An important element when considering buying or selling a property or opportunity is exploring what “could” happen, especially for planning possible exit strategies. As market and property conditions change over the years, it can be worth revisiting related trends and strategies. The National Association of Realtors came up with an example when analyzing the “home equity tax” in various markets around the country.
Those markets seeing significant increases in property values appear to be bringing great news to long-time home owners. However, as the below linked article details, certain cities and areas have experienced increases which bring the value of homes beyond the exemptions the owner is entitled to. In other words, there may be added negative consequences for selling at a significantly higher price which would not be expected by the seller. The report claims that more than 13 million homeowners would currently fall into this category.
Chances are the majority of them are not aware of the situation. A savvy real estate broker can be of service to those homeowners, especially if considering or looking to sell. I’m not a tax professional or CPA, but my hunch is that there are ways to work around the “excess” profits. One way, if feasible, would be for the seller to act as the bank and offer seller financing. Even if they have to significantly reduce the sale price (to stay under the home equity tax), they would make it up by spreading out payments with interest over the years and wind up with a similar profit even if over a longer period of time.
Meanwhile, a potential buyer or investor might be able to research the specifics and acquire a home for a much lower price than the going rate to take advantage of the situation.
Phoenix, San Diego, Nashville, and Boise are among the cities facing the situation due to the rise in home prices over recent years. My hunch is that many home owners in those (and other) cities still are not aware of this change. These are examples of situations where those that do their research stand to gain significantly over others that have no idea. I know this because my team and I get hired to perform thorough, unbiased, and custom research. The goal is to help our clients to be “first in” on their next great opportunity!
