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Thursday, January 29, 2015

Need tax help - Go with a Pro - Get Gerry Hoffman

It’s that time of the year when people think about taxes. Those are thoughts that stir fear and trepidation in many. The tax laws just keep getting more and more complex and there are more and more of them to be concerned about. All of this complexity increases the chances that you’ll do something wrong and end up with an IRS audit. That’s the big reason to seek help with your taxes. Once you’ve admitted that you’d like help, get the best - go with the pro - Gerry Hoffman of Hoffman’s Tax and Accounting.

I know of no one better to help you with your taxes and, if needed, to represent you at an IRS audit than Gerry Hoffman. Gerry holds a Master of Science in Taxation Degree and is certified to represent taxpayers before the IRS. If you spend any time just talking to Gerry about taxes you’ll come away with a couple of thoughts – this guy is passionate about his work and he knows what he’s doing. This is no “pay me $200 and I’ll fill in your tax forms” guy. Gerry studies the tax laws and takes over 40 hours a year of continuing education in order to keep up with all of the tax law changes. He knows where all of the legal tax breaks are and he knows where the lines are that you shouldn’t cross. He won’t let you wander across those lines and get into trouble.

This tax year in particular it is critical to understand the tax implications of the Affordable Health Care Act (aka. ObamaCare). Gerry knows what you can and cannot deduct based upon your situation and the choices that you made. Let’s face it, most of us don’t have a clue. If you bought or sold real estate during 2014 it is also critical to have someone who understands the tax codes help you with what is deductible and what isn't.

If you listen to a few of Gerry’s stories about going to IRS audits with clients you’ll quickly conclude that you’d want him there with you if you ever got called. Going into an audit situation like that without someone like Gerry is like going to trial on a potentially serious charge without a lawyer – don’t do it. I particularly like the stories he tells about sitting at the IRS  Audit table with his foot on top of his client’s foot, so that he can remind the client when to keep quiet by gently (sometime not so gently) stepping down. Also his advice, about staying quiet when the auditor leaves the room and until you get all of the way out of the building, makes perfect sense – there is always a chance that they are listening in on any conversations. Gerry makes sure that he doesn't have to confer with his clients on a phone while that sit behind glass in the next room.

Gerry’s a pleasant enough fellow that you might enjoy meeting him at a social gathering and talking about other things; however, he really comes alive when the subject turns to taxes and his passion for that topic shows through. I don’t know about you, but I’d much rather have a guy who is excited and committed to his profession than some part-time tax preparer trying to make a few extra bucks during tax season, especially after he's worked all day at his regular job . That guy will likely be back at his full-time job, if you get called in for an audit. Gerry will be there, ready to make sure that you don’t make any mistakes during the audit and to defend any and all entries that he made on your return (because he won't make any that can get you in trouble).

So, if yo want honest and knowledgeable tax help this season give Gerry a call at 248-553-2226 and get professional help this tax season.

Friday, January 23, 2015

2015 Economic Outlook: Economy Drags Housing Upward

A Press release today from Fannie Mae is encouraging for the housing market in 2015 –
WASHINGTON, DCDriven by strengthening private domestic demand, economic growth is expected to accelerate modestly this year and drag last year’s unspectacular housing activity upward, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group. Amid continued low gasoline prices, firming labor market conditions, rising household net worth, improving consumer and business confidence, and reduced fiscal headwinds, the economy is expected to climb to 3.1 percent in 2015, up from the Group’s estimate of 2.7 percent in the prior forecast. The stronger economic backdrop should lead to improving income prospects, underpinning a higher rate of household formation in 2015.

"Our theme for the year, Economy Drags Housing Upward, implies that both housing and the economy will pick up some speed in 2015, but that the economy will grow at a faster pace," said Fannie Mae Chief Economist Doug Duncan.  “We believe this will motivate the Federal Reserve to begin measures to normalize monetary policy in the third quarter of this year, continuing at a cautiously steady pace into 2016 and 2017, likely keeping interest rates relatively low for some time."
Duncan went on to say, "Given historically low mortgage rates and a gradual easing of lending standards, our forecast calls for a 5.8 percent increase in total home sales for the year. Most of that is likely to come from growth in existing home sales, but we expect the rising share of new home sales to lead to a healthy increase in single-family construction of about 19 percent, or 765,000 units. Although we don’t view this as signaling a breakout year for housing, we do expect to see broad-based improvement in 2015 following a disappointing and uneven year for the housing recovery in 2014."

