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Margaret Heidenry

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Spring is upon us, which typically involves a big peak of home buyers checking out properties, negotiating, and closing on new places. But the coronavirus outbreak—with its quarantine measures and economic uncertainties—has many a real estate shopper wondering: Should I buy a home now, or wait?

We’re here to help you navigate this confusing new normal with this series, “Home Buying in the Age of Coronavirus.”

This first installment aims to help you figure out whether you can—and should—shop for a home right now, or hold off until this crisis blows over. Read on for some honest answers that will help you decide what to do.

The impact of the coronavirus on the housing market

So what state is the housing market in right now, anyway? While that depends on how bad an outbreak an area is suffering, most markets are feeling some sort of hit.

“The coronavirus is leading to fewer home buyers searching in the marketplace, as well as some listings being delayed,” says Lawrence Yun, chief economist for the National Association of Realtors®.

The latest NAR Flash Survey: Economic Pulse, conducted on March 16 and 17, found that 48% of real estate agents have noticed a decrease in buyer interest attributable to the coronavirus outbreak.

However, nearly an equal number of members (45%) said that they believe lower-than-average mortgage rates are tempting buyers to shop around anyway, without any significant overall change in buyer behavior.

For those who are determined to buy a home, there is opportunity out there.

“This is the best buyer’s market I have ever seen in my career,” says Ryan Serhant of Nest Seekers and Bravo’s “Million Dollar Listing New York.”

“Sellers are nervous, there’s excess supply, and interest rates have been hovering at historic lows. You can own a home for less per month than you can rent an equivalent property in most areas,” he adds.

With fewer home buyers out there looking, you have less competition in your way.

“Unmotivated and uncommitted buyers have dropped off,” adds Maggie Wells, a real estate professional in Lexington, KY. “Less competition is a huge leg up in this market.”

The window of opportunity for buyers won’t stay open wide forever. NAR data shows that there was a housing shortage prior to the outbreak.

“The temporary softening of the real estate market will likely be followed by a strong rebound, once the quarantine is lifted,” says Yun.

This pent-up demand could eventually push home prices higher. That could mean that the time to strike for bargains is now.

Bottom line: If social distancing has made you realize you don’t love the place where you’re currently spending most of your time, it’s a good time to consider buying.

How the housing industry has adapted to keep buyers safe

Although it’s a scary time to be out and about checking out real estate, it is still possible to do so and stay relatively safe. The industry has rapidly adapted, introducing approaches that minimize exposure to the virus.

For instance, many agents are now working remotely and conducting most of their business virtually.

“Buyer and seller consultations have transitioned to virtual meetings with success,” says Kate Ziegler, a real estate agent with Arborview Realty in Boston.

While open houses or showings may not be easy to arrange because of quarantine or other safety issues, real estate listings have stepped up to the plate by offering virtual tours.

“We can send clients videos of whatever properties they want to see, or we are happy to have our agents FaceTime from a property,” says Leslie Turner of Maison Real Estate in Charleston, SC.

While those who are immunocompromised may want to stay home, if you’re otherwise healthy, it is also still possible to see some homes in person in some parts of the country. You’ll want to take some precautions before you go.

“Hand sanitizer at the door has become the norm, as well as shoe covers, even on sunny days,” says Ziegler.

During the tour, it’s also now customary for the listing agent to open all doors, so that home buyers can explore closets and other enclosed spaces without touching anything as they look.

If you do make an offer that’s accepted and you head to the closing table, real estate agents and attorneys are also adapting to remote closings, to keep you out of a crowded conference room. (We’ll provide more information about virtual tours and remote closings in later installments.)

How to weigh economic concerns

Coronavirus aside, anyone thinking about buying a home is also likely to be weighing whether it’s a smart idea when the economy is in a downward spiral. But in the same way you can’t easily time a stock purchase to make a profit, you can’t easily time a home purchase, either.

“Recession or not, it’s impossible to time the market, whether for buying stock or buying real estate,” says Roger Ma, a New York–based financial planner and owner of lifelaidout.

Just keep in mind that while current market conditions offer an incredible opportunity for home buyers to lock in historically low interest rates for a mortgage, rates are actually going up quickly, because so many people are refinancing.

If you wait too long to buy, you may miss the money-saving boat. So make sure to read up on the latest mortgage rates first.

Besides mortgage rates, home buyers are probably wondering about the stability of their income, as fear of layoffs loom.

“We are entering uncharted territory,” says Michael Zschunke, a real estate agent in Scottsdale, AZ.

On the flip side, putting a property under contract now and locking in a low interest rate gives a buyer some control at a time of relative uncertainty, adds Turner.

The takeaway from all this? It matters more than ever to get pre-approved for a mortgage, to calculate your home-buying budget accurately.

