THE 4 Ps OF REAL ESTATE MARKETING

WHAT ARE THE 4 Ps OF REAL ESTATE MARKETING

The 4 Ps of real estate marketing are PROPERTY, PRICE, PLACEMENT, and PROMOTION. An experienced real estate professional uses this as a model for knowing how to market for success. It also aids by enhancing the components of your marketing mix to meet your unique situation.

MARKETING THE PROPERTY

There are many things you can do to improve the marketing of your property that have to do with the property itself. First, de-clutter. Removing clutter improves the visual appeal and perceived value of your property. Likewise investing in a deep cleaning and repairs on your property can help you get a better price.  Fresh paint almost always improves the “show-ability” of your property.

Proper staging with “eye-candy” and pleasing colors, art and other attractive items is also a big plus. Additionally, it is always beneficial to identify your property’s unique selling proposition. For example, if your property has a large, well-manicured yard, make sure all windows facing the yard have their drapes open. Also, make sure your yard is well lit at night so a buyer doesn’t miss this big advantage your property has. Ensure that you mention your “well-manicured yard” in all other marketing materials and placements.

PLACE

To make sure your property marketing is effective and believable, you should always have a Current Comparative Market Analysis [CMA] available and used to a) help determine your opening price for your property and b) incorporated into the information people who show your property share with prospective buyers.

Additionally, make sure your property descriptions anywhere online are created to improve your positioning for online searches. This will increase the chances buyers will find your listing.

And always encourage multiple offers. Jumping at the first offer is never a good idea. Even if it is the best price you can get, you won’t have a frame of reference and may doubt yourself after you close the deal.

ENHANCEMENT TO YOUR ONLINE & OFFLINE MARKETING

You can do several easy things you can do to enhance your 4 Ps of real estate marketing efforts. These include:

  • Professional photography
  • Copywriter-style property description
  • “Coming Soon” to build intrigue
  • “Open House” makes showings easy
  • Social media – reels, stories, proper hashtags for target marketing
  • Utilize Multiple Listing Services (MLS)
  • Build or take advantage of online portals
  • Have your agent contact other local top agents

Ask if your agent can develop a marketing mix like this. If your agent can’t do this, and if they can’t explain why it is important to do so, find another agent. Taking these steps to enhance the Four Ps of your property marketing will go a long way towards getting you’re the PRICE that you want! If you need this type of help with your marketing, contact us here.

THE 1031 EXCHANGE

1031 Exchange

1031 EXCHANGE: WHAT AND WHY?

A 1031 exchange is an transaction that entails selling one investment property in order to purchase another. When swapping your current investment property for another, you usually pay a significant amount of capital gain taxes. On the other hand, if this transaction qualifies as a 1031 exchange, you can defer these taxes indefinitely. This allows an investor the opportunity to move into a different type of investment real estate. Or you can shift your focus into a new geographic area without incurring a large tax burden.

To understand how beneficial a 1031 exchange can be for you, learn about capital gains tax on your property. This is because, in most real estate transactions where you own investment property for more than one year, you pay a capital gains tax. You are directly charged a tax on the difference between the adjusted purchase price (initial price plus improvement costs, other related costs, and factoring out depreciation) and the sales price of the property. The percentage that’s taxed on your capital gains depends on the tax bracket that you’re in. The 1031 exchange is defined under section 1031 of the IRS code, which is where it gets its name. You can learn more about 1031 Exchanges by CLICKING HERE.

REQUIREMENTS FOR A 1031 EXCHANGE

The main requirements for a 1031 exchange:

  • Must purchase another “like-kind” investment property
  • Replacement property must be of equal or greater value
  • Must invest all of the proceeds from the sale (cannot receive any “boot”)
  • Must be the same title holder and taxpayer
  • Must identify new property within 45 days; and
  • Must purchase new property within 180 days

COMMON MISTAKES

A) Selecting a less-than- qualified “Qualified Intermediary.” A “Qualified Intermediary” is a professional third-party company that handles the exchange process. They help you avoid making any critical mistakes that could jeopardize your tax-advantaged sale. An incompetent Qualified Intermediary could subject you to loss of funds, lawsuits, risk of unintentional tax fraud and other problems.

