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Settlement of a Federal Lawsuit Will Change How Real Estate Agents Are Paid

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click to enlarge James Buck Vicky Phillips is selling her Westford home without a Realtor.

Before she put her Westford home on the market, Vicky Phillips did some math. With the four-bedroom home priced at $808,000, Phillips estimated it would cost her about $48,000 in commissions for a real estate agent to handle the sale.

Phillips decided to keep that money and sell the home herself. In May, she posted it on Picket Fence Preview, a website featuring homes that are for sale by the owner. She also paid a real estate agent $499 to offer the house on the multiple listing service, a system that shows all the properties for sale through brokers.

“It isn’t complicated,” said Phillips, who owns a business and noted that she has signed much more detailed contracts than the one she’ll use in selling her home.

She’s shown her home five times, a process that usually takes her about two hours, including tidying up. If she contracted with a real estate agent to handle the sale, that person would expect the standard 2 or 3 percent commission, as much as $24,000. If a buyer’s agent were involved, as is often the case, that person would take another 2 or 3 percent of the sale price.

“Real estate agents are great, but what are you paying for?” Phillips asked.

Questions like Phillips’ have roiled the real estate profession for years, and recently a rebellion of home sellers succeeded. In March, the National Association of Realtors agreed to pay $418 million in damages to settle a 2019 federal lawsuit that accused the organization of violating antitrust laws by adopting rules that created an industry-wide standard commission.

The settlement specifies that the NAR must drop rules that require the agent for the home seller to offer payment to the agent for the buyer. Those rules have resulted in the standard 5 to 6 percent commission being incorporated into the price of most homes for sale. Under the settlement, it will be easier for buyers and sellers to negotiate commissions with their real estate agents.

The settlement made national headlines, with some analysts predicting that the price of buying a home would drop significantly as a result of the decline in commissions.

Smaller commissions would be good news for Vermont home sellers, but local experts say the soaring cost of buying a house is mainly the result of the spike in home values. The median price of a house sold in Chittenden County climbed by more than $100,000 between 2020 and last year, to $460,500. With the typical commission of 5 or 6 percent, someone selling that home would pay the agents involved as much as $27,000.

Many real estate agents insist the national settlement won’t change anything in Vermont. Local agents have always been up front with homebuyers and sellers about how much commissions would cost — and have always been open to negotiation, said Kathy Sweeten, CEO of the Vermont Association of Realtors.

“It’s not going to have a huge effect, because we already do this,” Sweeten said in an interview. That’s the position many of Vermont’s real estate agencies are taking, too.

“We’ve been doing business this way for many years now with our agency disclosures,” Four Seasons Sotheby’s International Realty CEO Laurie Mecier-Brochu said.

But home industry analysts say the settlement will likely free up consumers to bargain with agents for their services. The Consumer Federation of America, an advocate for nonprofit consumer groups, said that while negotiating has always been an option in theory, contracts are usually written by lawyers for local real estate associations. Under the existing system, many homebuyers are unaware they’re paying a commission of 2 or 3 percent to their agent, because it’s incorporated into the home seller’s fees and therefore into the price of the home.

Starting next month, buyers who hire an agent to show them homes will be asked to sign a contract spelling out what they will pay the agent if there is a sale, so the cost will not be hidden in the sale price of the home. The advocacy group said the settlement will create more freedom and transparency for agents and consumers.

Change won’t happen overnight.

“The residential real estate marketplace will take some time, perhaps several years, to fully process the implications of this settlement,” the Consumer Federation said in a statement after the NAR settlement was announced.

Not all agents are paid by commission. Some charge a flat fee — $3,500 is common — instead of a commission, using that transparency as a selling point. And there have always been homeowners such as Phillips who avoid commissions altogether by tackling home sales on their own.

Changes in technology are making that easier. Nowadays, websites such as Zillow and Redfin display the homes that are listed on the MLS, making them available online to anyone who knows how to look for them. When she was shopping for a house two decades ago, Phillips noted, the real estate agent would print off MLS listings and mail them to her, a cumbersome process that gave the agent control over which properties Phillips could consider.

Online listing services also help would-be home sellers see what similar properties are going for — and provide valuable information to buyers, such as how much the home sold for in the past.

“Before, you couldn’t really go on Zillow and find comparables and past histories and what the taxes were” for houses on the MLS, Phillips added.

Demand for homes is high in Vermont, making it a good time for sellers to try their hand at going it alone.

Before she put her Montpelier modular home on the market in May, Tammy Parish asked for advice on Front Porch Forum about selling without an agent. She got a flurry of responses from sellers who had done that — as well as several pleas from people who wanted to tour her home.

“My phone blew up. It was people giving me advice saying, ‘Yes, you can do it’ or ‘No, it’s more detailed than you think,'” said Parish, who added that she sold her home for $240,000 the following weekend to one of the people who had responded to her query.

Parish hired a lawyer to help with a contract, paying around $2,000, she said. A 5 percent commission would have set her back around $12,000.

“That’s a lot of money to give to someone else for putting pictures out there and marketing it,” she said.

Phillips said more than 25 agents have gotten in touch since she posted an ad for her Westford home on Front Porch Forum in May.

“They all want to represent me,” said Phillips, who thinks a lack of inventory and high interest rates may have created a very slow market for agents. She added that there are times when using an agent is essential. She’s looking for property in Asheville, N.C., where she’ll build her next home, and she said the agent alerted her that land prices were lower in a neighboring town because of a local paper mill.

“She said, ‘On the right day you don’t smell it, but on a bad day, not only do you smell it everywhere, the fumes are toxic,'” Phillips said. “Good advice.”

If more negotiations lead to lower commissions, as expected, some agents might leave the profession. The number of real estate agents licensed in Vermont jumped during the pandemic, reaching 3,072 last year — the most since the Secretary of State’s Office started keeping records in 2008. Right now, 2,843 people are licensed to sell real estate, according to the office.

click to enlarge James Buck Mikail Stein of RE/MAX North Professionals showing a house

It’s a tough way to make a living, according to Mikail Stein of RE/MAX North Professionals, who sells about 40 homes a year. Stein said his overhead is high and his hours are long. Income is unpredictable.

“Only in the last two years of my career have I had a winter where I wasn’t freaking out about where things were financially,” Stein said. “And hourly-wise, most people do way better than me.”

Stein thinks career professionals such as him will stay in the business, and if commissions drop, part-time, new or unskilled agents will be most likely to leave.

“I hope what it ends up doing is providing the public with better service,” he said of the NAR settlement. “For those of us who do bring high service, the compensation will be just. And for those who don’t, the market will say, ‘You’re not providing enough.'”

A Game-Changing Federal Case

The lawsuit
A group of Missourians who had used real estate agents to sell their homes filed a 2019 class-action lawsuit against the 1.5 million member National Association of Realtors and several multistate real estate brokerages. The suit alleged that the defendants had conspired to inflate real estate commissions paid by the homeowners.

The details
The lawsuit took aim at the NAR’s “cooperative compensation” rule, which requires the home seller’s agent to offer compensation to the agent for the buyer in order to add the home to a multiple listing service. The suit charged that the NAR, by controlling almost all the multiple listing services in the U.S., was wielding monopoly power to keep commissions artificially high.

