Understanding Capital Gains In Real Estate

When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations. How to calculate gain in real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis.

To calculate, follow these steps:
1. Purchase price: _______________________

The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.

2. Total adjustments: _______________________
To calculate this, add the following:
Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.

3. Your home’s adjusted cost basis: _______________________
The total of your purchase price and adjustments is the adjusted cost basis of your home.

4. Your capital gain: _______________________Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.

A Special Real Estate Exemption for Capital Gains since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:
You have lived in the home as your principal residence for two out of the last five years.
You have not sold or exchanged another home during the two years preceding the sale.
You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.

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8 TIPS TO GUIDE YOUR PASADENA HOME SEARCH

For many people, buying a first home is a rite of passage and ownership in part of the American dream. And while many excited hours are spent planning interior color schemes, choosing new furniture and dreaming of moving day, many first-time buyers spend equal amounts of time fretting and fearing the home buying process. Let’s face it, if you’ve never purchased a home before, the prospect can seem downright intimidating. There are many decisions to make—legal, financial and emotional, just to name a few. Luckily, there are steps you can take to ensure an enjoyable experience.

1. Research before you look. Decide what features you most want to have in a home, what neighborhoods you prefer, and how much you’d be willing to spend each month for housing.

2. Be realistic. It’s OK to be picky, but don’t be unrealistic with your expectations. There’s no such thing as a perfect home. Use your list of priorities as a guide to evaluate each property.

3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down payment and closing costs. Then, talk to a lender and get prequalified for a mortgage. This will save you the heartache later of falling in love with a house you can’t afford.

4. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion, but be ready to make the final decision on your own.

5. Decide your moving timeline. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area? All of these factors will help you determine when you should move.

6. Think long term. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in this home for a longer period? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that will best suit you.

7. Insist on a home inspection. If possible, get a warranty from the seller to cover defects for one year.

8. Get help from a Pasadena REALTOR®. Hire a real estate professional who specializes in buyer representation. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. Buyer’s agent's are paid out of the seller’s commission payment.

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Take The Stress Out Of Homebuying

Buying a Pasadena home should be fun, not stressful. As you look for your dream home, keep in mind these tips for making the process as peaceful as possible.

1. Find a Pasadena real estate agent who you connect with. Home buying is not only a big financial commitment, but also an emotional one. It’s critical that the Pasadena REALTOR® you chose is both highly skilled and a good fit with your personality.

2. Remember, there’s no “right” time to buy, just as there’s no perfect time to sell. If you find a home now, don’t try to second-guess interest rates or the housing market by waiting longer — you risk losing out on the home of your dreams. The housing market usually doesn’t change fast enough to make that much difference in price, and a good home won’t stay on the market long.

3. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas from too many people will make it much harder to make a decision. Focus on the wants and needs of your immediate family — the people who will be living in the home.

4. Accept that no house is ever perfect. If it’s in the right location, the yard may be a bit smaller than you had hoped. The kitchen may be perfect, but the roof needs repair. Make a list of your top priorities and focus in on things that are most important to you. Let the minor ones go.

5. Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price or by refusing to budge on your offer may cost you the home you love. Negotiation is give and take.

6. Remember your home doesn’t exist in a vacuum. Don’t get so caught up in the physical aspects of the house itself — room size, kitchen, etc. — that you forget about important issues as noise level, location to amenities, and other aspects that also have a big impact on your quality of life.

7. Plan ahead. Don’t wait until you’ve found a home and made an offer to get approved for a mortgage, investigate home insurance, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers.

8. Factor in maintenance and repair costs in your post-home buying budget. Even if you buy a new home, there will be costs. Don’t leave yourself short and let your home deteriorate.

9. Accept that a little buyer’s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big financial commitment. But it also yields big benefits. Don’t lose sight of why you wanted to buy a home and what made you fall in love with the property you purchased.