B) Taking possession of the proceeds from the relinquished property. For a successful 1031 Exchange, the proceeds must be held in escrow for the seller, usually by the Qualified Intermediary. Proceeds must all be reinvested into the new property. You cannot receive boot, ie., cash, stocks, bonds, personal property.

C) Not keeping track of the exact deadlines and adhering to them properly:
– Must identify replacement within 45 days of sale of relinquished property.
– Must close replacement within 189 days of sale of relinquished property.

D) Selling or exchanging property not held for investment or used in trade or business. For instance, this includes personal use property, like a residence or 2nd home are not eligible.

E) Attempting to exchange property held in a partnership or multi-partner LLC. Ask your tax advisor about a 1031 Drop & Swap.

Consult with your tax professional before beginning a 1031 exchange. The tax benefits for this type of exchange for investment real estate is sizable. However, you must guard against making any mistakes to avoid serious penalties.

Untaxed Gift Limit Increased for 2022

2022 Untaxed Gift Limit Amount increased to $16,000
Three generation Hispanic family standing in the park, smiling to camera, selective focus

WHAT WILL THE NEW UNTAXED GIFT LIMIT BE?

The untaxed gift limit for 2022 is $16,000 and no tax is due to the donor or the donee. There are provisions that would allow gifts higher than this amount. This is provided that the total lifetime gifts above the annual exclusion of $12.06 million for 2022 has not been met.

The donor and donee can be separate persons so that the aggregate tax-free gift for one-year amounts to more money. For instance, a father and mother can gift $16,000 each to their son. They can also gift an additional $16,000 each to their daughter-in-law. This equates to a total $64,000.

REQUIREMENTS FOR USE AS DOWN-PAYMENT

If the son and daughter-in-law use the money as a down payment on a home, the mortgage company might require a gift letter. The letter is usually a statement from the parents stating the money is a gift with no need for repayment. Lenders may ask the exact amount of the gift, where it came from and the relationship involved.

EARLY INHERITANCE OR HELP WITH INTEREST RATE

Family members and friends with financial resources can become the catalyst that allows buyers with good credit and income to purchase a home. Gifted funds provide a down payment and acts as an early inheritance. This allows the recipients to show their gratitude and the donor to see the enjoyment and benefit of the gift.

In some situations, the buyers have saved enough money for a minimal down payment. By using gifted cash to they can put more money down. This may help them get a lower interest rate or eliminate the need for private mortgage insurance.

The important thing involving gift funds is to have complete disclosure with the lender. It is best discussed during the pre-approval process. Your real estate professional should also know about it so they can guide you through the process.

Surviving Spouse Sale Period

Surviving spouse home sale

Importance of Understanding the Surviving Spouse Sale Period

Why do you have to pay attention to the surviving spouse sale period? Most married couples own their home as joint tenants with rights of survivorship. If one spouse dies, the surviving spouse inherits the home, along with their basis. This does not trigger a taxable event. However, the capital gain exclusion is reduced to a single person’s share unless the survivor disposes of the property in the allowable timeframe.

Tax Ramifications

Married couples, filing jointly, have up to $500,000 of capital gain exclusion on qualifying sales. As a single taxpayer, the survivor is only entitled up to $250,000 exclusion of capital gain. For instance, if the home at the time of death is worth $900,000 with a basis of $400,000, the gain is $500,000. If the surviving spouse sells the home, their exclusion is only a maximum of $250,000. This makes the other $250,000 subject to long-term capital gains tax.

Exception Tied to Surviving Spouse Sale Period

However, there is an exception to the rule. If a sale occurs within two years of the death of their spouse, the survivor is entitled to the $500,0000 exclusion. This is when the ownership and use tests are met prior to the death. The two-year period begins on the date of death and ends two-years after that date. Therefore, the property needs to close and fund by that anniversary.

For more information contact your tax professional and download IRS Publication 523 and download our Homeowners Tax Guide. If you have any questions about this or need help selling your property after the death of a spouse, contact Sound Investments, Inc. We have the experience and the understanding needed to assist you during this difficult time.

