Sellers

Set a price at the lower end of your property’s realistic price range.  You will get multiple offers.

…for at least two weeks before you begin showing it.

It’s often disruptive to have a house ready to show on the spur of the moment, but the more often someone can see your home, the sooner you’ll find a buyer.

Decide in advance what price and terms you’ll find acceptable.

If your home has been on the market for more than 30 days without an offer, be prepared to lower your asking price.

I can’t emphasize this enough, declutter!  Dont just clean the house go a little crazy decluttering.  Throw out or file stacks of newspapers and magazines. Pack away most of your small decorative items. Store out-of-season clothing to make closets seem roomier. Clean out the garage. Remove personal items such as photos, refrigerator magnets, etc.—this makes it easier for prospective buyers to envision themselves in the home.

and screens to let more light into the interior.

Wash fingerprints from light switch plates. Mop and wax floors. Clean the stove and refrigerator. A clean house makes a better first impression and convinces buyers that the home has been well cared for.

Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Open the windows.

in light sockets to make rooms seem brighter, especially basements and other dark rooms. Replace any burnt-out bulbs.

that can create a bad impression. Small problems such as sticky doors, torn screens, cracked caulking, or a dripping faucet may seem trivial, but they’ll give buyers the impression that the house isn’t well-maintained.

Cut the grass, rake the leaves, trim the bushes, and edge the walks. Put a pot or two of bright flowers near the entryway.

in your driveway and reapply sealant, if applicable.

Well.. clean your gutters!

and door numbers.

from a reliable repairperson on items that need to be replaced soon (a roof or worn carpeting, for example). In this way, buyers will have a better sense of how much these needed repairs will affect their costs.

to prove to buyers that the property is not infested.

so you’ll be able to make repairs before buyers become concerned and cancel a contract.

on the furnace, appliances, and other items that will remain with the house.

… provided by us. Be sure that you don’t forget latent defects that might create liability for you after the sale.

In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate this:

1. Start with the purchase price of the home. (This is the sale price, not the amount of money you actually contributed at closing.)

2. Add Adjustments:

• Cost of the purchase—including transfer fees, attorney fees, inspections, but not points you paid on your mortgage.
• Cost of sale—including inspections, attorney’s fee, real estate commission, and money you spent to fix up your home just prior to sale.
• Cost of improvements—including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.

3. The total of this is the adjusted cost basis of your home.

4. Subtract this adjusted cost basis from the amount you sell your home for. This is your capital gain.

If you are preparing to sell your home, you should be aware of the capital gains tax implications. There is a good chance that you will not owe any capital gains taxes on the sale of your principal residence if you meet certain federal requirements. And, if you do, the amount of capital gains that you pay on will be significantly reduced.

Capital Gains Taxes on the Sale of a Home

The capitals gain, or real estate profit, is calculated by deducting the price you paid for your home from the sales price. Other potential deductions include any major home improvements or costs incurred while preparing to sell (keep your receipts!), the commission you paid to sell your house, and any closing costs you paid to purchase it originally and to sell it now.

If you are single or are married but file taxes individually, you do not have to pay income tax on real estate profits unless they exceed $250,000. For married couples who file jointly, the exclusion increases to $500,000.

To qualify for these tax exemptions on your home sale, you must meet the following IRS requirements:

• Owned the home for at least 2 years (ownership test)
• Lived in the home as your primary resident for two out of the past five years prior to the sale (use test)

If you own two homes and split your time between them, your primary residence is the one that you live in for the majority of the time. Thus, the two-year residency requirement doesn’t have to be consecutive – you just need to have resided in your home for a total of 24 months out the five years prior to the sale. 

You cannot claim the capital gains exclusion if you previously claimed it for the sale of another home within two years of the sale of your home. Additionally, if you sell your home for less than you owe on it, you cannot deduct that loss unless you turn it into a rental property. Speak with an accountant to get the specific rules here.

If you plan on selling your home and received a first-time homebuyer credit (applicable to homeowners in Maryland), you must repay the full amount of the credit if the property is no longer your primary residence within three years of the date of purchase.

Exception to the Rules

There are few exceptions to the rules for claiming the capital gains exemption. An example would be if you had to move before owning the home for two years because of a job change or because you experience what the IRS designates as an “unforeseen circumstance,” such as a divorce or natural disaster. In these situations, the IRS will allow you to prorate the exclusion.

Calculating Capital Gains

Let’s say you bought your house for $400,000, put in $75,000 in improvements, and had related fees and costs of another $10,000. This gives you a cost basis of $485,000. If you expect to sell the house for $750,000, the potential capital gain would be $265,000. If you are married and met both the ownership and use tests, you could exclude the entire gain from your taxable income. However, if you are single, the exclusion only goes up to $250,000, so you would owe capital gains taxes on $15,000.

Non-residents may have income tax withheld at settlement until you pay next years taxes. Also, if you worked from home or used part of the property for business and wrote it off during that time, you will be taxed on that percentage of the profit. Furthermore, if you rented your home out and depreciated it, you may be responsible for paying taxes on the depreciated amount unless you sell the property through a tax free exchange.

A tax free exchange allows you to sell investment property and purchase other similar property without paying any capital gains tax on the property you sold. I sold a rental property in Hawaii in 2006 and put the proceeds into an exchange account from which I purchased a rental property in Galveston, Texas. I paid no taxes on the sale due to this kind of exchange. 

If you have extenuating circumstances that may affect your capital gains, you should contact a certified public accountant or tax attorney for professional guidance.

If you would like help getting top dollar for the sale of your home, contact the DeLorenzo Group today.