Wednesday, November 13, 2013

The Best Ways to Decrease your Real Estate Taxes

As federal, state, and municipal debt continues to increase at unprecedented rates, governing bodies are constantly exploring ways to generate more income to fund their expenditures.  Real Estate taxes are a large source of revenue generation.  Therefore, if there is a way to increase your taxes, a governing body will have no issues taking advantage of the opportunity.  The following are a few tips for how to decrease your real estate taxes.

1.  Consult / Retain an Attorney Who Practices Property Tax Law - Seek referrals from your trusted sources for the contact information of a property tax attorney.  The attorney will have the experience necessary to discover a strong argument and file a property tax appeal.  It is common for the attorney to charge a small fee upfront, as well as a percentage (22 – 50%) of the reduction if the appeal is successful.

2.  Pay your Property Taxes on Time – Be sure to pay your property taxes on time.  Some counties do not allow you to move forward with an appeal if your taxes are not paid by the due date.

3.  Identify your Appeal Dates – In order to appeal your taxes, you will need to file the necessary documentation by a specific deadline.  Appeal windows vary depending on state and county.  Know these dates so you do not miss the opportunity to file your appeal.

4.  Determine How Your Property is Assessed – Again, this is county and state specific.  Knowing how often your property is assessed and how long your news assessment stays in place is critical.  Reference your county’s tax portal or website to obtain clarification.

5.  Review the Assessor Record for your Property – Each county keeps a record on the characteristics of your property.  This record is public and contains the property type, use, age, building square footage, total square footage(land), bedrooms, bathrooms, etc.  Review the record for any errors.   If the information is incorrect, it could increase the assessor’s value.

6.  Find Comparable Properties – All property records in your county are public.  When determining whether you have an argument for an appeal, review the comparable properties located with a few miles of your property.  Look for properties with similar characteristics and compare the assessed values.  If there are discrepancies in assessed values, you will have enough evidence to file your appeal. 

7.   Take Advantage of Exemptions – Depending on the property’s use (primary residence, second home, investment property) and the county in which it is located you may be eligible for tax exemptions.  Know your states exemptions and take advantage of these savings.  For Illinois’s Cook County, the following are examples of the exemptions that they provide:  Homeowner, Senior Citizen, Senior Freeze, Home Improvement, Returning Veterans’, Disabled Veterans’, and Disabled Persons’.

It is in your best interest to know everything about your locality’s real estate tax code and the strategies you can take to make sure you are not over taxed.

Sunday, November 10, 2013

How Not to Lower the Value of Your Home

Since the housing collapse of 2008, many people have found themselves uncertain about what is in store for the housing market in the coming years.  Although the nation has seen some of the hardest hit cities begin to rebound in value, many people are still wary about whether they will be able to sell their homes let alone qualify for mortgage financing for their potential new home. 

These uncertainties have lead people to upgrade their homes in the hopes of some day finding a buyer, and also to make their extended stay bearable until the time is right to sell.  During the sub-prime years of lenient lending guidelines and Loan-to-Value ratios well above 100%, (with the help of home equity loans (HELOCS) of course) we saw people spending money on upgrades that proved worthless in the end.  Some additions and upgrades that are believed to increase the value of your home will actually add additional expenses, or make the home too unique to market to the masses.  The following is a list of tips for what not to do when upgrading your home.

Install Swimming Pools

Although this is an upgrade that is specific to people who have the space and zoning that allows for a swimming pool, the addition is an amenity that appeals to a small range of buyers.  Swimming pools are not only expensive to build, but are also expensive to maintain.  Take into consideration your location, the demographic of your area, and the average income of the potential buyers before deciding to move forward.

Add a Hot Tubs, Whirlpools, and Saunas

Hot tubs, whirlpools, and saunas are common expensive additions that many think are going to be useful and will add value to their homes.  Just like swimming pools, these amenities are thought to be valuable until about 5 months after they are installed.  They require costly maintenance and will lose their appeal with time.

 Create Larger Common Areas by Eliminating Bedrooms

If you need more space, do not take down a wall that makes a legal bedroom.  Home appraisals are based on many variables, and the amount of bedrooms is critical to the value of the property.  If you need more space, convert the bedroom, (without tearing down the wall) into a den so that it will still be considered a bedroom at the time of sale. 

Mix High End with Run of the Mill

You have probably all seen this before, a home with high end appliances (Sub Zero, Wolf, Bosch, etc.) and low end, run-of-the-mill cabinets from Home Depot.  A savvy home buyer will know the difference between custom cabinets and cabinets that were pre-sized and fabricated.  With that being said, keep the quality of your fixtures and appliances consistent.  Something high end will only make the cheap stuff look even worse.

Include Extravagant Lighting Fixtures

Remember, the goal is to sell your home eventually.  If extravagant lighting is your forte, it will probably only be liked by a limited or select number of potential buyers.  Keep it basic: make upgrades, but focus on appealing to the masses to assure the upgrades are timeless.

Select Uncommon Colors and D├ęcor

Stick to neutral colors: do not go overboard with bright colors or busy wallpaper.  To sell the house, you will most likely have to repaint these walls in neutral colors and remove the wallpaper.  If you chose not to do so, it will show in the listing photos and defer potential buyers before they even see the property in person.

You have stuck it out this long in a home that you probably thought you were going to sell in 5 years, so do not decrease your chances of finding a buyer when the time is right.  Think long and hard about the upgrades you want to make and be sure they will be favorable to the largest pool of potential buyers to avoid lowering the value of your home. 

Thursday, November 7, 2013

Submitting a Cash Offer with Financing

When submitting an offer to buy any type of Real Estate, an all cash offer shows the seller that they are entertaining a serious bidder.  In submitting a cash offer, the bidder demonstrates that they are willing to forfeit the earnest money (deposit) if they are unable to close the deal by the date provided in the contract.  With the earnest money at stake, this eliminates some of the uncertainties in the early stages of the transaction.  As of July 2013, 40% of the residential deals that closed were all cash offers according to Realty Trac.  If you are a buyer looking to finance your purchase, there is a strategy that you can take to insure that you are competitive in the bidding process.  The strategy does come with risk, but will show that you are serious about closing the deal.

It is common for residential real estate contracts to contain a financing contingency.  This contingency provides the seller with a date that a buyer must submit a mortgage or financing commitment by.  For uniform residential real estate contracts, the common period given to submit a commitment is 30 days.  If a commitment is not obtained from the lender by the date provided, the earnest money is refunded and the contract is deemed void.  By removing the financing contingency, it will demonstrates that you are willing to forfeit your earnest money if you cannot close by the date set forth in the contract.  For a qualified buyer this does still entail minor risk, but if done properly it will aid in the validity of your offer and potentially result in a successful acquisition.

Timing and due diligence are critical to successfully close on an all cash deal with financing.  First, you need to assemble your team of experts.  Find a seasoned real estate agent, mortgage broker and attorney who are willing to work closely together.  Inform them of your objective and make sure they have no reservations.  All will need to be harmonious, punctual and efficient to get deal the done.  Provide your mortgage broker will all the documentation needed for underwriting and have them provide a pre approval with the maximum mortgage amount that you qualify.  Make sure they take all the necessary steps to insure that you have zero issues with obtaining a mortgage.  Next, indentify a property and do your own research and investigation to discover any obvious problems.  Your real estate broker and attorney will aid in this due diligence.  Finally, discuss with your team how quickly they believe the deal can get done and set a reasonable closing date.  Although you have planned strategically to submit this offer, still allow some extra time for possible complications.  All the above steps will not guarantee that the offer is accepted, but will remove the uncertainty of the offer being contingent on financing.