The verdict
A federal jury in Missouri ruled for the homeowners in October 2023, awarding them $1.8 billion in damages. The NAR said it would appeal.

The settlement
Instead, in March, the NAR settled the case for $418 million in damages and an agreement to change some of its practices.

What will change?
Sellers’ agents won’t set the commission earned by the buyer’s agent. Instead, homebuyers will negotiate directly with those agents for their services. The changes are due to take effect in August.

What’s next?
In Vermont, analysts say it is too soon to predict what, if any, impact the settlement will have in the state. Prices are high, driven by a critical shortage of inventory and high demand.

“If I had to guess, I would say Realtors will become less powerful, and maybe there will be more fee-for-service” real estate transactions, said Jeff Lubell, a Norwich resident who works as a principal associate in housing policy for Abt Global, a consulting firm in Rockville, Md. “We’ll see different patterns in different places.”

An unintended consequence?
Some real estate companies and analysts say the settlement will hurt low-income homebuyers. Those buyers may not be able to afford to pay an out-of-pocket commission to their agent. Previously that commission was incorporated into the price of the home, and thus into the mortgage paid over time.



This article was originally published by a www.sevendaysvt.com . Read the Original article here. .

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Realtor Fees And Real Estate Commissions in California | Bankrate

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Traditionally, when a homeowner hired a real estate agent to handle the sale of their property, they agreed to pay that agent, as well as their eventual buyer’s agent, a commission. This fee typically amounted to between 5 and 6 percent of the home’s selling price, split more or less evenly between each agent.

Due to a recent lawsuit settlement, sellers may no longer be on the hook for buyer’s agent fees. But if you use a real estate agent, he or she will have to be paid somehow. How does that look for California home sellers? Let’s take a look at Realtor fees in the Golden State.

How much are real estate commissions in California?

In California, the current total real estate commission averages 5.11 percent, according to the latest data from Clever Real Estate. This clocks in lower than the national average of 5.49 percent.

That might be because the California housing market is so expensive: The median price of an existing single-family home in the state was about $908,000, in May 2024, per the California Association of Realtors (CAR). For a home sale of this amount, 5.11 percent equates to $46,400 total, or $23,200 per agent.

Chalk it up to the high cost of living in the Golden State. Here’s what the Realtor fees would be in a few major cities across the state, assuming a home’s median sale price per May CAR data and an even split of a 5.11 percent commission:

City
Median price
Total agent commission
Individual agent commission

SOURCES: California Association of Realtors May 2024; *San Jose median price from Redfin May 2024 

Los Angeles
$811,610
$41,473
$20,736

San Francisco
$1,690,000
$86,359
$43,179

San Jose*
$1,500,000
$76,650
$38,325

Fresno
$425,000
$21,717
$10,858

Sacramento
$555,000
$28,360
$14,180

What’s included in a real estate agent’s commission?

Whether they’re representing the buyer or the seller, most agents do a lot to earn their fee.

“For the seller’s agent, the commission generally includes services like listing and marketing the property, hosting open houses, negotiating with buyers and assisting the seller through the closing process,” says Scott Beloian, broker/owner of Westcoe Realtors in Riverside, California. Listing agents also often prepare a comparative market analysis to determine a competitive price and help the seller review and compare offers.

“For the buyer’s agent,” Beloian says, “the commission covers tasks such as finding suitable properties, setting up property viewings, advising on the [bidding] strategy and guiding the buyer through negotiations and closing.”

Who pays agent commissions in California?

Across the country, including in California, it used to be that commissions for both agents in the transaction were paid by the seller. “This arrangement [meant] that, while buyers [did] not directly pay the commission, the cost [was] typically factored into the home’s final sale price, affecting both parties indirectly,” says Beloian.

Again, however, changes to the way Realtor fees are paid are coming this summer. Under the new rules, sellers may — or may not, depending on the details of their deal — be responsible for paying their own agent directly.

Are California real estate agents worth it?

Although no one is required to use a real estate agent to either buy or sell a home, there can be considerable advantages to doing so. Agents are licensed professionals who are experts in their local markets. Their job is literally to help you meet your real estate goal, whether that’s earning top dollar on your sale or finding you the right new home at the right price.

Selling a home without a listing agent — known as a for sale by owner transaction, or FSBO for short — means you take on all the responsibilities typically managed by an agent yourself. With California’s high home prices, a mistake in negotiations or missed detail on the contract can really cost you.

That said, $23,200 apiece in commissions is a lot to tack onto an already pricey transaction. And there can be disadvantages to using an agent, aside from that cost, as well. For example, if the two of you don’t mesh well in your schedule or communication styles, working together can be a rough road. And most agents juggle multiple clients at once, which means you might not always be their top priority.  But generally speaking, the pros of having an agent on your side should outweigh the cons.

Saving on commission fees

There are ways to save money on fees if the commission is a hurdle you just can’t get past:

Negotiate the rate: Real estate commissions are often negotiable, and many agents might be willing to lower their rate if you ask. On a high-priced home, even a small rate reduction can make a big difference.

Choose a discount agent: Think about hiring a low-commission real estate agent — companies like Redfin and Clever often charge closer to 1 or 1.5 percent of your home’s sale price, rather than the traditional 2.5 or 3 percent. You might also explore agents who operate on a flat-fee basis, earning a predetermined amount rather than a percentage of the sale price.

Sell by owner: When you sell without a listing agent, you don’t have to pay a listing agent’s commission. But you do have to do all the work yourself, and you still might have to pay your buyer’s agent.

Sell to a cash homebuyer: There are many companies in California that buy houses for cash, closing quickly with no hassle and no Realtors or fees. However, this method will yield a lower sale price compared to a traditional market sale.

Find a trusted California real estate agent

If you’re ready to sell and eager to maximize your profits in the pricey California market, your next step is to find a local real estate agent to team up with. Do your homework first: Start by asking for referrals from family and friends. Look for agents with a thorough knowledge of your specific area and expertise in selling properties similar to yours.

Interview multiple agents and ask targeted questions to help you make an informed choice. The better you click with someone, the smoother your journey is likely to be.



This article was originally published by a www.bankrate.com . Read the Original article here. .

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How Do Real Estate Agents Get Paid? What to Know About Commissions After the NAR Settlement

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NAR settlement 2024: New real-estate commission rules

While both buyers and sellers typically use real-estate agents, traditionally, only sellers have paid directly. The commission is then split between the listing agent and the agent representing the buyer.

Critics have said for years that this structure limits competition, lacks transparency and artificially inflates both commissions and home prices. In October 2023, a jury ordered NAR and a number of well-known real estate brokerages to pay $1.8 billion in damages in a Missouri–based lawsuit arguing as much.

While NAR initially indicated it would appeal the verdict, in March the trade group opted to settle the case instead. The plaintiffs agreed to release NAR from the jury verdict in exchange for $418 million in damages and a host of new commission-related rules that are expected to go into effect in August (pending judge approval).

Those rule changes include:

Mentions of buyer-agent compensation will now be prohibited in listings on Multiple Listing Services, the regional databases agents use to list and market properties.  All commission splits will need to be negotiated separately, giving sellers more power over what—if any—compensation they’ll offer to buyer agents.Buyers and agents will need to sign a contract, detailing the fees and compensation they’ll owe, before even touring a property. This may open the door to more negotiation for buyers and new pricing models—like sliding-scale commissions or an a la carte approach, where buyers pay per service.

