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Welcome to the Michelle Cannon Team blog, we specialize in the Northwest area of Houston including Spring, The Woodlands, and Cypress. Our team is ranked in the top 200 RE/MAX teams in the state of Texas!
It Nailed Down? What Stays in the House and What Goes
The doors, the windows, and most likely the azalea bush by the
driveway—you’d expect those to stay with the new house you just bought,
and you’d be right. But what stays in the house when you buy it?
Who claims the
washer and dryer? Will the sellers bequeath the lawn mower? What about the
bathroom fixtures? Your real estate attorney will know specifics about
what you are legally entitled to keep as the new homeowner, which can vary
the basic rule is this: if it’s nailed down, it stays. If it’s not, it
goes—unless otherwise negotiated.
Here’s a primer on
the basics of what stays in the house for the new owner:
Mostappliancesare moveable items, and moveable items
are considered personal items or possessions of the seller. The real estate
agent should have explained things such as, “The seller was leaving all
the kitchen appliances and the washing machine—but not the dryer.”
If there are
leftovers that haven’t been mentioned yet—say, the portable air
conditioner in a basement window—ask the experts as you negotiate the closing.
The seller might agree, especially for a price.
Plants, shrubs and trees in the ground remain with the new house. Backyard
equipment—such as lawn chairs, tables, swings and grills—are all considered the
seller’s personal items. A swing set may get a bit tricky, because it is
possible to claim it’s attached to the ground in some cases.
If you have a
questions about anything specific, the real estate attorney should make sure
it is answered by the closing. The seller may be very willing to let you
have backyard items for a price.
Light Fixtures Light fixtures,
lamps and chandeliers usually spark discussion between the buyer and seller.
Items clearly attached to the home—and if removed may damage walls—are
considered fixtures. Fixtures must remain in the new house unless the
seller explicitly states the item isn’t included in the sale.
The seller may not
care about the $40 Home Depot sconce, but the family-heirloom, lead crystal
chandelier could be held dear. If the buyer agrees to let a priceless
fixture go, it falls on the seller to remove the chandelier without damaging
Lamps attached to
nothing but the cord plugged into an outlet fall under “movable items” and go
with the seller. It’s a good idea, if you’re the buyer, to inventory all the
fixtures and fans in the new house, and you should make sure you and the seller
know exactly who wants and gets what items before closing.
Built-in bookcases—they’re nailed down, so they stay. Ditto custom-made
valances. But the owners have a right to claim store-bought curtains hung on
As one Wall Street
Journal expert notes, it’s become more commonplace to have large televisions
mounted on the wall, but they can be easily popped out. The owner of a 80″-plasma TV may
not imagine letting that go over a $30 wall bracket. Those gray areas can be
If the sellers plan
downsize, you might even be doing them a favor by agreeing to take on some of
And if there’s something they desperately want to keep, that could play in your
favor if you ask for a give-back on a price point.
The one thing no one
wants is for a pair of $50 curtains or a cheap TV wall bracket to make or break
a home sale. So make sure you know what stays in the house when you’re buying
You worked so hard to
own your home, it’s hard to imagine moving on—much less to a smaller abode. But
while downsizing your home may involve major lifestyle changes, there are a lot of advantages to moving into
a smaller space.
Downsizing remains one
of the most effective ways to lower housing and energy costs.
While the size of the
average American home remains fairly large, there are signs that
downsizing may increase in the future.
Downsizing Trend: No More McMansions
The average American
home has grown from under 1,900 square feet some 20 years ago to more
than 2,400 square feet, according to 2013 U.S. Census data.
Families who bought
five, ten, or even 15 years ago or more might find many rooms unused as their
children have grown and moved out. While the Baby Boomers continue to hold on
to many of those larger homes, according to recent reports, experts predict an uptick in downsizing as
the oldest Boomers enter their mid-70s.
“We continue to move
away from the McMansion chapter of residential design, with more demand for
practicality throughout the home,” writes Kermit Baker, chief economist at the
American Institute of Architects. “There has been a drop-off in the popularity
of upscale property enhancements such as formal landscaping, decorative water
features, tennis courts and gazebos.”
Large foyers are
becoming a thing of the past. The formal living room is being replaced by a
more flexible open plan, such as a large family room/breakfast
For some homeowners,
of course, downsizing is not a matter of choice, but of necessity. Many
families are still digging out of the recession, which had an impact on home values, employment and retirement nest eggs invested
in the stock market. A couple finding itself with a diminished income may
simply be unable to keep up with mortgage payments and maintenance costs on a
2,800-square-foot home on a half-acre lot.
