Will Everyone Have to Pay a 3.8% Tax When Selling Their House?

I’ve just received yet another chain email regarding the rumor about The Affordable Care Act, aka Obamacare. The claim states that everyone will have to pay a 3.8% tax when you sell your house. This is part of the attempt to scare and it has succeeded with some people. No matter which side of the political spectrum one is on it always pays to check the facts for yourself.

What the law says is according to Politifact.com and FactCheck.org is the health-care plan does include new taxes. One of them is a 3.8-percent tax on home sales by the wealthy and won’t affect the vast majority of sellers or buyers.

Here's why.

The tax does not apply to individuals with an adjusted gross income of under $200,000 in the year the sale takes place. Nor does it apply to couples with an AGI below $250,000. The amount a person (or a couple) makes on the sale is not included in the income calculation.

That rule alone eliminates the tax on more than 97 percent of tax returns.

Even if the seller exceeds the income limit, the tax only applies to the profit from the home sale, not the sales price itself. That's why it's not a sales tax, as it's sometimes characterized.

There is more to this story that can be read at

 http://www.politifact.com/rhode-island/statements/2012/jul/15/vincent-buddy-cianci/talk-show-host-buddy-cianci-says-obamas-health-car/

FactCheck.org has researched it and here is their conclusion under the heading “A 3.8 Percent “Sales Tax” on Your Home?”  Check out the details at

http://www.factcheck.org/2010/04/a-38-percent-sales-tax-on-your-home/

There is no Santa Claus, no Man-in-the-Moon, and certainly no provision in The Affordable Care Act which says everyone who sells a home has to pay a 3.8% tax. Period.

Notice to Builders Regarding Home Buyers



The builders are back at it. Drive around any area of Seattle now and you will see homes being demolished and a new home being built in a short time. This is great for the economy because as housing goes so does the Nation’s economy.

The problem from my viewpoint and experience is builders should be building some single level homes because there definitely is a market for them. The baby boomer population is aging rapidly, at least one day at a time, and they are having a hard time finding homes with little or no stairs. In West Seattle, for example, if you want to buy a one level home most likely will have to choose between this 1940s built “war house” or that 1940s “war house”.  These homes are typically 2 bedrooms, one bath and from 720 sq ft to 800 sq ft.

One recent transaction saw a one level modular home that was in “fixer” condition was purchased and flipped. This home is located just west of the Alaska Jct. I saw it come on the market at $550,000 and knowing the market my first thought was this home will be on the market for a long time. Two days later there was a “Sold” sign on it. Figuring the home would need to pass the appraisal process it would ultimately sell for less. Much to my surprise, and that of every agent that is familiar with the home, was surprised to find that is sold not for the asking price of $550,000 but actually closed for an all cash price of $575,000.  Not everyone wants a huge 2-story home that takes up most of the lot.  

Builders take notice that you are missing an opportunity for what would be a very lucrative niche market because of the growing number of us aging people, and that include all of us.             

Look Before You Leap: Cost vs Value

National Cost vs ValueHave you ever wondered how much value a kitchen remodel added to your home vs how much that new kitchen costs? More and more homeowners are taking on remodeling projects. Some are upgrades, some are new additions, and some are necessary replacements. This site is a plethora of information about remodeling. Remember to look before you leap!

Here is a link to finding the cost vs value for the entire nation

National Cost vs Value Data

You can "drill down” to find it or use this link to jump directly to Seattle

Seattle Cost vs Value Data 

Are Home Prices Too High??



After reading a few questions on another site’s blog regarding, “Are home prices too high?” and the subsequent comments peeked my interest. I hear and read frequently that same question. Let’s look at how it is in the “real world” of real estate prices which is basically the same as selling a car, a suit of clothes, or a loaf of bread.

If I want to buy a suit of clothes and the store is asking more than I think it is worth I will pass it up and not buy it for their price. A clothing store has set prices and we in this country do not bargain like some other cultures. The same is true with that loaf of bread.

