Keith and Kinsey's Real Estate Update


New Brokerage – Great Rock Realty
March 23, 2013, 6:09 pm
Filed under: Business, Real Estate | Tags: , , ,

Great Rock Logo TallWe’ve been slacking on blog posting lately. That is because we’ve been swamped! I think the last 6 weeks have been our busiest ever, and in addition to that we started our own real estate brokerage. I (Keith) made the transition to Great Rock Realty 5 or 6 weeks ago in to get things started. Kinsey just transferred her license over on Friday.

Great Rock Realty is now officially open and ready for business! In fact, we’ve already got two properties under contract as Great Rock Realty. Our website isn’t quite done yet, but it should be ready in a couple more weeks.

Our clients probably won’t notice much of a change with this move since we’ve always been fairly independent, even while working other brokers. Our goal with the new business is to provide the same great service, help more buyers and sellers, donate more money to charity, and eventually bring on other quality agents to do the same.

You will continue to see our personal branding as Keith and Kinsey Real Estate. This has become our recognizable personal brand. Great Rock Realty will just replace the roll that Keller Williams had played for us in the past. So, don’t be surprised to see both logos on signs around town.

We will continue our charity program with 10% of our commissions going to the charity of our clients choice. As we add agents and grow our new business, we will also donate 10% of Great Rock Realty profits to charity.

It’s been a lot of work to get things set up, and we are excited and looking forward to this new challenge and adventure. Thanks to all of our clients, family, and friends who have been very supportive in this move.

On a side note… 6 weeks until the baby is expected! 🙂 We’ve got lots to get done!



Are We Transitioning to a Seller Market?
March 8, 2013, 11:15 am
Filed under: Real Estate, Uncategorized | Tags: , , ,

February really started to get active in the Madison area housing markets. It’s a little premature to say, but there are 6 things that lead me to believe the market is shifting.

  • Real estate agents, home inspectors, and mortgage lenders all seem to be swamped.
  • 4 out of the last 5 deals we’ve worked on have been multiple offer situations.
  • Our 2 most recent listings had accepted offers within a week of going on the market.
  • Sellers are becoming a little more firm with negotiations because of the amount of showing activity they’ve been getting.
  • It’s getting hard to find good inventory in some areas.
  • Many properties our buyers request showings on have accepted offers already.

What do you think? Is it becoming a seller’s market? Or is this just spring activity coming early or fear that interest rates will rise?



Real Estate Tax Deductions
February 17, 2013, 8:15 pm
Filed under: Income Property, Real Estate

It’s that time of year again… Tax time. I know, I cringe when I think about it too. Real estate is one of the most tax favored assets in the United States. If you’re a home owner or rental property owner, don’t forget to take advantage of all the tax deductions available to you. The following are real estate related items that are usually deductible.

Home Owner Tax Deductions

  • Mortgage Interest: Interest paid on your mortgage is deductible, if the balance is under $1million ($500,000 if married filing separately).
  • Points or Loan Origination Fees: If you bought a home in 2011 check your closing statement for points or origination fees, these may be deductible.
  • Property Taxes: Real estate taxes excluding itemized charges such as trash collection or improvement assessments are deductible.
  • Mortgage Insurance (PMI): If you pay mortgage insurance premiums and your adjusted gross income is less than $109,000 ($54,500 if married filing separately) these premiums are deductible.
  • Capital Gains Exclusion: If you sold a property that was your primary residence for 2 out of the last 5 years, your profits are excluded from capital gains taxes (up to $500,000 married filing joint).

Rental Property Deductions

In addition to the items above, income properties offer even more deductions.

  • Rental Expenses: There’s a whole slew of things listed on IRS Schedule E that are tax deductable for rental properties. These items are pretty self explanatory and include; advertising, cleaning and maintenance, insurance, legal and other professional fees, management fees, supplies, and utilities.
  • Depreciation: Our tax system allows you to claim depreciation on improved portions of your income properties (the building, not the land). This is generally done on a 27.5 year schedule. Note; you do have to reclaim that depreciation when you sell, unless you do a 1031 exchange.
  • Auto and Travel: Most small rental property owners use their personal vehicles for business purposes and can claim the standard mileage rate as a deduction for their rental related travels.
  • Home Office Expense: If your rental business office is in  your home, you may qualify for the home office deduction. This would allow you to deduct a portion of the expenses related to your home (insurance, repairs, utilities).

I hope this information helps you recognize a few ways you could save on your taxes. However, you should always check with your tax adviser before claiming any of these items. I am not a tax professional, and I am not intending to give tax advice.



