Get The Answers To Selling Your Home
There are many factors that determine the value of your home under current market conditions. The home itself is only a part of the puzzle. Let us take you through each factor to help clarify the process we use to establish your home's value.
Location
Where your home is located, may be the single most important factor when determining the value of your home.
Condition
The condition of your home affects the price and how quickly it will sell. The appearance both inside and out can bolster the buyer's perception. Since emotion plays a large part in buying a home, the buyer's first look is important!
Price
Establishing the correct price for a home will help insure a quick sale for your home. A Comparative Market Analysis will enable you to decide the optimum price for your home. (See Comparative Market Analysis explanation.)
Competition
Buyers will evaluate your home against others they deem comparable. Properties currently for sale and properties that have recently sold will have the greatest impact on the market value of your home.
The Market
The real estate market is always changing and these changes may affect property values. Knowing that is is difficult to forecast the market, a flexible marketing plan will help prepare you and your home for sale.
A Comparative Market Analysis is prepared, in advance of placing a home on the market, to help determine its Fair Market Value under current market conditions. The analysis compares the prices of recently sold homes that are similar to your home in terms of location, style and amenities. The analysis uses the most current and reliable information from the IRES/Multiple Listing Service (MLS), real estate firms, and title companies.
The Fair Market Value is defined as the most probable price that can be obtained for a property sold at a particular point in time, under normal market conditions, on the open market.
Comparable properties that are currently for sale or that have recently sold are included in the analysis. They provide a base line from which to begin the comparison. Other factors considered in the comparison are square footage, location, amenities, age of the home, the physical condition of the home, and the effects of any existing financing on the home. These properties help define current market conditions.
The price your home ultimately sells for will be greatly influenced by your motivation for selling, the motivation of the buyer, and market conditions at the time offers are received. Remember that a Comparative Market Analysis is just an estimation and the price could vary up or down based on those motivations and any fluctuations in the overall market.
Preparing Your Home For Sale
By Maximizing First Impressions!
Selling Faster & For More Money
Exterior and Curb Appeal
Experts say most buyers make their decision at first sight.
Repairs
The rule of thumb is, if something needs repair, fix it! There are probably many things in your home that you have simply become used to over time—things that you have been promising yourself that you will attend to. Well, now is the time. The buyer will mentally add up the cost of repairing all those minor flaws and end up with an amount that is generally much higher than what it would cost you to do the repairs.
You might be saying to yourself, "These repairs aren't any big deal." but the buyer is thinking, "If the owners didn't care for these little items, then what about the roof and the furnace?" Needed small repairs and perceived owner neglect will either lower the purchase price or lengthen the time required to sell.
Check all walls for peeling paint and loose wall paper.
Large repairs: In today's climate of open disclosure and vigilant professional home inspections, the rule is "Treat a buyer as you would yourself." Repair any problems with major systems or offer an allowance for the buyer to make repairs after closing. Always disclose anything that you know about the property. Having been a consumer yourself, you know that buyers will more readily make a purchase decision with someone who they can trust.
General Exterior
Prospective buyers will react well to signs your home has been meticulously maintained.
Manicure landscaping: mow, edge and water lawn, trim hedges, weed and fertilize flowerbeds, and prune trees.
Keep driveway clean and free of parked cars, and keep the garage door closed.
Repair or replace loose or damaged roof shingles.
Minimize cracks or crumbling on walkways, walls, or steps, and keep them clean and free of obstructions like toys or snow.
Items from RV's to waste cans left out can contribute to a cluttered or busy appearance. Make sure that from the street, your property appears clear.
Inspect appearance of interior window coverings from the curb.
Repair any peeling paint or loose caulking on windows or other areas.
Take steps to eliminate insect or rodent pests.
Pick up after your pets and neighborhood animals.
Doorway
While agents work the lockbox for a key, buyers have idle time to notice details.
Apply a fresh coat of paint to the front door.
Consider adding pots of flowering plants in the entryway if weather permits.
Eliminate cobwebs and groom doorway area windows, porch lights or decorative glass.
Interior Appeal
Once inside, experts say most buyers are reaffirming their curbside decision.
Clean, Clear, Light and Bright
Give every room in the house a thorough cleaning and remove all clutter. Hiring a cleaning service may pay for itself by adding to a buyer's perceived value of your home.
For a sleeker, more spacious look, consider placing furniture from crowded rooms in storage.
