Best Deduction You've Never Heard Of

The fluffy Home section of the New York Times typically soft-focuses on design trends and pretentious homeowners. But in an unlikely twist, today’s Times delivers actual consumer information in the form of a story about the homestead exemption, a legal status that can provide you with tax deductions and other breaks just for living in your house.

Many homeowners don’t know about, thus don’t claim, the exemption. Typically, mortgage companies collect and escrow your property taxes. It’s not their job to inform you that you might be overpaying if you qualify for a deduction based on the exemption. Sometimes there are restrictions on who qualifies – most often, being a senior citizen.

Don’t get too excited quite yet. Some greedy folks exploit exemptions to sidestep high taxes on second homes…a big enough problem to create a business opportunity for legal database Lexis Nexis, which is about to introduce its Homestead Exemption Fraud Detection Solution.
This will cross-reference homeowners’ addresses to flag potentially fraudulent exemptions to revenue-starved municipal and state officials.

If you’re flagged, you could get hit with fees and fines, not to mention the cost of hiring a tax or real estate attorney or accountant to sort things out. This is a good moment to ascertain your status: do you qualify for the exemption? If so, what’s it worth to you? And what is your current status worth to officials?

Image from Morguefile user nastic.

Soon on the Menu: Real Estate a la Carte

The lurching drop in real estate sales – 25.5% down in July from 2009, according to the National Association of Realtors-- makes us wonder when the agents’ business model will break. Their clients aren’t the only ones under water. The 6% commission business model just can’t hold up.

In yesterday’s page one story about the freefall, the New York Times cited industry insiders making the by owner business case:

Those on the front lines of real estate describe an unusual standoff between buyers, who can afford to be fickle as rarely before, and sellers, who feel they cannot go lower. For many sellers, agents say, another 5 percent would mean taking a loss.

Let’s pause for a moment on that thought. Five percent makes the difference. Gee, that’s awfully close to the 6% commission that is the entitlement embedded in the agents’ current business model.

The raw truth is that a sinking market doesn’t provide enough business to justify the current brokerage infrastructure. We’re already seeing big agencies collapse.

They’ll have to evolve – fast – to survive.

Here’s what they need to do:

• Unbundle their services. Does a seller want help only with negotiation and closing? Offer those and other services in an ‘ a la carte’ menu.
• Lose the attitude about ‘by owner’ sellers. Even now, with buyers scarce, foolish agents shun ‘by owner’ listings – even when the by-owner seller offers a 1% or 2% commission. Get over yourselves!
• Advocate for the long-term value of housing, not just for the transaction. Nobody is fooled by your high-dollar lobbying. Masquerading as champions of homeownership when it’s all about the commission is totally transparent to the American public. Hit ‘restart’ on your advocacy and realign your message so Americans feel you’re about more than your check at closing.
  

Think they’ll listen?

Morguefile image by npclark2k.