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Fournier Law Blog

Intelligent legal insight from our team of experienced attorneys.

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Building Wealth: An Unmistakable Benefit of Buying a Home

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When deciding to buy a home or rent a home, the lists of pros and cons for buying or renting can be overwhelming.  Depending on the current market conditions, it may seem obvious which choice is more economical.  When rates are low and prices are low, buying a home appears to be the best choice.  However, as mortgage rates and housing prices begin to increase, renting a home is an option that might seem more economical.

However, an important factor should be considered before deciding to rent instead of buy, even as mortgage rates increase and home values begin to rise.  According to an article published by Realtor.com, The Misleading Math Behind the Rent vs. Buy Calculation, “…homeownership is a critical building block of household wealth. Owning a home is a key reason why the median net worth of a homeowner is almost $200,000 while the median net worth of a renting household is just over $5,000.”

A closer look at the comparisons between the cost of buying versus renting reveal some long term advantages to owning a home and uncover some details worth considering.  It is common knowledge that part of each monthly payment go toward the equity a homeowner has in their property with a fixed 30 year mortgage. Additonally, as the home owner gets further into the lifetime of the mortgage, the amount they are paying into their own equity begins to increase. An important detail to note, which may not be a common consideration, is that the payment amounts are actually “frozen” for the lifetime of the mortgage.  It is unlikely that a renter could expect such a guarantee.

Homeowners know what their housing payment will be for the next 360 months, not many landlords are willing to lock their monthly rental rate beyond a year or two.  Further, homeowners are, in essence, locked into a “forced savings plan” where they pay some percentage to their own equity each month. This reason, alone, is the primary factor which makes it more feasible for homeowners to accumulate wealth.

Read the entire article. 

 

 

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Are You Sure Your Mortgage Interest Is Tax Deductible?

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As you prepare your taxes this year, you may or may not notice a re-designed form 1098, the form used to report the amount you paid in mortgage interest for the tax year.  Although there have not been any changes made to the mortgage interest deduction regulations in several years, in 2015 the U.S. Congress did pass new rules with regard to how mortgage interest is reported.  The form now requires more details to ensure homeowners’ properties and mortgages indeed qualify.

According to an article published by Kiplinger, titled Mortgage Interest Tax Deductions May Get Extra Scrutiny This Year, “The new form will include the mortgage origination date, the balance at the end of last year and the address of the property securing the loan, as well as other information useful to the IRS.”  As a result, we could see the IRS perform more audits that specifically focus on mortgage interest.

Therefore, it is important for homeowners to have a clear understanding of what properties qualify for mortgage interest deductions as well as how much and what kind of debt falls within the IRS guidelines before filing your taxes this year.

The Kiplinger article provides specific details and helpful examples, click here to read the entire article.

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Single Women Outpace Single Men in Home Ownership Trends

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Since 1981, single women have lead single men in the category of home ownership.  Over the past few years, the gap has grown even larger.  According to a data released by the National Association or Realtors, in 2016, single women accounted for 17 percent of the US. homeowners.  Single men lagged behind,  making up only 7 percent of all American homeowners.

According to an article published by Bloomberg.com, “Women earn less than their male counterparts, pay harsher workplace penalties for pursuing parenthood, struggle more with debt, and save less for retirement.”  Nevertheless, the rate at which women purchase homes outpaces single men.  This begs, the question, why?

The most prominent reason, Mary Pilon points out in her article, “Why Single Women Are Buying Homes at Twice the Rate of Single Men”,  is that a woman, as a single mother, places significant value in providing a stable home for her child.  Since women are three times more likely, than a man, to be the single parent, the number of homes purchased by a single parent will most likely be a single mother.FotoFlexer_Photo

Additionally, there are more and more unmarried Americans 25 years old or older; in fact about 20 percent of Americans over the age of 25 are single.  According to Bella DePaulo, a professor at the University of California at Santa Barbara, women seem to embrace their single lifestyles more readily than single men.  Owning their own home is a way many single women choose to enjoy their years as single professionals; they truly revel in the independence and empowerment home ownership represents.

Read the entire article.

 

 

Photo Credit:  Mark Moz

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Why are Du Page County Home Values Declining?

