Dallas Appraiser L.L.C. wants your help and commentary on our Real Estate Blog

Title: 

Estate Tax:  What It Is And How It Is Filed

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584

Summary:

According to the Internal Revenue Service (IRS), an Estate Tax is a tax that is imposed on your right to transfer your property and belongings after your death. The individual who is in charge of handing and filing an Estate Tax return is often the estate representative. An estate representative can be a family attorney or a family member who was declared the executor of an estate in a will. When dealing with an Estate Tax, there are number of things that an individual or fam...

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Article Body:

According to the Internal Revenue Service (IRS), an Estate Tax is a tax that is imposed on your right to transfer your property and belongings after your death. The individual who is in charge of handing and filing an Estate Tax return is often the estate representative. An estate representative can be a family attorney or a family member who was declared the executor of an estate in a will. When dealing with an Estate Tax, there are number of things that an individual or family must do when preparing to deal with the Internal Revenue Service (IRS).

There are certain restrictions for estates that are subject to the Estate Tax. Each year tax laws are updated or completely changed; therefore, estate representatives or family members are encouraged to review the new Estate Tax laws. At the current time, the majority of estates are not subject to an Estate Tax if they are valued at less than one million fifty thousand dollars. The Estate Tax value is expected to increase up to two million dollars for the 2006 year. In addition to meeting a certain estate value, it is also likely that the majority of properties that are jointly owned will not be taxed if at least one property owner is still living. http://www.taxhelpdirectory.com/taxlaw/

An Estate Tax return is due to be submitted to the Internal Revenue Service (IRS) nine months after the estate owner passed away. As with regular tax returns, it is possible for estate representatives or family members to obtain a deadline extension. If tax is owed on the estate, it still needs to be paid before the nine months arrives even if an Estate Tax return deadline was granted. Not paying the estimated amount of estate taxes due can result in late fees or additional penalties. 

The Internal Revenue Service (IRS) will determine the amount of Estate Tax owed by taking the fair market value of all property items that were previously owned by the estate owner before he or she passed away. Fair market value takes into account when an item was purchased and exactly how much it is worth today. When all of those items are added up the total is referred to as the Gross Estate. As with traditional tax returns, estate taxes are allowed tax credits and tax deductions. When all of these items are computed together the amount of tax owed will be determined. 

When an Estate Tax return is being filed with the Internal Revenue Service (IRS) there are a number of other important documents that must be sent along with the return. These items include a copy of a death certificate, copies of property appraisals, copies of litigation documents that may apply to the estate property, and a copy of the deceased’s will. As previously mentioned, an Estate Tax return can be filed by a lawyer, an estate representative, or a family member. Individuals can acquire the Form 706: United States Estate (and Generation - Skipping Transfer) Tax Return by contacting the Internal Revenue Service (IRS) or by downloading the form online.

Only a small percentage of Americans are required to file for an Estate Tax return; however, that does not mean that taxpayers do not need to know and understand what an Estate Tax is. A taxpayer may not own a high valued property; however, that does not mean that they cannot inherit one or be named an estate representative by a friend or family member who has passed on.

Title: 

Tax Traps for New Real Estate Investors

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845

Summary:

Real estate belongs in every investors portfolio, but make sure you don't fall into these common tax traps. So says CPA and bestselling author Stephen L. Nelson.

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Article Body:

Perhaps one should not be surprised that new real estate investors fall into the same tax traps again and again. Real estate burdens investors; especially new investors with some tricky tax accounting.

But just because some other newbie makes these mistakes, that does not mean you need to. You just need to know where the traps are so you avoid them. And here are the biggest real estate tax traps you do not want to fall into:

Tax Trap 1: Passive Loss Limitation

On paper at least, real estate often loses money. Even if the rent pays the mortgage and the operating expenses, the books still show a loss because you get to write off a portion of the purchase price through depreciation each year.

If a rental house that cost $275,000 breaks even on cash flow, for example, you might also get a $10,000 annual depreciation deduction. If your marginal tax rate is 28%, that depreciation should save you $2800 annually.