Still, the very idea
of downsizing takes some getting used to—much less carrying out a downsizing
plan. If you feel stuck, a home downsizing consultant can help you
formulate a plan of action, appraise and sell belongings, and estimate how much
money you stand to save.
Learning to Live With
Downsizing your home
means a change in lifestyle and attitude. You may have to learn to live without
a garage, that extra bathroom, and the basement storage where you tossed years’
worth of home goods, equipment and mementos. A smaller home can mean less room
for guests and less opportunity for privacy.
As you consider
downsizing, ask yourself these questions:
§Do you feel ready to live more simply?
§Are you prepared to divest yourself of
§How many of the things you’ve accumulated over
the years do you truly treasure?
Home downsizing is
really about making do with less. But some people would say that less is more.
Rather than devoting your time and energy to supporting and maintaining your
home, you may find yourself devoting more of your time and energy to enjoying
To find a house
is more than simply choosing a place to rest your head.
The location impacts
virtually every aspect of your life, from your commute to grocery shopping to
leisure time. A home’s layout can promote or hinder your lifestyle, and
large monthly mortgage
payments can seriously
dent your budget.
Is your potential new
home well suited to getting where you need to go?
Will you face
frustrating gridlock on your morning commute? Do the rush-hour drive to check
whether traffic flows smoothly. Daily two-hour traffic snarls—maybe even each
way—can ruin your mood and your schedule.
Will winter ice or
spring storms make the roads hard to navigate? Research the city or township’s
record of road maintenance. In snowy regions, a street that never sees a
snowplow can severely impede your ease of movement. Streets riddled with
potholes are inconvenient and dangerous.
groceries and household items. Explore the local shopping areas. If the
closest grocery store takes more than half an hour to reach, how will that fit
into your lifestyle? Are you prepared for two-hour grocery runs? Or will you
accept the higher prices and limited choices of nearby convenience stores?
On the other hand, you
might decide that a quiet, remote location is worth the trade-off of easy
access to goods. And perhaps a favorite restaurant or grocery store close
Leaving Room for Fun
Both your home’s
location and its setup will affect how you spend your time off. Do you enjoy
the nightlife? If so, consider the house’s distance from the local
hotspots. Is it a distance you’re comfortable with? Or will you need to scale
back your social life?
For an avid hobbyist,
you’ll want to make sure your new home has room for what makes you happy. If
you’re a passionate home chef, a tiny galley kitchen may quickly frustrate
you. If you are a fitness fanatic, make sure there’s room for your
Find a House for
You know how many
bedrooms and bathrooms you need. Yet it’s easy to become wowed by extras
and lose sight of the essentials.
If you mean to buy a
“forever” home, that dramatic sweeping staircase can put stress on aging
knees. That alluringly vast lawn will consume your free time. A finished
basement rec room won’t do for young children who demand more parental supervision.
Take a minute
to carefully consider the home’s structure and layout to determine whether
the space matches your lifestyle.
Budgeting for Your
Home and Your Life
Even after the bank
has cleared you for a mortgage, consider those monthly payments. How deeply
will they impact your quality of life?
Some people are
content to live frugally, enjoying the comfort of home ownership. Others feel
edgy when they don’t have cash on hand, whether that’s the freedom for a
little guilt-free shopping or a larger savings safety net.
So before you sign
that contract, take some time to really consider whether the home fits all
of your needs and wants. Your future self will thank you.
and Pre-approval: Do You Really Need Both?
What kind of mortgage you can afford and what kind you can get are important things to know
when you begin the home-buying process. You might have a ballpark price range
for your next home, but you run the risk of setting your sights too high—or too
low—without some additional legwork. Narrow down your range by getting
pre-qualification and then pre-approval.
(sometimes abbreviated as ‘prequal’) is a basic overview of a borrower’s
ability to get a loan. You provide all the information, without any kind of
paperwork to back it up.
more in-depth. The lender will look
at your bank statements, credit score and other information to demonstrate
your financial capability. Neither is a guarantee you’ll get the loan, but a
pre-approval is more reliable and more favorably viewed byREALTORS® and potential sellers when you start home shopping.
So why get
§It’s quick and can be done online or over the
§It can give you a basic idea of what kind of
mortgage you can get
A Good Idea, Not the
pre-qualification is relatively easy, don’t rely entirely on that information.
Mistakes can be made and discrepancies can and will be found during the
pre-approval or the
final approval process.