So, what does all of that mean for us in Southeastern Michigan? Well, we have started to see local headlines about our unemployment rate being the lowest in over 10 years; so I guess we are already a part of the national economic trend. Our housing market, at least in my little 8–Township patch has lagged seriously behind and has had a very low inventory of homes for sale for quite some time. Hopefully that will pick up some soon. It is actually very frustrating for people who want to move into this area right now – they can’t find a house.

or would-be sellers this is not carte blanche to jack up the price and try to gouge the buyers; but, it is a great time to sell for a good price more quickly that you might if you wait. Many people take their homes off the market for the winter, which is a mistake. Winter buyers are serious buyers, who aren’t out just kicking tires; they need a house. People wishing to sell should take advantage of that and the low inventory and list now. If you wait until warm weather you just be lumped in with a big crowd of homes coming on the market. Maybe you welcome competition in sports or business or elsewhere in life; real estate is not a place where competition is good (at least not for the sellers – buyers love it). 

So the bottom line here is to get on the market if you’ve been holding off until things got better. They just did! You’ve put your life on hold long enough waiting for the market to improve. Well it did, so don’t wait to be dragged kicking and screaming into the market. You’ll just be left behind kicking and screaming; or maybe just crying. 

Thursday, January 22, 2015

This old house is not a Little Rascals episode…

I got a call the other day from an agent with some questions about looking for and buying historic homes. We had a nice long conversation about her buyers’ desires to buy and fix up a historic home. Apparently they watch and lot of HGTV and the Rehab Addict show starring Nicole Curtis and think that they’d like to do something similar. I will admit that I like Nicole’s show and watch it often, along with the Property Brothers show and a couple of the other “reality” shows on HGTV. I referred the agent to my web site and an article that I did several years ago that is posted there about historic homes – see - which might help them get started on understand the challenges better.

When I hear questions or stories like this I always remember episodes of the old Hal Roach show – The Little Rascals (also known as Our Gang) in which someone’s aunt would desperately need
money to avoid being thrown out of her house. The Gang would jump to the rescue by raising money. One of the characters, usually Spankey,  would say something like – “You get a stage and I’ll get a band together and we’ll put on a show.” Off they would scurry, rounding up the gang and putting together a show, for which they charged an admission from other children in the neighborhood. Sure enough there would be a stage of sorts, usually in a big barn, and a ragtag band. There would be several acts and Alfalfa would end up closing the show by singing a song to a great round of applause. They would take the money raised to the desperate aunt and she would get to stay I the house, usually much to the chagrin of the mean old banker who was try to repossess her house.

For many couples, especially young, idealistic couples, buying and fixing up an old house can seem to be similar – they say, “You get a ladder and I’ll get some paint and we’ll fix up this house.” Nothing could be further from the reality that they will discover as they tackle the project. There was a movie titled “The Money Pit” that comes closer to the truth; although that does not have to be the case either. The key is letting go of the images of yourself jumping into the project as if you are Nicole Curtis and getting real about the costs and the skills required to tackle an old house
renovation. Nicole uses a lot of professionals in her projects, although you see mainly her tearing things out, nailing up new molding or putting up bathroom tile and painting. What the casual viewer may not appreciate is the level of skills that she has developed over time to be able to do those things and the number of tools that she needs to have at hand in order to do them. Many DIYers don’t really have either of those things going for them – skill or tools.

I usually spend time with buyers who say that they want to tackle something like an old house renovation trying to get them to understand the many things that will require professional (most times licensed) help and/or specialized tools and skills. Sometimes I get push back like – “Well, my dad (substitute “best friend” here if you like) is a plumber (or electrician or carpenter) so he can help us with that. Sure they’ll help some, for some period of time, in areas that they have the skills and tools for; but projects like a complete old house remodel will touch on every aspect of the building trades and most people don’t have that many friends or family willing to work that long for nothing. So, first, take stock of your own skills and the skills of those that you might be actually able to call upon for help and look at the tools that you have already. You’d be surprised how much of the cost of a renovation goes into buying or renting the necessary tools.

