Once you’ve chosen to sell your home, setting the price is the most important decision you’ll make.  No question about it.  What I wrote over six months ago in Price Your Home to Sell is worth a second, third and even a fourth reading.

If the real estate agent you’re talking to isn’t telling you the things I’ve written below, you’ve got the wrong agent.  Contact Michael Zimmerman or call 808-457-9683 for an appointment immediately.

Major points to consider when deciding on your list price:

• An overpriced home will definitely take longer to sell (if it sells at all).
• If you overprice, you’ll probably receive less than if you priced it correctly to begin with.
• A high asking price does not guarantee a high selling price.
• Buyers do what buyers do — they shop around to find the best value.  Make sure you offer the best value.
• Buyers qualified to purchase your home may not even see it if it’s overpriced.
• If your home is priced too high, it will not compare favorably to correctly priced homes in the same price range.
• If you overprice, your listing will likely become stale.  Some buyers won’t even come to see it and the ones that do will feel they can aggressively negotiate on price.  They assume you will be desperate to sell and that they have little or no competition.
• Carefully consider what comparable homes recently sold for and look at comparable pending sales.  These are good indicators of market value.
• Don’t get lost in emotion.  No amount of anxiety is going to make buyers pay 10, 20 or 50 thousand dollars over market price for your home.
• Your home is special to you.  That’s not true for the buyer, yet.
• Buyers simply do not care how much you "need" to net from your home sale.

Are you considering a home or investment property sale?  If so, contact Michael Zimmerman.  In addition, check out the seller resources available on my web site.

Michael Zimmerman just sold the Ko’olani condominium with this breathtaking view.  It was the first high floor two bedroom sale in nearly two months.  Ko’olani is conveniently located, just minutes away from Ala Moana Shopping Center, Ala Moana Beach Park, Ward Centers, Downtown and Waikiki.

Ko’olani Condominium, 1177 Queen Street #4207
Sold for $915,000 Fee Simple

Ko’olani is one of Honolulu’s newest luxury condos.  The building’s superb amenities include fitness center, saltwater pool, whirlpool, billiard room, tennis courts, movie theater for 18 guests, business center, putting green, party room, concierge, conference room and a dog park.  The sold apartment’s highlights included:

• Panoramic Pacific Ocean Views
• Large bright rooms throughout
• 2 bedrooms & 2 baths
• Living area approximately 1108 square feet
• Open lanai approximately 49 square feet
• 2 covered, assigned, parking stalls
• Gourmet kitchen with with Viking appliances and granite counters
• Luxurious bath to match the lovely master bedroom

Looking for your very own high floor condo with a spectacular view?  Contact Michael Zimmerman or visit my web site to perform your own specific Honolulu home search.

This is the final post of this four-part series on 1031 exchanges.  Internal Revenue Code Section 1031 provides a great chance to deferring taxes and build wealth.  The Internal Revenue Code rules are complicated, so please consult your tax professional.  Let’s answer some Frequently Asked Questions.

Q:  How do I identify replacement property?
A:  The identification must be submitted in writing, unambiguously described, signed by the investor and delivered to the title company before midnight on the 45th day.  The title company will provide the necessary forms.

Q:  What happens if I change my mind and want to cancel my exchange?
A:  If you transfer the relinquished property and do not replace it with another, the sale will be a taxable event and any capital gain will be subject to federal and state capital gains tax.  If you decide to cancel the exchange after the title company has received exchange proceeds, access to those proceeds may be limited until certain time periods elapse.

Q:  What if I sell a property and then decide I want to make it part of a tax-deferred exchange?
A:  If you actually or constructively received proceeds from the sale, it may not be possible to include that property in a tax-deferred exchange.  If you have entered into a contract to sell, but have not closed, it mat be possible to carry out a tax-deferred exchange, provided you execute the proper exchange documents, identify the replacement property within 45 days of the closing and actually receive it within 180 days or before your tax return is due.  Consult your attorney and tax advisor to help you make that determination.

Q:  What is "boot"?
A:  Boot can be cash received from the sale of relinquished property or other non-cash consideration, including any property that is not "like-kind", promissory notes or debt relief (mortgage boot).  If you receive boot in an exchange, it is likely that all or some portion will be taxed.

Q:  Can or should I do a tax-deferred exchange for my personal residence?
A:  No, your principal residence is not considered investment property and therefore, does not meet the requirements of Internal Revenue Code Section 1031.

Read Part 1

Read Part 2

Read Part 3

Please contact Michael Zimmerman if you have a specific question about 1031 exchanges or search for investment opportunities using my Honolulu home search.

