What does your future vacation home look like? Where is it located? As you hunt down your Vallarta dream home, consult this list to evaluate properties and keep your priorities top of mind.
Your Vallarta Property Wish List part 1
5 Steps to Deciding How Much to Offer – or Ask – for Your Home
Here is a very good article posted by Tara. While all information isn’t pertinent to Puerto Vallarta, Mexico, real estate, you can get the main idea from it. Happy reading! Marilyn
One of the hardest, most important decisions homebuyers face is how much to offer for their home. And the glut of information on the web about real estate only makes buyers even crazier than the decision itself does. Supply, demand, foreclosure rates, mortgage rates – buyers think they need to run spreadsheets and do fancy math to make a smart offer. And THAT can be super intimidating.
But the fact is, there is a pretty short list of steps you need to take to make a smart offer – one that gets you a great value, but is also likely to be successful at getting the property. (A low offer does not make for a great deal if you don’t get the house!) And most of the same steps apply to sellers trying to set the list price that will lure the most buyers (and net them the most cash)!
Step 1: What do the “comps” say? First things first. When it comes to pricing a home, or making an offer to buy one, the ‘first thing” is the home’s fair market value. Both buyers and sellers should work with an experienced, local agent to understand what the home’s value is. Most agents will do this by offering you a look back at similar properties that have recently sold in the neighborhood – i.e., the comparable sales, or comps.
Ideally, look for comparables that are very recent sales (3 months or less before you’re listing or buying), very similar properties (i.e., same number of bedrooms, bathrooms, square footage; and similar style, condition and amenities). If you do get into contract, these may be the same comparables which will be considered by the appraiser, so looking at them before making an offer can:
(a) provide factual support for a lower-than-asking offer or for the asking price, in a negotiation, and
(b) result in a sale price at which the property will actually appraise, later on – avoiding the common glitch of the deal falling through because the appraisal comes in way below the agreed-upon price.
Also, looking at comps is the first step for locating a home’s seller and prospective buyer in the reality-based universe of current home values. The fact that you bought or refinanced the place at a given value 5 or 6 years ago is entirely irrelevant to what it’s worth today, as is the buyer’s belief that the place was worth $100K less at the trough of the market, in 2009.
Step 2: What can you afford? This step is much more critical for buyers than for sellers. (Unfortunately, sellers, the facts that you need to net a particular amount to buy your next home or pay your existing mortgages or credit card bills off has no relationship whatsoever to the price at which you should list or will sell your home.)
Buyers – it’s a must to make sure that your offer price for any given home falls within the range of what is affordable for you. This includes offering a price within the range for which your mortgage was preapproved, but also includes making sure that the monthly payment and cash you’ll need to close the deal (down payment + closing costs) are affordable in light of the particular house. If, for example, the property will require repairs for which you’ll need to conserve cash, or has HOA dues you hadn’t planned on, you may need to rejigger your offer accordingly.
Step 3: What’s your competition? (And what’s theirs?) This is another step at which it’s critical to check in with your agent. You need to know what level of competition you’ll face – whether you are a buyer, or a seller. As a seller, you can find this out by looking at things like how many comparable homes are listed in your town or your neighborhood in your general price range (your agent will brief you on this). Sellers should also consider what type of transactions their home will be up against – the more distressed properties (foreclosed homes and short sales) with which your home must compete, the more aggressive you must be with your pricing to get your home sold.
The more competition you have, as a seller, the lower you should tweak your list price to attract buyers to come see your home. (And the more buyers come to see your home, the more likely you are to get an offer!)
Buyers should also be cognizant of the competition level they will face for homes. Believe it or not, even on today’s market there are properties and neighborhoods in which multiple offers are the name of the game. Work with your agent to understand the list price-to-sale price (LP:SP) ratio , which lets you know how much under or over the asking price properties are selling for in your target home’s neighborhood; the higher the LP:SP ratio, generally speaking, the less competition there is among buyers.
