2012 Tax Tips for Homeowners

 Below are several common real estate tax tips that may be helpful to you. For more information about these tax incentives and to determine which ones you may qualify for, please consult with your tax advisor or join us at our Tax Seminar on February 8th.

• Mortgage interest. For most people, the biggest tax break from owning a home comes from deducting mortgage interest. Your lender will send you Form 1098 in January listing the mortgage interest you paid during the previous year. That is the amount you deduct on the Schedule A tax form. Be sure the 1098 includes any interest you paid from the date you closed on the home to the end of that month. This amount is listed on your settlement sheet for the home purchase. You can deduct it even if the lender does not include it on the Form 1098.

• Mortgage Points. When you buy a house, you may have had to pay "points" to the lender to obtain your mortgage or buy down your rate. This charge is usually expressed as a percentage of the loan amount. And, believe it or not, you may get to deduct the points even if the seller paid them for you as part of the deal. The deductible amount should also be shown on your 1098 form.

• Real-estate property taxes. You can also deduct the local property taxes you pay each year. In the year you purchase your residence, you likely reimbursed the seller for real estate taxes he or she had prepaid for time you actually owned the home. If so, that amount will be shown on your Hud-1 settlement sheet. Include this amount in your real-estate tax deduction. You can't deduct payments into your escrow account as real-estate taxes, as these deposits are simply money put aside to cover future tax payments. You can deduct only the actual real-estate tax payments made from the account by your lender.  
   

• Private mortgage insurance premiums. For mortgage loans with a down payment of less than 20% of a home's cost usually include a premium for private mortgage insurance (PMI), an extra fee that protects the lender if the borrower fails to repay the loan. PMI premiums can be deducted by home buyers. This write-off phases out as income increases above $50,000 on married filing separate returns and above $100,000 on all other returns.

• DC tax credit for first-time home buyers. First-time buyers of property in Washington, DC get a federal tax credit of up to $5,000. This tax incentive phases out as income rises between $70,000 and $90,000 on single returns and between $110,000 and $130,000 on joint returns.

• Home improvements. Save receipts and records for all improvements you make to your home, such as landscaping, storm windows, fences, a new energy-efficient furnace and any additions. When you sell your home, the cost of the improvements is added to the purchase price of your home to determine the cost basis in your home for tax purposes.

• Energy credits. Some energy-saving home improvements to your principal residence can earn you an additional tax break in the form of an energy tax credit. To learn more visit: www.energytaxincentives.org/

• Tax-free profit on sale. Another major benefit of owning a home is that the tax law allows you to shelter a large amount of profit from being taxed if certain conditions are met. If you are single and lived in the house for at least two of the five years before the sale, then up to $250,000 of profit is tax free. If you're married and file a joint return, up to $500,000 of the profit is tax free if you lived in the house as a primary home for two of the five years before the sale.

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The Ins and Outs of Short Sales

Buying Short Sales

In this current DC real esate market, one of the best options for many new homebuyers is purchasing a short sale home. But, what does short sale mean? A short sale is when a seller owes more than the market value of the home, and lenders have the opportunity to sell the property before the bank forecloses on the home rather than after. While buying short sales creates the opportunity for real estate investors to pay well-below-average housing prices for properties within ideal locations, there are still a few drawbacks.

If you're interested in buying short sales, here are a few things you need to be aware of:

Why Banks Short Sale Pre-Foreclosure Homes

The last thing a bank wants to do is own a property secured by the bank's loans. When a property owner is in default and owes more than what the home is currently worth, the bank will work with the seller to offer the property for less than they owe on the mortgage loan.

How much money will banks take off? When buying short sales, how much should I expect prices to fluctuate? On average, banks estimate that holding on to the property after foreclosure will cost up to 18 percent of the home value to complete the inspection, appraisals, repair and maintenance. Instead, it is a much easier and financially sound decision for banks to sell the home ôas isö to avoid any third-party inspection process.

Be Prepared and Patient When Buying a Short Sale

Buying short sales might seem like a good deal for the buyer, but that's not always the case. Here are three major conflicts buyers and sellers face when a short sale, pre-foreclosed home is on the market: 

• Time: Don't let the name fool you. Buying short sales takes a very long time. There's a whole gambit of scenarios of why a short sale might be delayed, but many of the hurdles buyers have to overcome have to deal with secondary financing on the homeowner's original mortgage, bank processing delays and private mortgage insurance policy breakdowns. Buying short sales is a very complex process, which can leave the short sell buyer in housing limbo for up to six months.

• Condition: Short sale homes often need additional maintenance and repairs. When the current property owner is unable to pay the mortgage on the home, more often than not the condition of the property diminishes over time. Additionally, short sale homebuyers should take into account that the property will have had more than one previous owner, which adds to the wear and tear.

• Lender Restrictions: Banks can renegotiate a short sale at the last second. If a new law passes, the market begins to change or the bank finds out more information about the property, they reserve the right to change the terms of the contract at any point in the process. Banks will also refuse to pay for extra services like seller closing costs or inspections. If you want something specific inspected on the property, you're probably going to pay for it yourself.