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A recent report released by the Du Page Policy Journal at the end of January pointed to some alarming statistics about the value of homes in Du Page county.   According to the report, in the past decade, home values in Du Page county have seen a decrease of just over 11%.  Home values in suburbs such as Hinsdale and Elmhurst have dropped approximately 25 percent since 2007.  Worse yet, homes in Willowbrook are down 48 percent from values ten years ago. An article published in the Downers Grove Patch details the home value decreases of many Du Page County towns and villages.  The article, written by Anicka Slachta, goes on to project what the next few years could look like for home values in this area of Illinois.FotoFlexer_Photo

These numbers can be unsettling to home owners, especially considering favorable mortgage rates home buyers have been able to secure recently, which normally helps drive up home values.  However, there is an obvious culprit behind these decreased home values.  As homeowners in these suburbs can attest, there has been a significant increase in government spending and taxes increases brought on by school tax levies and city debts.  As the homeowner rate taxes increase in these towns, the values of the property fall.

Read the entire article.

 

 

Photo Credit: Craig Toocheck

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What to Consider When Deciding on a Home Renovation

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It’s the time of the year when many homeowners consider tackling home improvement projects.  It can be exciting to think about designing a dream kitchen or bathroom.  However, before taking the plunge and spending thousands of dollars, its worth reviewing which home improvement projects offer the best return on your investment.22342993781_c39181aa68_o

A list of home improvement project’s cost as well as the return on investment has been compiled by Remodeling magazine.  Topping the list of renovation trends with the highest ROI are energy efficiency upgrades such as adding fiberglass attic insulation.  It has an average ROI of 107%.

Additionally, an up and coming trend is updating a home to include “universal design”.  According to an article published by Realtor.com, written by Judy Dutton, universal design… “ensures that a home’s features can be used just as easily by the elderly and disabled as anyone else. That means things like grip bars in showers, lever-style doorknobs, and wider, wheelchair-friendly doors. A universally designed bathroom, for instance, reaps a respectable 68.4% ROI.”

These types of upgrades to a home aren’t as glamorous or exciting as the updates to kitchens and bathrooms that are seen on home improvement shows and magazines.  Unfortunately, these types of improvements do not offer the same ROI on average.  In fact, many home improvement projects, such as bathroom remodel, master suite addition and back yard decks and patios, have a return on investment around 65%.

When determining whether a home improvement project is a wise investment to make or one that a homeowner should take a pass on, Dutton suggests considering how long you plan to stay in the home.  When homeowners plan to sell the home in less than five years, its advised to take the return investment into account.  If you plan on staying longer, however, it may be worth the cost because it will be an upgrade you plan on enjoying in your home for a while.

To see the entire article and the list of remodeling projects cost and ROI, click here.

 

 

 

 

Photo Credit: Highmark Builders

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U.S. Homeowners Saw Significant Equity Growth in 2016

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Many American homeowners can look back on 2016 as a year of growth.  Specifically, growth in the amount of equity they now have in their home.

According to a report released by the Federal Reserve, the average American homeowner gained just over $12,000 in equity from September 2015 to September 2016.  In some of the hot markets of the U.S., homeowners may have seen upwards of $25,000 in equity growth during that time frame.7187826211_2c8a407e58_o

Factors such as the low interest rates that continued to be available throughout 2016, coupled with the low inventory of homes for sale, drove the value of homes upward. In an article published in The Chicago Tribune by Kenneth R. Harney, additional factors for increased home values are detailed.

Harney goes on to suggest what homeowners with significant equity in their homes might choose to do with it.  Homeowners who decide they want to tap into the equity instead of letting it continue to grow are advised to use the funds, which might be accessed via a home equity credit line, in a responsible manner such as home renovations, consolidation of credit card debt or student debt.  Since rates are expected to rise in 2017, homeowners considering a HELOC as an option might want to act sooner rather than later.

Read the entire article for more details.

 

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What Are Experts Predicting for the 2017 Real Estate Market?

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The end of 2016 is just a matter of weeks away and, just as we have come to expect this time of the year, real estate analysts have begun making predictions about what could be in store for the 2017 real estate market.  Many of these professionals and experts have similar expectations for the upcoming new year; some are based on anticipated changes that may be be ushered in as our new president takes office in January.

21523294814_04cbbd293f_oHousingwire.com journalist, Kelsey Ramirez, published a list of predictions made by Zillow.  Among the expectations for the 2017 real estate market that made this list: increased development of smaller homes located closer to urban areas with access to public transportation, an increased of number of millennials purchasing homes, an increase in the affordability of renting, and an increase in the cost of building homes.