It’s not yet clear how these rules will play out on the ground, but they could lead to a major shift in how real-estate agents get paid and who uses an agent. Experts also predict that average commissions could eventually fall by as much as 30%.

How much are current real-estate commissions?

Real-estate agents are paid a commission based on the sale price, and for now, buyers and sellers pay an average of 5.45% the transaction amount, according to research by real-estate brokerage Clever. However, the typical commission varies by location, ranging from 4.90% in Washington, D.C. to 6.07% in Missouri.

Here’s a look at average real estate commission by state:

“Commissions can and do vary widely,” says Adie Kriegstein, an agent with Compass Real Estate in New York. “Location is a huge factor, as markets often vary city to city and state to state. On top of location are just the market conditions: Is it a buyer’s market, seller’s market or simply one that is transitional? The type of property also changes commission rates.”

In the luxury market, for example, commission percentages can often be lower. This is because higher-end properties come with higher price tags, leaving agents more room to negotiate and still get a decent payday.

The exact commission percentage is typically negotiated upfront and will be detailed in the listing contract with a seller. So, for example, if the agreed-upon commission was 5% and they sold a home for $500,000, the agent’s real-estate brokerage would get a $25,000 commission check once the transaction was complete.

It sounds like a lot of money, but that check is rarely a single agent’s to keep. They often have to split that payment with one, two or even three other parties(more on this later). The settlement is meant to end parts of this practice, but it is not yet clear how much agents will be able to charge for their services, though the change is likely to be more dramatic on the buyer end of the equation.

How is the commission divided between agents?

Making things even more complex, unless the same agent is representing both the buyer and the seller, the selling agent gives a portion of the commission to the buyer’s agent—generally in a 50-50 split. With a $25,000 commission, that would mean the listing agent would get $12,500 and the buyer’s agent $12,500.

Beyond that, there are further splits. Often, the agents will also have to share their commission with their broker—the leader of the brokerage firm they work for. These splits vary based on the company, but it often starts at 60-40 (with 60% for the agent and 40% for the broker) and goes up to 80-20 for more experienced agents.

If the agents in that same $25,000 commission scenario had 60-40 splits with their brokers, that’d mean the listing agent and selling agent would take home just $7,500 each.

“Buyers and sellers can be wary of the 5% commission rate, but their individual agent typically ends up only seeing 1.5% on each deal,” says Christa Kenin, an agent and attorney with real-estate firm Douglas Elliman in Connecticut.

To be clear: Not all real-estate brokerages operate this way (just most). National discount brokerage Redfin, for example, pays its agents a salary. Realty ONE Group, which has over 400 franchise offices, lets its agents keep their full commissions, though agents do pay fees to the company.

Can sellers negotiate real estate commissions?

With inflation and mortgage rates high, a 4% to 6% commission might seem pretty pricey—regardless of whose pocket it goes into. Fortunately, “all commissions are negotiable,” says Joe Rath, head of industry relations for real-estate brokerage Redfin.

If you’re a seller looking to negotiate a lower commission with an agent you’re considering, it is important to do so up front. Ask your agent to detail what their proposed commission entails—what services and value they’ll provide in exchange for their fee. You can then agree to remove or reduce certain services in exchange for a lower cut.

“Commissions can vary depending upon the level of service that an agent provides, such as marketing, social media, etc.,” says Bryson Taggart, an agent with Opendoor in Arizona. “If a client wants drone photography, videos and a 3-D printing of their home, that commission may come at a higher price than if they simply want it listed on the MLS.”

You may be able to ask for a lower commission depending on market conditions, too. If it’s a seller’s market and homes are selling at inflated prices and record speeds, you may have more room to negotiate than when buyers are harder to come by and selling a home takes more work.

“Consider the conditions of your current market,” Kriegstein says. “If it’s a hot market with little supply and a lot of demand, you can likely leverage your commission. However, if the market is a buyer’s market you may not want to do that, as other properties could be offering more enticing commissions.”

Can buyers negotiate?

Buyers may be able to negotiate fees with their agents, too, though for now, opportunities for this are rare since sellers typically pay the full commission. Once the new rules from NAR’s settlement go into effect, buyers should have much more negotiating power.

Until then, you might be more able to negotiate if your agent is also the listing agent on the home you’re buying or if you’re buying a For Sale By Owner, or FSBO, property. Some brokerages offer buyer’s commission rebates, typically in the form of closing credits, though the practice is banned in eight states.

Other options

Negotiating isn’t your only option. You can also look to alternative agents and brokerages for reduced fees, too. Discount brokerages such as Redfin and Clever charge just a 1.5% listing fee (versus the usual 2% to 3%), plus the buyer’s agent fee. Other brokerages, such as Homie and ListingSpark, operate on a flat-fee basis.

You also have the option to go agent-free altogether. According to the National Association of Realtors, about 10% of all home sales are FSBOs.

Just keep in mind: If you go this route, you’ll need to handle all aspects of the sale yourself. As Kuba Jewgieniew, CEO of Realty ONE Group, explains, “Realtors work incredibly hard, with the bulk of that work done behind the scenes—negotiating, researching, marketing, writing up contracts and more.”



This article was originally published by a www.wsj.com . Read the Original article here. .

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A Guide to All the Real Estate Reality Shows on Netflix

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The allure of the real estate reality show is two-fold: showcasing luxury real estate in the world’s most desirable locations for an aspirational viewing experience and encouraging audiences to shamelessly indulge in their inner voyeur. There’s no denying the pleasure of seeing the interiors of the homes of the rich and famous, or, in what may be a more compelling draw for many viewers, granting access to the private dramas and personal conflicts of those on the show. In recent years, realty as reality show fodder has boomed, especially on Netflix, where shows like Selling Sunset and Buying Beverly Hills pair luxury real estate offerings with captivating reality TV personalities. Netflix’s latest entry, Owning Manhattan, out June 28, is real estate reality at its finest—glittering escapism with just enough personal drama to temper the opulence.

Here is a guide to the best real estate reality shows to stream on Netflix.

Buying Beverly Hills

At the center of Buying Beverly Hills is Mauricio Umansky, a familiar face to many reality television fans. That’s because Umansky has been a fixture on Bravo’s The Real Housewives of Beverly Hills since 2010, which stars his now estranged wife Kyle Richards. Buying Beverly Hills switches the spotlight over to Umansky and his lucrative real estate firm The Agency, which employs some of Umansky and Richards’ daughters as well as other young realtors hoping to make it big. The show’s got it all: tours of glitzy multi-million dollar homes, realtors clashing over deals, and, of course, casual accusations of nepotism as everyone at the office discusses who could possibly be next in line to take over the family business.—Annabel Gutterman

Marriage or Mortgage

Reality shows about the wedding industrial complex have long been a staple of the genre, but with Marriage or Mortgage, the fantasy of wedding planning is tempered by a bracing perspective about the economic realities of our time. The premise of the show is seemingly simple: couples meet with hosts Nichole Holmes, a real estate agent, and Sarah Miller, a wedding planner, to debate whether they’d like to spend their hard-earned savings on a house or a wedding. But the show cogently taps into the emotions of economics—how we spend our money and why. While it’s easy to reason that a down payment on a house is a better investment than spending tens of thousands of dollars on a wedding, for many of the couples on the show, having a blowout party to celebrate their nuptials holds far more value than owning a home (six out of the 10 couples featured in the series opted for the wedding). Adding to the emotional weight of the show is the knowledge that much of the show was filmed pre-2020, so many of the couples who chose “marriage,” were forced to postpone or downsize their weddings. Ultimately, Marriage or Mortgage is a portrait what our finances can tell us about ourselves.—Cady Lang