This information is provided as a courtesy only, is not a warranty and should be independently investigated by buyers. This information is deemed reliable, but NOT guaranteed.  Consult your attorney and tax advisor before you exchange investment property.

As I wrote earlier, Section 1031 of the Internal Revenue Code provides a tremendous opportunity to build wealth by deferring taxes.  Within carefully defined limits, investors may carry forward gains made on one property into another property and defer capital gains taxes.  The 1031 exchange rules are complicated, so be sure to consult with your tax professional.  Let’s continue with some important points.

Reverse Exchange
This occurs when an investor wants to acquire replacement property prior to the closing of the relinquished property.  Warning:  reverse exchanges are much more costly and complicated than a normal 1031 exchange, so please consult with your tax professional and title officer prior to initiating this type of exchange.

Special Circumstances
If any of the circumstances listed below apply to your transaction, be sure to notify your real estate agent, your title officer and your tax professional.

• Disposing of property held by a partnership
• Disposing of property held in a living trust
• Exchanging property with a related party
• Receiving cash from the exchange
• Acquiring property of lesser value than the relinquished property
• Carrying back financing on the relinquished property (carry back note)
• Acquiring replacement property in the following tax year
• A reverse exchange transaction
• Improvements will be made to the replacement property (construction)
• Acquiring replacement property with spouse or others whom were not a party to the exchange
• Combination exchange (part investment property and part owner occupied)
• Residing in a state other than the relinquished property

Read Part 1

Read Part 2

Read Part 4

Please contact Michael Zimmerman if you have a specific question about 1031 exchanges or visit my web site to find investment opportunities using my Honolulu home search.

This information is provided as a courtesy only, is not a warranty and should be independently investigated by buyers. This information is deemed reliable, but NOT guaranteed.  Consult your attorney and tax advisor before you exchange investment property.

As I wrote in Part 1 of the 1031 Exchange series, Section 1031 of the Internal Revenue Code provides a remarkable opportunity to build wealth by deferring taxes.  Within carefully defined limits, investors may carry forward gains made on one property into another one, deferring capital gains tax, allowing full use of equity in the acquisition.  Let’s continue with the important points.

Fully Deferred Exchange
For an exchange to be fully tax-deferred, replacement property must be equal to or greater in value and equity than that of the relinquished property.  In addition, debt on the replacement property must be greater than or equal to the debt on the relinquished property, unless cash is added to offset debt.

Replacement Property
An investor may identify replacement property according to the following rules:

• 3-property rule - three properties, regardless of value
• 200 percent rule - any number of properties, as long as their combined fair market value does not exceed twice the value of the relinquished property
• 95 percent rule - any number of properties, regardless of their combined fair market value, as long as you acquire 95 percent or more of the total value of such properties

Read Part 1

Read Part 3

Read Part 4

Please contact Michael Zimmerman if you have a specific question about 1031 exchanges or visit my web site to find investment opportunities using my Honolulu home search.

This information is provided as a courtesy only, is not a warranty and should be independently investigated by buyers. This information is deemed reliable, but NOT guaranteed.  Consult your attorney and tax advisor before you exchange investment property.

A tax-deferred exchange enables real estate investors to preserve wealth by re-investing in "like-kind" assets.  When real property is sold, an investor may incur federal capital gains tax and, in some states, state tax as well.  A tax-deferred exchange allows investors to sell investment properties and acquire "like-kind" properties while deferring federal capital gains tax.  Many states with a capital gains tax offer a similar tax advantage.

Section 1031 of the Internal Revenue Code provides a remarkable opportunity to build wealth by deferring taxes.  Within carefully defined limits, investors may carry forward gains made on one property into another one, deferring capital gains tax, allowing full use of equity in the acquisition.  The Internal Revenue Code rules can be rather complicated, so be sure to consult with your tax professional.  Let’s cover some of the important points.

What is "like-kind"?
"Like-kind" does not mean "exactly the same" regarding exchanges of real estate.  A condominium rental unit may be exchanged for a single family rental or other real property like a retail center, office building, farm property or a leasehold interest in real estate of 30 years or more.  Most real property is considered "like-kind" to other real property.

Identification Period (45 Day Rule)
The replacement property must be identified within 45 days of the transfer of the first relinquished property.

Exchange Period (180 Day Rule)
The replacement property acquisition must be completed by the earlier of:  
(1) 180 days of the transfer of the first relinquished property or
(2) the due date of filing your federal income tax return for the year in which you transferred the first relinquished property, including filing extensions.