Second, get real on a budget. I can’t tell you how many half-finished old home remodeling projects I’ve seen show up on the foreclosed list. It costs a lot of money to redo one of these old homes; even more if you are committed to keeping everything looking original. What you may initially see as just
new cabinets and tops, plus appliances for the kitchen remodel can turn quickly into all new wiring and plumbing, when you demo out the old kitchen and discover what is behind what was there. It’s not unusual that the entire house may have to be rewired and re-plumbed to bring it up to current building codes; and you will have to bring it up to current codes, assuming that you pull permits for the remodeling work. Do even consider doing a major remodel without pulling permits.

Oh, and while you’re at it; did I mention that most of these old house are full of asbestos, which was commonly used as insulation on the steam or hot water pipes leading to the radiators, plus much of the old tile used on floors back then was asbestos-based. If you watch Property Brothers on HGTV, too, you’ll know that discovering asbestos is not a good thing and very expensive to deal with. In Michigan we have only one dump site left that will even accept asbestos waste and the disposal fee is high. While we’re dealing with environmental issues, a quick check of the plumbing will normally
turn up some lead pipes in the system. If you’re lucky they are only on the waste side of things and could be left in place. Any lead pipes on the supply side will need to be replaced. As long as you are dealing with the plumbing you might also want to have the waste line to the sewer scoped out with a TV camera (lots of local plumbing companies can do that). You may be appalled at what you find there. In many old houses there really isn’t even a real pipe that goes out to the sewer Many historic homers were connected to eh sewers using clay pipes and some just used a form of rolled up tar paper shaped to look and act like a pipe. When those “pipes” fails (and it will eventually fail) you will be responsible for the replacement all the way to the sewer from your house (think backhoes and lots of cost).

The electrical systems in most old house is inadequate (quite often even less than 100 Amp service with old screw-in fuses instead of breakers) and it is dangerous. Most old houses don’t have ground wires to the receptacles, so plugs are un-grounded. People didn’t have all of the appliances and electronics that most people have these days, so even the wire from the power pole to your house may be inadequate for the demands currently being put upon it. Start from the pole and rewire in – think big money and a lot of work to try to run ground wires to every receptacle in the house. And don’t forget that current electrical codes require GFCI-protected circuits in the kitchen, baths, garage and all exterior plugs. Cha-Ching$$$

As for heating and cooling; most historic homes had some form of steam heat when built and many were converted to hot water later. There may be one or two pipes running to each radiator, but there usually are no ducts anywhere. Fortunately (as Nicole Curtis does in her rehabs sometimes) there are ways to put in forced air systems to heat and cool, either by carefully hiding regular ducts in closets and cabinets or by using modern micro-tube ducts and two systems – one in the basement to take care of the first floor and one in the attic to handle the second floor. If you have enough money, anything is possible.

And, if you do get a new heating system in place, what are you going to do to hold that heat in? Most old houses were not built with anywhere near adequate insulation in either the walls or the attic and most have single pane glass in the windows (many have old storm windows that do little more thanbigger bucks if you chose to put in historically correct looking insulated windows). The insulation in the attic will usually need to be doubled or tripled to get to current code standards and the walls may have no insulation at all. That means cutting openings (outside or inside) and blowing in insulation and then repairing the cuts or holes that you created. Thinks additional $$$.
slow down the cold air). If you are going to just waste the heat that your new heating system produces you’ve got to insulate to hold it in and put in new, thermal windows as well. We’re talking big bucks to put in all new windows (even

If all of these details and warnings about things that you may have to deal with is scaring you – good; you should be scared. Maybe, out of that fear (or at least concern), may come more rational decisions about the whole project to fix up an old house.  “You get the ladder and I’ll get the paint”, doesn’t cut it (but I suppose it could be amusing to watch as a reality TV special). Just don’t expect Nicole Curtis to stop by to help out. You are more likely to get a visit by the mean old banker wanting his money.

