhood? The neighborhood you pick for your first home might not be the same neighborhood you want to settle down in for good. For example, you may have realized that you’d like to be closer to your job or live in a better school district.
4. Are there reasons why you can’t remodel or add on? Sometimes you can create a bigger home by adding a new room or building up. But if your property isn’t large enough, your municipality doesn’t allow it, or you’re simply not interested in remodeling, then moving to a bigger home may be your best option.
5. Are you comfortable moving in the current housing market? If your market is hot, your home may sell quickly and for top dollar, but the home you buy also will be more expensive. If your market is slow, finding a buyer may take longer, but you’ll have more selection and better pricing as you seek your new home.
6. Are interest rates attractive? A low rate not only helps you buy a larger home, but also makes it easier to find a buyer.
Understanding Capital Gains in Real Estate
When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:
1. Purchase price: _______________________
The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.
2. Total adjustments: _______________________
To calculate this, add the following:
- Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
- Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
- Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
3. Your home’s adjusted cost basis: _______________________
The total of your purchase price and adjustments is the adjusted cost basis of your home.
4. Your capital gain: _______________________
Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.
A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:
1. You have lived in the home as your principal residence for two out of the last five years.
2. You have not sold or exchanged another home during the two years preceding the sale.
3. You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.
What is a Homestead Declaration?
A properly recorded Homestead Declaration protects the declarant from losing a portion of "his or her" equity due to lawsuits that result in judgment liens being attached to their property.
Who is eligible for a Homestead Declaration?
All homeowners that reside in their home, and use it as thier principal place of residence.
What are the current amounts of protection?
The equity, that is protected from lien attachment is as follows:
Each person owning an interest in the home, such as an unmarried co-owner......$50,000
Head or member of family............................................................................. $75,000
Husband & Wife........................................................................................... $75,000
Single (65 years and older or disabled).............................................................$125,000
Husband & Wife (when one or both is 65 or disabled0......................................$125,000
Do these amounts ever change?
Yes. Periodically, the California State Legislature will raise the amounts of entitlement. The homeowner will automatically receive the amount of the increase, without having to refile additional paper work.
Can I remove the Homestead?
Yes. There are three ways this can be accomplished:
1. You can record a document called "Abandonment of Homestead"
2. If you sell your home, the Homestead is automatically removed.
3. By operation of law, if you change your principal place of residence and you record a new homestead, the first homestead that you recorded will cease to exist.
What items are not covered by the Homestead?
To name a few:
- Judgments for spouse or child support.
- Tax Liens & Mechanic's liens.
- Judgments recorded before your Homestead
- Loans or debts secured by the property (Deed of Trust).
For further information on Homestead Protection, please consult an attorney.
Los Angeles/Ventura County (800) 722-9277 Santa Barbara County (805) 564-8366 Orange County (949) 495-9306 San Diego County (619) 574-5985
Information from Equity Title Company
