Are you getting ready to put your home on the market and want to know what you can do to help your Realtor sell your home? Below are some ideas that will get your house looking neat and ready for potential buyers to walk through.

1. Reduce the amount of furniture you have in a room. You want the home to have a large floor area and all doorways and halls to be open and clear.

2. Get rid of clutter. The photos that you cherish and are hung throughout your home are a distraction to future buyers. They want to imagine themselves in the house and not what kind of family currently lives there. Remove knick knacks from counters and shelves and throw away or hide magazines. Begin packing and store boxes in a storage unit or in your attic or donate to a good cause.

3. Repaint those colorful walls. Create a neutral canvas for buyers, paint walls an off white or light beige color. You may have loved that bright orange in your kitchen and adorable pink in your little girls room, however, it’s time to paint and create a generic look for future buyers. Paint is cheap and will make a huge difference when your home is on the market. It will look fresh and clean with a good coat of paint.

4. Organize closets. Buyers want to look in every door and sometimes the cabinets as well. Take a day or two to throw away, donate or pack items that you aren’t using. Closets can get very cluttered and you want to show off your storage space as it is a great asset to your home.

5. Put valuables in a safe deposit box or in a hidden safe. Remember that strangers will be coming into your home to view. Don’t put your grandma’s wedding ring or your rare baseball cards in drawers or counters where people can take them.

6. Make your home sparkle. Keep your home as tidy as possible by vacuuming, dusting, keeping dishes out of the sink, hang fresh towels in the bathroom, get your windows washed, dust fan blades, replace worn out rugs, remove cobwebs.

7. Do the sniff test. If you made fish the night before you may want to open some windows and boil a pot of water with some cinnamon sticks, light a candle or bake some cookies.

8. Do some minor repairs. Fix leaky faucets, replace old grout, put some W2 on squeeky hinges, replace any burnt out bulbs, repair holes in drywall, remove wallpaper, etc. Walk into each room and really look around to see what you can do to repair anything that is visible.

9. Check your curb appeal. The first impression your buyers will have begins before they ever enter your front door. Lure them in with fresh planted flowers, neatly trimmed bushes, green and well manicured lawns, clean sidewalks and patios and clean exterior paint. Make sure your address is easy to read from a car.

10. Recruit your Realtor or best friend to do a walk through and give any advice after you have completed the previous 9 items. Everyone sees things differently and they may have some great advice on something that was overlooked.

Doing these 10 things will be the best things you can do to get your home sold quickly after you have decided on a competitive listing price.

The IRS says there is no free lunch. If you transfer title on your home, whether voluntarily through a warranty deed or grant deed, or involuntarily through foreclosure, you have sold your home. You might be subject to taxes, even if you sold your home at a loss, either on a short sale or by foreclosure.
It doesn’t seem fair. What’s worse is you might not even find out that you owe taxes until the day you open your mail to find a 1099.

I spoke with Julian Block, an attorney in Larchmont, NY, who has been cited by The New York Times as a leading tax professional. Here is what he has to say about taxes, gains and losses on distressed sales such as foreclosures and short sales:

Julian Block on Gains and Losses

"Sellers who have owned their personal residences for lengthy periods still will realize gains.

"But sellers of residences acquired within the past two years or so are going to incur losses. Even assuming no price declines, losses will result because of expenses for real estate brokers, lawyers and the like. Sellers will not be able to deduct those losses. Makes no difference that they are forced to sell because of, for instance, job changes or health reasons.

"Besides problems for sellers of personal residences, there are tax troubles for investors who, say, bought several condos in places like Florida and are unable to flip them because prospective buyers are waiting for further price declines. Often, it is not worthwhile for those investors to rent their places; what they receive as rent payments will be insufficient to cover their real estate taxes and mortgage interest. Their only option is to sell at a loss."

Block on Offsetting Losses Against Gains

"Sellers can offset their capital losses against capital gains. But in the absence of capital gains, the yearly cap is $3,000 ($1,500 for married couples filing separately) on the amount of losses they can offset against their "ordinary income," meaning income from sources like salaries, pensions and withdrawals from retirement plans. The law allows them to carry forward unused losses to later years."

Block on Tax Rules for Foreclosures

"The IRS has tax rules for foreclosures or repossessions by lenders of homes of owners who have fallen behind on their mortgage payments. There can be severe and unexpected tax consequences for an owner who simply walks away because he or she has little or no equity and the lender takes over and sells the place.

"In that situation, cancellation or forgiveness by the lender of the debt usually means the debtor has reportable income, though there are some exceptions — for instance, insolvency."

