All Encompassing Mortgage and Real Estate Thread

[UTPhil2006 3930]

23 minutes ago, Larry T. Spider said:

He lives in the other city and this is my first deal using him. He started as an investor there before becoming an agent and is definitely worth paying out of pocket for. 

I feel like this situation is going to become more common with sellers trying to get a discount on commission and buyers having to foot some of the bill. Not necessarily against that, but sellers are usually the ones walking away with money while buyers are writing a fat check already. If somebody was buying an 800k house (common in Austin) that would be another 8k added to their down payment and closing costs. 

Yeah it’s definitely going to be an adjustment period as it officially starts these next few weeks. Some fine tuning. Each home is a different situation but on a decent portion the buyer isn’t just gonna keep footing the bill without trying to get some of it back or they’ll just walk. Just more negotiation in the whole process which isn’t necessarily a bad thing 

[Wulaw Horn 19590]

I don't expect, in all but the hottest of seller markets, that the buyer is ever going to end up paying hardly anything in commission.  If a seller wants to pay no buyer commission buyers agents (or buyers themselves) aren't going to be super keen to look at the property.  It's going to sit.  They are going to get offers that are 3% less.  They are going to get offers from buyer saying "hey- I only have a minimum downpayment- I'm scraping for closing costs- I can pay the list price but I can't pay another 3% in closing costs on top of that because you won't facilitate this transaction for 'reasons'"  

Everything is obviously negotiable but this whole things seems like a solution in search of a problem, and I'm a guy that thinks 90% of the people that have a real estate license should be fired off into the sun due to gross incompetence, but this thing never made any sense and I doubt it fundamentally changes anything in practical application when it comes down to it. You can't squeeze blood out of a turnip and that's what trying to get an extra 3% from the majority of buyers, at the majority of times, in the majority of places is like trying to do.  

[Muny_Tex 315]

^^^Very good insight; although I would peg the realtor worthlessness index closer to 97%.  For that reason, I think this saga ends with a range of flat-fee / self-service tools that enable buyers to "self-represent" at a much higher frequency....which is a big net positive for the consumer once people with moderate education + basic business sense realize it's not that big of a deal to do it alone.  (Note: It is a way bigger/more precarious deal to SELL without an agent, this concept would/should solely apply on the buyer side).

I guess Redfin is trying to protect their existing (albeit ineffective) model with their in-house agents, but I'd think they (or even someone like Rocket) could do very well if they launched some sort of "Power Buyer" package for like $450 that included a background check, mortage prequal, and ~30 minute video and follow-up Zoom that drills-down on the basic rudiments of an offer (Option Period, Earnest Money, Appraisals, Inspections, etc).  Once complete, those solo buyers would be able to access lockboxes to view homes on MLS (with certain conditions) and then fill out some sort of online template that generates into a DocuSign-ready contract offer.  

This same package would include pre-vetted inspectors, lenders, appraisers, title co's etc who will turnkey the rest of the key milestones once things get rolling.  Not a perfect fit for everyone, but very much in the realm for sizable segment of people who know how to make coherent phone calls, write complete sentences, and use a calculator.

And on the other hand, if seller's don't want to partner with amateur hour buyers then that's their prerogative (and will likely cost them $$ in form of concessions to cover that extra 2%), and presumably will justify the old-guard collecting their commissions as before...just through a different avenue.

 

 

 

Edited August 8 by Muny_Tex

[Wulaw Horn 19590]

45 minutes ago, Muny_Tex said:

^^^Very good insight; although I would peg the realtor worthlessness index closer to 97%.  For that reason, I think this saga ends with a range of flat-fee / self-service tools that enable buyers to "self-represent" at a much higher frequency....which is a big net positive for the consumer once people with moderate education + basic business sense realize it's not that big of a deal to do it alone.  (Note: It is a way bigger/more precarious deal to SELL without an agent, this concept would/should solely apply on the buyer side).

