Latest Real Estate Gossip
by Leonard Steinberg
When calculating how much your home has increased in value, you have to identify its COST BASIS – meaning anything and everything that you spent to pay for the product. The IRS defines a capital improvement as a home improvement that adds market value to the home, prolongs its useful life or adapts it to new uses. Minor repairs and maintenance jobs like changing door locks, repairing a leak or fixing a broken window do not qualify as capital improvements. Capital improvements and things you can put in your COST BASIS include:
* The price you paid for the property, including settlement costs, such as: title fees, legal fees, recording fees, survey fees, and any transfer taxes or fees you paid in connection with the purchase.
* Additions: An added extra bedroom or bathroom, a deck on the back of the home, a new garage, an added porch or patio….anything that adds value to your home.* Lawn and grounds improvements: Value-adding landscaping projects, driveway or walkway construction, a new fence or retaining wall, adding a swimming pool, etc can qualify as property improvements.
* Exterior improvements: New windows, a new roof, and new siding are examples. Any and all renovation costs including ANY and ALL costs related to that renovation work.
* Insulation: This includes insulation in the attic, inside walls, under floors, or around pipes and ductwork.
* Systems: Installing a new heating or air conditioning system, new ductwork, adding a central vacuuming system, wiring improvements, installing a security system, solar, geothermal, generators, batteries, and putting in lawn irrigation are improvements.
* Plumbing: Installing a septic system, water heater, or soft water system adds value.
* Interior improvements: New appliances, kitchen renovations, new flooring/carpeting, the installation of a fireplace, etc.
* If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs as long as they were made within 90 days of the closing.
COST BASIS does NOT include hazard insurance premiums, moving expenses, or any mortgage-related charges (mortgage insurance, credit report fees, and appraisal costs are out) and general repairs that are essential to keep something working do not qualify. Yard maintenance, HOA fees, and real estate taxes don’t count.
Always check with your accountant when in doubt. Keeping tabs of these costs throughout the lifetime of a house is wise.
by Leonard Steinberg
We all have to eat. So it is natural and understandable to place one foot ahead of the next and focus on today and maybe tomorrow, but as professionals building thriving businesses – and lives – we need to focus as much on the day after tomorrow and well beyond.
Being present is essential in being fully engaged in a career and life. Who knows what tomorrow brings? However, the smartest, most accomplished people and companies plan for long term needs too. They make plans for weeks, months and years from now and put into place plans, projects and protections to be prepared for this future. There is one certainty in life we can all agree on: change. Markets change. People change. Technologies change. Political leadership changes. We age (all of us, sorry!). Being caught off guard can be debilitating.
We are rather disciplined to take out insurance policies, get a good education and save for retirement. These are established habits. And they all have one thing in common: they involve some investment, sacrifice and a little ‘pain’. Wouldn’t it be much more fun to spend that money on a trip or a new car? But we have learned over time that without these things the relatively minor pains we feel now are far less painful than that which we might experience in the event of a disaster without insurance, a career without education or a retirement without savings.
So what are you doing today to plan for the long term? What could you do to insulate your long term future? What can you invest today – whether in time or money – to be rewarded later? Yes, focus on today and tomorrow as your priority, but dedicate some time and thought – and action steps – to some long term planning.
|This past week we’ve endured our fare share of media articles that were either incomplete, inaccurate or downright misleading. Yesterday, The Wall Street Journal published an article about some academics discussing how overpaid real estate agents are and how to fix this problem…..in a publication that supposedly believes in free markets and capitalism. It was another embarrassing moment for the WSJ which used to focus on facts and data and tell the complete story.|
The writer for this article was basically making the case for any entity on the planet that would sharply reduce the excessive fees us agents charge for doing what this troupe deem as ‘quick and easy’ money. The article continued the myth that all agents everywhere earn ALL 6% commission simply by doing a little paperwork, a few showings and bingo! Jackpot! Not one real estate brokerage or agent was consulted in this embarrassing lapse of journalistic drivel. So while I could go on and break down each and every ridiculous claim and their solutions, I’d rather focus on the more important lesson from this moment.
Here again we see how some of the fame-seeking, drinks-throwing loons on Reality-TV calculating their commissions BEFORE a showing (never mentioning splits or expenses of course….or the time and energy and work that happens well before a transaction and forever afterward) have given the world – even College Professors – the completely false/distorted impression of what we do and how we earn our fees. That’s aside from boasting about the ‘millions’ they make, the private jet lifestyle they lead, etc. The damage they have done over a decade may take a decade to undo……but only if we do something about it.