10. Choose a home first because you love it; then think about appreciation. A home’s most important role is to serve as a comfortable, safe place to live.

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5 THINGS EVERY HOME BUYER SHOULD KNOW

Most buyers know the basics of a real estate transaction; the information directly effecting their situation such as mortgage payments, closing costs, commission and so on. Most feel confident in their choice of houses and may have put some time into researching the area and schools, but there are a few things that catch many people off guard. These details often appear at the last minute and the buyer is aware then details usually cannot be changed and the results can often cause delays and or loss of funds.

1. Your Initial Deposit: When you made an offer to purchase, this included a good faith deposit. This deposit is also called "earnest money". This deposit is held in escrow until the close and is credited to the buyers closing costs. But, if escrow gets cancelled what happens to the deposit? Most people are unclear about the disposition of their deposit; sellers assume the deposit is automatically theirs if the buyer cancels but this may not be the case. It's best to find out how this process works and what is needed in order for the buyer to recoup their deposit or what details constitute the forfeiture of the buyers deposit. This is often spelled out in the initial offer, so ask your Pasadena Real Estate Agent to explain the process.
2. Taxes: Most people are aware of their tax rate, but have never calculated what the actual yearly amount will be. Something else to consider, if you purchase a new home from a builder you're going to receive a supplemental bill shortly after the close of escrow. This supplemental bill will be equivalent to one year's worth of property tax. This is a shock to many people, since most people never know its coming. Another little detail that often slips through the cracks; assessments. Newer communities likely have assessments in addition to your basic property tax rate. Many people don't know that often assessments can change and be added yearly, which equates to higher property taxes every year.
3. Homeowners Association: When considering a home within a homeowner's association, it's always prudent to thoroughly read all the Covenants, Conditions and Restrictions (CCNR). Yes, this is often a huge document, but it's given to you before you close escrow for a reason; these CCNRs directly affect you. If you don't know and understand all the rules, this can lead to a less than ideal situation if you unwittingly break a few. Little things like permission to paint your garage door or installation of a backyard patio can lead to huge problems including legal action. Know the rules!
4. Home Warranty: Understanding how your home warranty works will save you a tremendous amount of frustration and hassle. Research before you close escrow, find a plan you understand and feel comfortable with, then request any extra coverage you think you need. Most home warranty companies offer basic coverage for appliances and air conditioning but, did you know they also offer coverage for an additional fee for such items as roof, well, and septic tanks?
5. Homeowner's Insurance: Of course everyone knows they need homeowner's insurance before closing escrow. Unfortunately most people wait till the last minute, run into snags, and then closing is delayed. If you approach this task as soon as you enter escrow this allows time to compare rates and if a snag does arise you have time to handle it, avoiding a hasty decision. If the previous homeowner has had a recent claim this can affect you the new purchaser. Better to know this early rather than the last minute.

Ask your Pasadena Realtor to help you understand the details that are a part of every real estate transaction and you'll enjoy smooth sailing every step of the way!
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Top 10 Mistakes Buyers Make When Buying in Pasadena

LOOKING FOR A new home in Pasadena? Well, you're in luck -- sort of. First, the good news: Home prices are adjusting and buyers have more negotiating power than ever before. Now, the not-so-good news: Lining up financing has become slightly more difficult as droves of current homeowners default on their existing mortgages. This isn't to say you won't be able to secure the home of your dreams, but you will need to be a bit more cautious and conservative with your purchase.

Here are 10 mistakes to avoid when looking for a home in today's Pasadena real estate market.

You didn't set a budget
Buy a Pasadena home that's way out of your price range and you could well derail your ability to fund other important items such as retirement savings, your kids' education -- not to mention an entertainment budget.
Mortgage brokers will tell you how much you can borrow. But that amount may not be what you can afford to pay.
"What if you have a lot of kids or you like to travel a lot?" he said. "You've got to ask 'How is this housing purchase going to affect our monthly spending?' You have to look at all of your monthly expenditures."
Experts say your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes.

