Real Estate – Selling and Selecting
Real Estate – Property Taxes
If you own a home, you pay taxes on it. These funds generally cover divisions within municipalities that are for betterment of the town/city (Police, Fire, Trash, Schools; etc). Whether these funds are always allocated effectively is another topic; but no matter where you own a home in MA there will be a tax due.
The “assessed value” of your home is issued on January 1 of given year. This amount is determined by the Town/City Assessor. As is often the case with taxes, they only seem to ever go up. So, you should pay careful attention each year as to the annual taxes due on your property. If you believe the assessed value and subsequent tax levied are not in line with the property value, then it is time to contest the assessment.
When contesting an assessed value you will have to file a “Tax Abatement”. Each town or city will have a channel to complete this document. Within the document you will outline specific information about your home, state reasons you feel it is inaccurately assessed, and site examples. Generally, there is a hard deadline for when the abatement must be filed (February 3, 2025 in Boston). If you miss this date there is no recourse until the following year. My suggestion is to always hand-deliver the document in person and ask for a stamped copy for receipt.
The success rate of abatements are very low unless you are filing as class action (ie. a 100 unit condo association files jointly against the town/city). This gets very expensive for the town to fight on legal front so there is a higher chance they will agree to abate the taxes. Having independently abated several assessments myself, I have yet to win against the assessor (even though I thoroughly cited clear and specific examples to justify a correction!). It is always an uphill battle going against “the powers that be”; but if you truly feel a property is not accurately assessed then you should always state your case. If nothing else, perhaps it may give the assessor pause next year.
Real Estate – Should you have a Home Equity Line?
Should you have a Home Equity Line?
Answer: Generally, Yes.
Also known as a HELOC (home equity line of credit), this type of loan can provide a safety net for you and your family. As someone who is most always averse to non- ROI debt… the reason I say “yes” to a HELOC:
- Outside of the closing costs (appraisal, processing/recording fees, attorney) it doesn’t cost you anything.
- You only owe on the loan if you use some or all of the funds.
- You have flexibility to use however much of the loan desired. It is as simple as writing yourself a check for amount needed.
- It allows you to keep cash funds invested in financial markets without having to sell.
- It provides for maneuverability when buying a home or another investment. For example, you can use the HELOC funds for a downpayment on a home purchase. This is especially useful when you own your current home and are planning to take equity from the sale to apply on purchase. Using the HELOC can make the sale process easier as you do not need to rush on market; you may even be able to choose a more opportune time to sell the home increasing your rate of return. Or, if the home you are purchasing is very competitive you may need to close within 30 days which makes selling your current home ahead of purchase nearly impossible. Once your current home is sold, you simply apply the proceeds to HELOC and your monthly payments go back to $0. The HELOC remains incase needed in the future.
- The rate is generally lower than a credit card or private loan.
- A HELOC helps create liquidity for your asset (home) that is otherwise frozen until sale.
- There is no prepayment penalty.
- Perhaps most importantly, it provides a layer of security for cash access if something unforeseen comes up (ie. medical emergency, job loss).
Things to be cautious/aware of with a HELOC:
- Do not spend the money for personal pleasure (ie. vacations, cars, jewelry; etc)
- Some say to use it for home renovations, but I am against that unless you are doing renovations to increase near term sale value; at which point you will pay off the loan.
- The payments are interest only, so there is no growth on the money.
- Lenders will usually allow you to take a credit line on your primary residence up to a max 85% of the homes value, minus the amount owed on first loan. So, if your home is worth $1,000,000 and you have a $500,000 mortgage the bank may offer a HELOC for $425,000 ($500,000 in equity x .85 = $425,000).
- Only use as much as you need.
- Pay off the money borrowed ASAP.
- There may me a small yearly fee for the HELOC (ie. $25-150)
- If you fail to make payments on the HELOC you risk losing your home in foreclosure.
So, essentially a HELOC is a very low cost option that provides you flexible use of cash and financial security in case of the unknown.
Real Estate – Falling Rates
Mortgage rates drop to lowest level since Feb ’23, and are down 15% since May. As I have been telling buyers, there are some deals out there if you can zero in on the right property. Real estate isn’t a one-size-fits-all on the investment front. Within a specific market/area the ROI between 2 properties can be drastically different, even if the purchase price and mortgage rate are the same. When purchasing, you need to fully understand the potential carrying costs in relation to updates, repairs, and general buyer demand for a specific unit type will be as years go by. So, although rates are down that does not mean you should jump at the first place you see without fully processing all sides of the purchase. The rates falling will however make it more competitive on the buying front. The summer saw a stall in buyer activity, but that has quickly transitioned as we settle in to Fall Market, compounded by rates dropping. If you are looking to purchase make sure you evaluate thoroughly before making an offer!
Real Estate – Selling and Selecting
@ sellers!
If you are considering selling your property, PLEASE research who is the best fit to represent you. There have never been more options to choose from on an agent front, so you need to be more careful than ever. Part of the issue with real estate as a whole is the very low barrier to entry. The simplicity of getting a license makes it really difficult to determine who is qualified VS. who simply “looks the part”. Real estate is not an overly complicated business, but small mistakes can lead to tens-of-thousands in dollars left on the table, if not more. Remember: real estate is most often the largest investment someone owns… so be sure to treat it that way!
Here are a few things to think about when interviewing:
- Does the agent know my market? Often sellers know more about the market than the agent they hire! The agent should be a wealth of knowledge/insight on the area.
- Do they have knowledge of construction/property maintenance? Questions always come up from buyers about the property (material quality, age/type of mechanicals, flooring, electrical, windows, roof, appliances, foundation, water entry; etc). An agent being able to succinctly answer questions often leads to a buyer waiving a home inspection or, at the very least, a higher level of comfort for the buyer.
- Do they know the points of differentiation from your property and others that have sold? Buyers often know the market really well, especially these days with sites like zillow, redfin etc that are full of information. If the agent isn’t familiar with the other sales in area they can’t effectively promote your home.
- Do they have an eye for decor and property prep? Often agents leave prep to the seller without guidance. This leads to the property selling for less than it could/should. If the home’s first impression online isn’t great there is a good chance buyers will not take the time out of their day to view in person.
- Review the agents past listings to see the quality presented! History repeats itself, and the internet is forever. 🙂
- Ask agent for their Average Days on Market AND Average Sale Price vs Initial List Price. These two measurable’s will give you historical representation of what to expect. This will also help you understand if the price agent suggests is accurate or inflated to simply “get the listing”; which often leads to price reductions or sale well below original price.
- Ask agent if they pay for extra marketing materials such as 3d Tours, floorplans, mailers, online ads; etc. Your agent should be putting you in best position possible, on all fronts.
- Is the agent your primary point of representation? Or, are they just the name on contract? With the growth of “team” models the last few years, you need to be really careful here. Often a seller may think an agent is representing them when in reality they are having an inexperienced team member do the leg-work/representation. *Of course an agent can’t be everywhere at once, so there are times a member or assistant hosts an open house, covers a showing; etc. But this should not be the norm if you are paying someone to represent you (imo).*
- Don’t feel pressured! If an agent approaches you aggressively question their motivation. Remember: they don’t get paid until a deal closes! So, unless it is coming from someone you genuinely trust, always question the advice you are getting.