Weekends and Holidays
If the 45th day falls on a Saturday, Sunday, or holiday, the replacement identification should be completed on a preceding business day.  Similarly, if the 180th day falls on a Saturday, Sunday, or holiday, the exchange must be completed on a preceding business day.

Read Part 2

Read Part 3

Read Part 4

Please contact Michael Zimmerman if you have a specific question about 1031 exchanges or visit my web site to find investment opportunities using my Honolulu home search.

This information is provided as a courtesy only, is not a warranty and should be independently investigated by buyers. This information is deemed reliable, but NOT guaranteed.  Consult your attorney and tax advisor before you exchange investment property.

Property boundary questions often arise when selling or buying oceanfront property.  Julia Jones, Account Manager at First American Title, has prepared two short papers explaining the basics of shoreline setbacks and shoreline property boundaries.  The first paragraph of the shoreline property boundaries paper and a link to the complete paper is below.

Shoreline Property Boundaries
"Shoreline property in Hawaii can decrease or increase in size based on the location of the shoreline and the natural process of erosion and accretion.  Erosion and accretion are gradual processes in which land is either reduced or increased in size based upon how the ocean deposits beach sand over time.  Because Hawaii’s beaches are a valuable resource, there are Hawaii statutes and case law which have discussed and defined the term "shoreline" which divides public and private land.  Land below the high water mark is a natural resource, and is owned by the state."

Read the complete Shoreline Property Boundaries paper in PDF format.

Read the first part of this series (Shoreline Setbacks):  Hawaii Oceanfront Property Boundaries Part I.

Contact Michael Zimmerman if you are thinking about selling or buying a home or condo in Hawaii.

This post is provided for informational purposes only and is not to be relied on for any reason.  If you have any questions regarding the location and effect of a shoreline boundary, please consult with a legal expert.

Property boundary questions often arise when selling or buying oceanfront property.  Julia Jones, Account Manager at First American Title, prepared two short papers explaining the basics of shoreline setbacks and shoreline property boundaries.  The first paragraph of the Shoreline Setbacks paper and a link to the complete paper is below.

Shoreline Setbacks
"The "shoreline" under Hawaii law means "the upper reaches of the wash of the waves, other than storm and seismic waves, at high tide during the season of the year in which the highest wash of the waves occurs, usually evidenced by the edge of vegetation growth, or the upper limit of debris left by the wash of the waves."  Haw. Rev. Stat. §205A-1.  Shoreline Certifications identifying where a shoreline boundary is located as of a certain date may be issued by the Chairperson of the State of Hawaii Department of Land and Natural Resources (DLNR), upon proper application.  DLNR Certifications are generally valid for no more than one year."

Read the complete Shoreline Setbacks paper in PDF format.

Contact Michael Zimmerman if you are thinking about selling or buying a home or condo in Hawaii.

This post is provided for informational purposes only and is not to be relied on for any reason.  If you have any questions regarding the location and effect of a shoreline boundary, please consult with a legal expert.

Many people routinely ask why they must pay for title insurance when buying or selling a home.  Julia Jones, Account Manager at First American Title was kind enough to provide a short paper explaining title insurance.  Below is the full text:

"Title insurance protects property owners from unforeseen claims against his or her legal ‘title’ to or ownership of the property.  Lenders generally require title insurance in order to assure that any loans secured by the property are sound.

Are you delaying a home or investment property purchase because you hope prices will drop?  You’re not alone.  As I wrote in a previous article titled Now is the Time to Invest in Oahu Real Estate, I know many people who sat on the sidelines since 2003, only to watch single family home and condo prices nearly double.  They’re still kicking themselves.

As our economy is weakened by the surge in oil prices that affect nearly every product sold, there is another facet of the property purchase we tend to overlook.  We’ve taken low interest rates for granted.  It’s easy to forget that mortgage rates were above 7% in 2002 and above 8% in 2000.  What if the Federal Reserve raises interest rates to fight the inflation being injected into the economy by rising oil prices?  Let’s compare mortgage payments at different interest rates.  The table below shows principal and interest payments on a $500,000 loan.  A 1% interest rate hike drives your monthly payment 11% higher.

Let’s look at this from another angle.  Let’s analyze the effect of interest rate hikes on your purchasing power.  The table below assumes you can afford a principal and interest payment of $3000.  A 1% interest rate rise reduces your purchasing power nearly 10%.

In conclusion, if you’re waiting for home or condo prices to drop, an interest rate increase could easily offset that price drop.  Ask yourself the following question.  What is more likely in the next year; mortgage interest rates rise by 1% to fight inflation or a 10% drop in home/condo prices?

If you’re getting ready to buy your first home or are selling and trading up, contact Michael Zimmerman for a no obligation consultation.