I guess Redfin is trying to protect their existing (albeit ineffective) model with their in-house agents, but I'd think they (or even someone like Rocket) could do very well if they launched some sort of "Power Buyer" package for like $450 that included a background check, mortage prequal, and ~30 minute video and follow-up Zoom that drills-down on the basic rudiments of an offer (Option Period, Earnest Money, Appraisals, Inspections, etc).  Once complete, those solo buyers would be able to access lockboxes to view homes on MLS (with certain conditions) and then fill out some sort of online template that generates into a DocuSign-ready contract offer.  

This same package would include pre-vetted inspectors, lenders, appraisers, title co's etc who will turnkey the rest of the key milestones once things get rolling.  Not a perfect fit for everyone, but very much in the realm for sizable segment of people who know how to make coherent phone calls, write complete sentences, and use a calculator.

And on the other hand, if seller's don't want to partner with amateur hour buyers then that's their prerogative (and will likely cost them $$ in form of concessions to cover that extra 2%), and presumably will justify the old-guard collecting their commissions as before...just through a different avenue.

 

 

 

As a seller there is almost no way I would want to work with a DIY buyer. As a buyer I know I would never work with a DIY seller.  The amount of shit that can get fucked up is staggering, and I'd rather just pay for someone else to have professional representation so I know that it's not going to be a shit show.  You can tell a lot about agents by the way they handle themselves and submit offers etc.  I have absolutely shit canned offers before b/c the agent is a mess and I didn't want to deal with it.  

[UTPhil2006 3930]

You gonna let someone who paid $450 and has a DL in your home for sale? 

[UT_OB1 2266]

3 hours ago, UTPhil2006 said:

You gonna let someone who paid $450 and has a DL in your home for sale? 

If I’ve already moved out?  Sure. If all our shit is still there…well that’s less crap I have to pack. Odds are it was something my wife HAD to have off Amazon and never opened anyway. 

[StassneyHorn 6767]

“Do I look like I could fit in at a billionaire’s party?”

I’ve made a few friends in San Diego who are boat captains (nbd, highly recommend) and one is currently at Anthony Hsieh’s (Loan Depot founder/Bad Company yachtsman) Newport Beach house for a big ass party.

You think he has a better chance of actually talking to him by saying he’s a charter captain or pretend to know shit about mortgages? 

 

Edited August 9 by StassneyHorn

[UTPhil2006 3930]

19 minutes ago, StassneyHorn said:

“Do I look like I could fit in at a billionaire’s party?”

I’ve made a few friends in San Diego who are boat captains (nbd, highly recommend) and one is currently at Anthony Hsieh’s (Loan Depot founder/Bad Company yachtsman) Newport Beach house for a big ass party.

You think he has a better chance of actually talking to him by saying he’s a charter captain or pretend to know shit about mortgages? 

 

Just grab any one of @Wulaw Horn post about Habib and quote it word for word. 

[Gil Bang 26231]

Here's what I plan to do:  I plan to sign my buyers at 2%. If the seller is paying 2%, then I will live with it.  If the seller is paying more than 2%, I'm going to "renegotiate" with my buyers, and sign a new deal at the higher amount, and offer my buyers half of the increased amount as a credit for closing costs.    If it's 2.5%, I get 25 basis points more, and my buyer gets a 25 basis points credit.   If the seller is offering less, I'm going to write the best offer I can, put in that my commission will be seller-paid at 2%, and let the net sheet do the talking.   

 

[ChickenSandwich 9957]

Would a seller be able to negotiate a set fee for a transaction?

Ex. Seller offers flat rate of $15k to be split between buyer/seller agent regardless of sale price?

[Wulaw Horn 19590]

5 minutes ago, ChickenSandwich said:

Would a seller be able to negotiate a set fee for a transaction?

Ex. Seller offers flat rate of $15k to be split between buyer/seller agent regardless of sale price?

I would think so, sure.  Seller's money they can enter into any kind of listing agreement they want (not all listings are at 6% for example).  That wouldn't solve any problem of buyer owing his agent whatever buyer agreed to though.

[Gil Bang 26231]

Yes absolutely. Commission can be a flat-fee or a percentage.  There is also something called a "net" listing.  In a net listing, in which the seller says "I want X for my property".  For any amount over X, the broker gets the difference. 

