New Year, New Tax?

Proposed Real Estate Tax

In early February, the Ohio House Finance and Appropriations Committee heard discussion of a potential real estate tax change that could be implemented.  As discussed in the video- housing, construction, renovations and repairs have been exempt from the tax talks- but the real estate industry may be facing changes in the near future.

The potential service tax would be applied for all REALTORS using the sample below taken from the video.

At the sale of a home, the agent receives commission, and the tax would be applied to the commission because it is a service provided by the REALTOR. 

A $100,000 home sale

$6,000 commission

Sales tax sample of 6% is $360

The tax amount of $360 on a $100,000 sale sounds small, but the name of the game is to sell, sell, sell! And those taxes would add up throughout the year.  The sales tax would include a ¾% vendor discount, similar to the sale of goods.  The 50% small business income tax cut is also included in the discussions, as well as a 20% reduction- which would apply to many REALTORS as well. The main issue of concern is essentially whether or not we should be adding taxes to one of the markets with the biggest potential favorable impact on our country!

 

http://ohiorealtors.org/2013/02/13/ohio-tax-commissioner-addresses-the-proposed-real-estate-sales-tax-during-house-hearing/

What is Behind 'DOM' in Homes for Sale?

If you have begun the search for real estate and homes for sale, you have undoubtedly come across certain terms that you have plugged into that Google search bar to figure out what exactly it is that you are looking at.  Although we can all easily uncover a definition, the underlying meaning can have several factors that come into play.  In most listings for homes for sale, realtors will include DOM or days that the house has been on the market.  Deciphering what each unique listing has to offer, and where exactly it stands in the test of time- is something that an experienced real estate agent can offer unparalleled guidance for.  It is easy to cross new listings off the list as far as unanswered questions related to DOM- a new listing is just that, and will reflect in the count!  A listing that has been on the market for any amount of time will require some further research. 

Several factors can come into play, including geographic location.  In the Greater Cleveland area, the average DOM is 107 days, compared to the national average of 90 days.  An experienced realtor can help navigate through various reasons for listing timeframe, as well as offer insight on potential opportunities.  In most cases, a house that has been on the market for an extended period of time will usually result in a seller that is more than likely willing to negotiate.   On the contrary, this can also mean the seller may be unwilling to negotiate, which your realtor will be able to quickly identify so that unnecessary time is not spent on wasted negotiation efforts.  Other factors that play into DOM could stem from a mismatch in listing price and current market value, and also human error in the MLS listing entry that doesn’t accurately represent the property.  A house could have been contingent, and the buyer may not have been able to secure the transaction, and the house would have been technically available throughout that time period as well.  Of course there is always the possibility that the house has issues deemed major, and the opportunity to receive a great deal with a bit of hard work is possible depending on each unique situation. 

 

What is PMI and why am I going to love it?

What is PMI?

PMI, or private mortgage insurance, is often looked upon as an enemy- an unnecessary fee that many of us in the housing market are forced to pay, with no other option.  PMI inherently receives a bad reputation, but I believe that education is key- and PMI can be our new friend, especially during

tax season!

Starting at square one as a potential buyer, we are contemplating how to buy a home, which REALTOR to choose, and of course a location to buy a house!  Many of the terms that a buyer comes across in the process can be confusing, and working with a great REALTOR is essential.   Often times we are the only individuals to which buyers can ask the important questions! 

PMI is actually a great tool for buyers, especially buyers that simply cannot put down 20% for a down payment.  The PMI is in place so that buyers can purchase a home, without a full 20% down- Yet lenders are still comfortable with the transaction because a safety net is put into place.  Once a certain amount of equity is reached, the homeowner cancels the PMI and no longer has to insure their mortgage privately.  

Why are you going to love PMI?

A homeowner is able to use the PMI premiums as a deduction on itemized tax filings!  PMI premiums can be deducted in the same year that they are paid, future payments would be deducted on corresponding years.  It is important to note that if questions arise, it is best to consult a tax professional.  Some limitations do exist, but as a general rule your PMI premium can be your next tax deduction.

Where Exactly Does Our Tax Money Go?

Whether you have recently purchased, or are a long time resident of North East Ohio, it is important to stay up-to-date with the most recent property tax information for our area.  Every county will re-evaluate property values using a three year cycle, and your newly assigned property value effects the taxes we as homeowners are responsible for.  Many of us are ready for the 2013 tax filing season, but do you actually know where the property taxes are allocated? 

Based on a $100,000 home value, the average tax rate equates roughly to $2,213 in taxes (Depending on actual rates for the seven counties surrounding the Cleveland-Akron area) and that amount is then dispersed accordingly.  The chart below created with data from Cleveland.com shows us where our money is headed. 

When considering purchasing home, a great REALTOR will be able to let you know tax information for an area that you are looking at homes for sale, and also pertinent information for the related areas that your taxes are designated to.  Often times taxes can be lower in townships and villages, but research and education play crucial roles for the long-term satisfaction resulting from choosing a particular area in which to live.