Your agent can also brief you on:
(1) The number of offers – if any – that have been presented on “your” property (which the listing agent will usually, gladly tell). If there are other offers, you’ll want to make a higher offer to compete successfully against them; and
(2) The number of days the home has been on the market, relative to how long an average home stays on the market before it sells – the longer it has, the more pressure is on the seller, price-wise, and the less competition the buyer is likely to have. (One exception is the sweet spot scenario, when a property that has been on the market for a long time has a price reduction and gets a bunch of offers as a result! )
Step 4: How much do they need to sell (or buy) it? Buyers: Has the listing in which you’re interested been reduced at all? By how much? Has the listing agent informed you that her clients are highly motivated, flexible or have an urgent need to sell?
Sellers – most buyers are not in a high state of urgency to buy these days, given the long-term, high affordability of homes and interest rates, except when they have an urgent personal reason for moving, e.g., buyers who are relocating for work. Of course, all of real estate is hyperlocal, so it’s important to understand how motivated buyers are in your local market, generally speaking, before you set your list price.
Step 5: How much do you want to buy, or sell, the place? #4 was about taking the motivations of the folks on the other side of the bargaining table into account when formulating your offer and your list price. This step is all about you – what’s your level of motivation? Now, buyers, you certainly shouldn’t offer a price way above what the place is worth (see Step #1) just because you really, really want it, unless you have the cash to throw around. But within the range of the home’s fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property.
Sellers: think of your list price as the most powerful marketing tool at your disposal. if you really want or need to sell, get aggressive about setting your price as low as makes sense for your your home’s value and local market dynamics to attract qualified buyers and help your home stand out against all the competition.
By Tara-Nicholle Nelson | Broker in San Francisco, CA
www.trulia.com
5 Tips to Sell Your Property Faster
There is no question that in many areas properties are currently on the market longer. As a seller, this slow-down means there is more competition for a limited pool of potential buyers. Consider the following 5 Tips to Sell Your Property Faster:
Price It Right
The first 30 days are the most critical. If your property is priced too high, interested buyers may never even tour your listing. The longer the property is on the market, the fewer the prospects.
Deciding the value of a property isn’t an exact science. Yet, there is data to help you determine a fair asking price that is right on target. Consult with an AMPI* real estate professional who can help you determine true market value based on a comparable market analysis, which will include recent property sale transactions as well as properties currently on the market. From the analysis, you may want to price your property conservatively to give it a competitive edge.
Make Your Property Irresistible
Unless they are looking for a fixer-upper, most buyers are more likely to make a bid on a property that they can enjoy immediately. Therefore, you need to create an environment the buyer can’t resist. In other words, do everything you can to make the property so attractive, charming, cozy, inviting, comfortable and exciting that a buyer will want to buy that lifestyle for himself.
Evaluate the property from a buyer’s point of view. An experienced AMPI real estate professional will be able to offer an objective view and will also know what buyers are asking for. Get your property in tip-top shape by making repairs and cosmetic improvements, and removing clutter. This may mean investing in a few upgrades to modernize your property’s look such as installing newer window coverings and light fixtures and painting the walls a neutral shade.
Create Traffic
If you want buyers to see your property, you must first find the buyers. Work with your real estate professional to design a marketing plan that is flexible and capitalizes on your property’s most desirable features. Your strategy should include ways to reach buyers online and offline – such as word of mouth, the Internet, yard signs, direct mail, open houses and so on.
Go with a Professional
Selling a property is more than just hanging a sign and having a listing on the Internet. In a competitive market, you don’t really want to take the chance of making novice mistakes that can slow the selling of your property.
By hiring a PVAMPI real estate professional, you get the benefit of an experienced marketer and negotiator who is familiar with real estate issues in your community. A real estate professional can offer worthy advice on pricing and staging your property based on their vast experience.
Another good reason to go with a real estate professional, it is the only way you can get in the MLS**, which ensures your property will be marketed in a number of different ways and easily accessible by all AMPI and MLS members.
Plus, there’s the added value of the peer-to-peer networking among real estate professionals, which can bring buyers and sellers together – sometimes even before the property goes on the market.
Offer Incentives
Offering incentives can be just the impetus a potential buyer needs to select your property over others. You may want to consider offering a paint allowance. Or, pay for a professional property inspection or a property warranty – and, depending on your market and budget, offer to pay some of the closing costs.
Don’t be discouraged if there are competing properties for sale in your neighborhood. With just a few smart moves, you can turn a buyers’ market in your favor.
* Mexican Association of Real Estate Professionals.