[UTPhil2006 3930]

Still got a little bit of ways to go to hit that 3.68 we hit for like 6 hours last week, but a decent day yesterday and a decent start today (down .05 so far) has us down to 3.85 on the 10 year 

[UTPhil2006 3930]

On 8/13/2024 at 8:40 AM, UTPhil2006 said:

Still got a little bit of ways to go to hit that 3.68 we hit for like 6 hours last week, but a decent day yesterday and a decent start today (down .05 so far) has us down to 3.85 on the 10 year 

And it’s gone gif. Jerks every day on competing data. 

[huge 3831]

I sold a house in March of 2021 and paid the 6%.

Any chance I get some of that settlement money?

[Captainant 28528]

11 hours ago, huge said:

I sold a house in March of 2021 and paid the 6%.

Any chance I get some of that settlement money?

In a few years you'll get a check for tree fiddy

[UTPhil2006 3930]

2 hours ago, Captainant said:

In a few years you'll get a check for tree fiddy

And tree fiddy of fees.

[Upgrayedd 5886]

On 8/9/2024 at 5:00 PM, Gil Bang said:

Yes absolutely. Commission can be a flat-fee or a percentage.  There is also something called a "net" listing.  In a net listing, in which the seller says "I want X for my property".  For any amount over X, the broker gets the difference. 

Can you split that overage?  Like savings in a GMP?

[Catpfish 618]

You can agree to whatever could be worked out.  However, from my experience, you don't see many, if any, net listings.  You really open yourself up to breach of fiduciary duty if the price differential/commission becomes too great.  Even though the seller might have agreed to the net price at the outset, that doesn't mean they won't come back and want more money.  I would guess that the courts would tend to side with the seller if it made it that far.

[Gil Bang 26231]

I've never seen a net listing in the wild.

[horn4life 3838]

So my mom is about to pass away, and I thought I read somewhere that in Texas the homestead value steps up to the current market value.  To basically eliminate any potential capital gain up to the point of the spouses death.  IS this correct?  I think Texas is unique in this aspect.

The reason i ask is that if that is the case and we rent my father's remodeled home, then I can use the stepped up cost value at my mother's death to depreciate from?  Example: built home for $200K, today house is worth $600K and mom passes.  That $600K value rather than the $200K build price is the basis from which I calculate the depreciation.

If so then he could show paper losses with the depreciation, that could offset some of his forced withdrawal income.  Anyhow too tired to research this so I ask you fine folks instead.

Thanks in advance

[LCHorn 2751]

47 minutes ago, horn4life said:

So my mom is about to pass away, and I thought I read somewhere that in Texas the homestead value steps up to the current market value.  To basically eliminate any potential capital gain up to the point of the spouses death.  IS this correct?  I think Texas is unique in this aspect.

The reason i ask is that if that is the case and we rent my father's remodeled home, then I can use the stepped up cost value at my mother's death to depreciate from?  Example: built home for $200K, today house is worth $600K and mom passes.  That $600K value rather than the $200K build price is the basis from which I calculate the depreciation.

If so then he could show paper losses with the depreciation, that could offset some of his forced withdrawal income.  Anyhow too tired to research this so I ask you fine folks instead.

Thanks in advance

I'm going to let someone better versed in accounting respond on the merits of what you're describing, but one think I do know firsthand is that the county isn't removing the homestead unless you're selling the property OR you notify them it's been conveyed (for example, through inheritance).  Your scenario is unclear about who's in line to inherit, too.  Is it you or your Dad?

[ChickenSandwich 9957]

Would a 44% capital gains tax cause a flood of rental and investment properties to be put up for sale?

[hornmpa96 2666]

2 hours ago, horn4life said:

So my mom is about to pass away, and I thought I read somewhere that in Texas the homestead value steps up to the current market value.  To basically eliminate any potential capital gain up to the point of the spouses death.  IS this correct?  I think Texas is unique in this aspect.

