Home is where we heal

Everyone is dealing with problems that they don’t readily show to the world. I have lived the last two decades as the sibling of someone struggling with addiction and it has shaped me in so many ways. It has also shaped how I see “home” and how I feel comfortable and relaxed.

If your home has always been your haven, then I must say that I envy you. Growing up alongside addiction has (at times) stolen away the space that one is supposed to feel their most relaxed. In my life, evenings at home could be peaceful or volatile and it was anyone’s guess which would unfold. That is the nature of the struggle of living amongst addiction. No say, no control, just your reactions and your reactions to other peoples’ reactions.

I didn’t understand what home was supposed to be until I purchased my own. There are so many people that I’ve seen take that same deep breath when they walk into their new home as their own space where they can heal from all of the things that have hurt them. Some clients are upfront about what may be going on, and some are not, but the sigh of relief after closing is unmistakable. The walk through the door signifies a weight being lifted, stress being released and the deep understanding that someone is safe in their new home.

Having a place to heal, to grow, to experiment and to express your creativity is more than just comforting, it should be a basic human right. Creating your own safe space is empowering and deeply transformative. It allowed me to learn the importance of emotional and spatial boundaries, and how to build and maintain them with those around me. Once you learn to create your own home, you will fight anyone and anything that tries to destroy it. Home becomes a place of strength, of healing, and a place to build hope.

Real estate is more than walls and windows, it’s helping clients to create their own safe space. I can say from very personal experience that our home is where we heal and I’m so thrilled to spend my days helping those around me to find their space.

Is now the time to… downsize?

As children grow up and move away their parents are hesitant to sell the house that their family has grown up in. The memories are hard to part with, but the house simply isn’t working for them anymore. Add that with the fact that this market has scared the heck out of everyone and there are some empty-nesters that are potentially missing out on an amazing opportunity to grow their wealth, upgrade their living space and live authentically to their current stage of life.

This market shouldn’t scare you, it should invigorate you.

The opportunities that you have are abundant. Receiving more for your home than you ever thought possible opens many doors of possibility to you. What could you do with an extra $40,000 that you weren’t expecting from the sale of your home and not having to make any costly repairs to get your home sold?

Pay off debt? Plunk more money into your retirement savings? Retire now instead of a year from now? Travel the US in an RV? Move to Costa Rica? Backpack Europe while staying only in luxury hotels because you’ve earned it after decades of corporate work? Whatever it is, you do you. Dream your biggest dream and watch the sale of your home carve out the first steps on your next great adventure.

Deciding to sell your home is a big decision, and it could be the start to an even bigger new chapter in your life. Need some additional information on the process or what you could net from the sale before you decide to move forward? I’m happy to help you however I can. A valuation of your home for today’s NC/SC market is always free, and I’m always happy to answer questions over a cup of coffee either in-person or virtually. So call me to get the information that you need to make the best decision for yourself.

Real Estate and Your Income Taxes

Looking around Charlotte it’s easy to see that the market is appreciating, aka the home values are increasing. With more people moving to Charlotte and interest rates still low, there are more buyers than properties available. If you purchased your home even a year ago it’s worth significantly more in today’s market. This has many people very excited to cash out the equity this market situation has given them. But selling your home without having lived there for two full years has some serious drawbacks that most homeowners and even some real estate professionals DON’T know about.

Those drawbacks are related to your taxes.

Under the current tax guidelines, as long as a homeowner has lived in their home as their primary residence for any 2 of the last 5 years, they can exclude $250,000 or $500,000 worth of gain on the sale of their home depending on if you file as single or married filing joint.

… So, what the heck does that all mean?

Let’s say that you purchased your house in June of 2019 for $250,000 and you don’t make any major upgrades during the time that you own it. Later on you decide to sell you house and you sell it for $325,000. In this example, your gain, or the money you made on the sale, is $75,000. If you lived in the home as your primary residence for at least two years, you report the sale on your taxes but the entire $75,000 is excluded from being taxed. You received $75,000 and you didn’t have to pay any taxes for it. That’s a SERIOUS benefit.

What if you sold the house after living there only one and a half years? The entire 75,000 you made on the sale of the home is taxable by both the federal government and the state government. This would cost you more than $18,750 in state and federal taxes (depending on your tax bracket and other variables of course). Even if you turn around and buy another house, you will be held liable to pay the tax on the gain you received.

It’s important to understand the impact that your real estate transaction can have on your financial situation and also your tax situation for the year. Staying a few extra months in a home could mean big savings for you in the long-haul, and understanding this situation could also keep you from jumping into the next highest tax bracket by realizing taxable income that could’ve been non-taxable with a few small tweaks.