Cash Now… Loan Later Potential Pitfalls

The Main Pitfall of Cash Now, Loan Later Purchases

Some homebuyers opt to pay cash now and get their mortgage loan later. Cash purchases are more common now due to low inventory and multiple offers. See some reasons why HERE. Buyers who pay cash for a home but expect to get a loan later need to be aware of IRS rules. You can lose your mortgage interest rate deductions with this type of cash purchase. If a buyer intends to get a mortgage later, there are important things to be aware of.

Most lenders are not concerned about whether the homeowner wants to deduct the interest. They want to make a good loan that will be repaid. So if a buyer qualifies for the loan, they won’t worry about making sure it fits the mortgage loan deduction window. A new loan must be established within 90 days of the date of purchase to qualify for interest deductions.

Qualified mortgage interest, which is deductible, is based on the acquisition debt used to buy, build or improve a principal residence. The maximum mortgage amount of interest deduction is $750,000 of acquisition debt. When cash is paid for a property, the acquisition debt is zero. Zero acquisition debt means no mortgage interest deduction. After the window of opportunity, the only way to increase the acquisition debt is to make and finance improvements to the home.

Therefore, if you are considering paying cash for a home, it’s best to consult your tax advisor. Contact Sound Investments, Inc. Our owner is also a tax professional who can help explain the ramifications of this type of purchase.

PMI (Private Mortgage Insurance) Facts

When Can You Cancel PMI?

Learn about PMI facts. Did you know that when Private Mortgage Insurance (PMI) is no longer required, you can cancel it? Moreover, by cancelling it you will lower your monthly payment. The PMI Cancellation Act provides for that removal. The borrower may request in writing when the loan balance is 80% of the original purchase price or value. Of course, the borrower must be current on payments for termination to be allowed.

There are other important criteria you must meet if you want to cancel PMI on your loan:

  • Your request must be in writing.
  • You must have a good payment history and be current on your payments.
  • Your lender may require you to certify that there are no junior liens (such as a second mortgage) on your home.
  • Your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the original value of the home. If the value of your home has decreased below the original value, you may not be able to cancel PMI at this time.

When Must the Lender Remove PMI

The lender must remove the PMI when the unpaid balance reaches 78% of the original value of the secured property. In addition, the lender or servicer must end PMI the month after the midpoint of the mortgage term is reached.

Other PMI Facts

Lenders may agree to terminate coverage wen the borrower’s equity reaches 20%, but the policies and procedures for cancelling or terminating PMI coverage vary widely among lenders.

VA mortgages do not have private mortgage insurance.

FHA mortgages require Mortgage Insurance Premium, MIP, which is required for the life of the mortgage for loans after June 3, 2013, when the loan-to-value percentage is greater than 90%.

Find out more about cancelling your PMI from the US Consumer Finance Protection Bureau by CLICKING HERE.

You may not be sure if you can cancel your PMI monthly payments. Consult your real estate professional, or contact Sound Investments, Inc. Get help understanding whether you can cancel PMI or not, and what the impacts to you may be.

What is Private Mortgage Insurance

What is Private Mortgage Insurance

Private mortgage insurance, also called PMI, is a type of mortgage insurance often required to pay for if you have a conventional loan. Like other kinds of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan.

PMI is handled by the lender and provided by private insurance companies. PMI is usually required when you have a conventional loan and make a down payment of less than 20% of the home’s purchase price. It is also usually required when you’re refinancing a conventional loan with equity < 20% .

How do I pay for Private Mortgage Insurance?

There are several different ways to pay for PMI. Some lenders may offer more than one option, while other lenders do not. Before agreeing to a mortgage, ask lenders what choices they offer.

The most common way to pay for PMI is a monthly premium.

  • This premium is added to your mortgage payment.
  • The premium is shown on your Loan Estimate and Closing Disclosure on page 1, in the Projected Payments section. You will get a Loan Estimate when you apply for a mortgage, before you agree to this mortgage.
  • The premium is also shown on your Closing Disclosure on page 1, in the Projected Payments section.
  • Sometimes you pay for PMI with a one-time up-front premium paid at closing.
  • This premium is shown on your Loan Estimate and Closing Disclosure on page 2, in section B.
  • If you make an up-front payment and then move or refinance, you may not be entitled to a refund of the premium.
  • Sometimes you pay with both up-front and monthly premiums.
  • The up-front premium is shown on your Loan Estimate and Closing Disclosure on page 2, in section B.
  • The premium added to your monthly mortgage payment is shown on your Loan Estimate and Closing Disclosure on page 1, in the Projected Payments section.

