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Cell Phone: 240-483-7556
Office: 301-384-8700

Tuesday, July 16, 2024

The case for working with a friend and agent

The familiarity and trust established in a friendship may be the ideal foundation for a successful business relationship. Having a loyal ally from their social circle adds a new level of insight and service to such an important financial decision in their lives.

When considering the choice of engaging a friend who also happens to be a real estate agent in the purchase or sale of their home, consumers are presented with a multitude of compelling reasons to embrace this option. Firstly, the pre-existing level of trust between friends lays a solid foundation for effective communication and transparency throughout the transaction. This trust, combined with the highly personalized service that a friend-agent can provide, ensures that the process is tailored to the individual's specific needs and preferences. Additionally, friends understand each other's lifestyles, priorities, and goals, allowing for a deeper level of advocacy and support throughout the real estate journey.

Accessibility is another key advantage of working with a friend-agent, as the familiarity and comfort level shared between friends often result in prompt responses and availability during crucial stages of the transaction. Furthermore, the common goal of achieving a successful real estate transaction strengthens the collaboration between friends, fostering a sense of loyalty and commitment to each other's best interests. With a friend-agent, clients can expect insider insights and valuable tips about the local market, along with a flexible and accommodating approach that aligns closely with their needs and preferences.

Moreover, the shared values and understanding between friends ensure that the agent's efforts are aligned with the client's long-term goals and aspirations. Beyond the transaction itself, utilizing a friend as an agent can strengthen the bond and deepen the relationship, as both parties navigate this important milestone together. Overall, the decision to engage a friend who is also a real estate agent offers numerous benefits, from enhanced trust and personalized service to insider insights and strengthened relationships, making it a compelling choice for many consumers.

A friend who also happens to be an agent understands the delicate balance between friendship and business and would never jeopardize the relationship for the sake of a transaction. In fact, they are likely to go above and beyond to safeguard their friend/client's best interests, leveraging their expertise and dedication to ensure a successful outcome while preserving the integrity of the friendship.

If a buyer or seller has reservations about engaging in a real estate transaction with a friend who also happens to be an agent, it's crucial to address these concerns openly and honestly. Rather than allowing apprehensions to fester and potentially strain the friendship, initiating a candid conversation with the friend-agent can provide clarity and alleviate any uncertainties.

By expressing their concerns and discussing expectations upfront, both parties can navigate the transaction with transparency and mutual understanding. Ultimately, opting to work with a trusted friend who is an agent, rather than a stranger, not only ensures professional guidance but also strengthens the bond of friendship through open communication and shared goals.

If a person feels strongly about not working with their friend/agent, they should consider asking for a referral to a trusted colleague of theirs who would represent their interests effectively.  Your friend would want to support you even if it's not as your agent.

Tuesday, July 2, 2024

Helping buyers make sense of upcoming changes

Upcoming changes in real estate transactions are imminent following the resolution of significant class action lawsuits involving sellers and the National Association of REALTORS� along with numerous leading real estate firms nationwide. These changes will have implications for sellers, buyers, and agents alike.

There has been a lot of news coverage in the past few weeks but unfortunately, much of it has added to the confusion on how things will change rather than clarify it.

It was reported that since the seller will most likely be paying only their commission, the price of homes will come down.  That is very unlikely to happen.  The value of a home is not determined by whether a commission is paid nor the amount of it.

In the terms of the settlement, which is still to be approved by a court, the change will go into effect on August 17, 2024 but some companies will implement the changes earlier.  The following excerpts are taken from the NAR Settlement Fact Sheet.

  • MLS participants acting for buyers would be required to enter into written agreements with their buyers before touring a home.
  • Compensation continues to be negotiable between agents and the consumers they serve.
  • Selling brokers must clearly state compensation offers to buyers' brokers on each listing, which may vary and can even be zero.Compensation offers may not be communicated through the MLS.
  • The types of compensation available for buyer brokers would continue to take multiple forms, depending on broker-consumer negotiations, including but not limited to:
    • Fixed-fee commission paid directly by consumers
    • Concession from the seller
    • Portion of the listing broker's compensation
  • The settlement expressly provides that sellers may communicate seller concessions � such as buyer closing costs � via the MLS provided that such concessions are not conditioned on the use of or payment to a buyer broker.