Short sale homes can be a great deal. It's true that buying short sales can be a very tricky process, but for the flexible and patient homebuyer, the short sale home can be the dream house they've been searching for.

Contact us today to learn more about short sales and to start your home search!

Browse DC Short Sales and Foreclosures

901 Monroe Street - Letters of Support

Friends of 901 Monroe Street,

We just wanted to provide everyone with an update from last night’s ANC 5A meeting.  Before a standing-room-only crowd, all 12 commissioners were in attendance and voted 6-5 (with 1 abstention) in favor of supporting the 901 Monroe Street project in its current design before the Zoning Commission.  It was a dramatic end to three hours of thoughtful and emotional discussion between residents, commissioners, and the development team.  We would like to extend our thanks to those of you who attended and spoke in support of the project as well as those who wrote letters/emails to your commissioners.   We are very happy with the outcome and look forward to the zoning hearing on January 19^th. 

WE NEED YOUR LETTERS OF SUPPORT!

We are making a big push to get letters of support into the Zoning Commission record by the end of the day on Friday January 6th, as the official record is typically printed for the Zoning Commission members 10 days in advance of the hearing.  Please contact us if you would like to help support the project by taking a few minutes to write a letter, and we can provide you with sample letters of support and assure that your letter gets delivered to the right people in time.

Please let us know if you have any questions.  Thanks again for your support!

Is Your Dream Home in the District Haunted?

Do you believe that houses can be haunted?  Do you believe you should know of the real or rumored past of your new home in the District?

This may seem just plain crazy, but what you aren’t told is an all-too-real aspect of buying a new home - unless it happens to you.  Because many jurisdictions, including the District, have in place what are known as “stigmatized property laws,” Realtors® aren't allowed to disclose whether or not a house is haunted. It's treated the same as discussing anything that may negatively impact a prospective buyer's view of a given neighborhood or property.

Some Realtors® are rigid adherents to the law; others believe that, with the permission of the seller, it's advisable to disclose everything about a property. As Washington real estate lawyer notes, “It goes with termites and leaky roofs...the more you disclose, the better. In fact, a ghost might turn out to be a good selling point.”

Regardless of your agent's opinion on the matter, the looming question remains: Are ghosts a serious issue in the Washington area? According to Bobbie Lescar, founder and director of the Virginia Ghosts and Hauntings Research Society, “Hauntings have picked up” recently. The organization receives 70-80 calls and emails each day. Her group will investigate and document empirical evidence, but they do not intervene; her volunteer staff usually conducts one full-scale investigation each month.

Lawana Holland, owner of the Washington, DC Ghost Hunting Page, notes that individuals should first look for natural causes, such as “an electrical problem or power lines,” at the root of what they believe is a haunting. She admits that sometimes, events do appear to be truly unnatural.

The founder of the Maryland Ghost and Spirit Association, Beverly Litsinger, says that “There are a lot of people who believe.” She also notes that, “People often make peace with ghosts...and just like you, they don't like to be ignored.”

What do you think about this?  Do you believe that houses can be haunted? Would you move into a home with that reputation?  Would you mind having a ghost as a roommate? Should you be warned?

Owning a home that's haunted – or even possibly haunted – can be an exciting undertaking. Are you planning to buy or sell a home in the DC area? The Menkiti Group is provides exemplary service, based on our core values of knowledge, team, community, and excellence. Contact the Menkiti Group today to discuss your real estate needs; based in Brookland, we are the premier real estate service company in the DC area.

The 203k Loan: Funds for Fixer-Uppers

The purchase of a house that needs repair is often a catch-22 situation, because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased.

HUD's 203(k) program provides the perfect solution, allowing you to purchase or refinance a property plus include in the loan the cost of making the repairs and improvements. The FHA insured 203(k) loan is provided through approved mortgage lenders nationwide to homeowners planning to occupy the property.

The down payment requirement for an owner-occupant (or a nonprofit organization or government agency) is approximately 3.5% of the acquisition and repair costs of the property.

Advantages of the 203k

The 203k loan takes much of the stress out of home renovations. One loan covers the entire process - even including an amount set aside in case of cost overruns.

• Perfect for fixer-uppers or foreclosure properties
• The loan closes BEFORE repairs begin
• The loan is based on the home's value AFTER improvements
• One closing with funds disbursed on a draw basis after dosing
• The loan amount can go as high as 110% of the "after-improved value"
• Repairs are completed within a specific time frame
• Built-in contingency reserve to protect from cost overruns for unforeseen repairs
• Borrower can finance up to 6 months of mortgage payments
• Streamline 203k loan offers even faster access to your funds & additional benefits!

A Wide Variety of Uses

• Remodel kitchen and baths
• Add a room, garage or a new level
• Make energy & structural improvements
• Tear down and rebuild (must leave part of foundation intact)
• Replace plumbing, roofing & more
• Add energy-efficient siding, windows & doors
• Eliminate health & safety hazards
• Paint interior & exterior
• Add major landscaping & site improvements
• Improve accessibility for people with disabilities

Contact us today for a list of recommended lenders who are offering the 203(k) Rehabilitation Program.