The reason i ask is that if that is the case and we rent my father's remodeled home, then I can use the stepped up cost value at my mother's death to depreciate from?  Example: built home for $200K, today house is worth $600K and mom passes.  That $600K value rather than the $200K build price is the basis from which I calculate the depreciation.

If so then he could show paper losses with the depreciation, that could offset some of his forced withdrawal income.  Anyhow too tired to research this so I ask you fine folks instead.

Thanks in advance

I’m not exactly sure of what’s being asked here.

Assuming the house is owned jointly, the surviving spouse should receive a step-up in basis for the 50% of the house received from the estate for federal income tax purposes. This happens through the federal estate tax law.

The stepped-up basis is only useful for federal income tax purposes if the property is a rental or is sold.

Also it should be noted that there are some potential limitations to utilizing a tax loss from rental activity. The owner may need to satisfy the active or material participation rules to deduct the loss.

The homestead exemption is a Texas property tax concept and the 65-over exemption can be utilized by a younger surviving spouse.

[UTPhil2006 3930]

26 minutes ago, ChickenSandwich said:

Would a 44% capital gains tax cause a flood of rental and investment properties to be put up for sale?

Don’t forget the 25% on unrealized capital gains. 

[Firemans4Horn 18528]

5 minutes ago, UTPhil2006 said:

Don’t forget the 25% on unrealized capital gains. 

 

32 minutes ago, ChickenSandwich said:

Would a 44% capital gains tax cause a flood of rental and investment properties to be put up for sale?

Those have about a 0.001% chance of passing congress. I wouldn’t worry too much about it. 

[UTPhil2006 3930]

8 minutes ago, Firemans4Horn said:

 

Those have about a 0.001% chance of passing congress. I wouldn’t worry too much about it. 

I figured as much. Still kinda crazy to see the unrealized one though. 

[Firemans4Horn 18528]

4 minutes ago, UTPhil2006 said:

I figured as much. Still kinda crazy to see the unrealized one though. 

That’s proposed on households with over $100mn 

[UTPhil2006 3930]

Just now, Firemans4Horn said:

That’s proposed on households with over $100mn 

Shit that doesn’t even get them into surly 3% 

[jimmyjazz 47137]

40 minutes ago, UTPhil2006 said:

Don’t forget the 25% on unrealized capital gains. 

Thanks for pointing that out.  We are talking about selling our house this spring -- what is the baseline gain that isn't taxed, and what is the tax rate above that gain?  Assume we are not buying another property.

[Catpfish 618]

Buying another property has no bearing on taxes anymore. You are allowed to exclude up to $500,000 if MFJ. That is gain not price as you'd be surprised how many people miss that aspect.

[jimmyjazz 47137]

1 hour ago, Catpfish said:

Buying another property has no bearing on taxes anymore. You are allowed to exclude up to $500,000 if MFJ. That is gain not price as you'd be surprised how many people miss that aspect.

That was my expectation, just wondered if anything had changed.  Thanks.

[horn4life 3838]

7 hours ago, hornmpa96 said:

I’m not exactly sure of what’s being asked here.

Assuming the house is owned jointly, the surviving spouse should receive a step-up in basis for the 50% of the house received from the estate for federal income tax purposes. This happens through the federal estate tax law.

The stepped-up basis is only useful for federal income tax purposes if the property is a rental or is sold.

Also it should be noted that there are some potential limitations to utilizing a tax loss from rental activity. The owner may need to satisfy the active or material participation rules to deduct the loss.

The homestead exemption is a Texas property tax concept and the 65-over exemption can be utilized by a younger surviving spouse.

Mom is dying, Dad is surviving. House is NOT yet a rental, but that is the plan going forward.  

My interest in the stepped up basis is to determine what the depreciable valua of the home is when it begins renting. 

I am not concetrned about the capital gains, but what would be the highest value to start the depreciation expense of his propery at?  His taxes are going to go up, because he has moved to assisted living near me. 

Quote

Assuming the house is owned jointly, the surviving spouse should receive a step-up in basis for the 50% of the house received from the estate for federal income tax purposes. This happens through the federal estate tax law.