If you’re worried about layoffs, you should buy a home well under budget so you have enough money left over for closing costs, home maintenance, and a rainy day fund. Now is the time to crunch your numbers more carefully than ever before. Below is what you need to consider.

  • Research ways to reduce your closing costs. For instance, many loans allow sellers to contribute up to 6% of the sale price to the buyer as a closing-cost credit.
  • Figure out how much you need to set aside for yearly home maintenance and repairs. A smart budget is to have between 1% and 4% of the purchase price of your home.
  • Be sure to put aside an emergency nest egg for unexpected repairs. On average, it’s a good idea to sock away 1% to 3% of a home’s value in cash reserves.
  • In our next installment, we’ll explore all the ways to conduct a house hunt safely. Stay tuned! In the meantime, here’s more on buying a home during a recession.

Author: Margaret Heidenry

Source: Realtor: Should I Buy a House During the Coronavirus Crisis? An Essential Guide

Working from home has multiple perks, not the least of which is the short commute to your home office in your PJs. (Yes, it’s a cliché, and yes, it happens.)

But while you might be incredibly talented at designing websites, writing novels, or whatever it is you do during your 9-to-5 at home, nearly all of us have the potential to get tripped up during tax time. (Those who have found themselves atypically working from home because of the coronavirus pandemic, take notes for next year!)

Granted, working from home—either part time or full time—provides plenty of ways to save on taxes.

But within those opportunities lie pitfalls galore (especially now that the new Tax Cuts and Jobs Act is in full swing), and they could lead to an IRS audit. To help you stay in the clear when filing for the 2019 tax year, take note of these six tax mistakes people often make when they work from home.

1. Assuming you can deduct your home office

If you work from home for a larger corporation (if you receive a W-2, that’s you), you cannot deduct the costs associated with a home office. Sorry, telecommuters!

Self-employed individuals, however, can still take the deduction, provided they have a dedicated, work-only space (see below).

2. Neglecting to take all of your deductions

Some of the best perks of being self-employed and working from home are the many deductions you can take for various expenses. However, a few are commonly overlooked, says Josh Zimmelman, owner of Westwood Tax & Consulting in New York City.

For instance, many don’t realize that they can deduct the percentage of their internet, landline, and utilities that are used for work.

Those who work from home can also deduct transportation costs to outside meetings, dues for professional development, and regulatory fees or licenses paid to state or local governments. So if you use any of those, make sure to add them to the heap!

3. Taking too many suspicious deductions

On the other hand, some self-employed folks put themselves at risk of an audit by trying to write off bogus expenses, Zimmelman cautions.

“In order for an expense to be deductible, it must be ‘ordinary and necessary’ to run your business,” he says.

Just because you’re at home while you work doesn’t mean you can write off that fancy new espresso maker, for example; nor should you write off lunch with your spouse at that bistro down the street (unless you’re in business together, and it was a working lunch).

4. Taking an inappropriate rent deduction for your home office

Working from home doesn’t automatically mean you can deduct a portion of your rent (or monthly mortgage fees) for the square footage you devote to a home office.

There are two main criteria for legally using this deduction, says Jason Miller, tax manager at Nussbaum Yates Berg Klein & Wolpow in New York City.

  • Your home office must be exclusively a home office, not sometimes used for professional use and sometimes for personal use. That means your kitchen counter, guest room, or TV room with a computer doesn’t count. In IRS parlance, they are looking for “regular and exclusive” use, Miller says.
  • Your home office must be your principal place of business. If you work at home and have an office outside the home, remember that you are not allowed to take the home office deduction, he says.

5. Commingling personal and business spending

Too many work-from-home professionals miss out on deductions because their finances are in serious disarray, Zimmelman finds. An easy solution is to carefully track business spending by setting up separate checking, savings, and credit card accounts.

You also need to keep meticulous records of what equipment is used for business activities and what is personal. So, for example, if you have one cellphone for both professional and personal use, you can deduct a percentage of the expenses on your tax return, based on the percentage of use.

“You’ll need detailed call logs or other documentation to back that up,” he says.

6. Thinking credit card statements are sufficient to prove expenses

Do you blithely toss receipts because you consider your credit card statement to be adequate proof of your expenditures? You could be in trouble if you’re one of the unlucky people to get audited.

“The IRS will not accept credit card statements as backup, because they do not show itemized details of what was purchased,” says Miller.

For example, say you have a charge from an office supply store for $1,500 on your credit card. The IRS cannot determine whether the purchases were for legitimate office needs or whether you were buying computer components for your teen.

Plus, remember that in an audit, the burden of proof still remains on the taxpayer to prove or substantiate expenses. So, keep saving those receipts! Apps abound, so you don’t have to stuff them in a shoebox; there’s even one called Shoeboxed, which scans and saves them for future reference.

Author: Margaret Heidenry

Source: Realtor: 6 Disastrous Tax Mistakes People Make When They Work From Home

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