It is important for buyers to understand that in the many forms of buyer representation agreements that exist throughout the United States, there will be a provision stating the buyer's agent fee for the transaction.  In the past, the most common way the fee was handled was through an agreement that the seller would pay a specific amount to the buyer's agent or that the listing fee would be shared with the buyer's agent.

The market will be in a state of uncertainty as to the different ways the buyer's agent will be compensated.  The most common ways would be:

  1. The seller will offer cooperative compensation.
    1. If the fee was less than stated in the buyer rep agreement, the buyer will be responsible for the difference.
    2. If the fee was more than stated in the buyer rep agreement, without exceptions addressing this specific condition, the buyer will have some options such as receiving it as a rebate at closing.
  2. If the seller was not offering cooperative compensation, the buyer would cover it personally.
  3. The buyer could direct their agent to only show houses whose seller is offering cooperative compensation.
  4. Direct the buyer's agent to negotiate in the offer to purchase agreement that the seller pays the buyer's agent fee.

Consistently, almost 90% of homebuyers have chosen to collaborate with a real estate agent or broker, a trend expected to persist. Despite the rise of digital research and transactions, the obvious value provided by REALTORS� endures, with nine out of ten homebuyers expressing satisfaction and a willingness to recommend their agent to others.

National Association of REALTORS� members will remain steadfast partners for the countless Americans pursuing the dream of homeownership, providing reliable support and guidance along the way.

For more information and another viewpoint, see this article published April 3, 2024.  Download a copy of 105 More Ways agents who are REALTORS� are worth every penny of their compensation.

Tuesday, June 25, 2024

How to change a second home to a primary home & why

The tax benefits of owning both a first and second home can be significant, with the IRS allowing taxpayers to deduct interest and property taxes on both properties as itemized deductions on their tax returns, albeit with certain limitations. Interest deductions are limited to the amount of debt incurred to buy, build, or improve the first and/or second home, with a maximum cap of $750,000. Property taxes, falling under the limitation of state and local taxes as set forth in the TCJA of 2017, are capped at $10,000 per year.

However, while second homes enjoy these benefits, they do not qualify for the Section 121 exclusion sale of principal residence rules. These rules only apply to a taxpayer's principal residence, allowing couples filing jointly to exclude up to $500,000 of capital gain from the sale of their primary home, and single filers up to $250,000 of gain, provided they have owned and used the property as their principal residence for two out of the five preceding years.

Taxpayers considering selling their second home, which wouldn't qualify for the exclusion, may explore changing its status to their principal residence. This entails owning and using the property as their principal residence for two years, along with careful documentation and planning to qualify for the exclusion. Indicators of a principal residence include making the second home the preferred mailing address for various documents, ensuring all family members reside there most of the time, having utilities in the homeowner's name, and updating addresses with relevant entities.

Changing the status of the second home to the principal residence can be beneficial to avoid recognizing gain on the sale. However, it's crucial to consult with a tax advisor to determine eligibility and ensure proper documentation and support for the change. This guidance will help navigate the process effectively and maximize tax benefits for the homeowner.

Tuesday, June 18, 2024

Homeowner Strategies to Minimize Gain & Maximize Proceeds

The gain on the sale of your home is determined by the price you sell the home, less selling expenses, less the price you paid for it, plus the capital improvements made during the time you owned the property.

IRS and accounting use the term "basis" to describe your cost in the home.  It is a dynamic number that changes over time based on capital improvements that are made and capital losses that are incurred.  What is called the tax basis may better be referred to as cost basis.  It is the taxpayer's cost in the property used to determine the tax on the gain of the sale.

The calculation begins with the purchase price of the property plus certain capitalized acquisition costs that were owed by the seller but were paid when purchased.  Examples would include real estate taxes owed through the day before the sale date, back interest owed by the seller, and charges for repairs that were the seller's responsibility.  Capital improvements made to the property during ownership will increase the basis.

Capital improvements must either materially add value to the home, appreciably prolong the useful life of the property, or adapt a portion of the property to a new use.  IRS Publication 523 has a section on figuring the gain or loss on a personal residence. 