Sounds sweet, right? Well, it is or should be. Except that the U.S. Congress labeled real estate investment a passive activity and said that, except in a couple of special circumstances, you can not write off passive activity deductions unless overall you show positive passive income.

This passive loss limitation rule means that many real estate investors do not get to use tax saving deductions from real estate, or at least not annually.

Two loopholes, courtesy of Congress, do exist that let you write off deductions from real estate even if overall you show a loss from real estate investing. If you are an active real estate investor with adjusted gross income below $100,000, you can write off up to $25,000 of passive losses annually. (If your income is between $100,000 and $150,000, you get to write off a percentage of the $25,000. Ask your tax advisor for the details.)

Here is the second loophole: If you are a real estate professional, Congress says the passive loss limitation rule does not apply to you when it comes to real estate. A real estate professional, by the way, is ‘not’ someone who is licensed as an agent or broker. The law instead creates a time-based test: A real estate professional is someone who spends at least 750 hours a year and more than 50% of their time working as a real estate agent, broker, property manager or developer.

Tax Trap 2:  Capitalization of Improvements

The next mistake that new real estate investors make? Thinking they can write off the amounts they spend to improve the property. Sometimes you can. Often you can not.

Here is why: Any expenditure that increases the life of the property or improves its utility needs to be depreciated over the next 27.5 years (if the property is residential) or over 39 years (if the property is nonresidential).

You can not, therefore, write off the money spent improving or renovating a house, except through depreciation.

I have seen new real estate investors in tears about this wrinkle. Some investor draws, say, $20,000 from his IRA or 401(k) to  fix up some rental. He figures he will be able to write off the $20,000 as a tax deduction in the year improvements are made.

No way. Instead, he will have to write off the $20,000 at the rate of a few hundred bucks a year over the next three or four decades.

The trick with renovation, if you want to call it that, is to keep the property well maintained as you go. Repainting, new carpeting, general repairs; these items should all be all deductions in the year of expenditure (er, subject to the passive loss limitation rule discussed as the first tax trap.)

Tax Trap 3: Missing the Section 121 Exclusion

Here is the final tear-jerker. And I see it several times a year. Someone decides that rather than sell their principal residence when they ‘move up’ to a larger new home, they are going to turn the original home into a rental.

This is a disastrous decision most of the time because of Section 121 of the Internal Revenue Code . Section 121 says that if you have owned a home and lived in a home for at least two of the last years, you will not pay any tax on the first $250,000 of gain on the sale ($500,000 of gain in the case of someone who is married and filing a joint return).

By converting a principal residence to a rental property, you turn tax-free gain into taxable gain if you do not sell the property in the first three years.

Two quick notes about goofing up the Section 121 exclusion. If you do not have appreciation in your old principal residence, you are not losing any Section 121 benefit by converting to a rental.

Second, if you do have a lot of appreciation in your old principal residence and want to use that equity to acquire a rental property, consider this: Sell the old principal residence when you move out so the gain is excluded from taxable income. Then use the tax-free proceeds to purchase another rental, perhaps even the house next door.

Title: 

A New Approach to Real Estate Lead Management

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403

Summary:

The Internet helped many real estate agents change the way they market their services. Now the same agents are changing the way they approach other aspects of the business - in particular, the process of capturing, filtering, and contacting leads.

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Article Body:

The Internet helped many real estate agents change the way they market their services. Now the same agents are changing the way they approach other aspects of the business - in particular, the process of capturing, filtering, and contacting leads. Web marketing helps attract more leads, but it's becoming clear that agents might not be the right people to deal with them anymore. As the job shifts elsewhere, the role of agents is being redefined.

Many real estate agents likely saw the change coming thanks to the difference between web leads and non-web leads. It can generally be boiled down to a difference in commitment: non-web leads are often solid referrals from other professionals who already know the client, while web leads can represent anyone with ten seconds to fill out an online form. Many Realtors with an online home search require people to fill out a contact form in order to view full details on a particular listing, and this tactic has had positive and negative results - mostly negative. People will readily supply their email address in order to view listing pictures, but that doesn't mean they want to buy a home - in many cases, they're simply spam-bots posting fake email addresses. These leads are less than ideal, but Realtors can't afford to disregard them entirely - that's why their role is being re-defined.