Why Price Isn’t Everything

Charlotte’s real estate market is nutty right now and with very little inventory on the market the chances of a home going into a multiple offers situation is exponentially higher. Especially in price points under 350k, where first time homebuyers are up against investors with deep pockets, all-cash offers, homes on the market only a day (if getting on-market at all) and general real estate debauchery.

Multiple offers. Highest and Best. What does it all really mean for the average homebuyer? Maybe not quite what you think. There’s a lot that goes into a seller selecting an offer from a pile of eager buyers, and it’s not just who offers the highest price (but yes, that’s important too).

Type of Financing

The type of financing that a buyer has can have vast implications when it comes to getting the transaction through to the closing table. FHA and VA loans are guaranteed by the government, but they also require more stringent approval processes. And because they are government-backed these processes can move slower and be more difficult to navigate. Down payment assistance programs can be another caveat within the process. A buyer would be silly not to take free money, but when that money comes with strings and stress for the seller, it might be best foregoing that money with our current market.

Buyer Liquidity aka money in the bank

Buyer liquidity is a natural extension of financing. Certain financing is geared towards helping buyers that don’t have much money to put down on a home. For example, there are VA loans that are 100% financed loans, so the buyer is bringing no money to closing. That’s great for the buyer, but what if the home doesn’t appraise up to the purchase price that’s written on the contract? The lender is only going to lend up to the appraisal price (aka what the home is “worth” in the eyes of the lender) so if the seller knows that the buyers aren’t bringing money for a down payment (or aren’t bringing much) then the likelihood is high that buyers won’t have cash to bring to cover the difference in the appraisal and purchase price. If this can’t get figured out in a timely manner then the buyer will have to terminate the contract.

Which brings us to…

Due Diligence and Earnest Money Deposits

If a buyer needs to terminate a contract the money that they have on the line is their Due Diligence money and potentially their Earnest Money. Whether or not they lose Earnest Money is dependent on when they terminate the contract (during or after the due diligence period) and certain types of financing require the buyer to receive their Earnest Money back if the home does not appraise for the purchase price (I’m talking about FHA and VA loans here).

If any of these termination scenarios were to occur, would the DD and EMD received from the buyer really be enough to compensate for the lost time and the seller having to go back to square one in selling their property? Riskier financing means more DD and EMD is needed to entice the seller to take a chance on the buyer.

Closing Date

Depending on the moving situation that the seller may be in, they may want to move very-very quickly and be done with the sale or they may want to stay in the house a few extra days or weeks to make the move-out process smoother. This can also lead in to the discussion of seller possession after closing. If, for example, the seller needs to sell their home to put money towards a new construction home they’re building they may need to close soon but then they don’t have a place to live until their home is completed and ready for move-in. A closing with seller possession after closing, also known as renting back a house after the sale, may be very-very important to the sellers. There are liability issues with the seller staying in a home they do not own for a period of time, so if this is something you’re interested in doing or offering, make sure you understand what could go wrong.

Buyer and Agent Requests

For the buyer this means other things that are requested as part of the contract. Usually it’s requesting the seller to pay a portion of the buyer’s closing costs, leaving personal property behind like a fridge, washer or dryer, or paying for a one-year home warranty for the buyer.

Requesting closing costs reduces the overall amount of money that the seller receives from the sale, and sellers don’t really like less money. Also, such a request tells the listing agent that the buyer is likely already strapped for cash because they need help paying their closing costs. It’s important to note that closing costs can’t really be financed as part of your loan amount, someone needs to pay them at the closing table. If those expenses are already tough for the buyer to cover are they really going to have money to cover an issue if the home doesn’t appraise? Likely not.

Another thing that goes into decision-making is how the buyer’s agent conducts themselves. I know, it doesn’t sound fair to be judged by someone else’s actions, but if that person is representing you and they aren’t conducting themselves in a professional manner then that’s a problem. If a seller receives two largely identical offers but one has a knowledgeable, communicative, and courteous agent and the other has a trainwreck of an agent, I have to tell the seller because it could impact the buyer’s ability to get things done in a timely and accurate manner, which could cause the buyer to need to terminate the sale.

Seller Preferences. Maybe.

This is where things turn into a grey area. It’s common practice these days for buyers to write personal letters to the sellers explaining why they love the house and why they should choose their offer over any other. Depending on the seller these may work, or they may backfire, so if you’re the buyer be careful! I had a client going through a messy divorce and they got a ton of letters explaining how the buyers saw themselves building their family with their spouse in the home. It was hard to read knowing the circumstances of the seller, who had also planned to grow their family in the home, but life ended up much different than they had expected.

