The Tax Reform Bill & Second Home Ownership

If you have been thinking of buying South Lake Tahoe real estate and using it as a second home, you likely have been wondering how the new tax reform bill is going to impact that. In fact, you may want to re think buying a second home if the sole purpose was so you could take the deductions as those are changing in 2018. If homes for sale in South Lake Tahoe were purchased before December 15th, you can still deduct mortgage interest from a $1 million cap. However, after that, this tax bill will cap interest deductions at $750,000.

Basically, what this means is that if you already have a $750,000 mortgage and plan to buy more South Lake Tahoe homes for sale, you will not be able to deduct the interest on that loan. If your loan is smaller, say $500,000, you would have and additional debt of $250,000 that would be fully deductible. Under the current tax rules, about 44% of homes are worth enough for homeowners to take advantage of the mortgage interest deduction when expenses are itemized. Experts suggest that the portion of eligible homes would decrease by 14.4% under the new proposed tax law. Especially since the standard deduction is nearly doubled from existing amounts.

South Lake Tahoe real estate buyers should also keep in mind that a result of this legislation may drive down the prices on South Lake Tahoe homes for sale. To the point that some expect the second home markets to be impacted quite a bit. Additionally, the coastal markets that are known for being pricey are expected to see these effects whereas other markets could remain stable. Meanwhile, markets that are expected to have the most change in value are the ones where residents are likely to use the mortgage interest deduction. 

Of course, buyers should not base their decision for purchasing additional homes for sale in South Lake Tahoe completely on taxes. The tax implications should not be the deal breaker on whether or not to buy a second home. In fact, the real criteria you should pay attention to are outlined below. 

Make sure you can afford it

Owning homes for sale in South Lake Tahoe goes beyond the mortgage. There are maintenance costs, insurance, furnishing and utilities. You have to keep in mind that while owning South Lake Tahoe real estate is a great investment, there are extra costs that comes with buying additional properties. You aren’t financially done once you get the loan under wraps. It isn’t just the house itself, it is the stuff that goes into the house and the needs that keep it functional that cost extra. You also have to keep in mind that some neighborhoods have HOA’s or community fees for certain amenities. Second homes are generally located in a vacation/resort area atmosphere. These usually tend to cost a little more depending on where your main residence is located and what areas you look in. If you are coming from the Bay area where the average sold price is over a million,  South Lake Tahoe homes for sale probably seem like a great deal! With an average sold price of just under $520,000, you can get a pretty great property. If you live in a small town where the average sold price is in the $200,000’s then South Lake Tahoe real estate may seem expensive. What is considered too expensive is really subjective compared to where your main residence is and what you already pay. 

Understand the rules for how you use it

The IRS defines what type of second property this is. If you mix it up, you could be violating the IRS regulations. Currently, if you use a second property for more than 14 days out of the year, it is considered a personal residence and not a rental property. Also, the local changes to the vacation home ordinance has greatly impacted buying a home and using it as a vacation rental in South Lake Tahoe specifically. With the city and county capping the number of properties that can be used as vacation rentals, you may need to put a long term renter in a home before getting it on a vacation rental program. 

If you were in the market to buy South Lake Tahoe real estate, be sure to give me a call. As a long time local South Lake Tahoe realtor, broker and owner of Pinnacle Lake Tahoe Getaways, I am very familiar with the ins and outs of buying multiple homes in the Tahoe basin. I would be happy to guide you through the journey of second home ownership. 

4 Tips To Know BEFORE You Make An Offer

If you have been searching for that perfect piece of South Lake Tahoe real estate, there are a few “Know before you go” tips. With a majority of South Lake Tahoe real estate being in a seller’s market, finding homes for sale in South Lake Tahoe in a competitive market can feel overwhelming. The last thing you want is to buy South Lake Tahoe homes for sale out of pressure or fear that if you don’t get “this one”, you will be stuck renting the rest of your life. Sounds pretty dramatic, huh? However, when inventory is low, prices are high and you find yourself stuck in bidding wars, emotions can take over and all sensibility goes out the window. Which is ok! Our job as South Lake Tahoe Realtors is to help guide you and offer options through out the entire experience. So what can you do to help the offer process? Check these out! 

1. Understand How Much You Can Afford

That doesn’t sound fun, does it? I mean the whole point of hunting for homes for sale in South Lake Tahoe is touring those dreamy properties that look like something out of HGTV, right? This is actually one of the worst things you can do when starting the South Lake Tahoe real estate search. First, fully understanding your finances is crucial in making an offer. Get pre approved (not pre-qualified) so you know exactly how much you can spend. When you set up showings for homes for sale in South Lake Tahoe that you can’t afford, you waste everyone’s time. Including your own. That is valuable time that South Lake Tahoe realtors could be using to schedule showings for homes you can actually afford. It doesn’t cause the home owner to have to vacate their South Lake Tahoe homes for sale for no reason. It also keeps you from getting attached to a property that you can’t afford. OR worse-trying to figure out how you can over extend yourself to make it work. 

2. Act Fast

This is not a time to dilly dally. With inventory levels across the country at an all time low, you need to be prepared to move quickly. In order for a market to be balanced, we need a six month supply. Real Estate in South Lake Tahoe is currently around a 3. Some neighborhoods are higher. Some are lower. Prices continue to go up. With buyer demand outpacing the supply, you will need to commit to getting into homes asap and working closely with your South Lake Tahoe realtor in finding a property that fits your needs. Once you do, make that offer! 