Clear kitchen counters of everything other than perhaps a few pretty items. Ask yourself: In a model home, would a professional decorator put your choice of items out on the counter?
Remember, closets will be opened! Keep closets, cupboards, and even your attic orderly and neat. Since you're anticipating a move anyway, consider holding a garage sale or boxing and storing unused belongings.
If necessary, repaint or clean/replace dingy, soiled or strongly colored walls, and window and floor coverings with a light, neutral shade. Bright rooms look bigger, and neutral colors help buyers envision their own furnishings and decor.
Repair dripping faucets, burned out light bulbs, or cracked windowpanes.
Repair cracks, holes or damage to plaster, wallboard, wallpaper and tiles.
Clean all windows, inside and out. This helps make the house sparkle.
Clean all wall-to-wall carpeting and area rugs. Clean and polish linoleum, tile and wooden floors.
Clean and polish all woodwork if necessary. Pay particular attention to the kitchen and bath cabinets.
Clean and polish all light fixtures.
Warm and Homey
Subtle scents of potpourri in bedrooms or baths and fresh baked cookies or cinnamon in the kitchen can make your home more inviting.
Keep an attractive set of towels in each bathroom to be brought out only for showings.
Neutralizing
Forget your personal taste...the "market" is always demand driven! The average buyer will have a hard time looking beyond blue carpeting and bold wallpaper. Consider replacing unusual or bold colors with neutral tones. Two coats of white paint may be the best investment you ever made.
Arrange furniture to give the rooms as spacious a feeling as possible. Consider removing furniture from rooms that are crowded. If necessary, store large items.
Pack up collectibles...both to protect them, and to give the room a more spacious feel. Leave just enough accessories to give the home a personal touch. Dispose of unneeded items.
Remove all clutter and make it a habit to pick up clothing, shoes, and personal possessions each day for possible showings.
Empty closets of off-season clothing and pack for the move. Organize them to demonstrate the most efficient use of space. Leave as few items on the floor or shelves as possible.
Atmosphere
When placing yourself in the potential buyer's shoes, you will want to consider the overall atmosphere of your home. Keep in mind your sense of smell as you go through the check list. Create the atmosphere of your home as a shelter, a place that is safe and warm, and in good condition.
A clean smelling house creates a positive image in the buyer's mind. Be aware of any odors from cooking, cigarettes, pets, etc., that may have adverse effects on potential buyers. Remember that some people are much more sensitive to odors than others. Smokers rarely notice the odor of tobacco that fills their homes, and pet owners may be oblivious to objectionable doggy odor.
You can use products like carpet deodorizers, air fresheners, and room deodorizers; but the best strategy is to remove the source of the smell rather than cover it up.
Unfortunately, often the only way to remove the smell of pet urine from flooring is to rip up the carpeting and padding and replace them. If this is preventing the sale of your home, don't hesitate to make this investment.
If smoking and cooking odors have permeated your home, have your carpets and furniture cleaned, and air out or dry-clean your drapes.
Mildew odors are another no-no. Don't allow wet towels to accumulate in hampers or dirty laundry to pile up in closets.
Once offensive odors are removed, consider adding delightful ones. Recent studies have shown that humans have strong, positive responses to certain smells. Cinnamon, fresh flowers, breads baking in the oven are all excellent ways to enhance your property for sale.
Staging
This part of preparing your home for sale is the most fun and involves the use of color, lighting, and accessories to emphasize the best features of your home.
Study magazine ads or furniture showrooms to see how small details can make rooms more attractive and appealing. The effect of a vase of flowers, and open book on the coffee table, a basket of birch logs by the fireplace, etc., can make the difference in a room.
The use of a brightly colored pillow in a wing chair or a throw blanket on a couch can add dimension to a sterile room.
Soften potentially offending views, but always let light into your rooms. Replace heavy curtains with sheer white panels. Never apologize for things you cannot change. The buyer will either decide to accept or reject the property regardless of the words you say. Just present the home in the best way possible with complete honesty.
Go through your photo albums and select pictures of your house and yard during all seasons. If hung at eye level in a well-lighted area, the pictures will speak for themselves and give you yet another selling edge.
Take advantage of natural light as much as possible by cleaning windows, opening shades and drapes, etc. Add lamps and lighting where necessary. Be sure that all fixtures are clean and have functioning bulbs.