Selling Sunset

With seven seasons under its crystal-encrusted Gucci belt, Selling Sunset is the grand dame of Netflix real estate soaps. Starring a highly telegenic subset of female agents at twin moguls Jason and Brett Oppenheim’s exclusive Los Angeles brokerage, the Oppenheim Group, the series quickly found a following among viewers who like their drama with a side of mansion porn, rather than the other way around. In its early heyday, the central conflict pitted reigning mean girl Christine Quinn—a clotheshorse of truly demented personal style—against wide-eyed newcomer Chrishell Stause, an All My Children and Days of Our Lives alum with Disney princess sparkle and a martyr complex. The show stagnated as Quinn alienated even new co-workers who seemed to have been cast solely to give her allies, and kept declining after her departure at the end of Season 5. Yet, whether you credit it to terminal bachelor Jason’s chaotic love life or the inexplicably moving bond between his loyal ex turned deputy Mary Fitzgerald and her much-younger, French husband Romain Bonnet or simply the cast’s preternatural ability to escalate a perceived slight into a full-on feud, Selling Sunset remains perplexingly addictive. Which is, of course, how you can tell it’s a reality-TV classic.—Judy Berman

Selling Tampa

Though the properties featured on Selling Tampa are ostentatious enough to steal the show, they’re easily forgotten in the midst of the high-octane drama that fuels Allure Realty, a Black woman-owned and operated firm that aims to take over the luxury real estate market in Tampa. Led by Sharelle Rosado, the “tough love” girl boss head broker of the firm, the agents at Allure, ranging from a pair of fun-loving best friends to a seasoned agent whose ambitions point to her striking out on her own in the future, never have a dull moment between their professional rivalries and the complex personal lives. Though the ladies of Selling Tampa were undeniably compelling as both real estate agents and reality TV characters, the show was prematurely canceled after its first season, a true loss for real estate reality fans everywhere.—CL

Selling the OC

What better way to capitalize off the success of Selling Sunset than by launching a spinoff series—and opening another Oppenheim Group brokerage—just 40 miles south? Selling the OC is the Trumpier younger sibling of the Netflix hit that could double as an anthropological study of Newport Beach and its billionaire residents. In this iteration of the show, the veneers are whiter, the tans are faker, and the McMansions are even more supersized; plus, Jason says bye-bye to Brett and serves as the sole Oppenheim brother on set. The agents (three of whom are named Alex) at this coed firm are all animatronic Instagram filters come to life, which only makes the inter-office dating and drama all the more fascinating.—Meg Zukin

The Parisian Agency

Many of Netflix’s realty reality shows bring the drama, but their real estate offerings—often plain white boxes and identical modern farmhouses—leave much to be desired. But The Parisian Agency: Exclusive Properties is for the architecture and interior design nerds.

The show focuses on the Kretz family as they try to find the right million-dollar properties for France’s rich and (sometimes) famous. You’ll tour a 19th century suburban mansion, a villa in St. Tropez, and countless apartments with classical details like Haussmann facades, ornate fireplaces, and French balconies. If you want even more charm, stay for the antics of the family’s grandmother, Majo.—Samantha Cooney

Owning Manhattan

In the vein of Selling Sunset and Selling the OC, Owning Manhattan, the latest addition to the large swath of real estate reality shows, is centered around a real estate agency—SERHANT in New York City. The agency is helmed by Ryan Serhant, who boasts about being the No. 6 spot on The Real Deal’s list of Top Residential Brokerages for 2022. He’s no stranger to the camera, gaining a reputation during his time on Million Dollar Listing New York. Owning Manhattan takes viewers through jaw-dropping apartments with high price tags around New York City and provides plenty of petty drama. In particular, Serhant, who is dedicated to integrating social media into the business practice of publicizing listings and turning his agents into internet personalities, brings an alluring charisma as he shares what it’s like to sell multi-million dollar dwellings while managing multiple egos.—Moises Mendez II

Buying London

Buying London is centered around the company DDRE Global, owner Daniel Daggers, and its agents. The company prides itself on its connection to celebrities and according to House Beautiful, Daggers has worked with members of the Royal family, in addition to “high-profile people in sports, entertainment, and finance.” While the show may not bring the highest level of drama, in comparison to other Netflix real estate reality shows, it does provide a window into the housing market of a notoriously expensive city.—MM



This article was originally published by a time.com . Read the Original article here. .

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How to Find a Real Estate Agent

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What does a real-estate agent do?

Real-estate agents wear many hats. Depending on the party they are representing—buyer or seller—and the state they’re operating in, an agent may negotiate, advise on pricing, draw up contracts, coordinate showings or all of the above.

The most valuable thing they have to offer, though? That’d be “knowledge,” says Philip Hordijk, founder of real-estate brokerage Leven Real Estate. “Knowledge of the market trends, knowledge of the active inventory, knowledge of the process and knowledge of getting a deal done.”

Nearly 9 out of every 10 buyers and sellers use a real-estate agent’s help, according to the National Association of Realtors. Here’s what you can expect an agent to do for you if hired.

What agents do for home buyers

For home buyers, agents play the role of guide. They help clients through every step of the process—first, zeroing in on suitable neighborhoods and properties and touring those homes. They also draw up offers, including negotiating a fair price and any contract contingencies, and they might attend the mortgage closing, too.

According to Kimberly Jay, a real-estate broker with Compass in New York, buyer’s agents can also help filter out properties that aren’t a good fit so buyers make efficient use of their time.

“When I work with my clients, I’m not trying to show them as many properties as possible, I’m trying to show them as little as possible, because time is something you can’t get back,” Jay says.

Real-estate agents can also provide valuable referrals throughout the home buying process—for home inspectors, attorneys, mortgage lenders, title companies, contractors for renovations and more. And in markets where condos and co-ops are common, agents are critical. These properties often require board approval, so buyers must submit applications and sometimes be interviewed before their offer is approved.

Jeremy Kamm, for example, is an agent in New York City. A big part of his job, he says, is researching the rules and regulations of properties his clients are interested in. Co-op purchases are particularly complicated because co-op boards have the power to deny an application and squash a deal.

“The board packages can be extremely tedious and time-consuming,” Kamm says. “We virtually hold their hands throughout the entire process.”

What agents do for home sellers

Seller’s agents—often called listing agents—are more focused on the property. They may stage the home, photograph it, market it and list it publicly. Most important, they price the home.

“An accurately priced, well-prepared listing will sell for more money than a home that is overpriced and then reduces its price,” says Jesse Sheldon, a real-estate broker with Re/Max NW in Seattle.

Listing agents also negotiate with interested buyers and their agents and coordinate showings to accommodate the seller’s schedule. They can also help sellers better spot good offers—buyers who are most likely to get approved for a mortgage or pass the co-op board’s approval, for instance.