We as a profession have failed miserably in CLEARLY messaging to the consumer exactly what a PROFESSIONAL agent does to earn their fees. Everything. Not just the open house or the showings. Not just the advertising, marketing, social media management, etc. EVERYTHING. As well as all the planning and advisory work that happens BEFORE something is listed and all the work that happens AFTER the closing. We also have to message the extensive expenses we incur and the mammoth expenses of our brokerage that we participate in with our splits. What does a website, tech tools, offices, staffing, advertising, marketing teams, etc cost to build and operate? WE – not the WSJ or the crafty drivers of this narrative whose sole purpose is to replace us or minimize our income for THEIR gain – must message this. The COMPLETE picture.
So let’s get started. Today. What can you do that messages the WORK and VALUE you deliver, not just the income, glamor, etc. And yes, all of this can showcase beautiful property too. Boasting about our incomes and successes is nice but may also message that we are indeed overpaid and its all too easy. (Most of us never message how tough it was to sell a listing over 18 months…..maybe the time has come to do so!)
PLEASE contact us today and we will show you our VALUE of WORK as agents that we will bring to helping you to get your real estate needs taken care of with professionalism.
|There is a common theme around the globe: home buyers and renters want brand new or newly renovated homes and are willing to pay a premium for them, often a large premium. It’s almost become an obsession. I’ve always been attracted to ‘projects’, but even I’m finding these projects more cumbersome these days. Here are my TOP 10 reasons I’ve identified for the NEW craze:|
1. Time is the Last Luxury: enjoying a home immediately is more meaningful to most. Waiting for a renovation or new build is time lost. The time and effort spent on a home build/renovation project is time you can spend on your career making the money to pay for a home, or enjoy with friends and/or family.
2. In a rising interest rates environment locking in to a rate has value.
3. When you buy a renovation project you need cash or (difficult to obtain) additional financing to renovate. One financed lump sum is quicker/easier.
4. With rising labor and materials costs, anticipated costs for renovation at closing are bound to rise. Most projects go over budget regardless.
5. Consumers want the least aggravation: older systems require more time, effort and money to service, maintain and replace.
6. New homes are usually much more energy efficient.
7. New/renovated homes have been adjusted to today’s lifestyle needs.
8. When you buy one apartment in a 50-unit building by a top architect/interior designer there is economy of scale: you would pay MUCH more for that quality of design for a single home project.
9. Decorating and furnishing is the fun part. Sorting through a complex permitting and approvals process is not nearly as much fun.
10. Seeing exactly what you’re going to get is much easier than imagining what could be.
I am sure that there are many more reasons to add. What ones would you add?
|By Leonard Steinberg|
I awoke this morning in my cozy warm bed and for a moment imagined the absolute dread and fear so many are experiencing right now around the globe, but especially today in the Ukraine. A week ago life was so different for so many and then, seemingly overnight, their world was turned upside down. They are not alone as so many around the globe experience the similar effects of war daily. I just cannot imagine what that must feel like, although I vaguely recall feeling fractionally similarly when New York City was attacked on 9/11.
One thing I remember most about 9/11 was the urgent need for food and …..shelter. My immediate, first instinct was to nest. I headed home. The power of ‘home’ as our safe haven, a sanctuary to be with those you care about most is truly astounding. During those scary and uncertain times where we were not certain whether further attacks were imminent and the stench of smoke filled the air with the odor of war, I will never forget just how much being ‘home’ helped soothe those fears and anxieties.
Yesterday, Ukraine’s practical horrors hit home directly when we heard from one of our vendors who is located in the Ukraine. They had to shut down their business. Their lives were in tumult. They had no idea what their future might deliver and you could sense their palpable fear. At that moment it all became more real to me after seeing images on the TV that often give you a less real impression of what the practical aspects war truly delivers to the people with the least say and power in the matter.
I recall my parents stories of living in war times in Europe and simply could not relate fully to their experience. I lived in war times in South Africa to know a little bit better, although as a kid you simply don’t have the same awareness that you gain in adulthood.
So today, let’s pause for a moment to acknowledge our extraordinary fortune. Maybe not Elon-Musk-style fortune, but the fortune that truly matters most: a roof over our heads, food, safety, lights, heating, freedom, good health, etc. We are indeed the lucky ones.
All of us woke up to a new reality this week as the Ukraine was invaded by Russia and the impact is being felt around the world. The prospect of being someone living in the Ukraine right now is unimaginable to me. In this uncertain time, COMPASS Cares is moving fast to identify a few ways you can help the people of Ukraine right now:
Ukrainian Red Cross Society is collecting donations to help those in need affected by armed conflict, blood collection, mobilization of volunteers and resources and more – Donate Here
United Help Ukraine is receiving and distributing donations, food, and medical supplies to internally displaced Ukrainians and families – Donate Here
Nova Ukraine is bringing humanitarian aid to vulnerable populations in Ukraine – Donate Here
Save the Children is delivering lifesaving aid to vulnerable children in Ukraine and around the world – Donate Here
Our COMPASS community spans many backgrounds and nationalities and I know there are members of our family who are be personally affected by these horrible developments. It’s times like this where community matters even most, but together we can show how much #COMPASSCares.
