Maybe having a mortgage is going out of fashion now that the affluent have taken over real estate? Or do we just need to Get Good Help with filing taxes? (30%-40% of Americans prepare their own taxes)
The mortgage-interest deduction, a beloved tax break bound tightly to the American dream of homeownership, once seemed politically invincible. Then it nearly vanished in middle-class neighborhoods across the country, and it appears that hardly anyone noticed.
In places like Plainfield, a southwestern outpost in the area known locally as Chicagoland, the housing market is humming. The people selling and buying homes do not seem to care much that President Trump’s signature tax overhaul effectively, although indirectly, vaporized a longtime source of government support for homeowners and housing prices.
The 2017 law nearly doubled the standard deduction — to $24,000 for a couple filing jointly — on federal income taxes, giving millions of households an incentive to stop claiming itemized deductions.
As a result, far fewer families — and, in particular, far fewer middle-class families — are claiming the itemized deduction for mortgage interest. In 2018, about one in five taxpayers claimed the deduction, Internal Revenue Service statistics show. This year, that number fell to less than one in 10. For families earning less than $100,000, the decline was even more stark.
The benefit, as it remains, is largely for high earners, and more limited than it once was: The 2017 law capped the maximum value of new mortgage debt eligible for the deduction at $750,000, down from $1 million. There has been no audible public outcry, prompting some people in Washington to propose scrapping the tax break entirely.
For decades, the mortgage-interest deduction has been alternately hailed as a linchpin of support for homeownership (by the real estate industry) and reviled as a symbol of tax policy gone awry (by economists). What pretty much everyone agreed on, though, was that it was politically untouchable.
Nearly 30 million tax filers wrote off a collective $273 billion in mortgage interest in 2018. Repealing the deduction, the conventional wisdom presumed, would effectively mean raising taxes on millions of middle-class families spread across every congressional district. And if anyone were tempted to try, an army of real estate brokers, home builders and developers — and their lobbyists — were ready to rush to the deduction’s defense.
Now, critics of the deduction feel emboldened.
“The rejoinder was always, ‘Oh, but you’d never be able to get rid of the mortgage-interest deduction,’ but I certainly wouldn’t say never now,” said William G. Gale, an economist at the Brookings Institution and a former adviser to President George H.W. Bush. “It used to be that this was a middle-class birthright or something like that, but it’s kind of hard to argue that when only 8 percent of households are taking the deduction.”
A combination of mine and Leonard’s lists of sweeteners:
In an increasingly competitive environment – especially on the high end – it may be wise to sweeten the package you are selling by including some value or time-savings item.
Some mega-homes include expensive fancy cars or artwork and other gimmicks, but of course those items are factored into the purchase price and often appear as somewhat desperate. Some may want to increase the commission incentive for the buyer’s agent.
It may be wiser to include certain items that are more focused on time-savings…..and something that may have practical value to make a buyer feel there is less to be spent after closing. Here are 10 ideas:
1. A buydown of the mortgage rate probably has the best financial impact – it can last for 30 years!
2. Pre-paid real estate taxes for the first year could be appealing, or paying HOA/Mello-Roos fees.
3. How about $5-10,000 worth of new landscaping, or window coverings?
4. One year’s worth of weekly yard maintenance would be appreciated.
5. $1,000 worth of Home Depot, Amazon, or UBER dollars could be appealing.
6. If a home has gorgeous views and big windows, include a year’s worth of window cleaning.
7. Offer to have the interior painted to colors of the buyer’s choice at closing.
8. Pay for a maid service to come weekly for a year.
9. If the house is staged, offer a price list of all the furnishings that could be bought. The buyer may see great time-savings value in not having to furnish themselves.
10. Lower the price!
These are just some simple ideas that may make your listing more memorable and more appealing to some buyers…..and possibly sweeten the deal enough to make them choose your listing over another one!
Earlier this week the grays were on their way out, but it may take a while. Can you believe that 34% are removing the bathtub? From Houzz:
Anticipating Aging Needs: The majority of baby boomers (ages 55 or older) are addressing current or future needs of aging household members during master bathroom renovations (56%). One-third of boomers are addressing current aging needs (35%), while nearly a quarter are planning ahead for future needs (21%).
Curbless Enthusiasm: Nearly half of boomers change the bathroom layout and one-third remove the bathtub (47% and 34%, respectively). Other upgrades include installing accessibility features such as seats, low curbs, grab bars and nonslip floors in upgraded showers and bathtubs.