Being pre-approved is
not a sure-fire way of obtaining a loan, either. For example, if you are
pre-approved one month, but then you take out a loan for a new car next
month, you can damage your ability to get a mortgage. You do not want to change
careers, spend too much money or take out loans during the home-buying process.
If you do, you can hurt your loan eligibility.
pre-qualified and pre-approved won’t guarantee you a loan, it’s recommended you
do both. At the very least, get pre-approved. Many REALTORS® and sellers won’t
consider you as a strong home-buying candidate without a pre-approval letter.
So when you’re looking
for a new home to buy, it’s in your best interest to do the following:
§Shop for a home based on your pre-approval
§Apply for the loan
If you follow these
steps in order, it can save you a lot of time and aggravation during the
mortgage loan and home buying process.
realtor.com® Mortgage App for AndroidoriOS.
A lien is a legal
document acting as security for the debt by giving the creditor a stake in
your home. When there is a lien on your home, what you can do with the property
is limited. You may not be able to take out a second mortgage or home-equity
loan with an
If you decide to sell
your home, the lien must be paid off at closing with the proceeds of the sale.
There are a number of
different types of liens creditors may place on your home. The most common are
mechanic’s liens, judgment liens and tax liens.
§Mechanic’s Lien: When general
contractors build your
home—or repairmen, carpenters, plumbers or painters work on your home—they may
file a mechanic’s lien on the property as insurance to make sure they’re paid.
§Judgment Lien: If you have lost a court case and there
was a judgment against you, the winning party of the lawsuit can file a
judgment lien against your home until the payment is collected. This type
of lien is also sometimes imposed by an attorney if you do not pay
your bill for legal services.
It is in your best
interest to have any lien against your home removed as quickly as possible. The
simplest way to have a lien removed is to negotiate with the lien
holder. For example, settling the lawsuit or paying any outstanding bill
to your contractor should remove the lien. If you owe back taxes, the Internal
Revenue Service may agree to remove the lien on your home if you plan to sell
the property and agree to a payment plan to repay the past due amount.
If you feel the
action is unjustified, you can file a lawsuit to have the court order the
lien removed. Your case will be investigated, and if there is no basis for
the lien, or if you can prove the debt was paid, it will be removed.
Updated from an
earlier version by Aviva Friedlander.
Buying a new home is
so personal. Yet, to sell yours, you’ll want to remove so many of your homey,
personal touches. This is part of staging your home: buyers should be able to
picture themselves living in your house—not picture you living
in your house.
will boost your home’s appeal—and
your chances of selling. And there are two rooms that often need the
most staging: bedrooms and bathrooms.
You might decide your
house looks good enough as-is. But even in a strong market, a little staging
could boost the offers you receive.
Think like a buyer
Staging lets you see
your house with fresh perspective and helps you correct any eyesores you
may have become used to over the years. It helps you to view some of your
beloved items as clutter and gives you the initiative to clear away unneeded items.
Staging will also help
you in the packing process, which inevitably involves streamlining and downsizing.
Bedrooms equal comfort
A bedroom should be a
place of serenity. Stage your bedroom to convey a tone of comfort and
relaxation. You want it to appear spacious. Here are some tips for presenting
§Paint it in soft, neutral tones
§Remove all furniture other than a bed, a
dresser and a few knickknacks
§Remove at least half of your wardrobe from
your closet to make the closet seem larger
§Clear away clutter, shoes, reading material
and family photos
§Invest in new linens and throw pillows
§Steam clean the carpets, clean the windows and
dust the shades
Bathrooms can be
Purchasers don’t spend
a lot of time in bathrooms, so your bathrooms have to make a great first
impression. Bathrooms should be impeccably clean and somewhat modern. Here
are some bathroom staging tips:
§Replace old bathroom fixtures, such as towel
rods and faucets, with sleek new ones
§Hang luxurious-looking towels to match
the bathroom’s color scheme
§Layer towels on the rack, smaller towels over
§Before an open house, put a bouquet of fresh
flowers in the bathroom
§Ruthlessly clean mold and dirt from tiles and
§Add spa-like accessories, such as candles,
scented soaps in baskets and glass containers holding cotton balls
Cleanliness is a
all. Buyers have to imagine themselves living in your home, and they will have
a hard time picturing themselves living in a dirty house. In fact, the top of
your to-do list when you list home to sell should be a deep, thorough clean, like your house probably hasn’t seen
since you moved in.