However, buying some items like a home or a car it is not uncommon for buyers and sellers to negotiate at “an arm’s length agreement” as it is called. In other words if the buyer doesn’t want to pay the asking price then they make an offer which the seller can either accept, reject, or make a counter offer to the buyer. When an agreement on the price is reached between the parties then that is the value of the home. If no buyers are interested in the home then the “asking price” is too high and the home sits on the market until the seller adjusts their asking price closer to the actual current market value. As supply and demand ebbs and flows so do the market values. That is one reason why home values fluctuate and timing, just like location, is critical.

If the home is financed with a mortgage then the lender sends out an appraiser to protect the lender’s stake in the property. The appraiser is looking for similar homes which have recently sold to justify the value to the lender.

Home values are set by demand for that home which is in direct proportion to the amount of supply at any given time. Example if there is one buyer and 10 homes then due to the number of homes (supply) the value is lower. On the other hand if there were 10 buyers and one home the price would be higher.

So when you hear that question,” Are home prices too high” now you can put that into proper perspective and make it work to your advantage.

A Way Out of the Foreclosure Mess??

The chief executive of San Bernadino County is thinking out of the box when it comes to a solution for the massive amount of foreclosured homes in his county. Check out his ingenious idea that helps homeowners big time and makes the bankers see red. Read the full details by clicking on this link:
A Way Out of the Foreclosure Mess??

Money Magazine: What is Your Home Really Worth?

Here is an informative look through an appaiser's eyes from Money Magazine:

NEW YORK (Money Magazine) -- When it comes to assessing a home's value, real estate agents and homeowners tend to be an optimistic bunch.

In the post-bust world, appraisers are a different story. They have to predict a realistic value for your home that the bank can use to extend credit to a borrower -- and that number can make or break your sale or refinance.

Appraisers say the following five areas are where homeowners often misjudge the worth of their abode.

1. The outside

The appraiser sees: Overgrown bushes and chipped paint.

What he does: Slices as much as 3% off the value of an average-size home.

Why: Curb appeal is primo. And an unkempt yard is a sign that there may be other issues.

"A good-looking lawn and bushes imply that you also take care of the internal systems in the house," says Jonathan Miller, president and CEO of a New York City-based appraisal firm that works throughout the tri-state area.

Moreover, the more meticulous your neighbors are about grooming, the more your appraiser will downgrade the value of your home.

"If a lot of the nearby properties are professionally maintained, the one that sticks out like a sore thumb will get a harder adjustment than in a subdivision where there's more variation," says San Diego appraiser Armando Ortiz.

2. Basic systems
The appraiser sees: A brand-new roof.

What he does: Nothing.

Why: Just as a knee replacement won't make you look 20 years younger, a new roof, furnace, or boiler isn't considered an improvement to your home.
That said, if your roof is in disrepair, replace it: Signs of leaks or discoloration can knock a significant amount off the home's value.

"When people buy a home, they expect the roof to be working," says Columbus appraiser Mike Armentrout. "So while a new one isn't an added feature, it will help your chances of a sale."

3. The basement
The appraiser sees: A recently finished basement with a half bath.

What he does: Adds about 2% to the value of the home.

Why: Yes, your finished basement adds value -- but don't expect it to count like first-floor space.

The addition of a bedroom and quarter bath on the ground floor could increase your home's value by up to 20%, especially if you've got only one other bathroom.

"A below-ground basement normally isn't included in the square footage of the house," says Miller.

The same rule applies to outbuildings like a pool-house casita, painting shed, or studio.

4. The market

The appraiser hears: Two nearby homes just went into contract above their asking prices.

What he does: Nothing.

Why: While a broker might pump up a home's asking price based on the sense that the market is "hot," by and large, appraisers are bound by the data of recent comparable sales.

What if prices are suddenly up in your area, and you're nervous that your house won't appraise for contract price? In that case, you might want to delay your appraisal until one of those recently contracted sales closes.

5. A remodel

The appraiser sees: An expensive, custom-made, built-in entertainment center.

What he does: Makes a negative adjustment to the valuation.

Why: "Cost doesn't equal value," says Miller.

Renovations that are at all trendy -- or not in keeping with the historical period of the home -- will be assessed at the cost of ripping them out.

Timeless improvements, on the other hand, such as a deep sink or new wooden cabinets in the kitchen, will add value.

So if you're thinking of remodeling, ask a local real estate agent to tell you what's on the wish list of today's buyers.