If Realtors are to keep their new web marketing model, they must also find a new lead management process. As it turns out, they might not have to look far; brokers might be in the best position to deal with agents' web leads. With their broader range of professional contacts, and generally superior office technology, brokers can filter more emails and follow up on more leads that look like they might go somewhere. The shift is also natural because most brokers function mainly to provide support to Realtors where necessary, and don't have a high web presence themselves. 

An agent-broker partnership would bring real estate in line with other industries where leads and sales are handled by separate bodies. In the mortgage industry, for example, more than 70 per cent of leads are filtered and supplied by real estate agents. The model proposed here works slightly differently because here Realtors supply the leads, but brokers filter them.

A smoother lead management process would also enable Realtors to focus on sales and client service, the two most basic aspects of their profession.

Title: 

A Checklist For Moving

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857

Summary:

MOVING! The very thought of it can send chills down our spine and can cause us to break out into a cold sweat. Experts say that any kind of "change" creates "stress". Moving, (and especially if we are relocating to a new city or state), represents a huge change and naturally brings a great amount of stress along with it. This can be a double whammy, because stress can lead to a lack of energy and motivation. Many of us tend to procrastinate during stressful periods of our liv...

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Article Body:

MOVING! The very thought of it can send chills down our spine and can cause us to break out into a cold sweat. Experts say that any kind of "change" creates "stress". Moving, (and especially if we are relocating to a new city or state), represents a huge change and naturally brings a great amount of stress along with it. This can be a double whammy, because stress can lead to a lack of energy and motivation. Many of us tend to procrastinate during stressful periods of our lives. This is one time, though, when we must rise above that. When preparing for a move we need to put the pedal to the metal and get a lot of things done. This checklist contains many suggestions that may seem like "no-brainers". However, the very act of printing out these simple suggestions and reminders can become a significant security blanket as the dreaded time approaches. Moving and relocating calls for being proactive, grabbing the bull by the horns and actually completing certain chores well in advance of their deadlines. Hopefully this little paper will help you to accomplish that. In this particular article we are leaving out the "big things" such as finding the best moving company, researching your new neighborhood's transportation, parking, employment, etc. Those are for other articles on another day. Today we are concentrating on the basics of planning and preparation.

Get rid of what you don't need.

Many of us are "pack rats". One thing that we can accomplish immediately is going through all of our "stuff" and getting rid of what we don't need anymore. Moving unwanted clothing and bric-a-bracs from one place of residence to another is a great waste of time and effort. It is surprising how much more in control we feel once we start narrowing down our "inventory" to what we actually need to keep. Getting rid of the unwanted items can be done by having a garage sale long before moving time and then donating the leftovers to the Salvation Army or other charitable groups.

Get all important papers and documents together and secure them.

Since moving is hectic, to say the least, we need to be aware of the exact location of all of our important items. Things that we absolutely must not lose or misplace should certainly be hand carried, not put in a box for the movers: 

Address Books, Birth Certificates, Bank Statements, Checks, Credit Cards and Statements, Home Movies, Irreplaceable Memorabilia, Insurance Policies, Marriage Records, Medical and Dental Records, Military Records, Passports, Photos and Photo Albums, Resumes, School Records, Stock Certificates, Tax Returns, Telephone Numbers, Valuables, Vehicle Documents, Wills.

Prepare well in advance for living at your new location.