Lenders might offer you more than one option. Ask the loan officer to help you calculate the total costs over a few different timeframes that are realistic for you.

What factors should I consider when deciding whether to choose a loan that requires PMI?

Tip

You may be able to cancel your monthly mortgage insurance premium once you’ve accumulated a certain amount of equity in your home. Learn more about your rights and ask lenders about their cancellation policies.

Like other kinds of mortgage insurance, PMI can help you qualify for a loan that you might not otherwise be able to get. But, it may increase the cost of your loan. And it doesn’t protect you if you run into problems on your mortgage—it only protects the lender. Find out more about PMI from the US Consumer Finance Protection Bureau by CLICKING HERE.

Lenders sometimes offer conventional loans with smaller down payments that do not require PMI. Usually, you will pay a higher interest rate for these loans. Paying a higher interest rate can be more or less expensive than PMI. It depends on a number of factors, including how long you plan to stay in the home. You may also want to ask a tax advisor about whether paying more in interest or paying PMI might affect your taxes differently.

Borrowers making a low down payment may also want to consider other types of loans, such as an FHA loan. Other types of loans may be more or less expensive than a conventional loan with PMI. This depends on your credit score, your down payment amount, the particular lender, and general market conditions.

You may also want to consider saving up the money to make a 20 percent down payment. This eliminates the need for PMI with a conventional loan. You may also receive a lower interest rate with a 20 percent down payment.

Ask lenders to show you detailed pricing for different options so you can see which option is the best deal.

Warning: Private mortgage insurance protects the lender—not you. If you fall behind on your payments, PMI will not protect you and you can lose your home through foreclosure.

Having an Up-To-Date Home Inventory

Is your home inventory up to date?

WHY YOU NEED AN UP-TO-DATE HOME INVENTORY

A current up-to-date home inventory of all the personal items you own is important. You may find that it may even be necessary. It is an enormous help if you are faced with filing a police report or insurance claim. In these cases, the homeowner is usually asked if they have a home inventory. If not, the homeowner must reconstruct one to estimate their loss.

TRY THIS EXERCISE

Imagine you are in this position. Would you be able to make an accurate list of your belongings and their value? As an exercise, pick a room of your home. While being in another room, list all your belongings and their value that are in the room. When you’re finished with the list, go into the room and check to see how you did.

This little exercise should demonstrate the difficulty of reconstructing an accurate list of your belongings. Moreover, depending on whether you missed a lot of items you could find that you aren’t adequately compensated by insurance when you try to replace your items. This demonstrates the importance of having an up-to-date home inventory. Not only will this help you purchase the right amount and type of insurance, having an accurate inventory makes filing a claim easier.

OTHER REASONS TO HAVE A HOME INVENTORY

An accurate accounting of your belongings helps you and your insurance agent determine that your belongings are properly insured. Another reason for having a home inventory is to create a maintenance calendar for your appliances. It can also help you declutter by getting rid of items no longer needed. Over half of households do not have a home inventory. Furthermore, the majority of those who do have them, haven’t updated them with new possessions purchased since it the original list was created.

The peace of mind having a current home inventory is a strong reason for making sure yours is up-to-date. It provides confidence that you keep your home and possessions financially organized and prepared. This should help if you need to prove the true value of your losses. It will also help you and your family return to your normal life after an unsettling event.

A HELPFUL WAY TO BUILD YOUR HOME INVENTORY LIST

Download our Home Inventory for more tips on creating one along with alternatives for documenting your belongings. It will allow you to take pictures and list individual items along with values. You can enter the information and images directly into the PDF so you can be stored safely in your online cloud storage once you are done.

Are You Well Positioned to Buy?

