Buying a Tallahassee home is the biggest investment many people ever make. And it can be the wisest, due partly to a number of tax advantages the government has instituted to encourage home ownership. These benefits can help reduce the cost of buying and owning a home and also leave you with more money when it’s time to sell.

Because tax rules vary based on income and other factors, you should consult an accountant or financial advisor for advice on your particular tax situation.

Mortgage interest

One of the biggest incentives to owning a home is that the interest you pay on your mortgage is tax-deductible, up to a limit of $1 million. This deduction, like most other tax breaks for homeowners, applies to any kind of home. That includes a second home, as long as you spend a certain amount of time there: either 14 days each year, or 10 percent as much time as it’s rented.

In addition, you can deduct the interest on up to $100,000 of other debt that uses your home as security — for example, a home equity loan. However, the amount you can deduct may be limited if the money you borrow raises your debt above the home’s actual market value. This can sometimes happen when a lender extends you a loan based on more than the value of the house.

You can also deduct any amount you pay for points to reduce the interest rate of your mortgage or other loan linked to your home. In most cases, the points on a mortgage to buy or build your principal home can be deducted fully in the first year. However, if you refinance, take a home equity loan, or a loan secured by a second home, the points must be deducted over the life of the new loan. The exception is if you use part of a refinanced mortgage to improve your house; that portion of the points can be deducted in the same year.

Tax-free profits

Another major advantage of home ownership is that, in most cases, you don’t have to pay taxes on any profit you make when you sell your home. The law allows you to exclude from taxes up to $250,000 in profit from the sale of your principal home — $500,000 for a couple who file jointly. This exclusion also covers the sale of a parcel of land adjacent to your house, unless it’s used for business.

There are some stipulations, however. The home must be your principal residence, and you (and your spouse, where applicable) must have lived there for at least two of the previous five years. You can only claim the exemption once every two years. If you don’t meet those requirements, you may still claim a partial exemption if the sale was due to a change in your place of employment, necessary for health reasons, or due to other unforeseen circumstances.

Property taxes

You can claim property taxes you pay as an income tax deduction. This applies to both your principal home and any others you may own. Any money held in escrow to pay future taxes, however, is not deductible.

Moving expenses

The government allows you to write off many of your moving costs when you buy a new home if it’s at least 50 miles closer to your job than your old home. To qualify, you must continue to work full-time in the general area of your job for 39 weeks during the following year. If you’re self-employed and work in your home, any move of 50 miles or more will make your moving expenses deductible. However, you must also work full-time near the new location for 78 weeks during the next 24 months.

Of course, because tax rules vary based on income and other factors, be sure to consult an accountant or financial advisor about your particular situation.

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he manner in which you acquire title has a bearing on legal ownership and on transfer in the event of death. Some types of title carry tax consequences. You should talk with a lawyer to find out your state laws and how holding title will affect you. Some states restrict the way parties may hold title, so all of these choices may not be available to you.

Sole and Separate.

If the home is in the name of one party and the other is not on title, the unnamed party may lose a voice in the say and control of the property, and possess no right to share future profits. Married couples who want to own real estate separately in some states must record a quitclaim deed from one spouse to the other.

Sometimes only one party of the two or more purchasers can qualify for the mortgage. It that event, it is common to add the omitted individual(s) by recording a quitclaim deed after closing. However, always seek legal advice because the loan may contain an alienation clause.

Joint Tenants with Right of Survivorship.

Each person owns an equal share and if one party dies, title transfers to the survivor, regardless of what a will may specify.

Joint tenancy requires four unities:

* Time. Each owner must receive title at the same time.

* Title. Each owner must receive title on the same deed or document evidencing title.

* Interest. Each owner receives the same proportionate and equal share of ownership.

* Possession. Each owner has the identical right of possession.

If one of the joint tenants sells or conveys the interest created in a joint tenancy to another person, the joint tenancy is broken, and a tenancy in common is created. Joint tenants cannot stop another tenant from breaking the joint tenancy.

Tenancy in Common.

Tenants in common share possession equally but may own equal or unequal shares of the home. If one party dies, unless the surviving party is named in the will, the decedent’s interest passes to heirs.

Tenants in common share one unity. The right of possession. All tenants in common have the right to occupy the property, and neither party can exclude the other.

Community Property.

In CA, for example, only married individuals may hold title as community property. Upon death, half ownership transfers to the decedent’s heirs.

In community property states, if a married person acquires title sole and separate, it is still possible for the omitted spouse to acquire a community interest in the property, even though that name is not on title. This event is typically caused by co-mingling funds.

Community Property With Right of Survivorship.

If one person dies, title transfers to the survivor, but during ownership, both signatures are required to encumber or sell the home.

This type of title does not allow either party to pass respective ownership to an heir.

Trust.

Some people establish trusts and transfer title to the trust to reduce taxes on the estate in the event of death. An estate planning attorney can set up a trust that is recognized by the I.R.S.

This type of trust should not be confused with an Offshore Foreign Trust, which unscrupulous financial planners peddle as a way to avoid paying taxes to the I.R.S.

Corporation or Partnership.

The legal entity owns the property, not the individual owners, and can result in tax consequences that may not be as favorable as some imagine. For example, corporations can be subject to double taxation (taxing the corporation and again taxing the shareholders). An S corporation avoids double taxation and is exempt from certain federal taxes. Always seek tax advice before forming a corporation or partnership.

Limited partnerships are managed by the general partner(s). The limited partners are not responsible for the debts of the partnership; typically the most a limited partner could lose is the limited partner’s investment.