Choosing a Lender
January 9, 2013, 11:37 am
Filed under: Real Estate | Tags: , , , , , ,

Your lender will be one of the most important people involved in your real estate transaction choosing them wisely is important. Just like agents, not all people within one organization operate the same. One loan officer at your bank may be horrible to work with and another may be great.

I always suggest people start looking for a lender one of two ways:

  • Ask you real estate agent who they recommend? Realtors have worked with many different lenders, and they know who has done a good job in the past and who hasn’t.
  • Ask your friends who they recommend? Your friends, family, or coworkers who have been through the buying process may have worked with somebody they really liked (or didn’t like).

So, how do you know if this lender will be good to work with? Here’s a few things to look for and pay attention to when talking to a lender:

  • Responsiveness is a key necessity in a lender. I’ve worked with lenders who wouldn’t respond to their clients questions for 4 or 5 days. This makes the buyer feel extremely insecure and freaked out through the home buying process. Find someone who responds at least within 24 hours when you call or email them.
  • Knowledge is another must have trait of a good lender. There’s a million different loan programs out there, but after talking through your situation, your lender should be able to give you guidance on what loan program best meets your needs.
  • Honesty is extremely important too. Of course it’s tough to tell if somebody is being honest with you in the first conversation you have with them. Although, your lender should be able to give you general guidelines about closing costs, fees, and rates. If you ask them questions about these things and you start to get the used car salesman vibe, run away. No offense to car salesmen, but you know what I mean.
  • Deadlines within your real estate contract must be met by your lender. So, you want somebody that is prompt and organized to meet these deadlines. Usually if they fit all of the characteristics above, they’ll come through with your deadlines. Of course, there can be snags in underwriting that aren’t your lenders fault, but a good lender will advise of those potential snags ahead of time.
  • Local lenders tend to be better to work with. It usually feels like somebody cares more about what you need, when you can actually sit down face to face. People get loans all the time without ever meeting their lender, but it’s good to know you have the option. It’s much nicer not dealing with a national call center.

Lastly, there’s the question of should you go with a broker or a bank lender. There is definitely a place for both.

  • Bank (and credit union) lenders are usually great to work with for somebody who is in a strong financial position to buy, and they often have the best fees and rates. Shop around for the best rates and fees.
  • Mortgage Brokers on the other hand are great at figuring out how to get the deal done if somebody is border line on a loan. They have a full arsenal of loan options available to them, and can sometimes make loans work that bank lenders can’t. Their fees and rates can sometimes be a bit higher, but if you’re not willing to shop around, they do the shopping for you potentially saving time and money.

In summary, there’s a lot to think about when choosing a lender, but take your time, ask for referrals and make a good choice.  If you are in the Madison area, there are some great lenders that we recommend on our web page.



How Does A Buyers Agent Get Paid?
December 10, 2012, 2:27 pm
Filed under: Real Estate | Tags: , , , , , ,

Many first time home buyers stay away from buyer’s agents because they think it will cost them money. Well, the opposite is really true; a buyer’s agent will likely save you money. How, you ask? Well, most often the buyer doesn’t pay the agent, and the buyer gets the benefits of an agent’s knowledge, expertise, and negotiating skills. See our post about the benefits of a buyer’s agent for more info on how they can help.

So, how does the buyer’s agent get paid? With the typical sale, a seller pays an agent to list the property for sale. Within the listing contract this listing broker says they will offer a specified percentage of their commission to a buyer’s agent, if there is one. So, the seller is paying a commission to the listing broker, and the listing broker is paying a commission to the buyer’s agent. This is the way most deals work.

Where the buyer needs to be careful is with FSBO’s (For Sale by Owner) and lower commission MLS deals. It’s becoming more and more common that FSBO sellers are willing to pay a buyer’s agent, but it needs to be written into the purchase contract. Also, many buyer agencies contracts will say that the buyer’s agent gets paid a percentage of the purchase price or the MLS offer of compensation (what the listing agent is offering), “whichever is greater”. When you sign a buyer’s agency agreement, make your agent cross out the “whichever is greater” portion. If you sign an agreement to pay the greatest of 3% or the MLS offer of compensation and the listing agent is only offering 2.5%, you as a buyer could be on the hook for the extra 0.5%. These instances are rare, but you need to be aware of them. We’ve actually never had a buyer pay us any portion of our commission out of their pocket.

As a buyer, having an agent work for you through a transaction rather than for the seller, at no cost to you, is a no brainer.