What agents do for renters

Real-estate agents don’t just help with purchasing property; they can also assist with rentals, matching renters with apartments or helping landlords fill vacancies. In some cases, agents may be able to connect tenants with off-market properties through their professional network, and they can help ensure the renter meets a unit’s requirements, too.

“Showing the renter an off-market listing is great,” Hordijk says. “But making sure they actually get the apartment they want is key.”

How to find a real-estate agent

Experience varies widely from one agent to the next. In fact, according to the National Association of Realtors, 25% of agents have two-or-fewer years experience, while 39% have 16-or-more years under their belts. Those with two years or less experience do an average of just three transactions a year. But agents with 16 or more? They do 14 deals annually.

While an experienced agent doesn’t necessarily mean you’ll get a better deal or sell your place for more, it does mean your agent has logged more time handling the ins and outs of real-estate transactions—negotiating contracts, vetting offers and pricing properties, for example—all things that can impact your bottom line and how quickly your deal gets done.

Agents’ credentials also differ. Some have extra education in luxury marketing, relocations or real-estate investing, for example.

Do you want to make sure you’re choosing the right agent for your deal? Here’s how experts recommend going about the process:

Ask friends, family and your employer

Referrals are the gold standard in the real-estate world. As Christian Ross, associate broker at Engel & Völkers puts it, “The best way to find a real-estate agent is through friends and family that have had exceptional experiences they rave about.”

If you’re moving somewhere totally new, reach out to your employer. The human resources department may have agents they can point you to. Exxon Mobil, for example, offers employees relocation and home buying assistance through its partner Cartus. If your company doesn’t offer something similar, you can also ask a colleague who they used when moving to the area.

A note of caution: Think hard before choosing a friend or family member to help with a real estate transaction. Ask yourself, suggests Desiree Avila, a real-estate agent with Charles Rutenberg Realty Fort Lauderdale: “Do I want to work with the best, or do I want to help cousin Johnny?”

“Unless that friend or family member is a real estate professional that is an all-in, seasoned agent with experience, that person may not be the right professional for the job,” says Avila. An agent “that doesn’t have the experience can be more of a liability than an asset.”

Check your local Realtor association

Most large cities have their own Realtor associations. In Houston, for example, there’s the Houston Association of Realtors, or HAR. The group’s site has an agent search tool you can use to find professionals that serve the ZIP Codes you’re shopping in. You can also filter for multilingual agents or agents with specific designations and specializations.

If you’re not sure what your local Realtor group is, NAR has a full list of state and local associations.

Search online directories—with care

There are plenty of third-party real estate sites that offer agent directories, too, including Realtor.com and Zillow. (News Corp, owner of The Wall Street Journal, operates Realtor.com under license from the National Association of Realtors.)

While these can be a good way to find candidates, it is also important to note that agents often pay for placement in these directories. This means that the agent who shows up first in your search may not be the best-suited one for you—just one who paid.

“There is nothing wrong with an agent investing in their business,” Ross says. “But you want to make sure you’re searching for an agent that matches the parameters you’re looking for.”

If you find an agent on a third-party site, check their license (and any disciplinary actions) with your state real estate board, and look for additional reviews. Yelp and your local real estate association can be good resources.

Ask your last agent for a referral

If you’re moving to a new metro or state, it might be impossible to use the last real-estate agent you worked with. Reach out anyway, and ask for a referral. If they work for a large firm, there is a good chance they know agents in other parts of the country, too.

Just be aware: They may get a referral fee or commission share from the other agent for these services if a deal gets done.

Interview several candidates

Even with a referral from a trusted source, you should interview a few agents before choosing. As Bret Weinstein, president of Guide Real Estate in Denver, notes, “Just because your friend had a great experience with someone, doesn’t mean that you will.”

You’ll probably work with your agent for quite a while, so it is critical to make sure you feel comfortable with them and that they understand your needs. Most listing contracts last at least 90 days, while finding a a property to buy can take many months.

“You speak with your agent a minimum of a few times a week, and it may even be every day,” Jay says. “Besides pricing and getting a home show-ready, you have to think about if you want to have a relationship with this person.”

To make sure you find the right fit, agents say to ask these questions when interviewing candidates.

Questions to ask a buyer’s agent

Buyers will want to get an idea of an agent’s experience in the local market and how available they’ll be throughout the home search.

Buyers should ask:

How long have you been working in this market?How many clients do you currently have?Is this your full-time job?What is your approach to finding properties?How do you handle multiple-offer situations?Can you help me navigate the mortgage process?How will we communicate? (Text, email, phone, etc.)Who can I contact if you are on vacation or unavailable for some reason?

Once you think you’ve found the right person, ask for at least three references.

Questions to ask a listing agent

When you’re looking for someone to list your home, you’ll want to focus on how they plan to market and price the property.

Sellers should ask:

What would your marketing strategy for my home look like?How would you price my property and why?How many homes have you sold in this area this year?Will you be hosting an open house?What’s your commission rate?

You can also ask for their sale-to-list-price ratio, which reflects the price their listings sell for compared with the asking price. Anything below 100% means their homes sell for less than what they price them at. In 2022, NAR data shows 65% of homes sold at or above list price. Another 1 in 5 sold for 95% to 99% of their list price. (Keep in mind, this can include homes that sold after a cut in listing price.)

Questions to ask yourself

Before you can choose an agent, you need to know what you want from one. Are you looking for someone who can sell your house fast? A person with tons of local experience? Someone who will market your property on social media, with virtual tours or in other creative ways? Make a list of what you want before you go into interviews.

Pay attention to the rapport you have with each candidate, and do a vibe check. “Does the agent listen to you?” Hordijk asks. “Does the agent ask you the right questions? Does the agent have time to help you or is he or she too busy?”

Types of real-estate agents

The term “real-estate agent” typically refers to someone who holds a real estate license in the state they are operating in, so the exact qualifications vary by state. In Texas, for example, you need at least 180 classroom hours with an approved education provider and to pass a state licensing exam.

With continuing education, agents can specialize in niches—such as luxury or commercial real estate—or even open their own brokerage and oversee other agents.

Realtor vs. real-estate agent

A real-estate agent and a Realtor are essentially the same thing, though the latter is one who has joined the National Association of Realtors, a trade organization for agents that represents 1.5 million agents.

NAR membership grants real-estate agents access to Multiple Listing Services—local databases used to list and share properties. Realtors also must take a course on NAR’s code of ethics—and agree to adhere to it—before becoming members. The code includes rules such as not misleading clients, safeguarding confidential information and disclosing any dual agency (when an agent represents both the buyer and the seller in one transaction).

Real-estate broker vs. agent

There is also a differentiation between a real-estate agent and a real-estate broker. Again, both professionals can help you buy and sell real estate, but brokers are higher ranking. A broker typically owns a real-estate firm and oversees other agents. Brokers also usually get a cut of commissions from agents they oversee.

The process for becoming a broker varies by state, but most need at least three years of experience, must meet additional education requirements and take a broker licensing exam. Once licensed, they can manage other agents or open their own brokerage.

Licensed brokers who don’t run their own firms are usually called associate brokers. They can continue to work under the main broker of the real-estate firm they work with.

How real-estate agents get paid

Real-estate agents are paid on commission in most cases. When a home sells, the listing agent typically gets around 6% of the total sale price. They then split that commission with the buyer’s agent and their supervising broker.