So like in original example House built for $200K - current actual value is $600K.  If they started renting the house before either spouse died the depreciable cost basis would be the $200K build cost (plus improvements).  However, if one souse dies, the depreciable cost basis would become $400K?  The $200K build  cost, plus the $200K step up in value from the deceased spouse.  So then the remaining $200K in value that is not included in the cost bases is the $200K of appreciation that is not stepped up of the surviving spouse? Correct?

So let's assume I make the property a successful rental for arguments sake.  For the years when my father is alive and the owner the depreciation cost basis will be the $400K.  Once my father passes the property will flow through to my sister and I as we are already on the deed.  At THAT POINT in time after my Father passes we would would get an appraisal to determine the value of the property fully stepped up.  Then my sister and I would restart the depreciation anew with the new higher value, say $600K if I used my mathematical example above.

Hope this is clear what I am trying to say.  I am just trying to make sure the math I am using to forecast the future accurately includes the all important depreciation correctly.

[hornmpa96 2666]

1 minute ago, horn4life said:

Mom is dying, Dad is surviving. House is NOT yet a rental, but that is the plan going forward.  

My interest in the stepped up basis is to determine what the depreciable valua of the home is when it begins renting. 

I am not concetrned about the capital gains, but what would be the highest value to start the depreciation expense of his propery at?  His taxes are going to go up, because he has moved to assisted living near me. 

So like in original example House built for $200K - current actual value is $600K.  If they started renting the house before either spouse died the depreciable cost basis would be the $200K build cost (plus improvements).  However, if one souse dies, the depreciable cost basis would become $400K?  The $200K build  cost, plus the $200K step up in value from the deceased spouse.  So then the remaining $200K in value that is not included in the cost bases is the $200K of appreciation that is not stepped up of the surviving spouse? Correct?

So let's assume I make the property a successful rental for arguments sake.  For the years when my father is alive and the owner the depreciation cost basis will be the $400K.  Once my father passes the property will flow through to my sister and I as we are already on the deed.  At THAT POINT in time after my Father passes we would would get an appraisal to determine the value of the property fully stepped up.  Then my sister and I would restart the depreciation anew with the new higher value, say $600K if I used my mathematical example above.

Hope this is clear what I am trying to say.  I am just trying to make sure the math I am using to forecast the future accurately includes the all important depreciation correctly.

That’s correct. Your dad’s basis for depreciation purposes will be 400k in your example. When you and your sister inherit the house, your basis for depreciation will be the fair market value at the time of inheritance.

[horn4life 3838]

50 minutes ago, hornmpa96 said:

That’s correct. Your dad’s basis for depreciation purposes will be 400k in your example. When you and your sister inherit the house, your basis for depreciation will be the fair market value at the time of inheritance.

Ok for some odd reason I thought Texas stepped up the entire value with the death of one spouse, that would have been nice. 

So we can depreciate, for however many years on the $400K (in my example) to offset my fathers income from required minimum distributions.  I am going to charge him 20% to manage, repair and furnish the property as a 30 day rental.  If it doesn't rent well, as a 30 day, we will likely just sell it.  I am going to go ahead and do a complete remodel myself, over the next couple months, and pull out about $15K to give me a cash starting point for the furnishings bringing the unit up.  If it works my sis and I will just keep the same arrangement and rent the house forever as far as I am concerned.  

The bonus is if a can get the 30 day furnished rental cash flowing, we would also have access to the lake house when not rented for family events, or to let friends and family use.

 

[UTPhil2006 3930]

I expected a far bigger drop this morning. Maybe the jobs numbers were also already cooked in. 

[hornmpa96 2666]

1 hour ago, horn4life said:

So we can depreciate, for however many years on the $400K (in my example) to offset my father’s income from required minimum distributions. 

 

Just to clarify something on this point - If your father generates a tax loss from the rental activity, he will have to work through the passive activity loss rules to ensure it’s deductible as I’m assuming he’s not a real estate professional.

Look at IRS Publication 925 which explains those rules.

