Real Estate Investing

It’s great to deduct the interest of your mortgage payment at tax time!  At other times, it’s pretty hard to swallow what the tax assessor says your home is worth.  I’ve listened to buyers complain that their tax assessment is too high, “What do you mean I have to pay city AND county taxes?” and “This is ridiculous! My home isn’t worth that!”  I’ve also fielded calls from buyers who were irritated because the assessment of their home was too low, “Has my home lost that much value this year?!”  Actually, I’ve had more calls from people upset at lower tax rates because they automatically believe their homes are worth only what the assessor says.  This, of course, is not true… a home is worth what the market dictates it’s worth.

(And I prefer a lower assessment so my taxes won’t be as high.)

Meanwhile, if you’re really unhappy at the government’s interpretation of what your home is worth, you should read this story found in Trulia’s Carnival of Real Estate.  Real estate writer Cliff Jacobson told how to challenge the tax assessor and his story was picked up by the mainstream media.  A reporter contacted him and the resulting story made the front page of the Rochester Democrat and Chronicle.

Cliff did some research on behalf of his fiance’s mother and wrote a helpful piece about how to lower your tax assessment.  His tips include,

One way to have your assessment lowered is to challenge the description and features of your home. Make sure the square footage, lot size, number of bedrooms and bathrooms and garage size are correct. Might the assessor be counting unfinished space in the basement or garage; or improvements you don’t have? Document with pictures when and where possible.

The other tips offered are sensible and smart, so read the whole piece.  He wrote a second piece about the lessons learned from challenging assessments in his own community.  His third piece was about the how his challenge succeeded.  He highlights that in preparation his strategy was:  1) Information 2) Comparables and 3) Condition.

In my own corner of the world, our local county commissioner called me several days ago regarding a discussion on our community blog about tax assessments.  There was confusion that he wanted to clarify so I offered the opportunity for him to submit a guest column about the subject.  He did.

All this talk of tax assessments reminds me of the “How [fill in the blank] views your home” joke.  A sample:

How You View Your Home

How Your Lender Views Your Home

There’s more and it’s funny!

So arson is not really your thing and you don’t feel like reading over hundreds of essay entries. How else are you going to unload that house? One option is joining the thousands of people looking into house swaps. We’ve discussed temporary house swaps for vacation purposes, but a growing number of people are choosing to make those swaps permanent.

The Wall Street Journal recently published an article outlining just how popular this has become. We’re talking 16,000 listings as a combined total between house swap sites like GoSwap.org, OnlineHouseTrading.com, DaytonaHomeTrader.com and DomuSwap.com. Popular free online classified ads site Craigslist saw a 56-percent increase in “home swap” ads during 2007 with 7,392 such ads listed, according to WSJ.

These house swaps are working over short or long distances, usually with realtors or some type of transaction manager involved. It is recommended that a clause be included in the terms and agreements of each contract that final sale is pending on the same-day closing of both houses. This prevents either homeowner from getting snowed and coming up short-handed.

GoSwap.org has a fairly comprehensive Frequently Asked Questions section that briefly outlines some of the tax implications of swapping houses. If ineligible for a tax-deferred 1031 exchange, the homeowners may want to reasonably adjust the home’s asking price - say, by relying on the lowest of several home appraisers’ reports - and thus reducing their capital gains tax obligation. Obviously, the “asking price” of the home can be tweaked (within reason) because it is of little consequence in a housing swap.

The benefits of swapping houses are many. In addition to tax benefits, it can allow homeowners to skirt around broker’s fees - typically 4% to 7%. Still, roughly 13% of the listings on DomuSwap.com were listed and handled by brokers. Housing swaps also make it more possible for people to move up to bigger living quarters, provided they can find someone with a bigger house who is wanting to downsize. Under current market conditions, it may not be terribly difficult to find someone who meets that criteria but has been unable to find a buyer. House swapping is an innovative new trend that seems to provide a win-win scenario for all involved.

The topic of global warming is hot right now, and eco-friendly everything is en vogue. Clean energy is a hot topic in current political debates and there’s even a new cultural phrase emerging - “E.C.” (environmentally correct).

Helping the earth is a worthy goal, but what if you could help yourself in the process? Obviously, we’ve discussed how eco-friendly building can reduce utilities costs. However, you may not know about the multitude of related tax benefits.

Tax Credits are available at the federal level for home improvements including: the installation of energy efficient windows; doors; roofing; insulation; HVAC; solar panels and fuel cells. More specifically, tax credits can tally up to $500 for general eco-friendly home improvements, but up to 30 percent of the cost of solar energy systems (up to a $2,000 limit) and up to 30 percent of the cost of fuel cell installation (up to a $1,000 limit).

Click here for info on which states offer incentives for energy efficiency, and also check out the Green Daily Tax Guide. There, you will find much more detailed information on eco-friendly tax benefits.