Do You Need An Appraisal Contingency?Posted byTeam H&L Miami @Real Estate Empireon7/15/2018Once you have signed the purchase and sales agreement, the property will be appraised by a licensed
Oct 3 2017 37430 1
Selling & Buying Real Estate: How to Get the Most Out of the Deal
Are you shopping for a new home? How exciting! You and your realtor have probably been racing to get your offers in since in most locales it is a “seller’s market” with so many buyers to compete with for the properties on the market and historically low home inventory.
But if you are selling your current home so you can buy another one, the seller’s market may work in your favor on the sale side since property inventory is low and there are so many home buyers competing to buy their dream home. Even if you sell your home quickly here are a few tips as you begin your home buying and selling journey.
Try making your purchase offer contingent on you selling your old home – that may work if you can demonstrate to a seller that there’s a good chance your house will sell quickly. And be sure to get qualified with a mortgage company before you shop so that you have the financing in place and know how much house you can afford.
If you find the perfect new home and want to close on it before the old one sells, how do you bridge the financial gap? If your old house has plenty of equity, and you have enough income to pay two mortgages, you may take out a bridge loan, which is a short-term loan using your old home as collateral. That will give you the funds you need to close on the new house, and the bridge loan will be paid off when you sell the old home. Or you can borrow from family or friends who are well-heeled, if you have any in that fortunate position who are willing to help.
If you’re lucky enough to make that purchase happen, you may benefit from more tax deductions. You get a tax deduction for interest paid on your mortgage, but what about the bridge loan and the loan on the new residence that you buy while waiting for the old residence to sell? Good news. Interest on loans for the purchase or improvement of up to two residences is tax deductible, so it is likely that you can deduct the interest on both mortgages and the bridge loan. And property taxes are tax deductible on all properties that you own as well.
Capital gains on the sale of your home may also have tax consequences. Ordinarily you would owe tax on the difference between the net sales price and your cost basis, but most home sellers don’t owe tax — since 1987, homeowners have been able to exclude most or all of the gain when they sell.
The general rule is that if you sell your primary residence, you can exclude a gain of as much as $500,000 if you’re married and filing a joint return with your spouse, or $250,000 if you’re single or married filing separately. To be eligible for the full exclusion, you must have owned the home and lived in it as your principal residence for at least two of the five years prior to sale.
If you have to sell your home but you’ve owned it less than two years, all is not lost. You can claim a reduced exclusion if the sale occurred because of a change in your place of employment, health reasons or “unforeseen circumstances” such as divorce, multiple births or job loss. So if you’ve owned and lived in the home for just 18 months when you sell, not 24 months, then 18/24 or 75% of the $250,000 per person exclusion would apply.
Most taxpayers are fortunate enough not to owe taxes when they earn money on the sale of their principal residence, but what about selling at a loss? Unfortunately, you can’t claim a loss from the sale of your principal residence.
Don’t worry about knowing the tax laws related to this milestone in your life. TurboTax will ask you simple questions and give you the tax deductions and credits you are eligible for based on your answers.
Team H&L Miami @ Real Estate Empire Group is a fast growing boutique Real Estate firm established in 2001. It began to revolutionize property sales as well as marketing through brokers, agents, and an....