The Exterior
Check your home for any needed maintenance just as a buyer would. Repaint or touch up as necessary. You can't make a better investment when you are selling your house! Don't let the outside turn buyers off before the inside turns them on.
Color has the power to attract. A tub of geraniums, a pot of petunias, or a basket of impatiens on the front steps is a welcoming touch.
If you are selling during the winter months, consider using a wreath of dried flowers on the front door.
If you have a porch or deck, set the stage with pots of flowers and attractively arranged furniture.
Check to see that all doors and windows are in good working order. Give special attention to your home's exterior doors and front entry. Clean and paint doors if necessary. Remember, first impressions are likely to color the remainder of the house tour.
Wash all windows and replace any broken or cracked window panes.
Screens should be free of any tears or holes.
Inspect all locks to ensure that they are functioning properly.
Check for loose or missing shingles.
Invest in a new doormat that says "Welcome."
The Yard
Make sure the yard is neatly mowed, raked and edged.
Prune and shape shrubbery and trees to compliment your house.
Consider adding seasonal flowers along the walks or in the planting areas. Plop the plants into a well-placed wheelbarrow, and old-fashioned washtub, or what have you. Such standbys as nasturtiums, petunias, impatiens, and verbena are easy to maintain if you only remember to water them regularly. Try a row of sweet smelling alyssum to line a short sidewalk or pop in some perky dwarf marigolds to form a cheerful oasis of color in your yard.
It is important to devote at least one area of your yard to outdoor living. Buyers will still recognize a scene set with picnic table and chairs and respond positively to it. Cover your picnic table with a fringed, red-and-white checked cloth, set out some plastic plates and glasses, bring out the barbecuing equipment, and buyers will almost smell the hot dogs cooking!
The Driveway
The driveway is no place for children's toys. Not only are such things dangerous, but the clutter is unsightly.
The surface of your driveway should be beyond reproach; after all, it's one of the first things a buyer will see when they drive up. Sweep and wash the driveway and walks to remove debris, dirt and stains. Repair and patch any cracks, edge the sides and pull up any weeds.
Room By Room Analysis
The Front Entry
Whether a gracious proportioned center-hall or a small space just large enough for a coat rack and a tiny table, this part of your home deserves your particular attention.
Study your entry hall and ask yourself what kind of impression it makes of your home. Dried flowers or a small plant can make a striking focal point on a hall table any time of the year.
Virtually any entry hall will benefit from a well-placed mirror to enlarge the area.
Your entry hall's flooring will be observed carefully by the prospective buyer. Make sure the surface is spotless and add a small rug to protect the area during showings.
The entry hall closet is the first one inspected. Make it appear roomy. Add a few extra hangers. Hang a bag of cedar chips or a pomander ball to give a pleasant, fresh scent. Remove all off-season clothing.
The Living Areas
Think of these areas as if they were furniture showrooms. Your job is to make each room generate a positive response. Add touches that make a room look truly inviting.
Sweep and clean the fireplace. Place a few logs on the grate to create an attractive appearance. You are welcome to have a fire going for showings during the winter months...it creates a great atmosphere.
Place something colorful on the mantle, but don't make it look like a country craft store.
Improve the traffic flow by removing excess furniture. Have easy traffic flow patterns. Be sure that all doors open fully and easily.
Draw attention to exposed beams or a cathedral ceiling with special lighting. Be sure to remove any cobwebs and dust.
Remove oversized television sets if they dominate the room. If necessary, substitute with a smaller one until you move.
The Dining Room
Avoid going overboard. To be effective, any stage setting that you create should reflect the character of your entire home appropriately.
Set the scene by setting the table with an attractive arrangement. Add fresh or silk flowers as a centerpiece.
Visually enlarge a small dining area. If your dining table has extra leaves, take one or two out. consider placing your dining table against the wall. Remove any extra "company" chairs. Consider putting oversized pieces in storage until you house is sold.
The Kitchen
Pay particular attention to your kitchen. This room continues to be the "heart of the home." A pleasant, working kitchen is near the top of most buyers' list of priorities and is a room that buyers always scrutinize closely.
Avoid clutter! Clean counters of small appliances and store whenever possible to maximize the appearance of work space.
Check the counter top around your sink, and remove any detergent or cleanser, etc., that may be cluttering the area.
Sinks, cabinets, and counter tops should be clean and fresh.
