‘Tis the season for gifts! What better gift than a down payment for a home buyer?

With the holiday season of giving just around the corner, it’s a good time to visit down payment gifts for home buyers. Getting money for a down payment on a home purchase could be the best gift ever, but there are  rules for gifts that you must know to make sure everything goes smoothly.

downloadGifts must be from family members.

As an overarching rule, mortgage lenders require gifts for down payments to be from family members. Lenders might make case-by-case exceptions, and if so, will require that the relationship of the non-relative and the other factors of the loan profile be strongly compelling. For example, if you were receiving down payment gift funds from your godparents and could document that they’ve been close to you and your family all your life, that might be a case certain lenders would accept.

Gift tax is imposed on the donor, not the receiver.

Two main provisions of gift tax law impact donors, and if handled properly, can enable the donor to have no tax liability, even for large gifts.

Annual gift tax exclusion limit

First, under the annual gift tax exclusion law, any individual can gift any other individual $14,000 per year tax free. So a married set of parents can each give $14,000 to their single child for a total of $28,000. Or that same set of parents could gift to a married couple a total of $56,000 without tax implications.

This doesn’t need to be filed on annual tax returns, but you need to make sure it’s easy to document gift tax compliance later if needed. The clearest way to handle the $56,000 example is to have the mom write two $14,000 checks: one to her son and one to her daughter-in-law. Then the dad would do the exact same thing, for a total of four checks of $14,000 each. Then if the parents were ever asked by the IRS to demonstrate they were within the annual exclusion limit, it would be easy.

Lifetime gift tax exclusion limit

Second, under the lifetime gift tax exclusion law, any individual can gift up to $5.34 million tax free over a lifetime. So let’s say in the example above that the married set of parents were trying to gift their married son a total of $100,000. We know that they can gift $56,000 tax free under the annual exclusion rule. The remaining $44,000 can be gifted tax free under the lifetime exclusion rule. That amount can all be transferred in a lump sum, and the donors must complete IRS Form 709 to keep a tally of gift funds that fall under the lifetime exclusion.  Both the annual and lifetime exclusions change each year.

Gift donors must provide letter & bank statement to lenders.

It’s not enough to tell your lender you’ll be getting gift funds from a family member. Lenders must track gift funds as painstakingly as they track all your other asset and income documentation.

The funds can’t just appear from your family donor, so add this topic to the list of things to talk about upfront. Here are the most important things to know:

  • You and the donor must both sign a lender Gift Letter verifying the funds are in fact a gift.
  • The letter will explicitly ask the donor to verify that the gift isn’t a loan.
  • Neither you nor the donor writes the letter. The letter will be provided by your lender, and it’s the only format that the lender will accept.
  • For most loans, donors must also provide proof of their ability to gift, usually in the form of a bank statement. There are very few exceptions, and your lender can advise on whether it will waive the requirement.

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As long as donors know these lender and tax rules upfront, the process is simple. So as we enter the season of gift giving, you can use these guidelines. Please consult your tax preparer or accountant and local lender to verify and craft a plan that works for you.

*Original article published HERE

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{home} Selling Tip Saturday – Why buyers Pass Up ‘Good’ Homes

Selling your home takes hard work and commitment to get it ready to impress buyers; It takes more than having the right location. While you can’t control the market, you can control your home’s appeal. Don’t let the following reasons make buyers pass on purchasing your home.

 

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Price: If you price your home too high, the right buyers won’t see it, and the ones who do see it will quickly realize other homes in the same range offer more value.

Clutter: If your tables are full to the edges with photos, figurines, mail and coffee cups, buyers will be more focused on trying not to break something than considering your home for purchase. Too much stuff makes it confusing for buyers to see the rooms clearly, so they’ll move on to a clearer choice.

Deferred maintenance: Buyers really want a home that’s been well-maintained, so it’s your job as the homeowner to keep your home in good condition. You don’t want buyers wondering what needs fixing and at what cost.

Outdated décor: The reason people are looking at your home instead of buying brand new is because of cost and location. They want your neighborhood but not a dated-looking home. Take popcorn ceilings and flocked wallpaper down. Replace carpet with an upgrade or perhaps hardwoods.