The Fiscal Cliff – How Does It Affect Real Estate?
November 28, 2012, 6:43 pm
Filed under: Income Property, Money, Real Estate | Tags: , , , , ,

There’s been a lot of discussion in the news about the fiscal cliff lately. In case you aren’t already familiar, the fiscal cliff is a combination of several laws which would result in tax increases and spending cuts starting in 2013. So, how does any of this relate to real estate?

The Mortgage Debt Relief Act of 2007 is one of the tax breaks that is set to expire at the end of the year. Generally, if debt is forgiven or canceled, this can be considered income to the borrower because it’s money they borrowed that they no longer have to pay back. So the borrower could be taxed on the amount of debt they were forgiven. This act excludes forgiven debt related to foreclosure, short sale, or loan modification of a primary residence from being taxable.

Even though the NAR (National Association of Realtors) is fighting hard to extend this act, I’m kind of torn on my opinion. Part of me says, we absolutely need to prevent people who have lost their home from being kicked while they are down and taxed on their debt forgiveness. Although, the other part of me says without this act we would have fewer people strategically foreclosing (walking away for convenience or part of their financial plan), which I don’t agree with. Maybe this act could be revised to provide incentives for short sales instead of foreclosures? This may prevent some strategic defaults while still helping those that are really trying to work with the banks.

Capital Gains Taxes are also set to increase from 15 to 20% on January 1st. I’m somewhat indifferent on this topic too. As real estate investors, lower capital gains taxes are beneficial for my wife and I in the long run. Although, I also understand the need for the government collect more than they spend, and I don’t think this is such a terrible place to squeeze more money out of tax payers. This will however, raise expenses for investors who are helping to revitalizing distressed properties, which could have a negative impact on a recovering market. So, I’d prefer to delay the increase a year or two or slowly raise it back to 20% over a period of a couple years.

The Mortgage Interest Tax Deduction is also a discussion item. Currently mortgage interest is a tax deductible item. Although, law makers are threatening to trim deductions allowed related to mortgage interest. Again the NAR is fighting to keep this tax deduction around. I think we all realize that this tax deduction is an incentive for home ownership and taking it away could slow (if not severely damage) the recovery of real estate markets. Although, I don’t think it would have much market affect if they set a lower maximum allowable deduction or eliminated the deduction for second homes. I’m probably the only Realtor and real estate investor that you will ever hear say this…  but I wouldn’t mind if this tax deduction was reduced over time and eventually disappeared. Why? because I don’t think our government should dole out rewards for having debt. Debt and the willingness of the American people to overspend is what got us in this mess to begin with.

What are your thoughts on the fiscal cliff? Do you agree or disagree with my thoughts?

 



The Golden Rule – How Does It Relate In Business
November 15, 2012, 12:15 pm
Filed under: Business, Life, Real Estate | Tags: , , , ,

Most of you have heard of The Golden Rule; “do unto others as you would have them do unto you.” As far back as I can remember this rule has been engrained in my brain. I don’t know whether my parents taught it to me or if I learned it from a Sunday school teacher way back when, but it stems from Luke 6:31 and Mathew 7:12 of the Bible. Ironically our pastor spoke about this a couple weeks ago after I had written half this blog. In any case, I’ve discovered how useful the Golden Rule is in business, in life, and in relationships.

In real estate, and any business for that matter, challenges arise, and mistakes happen. Often when a complication arises in a business transaction somebody ends up getting pissed off, defensive, disrespectful, or blaming. I’ll admit I’ve been guilty myself a time or two. However, you’d be surprised at the number of times I’ve had another agent yell, cuss, or even hang up the phone on me (I can say I’ve never done that). That kind of reaction never solves anything.

I always try to put myself in the shoes of the person on the other side of the deal. I ask myself if I were them, what would I do? …and If I were them, what would I want me to do? After all, a transaction must work for the people on both sides, or you’re not going to reach a deal.

This thought process not only helps a lot with the respect factor, it can also help with negotiations. You can negotiate hard while still being respectful, and treating others how you expect to be treated. In fact, if you can be friendly, helpful, and find out what the other party really needs it will almost always result in a better deal.

In other respects treat your clients how you would want to be treated as a client too. The reason most businesses fail is because they don’t meet the needs of the customer. A business is profitable when their product or service is valuable to the consumer. Provide your clients with the service or product you would expect and your business will be perceived as valuable.

This golden rule works well for our real estate sales business, our rental business, our marriage, and life in general. It’s Gods rule and words to live by. It’s not about you, it’s about others. The rule of business is the same as life and the path to success requires you treat others the way you wish to be treated. Doing the right thing is the key to integrity.