With the spring real estate market about to blossom, there are a few things about selling your home that may be worth evaluating before the sign goes in the ground.
If you are going to do any fix-up in preparation to sell, talk to a few real estate professionals about the merit of your fixes and the anticipated payback. There are lots of opinions regarding what you should do, but the real answer depends on the price point of your home and the local market conditions.
The next part is pricing the home. Everyone wants to maximize their selling price, but today’s buyers are quite picky if you are trying to get every cent out of the sale.
You may consider attending a few open houses to see what comparable homes are asking. Selecting a broker should be done based on more than how a realtor may price the home. Some may come in with an unrealistic market survey simply to get your listing. It also seems that even the real estate business is being affected by online listings and virtual brokers. Investigate this option before you plunk down 5 or 6 percent to a full service broker. In a real hot market it may not be necessary to hire a full service realtor.
Think about your financial situation after the sale.
If there is going to be a gain on your home, plan ahead to be sure that there will not be any tax due. The IRS rules now allow for a gain to be excluded from income of up to $250,000 for single taxpayers and up to $500,000 for married taxpayers filing jointly. Anything north of that will be taxed. It is also important to note that you may only claim this exclusion once every two years. So if your home was a fixer-upper where you’ve created a nice gain, then you may have to wait a bit before selling.
If you’ve ever used the home for business and depreciated a portion of the home, that may also trigger some tax. The same would hold true if you ever rented a part of this house, as in a two plus family residence or if you rented the entire residence while living somewhere else. Plan ahead for this and speak to your CPA in advance of the sale to know your options.
This is also a good time to begin putting together all of the tax cost data for your home. Your tax cost includes your purchase price, plus any improvements made. It is important to distinguish maintenance from improvements. Painting, for example, is not considered an improvement and would generally not add to your tax basis of the property. On the other hand, painting and other maintenance type of fix ups done just before the listing to spruce up the home for sale may be included as a fixup cost and added to your basis.
John P. Napolitano CFP, CPA is CEO of U.S. Wealth Management in Braintree, Mass. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.