All appliances should be absolutely clean, bright, sparkling and shiny!
Clean off the top of the refrigerator! If you must use that space for storage, use baskets and bowls to camouflage the items kept there.
Set the scene with an open cookbook, a basket filled with fruit, a basket of flowers, or a ceramic mixing bowl and wire whisk.
Create the aromas associated with happy homes! Bake some cookies from premixed, refrigerated cookie dough, start baking a loaf of refrigerated bread dough, or pop a frozen apple pie in the oven.
In the heat of summer, place a bowl of lemons or limes on the counter to provide a fresh and pleasant aroma.
Clean and organize all storage space. If your cabinets, drawers, and closets are crowded and overflowing, buyers assume that your storage space is inadequate. Give away items you don't use, storing seldom-used items elsewhere, and reorganize the shelves. Neat, organized shelves and drawers look larger and more adequate for prospective buyer's needs.
Large, cheerful kitchen windows are an advantage and should be highlighted as a special feature of your home. Take a critical look at the window treatment...is it clean, sharp and up-to-date? Do the curtains need washing or the blinds need cleaning? Would the window area look better without any window treatment?
If you have a counter top eating area, set two attractive place settings with coordinating napkins and placemats, and place cushions on the stools.
Set the table for an informal meal with bright placemats and a generous bowl of fruit as a centerpiece.
Laundry Room
A separate laundry room is a true asset and is one of the most frequent requests that buyers make during a home search. Don't hide this treasure behind closed doors. Spruce up the room and open the door proudly for inspection.
Add a fresh coat of paint or put up a cheerful wallpaper.
Organize all closets and storage space.
Remove all dirty laundry. Keep current with your laundry or store all dirty laundry in a closed container (maybe even hermetically sealed and welded shut).
Clean and polish the washer and dryer.
Consider adding an attractive, coordinated throw rug.
Stairways
Stairways should provide an attractive transition from one level of your home to another.
Make certain the stairs are safe! Stair lighting should be more than adequate, stairs must be clutter free, stair railings tight and secure, and runners or carpeting tacked securely. Remove any items from the surface of the stairs and store elsewhere. Check the condition of the walls, and paint or re-wallpaper if necessary.
If the stairs are a focal point of the main living areas, carefully choose accents to improve the visual appeal. If you have a wide, gracious staircase, emphasize this feature by hanging a few pictures along the wall. Draw attention to a handsome lighting fixture by polishing the brass and dusting each small light bulb or crystal prism.
Bedrooms
Imagine for a moment that you're in the "bed-and-breakfast" business. How would you change your home's bedrooms to appeal to a paying lodger? Naturally, you'd make up the beds with your prettiest sheets and comforters. Maybe you'd add a vase of flowers on the dressing table or a cozy armchair in the corner. Every bedroom in you home should invite prospective buyers to settle right in.
Large master bedrooms are particularly popular among today's home buyers. Make your bedroom larger. Paint the room a light color, remove one of the bureaus if the room is crowded, and minimize clutter to maximize spaciousness. Aim for a restful, subdued look.
A private bathroom off the master bedroom is a real sales plus. Decorate to coordinate with the color scheme of your bedroom, creating the "suite" effect.
Virtually all buyers are looking for a house with plenty of closet space. Try to make what you have appear generous and well planned. Remove and store all out of season clothing. Remove any items from the floor area. This will make a closet seem more spacious. Arrange all shelves to maximize the use of space.
Make sure all articles in the closet are fresh and clean smelling. When prospective buyers open your closet door, they should be greeted with a whiff of fresh smelling air.
Make sure all closet lights have adequate wattage and are operating. Add battery operated lights to those closets that lack them. Lighted closets look bigger, are more attractive, and allow buyers to inspect the interiors easily.
Take time to explain the importance of marketing to your children. Encourage them to participate in preparing your home for showing, particularly the principle of appealing to the widest possible market segment. Ask you children's cooperation in making their beds and picking up their rooms prior to showings. Consider promising a special reward if they willingly participate in your house selling goals.
Have them pack up any items that are not currently in use and dispose of unused possessions.
Remove any crowded, unusual, or personal wall hangings such as posters and store them until your home is sold.
Bathrooms
Wise sellers take special pains with preparing their bathrooms for scrutiny by strangers. The bathroom is a room after all, and a very personal one. Prospects will inspect yours carefully, so be sure it is immaculate. Cleanliness is the key! Make sure that all surfaces are spotless.