It is possible that soaring energy costs could trigger a recession. Some believe oil prices could soar as high as $150/barrel. Alienating Russian global supplies is helping drive the price of oil and gas at rather alarming rates, rapidly. Oil and gas impact the price of almost everything and will certainly impact the average consumer’s ability to spend on other things.
The US average consumer consumes over 560 gallons of gas per year. The average U.S. home uses 196 cubic feet of natural gas. Plastics are produced from natural gas, feedstocks derived from natural gas processing, and feedstocks derived from crude oil refining. Almost everything we buy is transported, sometimes long distances, in entities that use gasoline and oil. The US is almost energy independent but pricing of commodities in a global market with OPEC’s baffling control over oil production – imagine if we as a profession formed a cartel to control how much inventory we release into the markets – but it is Europe that is reliant on so much commodity imports that will probably suffer most….thankfully Winter is coming to an end soon requiring less heating.
So is the US heading into a recession? I don’t know. No-one knows for certain. However, its important to note that house prices declined significantly during the 2008-9 Great Recession, but in other modern recessions, house price appreciation hardly shifted, and year-over-year existing-home sales growth barely declined. Home prices and existing home sales don’t necessarily decline just because of a recession. Sometimes the housing market actually benefits by a recession as monetary policy is usually eased to boost the economy, often leading to falling mortgage rates, which increases consumer home buying power that can make homes more affordable.
From July 1981 to November 1982, during the Reagan years, an economic downturn was triggered by tight monetary policy in an effort to fight mounting inflation. It worked, ending a surge of inflation that had started in 1972 and hit a high in the teens in 1980. By 1986 it was under 2%.
A recession may also cool the excessive demand we are currently experiencing – as well as some of the price gouging – which have been one of the prime drivers of supply chain disruptions and rising inflation. Allowing industry to catch up after under-estimating this extreme demand could prepare us for the next surge. Getting the monetary supply balance right will be the key: we want inflation to come down, but we DON’T want tens of thousands of job losses.
(edited from a Bloomberg article)
Some call the SALT deduction a giveaway to the wealthy. The optics are bad. But the deduction for state and local taxes (SALT) actually serves a purpose. That’s why it’s been law since the first federal income tax under President Abraham Lincoln in 1861.
* The SALT deduction combats–imperfectly—tax competition, which is a destructive race to the bottom in taxes and government services. A state that slashes tax rates and balances its budget by simultaneously reducing services to the poor wins two ways: It gets an influx of businesses and residents from higher-tax states, and it chases away poor people, who make their way to those high-tax states that are losing their tax base, an unsustainable dynamic.
* The SALT deduction restrains tax competition by subsidizing high-tax states: the pinch that taxpayers in those states feel from high state and local taxes is eased by the break they get on their federal returns.
* Voters in low-tax states sometimes ask why the federal government should be subsidizing states that choose to impose high taxes: some of the benefits of high-tax states’ higher spending are shared by people in low-tax states. The safety net for the poor. The roads and other public infrastructure available to residents and visitors alike. When you add up all the flows, high-tax states on average contribute more to the federal coffers than they get in return.
* Restoring full SALT deductibility would reduce federal tax revenue a lot making it less popular. It’s also true that most of the benefits would go to high earners, but that’s not necessarily a permanent condition. State governments constantly weigh how much they can tax their richest residents without driving them away. Since the revised tax law enacted in 2017, the effective state and local tax burden on rich people in so-called ‘blue’ states has gone up.
* Some rich people are bailing out of their states although Congress wisely left the full deduction in place for corporate income taxes because corporations are more mobile than individuals.
* If the SALT deduction cap remains in place, state governments are going to be forced to stanch the bleeding by cutting taxes on their rich residents. Rich people can move; they will be OK whether the cap stays or goes. Restoration of full SALT deductibility isn’t for their sake and wouldn’t make much difference to them in the long run. It’s the high-tax states like New York and California that need help.
“It’s wrong for people to be taxed on the federal level for money they no longer have because it was taxed away at the state or local level. This adverse consequence of double taxation between
federal and state tax systems in a federal system has not received proper attention. Mitigating double taxation has been a fundamental building block of both the international and interstate tax order.” – William Barker, Penn State Dickinson Law School. Barker asks whether it wouldn’t be better if Congress went beyond restoring full deductibility of state and local taxes from their taxable income and give taxpayers an outright credit on their federal taxes for whatever they paid in state and local taxes, limited to some percentage of their total federal tax liability?