You picked the wrong mortgage
These days, many homebuyers are rushing to secure a mortgage as fast as possible without fully exploring their options. That's because sellers often only consider bids from individuals who have been pre-approved for a loan. A word of advice? Pick your financing package with care.
First-time home buyers may qualify for a programs that requires lower down payments and easier qualification limits than standard loans.

You picked the wrong area
Some areas may just be out of your price range, and you'll probably have to search for a location that's affordable for your budget. That doesn't mean you should choose the cheapest locale.
If you don't like the location you'll be unhappy. What's more, you'll probably have a hard time selling your property if the area isn't good. Ask around and read the local papers to know how the area is faring economically, what the major issues are, how many resources it offers.

You didn't know what homes really cost
The best way to determine if you're getting a fair deal is by comparing the cost of the home you're interested in with similar homes in an area. You can do this easily by having your Pasadena Realtor provide you with a CMA (that's short for Comparable Market Analysis). A CMA lists such things as addresses of recently sold homes, prices, date sold, the number of bedrooms and bathrooms and -- ideally -- such things as the home's condition, its size and extra features.

You used a bad real estate agent
Don't make buying a home more difficult by choosing the wrong agent. You want a buyer's agent who works for you and understands your needs and financial limitations.
References from friends can help you find a good pro. Interview three, and ask to see their activity lists, which reveal every property the agent sold (or whose clients bought) in the past year. Look at sales prices. Make sure the agent has experience in the area where you want to live and the price range that you're looking for. Find a Pasadena Real Estate Agent.

You never went back to check on the neighborhood
If you're like most homebuyers, you probably spend many weekends looking for a new dwelling. But what happens to the neighborhood on weekdays or after dark? Is the house that's "convenient to town" sitting on a main thoroughfare that fills up with cars come commute time?
The only way to answer these questions is to go back and see what the neighborhood's like at various times of the day and week. Do your neighbors spend weekends with the stereo blaring? You want to know as much about the neighborhood as possible before you buy.

You forgot to consider resale
It's easy when you're house hunting to forget what it's going to be like to sell your home down the road. But as you tour homes, put yourself in the perspective of the sellers. You may be drawn to a home that has quirky features or no closets or just one, tiny bathroom. But others may not be as enthusiastic. When you buy, think about the day it comes time to sell.

You bought the most expensive home on the block
It's wonderful when you find your dream house, but if it's the most expensive home on the block you could have a problem. Quite simply, your neighbors' lower home values will dampen yours. Remember, people who buy a $500,000 home usually want to be surrounded by other $500,000 homes, not tiny $100,000 bungalows.

You didn't do an inspection
Bottom line: you should never buy a home without having it inspected. After all, you don't want to learn that you've bought a house that's filled with termites or has a frazzled electrical system. If you're building a new home, an inspection can ensure that all the work has been finished properly.
Home inspections typically run $300 to $600 and usually include a check of a home's heating and air condition systems, plumbing and electrical works, roof, walls, foundation/structure, drainage, the garage and basement.
What's frequently not covered? Termite, radon, asbestos, mold and lead inspections. Don't rely on inspectors to hire other pros to check for these items, that's part of your responsibility. Most home inspectors will describe what they do and what they don't do.

You forgot about closing costs
Think it's bad to pay tax when you eat out? Wait until you're paying closing costs, which can run 2 to 5 percent of the home's purchase price
A mortgage lender should provide you with a specific estimate of what costs will be. But keep in mind they include such things as origination (points) on a loan, escrow fees, title and homeowners insurance, legal costs, property taxes, fees to record your need deed and notary fees.

Reasons why condos are a great second home!

If you make a Pasadena Condo or Pasadena Townhome your second home chances are you will be very happy with your choice.