There are many things that we can do at our new location well in advance of our move that will help smooth out the bumps and grinds of our relocation process when the actual event occurs: Open up new bank accounts. Open up a new Safe Deposit Box. Contact the new area utility companies and arrange for your new services. These can include Cable TV, gas, electric, oil, telephone, water and Internet access. Arrange for new medical providers. If you are moving to a new state, contact the DMV and get forms necessary to re-register your vehicles. Contact your insurance companies and find out if your car insurance, homeowner's insurance, etc. can be transferred. If not, find an Insurance Broker in your new area and discuss your needs and requirements for new policies. Go to the post office and get a moving kit. Prepare change of address forms for all of your correspondents; credit card companies, other credit accounts, banks, insurance companies, current utility companies for final statements, magazines and other subscriptions, family, friends, and any other persons or businesses that you correspond with on a regular basis.

As the time approaches, get a nice new legal pad.

As moving day approaches and when the moving process actually begins, you don't want to be hunting for phone numbers in wallets, purses, or address books. Have a nice new legal pad ready with all important phone numbers written clearly and legibly for both your old and new contacts: Banks, Doctors, Emergency contacts, Family members, Friends, Landlords or Real Estate Brokers, Movers, Pharmacies Schools, Storage Facilities, Utilities.

With proper planning and preparation the moving process, though never fun, can at least be sane. With proper planning and preparation the utilities at your present address can be disconnected the day after you move and the utilities at your new address can be connected the day prior to your arrival. With proper planning and preparation you will not be frantically searching for a new doctor or pharmacy, if that unfortunate need arises. With proper planning and preparation you will have all of your important documents at the tip of your fingers at all times. With proper planning and preparation your mail will start arriving the day after you move in to your new abode and your life will endure a minimum of chaos and clutter.

Good luck with your move and good luck in your new home or apartment.

Title: 

A Bit About Mold

Word Count:

301

Summary:

There are a number of little things to look out for when purchasing a new home. Normally the things to consider includes such things as location, wiring, the condition of the house itself, and several other factors. One of these factors that the home buying public is becoming more concerned with is mold.

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Article Body:

There are a number of little things to look out for when purchasing a new home. Normally the things to consider includes such things as location, wiring, the condition of the house itself, and several other factors. One of these factors that the home buying public is becoming more concerned with is mold. There are many different types of mold that can occur in a home and lead not only to structural damage, but some health concerns as well. Mold is difficult to find in many homes as it grows exclusively in dark and moist areas that are usually hidden somewhere in the structural areas of the home such as attics and basements. By the time mold shows up in the actual living areas, chances are that it is all through the home. 

One of the most likely places for mold to form is anywhere that moisture is improperly vented. Another area of concern is if a home has ever flooded and was not completely or properly cleaned and dried after. Leaky plumbing and basement crawlspaces are other likely candidates. Mold can be a difficult thing to completely get rid of as the only thing it needs to continue growth is an organic material such as wood, and moisture. Both of these items are usually abundant in any home. The most likely was that moisture finds its way into the home is through faulty or leaky roofs and foundations. Both of these areas should be checked over by an experienced mold inspector on a fairly regular basis if there is any worry of mold beginning to grow, or if these has been mold in the past. Mold can be an expensive problem to deal with so be pro-active about looking for it, it can save you money in the long run.

Acting Into Appraisals

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Investments, terms for loans, processes, and other parts of real estate can often be overwhelming to someone who hasn't received a degree in real estate.  If you are looking for definitions and actions behind those definitions, then don't forget about getting the right appraisals.  This will help you if you are looking for the right market for your home. 

An appraisal consists of a professional opinion that is made about a property.  Included in this opinion are several factors that allow for this statement to be made.  Overall, the appraisal will lead to the conclusion of what the market value is.  If the market price can not be defined easily, then someone can look at the different parts of the property and determine what they believe the market price should be.  Usually, this will be done by an inspector looking at the various mechanics that may have been swept underneath the rug.  

An appraisal is a necessary requirement when one is looking into selling a home or having the property insured or financed.  It may use several external resources and definitions of what market value may include in relation to the opinion being made in order to determine the price value of a home.  When getting an appraisal, you can expect that the estimates will be based around the various factors that are related to the market at the time.  Instead of just examining the parts of the property, an appraiser will also examine the neighborhood and see what everything else is worth in relation to the property.  