Smells: There’s not a buyer in the world who will buy a home that smells like pets, dirt or water damage. If you get an offer at all, it will be low and contingent on a positive inspection.

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It’s Trumansburg Tuesday!

Today’s Trumansburg Tuesday is for you buyers out there… ever wonder what it costs to hire a buyer’s agent?  How does a buyer’s agent get paid?   If you are hesitant to hire an agent to represent you and advocate for you on the purchase of you home because you don’t know if you have to pay them… then read on and hesitate no more!

 

Do you ever wonder if you need to pay your real estate agent when you buy a home?

If not, then how do they make money?

Or, do you know they get paid somehow…but just aren’t sure how?

Well, you’re not alone. Lots of people aren’t sure how that all works.

The short answer

To answer the question as plainly as possible…

When you buy a house, you (usually) don’t have to pay your buyer’s agent. At least not in the sense of you writing out a check to the real estate agent or their company.

However, he or she will get paid.

The thorough answer

It’s kind of confusing, right? If you’re not paying your agent, who is?

The seller is…kind of.

(We’ll elaborate more on this later).

So the question becomes: Why would they work with you, for you, and with your best interests in mind, if you aren’t paying them?

Because that’s their responsibility.

It wasn’t always that way, though. It used to be that all agents were essentially working for the seller, trying to get the highest price they could for the house.

That’s changed…actually quite a while back. But the way agents get paid has not.

The seller still pays the commissions, even though the buyer’s agent is representing the buyer’s interest, not theirs.

So that sounds just as weird for a seller, right? Not really. It actually makes sense (and if not, it should in a minute).

The money comes from the equity

In order to sell a house, the owner needs to have equity. In other words, they have enough money to sell the house for a certain price, pay off any existing loans, and other costs (like real estate commissions), and still walk away with money in their pocket.

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(Yes, they can sell even without equity, but we’re not getting into that here. Those are short sales. And, yes, even then the buyer’s agent gets paid by the seller, even though there’s no equity.)

It’s the buyer’s responsibility to come up with a down-payment. It would be tough for most buyers to also have to pay a buyer’s agent out-of-pocket.

So, it makes sense that even though buyers’ agents represent the buyers’ interests, that the commission still comes out of the equity of the house.  And the commission is negotiated between the seller/owner and their listing agent.  The listing agent then offers compensation and cooperation per the multiple listing service.

Look at it this way…

You are actually paying your buyer’s agent. If you, and your down-payment, and loan did not pay the seller the agreed upon amount, the seller wouldn’t have the money to pay the agents.

It’s your money, too, even though it looks and feels like the money is being paid by the seller.

Bottom line? Do your homework

A lot of home buyers don’t give an awful lot of thought to the agent they choose to helpthem buy a house. Perhaps it’s because there often isn’t a single moment of “hiring” the agent.

Maybe it’s because of the confusion and concern about committing to a buyer’s agent must mean you’d have to agree to pay them directly.

Whatever the reason is, many people just sort of bounce around to open houses, or go see houses with any old agent they come across, or go directly to the listing agent.

Don’t do any of that.

Seek out, find, and hire the best real estate agent you can find, because whomever you choose will get paid the commission offered by the seller.

So, choose well. You’re paying for that agent, as much as the seller is…just not directly by writing out a check to the agent.

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{Home} Selling Tip Saturday

It’s about that time of year when home seller’s start to contemplate or prepare to sell in the Spring.   If you’ve contacted a REALTOR and started the conversation about getting your home ready to sell in the spring, congratulations, you are ahead of game!house-for-sale-1200xx1200-675-0-63

The best tip I can give you about selling is this:  call or email a LOCAL REALTOR or better yet, me! 🙂    I can answer your questions, give you a ‘to-do’ list to prepare your home to sell, give you a draft market analysis, recommend repairs or a pre-listing inspection so there are no surprises, and give you the run down on how this whole process works.

The first and best step in preparing your home to sell is to contact a REALTOR.  They know the local market and are your best resource.

And if you already know which REALTOR you are hiring to list your house and are looking for a punch list of what to tackle prior to listing read the “great big list of things to do when getting ready to sell your house”!

Happy home selling!

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