**Multi-List System
By Marilyn Newman
Sales Associate, Prudential California Realty Vallarta Division
Tere Kimball
Broker Partner, Prudential California Realty
MEXICAN FIDEICOMISO PROPERTY OWNERSHIP BY US TAXPAYER’S
WHAT ARE THE IRS FILING REQUIREMENTS
By Don D. Nelson, Attorney at Law, C.P.A.
If you own your Mexican real estate through a Fideicomiso you have a yearly U.S. Tax filing obligation with the IRS. There are two informational forms which must be filed each year by Fideicomisos which have been deemed to be foreign trusts. These filing requirements are set forth below:
• Form 3520A is due on March 15th following the end of each calendar year. The due date of this form can be extended for six months if the extension is filed before the due date.. None of the Banks in Mexico who act as trustee will file this form for your as required by US tax law. Therefore, you must file it yourself since it is you the IRS will penalize if it is not filed. There is a penalty of 5% of the value of the assets in the trust for failing to file this form. This penalty can be waived for resonable cause. The form contains information on the Fideicomiso, its beneficiary(ies), its income and expenses, and the value of its assets, etc.
• Form 3520 is due on the extended due date of your personal tax return. However it is filed separately from your personal return. Failure to file this form can result in a penalty equal to 35% of the value of the Mexican real estate transferred to the Fideicomiso. This penalty is currently waived if you provide the IRS with a reasonable late filing excuse. This form mostly duplicates the same information contained in the form 3520A the addition of other informational items.
• Both of these forms are filed separately from your personal tax return and go to a different address than your tax return.
• The Fideicomiso must secure a US Federal ID number from the IRS. The ownership of all US owners must be reported.
• To date, we have successfully managed to file these forms late for Mexican property owners who did not know their obligation to file, and have succeeded in avoiding all potential penalties.
• If you the property you own in your Fideicomiso has been your primary personal residence for 2 out of the past 5 years, and you filed jointly with your spouse, the first $500,000US ( $250,000US if you are singled) can be exempt on your US tax return. You can claim a foreign tax credit for taxes paid on your sales gain in Mexico against your US tax on any gain on the sale in excess of the exemption amount.
• If the property in your Fideicomiso is a rental, you must report the income and expenses on of the rental on your US tax return. You must depreciate the value of the improvements and structure on the property over a 40 year period. Keep in mind that you must also file and pay income and IVA taxes on your rental income in Mexico or risk problems with the Hacienda.
In the past year several attorneys have written articles analyzing the IRS foreign trust filing requirements and have expressed their opinion that a Fideicomiso is not a foreign trust and should not have to file Form 3520 and 3520A. That is good theory, but does not reflect the position of the IRS. Unfortunately the Fideicomiso document is worded as a foreign trust, holds title to the property in your behalf, and is administered by the Mexican Bank trustee. The IRS has never issued any pronouncement in writing that exempts Fideicomisos from filing the forms. Representatives of the IRS have indicated that it does not have any plan to exempt Fideicomisos from filng these forms. Therefore, if you chose not to file you are at risk of being assessed the high penalties for nonfiling as set forth previously.
If you own your Mexican real estate through a Mexican corporation you are required to file Form 5471 each year with your US income tax return. This form reports various information on the shareholders, income and expenses, and assets and liabilities of the corporation and the property it holds. Failure to file this form on filing it late can result in a $10,000 per year penalty. If you have a reasonable excuse for late filing that penalty is currently usually waived, though this policy may change in the future.
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Don D. Nelson is a U.S. Attorney and C.P.A. who has been assisting US Citizens who live, work or own property in Mexico with their US tax return filing requirements and tax planning for over 20 years. His clients have “attorney-client” privilege which is not available from other tax preparers and C.P.A.s. In the past six years he has assisted a large number of Americans file their Fideicomiso US Tax Forms and has been to date very successful in helping all of them avoid any penalties for filing past years or filing late. Whether the IRS will continue to waive the penalty in future years is not known.
Visit Don’ websites at www.TaxMeLess.com & www.ExpatAttorneyCPA.com Email: ddnelson@gmail.com US Phone (949)481-4094
For the latest developments and news concerning US and Mexican taxes visit his blog at www.us-mexicantax.blogspot.com