By appraising a property, you will know how much the home is worth in relation to your own needs on the property and in relation to everything around it.  By observing the standards that are set both inside and outside, you will have the ability to know when the timing is right to get involved with your piece of real estate.  

Title: 

Advice on Picking a Real Estate Agent

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472

Summary:

The ideal agent is not always the one with the most sales under his or her belt, or the most years on the job. The ideal agent is one who listens to you, is easy to get along with, and has the tools and skills to address your unique situation.

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Article Body:

The ideal agent is not always the one with the most sales under his or her belt, or the most years on the job. The ideal agent is one who listens to you, is easy to get along with, and has the tools and skills to address your unique situation. 

Every home buyer is different. Some have credit issues. Some are buying from out of state. Some need help selling their current home in addition to buying a new one. Just as buyers have different needs, real estate agents have different skills and specialties.

Here's how to find the agent who's right for you:

1. Ask friends and family for agent referrals.

Nobody knows you as well as your friends and family do. So they're often in the best position to recommend an agent who is well-suited for your needs. You can also trust a referral from friends or family more than one that comes from a stranger.

2. Talk to multiple agents.

I once saw a statistic that 84% of home buyers choose the first real estate agent they contact. This means one of two things. Either most people are choosing wisely the first time, or they're just rushing into things without shopping around. Probably a little of both.

You don't have to exhaust yourself interviewing agent after agent, but at least talk with two or three to see who you're most comfortable with (which leads to the next point).

3. Consider the vibe factor.

Professional expertise is an important criterion when choosing a real estate agent. But interpersonal skills are equally important. After all, you'll be working with this person anywhere from 2 to 12 months, so it helps to get along with them. We all have unique personalities, and that's the way it should be. But when working with someone professionally, if helps if their personality "meshes" well with your own.

4. Ask how they hunt.

When deciding on a real estate agent, ask how they search for homes. Some agents have their own preferred listings that they favor. But you want what's best for you, not what's best for your agent. You're paying them, right? So make sure the agent is willing to search high and low to find the best home for you. That includes using the Multiple Listing Service (MLS) as well as their own personal network.

5. Read paperwork carefully.

This advice is heavily used for a reason. It's critical that you examine all documents during the home buying process, and that includes your agent agreement. At some point during the relationship, your agent will probably ask you to sign an agent agreement. Basically, it just means that if the agent shows you a particular property, your purchase of the property should be credited to that agent. In most cases it's a simple, just be sure to read it carefully and ask questions.

Title: 

Advice On Selling A House

Word Count:

459

Summary:

Of course you should clean up the house when you are trying to sell it. But what else can you do to get it sold fast, and at a higher price?

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Article Body:

Maybe you've read lots of advice on selling a house. But do you know the biggest mistake many people make when selling a house? Not understanding real estate value. 

You see, it doesn't matter what you think your home is worth. It doesn't matter what you did to make in nicer for your family. The value of your home is determined by buyers, and sometimes these buyer’s may have to bring cash to the table. What you enjoyed about your house may be irrelevant when it's time to sell. Think in terms of what buyers want, and use some of the following advice on selling a house.

 1. Know the market. What other similar houses have sold for? Have those examples ready to show potential buyers.

 2. Decide on a minimum price - the price below which you just won't move. Don't tell your agent what this minimum is, but negotiate with any buyers who make an offer near or above it.

 3. Concentrate on the visible things first. A new mailbox is often a good idea. When buyers fall in love with the house before they even enter it, they forgive a lot of problems.

 4. Clean the neighborhood. If a neighbor's yard is a mess, give their kids $10 to pick up the yard. Spend $20 to put flowers in any common-areas, and buyers will have a better first impression of the neighborhood.

 5. If you or your agent aren't getting many calls, try something new. Is more advertising necessary? Is the price too high? If price is the problem, drop it fast. That perfect buyer might pass on by while the the home is still over-priced. 

 6. Listen to prospects. They'll be more objective than you. If you hear several times that the kitchen is dark, get out the white paint.

 7. Find the average sales time for your area. If your house is taking longer than average to sell, there's a problem, and usually it's the price.

