February 2011 Archives

February 28, 2011

In a Divorce, Is It Best to Sell the House?

Given that January was the month in which the most divorces were (according to the averages) filed, the question on a lot of former couples' minds right now is probably, "Who gets the house -- or do we sell it?"

The issue has only gotten thornier since the recession, with both house values and earning power down. As explained in the article, "Divorce Wannabees in the Age of Recession: How Trapped Couples Are Coping," by Roslyn Zinner of the Huffington Post, couples who are underwater on their mortgage or have significant other debts simply can't, in some cases, afford to split up the household -- leading to situations where, for example, one spouse "moves" to the basement.

Hmm, could there be a silver lining in Zinner's description of how couples don't fight over the house so much anymore, since neither wants to deal with the costs of homeownership? Okay, never mind.

Interestingly, one solution she describes -- in which the couple agrees to continue jointly owning the home, while one moves to an apartment, and they sell when the economy is better -- was exactly that arrived at (after much negotiation) by a Los Angeles couple described in the Financial Adviser blog titled "Breaking Up Is Hard to Do," by Zack Anchors, in the Wall Street Journal.

So, if and when the market turns around (whenever that might be, which no one can safely predict), we may see a flood of homes being sold by long-divorced couples!

February 24, 2011

Where Should Your Cat or Dog Go During House Showings?

Ask any experienced real estate agent about whether a cat or dog should stay in the house while prospective buyers are touring, and the answer is usually, "No way." As with everything about preparing a home for sale, you're trying to appeal to the "average" person, and that person may not be a cat or dog lover, or may even be allergic.

Not to mention the pets' own interests -- seeing hordes of people tromping through the house may prompt them to make a quick escape through an open door.

But The New York Times added some new food (or kibble) for thought on this topic with its article, "Pets Help Sell Manhattan Apartments," by Constance Rosenblum. It's full of stories of cats and dogs that charmed the prospective buyers, added a sense of warmth to the apartment, in some case literally showed the visitors around, and were missed when the new owners moved in and the four-pawed friend was no longer there to welcome them.

You'll want to read the story for yourself. But here are my conclusions about why it worked in these cases, or how a pet  can be useful in the homeselling process.

dog-relaxes.jpg1. It all hinges on whether the cat or dog is seriously cute. If so, you might give it a try at individual showings at least, if not necessarily at the open house. Not all pets have the same degree of magnetism. If you've already noticed that your cat or dog becomes the center of attention at every party you give, makes friends with people who swore they didn't care about animals, or attract exclamations like, "Awww" from every passerby, maybe this is a pet that can be drafted into home-selling service. (The opposite goes for barking dogs and cats that give people the stink-eye.)

2. If you're going to keep the pet around, make sure there are no animal smells. Put the kitty litter box as far from the madding crowds as you can (of course, show the cat where it is), and invest in the most expensive, odor-defying litter. For dogs, perhaps do as Wraggles' owners did, in the NYT story, and have the dog bathed and groomed before showings.

3. If having the actual animal at showings isn't realistic, consider including it in your publicized photos of the property. Hey, all the home furnishing catalogs do it, why not you? A cat or dog creates a focal point, and helps make your home look like a cozy place.

What commission you negotiate with a cat or dog who helps you sell is up to you. But a treat is no doubt in order!
February 17, 2011

No, You Can't Deduct Losses on the Sale of a Home

This myth has been busted a zillion times, and yet it persists -- maybe because taxpayers believe that the tax code should make logical sense. If you have to pay capital gains tax when your profits on the sale of a house exceed the $250,000 (or $500,000 per married couple filing jointly) exclusion, then why shouldn't you be able to apply your losses on a  home sale against any other capital gains?

image_3_Thumbnail.jpgOops, looks like I boxed myself into a corner where I now have to explain this. The short of it seems to be that a house is considered "personal property" by the IRS, and personal property gets special treatment -- and not the good kind of special. You pay taxes on the gains from the sale of personal property, but get no benefits from the losses. (Perhaps they're trying to avoid having people take massive deductions for every item sold cheap at a garage sale.)

Worse news yet, if you had to sell your house for so little that your lender needed to forgive some of your debt (as with a short sale or a deed in lieu of foreclosure), the IRS may try to collect tax on the amount of the forgiven debt. The reasoning is that it's almost like your lender handed you a check, which is income -- never mind that you then handed it back to the lender. But don't panic: You may qualify for relief under the Mortgage Forgiveness Act, described by the IRS at www.irs.gov/newsroom/article/0,,id=205004,00.html

February 10, 2011

First-Time Homebuyers -- Could Your Landlord Ruin Your Credit Score?

If you're renting now, and planning to buy, you need to read this new article by Attorney Janet Portman -- particularly if you've got a difficult landlord, and may have to withhold rent payments anytime soon.

The long and short of it is that Experian, one of the three major credit reporting agencies, has implemented a new program that allows some landlords (particularly those with a lot of properties) to regularly report their tenants' payment records. All very well and good for the tenants who always pay on time, but not so great for those who don't -- even if the nonpayment was for perfectly legal reasons.

A positive credit history and score is crucial when trying to line up financing to buy a home. So unless you're one of the lucky few who plans to pay all in cash (rumor has it they exist), keeping your score high should be tops on your priority list. For more advice on that, see Nolo's article on "Credit Scoring." 
February 4, 2011

Tax Benefits for Homeowners: Don't Forget the 14 Free Days of Rental Income

Thanks to Stephen Fishman and his column with Inman News for reminding us that the tax benefits of homeownership include not only the often-discussed mortgage interest deduction and capital gains tax exclusion upon sale, but the ability to rent your house to someone else (perhaps a vacationer?) for up to 14 days a year without paying tax on the income. Get the full story and details in his article, "The tax benefits of homeownership."
February 2, 2011

Home Sellers Beware the Color Trends!

Every year, paint companies try to get us excited by proclaiming that certain hues are the coming trend. Okay, that sounds like I'm all cynical and superior, but I suppose I too get tired of the same old wall colors after a time, and feel refreshed by looking at new and different shades.

Nevertheless, if you're trying to sell your house, that doesn't necessarily mean you should rush to paint your house in the latest trend colors -- especially since this year's colors include shades that anyone who isn't used to the names for, say, lipsticks, would call "pink."

There's Pantone's "Honeysuckle," for example ("2011 Color of the Year!"), Behr's "Tokyo Pop," and (in a rare example of calling a color a color), Sherwin Williams' "Exuberant Pink," part of its "Restless Nomad" line. 

What's wrong with pink? Oh, nothing except academic research findings! It was only last summer that  SmartMoney and others reported on a study by Old Dominion University concluding that home buyers who see photos of bright pink walls assume that the house will sell for less than other homes with (dare I say?) classier or more mature colors. And the stagers and other real estate pros have been telling us for years to keep the colors neutral, so as to appeal to the widest possible audience.

(In fact, here's a blog by a stager in Florida whose website palate suggests that she personally likes the color pink just fine: but who didn't use a bit of it in her choices of best 2011 paint colors.) 

So, do your selling agent a favor and hold off on drenching your walls in a shade suitable for Valentine's Day until you're happily ensconced in your next home.