Another Housingwire.com article written by Ben Lane details some predictions made by Redfin.  Lane indicates, “according to a new report from Redfin, homes will fly off the market in 2017, faster than any other year on record.”  Another prediction on the Redfin list is an expectation that the housing market growth will continue, but at a slower pace than we saw in 2016.  The company also predicts an increase in mortgage rates, yet do not expect a significant increase.

Read the entire article and find links to additional 2017 predictions.

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Homeowner Tax Breaks: Important Reminders and Potential Changes in 2017

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Most homeowners are aware, or at least should be aware, of tax breaks available to them via various homeowner tax laws.   The homeowner tax breaks are designed to make owning a home more appealing and, in many cases, more affordable to the home owner.

FotoFlexer_PhotoIn the article 2017 Mortgage Deduction: What Every Taxpayer Should Know published by FoxBusiness.com, the journalist details the types of tax breaks homeowners can take advantage of when filing their taxes each spring.   The most common, the mortgage interest deduction, journalist Dan Capinger describes by writing, “Homeowners can typically take the mortgage interest they pay for loans on their home and include it in their itemized deductions.” This can apply to the cost of buying or building your home; even major home improvements can qualify. The current restriction is that the principal balance falls below $1 million for tax payers that file jointly.

However, as the United States prepares to inaugurate president-elect Trump, changes to the mortgage interest deductions are anticipated.  During the 2016 presidential campaign, Trump expressed interest in limiting itemized deductions to $200,000 for joint filer; subsequently resulting in a lower cap on mortgage interest deductions.

The potential changes aren’t expected to make any significant impact to most homeowners.  Therefore, homeowners should still look for many of these tax benefits to continue to be available, providing access to helpful tax cuts.

Read the entire article for additional details on tax laws available to homeowners.

 

 

Photo Credit:  Darren Shaw

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Court Ruling May Affect Business Practices for Dual Agents

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A recent ruling by the California Supreme Court might affect some real estate agents and their customers.   Specifically addressed in this court case are “dual agents” and the agent’s responsibility to serve the seller as well as the home buyer equally and ethically.

supreme-court-1-1224507In the case brought to the courts, a home buyer in California purchased a home in 2007.  The buyer’s real estate agent worked for the same real estate firm as the seller’s agent. Therefore, the real estate broker was, in fact, a dual agent in the real estate transaction.   It later came to light that the home’s square footage was actually significantly less than what was quoted on the flyer provided by the seller’s agent.    Based on evidence presented, the justices determined that the buyer’s agent “…breached his fiduciary duty by failing to communicate all of the material information he knew about the square footage.”

In an article published in OCRegister.com, the journalist, Marilyn Kalfus, describes how this ruling could affect both agents and consumers.   Specifically, some view this ruling a win for home buyers.  In essence, it will ensure home owners are provided thorough and detailed information about the home they plan on purchasing.    It doesn’t seem as though the ruling will end dual agent transactions, but it will require brokers to balance the communication they are providing to home buyers while protecting private information that may have been provided by the seller.

Read the entire article.

 

Photo Credit:  David Lat

 

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Rising Home Values Means More “Equity Rich” Homeowners

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For the past four and a half years, the median prices of homes in the United States have been increasing year over year.  This positive news, coupled with the fact that home owners are making the choice to own their properties longer, has helped more and more home owners become “equity rich”.

business-1-1246320The findings from a report released by ATTOM Data Solutions revealed 23.4% of home owners are considered equity rich, meaning they have a loan-to-value of at least 50%.  In fact, the number of homeowners with at least 50 percent loan to value ratio increased by 2.6 million from the third quarter of 2015 to the third quarter of 2016.

According to an article written by Kelsey Ramirez, published by HousingWire.com, the amount homeowners who fall into the category of “seriously underwater” is smaller than last year at this time.   Specifically, the number of homeowners with a loan-to-value ratio of more than 125 percent decreased by 854,000.

Just as the real estate market varies in markets across the U.S., trends for homeowners’ equity or lack thereof vary based on geographical locations.  More equity rich home owners are seen in locations such as San Jose and Los Angeles,  as well as Honolulu and Pittsburgh.  Conversely, in locations such as Las Vegas, Cleveland, Toledo, and Detroit, there is still a large percentage of home “seriously underwater”.

Read the entire article.

 

 

Photo Credit:  Svilen Milev

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