There are sites all over the web that offer to tell you what your home is worth. Simply plug in your address and email and you’ll get a value. It’s fast; it’s easy but is it accurate?
The value is determined by what is called an Automated Valuation Model (AVM) that analyzes public record data with computer decision logic. Square footage, age, number of bedrooms and location are easily definable objective data. The challenge is identifying, measuring and comparing the subjective data.
An AVM cannot identify how unique features might add or detract from the value, if the market is declining or why the comparable sales apply or don’t apply to the subject property. Is a home worth more because it is near shopping or less because it is across the street from a high-traffic commercially zoned property?
Experienced professionals are more likely to make proper adjustments for condition, market appeal and positive and negative influences.
Imagine that you’re going out for dinner and you consult HamburgerAVM.com to tell you how much a hamburger is worth. It might be accurate based on condiments, vegetables and weight but can it address things like taste, quality, cleanliness, service, convenience or atmosphere. You certainly couldn’t present the printout to the waiter to negotiate a lower price.
An AVM can be a tool that a homeowner, prospective buyer, mortgage officer, appraiser or real estate agent can use to get a quick idea of price but there are inherent limitations that can only be considered by personal examination balanced with experience in the market place.
Experience and understanding of the subject property and the marketplace are critical to having confidence that a value is accurate. Any person could go through the same steps to arrive at a value but an experienced, well-trained professional is far more likely to assess all of the variables more accurately.
There are many reasons people want a home with the most frequent responses being a place of their own, to raise their family, share with their friends and feel safe and secure. These are all strong motivations fueling the American Dream of owning your own home.
The motivation is so dominant that buyers are willing to make sacrifices to have their dream come true. According to the 2014 National Association of REALTORS® Home Buyers and Sellers Survey, 72% of first-time buyers cut spending on luxury or non-essential items. They also cut spending on entertainment, clothes and even cancelled vacation plans.
The value of getting their own home is more important than the immediate gratification of things that are considered less important. While qualifying guidelines were increased last year, there are still more buyers purchasing homes at near record-low mortgage rates.
Insurance is a way to hedge the risk of a possible loss on an asset that a person or entity cannot afford. The cost of the coverage is determined by risk and exposure to the insurer and reflected in the premium.
Another way to say it is: don’t buy insurance when you can afford the loss. If you have a mortgage on your home, you must have insurance. It is probably prudent for most people to have property insurance but certain coverage might be avoided because you can afford the loss if you were to have an occurrence.
- Call your current agent and review your insurance coverage. Ask if there are any available discounts whether your property qualifies for now or after certain improvements are made. Monitored alarm systems, dead bolts, smoke detectors, updated electrical, certain types and ages of roofs among other things may be eligible for individual discounts.
- Compare the newly revised coverage and premium with other reputable agencies and insurers. Shopping can be time consuming but experts agree that the exercise can be valuable and should be considered every few years.
- Deductibles are an easy way to affect the premium based on the initial amount of loss that the insured wants to assume. The higher the deductible, the lower the premium. Determine the amount of risk you want to assume and select an appropriate deductible.
- Consider bundling your home and auto policies for possible discounts and leverage for better service.
- Don’t become a co-insurer. Most policies stipulate that a building must be insured for at least a certain percentage, usually 80% of its insured value to be able to collect the full amount of a partial loss. Insured value is not always the same as market value. The land is not considered in the value but replacement cost of the dwelling is.
It isn’t possible to purchase insurance after a loss; it must be purchased before a loss is incurred. Premiums are based on careful analysis of insurer’s loss and overhead expense plus a profit. As a homeowner and an insured, it would be equally wise to analyze coverage, claim service, your risk tolerance and the premium you’ll pay for that coverage.
Even if you’re having a professional help you with your income tax return, you need to provide them with information on the money you spent that might be deductible. Look at the following list to see if any of these things need a little more investigation to determine if they apply to your situation.
- If you refinanced your home for the second or subsequent time in 2014, there may be points that can be taken as an interest charge.