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Tallahassee home buyers typically sign buyer broker agreements with their real estate brokers / agents before writing a purchase agreement. The buyer broker agreements spell out precisely who represents the buyer. It’s also known as buyer representation. There are a huge variety of buyer broker agreements used throughout the United States. For simplicity, I will review the three most common types of agreements used in California, with most weight given to Exclusive Right to Represent because it’s the preferred form.

The following information is a general overview. It is not a legal interpretation of Tallahassee Buyer Broker Agreements. I cannot give legal advice. If you desire legal advice, please consult a real estate lawyer.

Tallahassee Buyer Broker Agreement (Non-Exclusive / Not for Compensation)

This agreement outlines the broker’s / agent’s duties and obligations to the buyer, agency relationships, broker scope of duty and buyer obligations; it does not provide for compensation.

* Buyer may hire more than one broker / agent to locate property

* Buyer is not obligated to compensate the broker / agent

* Buyer has the right to demand single agency

Buyer Broker Agreement – Non-Exclusive, Right to Represent

The non-exclusive agreement outlines the broker’s / agent’s duties and obligations to the buyer, agency relationships, broker scope of duty and buyer obligations; however, it does provide for compensation. It also removes the buyer’s responsibility to pay a commission if the broker / agent is paid by another party such as the seller.

* Buyer may purchase a property through another broker / agent, as long as the property is not a home introduced by the first broker

* Buyer has the right to demand single agency

* The broker / agent can receive a higher commission than the negotiable fee stated in the agreement if the seller elects to pay more and it is disclosed

Tallahassee Buyer Broker Agreement – Exclusive Right to Represent

This is the form that I use with my buyers. It is similar in scope to the non-exclusive form except for one major distinction: the buyer has agreed to work exclusively with the broker / agent.

* The Tallahassee buyer cannot hire more than one broker / agent to represent her

* The commission is negotiable

* Buyer has the right to demand single agency

* The buyer is not responsible for the commission if another party (such as the seller) pays it

* The broker / agent can receive a higher commission than the negotiable fee stated in the agreement if the seller elects to pay more and it is disclosed

While non-exclusive agreement terms may run for a month or two, exclusive agreement terms are typically anywhere from three months to one year. If the buyer elects to subsequently purchase any property introduced to her by the agent, she will owe the agency a commission. Exclusive representation gives the broker / agent the ability to negotiate with unrepresented sellers (such as for sale by owners) on the buyer’s behalf. In these instances, the commission is often added to the sale price and then paid by the buyer to the broker as part of the financing. If the buyer is able to purchase the property at a substantial discount through the power of the broker’s / agent’s negotiating ability, the broker / agent will have more than earned her fee. Exclusive representation means the broker / agent is employed by the buyer and will work diligently on the buyer’s behalf.

Termination

Ask the Tallahassee broker / agent if she will release you from the contract if you find that the relationship is not a good fit for you or vice versa. While agents are not bound to release you, if they won’t agree to this upfront, don’t sign the agreement with them. Professionals give personal guarantees that the customer will be satisfied. If an agent can’t give you that guarantee, the agent does not deserve your business.

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Just like buyers who get cold feet, sellers can also feel remorse, have second thoughts. Seller’s remorse often happens because the seller was not really motivated in the first place. Sometimes sellers think they want to sell, but they don’t really have good reasons to sell.

What is Seller’s Remorse?

Sometimes sellers want to “test” the market, to see how much a buyer will offer, to figure out if a home is priced right. That is a wasted effort and pointless.

Real estate agents spend money to advertise and market. Agents receive no return on that investment and earn no money when sellers are not serious about selling.

Seller’s remorse means the seller has decided it was a mistake to list a home for sale and no longer has a desire to sell. A seller of a Victorian fourplex in Sacramento decided to put his home on the market because he felt the market was declining. He thought if he waited a few more years, the value would fall so low that he would lose his opportunity to make a reasonable profit.

After his Realtor brought him an offer, he panicked. He came to the conclusion at midnight that he could not part with his home of 16 years at any price. Suddenly, the reality of the situation hit him. It was all fun and games when buyers came through to tour. But when the time came to sign on the dotted line, the seller froze. It’s a common reaction when a seller is not truly motivated.

How to Prevent Seller’s Remorse

Owners can prevent seller’s remorse by thinking through the entire process and having a plan — a relocation goal — including strong reasons for selling.

* A real estate agent can help a seller plan for the future and walk the seller through options. Discuss wants and needs with your agent.

* Draw up a Ben Franklin list, sorted by benefits and drawbacks to selling. If the benefits outweigh the drawbacks, then you should sell. If the drawbacks exceed the benefits, don’t put your home on the market.

* If a seller is worried about not being able to find a suitable replacement home, the seller can sell on a contingent contract. Contingent contracts give the seller a period of time to locate another home without an obligation to sell to the buyer if that home is not found.

How a Seller Can Cancel a Listing

* A listing agreement is a binding contract between the seller and real estate broker.

* Exclusive right-to-sell listings are the most common and entitle the broker to a commission if a ready, willing and able buyer makes a full-price purchase offer.

* Sellers who get cold feet can cancel the listing but may end up owing the broker a commission if the broker performed.

* Do not sign a six-month listing agreement if the agent will not agree to cancel the agreement at your request. Ask about the length of the listing and if you can shorten the term.

* Many real estate agents enjoy a good reputation in the community and would be willing to cancel a listing, but you should ask about it before you sign a listing.

* Before you fire your agent, talk to the agent, the agent’s broker and your real estate lawyer.

What Happens if a Seller Gets Cold Feet at Closing?

* Although there have been a few court cases that have ruled against the seller, generally the court will not make a seller sell.

* However, buyers often retain the right to pursue damages and sue the seller.

* Moreover, the brokers will have likely earned a commission and be entitled to demand that payment.