Block on Personal Liability

"An example: Brown buys a condo and uses it as a personal residence. He pays $300,000, down payment of $15,000 and takes a mortgage loan of $285,000. He is personally liable for the mortgage. When the remaining balance of the loan is $280,000, Brown defaults and the lender bank accepts his voluntary conveyance of the unit, canceling the loan. Similar condos at the time sell for $230,000.

"The tax code treats the transaction as a sale. Brown incurs a nondeductible loss of $70,000, the amount by which his condo’s adjusted basis of $300,000 exceeds its market value of $230,000. No deduction for the loss because Brown uses the condo as a personal residence.

"Brown also has reportable income of $50,000 when the bank cancels the loan. The $50,000 is the amount by which the debt of $280,000 exceeds market value of $230,000.

"Enter the IRS when the mortgaged property is foreclosed or repossessed, and the bank reacquires it, or the bank knows Brown has abandoned the property. The bank sends a Form 1099-A to Brown and the IRS. Using the numbers in the example, the 1099-A indicates the foreclosure bid price ($230,000), the amount of Brown’s debt ($280,000), and whether he was personally liable. Debt cancellation (here, $50,000) is taxed at the rates for ordinary income, same as for salary."

Secured Debt Without Personal Liability

According to Kleinrock Publishing, the IRS says sellers who are not personally liable for a debt will realize an amount that includes the full canceled debt, even if the value of the property that is security for the debt is less, which can be offset depending on your adjusted basis in the property. Purchase money loans secured by real property in California carry no personal liability.

For example, Ms. Smith buys a home valued at $300,000, puts down $30,000 and takes out a mortgage of $270,000. Smith stops making payments. The bank forecloses on a loan balance of $260,000, and the market value of the home has fallen to $250,000. Smith has an adjusted basis of $265,000, due to a $5,000 casualty loss. The amount Smith realizes on the foreclosure is $260,000. Smith figures her gain or loss by comparing $260,000, which is the amount realized, to her adjusted basis of $265,000. She has a $5,000 realized gain.

Before Foreclosure or Selling, Plan Ahead

Before you sell on a short sale or go through a foreclosure, seek legal and tax advice. Do tax planning ahead of time, before it is too late.

For more information, contact a Certified Public Accountant or check the IRS Web site.

A temporary fix, called the Mortgage Forgiveness Debt Relief Act of 2007, provides relief from debt forgiveness taxation for certain owner occupants until December 31, 2012. Call your lawyer to determine if you are exempt from taxation.

Buying or selling, Keith Judish is here to act as your local real estate specialist.

Keith Judish
REALTOR®
Windermere West Valley
Direct: (623) 224-7956
Email: info@247realestateonline.com

Forget everything your loan servicer told you, said the leader of a non-profit homeowner advocacy and loan-modification counseling group that’s visiting Phoenix through Monday.

Neighborhood Assistance Corporation of America chief executive officer Bruce Marks said his organization can and will restructure any homeowner-occupant’s unaffordable home loan into the mortgage it should have been.

That means anyone, no matter how rich or poor, whose loan payments are more than 31 percent of the household’s gross monthly income can walk into the Phoenix Convention Center and leave the same day with an affordable, 30-year, fixed-rate mortgage that will pay off the home completely.

How can Neighborhood Assistance do what lenders can’t or won’t do? In a word, “terrorism.”
“It’s basically nonviolent terrorism against banks,” Marks said.

The group has been likened to a gang of bullies, threatening lenders with public humiliation, lawsuits and boycotts in its efforts to secure better loan terms for its free customers.

Marks said the major banks have acquiesced, as evidenced by the rows of loan-servicing agents operating a temporary home-loan triage unit inside Neighborhood Assistance Corp.’s massive convention space on Friday, the group’s first day in Phoenix.

Some observers have criticized the group’s means, but Goodyear resident Roman Sieminski said the ends more than justify them.

“A friend of mine used NACA a few months ago and actually got his loan principal down by 50 percent,” said Sieminski, who was seeking a loan modification from the group on Friday. He said the HUD-approved non-profit’s methods are no worse than those of lenders who have refused to lower struggling borrowers’ payments on their own.

And Neighborhood Assistance is acting in the service of homeowners who want to pay off their homes but simply can’t, Sieminski said.

“They’re giving people the key to unlock their own cage,” he said.

Reach the reporter at craig.anderson@arizonarepublic.com or 602-689-9288.

by J. Craig Anderson – Oct. 2, 2009
The Arizona Republic