Personally, I believe that if the full SALT deduction is not re-instated, those who may be short-term beneficiaries will regret the long-term consequences. When tax laws don’t factor in cost-of-living differences ultimately they will fail. Killing the goose that lays the golden egg is never wise. Collecting more taxes on less almost always nets less.
I feel terribly for so many buyers right now – and their agents – as they navigate the hyper-competitive, increasingly less affordable markets throughout most of the USA. Not only are they competing in a low-interest environment with significant pent-up demand, under-supply, under-building, increased consumer savings and credit scores, Spring optimism, a clear path to the end of the Covid nightmare as vaccine administration soars, inflation, rising prices, institutional investors competing with them……possibly even more daunting is GEN-NEXT, a large group of potent homebuyers reliant on inherited or transferred wealth…..and no, they are not necessarily just millennials in age.
Many of my peers in their 50’s are dealing with aging parents right now. Realistically, many of them will – and are already – inheriting from their parents as they reach the end of life. If the average US lifespan is around 80 years old, and the average age of giving birth is approaching 30 years old, you do the math. Inheritance is not something merely assigned to the super-rich. The average American has a net worth of around $177,000 at death. In wealthier cities, this number jumps automatically, often driven simply by real estate values. Regardless of the size of the inheritance, this cash infusion is often the driver of heirs to buy a home.
Wealth amongst the wealthier – not necessarily just the rich – is often distributed well before death. Sometimes this is done so for taxation and estate planning purposes, but often it is done to help kids get going in life, especially as they form families. Few can afford to gift a kid $5 million, but many more can afford to gift $25,000. Many trusts require young heirs to spend on investments, education, or real estate, not Ferraris.
My point is that while we are all clearly aware of the GREAT WEALTH TRANSFER – over $750 billion per year in the US alone – we may not be as aware that the beneficiaries will be of ALL age groups, anywhere from super-young grandkids, all the way up to those in their 70’s and older. It has started already and will grow notably. GEN-NEXT is an age-agnostic demographic!
Remember in the ‘old days’ how we used to call a limo service? That service evolved into UBER…..but much of the traditional model remains. There is still a car and a driver: it’s just the way we connect with that service that changed and became (mostly) more efficient.
Remember in the ‘old days’ how we used to do building applications with rainforest’s worth of paper and a tiresome Xerox machine to make copies? Now, most of this is done digitally, an evolution of a traditional practice. So much of the technology that we see today is a lot more evolutionary than revolutionary. Most technology that humans love in the luxury marketing arena improves traditional models, but it does not replace them. It can make them more efficient and yes, even more enjoyable. My dentist’s efficiencies are fueled by the new technology he uses, but he has not been replaced by a computer. Would YOU let a machine-operated drill near your mouth?
In the ‘old days’ I used to put together a folder with a list of useful resources for the home – or delivery menus – print up thousands of copies, bind them and then mail them to my clients. They would keep these in a kitchen drawer and refer to them when needed. When the digital world became more prevalent, I evolved this into a DIGITAL version that allowed our clients to access this information from the palm of their hands. The product or intent was not replaced…..it merely evolved. When you get an AMAZON package, that box was wrapped by a human…..not too dissimilar to the human that used to wrap your box in a retail store. In the past year, the many ZOOM calls provided the technology that allowed us to meet remotely, but without the humans using and driving them they – and Zoom – would not exist.
Think of all the systems and marketing touchpoints in your world and how they too have evolved over time. How can you improve what you do? How can you make things more seamless and efficient? How can you save time and aggravation? We don’t have to replace or eliminate things to make them better. Evolution fueled by technology is nothing terribly new, but when it is intelligently structured – with a thoughtful human touch – it is good for everyone.
Have a nice day!
Alex Daigh of COMPASS New York identified yesterday one area of the real estate equation that is still extremely annoying, frustrating, and cumbersome …… the actual physical moving part.
Yes, in between the cracks there are some outstanding movers. But many are notoriously annoying at best. Getting an accurate quote can often be challenging – to put it kindly – and often additional fees and add-ons are presented at your most vulnerable moment. Insurance by the pound seems like a joke at best. Some movers have invented gun-to-your-head negotiation skills. Often big tips are mandatory, aside from enormous hourly fees that you can be almost 100% certain are not being passed onto the heroes that do moving work, probably one of the toughest physically draining jobs.
This is one area where we agents can shine. Identifying local movers that are outstanding is something our clients will truly appreciate, possibly more so than anything else. I have stopped referring to ‘bargain movers’ as they are not too dissimilar to bargain real estate agents…..you pay for what you get! I have my ‘go-to’ movers but unfortunately, they are not 100% consistent. One day in the future this is an area we at COMPASS will have to resolve if we truly wish to capture the hearts of our clients. It’s an opportunity of a lifetime!
Have a WONDERFUL Wednesday!