Agents who work with renters can be paid a flat referral fee or, in areas with lots of rental volume, one month’s rent or a percentage of the total annual rent. The model and rate depends on the market.



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Real estate: What’s the success rate of selling your own home without an agent

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Q: I am the personal representative of my dad’s estate that is going through probate. I have a question about the seller’s disclosure statement. I lived in the house when I was a kid/teenager. I moved out when I turned 18, 40-plus years ago. I have never been on the title to the property. Do I still need to fill out a seller’s disclosure statement because I lived in the house?

A: Normally when a property is to be transferred (sold) because of an order by a probate court in the administration of an estate; the seller/executor/personal representative is exempt from filling out a seller’s disclosure statement except when they have lived in the property, as an adult, even if they had no ownership in it. As per the Michigan Association of Realtors legal counsel, an adult who has no ownership in the property and only lived in the home as a child/teenager or college student is exempt from filling out a seller’s disclosure statement. As always, consult an attorney when dealing with legal matters, especially an estate.

Q: We are going to be selling our home this year. My son-in-law says we should try selling it ourselves. I’m not comfortable doing that. Are there any statistics that show what the success rate is with for sale by owners?

A: That’s a good question. FSBOs (for sale by owner) sales accounted for 7% of home sales in 2023. The typical FSBO home sold for $310,000 compared to $405,000 for agent-assisted home sales, according to the National Association of Realtors. This sales price differential between for sale by owner and agent-assisted home sales has been going on for years. Sure, you can go in thinking that you will be saving a 5% to 6% negotiable commission, but on the other end, you are losing over 23% in sales price.

Market update

March’s market update for Macomb County and Oakland County’s housing market (house and condo sales) is as follows: In Macomb County, the average sales price was up by more than 6% and Oakland County’s average sales price was up by more than 5%. Macomb County’s on-market inventory was down by more than 30% and Oakland County’s on-market inventory was down by more than 28%. Macomb County’s average days on market was 33 days and Oakland County’s average days on market was 34 days. Closed sales in Macomb County were down by almost 26% and closed sales in Oakland County were down by almost 15%. The closed sales continue to be down as a direct result of the continued low inventory. Demand still remains high. (All comparisons are month to month, year to year.)

By the long-standing historical definition from the National Association of Realtors, which has been in existence since 1908, a buyer’s market is when there is a seven-month supply or more of inventory on the market. A balanced market between buyers and sellers is when there is a six-month supply of inventory. A seller’s market is when there is a five-month or less supply of inventory. Inventory has continued to stay low. In March, the state of Michigan inventory was at 1.6 months of supply. Both Macomb and Oakland county’s inventories were at 1.2 months. As you can see, by definition, it is not a buyer’s market.

Steve Meyers is a real estate agent/Realtor at RE/MAX First in Shelby Twp. and is a member of the RE/MAX Hall of Fame. He can be contacted with questions at 586-997-5480 or Steve@MeyersRealtor.com You also can visit his website: AnswersToRealEstateQuestions.com.



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‘Selling The OC’s Ali Harper: Why is someone without a real estate license on this show?

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Selling The OC Season 3 is one of the most perplexing seasons of reality TV I’ve ever witnessed for so many reasons. I have no idea, for instance, why Alex Hall lied about trash talking a colleague on a podcast instead of simply owning it. I have no clue why the show is trying to sell us on Hall and Tyler Stanaland’s romance when we already know they had a falling out. And I don’t know why — after two seasons of minimal screen time — Sean Palmieri loudly emerged from obscurity to claim his male coworkers are in love with him and/or tried to initiate a threesome. None of those sagas make much sense to me. But, hey! At least they involve real estate agents. The one thing I can’t wrap my head around in Selling The OC Season 3 is what the heck Ali Harper, a newly aspiring real estate agent without a real estate license, is doing on this real estate show.

From a business standpoint, numerous aspects of The Oppenheim Group’s Netflix shows are downright mortifying. Personal and professional boundaries are consistently crossed. Problematic behavior — from flirting to fights — runs rampant in the offices. And while Selling The OC’s agents successfully craft compelling reality TV, they’ve also created an extremely toxic work environment — one which edits suggest O Group boss Jason Oppenheim barely regulates. Perpetual drama and tarnished reputations aren’t a great look for business, but in the background of all the heated back and forths, it’s clear the O Group’s employees are experienced in real estate, working to sell houses, and making themselves and the company some serious cash. Everyone except Harper, because, again…she’s not a real estate agent yet!

As Decider noted in a previous piece, Harper made it to the real estate/reality TV big leagues by essentially flying to Orange County from her home in Nashville, walking into an O Group open house, and chatting up the show’s stars. That’s what Selling The OC wants us to think, at least. We have no idea how or why the former Miss Tennessee USA was actually cast on the show, but star Polly Brindle vouched for her and Jason took a chance on her, so here she is in all her inexperienced glory. 

Photo: Netflix

In Season 2 we saw Harper shadow agents, start learning the real estate ropes, and assure Jason that she loved people and houses, so she’d be perfect for the career. She was so committed to proving herself that she even bet Senior Realtor Associate Gio Helou she would sell a house within two months of getting her license. If she did, he agreed to strut through the office in a bikini as a nod to her pageant days. Harper set herself up as a potential real estate wunderkind, but when Season 3 rolled around, she reminded viewers that though she may have the personality, clothes, and fight required to fit in on the show, she sorely lacks the realtor skills and smarts that should be a prerequisite for joining any agency, especially one as esteemed as The Oppenheim Group.

In Harper’s Season 3 intro, she says she packed up her whole life in Nashville to move to Orange County and “will do anything it takes to make it here,” even calling her new career path in real estate “the ultimate goal” and saying “failure is not an option.” Later in the season she reveals she completed the 135 hours of real estate coursework required to become an agent in the state of California and can apply to take the exam, which sounds promising. But from asking “What exactly is a broker’s preview?” and bombing an “easy” pop quiz from Jason to causing an unprofessional scene at one open house and showing up unprepared to another, it doesn’t feel like Harper is “doing anything it takes” to make it in OC real estate. (As of Selling The OC‘s April 24 press day, Harper had yet to take the exam because she was waiting on her application to be accepted.)

The Orange County newbie wasn’t out of line for being frustrated by Alex Hall’s podcast lies, but she shouldn’t have publicly confronted her in the middle of a professional open house, causing a petulant scene that reflected poorly on The O Group. Harper’s time at the agency should have been cut short after Polly got an email from a fellow professional complaining about her behavior. (After all, cast members repeatedly spout some version of “There are no second chances in this town. People talk.”) Instead, Jason gave her the ultimate second chance by letting her run an open house for Gio — despite Alex Hall saying, “I would never have an unlicensed agent. I would rather not hold the open house,” and Gio adding, “[Agents] can jeopardize someone who is interested with some inexperience.”

Jason argued the opportunity would be a valuable experience for Harper; that the way to learn is to just dive right in. “I certainly never sat at a 13 million listing my first year,” he added. (The reason for that, I assume, is because it’s something to be earned rather than handed?) Anyway, all the Southern Charm in the world couldn’t help Harper answer the endless stream of questions at that broker’s open. Perhaps the edit did her dirty, but from the looks of the episode she had the general bed, bath, and square footage numbers down, and not much else. A once-in-a-lifetime opportunity like that required some Rory Gilmore-level cramming and preparation. Instead, a flustered Harper told prospective buyers that Gio let “the only girl in the office without a real estate license” run his open house, reminding us the mess wasn’t solely her fault. Jason, WYD?!