[Wulaw Horn 19590]

2 hours ago, UTPhil2006 said:

I expected a far bigger drop this morning. Maybe the jobs numbers were also already cooked in. 

818k that didn’t exist. What nonsense did that do the last 12 months. Fed cuts should have happened before.  So aggravating. 

[UTPhil2006 3930]

6 minutes ago, Wulaw Horn said:

818k that didn’t exist. What nonsense did that do the last 12 months. Fed cuts should have happened before.  So aggravating. 

Don’t go look at the inflation thread 

[Texas Jeff 1999]

Would a 44% capital gains tax cause a flood of rental and investment properties to be put up for sale?

I would think that most people would just not sell at all and wait for a better time.

[Incredulity 11875]

11 minutes ago, Texas Jeff said:

I would think that most people would just not sell at all and wait for a better time.

I think he is referring to the time period immediately preceding implementation.

[Wulaw Horn 19590]

24 minutes ago, UTPhil2006 said:

Don’t go look at the inflation thread 

No worries. Every month I posted the stuff about the jobs report being nonsense that habib posted and a certain segment told me how dumb that was. Ok. Take 60k jobs off every month and let’s have those conversations again. 

[Incredulity 11875]

4 minutes ago, Wulaw Horn said:

No worries. Every month I posted the stuff about the jobs report being nonsense that habib posted and a certain segment told me how dumb that was. Ok. Take 60k jobs off every month and let’s have those conversations again. 

Do you even double coupon, bro?

[Wulaw Horn 19590]

4 minutes ago, Incredulity said:

Do you even double coupon, bro?

No idea what you are trying to say here or if you are making a joke and I’m too dumb for it to land. Spell it out like I eat paint chips. 

[Incredulity 11875]

3 minutes ago, Wulaw Horn said:

No idea what you are trying to say here or if you are making a joke and I’m too dumb for it to land. Spell it out like I eat paint chips. 

don't hoard those paint chips, fuel for hard work right there.  

Its a joke in regards to the posters who have denied inflation and pumped "job creation" in the last 48 or so months.

 

just being snarky/surly

[UTPhil2006 3930]

33 minutes ago, Incredulity said:

Do you even double coupon, bro?

He was actually on your side 

Just now, UTPhil2006 said:

He was actually on your side 

@Wulaw Horn

[horn4life 3838]

Should have cut at the latest last month.  The bury inflation goal is fantastic. But the Feds job is to ANTICIPATE,  not respond.  They were late to the rate increase party, and they are late to the cut party.  IMHO of course.  

I think they should go a half.  But then somebody might argue that's political, so likely the quarter they should have dropped two weeks ago.  But a half spurs R.E market during a traditionally lower activity time frame like the fall.  Then the cuts could cascade from there.  Oh well, I'm sure Jackson Hole is a lot more refreshing than Austin today.

 

[LCHorn 2751]

1 hour ago, horn4life said:

Should have cut at the latest last month.  The bury inflation goal is fantastic. But the Feds job is to ANTICIPATE,  not respond.  They were late to the rate increase party, and they are late to the cut party.  IMHO of course.  

I think they should go a half.  But then somebody might argue that's political, so likely the quarter they should have dropped two weeks ago.  But a half spurs R.E market during a traditionally lower activity time frame like the fall.  Then the cuts could cascade from there.  Oh well, I'm sure Jackson Hole is a lot more refreshing than Austin today.

 

I’m okay with 25 now and higher expectations for another cut in ‘24.  

[StassneyHorn 6767]

3 hours ago, Wulaw Horn said:

No idea what you are trying to say here or if you are making a joke and I’m too dumb for it to land. Spell it out like I eat paint chips. 

He thinks saving money at grocery stores is double couponing.

And your own analysis to only trust revised reports gets thrown out the door as soon as this report was released.

[StassneyHorn 6767]

3 hours ago, Incredulity said:

don't hoard those paint chips, fuel for hard work right there.  

Its a joke in regards to the posters who have denied inflation and pumped "job creation" in the last 48 or so months.

 

just being snarky/surly

48 months? Bwahahaha