Ann Arbor Real Estate Talk

Ann Arbor home sellers, did you know there is a tax of 3.8% tax increase included in the Obama Health Care bill when you sell your home after January 1, 2013?

How the 3.8% Tax Works on the  Sale of your Ann Arbor Home

Here is how the 3.8% tax increase will work, if you have a gain of less than $250,000.00 for single payers and $500,000 for joint payers you will not be taxed. It does NOT override the Federal Income Tax Law.

However, if you have owned your home for many years, and make $600,000.00, then your taxes would be increased 3.8% on the gain from the sale of your home starting January 1, 2013 . In this scenario you would pay 3.8% or  $3,800.00 on the gain over $500,000. For a single filer it would be anything over the $250,000.00 level.

If you purchased your home for $200,000. and are single, and sell it for $300,000. then your additional 3.8% tax liability could potentially be $3800.00 used to fund Medicare.

I know the tax increase doesn’t apply to that many people, less than 2% nationwide,  but for Ann Arbor home sellers, it is still a tax increase written into the Health Care Bill that many Ann Arbor home sellers may not know about. We live in a fairly wealthy community in Ann Arbor so this 3.8% tax increase will potentially apply to more.

 The 3.8% tax increase is for Medicare

The revenues generated from this 3.8% tax increase will be allocated to the Medicare Trust Fund that is part of the Social Security System. That fund is currently on shaky financial footing.

The Medicare tax hike would for the first time incorporate filing status into each person’s Medicare tax liability, and also for the first time, the Medicare tax will not apply just to wages but also to investment income such as income from capital gains, dividends, interest and rental property. In its first year of application, 2013, the new Medicare tax will hit approximately the top-earning two percent of families.

According to the National Association of Realtors, “The new 3.8% Medicare tax includes in the Health Care bill is assessed only when Adjusted Gross Income (AGI) is more than $200,000/$250,000. AGI includes net income from interest, dividends, rents and capital gains, as well as earned compensation and several additional forms of income presented on a Form 1040 Income Tax Return.

The tax is NOT imposed on the total AGI, nor is it imposed solely on the investment income. Rather, the taxable amount will depend on the operation of a formula. The taxpayer will determine the LESSER of (1) net investment income OR (2) the excess of AGI over the $200,000/$250,000 AGI thresholds. Thus, if net investment income is the smaller amount, then the 3.8% tax is applied only to the net investment income amount. If the excess over the thresholds is the smaller amount, then the 3.8% tax would apply only to the excess amount.

If you would like me to I would be glad to send you a pdf file published by the National Association of Realtor where you can read about different scenerio’s for investment properties, vacation homes etc..

Just send me an email or leave it in the comments below. There have been a lot of rumors circulating about this 3.8% tax increase on the sale of your home, let me know if you need the document.

Rentals in Ann Arbor are scarce.

Currently rentals on the market for single family homes in Ann Arbor are slim to none.

• Between the range of 500-850 a month there are only 2 rentals in Ann Arbor and I know one of them has a lease application on it.
• Between the range of 855-1200 a month in rent there are also only two rentals in Ann Arbor;one at 980.00 and one at 1050.00

Ann Arbor is a transient community in many ways, we have Dr.’s, Fellows, Residents that come in for 2-5 years, many just want to rent due to the uncertainty of the Michigan market. Plus the students that are looking to rent homes together which changes each semester.

Why are Rentals Scarce In Ann Arbor?

One reason that the rental market is scarce in Ann Arbor is due to the amount of Short Sales and Foreclosures of people that can not get a mortgage right now.

Another reason the rental market in Ann Arbor is scarce is consumers don’t have a lot of confidence that they won’t loose money if they are only going to live here a short time.

Scarcity of Rentals Creates Higher Prices

If you are a seller that has not been able to sell your home, now would be a great time to rent your Ann Arbor home. When the Missy Caulk Team takes a listing contract, it is put in the Ann Arbor Area MLS, we obtain a rental application from the potential tenants, one application for each person renting the property, we pull their credit so you can make a good decision on who you want to rent your home too.

Rental Options

Renting with an option to buy in Ann Arbor is also a great opportunity for both buyer and seller.The seller can rent out the home for a couple of years and when the tenant is able to get a mortgage they can proceed with the purchase. We get calls on this all the time.

Rentals in Ann Arbor are scarce but they don’t have to be with creative thinking in todays market.

Is Fannie Mae and Freddie Mac really helping homeowners stay in their homes?

Well not according to the investigative reporting at the Detroit Free Press.  They recently did a study and obtained documents via Freedom of Information requests and the results are disturbing for Ann Arbor Area home owners.

In December Fannie Mae announced via a top executive that they were doing everything possible to help homeowners stay in their homes. However, the documents 2300 of them proved otherwise. While the banks were trying to work out loan motifications via the HAMP (Home Affordable Modification Program) Fannie and Freddie were telling them to “Proceed with sale”.