Replace worn or dirty shower curtains, clean and repair caulking, and remove non-skid bath decals that are in poor condition.
Clear off countertops and store all personal care products out of sight.
Repair any faucets that leak or do not function properly. Clean off mineral deposits with vinegar or commercial products.
Clean and organize all cabinets and drawers. Don't forget the medicine cabinet: dispose of old prescriptions, and polish the shelves. The same goes for the storage cabinet under the sink.
Remember to appeal to a wide range of buyers. Play down dominant colors with contrasting neutral colored towels and accessories. If your bathroom is mostly white or neutral, add a few cheerful accents of color: use towels in the popular new shades. Don't hesitate to buy a few new towels and a rug...you'll be taking them with you to your new home.
Scrub and wax an old floor. Cover the largest area you can with a freshly washed scatter rug.
Decorate and personalize to create a pleasing, individual look. Consider bringing out your best towels and perfumed guest soaps. Add a plant for color and freshness.
A gentle hint of fragrance in the air is fine, but keep it subtle.
Garage
Sweep and wash the floor to remove dirt and stains. Organize tools, garden equipment, bicycles, etc. A clean, organized garage appears larger.
If the area is dark, add more light. If it is small and accommodates only one car, remove your car before buyers visit. An empty garage always looks larger. If you have a two car garage with very little extra room, remove one of your cars so that buyers can make their inspection in comfort.
Get rid of anything that you don't plan to move to your new home. Place remaining stored material neatly in boxes, and position away from walls.
Seller's Property Disclosure
| Q: | Whose obligation is it to disclose pertinent information about a property? |
| A: | Obligations
to disclose information about a property vary from state to state.
Under the strictest laws, the seller and the seller's broker, if there is one, are required to disclose all facts materially affecting the value or desirability of the property which are known or accessible only to him. Items sellers often disclose include: homeowners association dues; whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice, such as a dog that barks every night or poor TV reception; any death within three years on the property and any restrictions on the use of the property, such as zoning ordinances or association rules. |
| Q: | How do I get the real scoop on homes I am looking at? |
| A: | Home
inspections, seller disclosure requirements and the agent's experience
will help. Disclosure laws vary by state, but in some states, the law
requires the seller to complete a real estate transfer disclosure
statement. Here is a summary of the things you could expect to see in a
disclosure form:
* In the kitchen -- a range, oven, microwave, dishwasher, garbage
disposal, trash compactor. Sellers also are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems. The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property. Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides. People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions. It's important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown significantly to accommodate increased demand from cautious buyers. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you. |
Lead-Based Paint Disclosure
Square Footage Disclosure
This disclosure is made to Buyer and Seller pursuant to the requirements of Colorado Real Estate Commission Rule E-41 and applies to improved residential real estate. In essence this disclosure indicates if the listing Licensee has or has not measured the square footage of the residence according to the standard measurement methodology: a.) Exterior measurement, b.) FHA, c.) ANSI, d.) Local standard or e.) Other. And if the listing Licensee is or is not providing square footage information; what source did the information come from: a.) Prior appraisal, b.) Building plans, c.) Assessor's office and d.) Other.
Measurement is for the purpose of marketing, and may not be exact and is not for loan, valuation or other purposes.
| Q: | Do sellers have to disclose the terms of other offers? |
| A: | According to experts, sellers do not have to disclose other offers |
| Q: | Should I add on or buy a bigger home? |
| A: | Consider
these questions before making a choice between adding on to an existing
home or moving up in the market to a bigger house: * How much money is available, either from cash reserves or through a home improvement loan, to remodel the current house? * How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level? * What do local zoning and building ordinances permit? * How much equity already exists in the property? * Are there affordable properties for sale that would satisfy housing needs? Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value. |
| Q: | What are some tips on negotiation? |
| A: | The more you
know about a seller's motivation, the stronger a negotiating position
you are in. For example, seller who must move quickly due to a job
transfer may be amenable to a lower price with a speedy escrow. Other
so-called "motivated sellers" include people going through a divorce or
who have already purchased another home.
Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up. Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all. |
| Q: | How long do bankruptcies and foreclosures stay on a credit report? |
| A: | Bankruptcies
and foreclosures can remain on a credit report for seven to 10 years.