3. Make a Solid Offer

Speaking of offers, work with your realtor in South Lake Tahoe to make sure it is a solid one! Picking a long time, local realtor who is active in your local area is the best way to put this together. You will need to consider comparable sales, other active listings nearby and what the sellers are hoping for. They may be hoping for a rent back situation for a month or two. Whatever their needs are, find out and work it into your offer so you stand out against the competition. 

4. Be Ready to Negotiate

Sellers are usually prepared to counter, and you should too. Be sure to get a home inspection so you know the true condition of the real estate in South Lake Tahoe you are about to buy. Something could come back that needs fixing. This is another tool for negotiations. This is also your opportunity to cancel the contract if the report is bad enough. As always, your realtor in South Lake Tahoe will be an excellent source of information when you get to this point in the process. 

Speaking of which, it doesn’t matter if this is your 7th home you are buying, or your first. Having a qualified, local expert by your side is key. No pun intended. But they really are the best at making sure the entire process goes smoothly. 

2017 Real Estate Lessons & What Not To Do in 2018

Whether you were selling or buying homes for sale in South Lake Tahoe this year, you probably felt like you had your work cut out for you. Whether it was trying getting your house ready for tours or trying to tour before an offer was made, this last year had everyone (especially South Lake Tahoe realtors) moving a mile a minute. Luckily, we learned a lot from this past year. If you are still on your home buying or home selling journey, check out these lessons and use them for yourself as we head into 2018!

1.) It’s closing day and you are feeling like you are home free. But you may be homeless if you can’t keep certain details to yourself. One example: Financial changes. We always tell folks to hold off on making any major changes to their finances while buying homes for sale in South Lake Tahoe. The littlest thing can impact your loan and halt that closing process completely. Rarely can anyone pull the wool over a lender’s eyes as they will re-pull all your info right before closing to make sure everything is good to go. It is not uncommon in this industry to have an escrow fall out due to an issue with lending the day of close. If you have made a change, your lender likely knows, but if they don’t say anything, you don’t say anything. In fact, when it comes to buying South Lake Tahoe homes for sale, use the old saying “If you can’t say anything nice, don’t say anything at all”. Selling can be emotional, so don’t make any snide comments that could offend the seller either.

2.) Which brings us to our next one: Sellers, you need to watch what you say as well. Buyer’s may ask why you are selling your South Lake Tahoe real estate and you want to give them an honest answer, without fully disclosing any negative details. If you give too much, you could hurt yourself in the process. Regardless of what side of the transaction you are on, let your South Lake Tahoe realtor do the talking. This is why you hire us. We help you navigate the market while getting the necessary details that help you get the most bang for your buck. If your South Lake Tahoe realtor isn’t present and you find yourself stuck in a tricky dialogue, stay as neutral as possible. 

3.) Get specific with the inspection report. Inspectors have over 1,500 tasks to check when going through homes for sale in South Lake Tahoe. That is A LOT! If there is something that is hard to reach or impacted by weather conditions, be specific in finding out how that will be checked or what can be done. Roofs for example may not be looked at if there are several stories and the conditions make it slick. It just isn’t safe. Also, snow or flooding could be blocking crawl space access. Be specific and find out what your options are. 

4.) Sellers, do not skimp on the cleaning. We have covered this in several blogs. When it comes to preparing your South Lake Tahoe homes for sale, understand the impact of first impressions. You may have turned a blind eye to the oil splatters in the kitchen or the dust on the blinds, but a fresh set of eyes will see it right away. Especially if they are about to spend money on it. A buyer is going to be going through South Lake Tahoe homes for sale with a fine toothed comb to make sure this is the property for them. Sure, your South Lake Tahoe real estate could be in good condition and just messy. However, a messy home suggests an owner doesn’t take care of the property, which is a red flag. Dust, deep clean and de-clutter! 

5.) Staging works. In fact 80% of staged South Lake Tahoe homes for sale go quicker and for more money when professional staged. Of course, this is a service that costs 4 figures and finding someone who does it well, is not always easy. Us realtors in South Lake Tahoe will always help and advise on this, but making your home appeal to buyers is huge. In fact, little things such as a TV above the fireplace or a statement wall or taxidermy can be a huge turn off. Buyers know it is your home, so they expect to see your things. However, you want to make it as neutral as possible so they can imagine their things as well.

6.) Speaking of what buyers think about your South Lake Tahoe real estate, there are a lot of trends that can turn them away. Bathrooms are just as much of a deal breaker as the main living spaces. It also isn’t the super retro trends (we’re looking at you green & orange 70’s countertops!) that are doing the deal breaking either. Turns out, the recent trends like all white bathrooms and double sinks could be a turn off for buyers. If you were thinking of making some upgrades, check out your bathroom to see if it deserves a little attention. 

7.) Get pre-approved! Pre approved, pre qualified…same thing right? WRONG! The smartest thing you can do when looking at a home is get all your financing in order first. If you know how much you can afford to spend and you have an approval letter from your lender, you have a good chance of getting your offer accepted over someone who doesn’t. If you are serious about home buying, this is the next step after finding your realtor in South Lake Tahoe. 

For more information on buying or selling real estate in South Lake Tahoe, give me a call! I have been working in our local market for a long time and served as the local board’s president for 2017. I take great pride in being informed on what is happening in our market and how it impacts buyers and sellers.