§Remove mold and mildew
§Scour away lime stains left by hard water
§Clean windows inside and out
§Wash all linens and curtains
If you smoke or have a
pet, be especially vigilant about eradicating those odors—because a clean,
well-staged home should bring you a quick and profitable sale.
Whether you’ve been a homeowner
for a few years or more than a decade, you may consider refinancing your
home loan whenmortgage ratesdip. If you’ve never refinanced
before, there are a few basic facts you need to know before you can decide if
it’s right for you.
You may be thinking since you’ve faithfully made all yourmortgage
payments on timeand
your income has even increased a bit since you applied for the loan,
refinancing should be a breeze.
But when you’re refinancing, you’re applying for anewloan. And whether you use the same
lender or another lender, you’ll be subject to complete documentation and
verification of your income, your assets, your debt-to-income ratio, your
credit profile and your job history. Not only do you have toqualify for the
loan, but your house must appraise for enough value to support the
Refinancingalso costs money: closing costs vary
by location but average 2% to 3%, or $4,000 to $6,000 on a $200,000 loan. Even
a “no-cost” refinance costs money you pay through a higher interest rate, a
larger loan balance or the payment of discount points.
If you’re refinancing to lower your payments, you can do a
simple calculation to determine how long it will take you to recoup the closing
costs on your loan. For example, if your refinance costs $2000 and your monthly
savings are $150 per month, it will take you a little over 13 months before
you’ve recouped your costs and truly are saving money.
Your decision to refinance or not should be made in the context
of your overall financial plan. Most people want to refinance when interest
rates are low, so they can pay less in interest and lower their monthly
payments. Some borrowers also want to refinance an adjustable rate mortgage
(ARM) into a fixed-rate loan before rates rise faster.
Others refinance when theirequityhas risen and they want to take cash
out of the property to make home improvements or pay off high-interest credit
Refinancing can also be a good choice if you want to reduce your
loan term from a 30-year loan to a10-, 15- or
20-year loanin order
to pay it off in full faster—although even with lower rates, your payments are
likely to be higher because of the shorter timeframe to repay the loan.
Loan terms and refinancing
If you’re currently financing your home purchase with a 30-year,
fixed-rate loan, you should carefully evaluate your payments and your options
for refinancing into a shorter term or into another 30-year loan. Typically, it
doesn’t make a lot of sense to refinance early in your loan, because initially
your payments are mostly interest—and you won’t have paid down the principal
If you’ve been paying your loan for seven or eight years,
your loan balance will be lower. If your goal is to lower your monthly
payments, you’ll benefit by both lower mortgage rates and financing a smaller
amount of money. However, by extending the loan term for another 30 years, you
may end up paying more in interest over the life of the loan, since you’re
essentially paying interest on the house for 37 or 38 years instead of the
original 30-year term.
If you want to pay off your loan faster, you should compare the
payments on a shorter term loan to see if you can comfortably afford the
payments. Interest rates are lower on shorter term loans, which can offset the
accelerated payoff pace.
Refinancing and future plans
Refinancing makes the most sense if you plan to stay in your
home for a few years, because if you’re selling soon, you may not recoup the
cost of the refinance. However, there are always exceptions to the rule, so if
you know you’ll sell in three years, for example, a refinance into an ARM with
a low, fixed interest rate for five years could be a smart decision.
Always make sure to consult a lender to discuss refinancing in
the context of your individual financial plan.
If you live in a newer
suburban community or planned unit development—like some 63 million Americans,
according to the Community Associations Institute—you are probably a
member of homeowners associations, or HOAs.
It’s also a good bet
you haven’t given your HOA much thought until you have a problem. Since HOAs
make and enforce the community rules, it’s smart to understand what you can do
if you can’t or don’t want to follow them.
associations, volunteer groups of neighbors who manage common areas and
community property, create their own own covenants, conditions, and
restrictions (CC&Rs). These CC&Rs cover:
§Resident behavior (no glass containers around
§Architecture (no fences higher than 8 feet)
§Common responsibilities (fee schedules and
fines for non-compliance)
Is there value to
living in an HOA? Depends on how you define “value”. A 2005 study that appeared
in the Cato Institute’s “Regulation” magazine compared a group of Washington,
D.C., area HOA properties with similar homes without community benefits—a total
of about 12,000 homes. The HOA house values were found to be 5.4% higher. With
the median home price around $190,000, that’s about $10,000.
Of course, that means
you’d pay more for the HOA home than the non-HOA home. And you’d pay dues,
which average $396, according to the Census Bureau. The real value is your HOA
property will be well-maintained and the rules for maintenance enforced.