Who It Hurts

• The obvious is the homeowner who is in the middle of trying to negotiate with the bank for a loan modification.
• It hurts the tax payers (us) as Fannie Mae knows we the home owners will bail them out. Right now they have an unlimited  check book to get more money from the government (or us as the taxpayers.)
• It may clean up the books but it hurts neighborhoods and property values for all of us.
• Since Fannie Mae and Freddie Mac were taken over by the government we have cost us over $1.4 billion.

Alan White a law professor at Valparaiso University who reviewed the documents obtained from the FREEP said, ” they are sabotaging the nations foreclosure crisis and helping drive down property values.”

Read the entire article on the FREEP for more details.

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What was the market like in July for the Ann Arbor Area ?

Well the news for July in Ann Arbor is really uplifting. Residential sales were up 29% over July 2010 with 331 closed transactions. There were 415 sales of all property types, which is a 10% increase.

The average sale price increased to $212,663. In July of 2010 the average sale price was $160,000.

Here are the stat’s for the individual school area’s. Which is how we search for homes in the Ann Arbor Area MLS.

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Weekly we get calls to the Ann Arbor Real Estate Team, Missy Caulk with buyers asking us to help them find a house or condo with a rent with an option to buy.”

What is a Rent with a Option to Buy

Renting with an option to buy is pretty easy to understand, first you rent and then you buy the same home. Many times renting  becomes necessary if you have been subject to a Short Sale or a Foreclosure the last few years and you are not capable of getting a mortgage on a home at this time.

In a few years time this would not be a issue. Therefore renting with an option to buy is great alternative for buyers.

Sometimes the buyers have had their credit destroyed by a divorce and so renting for a year may be more feasible until they can get back on their feet.

Sometimes men need to rent with an option to buy because the divorce is not final and they need to rent until it is. In Michigan we still have dowry rights so any property owned until he divorce is final the wife gets part of the property.

The Problem

So what’s the problem with renting with an option to buy?  First of all homes that are available with a rent to option to buy are hard to find, we are in a rental shortage right now in Ann Arbor, Saline and Dexter. There are more people wanting to rent than homes available so the ones that do come on the market go quickly.

Second,many sellers are reluctant to take a offer with the rent to own option. They fear is they agree to rent for 1-3 years until the buyer can obtain a mortgage that the “market will go up” and they will be stuck selling a home or executing a purchase price now that in three years will be too low.

Third, may local REALTORS don’t publish in the MLS remarks that their sellers would be open to to rent to buy option. Last, week we had made a call to a local agent as we have a buyer who wants to rent for ONE YEAR and then purchase. Having gone through a Short Sale due to job loss and divorce  years ago, he is not able to get a loan. His credit is outstanding, and he has a new job.

So we called up the listing agent on a home we had shown him and asked if the sellers would be willing to take a rent to own on their home (which has been on the market for 9 months and smells like smoke)

“No”

Never mind he didn’t even ask his sellers, that is a whole different story. Just NO.

Now, if I had been trying to sell my home for 9 months, no offer and had a ready, willing and able buyer I would have 1) asked the sellers, 2) done it.

These are some of the difficulties with Rent with Options to buy. But, many times it can be a win win for both buyer and sellers.

If you have a home you would be willing to sell with a rent to option, give me a call or email as we would love to talk to you.

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Post from: Ann Arbor Real Estate Talk

Renting with An Option to Buy in Ann Arbor

Recently MSN named Burns Park as one of the top neighborhoods for grown-ups located in college towns. Burns Park is located within walking distance to the University of Michigan, with tree lined streets, and homes that are turn of the century.

Most people that live in Burns Park don’t really mind the smaller back yards because Burns Park is so beautiful and is attached to Burns Park Elementary school.

A little North East of the park is Ives Woods which is one of the most expensive neighborhoods in Ann Arbor.

West of Packard is an area called “Lower Burns Park”, that has student rentals, sorority and fraternity houses.

To add to the charm and desirability of Burns Park, each year they have their own 5 and 10K run and their own theater group the Burns Park Players.

According to MSN, “For every 10,000 Ann Arbor residents, 555 were crime victims, the FBI says. Burns Park, southeast of downtown, is safer than 87% of other U.S. neighborhoods, NeighborhoodScout.com says.

This slice of Ann Arbor ranks below the national average in six of nine crime categories tracked by RelocationEssentials.com, a moving-assistance website, including aggravated assault and burglary.”

At the time of this post their are 26 active homes on the market in Burns Park, ranging in price from $158,000. to $1,395,000.00.

Forty-six homes sold in the last year in the Burns Park area.

If you are looking for homes for sale in Ann Arbor, and/or the Burns Park area, start your search here, with Google Maps, Satellite Images, and multiple photos.

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Post from: Ann Arbor Real Estate Talk

Burns Park One of Top College Neighborhoods for Grown-ups in Ann Arbor