 8. Ask your real estate agent what she plans to do - before you sign a listing agreement. Write down what she says, and hold her to her promises.

 9. If there are known problems, such as an old roof, get an estimate for repairs. The sellers may want a $7,000 allowance for a new roof - until you show them your $4,000 estimate.

 10. Do improvements that can realistically get you at least a two-to-one return on investment. If $300 to seal the driveway is likely to add $600 to the sales price of the home, do it. Always consider first those things that are most visible.

There are dozens of things you can do to sell your house faster, and get a better price. Start with the ones that will get the most "bang for your buck." Also, read and USE good advice on selling a house.

Avoiding Extra High Financing Costs

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Did you know that there are ways for you to pay less while you own more?  If you know exactly how to work with the real estate market, then you can also find ways to avoid extra financing costs.  By finding the right area to focus on for your investment, you will be able to pay lower amounts without extra charges.  

One of the easiest ways to avoid extra costs is to make sure that you pay your loan on time.  Usually, mortgage companies will add in extra finances if you don't pay by a date that they have set for you.  Over a specific amount of time, this can cause you to pay hundreds of extra dollars in financing at one time.  Staying ahead and consistent will help you to keep costs stable and lower.  

Of course, knowing the loan options that are available to you can also help you to avoid financing costs.  Some homes will require that you invest more, and some loan programs will also ask that you invest a higher amount.  You will either want to make sure that this will be beneficial to you in the long run or you will want to look into a different type of plan.  The plans that you invest in for mortgages will make a large difference in how much you pay overall and how much you pay each month.  

The finances don't stand alone when you are trying to avoid extra costs.  The value of the property that you are investing in will also make a difference.  The goal for any real estate investment is that there should be a high quality home for a lower price.  You want to get as close to this goal as you can.  Even if you pay on the home for a while, it will allow you to benefit later on with the investment that you have made.  You will have the ability to have more returned to you when you decide to invest in something bigger and better.  

Real estate financing can be beneficial if you approach it correctly.  Understanding how all of the parts of your loan, your home and your individual need works together can help you to find the best deal.  Over time, you will not only have a home to live in, but will also have an investment that can help you to make the most of what you have. 

Title: 

Avoid Legal Battles over Broker Commissions

Word Count:

353

Summary:

Clearly spelling out the terms of agreement is the first rule for owners and brokers.  This is the best way to prevent litigation.

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Commission agreements that spell out how brokers are paid typically use form documents.  The commission formula sometimes changes, but the terms and conditions usually stay the same.  Consequently standard terms and conditions of commission agreements are often ignored by brokers and owners once the agreement is signed.  Since the broker’s income is tied to the terms of those agreements, close attention to details are vital to all parties involved.  

Recent lawsuits stemming from disputes over broker commissions reveal tough lessons about the importance of paying close attention to commission agreements.  

A building owner in Detroit was forced to pay a commission because the original agreement did not contain an expiration or termination date.  The building owner argued that there are a number of key terms understood and agreed to prior to signing the agreement that were not contained in the final written agreement.  The judge overruled this argument stating that the contract was clear as written.  

Judges and juries are not real estate professionals.  The term ‘procuring cause’ may have a standard definition in the real estate business, but mean nothing to a juror.  All parties involved must make sure the language is clear.  A judge or jury will not rewrite a contract to save either party from a bad business decision.

Even after a favorable commission contract is successfully negotiated and written, it is not OK to simply file it away.  Either party cannot claim they forgot about the agreement.  

The lesson here is to carefully note important terms and conditions, especially those that relate to performance, compensation, and termination.  

Legal disputes are not unique to any location.  Judges and juries nationwide are showing resistance to insert terms into commission contracts or allow parties to ignore the terms of a contract.  Recently there is been an increase in the number of disputes.  Some have settled out of court, yet a fair number have gone to litigation.  This can be reversed through the efforts of brokers and owners who invest more time and effort putting together agreements and abiding by them.  This is the best method of prevention.  

Good luck to you,