When You Don’t Like
Some boards can impose
what some homeowners believe are invasive, silly or elitist rules. In 2014, a
Myrtle Beach, SC, association decided homeowners could have only two pets. A
couple who’d had three dogs for the past 14 years were threatened with a
$100-a-day fine unless they got rid of one of their dogs.
And some years back,
news outlets reported a story about a homeowner in an upscale gated community
in Frisco, TX, who was threatened with fines for parking his new Ford F-150
series truck in his driveway overnight. The board made exceptions for several
luxury brands, but his mid-range truck was ruled “not classy enough.”
Even if you disagree
with the rules, keep paying your dues. HOAs have broad legal powers to collect
fines and fees and regulate activities. If you don’t respond to letters from
the board, property manager, or a collection agency, the HOA can and will turn
to small claims court or file a lien against your property.
You can handle some
issues with a phone call. For example, adding recycling to the garbage
collection route is a budget, not a rules, issue. Call the board member who
oversees trash collection to find out if there’s leeway in the budget. If you
want to do something that’s against the rules—like flying the American flag in
your yard—start by:
§Making a written request for variance, using
the appropriate HOA form in your CC&R documents. A variance gives you
permission to be the exception to the rule. Submit your request to the board
and property management company.
§Seeking a compromise: That you’d like to fly
the American flag, but only on national holidays.
Don’t Expect a Quick
Some HOA boards meet
as little as twice a year. If the board decides the issue is worth pursuing, it
may require a community vote. If it passes a majority, the board will adopt it.
Board members also may consult the HOA attorney to see if there’s a legal
liability if they rule against you.
If you don’t get a
timely response, request a hearing and resubmit your request for variance with
as much support for your cause as possible.
If the board rules
against you without a community vote, you can appeal the ruling with a petition
signed by a majority of other homeowners.
But if you fly your
flag without permission, expect to get fined. Fines can range from a nominal
$25 to a painful $100 or more depending on the issue. Your CC&Rs will
indicate the fine schedule—per day, per incident, etc. Interest for nonpayment
can accrue, and the HOA can sue you in small claims court.
If you feel the ruling
or the fines are unjust, the last resort is to hire an attorney and sue the
HOA, as a flag-flying couple did in 1999. They battled their HOA in court for
nine years before the case was settled in their favor.
Become the Rule
If you don’t like the
rules, the best way to change them is to become part of the process.
1. Know your
CC&Rs, annual budget, and employee contracts. Do you see areas where expenses can be
cut? Are service providers doing their jobs?
2. Volunteer for a
committee or task. If the board
needs to enforce parking rules, for instance, you can volunteer to gather
license plate numbers of residents’ vehicles. In addition, put your
professional expertise to work: Assist the board with data entry, accounting or
3. Stand for election
to the board. When a position
becomes open, the board notifies the members, and you can put your name
forward. New board members are elected at the annual meeting by member majority
vote. Many boards are three to nine members large, with terms of one to two
As a board member, be
prepared to spend two to four hours a month:
§Reviewing property management reports
§Talking to other board members and residents
Most boards meet
quarterly; small boards only meet twice a year for a couple of hours.
Accept that you might
become less popular if homeowners don’t like your decisions. In the worst case,
you could be sued, along with the rest of the association.
But there are rewards.
You’ll feel more in control of your community’s fate. You may find that some
rules you didn’t support have merit after all. But most of all, you’ll know you’re
doing all you can to protect your quality of life and your home’s value.
Consumers considering a home purchase often
want to get a handle on how long the process takes.
The problem is that it’s a surprisingly subjective and
multilayered question. Answers tend to focus on the typical time it takes to
close a home loan once you’re under contract, which is usually 30 to 45 days.
That’s an accurate response, but it’s a vantage point that
leaves little room between the starting and finish lines. The home-buying
journey— fromfinancial preparationand finding the right home to getting under contract and through
closing—tends to take a lot longer.
The reality is there is no stock answer, mostly because
everyone’s journey is different. Here is a closer look at some stages and steps
that can shape your home-buying timeline.
Building Credit & Savings
Signing a purchase agreement to buy a home is a key step, but it
doesn’t mean much if you don’t have the credit and assets necessary to secure a
You might need to spend time burnishing your credit profile or
stockpiling savings in order to qualify for a home loan. Credit-score anddown paymentrequirements can
vary depending on the lender and the loan type. (Checking your credit scores
before you begin your home search can help you determine if you need more time
to build your credit. There are various services that allow you to check your
credit scores for free,including Credit.com.)