Photo: Netflix

When Jason sat Harper down post-open house, he grilled her about how long the average escrow is and what types of inspectors she’d suggest to potential buyers. She couldn’t answer. “These are things you need to know already. Those were easy questions and I feel like you had plenty of time to get moving on your real estate license,” he said, asking if she actually has a passion for real estate and is serious about the career. When Harper replied “absolutely,” he stressed, “Your business card has your name and my name on it…You have a very coveted desk here, so pass your test and start producing.” Again, I ask, why does she have a business card?!

Selling Sunset has welcomed its share of new cast members in the past — from current O Group realtor associates Bre Tiesi and Chelsea Lazkani to Season 7 surprise Cassandra Dawn — and despite their differences, they all had one crucial thing in common: real estate licenses.

I’m all for an underdog story, and if Harper is truly passionate about real estate then I encourage her to keep following her dreams, but couldn’t Jason have found someone with a real estate license to take a chance on?! As far as Selling The OC‘s cast goes, Harper is one of the most down-to-earth personalities and strikes a refreshing balance in the office. As a person, she seems fine! It’s the perplexing privilege of her going from zero experience to a top agency in the luxury real estate game that prevents me from fully embracing her.

If Selling The OC gets renewed for a Season 4, perhaps Harper will study her butt off, pass her real estate exam on the first try, and start successfully selling houses for the O Group, proving she’s deserving of a coveted desk. Until she brushes up on the real estate basics, however, I don’t think Gio has to worry about strutting his stuff in a bikini anytime soon.

Selling The OC Season 3 is now streaming on Netflix.





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Real estate data reveals the best time to sell your home in 2024

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FOX Business’ Gerri Willis breaks down speculation that the best time for homeowners to sell their homes might be sooner than expected.

If you’re a homeowner waiting on the sidelines for the perfect time to sell your home, this week could be your time to shine.

Despite mortgage rates inching closer to 7%, a recent research from Realtor.com indicated the week of April 14-20 might be the ideal week for potential sellers to list, as spring historically brings with it higher buyer demand and a market with low inventory, setting the stage for bigger bids.

Some homeowners have been on the sidelines for two years, waiting for mortgage rates to fall, additional survey data from the site showed.

However, while 50% say they’re willing to hold out longer in hopes of rate drops, nearly 30% say they need to sell soon for “personal reasons,” including profits, need for more space, or plans to rent, to name a few.

SELLING YOUR HOUSE? HERE’S THE BEST TIME TO DO IT

The best time to sell your home might be the week of April 14-20, according to Realtor.com data. (REUTERS/Jeff Haynes  / Reuters Photos)

Survey data also showed that sellers are adjusting their expectations to meet the current market, with 8 in 10 settling in on the expectation that the mortgage for a newer home will be higher than their current home. 

“With the market cooling in many areas, 12% expect a bidding war to take place (vs 27% in 2023), and only 15% expect to get more than their asking price (vs 31% last year),” the report continued.

The separate analysis from last month pointed to the April 14-20 listing timeframe by taking into account the number of buyers, listing prices and seasonal trends, to determine the period for the most favorable for home selling conditions.

TIME TO SELL YOUR HOME? HERE ARE 3 QUESTIONS TO ASK YOURSELF

50% of sellers still on the sidelines say they will wait out rates while 29% say they need to sell soon. (FOX Business / Getty Images)

“We’ve got the most favorable balance of all of these factors for sellers. It suggests they will be able to sell quickly at a good price and be happy with the outcome,” said Realtor.com chief economist Danielle Hale.

The report indicated that this week offers a higher-than-average number of buyers along with a lower-than-average time on the market and higher-than-average prices, coming in at 1.1% higher than the average for other weeks throughout the year.

REALTOR DESCRIBES THE SHIFT THAT’S DRIVING REAL ESTATE ‘ACROSS THE BOARD’ IN TOP MARKETS

Realtor.com analysis indicates that homes historically reached higher prices during the week of April 14. (Photo by STEFANI REYNOLDS/AFP via Getty Images / Getty Images)

FOX Business’ Gerri Willis, speaking on “Varney & Co.,” on Monday said “sellers are getting more realistic,” noting that they have to “embrace” current rates.

Rates for 30-year mortgages averaged 6.88% last week, according to Freddie Mac’s latest survey. 

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Fox Business real estate contributor Katrina Campins discusses a settlement that may cause homes to receive lower offers on ‘The Bottom Line.’



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How real estate commission changes could make buying and selling a home cheaper

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Debra Kamin:

You’re absolutely right, that, for first-time homebuyers, it is often very difficult to scrape together just the money you need to be able to get that down payment to buy that first home, especially now, when the housing market is so tight and so expensive.

And in the past, one thing that homebuyers did not have to worry about was paying their real estate agents. So, as this settlement has its effects, one of the things we might see is that homebuyers now feel, oh, gosh, I also have to pay my real estate agent on top of everything.

But, most likely, what’s also going to happen is we’re going to see new models for compensation evolve out of this that didn’t exist before, where the way that we pay real estate agents, particularly on the buy side, might be completely different. It could be a flat fee. It could be by the hour. There’s all sorts of ways to pay agents that never existed before because there wasn’t a competition in the market that allowed those new methods to be introduced.



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Capital Gains Tax On Real Estate And Selling Your Home | Bankrate

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Key takeaways

Capital gains tax is a levy imposed by the IRS on the profits made from selling an investment or asset, including real estate.

Primary residences have different capital gains guidelines than rental and investment properties do.

It’s possible to lower the capital gains tax you owe by taking advantage of available deductions, exemptions and exclusions.

Naturally, you want to make a nice profit on your home when you sell it. But beware a bite in your earnings when tax day rolls around: the capital gains tax. If your home has substantially increased in value, you could be liable for a substantial sum when you pay your annual income tax.

Fortunately, there are ways to avoid or reduce the capital gains tax on a home sale to keep as much profit in your pocket as possible. Here’s everything you need to know.

What is the capital gains tax on real estate?

Key terms

Capital gains tax
A levy imposed by the IRS on profits made from the sale of an asset, such as stocks or real estate — that profit is considered taxable income.

Long-term capital gains
A tax on assets held for more than one year.

Property value
The amount a buyer is likely to pay for a real estate asset (i.e., property).

Broadly speaking, capital gains tax is the tax owed on the profit (aka, the capital gain) you make when you sell an investment or asset. It is calculated by subtracting the asset’s original cost or purchase price (the “tax basis”), plus any expenses incurred, from the final sale price.

Special rates apply for long-term capital gains on assets owned for over a year. The long-term capital gains tax rates are 15 percent, 20 percent and 28 percent (for certain special asset types, like small business stock collectibles), depending on your income.

Real estate, including residential real estate, counts as a taxable asset. Therefore, any financial gains from a home sale must be reported to the IRS: You calculate and pay any money due when filing your tax return for the year you sold the property.

While its rates are typically lower than ordinary income tax rates, the capital gains tax can still add up, especially on profits for big-ticket items like a home — the largest single asset many people will ever own. The capital gains tax on real estate directly ties into your property’s value and any increases in its value. If your home substantially appreciated after you bought it, and you realized that appreciation when you sold it, you could have a sizable, taxable gain.