Position yourself for buying

REAL ESTATE INVENTORY REALITIES

If you are looking to buy a new home, it is critical that you are well positioned to buy. Right now, some buyers are becoming discouraged. They feel that there are not enough homes on the market, especially, in certain price ranges.  When they do find something they want, there may be multiple offers and they end up losing to another buyer. If you experience this, you may choose to wait until the market changes.  This is understandable. However, your wait may be very long, and it may end up costing you more.

Inflation is affecting all sectors of the economy; prices on food, cars, and electronics are going up as well as housing and mortgage rates.  Home prices rose 20.2% year over year in May 2022 over 2021, according to a recently released CoreLogic report.  The advantage for current homeowners wanting to move up is that their current home is now also worth more which will help pay the increased price for a larger home.

OPPORTUNITIES EXIST

And while it is true that housing inventory is at very low levels, over six million homes sold last year. For buyers, the problem was that available homes sold fast and there was a lot of competition for them. This certainly isn’t as easy as if there were four to six month’s supply of homes for sale. But, once you purchase a home, these same dynamics will be working in your favor to build your equity with appreciation.

BECOME WELL POSITIONED TO BUY

Successful buyers separate themselves by being well positioned to buy when the new listings hit the market.  They arm themselves with the following:

  • Working with a trusted real estate professional
  • Pre-approved by a local lender
  • Developed a plan to write a competitive offer
  • Determined their limits financially and emotionally.

Remember, six million people bought homes last year and you can be among the fortunate ones who buy one this year.  Be committed to what it takes in a highly competitive market.  Surround yourself with a competent and confident team that will produce the results you want.

For more information, download our Buyers Guide and schedule an appointment with us to get the facts about the best plan to get you into a home this year.

Avoid These Common Buyer Mistakes!

HOW TO AVOID COMMON BUYER MISTAKES

When buying any property, you want to avoid making these common buyer mistakes. Like driving a racecar, buying a home can be a very fast but complex process. And like racing, if you make a mistake, you can easily miss your chance to grab the position you want. Buying a new home is an emotional process. However, you if you don’t use your logic and the right information, it becomes much harder to get the home of your dreams. Let’s look at some tips about mistakes to avoid when you buy.

AVOID UNFAVORABLE FINANCIAL MISTAKES

Manage your credit score and make sure it is as high as you can make it. It’s important to know your credit score when you are looking to finance a new home. And keeping it as high as possible by avoiding bad financial practices is critical. Remember, borrowers with the best credit scores get the lowest mortgage rates.

Don’t look at new homes without being pre-approved for a loan first. Because the real estate market is so competitive, it is unlikely that your offer is accepted if you aren’t already pre-approved. It is also very likely that you will lose the opportunity to bid if you need to take the time to get a loan approval.

While we are on the topic of mortgage loans, do your homework! Shop around for the best mortgage rate available. Rates and fees are not the same from all lenders. Regardless of your credit score, different lending institutions will often offer different mortgage rates. Find the best one for you. You real estate agent can help you do this.

It is unwise to spend your entire savings to purchase a home. Hidden and unexpected homeowner costs can leave you vulnerable in emergencies. 

KNOW THE NEIGHBORHOOD

Research the neighborhoods you want to look in. Find out about schools, crime statistics, access to amenities and emergency services. These will affect both how happy you will be while in your new home, and how much value you’ll receive when it’s time to sell. Also find out what recent “comparables” in the neighborhood sold for. This will give you a realistic idea of what range of prices you can expect.

Good schools affect your property value positively.

PROTECT YOUR RIGHTS

Never waive the right to inspection. Waiving the right for inspection may make your offer look better, but you give up protection from unexpected problems and expenses. Be wary especially is the seller is eager to accept your offer only if you waive inspections.

Not working with a real estate professional is a big mistake some buyers make. Purchasing real estate is an extremely complex process. If you don’t believe us, you only have to go through all the documents and requirements someone else has on purchasing their property. You can see that without inside knowledge to the terms, language and processed involved you can easily get lost and confused. A real estate expert has the knowledge to guide you successfully through the process.

Remember. With a reputable real estate professional on you side, you can easily avoid these common buyer mistakes and others. For more information on how this is done, you can contact us at (510)-244-0081. Or Click Here to send us a message. Sound Investments, Inc. is here to help you!