Buying Real Estate

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In this age of information so many websites provide information to potential buyers of real property that some might ask "What should I look for in a real estate professional"? The simple truth is most potential buyers of real estate work with a real estate person with whom they feel comfortable. Implied within "feeling comfortable" is typically a satisfactory degree of trust and a sense that the real estate person will understand their circumstances and needs and perform his or her services accordingly.

But the questions remain, why work with a real estate professional and what qualities should he or she have?

Practically every real estate transaction I have been involved in has different elements and challenges. Sometimes the "perfect property" is overpriced or the seller/listing agent is unreasonable in various aspects of the negotiation, or the property has significant and/or unique condition issues. Some properties have development issues, such as can an accessory unit or other additions be made to the property, or how much will it cost to remodel the kitchen. Will government permits be required? How much will permits cost and how long will the permit process take. Will a private land use consultant be required? Is there a right of way that affects the use or value of the property. Is there a potential for rent control. How does the (section 8) HUD rental program affect income, repairs or the vacancy rate. What can I do with the excess land or is there a chance for rezoning? What type of loan would be best for me and a particularly property.

These, and a wide variety of other challenging issues, can often be analyzed, put into a proper perspective and dealt with affectively by an experienced real estate professional. If the issues can be resolved, the question is do they affect value and, if so, how much?

In short, a knowledgeable real estate agent or buyer's broker can guide you through the process of buying real estate and make the process much easier, free from worries about any challenging issues being overlooked or poorly handled and increase the likelihood that your goals in the purchase of real estate will be met.

Benefits of Real Estate Ownership

Though the majority of property owners are motivated by the wish to have a home to raise a family, provide a comfortable lifestyle and security in their adult and senior years, there are others that choose real estate investing as a vehicle to financial security and as an important aspect of estate building.

Appreciation

While no-one can say what future appreciation will be, most knowledgeable people would agree the mid to long term investment in Santa Cruz County properties will likely be as productive an investment as can be made. The reason for this is that Santa Cruz has become a bedroom community to the "Silicon Valley", the heart of the high tech world, 30 miles "over the hill" in the Santa Clara Valley. The University of California at Santa Cruz continues to grow, while there is limited land resources for new development, along with government "growth" control. Last, as they say, location, location...Santa Cruz is well located on the beautiful Monterey Bay in the heart of northern California.

Tax Benefits

Your ability to deduct interest depends on many factors. The below information is general and should not be relied on to make decisions regarding the purchase of real estate. Consult a professional tax consultant for advise on tax matters.

New Home Buyer Tax Credit - The Housing and Economic Recovery Act of 2008 provides a tax credit for first-time homebuyers of, with certain exceptions, 10% of the purchase price up to $7,500 maximum. The tax credit, however, must be repaid like an interest-free loan in equal installments over the next 15 years or in full if the homebuyer sells the property for a gain. A buyer qualifies as a "first-time" homebuyer as long as the buyer (and spouse if any) has not owned a principal residence in the U.S. for the last three years. The tax credit phases out for a taxpayer with a modified adjusted gross income over $75,000 (or $150,000 for joint returns). This tax credit is available for qualifying homes purchased from April 9, 2008 through June 30, 2009...another provisions of the new Housing Act include, without limitation, new conforming loan limit starting January 1, 2009 for FHA, Fannie Mae, and Freddie Mac at 115% of an area's median home price, not to exceed $625,500, an increase in FHA's minimum down payment requirement from 3% to 3.5%

Mortgage Deductions - One of the most important tax advantages of home ownership is the deduction of mortgage interest. If you itemize deductions on Schedule A of your federal income tax return, you can generally deduct the qualified residence interest that you pay on certain home mortgages taken on your principal residence. (This also applies to second homes.) That is, you may be able to deduct the interest you've paid on a mortgage to buy, build, or improve your home, provided that the loan is secured by your home.

Real estate property taxes - you can generally deduct the real estate taxes that you've paid on your property in the year that they're paid to the taxing authority. Only the legal property owner can deduct the real estate taxes. In some cases, prepaid real estate taxes can be deducted in the year of the prepayment.

Tax treatment of home improvements and repairs - Home maintenance and repairs are generally nondeductible. Improvements, though, can increase the tax basis of your home (which in turn can lower your tax bite when you sell your home). Improvements add value to your home, prolong its life, or adapt it to a new use. For example, the installation of a deck, a built-in swimming pool, or a second bathroom would be considered an improvement. In contrast, a repair simply keeps your home in good operating condition. Regular repairs and maintenance (e.g., repainting your house and fixing your gutters) are not considered improvements and are not included in the tax basis of your home. However, if repairs are performed as part of an extensive remodeling of your home, the entire job may be considered an improvement.

Deducting points and closing costs - When you take out a loan to buy a home, or when you refinance an existing loan on your home, you'll probably be charged closing costs. These usually include points, as well as attorney's fees, recording fees, title search fees, appraisal fees, and loan or document preparation and processing.

As a home buyer, you can deduct points in the year that you buy your home if you itemize your deductions. However, you must meet certain requirements. Refinanced loans are treated differently. The points that you pay on a refinanced loan generally must be amortized over the life of the loan. In other words, you can deduct a certain portion of the points each year. There's one exception: If part of the loan is used to make improvements to your principal residence, you can generally deduct that portion of the points in the year that the points are paid.

Exclusion of capital gain when your house is sold - If you sell your principal residence at a gain you may be able to exclude from taxation all or part of the capital gain. Generally speaking, capital gain (or loss) on the sale of your principal residence equals the sale price minus your adjusted basis in the property. Your adjusted basis is the cost of the property (i.e., what you paid for it initially), plus amounts paid for capital improvements, less any casualty losses claimed for tax purposes. If you meet the requirements, you can exclude from federal income tax up to $250,000 ($500,000 if you're married and file a joint return) of any capital gain that results from the sale of your principal residence, regardless of your age. In general, an individual, or either spouse in a married couple, can use this exclusion only once every two years. To qualify for the exclusion, you must have owned and used the home as your principal residence for a total of two out of the five years before the sale.

Email: Rick@RickWilkins-re.com

Office 831-464-3606

Senior Real Estate Specialist