The Suite Life: Homeowners are focusing on the master suite as a whole, with nearly half of master bathroom projects accompanied by master bedroom renovations (46%). Master bathrooms command the second-highest median spend ($7,000) in home remodels, behind kitchens ($11,000), while master bedroom spend rivals that of living rooms ($2,000 versus $3,000, respectively).
Premium Features Galore: A surprising one in 10 master bathrooms is the same size or larger than the master bedroom (11%). Beyond size, premium features in master bathrooms are on the rise, with dual showers, one-piece toilets, vessel sinks and built-in vanities showing significant increases in demand in the last three years.
Bathed in Gray: Gray palettes continue to lead in walls and flooring and are increasingly popular in cabinets. Newcomer styles continue to overtake contemporary style, with farmhouse more than doubling in popularity, from 3% in 2016 to 7% in 2018. Matte nickel and polished chrome are the most common metal finishes.
Kayla returned from Manhattan for the long Thanksgiving weekend, and we were talking about the sluggishness in New York City market, which has been going on for 2+ years. By now agents have learned that there’s no use fighting it – you have to learn to adapt.
It was in the year of her birth, 1991, when I experienced my first market slowdown. All I knew was that there wasn’t a buyer for miles, and with a newborn child, I need to hurry up and figure this out!
This is my third time around the block, so I offered her a few ideas.
First let’s acknowledge how it works in a seller’s market. Buyers find a house that is a good fit, and they buy it. Agents might offer up a strategy to get a discount, but for the most part, buyers pay the sellers’ price. It’s binary – it is yes or no, is this the right house? If it is, then pay the price.
Now it’s different, and if you can get a buyer to look at homes, their answer will be the same everywhere – ‘no’. Because they are looking for any reason not to buy – and every house has one – once they find it then it’s game over. But rather than just saying no to every house and never buying anything, let’s take it a step further.
At what price would you be a buyer?
Price will fix anything, and the price itself is usually the problem – it’s too high.
If the buyer would be interested at a lower price, then all you have to do is present a powerful case to the seller and listing agent to see if there is enough motivation to at least listen, and hopefully make a deal.
If you just make a lower offer without justification, I can already tell you what the answer will be: “No, and get off my lawn”.
To get something, you have to give a little. Here are ideas:
Make an clean offer with quick close date. These work best on vacant properties where sellers might be eating an extra payment.
Make an offer using older comps, and point out that the Case-Shiller pricing (or other) has retreated back where it was X months ago.
Make an offer based on the cost of the needed improvements, and include contractor quotes when possible.
In all cases, include a photo of the family and pets, and an introduction that explains the offer. Usually the listing agent will just forward the explanation right to the sellers, so it’s a way to have influence over the outcome. Without an introduction and explanation, the listing agent has to justify the low price himself, and he won’t try too hard and risk looking bad.
We need price discovery!
The only way to find out what the seller might take is to put an offer on the table. It may seem risky to be among the first to take the plunge, but by April/May we should see more people finding a way to make a deal. Those will probably be with the sellers who have been trying to sell for 90+ days, and are tired of the process. Let’s give it a shot!
Punky asked what’s in that “awesome I got everything going for me” house.
These thoughts are culled mostly from conversations with our buyers, personal observations, multiple bidding wars, with an emphasis on investment value and some anticipation of future trends:
1. Location – Because buyers are looking long-term, the flight to quality has never been so active. Buying the best location you can afford will never go out of style. Being in a great school district is smart, even if you don’t have kids.
2. Light and Bright – South-facing homes with ample windows that allow full sun are much preferred. You may have to provide shade in the summertime, but you’ll save on heating bills in winter and overall have a sunnier disposition than those who live in a cave. There will be more push towards solar panels at home, and they prefer a south-facing roof.
Sellers should do more to their properties today to get them sold.
Even those who were nicely updated with the golden Tuscan look or cherrywood floors and cabinets just a few years ago look dated today. Modern photography doesn’t hide it, and in some cases can make it look worse.
Do you remodel the whole joint?
Nobody wants to go too far, but there are modest improvements you can make to help the cause:
New flooring and paint.
New pulls and handles on cabinets.
New towels and towel racks.
New lighting – especially the LEDs.
New sod and landscaping.
Here are a couple of extreme examples but for anyone selling a house that is more than ten years old, your trees are probably overgrown and more of a distraction. The clean, crisp neutral look goes for the exteriors too:
"Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community... more "
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