Some of the following may be considered capital improvements: landscaping, driveway, fence, swimming pool, new roof not covered by insurance, replacement of HVAC equipment and appliances.  Maintenance and repairs to a person's home is not a capital expenditure. 

If the owner purchased a home for $350,000 and during that time spent $110,000 on qualified improvements, the cost basis of the property would be $460,000.

If cost recovery had been taken on the home when it was used as a rental property, even though it is now considered a principal residence, the total amount of the depreciation lowers the basis in the property.


Purchase Price


Plus Capital Improvements


Adjusted Basis


Sales Price


Less Selling Costs


Net Selling Price


Less Adjusted Basis


Capital Gain


In the example above, if the taxpayer owned and used the home as their principal residence for two out of the last five years and had not taken an exclusion on another home during the two years prior to the current sale and didn't acquire the home through a 1031 exchange during the past five years, the gain qualifies for an exclusion and no tax paid.  Single taxpayers and married taxpayers filing separately can exclude up to $250,000 of gain from the sale of a principal residence.  Married taxpayers filing jointly can exclude up to $500,000 of gain from the sale.

Record keeping is important for you to substantiate the capital improvements when it comes time to calculate the gain.  While IRS does allow you to reconstruct the expenses, it is much better to keep track of them in a contemporaneous manner with dates, receipts, and possibly, pictures for the more expensive improvements.

For more information, download our Homeowners Tax Guide.

Tuesday, June 11, 2024

Living the Dream: The Value of Homeownership

Owning a home has long been considered a fundamental part of the American dream. It represents far more than just having a place to live�it embodies values, aspirations, and a sense of security. Here's why homeownership is widely regarded as a key component of the American dream:

Stability and Roots: Owning a home provides a sense of stability and roots in a community. It allows individuals and families to establish themselves, put down roots, and create a sense of belonging.

Wealth Building: Homeownership is often seen as a pathway to wealth building. By building equity over time, homeowners have the potential to accumulate wealth, establish financial security, and pass down assets to future generations.

Personalization and Pride: Homeownership grants the freedom to personalize and customize a space according to personal taste and style. It offers a sense of pride and accomplishment, as homeowners can create a place that truly reflects their identity and values.

Community and Social Connections: Homeownership fosters a sense of community and social connections. Neighbors become more than just acquaintances; they become friends, creating a supportive network that enhances the overall quality of life.

Stability for Future Generations: Homeownership provides a stable environment for future generations. It offers the opportunity to create lasting memories, build family traditions, and provide a secure foundation for children and grandchildren.

Financial Benefits: Homeownership can provide various financial benefits, including potential tax advantages and the opportunity to build credit and establish a solid financial history.

Sense of Achievement: Achieving homeownership is often viewed as a significant milestone and a symbol of personal achievement. It represents hard work, dedication, and the fulfillment of a long-held dream.

Control and Independence: Homeownership brings a sense of control and independence. Homeowners have the freedom to make decisions about their property, from renovations and improvements to landscaping and design choices.

Long-Term Investment: Real estate has historically been a reliable long-term investment. Homeownership allows individuals to build wealth over time while enjoying the benefits of a place to call their own.

Emotional Well-being: Owning a home can contribute to emotional well-being and overall happiness. It provides a sense of security, pride, and a place to create lasting memories with loved ones.

Homeownership represents a significant part of the American dream, encapsulating aspirations for stability, financial security, personalization, and a sense of community. It symbolizes the pursuit of a better future, a place to call home, and the realization of one's own piece of the American dream.

For more information, download Homeownership Today!

Tuesday, June 4, 2024

How to get a lower rate and a lower price

Are you in the market for a new home and wondering which mortgage option is right for you? While the world of home financing offers a surplus of choices, one option often overlooked is the Adjustable Rate Mortgage, or ARM. If you're in a market where interest rates are trending lower, an ARM could be the key to significant savings and financial flexibility.

The problem is simple, while you're waiting for interest rates to come down, the price of homes are still going up.  Any savings from the lower interest rate could more than be offset by the increase in purchase price due to appreciation.  Buying at today's prices with an interim loan might be the answer.

