Tips for Buying or Selling Your Home in Oregon part 5

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Use these tips in any city or town in Oregon

LANDSCAPING CAN RAISE VALUE

If you want to get maximum value out of the home you buy, whether it’s brand new or used, make sure it’s properly landscaped. Good landscaping can enhance the appearance of  a new home in Pendleton and make it look “established.” It can compliment the architecture and provide a pleasant environment for outdoor living. Landscaping can also help create privacy and reduce noise. Landscaping can act as a windbreak and can also keep the home cooler in hot weather.

Good landscaping can often increase by 10 or 15 percent the price you can get when you sell the property in Pendleton.

But do remember that a good landscaping job can cost a lot of money. If you want a lot more than the minimum that builders usually provide, think about having the builder coordinate with a landscape architect to install it when you buy a home in Pendleton, add it to the cost of the home and then you can pay it off over the length of the mortgage rather than parting with a lot of cash at the outset. 

LIKE FOR LIKE EXCHANGE  

You own a rental property in Pendleton that has appreciated over double in value. Now, you want to buy another property in Pendleton that has about the same current value. Would it make more sense to sell the first property and then buy the second?

Not really unless you want to pay unneeded capital gains tax. It would be wiser to consider a tax-free swap. In this way, you would not have to pay any gains tax on the big profit you’ll make on the original property. In fact, you could keep the excess cash you receive over the deposit you’ll need for the second Pendleton property as a tax-free gift from Uncle Sam. A swap is a swap and not a sale.

You can only exchange like properties (like rental property for rental property) not an apartment house for a yacht or a private residence. Also, you must find a new property in Pendleton within 45 days and buy it within 180 days. Make sure you have professional real estate and legal help. An exchange is not for amateurs.

WHEN PARENTS HELP   

Some first-time Pendleton home buyers (actually 20 percent) are fortunate enough to buy their first homes in Pendleton with help from their parents. In these cases, parents typically provide half the down payment for would-be homeowners who otherwise would not have savings and incomes large enough to qualify for a mortgage.

Parents tend to make a gift rather than a loan in such cases because too much debt can count against prospective borrowers when qualifying for a Pendleton home loan. As long as the buyers ante up a fourth of the down payment, lenders don’t care if family generosity makes up the difference. However, they WILL ask for a gift letter, a simple document acknowledging that parents do not expect repayment.

On the other hand, if there is an actual LOAN being made from parent to child, it should be secured with the same sort of paperwork that a bank would use. That way, the interest repaid will be fully deductible as a home acquisition loan.

$500,000 TAX BREAK ON SALE 

QUESTION: What effect does the present tax law have on capital gains tax when I sell my home in Pendleton?

ANSWER: It has a tremendous effect and it could not be better for the Pendleton homeowner. The latest tax law now allows homeowners to avoid paying taxes on the first $500,000 of profits in a home for joint filers, or on the first $250,000 of profits for single filers at the time they sell the home.

To make matters even better, a homeowner can use this $500,000 tax exemption repeatedly, as long as he or she lives in each house for at least two years.

If you are one of the few whose profit is over $500,000, there’s more good news. The top tax rate on capital gains has dropped from 28 percent to 20 percent. For those in the lowest tax bracket, it falls from 15 percent to 10 percent. The new tax look is here and it is great for Pendleton home sellers. 

LOAN COMMITMENT RISKS 

Once you get a loan commitment, don’t take it for granted that you will get the loan. Since lenders take a risk when committing to a fixed-rate loan, they often put in conditions.

For example: a commitment can become null and void if the borrower fails to qualify, the appraisal falls short of the contract price, the loan isn’t closed before the commitment expires or a third party fails to provide necessary documents. To protect themselves against wide swings in interest rates, some lenders will insert a clause which releases them if rates change more than a certain amount. Often, fine print clauses allow the lender to back out should the original terms no longer be advantageous.

This is why it is extremely important that the buyer utilize the services of a real estate professional. Knowing what to look for, understanding the terminology and being able to explain every minor detail to clients is a valuable service Realtors can provide. 

FIRST-TIME BUYER 

Most first-time Pendleton home buyers are renters. As such, the best time to close on a home in Pendleton is when your current lease ends. Don’t sign another year-long lease if you expect to buy a home before the lease period expires. Doing so will end up with a dent in your pocketbook from writing rent and mortgage checks. If you can’t time your closing correctly, approach your landlord about a shorter lease – say, three to six months in length. One alternative is a month-to-month lease. You  may be able to ask your landlord to include an escape clause in your new lease that will allow you to get out of  your lease with 30 or 60 days’ notice.

Coming from a cramped rental, almost any home in Pendleotn will look good. Try to avoid jumping at the first house you see. Look at many to see what’s on the market. Inspect different types of homes in Pendleton including condos, duplexes, townhouses and single-family homes. Some objectivity should have returned. Now make your choice.

BEFORE YOU RENOVATE 

There are two truths about Pendleton home renovation: Every project costs more and takes longer than expected. So, before you start, keep your cost estimate high and remember the words, “Return on investment.” Whether you hire professionals or do the renovation yourself, be aware that your investment will not always result in dollar-for-dollar increase in the value of your Pendleton home. Although some homeowners do make a profit on their remodeling, history tells us that some Pendleton homeowners won’t even recover their costs.

Do your homework. Get estimates on the costs. Study the local real estate market to be sure you’re making improvements that Pendleton home buyers want and will pay for.

Don’t go overboard. Getting your money out of a house priced well above neighboring houses will be difficult. As a general rule, the value of the home AFTER renovation should not exceed the value of any house in your neighborhood by more than 20 percent.

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