How much is capital gains tax on a primary residence?

Calculating capital gains tax in real estate can be complex. The tax rate depends on several factors:

Your income tax bracket
Your marital status
How long you’ve owned the house
Whether the house was your primary residence, a secondary residence or an investment property

Star Alt

Keep in mind: The tax is only assessed on the profit itself. If you purchased a house five years ago for $250,000 and sold it today for $500,000, your profit would be $250,000. (Though there are deductions you could take that would effectively reduce your net profit.) You would need to report the home sale and potentially pay a capital gains tax on the $250,000 profit.

For the 2023 tax year, you are not subject to capital gains taxes if your taxable income is $44,625 or less ($89,250 if married and filing jointly). If it’s between $44,626 and $492,300 as a single filer, or between $89,251 and $553,850 if married and filing jointly, you would pay 15 percent on the $250,000 profit. Above those top amounts, the capital gains rate would be 20 percent.

However, the IRS gives home sellers multiple ways to avoid or reduce their capital gains taxes, principally if their property is a primary residence. You can exempt a certain amount of the profit — up to $250,000 or $500,000, depending on your filing status — from the tax if you meet certain conditions.

An ill-timed sale could result in a significant tax bill that could have otherwise been avoided.
— Greg McBride, Bankrate Chief Financial Analyst

“Before selling your home, familiarize yourself with the capital gains tax exclusion rules and consult a tax advisor,” says Greg McBride, Bankrate’s chief financial analyst. “An ill-timed sale could result in a significant tax bill that could have otherwise been avoided. If the property has been your primary residence for less than 24 months, for example, you may decide to hold off until you’ve reached that threshold to avoid capital gains tax.”

If you sell a house or property in one year or less after owning it, the short-term capital gains is taxed as ordinary income, which could be as high as 37 percent. Long-term capital gains for properties you owned for over a year are taxed at 0 percent, 15 percent or 20 percent depending on your income tax bracket.

How much is capital gains tax on a rental property?

A rental property doesn’t have the same exclusions as a primary residence when it comes to capital gains taxes. You would have to pay a 25 percent depreciation recapture tax on the portion of your profit from previously claimed depreciation and 0, 15 or 20 percent in long-term capital gains taxes, depending on your income and filing status on the balance.

Suppose the property you bought for $250,000 and sold for $500,000 was a rental. If your profit included depreciation you claimed as a business expense, the IRS would levy a 25 percent depreciation recapture tax on that amount. Your profit balance would be taxed at a 0, 15 or 20 percent capital gains rate, depending on your income.

If you plan to sell a rental property you’ve owned for less than a year, try to stretch ownership out to at least 12 months, or your profit will be taxed as ordinary income. The IRS doesn’t have a ceiling for short-term capital gains taxes, and you may be hit with up to 37 percent tax.

How to avoid capital gains tax on a home sale

Capital gains taxes can greatly affect your bottom line. Fortunately, there are ways to reduce or avoid capital gains taxes on a home sale altogether. It depends on the property type and your filing status. The IRS offers a few scenarios to avoid capital gains taxes when selling your house.

Bankrate insight

When does capital gains tax not apply? If you have lived in a home as your primary residence for two out of the five years preceding the home’s sale, the IRS lets you exempt $250,000 in profit, or $500,000 if married and filing jointly, from capital gains taxes. The two years do not necessarily need to be consecutive. If you become disabled, receive a job offer in a new area or are forced to sell your home before you have lived there two years, you may qualify for an exception to the two-out-of-five rule.

Avoiding capital gains tax on your primary residence

You can sell your primary residence and avoid paying capital gains taxes on the first $250,000 of your profits if your tax-filing status is single, and up to $500,000 if married and filing jointly. The exemption is only available once every two years. But it can, in effect, render the capital gains tax moot.

Let’s say a single filer bought a home for $250,000, lived in it for three years, and then sold it for $400,000. Their profit is $150,000. But that’s exempt from any capital gains tax because it’s under the $250,000 threshold allowed for gains.

Of course, there are conditions. To qualify as your primary residence, the IRS requires that you prove the property was your main home where you lived most of the time. You’ll need to show that you owned the home for at least two years and lived in the property as your primary residence for at least two of the five years immediately preceding the sale.

However, there is wiggle room in how the rules are interpreted. You don’t have to show you lived in the home the entire time you owned it or even consecutively for two years. You could, for example, purchase the house, live in it for 12 months, rent it out for a few years and then move in to establish primary residency for another 12 months. As long as you lived in the property as your primary residence for 24 months within the five years before the home’s sale, you can qualify for the capital gains tax exemption. And if you’re married and filing jointly, only one spouse needs to meet this requirement.

Avoiding capital gains tax on a rental or additional property

If you own an additional property that you plan to sell, you will need to plan to lower your tax liability. There are several ways to mitigate any capital gains tax:

Establish the rental as primary residence

You might find that an investment property you rent out and plan to sell has spiked in value. Moving into the rental for at least two years to convert it into a primary residence to avoid capital gains may be a good idea. However, you won’t be able to exclude the portion you depreciated while renting the property. You’ll lose primary residency status on your main home, too, but that can be regained later by moving back in after the sale of the rental property. If you don’t plan to sell the main home for at least two years, you can re-establish primary residency and qualify for the capital gains exclusion later.

1031 exchange

You can also take advantage of a 1031 exchange. Known as a like-kind exchange, it only works if you sell the investment property and use the proceeds to buy another similar property. If you keep putting the sale proceeds into another investment property, you can put off capital gains tax indefinitely.

Opportunity zones

The 2017 Tax Cuts and Jobs Act created opportunity zones — areas around the country identified as economically disadvantaged. If you choose to invest in a designated low-income community, you’ll get a step up in tax basis (your original cost) after the first five years. And any gains after 10 years will be tax-free.

Deduct expenses

If you still have capital gains after taking advantage of exemptions and exclusions, focus on lowering the amount of the taxable profit or gains. Some qualifying deductions include:

The cost of repairs to a home or investment property
Improvements and upgrades, such as adding a bedroom or renovating a kitchen

Losses in investment property income due to tenants unable to pay rent
Cost of legal, professional and advertising fees to evict a tenant or find a new one

Closing costs from the property sale

Remember to keep organized records and documents, including receipts, bills, invoices and credit card statements, to support your expense claims in case you’re audited.

FAQs

How much is capital gains tax on real estate?


The capital gains tax rate on the sale of a primary residence can be as high as 20 percent of the profit on a home owned for more than a year, and as high as 37 percent on one owned for a year or less. If you own and live in the home for two out of the five years before the sale, you will likely be exempt from any capital gains taxes up to $250,000 in profit, or $500,000 if married and filing jointly.

Is there a way to avoid capital gains tax on the selling of a house?


You will avoid capital gains tax if your profit on the sale is less than $250,000 (for single filers) or $500,000 (if you’re married and filing jointly), provided it has been your primary residence for at least two of the past five years. For investment properties, capital gains taxes can be deferred with a Section 1031 like-kind exchange, in which you use the profit from the sale of one investment property to buy another of equal or greater value.



This article was originally published by a www.bankrate.com . Read the Original article here. .

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