Picture this: You've found your dream home, and it's time to secure financing. An ARM often starts with a lower initial interest rate than a fixed-rate mortgage. This means your monthly payments will be more manageable from day one, allowing you to allocate your budget wisely.

In a market where interest rates are on a downward slope, ARMs can lead to even lower monthly payments. If rates continue to decline, your mortgage payments could shrink, leaving more money in your pocket.

If you anticipate selling or refinancing your home within a few years, an ARM can be a strategic choice. The lower initial rates and shorter fixed-rate periods align with your shorter-term ownership plans, offering cost savings during your stay.

Imagine paying less interest over the life of your mortgage. In a declining rate environment, an ARM can translate into lower overall interest expenses compared to a fixed-rate mortgage, assuming the rates stay favorable.

One of the unique features of ARMs are the rate caps. These caps limit how much your interest rate can adjust during each period, offering a safeguard against sudden and steep rate hikes. Your financial peace of mind is protected.

A lower initial interest rate can boost your borrowing power. With an ARM, you may qualify for a larger loan amount or consider a property that might have been just out of reach with a fixed-rate mortgage.

Lower initial monthly payments with an ARM can free up funds that you can redirect towards paying down your mortgage faster. This could help you build equity in your home more rapidly.

Life is full of surprises, and an ARM provides you with flexibility. As market conditions change, you have the option to adapt your mortgage to your financial goals. You can choose to refinance, lock in a fixed rate, or ride the wave of lower rates.

While ARMs offer exciting benefits in a declining rate environment, they are not without risks. If interest rates rise, your monthly payments could increase, potentially impacting your budget. Therefore, it's crucial to assess your financial situation, future plans, and risk tolerance carefully.

When the market is trending toward lower interest rates, an Adjustable Rate Mortgage can be a valuable tool for savvy homebuyers especially when the price of homes are still going up. It's all about seizing the opportunity for savings, financial flexibility, and homeownership that aligns perfectly with your goals and lifestyle. Explore your options, consult with a trusted mortgage professional, and make an informed decision that leads you to your dream home with your financial well-being in mind.

Tuesday, May 28, 2024

Home selling strategies for downsizing seniors

Downsizing can be a significant life transition for any age person, but especially for seniors who may have lived in this last home for some time. Follow these suggestions to make the downsizing process smoother and less stressful.

  • Start Early: Begin the downsizing process well in advance of your planned move. Give yourself plenty of time to make decisions and avoid feeling rushed.
  • Assess Your Needs: Evaluate your current and future needs in terms of space, accessibility, and location. Consider factors like health, mobility, and proximity to family and healthcare facilities.
  • Create a Plan: Develop a comprehensive downsizing plan that outlines your goals, priorities, and a timeline for each task. Having a plan will keep you organized and focused.
  • Declutter: Go through your belongings room by room and decide what to keep, donate, sell, or discard. Be realistic about what you truly need and use regularly.
  • Seek Professional Help: Consider hiring a professional organizer, downsizing specialist, or real estate agent experienced in working with seniors. They can offer guidance and support throughout the process.
  • Embrace Technology: Digitize important documents and photographs to reduce paper clutter. Consider using digital tools to keep track of your possessions.
  • Measure Your New Space: Obtain floor plans or measurements of your new home to ensure your furniture and belongings will fit comfortably. This can help you decide what to bring and what to leave behind.
  • Prioritize Sentimental Items: While downsizing often involves letting go of sentimental possessions, choose a few cherished items to keep and display in your new space. Consider passing down heirlooms to family members.
  • Hold an Estate Sale or Auction: If you have valuable items that you no longer need, consider selling them through an estate sale or auction to help fund your downsizing efforts.
  • Stay Positive: Downsizing can be emotionally challenging, but it also offers the opportunity for a fresh start and simplified living. Focus on the benefits of your new home and lifestyle.

Remember that downsizing is a personal journey, and it's essential to approach it with patience and a positive mindset. Don't hesitate to seek support from family and friends, and don't be too hard on yourself during this process.

For more information download our guide Downsizing Your Home.