Some lenders will consider a borrower earlier if they have reestablished good credit. The circumstances surrounding the bankruptcy can also influence a lender's decision. For example, if you went through a bankruptcy because your employer had financial difficulties, a lender may be more sympathetic. If, however, you went through bankruptcy because you overextended personal credit lines and lived beyond your means, the lender probably will be less inclined to be flexible. |
| Q: | What do all of those real estate acronyms in the ads mean? |
| A: | If you find
yourself stumbling over weird acronyms in a real estate listing, don't
be alarmed. There is method to the madness of this shorthand (which is
mostly adopted by sellers to save money in advertising charges). Here
are some abbreviations and the meaning of each, taken from a recent
newspaper classified section:
* assum. fin. -- assumable financing |
| Q: | What contingencies should be put in an offer? |
| A: | Most offers
include two standard contingencies: a financing contingency, which makes
the sale dependent on the buyers' ability to obtain a loan commitment
from a lender, and an inspection contingency, which allows buyers to
have professionals inspect the property to their satisfaction.
A buyer could forfeit his or her deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. The purchase contract must include the seller's responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property. |
| Q: | Where do I get information about closing costs? |
| A: | For more on closing costs, ask for the "Consumer's Guide to Mortgage Settlement Costs," Federal Reserve Bank of San Francisco, Public Information Department, P.O. Box 7702, San Francisco, CA 94120 or call (415) 974-2163. |
| Q: | Are taxes on second homes deductible? |
| A: | Interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics. |
| Q: | What home-buying costs are deductible? |
| A: | Any points
you or the seller pay for your home loan are deductible for that year.
Property taxes and interest are deductible every year.
But while other home-buying costs (closing costs in particular) are not immediately tax-deductible, they can be figured into the adjusted cost basis of your home when you go to sell (any significant home improvements also can be calculated into your basis). These fees would include title insurance, loan-application fee, credit report, appraisal fee, service fee, settlement or closing fees, bank attorney's fee, attorney's fee, document preparation fee and recording fees. |
| Q: | Are seller-paid points deductible? |
| A: | As of Jan. 1, 1991, homeowners have been able to deduct points paid by the seller. This deduction previously was reserved only for points actually paid by the buyer. |
| Q: | What are the rules on capital gains when inheriting a house? |
| A: | When
children inherit a home, the Internal Revenue Service determines their
basis in the property on the date of the person's death. The cost basis
is not the amount the owner originally paid for the house. It is the
property's fair market value on the date of the mother's death, says
Pamela MacLean, assistant public affairs officer with the IRS.
Cost basis is a tax term for the dollar amount assigned to a property at the time it is acquired, for the purpose of determining gain or loss when it is sold. Assume the property was divided up equally. If one of the three siblings sold her share, she must pay capital gains tax for whatever profit she made over one-third of the new basis, MacLean said. Other tax consequences include estate taxes. However, the estate must total $600,000 or more before tax issues become a concern. The IRS allow residents to pass on property, cash and other assets worth up to a total of $600,000 before charging the heirs any taxes, according to MacLean. Regarding the transfer of ownership, quit claim deeds often are used between family members in situations such as this when an heir is buying out the other. All parties must be agreeable to dropping a name from the title. Other resources: IRS Publication 448, "Federal Estate and Gift Taxes." Order by calling 1-800-TAX-FORM. |
| Q: | Can I deduct the loss I suffered when I sold my home? |
| A: | The IRS allows no deductions for losses on the sale of your own home. There's no way to use a loss to your advantage on your income tax return. It won't matter what type of misfortune you may have run into, write Edith Lank and Miriam Geisman in Your Home as a Tax Shelter, Dearborn Financial Publishing, Chicago; 1993. |
| Q: | Where do I get information on IRS publications? |
| A: | The Internal
Revenue Service publishes a number of real estate publications. They are
listed by number: * 521 "Moving Expenses" * 523 "Selling Your Home" * 527 "Residential Rental Property" * 534 "Depreciation" * 541 "Tax Information on Partnerships" * 551 "Basis of Assets" * 555 "Federal Tax Information on Community Property" * 561 "Determining the Value of Donated Property" * 590 "Individual Retirement Arrangements" * 908 "Bankruptcy and Other Debt Cancellation" * 936 "Home Mortgage Interest Deduction" Order by calling 1-800-TAX-FORM. |
Copyright 1999 Inman News Features