Now that the housing market has finally begun to stabilize and interest rates remain at historically low levels, more and more homebuyers and sellers are dipping their toes back in the water.
If you're planning to sell your home, you need to understand the tax implications of selling a home as well as be aware of structural and cosmetic flaws in your home and neighborhood that could undermine your asking price or keep the property languishing on the market for months.
First, the tax tips:
In general, if you make money on the sale, you can exclude the gain from your taxable income (as outlined below) if you've owned and used the home as your residence for two out of the past five years.You may be able to exclude up to $250,000 of the gain from your income ($500,000 on most joint returns).If you can exclude all of the gain, you don't need to report the sale on your tax return.Gains that cannot be excluded are taxable. You must report them on Form 1040, Schedule D.You cannot deduct a loss from the sale of your main home.For more information, see IRS Publication 523, Selling Your Home (at www.irs.gov).
Many factors can negatively impact your being able to attract buyers and ultimately get the price you want. Sometimes there's not much you can do:
If you're located on a busy street or the local school district is subpar, you probably won't fetch as much as for the same house in a better neighborhood.If your house is the only contemporary model in a sea of colonials or if your remodeled McMansion is surrounded by two bedroom/one bathroom cottages, many buyers might be turned off. Not everyone wants to stand out from the crowd.If you started remodeling and didn't complete the job, many people won't want to take that on, even with a significant reduction in price.
However, there are many relatively minor changes that may boost your home's marketability. For example:
If your interior or exterior walls are painted with bold colors or textures, it might be worth toning it down with a more neutral palette.If you can afford it, have your home professionally staged, since they know how to maximize space and show off a home's strong points (while hiding its defects.) But if you're using your own furnishings, thin them out.Mismatched appliances, cabinetry and plumbing fixtures stand out like sore thumbs. The same goes for worn floors or carpeting. Discuss with your realtor which improvements might be worth the investment.Make sure your yard is well-tended and has at least basic landscaping. Overgrown weeds and abandoned junk don't help your curb appeal. The same principle applies for common areas if you live in a condominium.
If there are foreclosed homes in the neighborhood, chances are they aren't being well-maintained. Make contacts with the lenders taking over these properties so you can report problems such as vandalism, trash or overgrown yards. If they're unresponsive, ask your city's building department whether they can charge fines or penalties.
Also, work with your neighbors to keep an eye on empty homes. Take turns mowing the lawn, picking up trash and removing graffiti. Anything you can do to bring up the quality of the neighborhood will improve your chance of selling.
Alderman directs Visa's financial education programs. To Follow Jason Alderman on Twitter: www.twitter.com/PracticalMoney.