I had another client who got their offer accepted because both the buyer and the seller were veterans. The seller felt so strongly about supporting a fellow veteran that they took a more-difficult VA loan as opposed to a conventional loan.

Seller preferences can get sticky if their preferences could appear to be a violation of fair housing laws. Choices based on the buyer’s race, gender, family status, etc. are highly discouraged by real estate professionals so we’ll try to keep these details out of the discussion if at all possible. When I talk to a seller about selecting an offer and personal details about the buyer are invovled in the submission I forewarn the seller than I will remove photos or information that could violate fair housing. If this is a problem for the seller then we have another issue entirely.

New Construction… Now What?

The purchase of a new construction home is exciting, with lots of time for anticipation of moving in to your new home. It feels like the builder rep becomes your new best friend, you get to pick out your packages and upgrades so everything can reflect your style (if the home isn’t already built or spec’d of course!), so with all of the excitement it’s important to keep in mind that there are pitfalls that you’ll want to avoid along the way.

Builder-Specific Contracts

Most if not all builders in the area use their own purchase contract forms. Why? Because it allows them to closely control the process, while being very forgiving to the builder and not very friendly towards the homebuyer. Example, there’s often a clause that the builder can delay construction for any reason and must simply begin the construction process on your lot within one year. That does not read that they’ll hand over a fully constructed home in one year, but merely start the build in one year. Regardless of when they tell you that the expected completion date is.

It’s extremely important to know and understand the contract terms that you’re signing and what your rights are if something goes wrong. Many builder contracts mandate the use of arbitration instead of legal action in a court of law. It’s important to know what this means before you find that you need to sue the builder. This might seem like something that wouldn’t happen often, but there are some very good lawyers here in Charlotte that spend their days only litigating with residential new home builders.

If you decide that the contract is too skewed in the builder’s favor and don’t want to agree to the contract there is little that you can do to still purchase the home. Using their contract is like the price of admission to the ballpark just to play the game. If you want the house, you will have to take on the risk.

Homeowners Inspections – pre and post drywall

Even if you’re buying your home new, there could still be issues that you would want to be aware of before closing, so I always, always, always recommend having an inspection done. And not just one inspection for new construction but TWO. The first is called a pre-drywall inspection. This is when everything has been framed, utilities have been installed and the walls are just about the be closed up. Having an inspection completed at this point allows the inspector to view areas of concern that are normally hidden behind drywall, meaning that they can see more potential issues. Just because a home is new doesn’t mean that it was built correctly, so buyer beware.

Once everything is completed I recommend having a traditional homeowners inspection. This is when the inspector will go through and look at everything they can to ensure it was built the way that it should’ve been. They will also find things like loose door molding and other random things that you’ll want the builder to fix prior to closing.

Environmental testing

Though a house might be new there’s still good reason to test things like water quality and whether or not the home has high levels of radon gas. Even if a geographical area isn’t know to have issues with radon there are some building materials that may be included in the house that might spike levels and that’s an important thing to know before you move in. Example, granite, though trendy in both kitchens and bathrooms, can be known to emit high levels of radon, so know your stuff and get a test.

First Year Warranty

Many builders will offer a warranty on their homes at the 12 month after closing. The builder will do a walkthrough with the owners and fix anything that may have broken or settled during the first year that you’ve lived there. This is another GREAT time to get a full home inspection. This gives you a full report with issues listed and pictures provided for the builder to then go and fix. I recommend scheduling a home inspection around month 11 so you’re prepared for the builder’s walkthrough. I also recommend keeping a running list of items you corrected taped to the inside of a kitchen cabinet. You might forget about that kitchen cabinet that doesn’t close quite right and miss having it fixed without you needing to call a fix-it person.

Sales Process

For builders this is a business, and they treat it as such. They are very savvy, so it’s important that you have someone on your side to represent you and your interests. Plus, it’s good to have someone that understands the builder’s sales process. Sales people have quotas to meet on a monthly and quarterly basis, so sometimes there’s more wiggle-room in the price than people realize. They have a purchase price listed but what they don’t tell you is that they likely have a range of prices they’re willing to accept if it means making a sale. You’ll have more luck negotiating on price if you buy already built inventory home, but if homes are slow to sell they might make an exception if you’re looking to go under contract on a to-be built home. You never know, so ask! And if you have any questions or changes that the sales staff agrees to, be sure to get it all in writing before signing and giving your deposit.