Borrowers looking at a $300,000 home would need at least $15,000
in cash for a minimum down payment on conventional financing (5%) and at least
$10,500 for FHA financing (3.5%).
The average conventional borrower in April had a 755 credit
score, while the average FHA borrower had a score of 685, according to mortgage
software company Ellie Mae.
Paying down debt, correcting mistakes on your credit report and
other steps can help boost your score, rapidly in some cases. But some
blemishes can take longer to clear up than others.
How long it takes to build that down payment nest egg depends on
the borrower and their budget. Scraping together enough cash to simply meet
those minimum requirements can take considerable time, especially for
But there’s no game clock on yourhome search. You can tour 50
homes over 50 weeks. You can buy the first showing.
It’s obviously the most personal part of the process, but it’s
also a time when perfect can truly be the enemy of good. First-time buyers
especially have to learn to balance wants and needs with the realities of their
housing market and what they can afford.
That’s not always an easy—or quick—lesson to learn.
For mortgage lenders, the home-buying clock starts once they get
a copy of your purchase agreement. From there, work starts on getting the
property appraised and all of your financial documentation in order for an
underwriter to review.
Like credit and underwriting requirements, appraisal time frames
can vary depending on the loan type. For example, mostappraisals on VA loansare back within 10 days, but it might take longer in more remote
parts of the country.
That 30- to 45-day window from contract to close is a good
ballpark for most purchase loans, unless you are trying to buy a short sale
(think more like 90 to 120 days). But understand it’s not uncommon for
underwriters to require additional documents once they begin scrutinizing your
Borrowers can help speed the process along by returning those
documents as quickly as possible. You don’t have a ton of control once you are
under contract on a home, but this is one key area where your swift action—or
lack of it—can have a big impact on your home-buying timeline.
While REALTOR® commissions and other closing costs will
impact how much you keep from the transaction, fortunately, if you’re like most
sellers, you won’t have to pay a capital gains tax on your federal income tax
return on profits up to $250,000 or $500,000 depending on how you file your
The Taxpayer Relief Act of 1997 made it easier for more
sellers to qualify for the capital gains tax exclusion. Prior to that date, the
exclusion was limited to a once-in-a-lifetime benefit and only to sellers over
There are a few requirements you must meet to avoid
capital gains taxes on your home sale, including:
§The capital gains tax exclusion is limited
to $250,000 of the profits from the sale of your home if you file taxes as a
single person and to $500,000 of the profits if you file taxes jointly.
§You must have lived in your home for at
least two of the previous five years. The time that you live in the home
doesn’t have to be within the past two years and doesn’t have to be altogether
in one solid block, either. You can live there in two different years within
the past five years and have that count. You don’t have to be living there when
the house is listed for sale, either.
§If you have used your home as a rental
property and want to sell it, make sure you have lived in the home yourself for
two of the past five years. In other words, if you lived in it for two years
and want to sell it, make sure you sell it before you have rented it for more
than three years.
§Your home must be your principal residence
rather than a vacation home or second home to qualify for the tax break.
§You can invest the profits in anything you
want. Before 1997, IRS rules said that you had to reinvest your profits from
the sale of one home into another within two years to avoid paying taxes. Since
1997, taxpayers are not required to buy another home.
§If you are married, you and your spouse
cannot have used the capital gains exclusion within two years prior to your
Even if you don’t qualify for the full capital gains tax
exclusion, you may qualify for an exception to the two-year residency rule.
Some examples of reasons you could be exempt from the two-year rule include an
early move due to:
§A change in your employment location
§A health concern that forces you to move
§Deployment for the military or foreign
§Divorce or separation
§“Unforeseen circumstances,” such as an act
of war or terrorism, or multiple births from one pregnancy.
The Affordable Care Act of 2010 imposed an additional
potential tax on the sale of real estate, but this tax impacts only high-income
individuals who earn $200,000 or $250,000 for a couple. This tax, designated to
supplement Medicare expenses, imposes a 3.8% tax only on the amount of profit above
the exclusion for capital gains taxes.
The only sellers who must pay this tax are those who have
an income above the threshold and who also sell a house with profits above the
capital gains exclusion. The tax is imposed only on the difference between your
profit and the excluded amount, not the full profit.
Consult IRS Publication 523,
“Selling your Home,” or consult a tax advisor to make sure you are following the
correct rules related to the individual circumstances of your home sale.