More than seven in 10 condo and townhome owners say they are satisfied with their purchase, according to a recent survey conducted by Zogby International for the Foundation for Community Association Research. The foundation conducts surveys periodically to keep track of the perceptions of owners who live in condos and townhomes and also to identify trends in the condo market.

There are a number of reasons why satisfaction is such a big trend in regards to communities governed by homeowners associations. Compared to single‑family homes, condos are generally less expensive. Cheaper prices make condos cheaper to operate as a vacation home, because property taxes, homeowners insurance and utility bills cost less. Townhomes and condos are also easy on your back!


Landscaping chores are not managed by you but by the association. Given the average condo has a smaller sq. footage than the average single family home keeping the interior clean and up to date is much easier. If this property is a vacation home then this means much less time and money spent on upkeep.

What's more, the homeowners association, as the community's on‑site governing body, is there to serve the best interests of the community. The association protects your home's value, provides security for the community and uses a professional management company to keep on top of operations.

Furthermore, the association is there to serve the best interests of the community. They protect your homes valuem, provides security and uses professional management companies to keep on track of operations.

All and all, with a single‑family home, not only could you spend more, but you are also pretty much on your own keeping things in working order. And lets face it who wants to being doing that when you could be enjoying your investment and entertaining guests!!

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ALICANTE VILLA TOWNHOMES ARE NOW FOR SALE

I came across these gorgeous new Pasadena townhomes for sale that I thought I should tell you about. They are designed by the architectural firm of Tyler and Gonzalez, Alicante Villas represents a wonderful opportunity to live in a new community of town homes located in the heart of Pasadena. This newly built home is not only elegantly finished, but designed with todays lifestyle needs. There are hardwood floors, crown moldings, recessed lighting, cherry cabinets, stainless steel appliances, and an abundance of slab granite and travertine surfaces. The powder room features a pedestal vessel sink. The master suite includes dual vanities in the bath. The unit has direct access to your private two car garage, as well. The homes are built around a lovely courtyard, complete with fountain, gazebo covered sitting area, and rose garden. Exterior details include; smooth finish plaster, custom tile accents, decoratively finished corbels, patios, and balconies with elegant iron work. They are also conveniently located to shopping areas and restaurants.

There are two and three bedroom townhomes available, listing price starts at $699,000. View more Pasadena Homes for sale or find a Pasadena Real Estate Agent that specializes in new construction.

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Pasadena Condos: Home or Condo?

Condominiums and townhouses offer an affordable option to single-family homes in many markets, and they’re ideal for those who appreciate a maintenance-free lifestyle. But before you buy, make sure you do your legwork and seek the help of a Pasadena Realtor. These are some of the important elements to consider:

Storage. Some condos have storage lockers, but usually there are no attics or basements to hold extra belongings.

Outdoor space. Yards and outdoor areas are usually smaller in condos, so if you like to garden or entertain outdoors, this may not be a good fit. However, if you dread yard work, this may be the perfect option for you.

Amenities. Many condo properties have swimming pools, fitness centers, and other facilities that would be very expensive in a single-family home.

Maintenance. Many condos have onsite maintenance personnel to care for common areas, do repairs in your unit, and let in workers when you’re not home — good news if you like to travel.

Security. Keyed entries and even doormen are common in many condos. You’re also closer to other people in case of an emergency.

Reserve funds and association fees. Although fees generally help pay for amenities and provide savings for future repairs, you will have to pay the fees decided by the condo board, whether or not you’re interested in the amenity.

Resale. The ease of selling your unit may be dependent on what else is for sale in your building, since units are usually fairly similar.

Condo rules. Although you have a vote, the rules of the condo association can affect your ability to use your property. For example, some condos prohibit home-based businesses. Others prohibit pets, or don’t allow owners to rent out their units. Read the covenants, restrictions, and bylaws of the condo carefully before you make an offer.

Neighbors. You’re much closer to your neighbors in a condo or town home. If possible, try to meet your closest prospective neighbors.

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