- Compare mortgage interest, property taxes and other eligible itemized deductions to your standard deduction to see which will give you a larger deduction.
- If you’re paying mortgage insurance premiums with your payment, you may be eligible to deduct them.
- If you purchased a home in 2014, there may be some deductions found on the HUD-1 form you received at closing.
- If you purchased a home in 2014 and the seller paid points on your behalf in order to get a mortgage, you may be able to deduct them.
- If you purchased and installed in 2014 qualified residential energy efficiency property or improvements, you may be eligible for tax credits.
- If you have dedicated, exclusive space in your home for a home office, you may be eligible for a deduction that may include a pro-rata share of insurance, utilities and other things.
If you need another copy of your closing statement for the home you purchased or sold in 2014, contact your real estate professional.
Over 50% of homebuyers don’t shop to find the best interest rate for their mortgage. While a buyer would rarely purchase the first home they look at, they will accept the rate and terms offered by only one lender.
While the borrower and the property affect the rate and terms that a lender may offer, it is not to be said that all lenders will offer the same terms and rates to the same buyer. Credit score, home location, home price and loan amount, down payment, loan term, interest rate type and loan type all affect the interest rate but different lenders can interpret this information differently.
Shopping around to compare rate and terms for a mortgage is a reasonable exercise considering that a half percent lesser interest rate could not only lower the payment but the cumulative interest that is paid while that loan is outstanding.
Some borrowers don’t shop the mortgage because they are concerned that having their credit checked multiple times could adversely affect their credit score. The credit bureaus take this into consideration when several requests are made by the same category of lender in a short period of time.
Check to see the difference 0.5% could make in the mortgage you’re considering by using the calculator provided by Consumer Financial Protection Bureau. Contact your real estate professional for a list of trusted mortgage professionals to consider.
The 19th Annual Alaska Ski for Women ~ Sunday, February 1, 2015
The Alaska Ski for Women is ON! No matter the weather, we will be skiing!
Join in the fun at the colorful Alaska Ski for Women (ASFW) – North America’s largest women-only cross-country ski event. This is a great event where women of all ages and abilities come out to Nordic ski approximately 2.4 miles (4K), many in colorful costumes, while raising funds for local non-profit organizations that help stop the cycle of domestic abuse against women and children.
This is not only a FUN event, it’s also a FUNDRAISING event! Through the generous donations of ASFW participants, and the hard work of our all-volunteer committee, the race has been able to make an impact in the community by contributing over $1,000,000 to groups that actively work to improve women’s lives. A special focus is ending the cycle of violence against women and their families and to help women in crisis find positive solutions to a healthier life. See our beneficiaries page for the list of current fund recipients.
Please continue to give generously with the assurance that 100% of your donation is dedicated to improving the lives of women.
For additional information please visit: http://www.anchoragenordicski.com/ski_for_women.htm
A simple decision to rent your current home instead of selling it when moving to a new home could have far reaching consequences.
If you have a considerable gain, in a principal residence and you rent it for more than three years, it can lose the principal residence status and the profit must be recognized.
Section 121 provides the exclusion of capital gain on a principal residence if you own and use it as such for two out of the last five years. This would allow a temporary rental for up to three years before the exclusion is lost.
Let’s assume there is a $100,000 gain in your principal residence. If it qualifies for the exclusion, no tax would be owed. If the property had been converted to a rental so that it didn’t qualify any longer, the gain would be taxed at the current 20% long-term capital gains rate and it may incur a 3.8% surcharge for higher tax brackets. At least $20,000 in taxes could be avoided by selling it with the principal residence exclusion.
Depreciation, a tax benefit of income property, is determined by the improvement value at the time of purchase or at the conversion to a rental whichever is less. If the seller sold the home and took the exclusion and then, bought an identical home for the same price, he would be able to have 60% more cost recovery and avoid long term capital gains tax.
It is always recommended that homeowners considering such a conversion get advice from their tax professional as to how this will specifically affect their individual situation.