Having said all of this; why am I still smiling that I own a historic home?  For one, I’ve got a few of the bigger projects done already; and, in the final analysis, it’s because the right historic house, given the right amount of investment, with the right tools or tradesmen involved, can turn out to be a great place to live. The character of the architecture, the great old woodwork and the sense of history can’t be found in a modern home. I often tell would-be historic home buyers that it’s a home and a hobby all in one.  If you are willing to continually work at it and put up with a few things as you go along it can be very rewarding, but it’s not an Our Gang play. 

Wednesday, January 21, 2015

Estate Sales in Real Estate

Getting an inheritance, even one that involves real property, is usually a good thing in the long run; however, it can be stressful and frustrating while going through the process of getting everything disposed of before splitting up the money. I have dealt with a number of instances of real estate that was inherited by one or more people upon the death of the owner. Most of the time it involves whatever home the owner was living in at the tie of their death; but recently I’ve also had vacant property (land or lots) cases.

Usually there are two or more siblings and one of them is designated at the Trustee or Estate Representative for the estate of the deceased. It is that person who usually has to make the decisions involved in selling the property – the listing price and the eventual sale price and all price decreases in between. They also have to deal with other issues, such as existing mortgages and tax issues. There is a good article covering some of the questions that can come up written by Benny L. Kass and published on the Realty Times web site - Dealing With An Inherited House. Benny’s article focused upon a couple of questions about the potential consequences of informing the mortgage company and the tax consequences of a sale. You should read that article in addition to what is here.

The most normal scenario with most estates is that a small group of people (usually the children of the deceased) now find that they own and are responsible for a vacant house, perhaps nearby, but just as likely in another part of the state or even in another state. If the deceased still had a mortgage on the place they may now be responsible for paying that bill, as well as for taxes and insurance and any other bills that concern the property. If the deceased left no money in the estate that can be used for those purposes, those bills can quickly become a burden for all of the survivors. Not many things tear otherwise close families apart more quickly than disagreements about money and inheritances. Usually the decision to list and sell the property as quickly as possible is a no-brainer.

Determining what price to put on the property is the key to a quick sale at the best return for the estate. Overpricing will result in the property just sitting there with the bills mounting; however, under-pricing it has a downside, too – the property may inadvertently become stigmatized, if people begin to believe that something must be wrong with it to justify the low price.

Many times homes that have been lived in by elderly owners in declining health will have suffered years of neglected or deferred maintenance. I have been appalled by some homes that I visited after a death and wondered how anyone could live like that. Such behavior is usually caused by a lack of money and a fear of being forced into a nursing home if the problems are brought up to children or relatives. We read about elderly people freezing to death in their homes every winter because they had a broken furnace and no money to fix it. What about their relatives? Many times they were too ashamed or too stubborn to ask for help.

If you’re considering buying a home like this, make sure that you have a very thorough hoe inspection done, so that all of the issues and potential problems can be identified ahead of the purchase. The estate may not have the money to fix anything, but you can usually bargain for a price reduction to deal with the issues. You should be aware that there are several things that could be wrong in a house that would prevent you from being able to get an FHA mortgage. You may need the flexibility of having a conventional mortgage lined-up, if you want to pick up a bargain estate house.
If you are the person responsible for selling the house, I’d advise that you get a really good Realtor who can identify the potential problems or get a home inspection done yourself, so that you know ahead what the issues are that you will be negotiating about later. I never advise putting much money into repairs at this point, unless the things that need attention will prevent a sale. Your Realtor should be able to advise you on the items that are currently on the list of things that an FHA or VA appraiser will be looking at that cold impact the sale. You might not be able to offer the house with an FHA or VA mortgage.

When it comes time to actually close the sale, the executor of the estate should make sure that all of the beneficiaries of the estate are aware of the sale and the price and hopefully in agreement; so that he/she doesn’t face a lawsuit from an angry sibling later. In most instances it is easy to gain that agreement. The various beneficiaries usually just want to sell the place, split the money and get on with life.

Sometimes, however, the property that is involved may be a “family retreat” – a lake front cabin or “a place up north”. In those cases not all family members who shared in the inheritance may wish to give the place up. They may have to work out a deal to put a value on the property and allow those who wish to retain and ownership of the property buy-out the others who just wish to cash-in and move on. The key to allowing that to happen without acrimony is to get a good appraisal that all parties can agree with, before proceeding to any buy-out negotiations. Outright purchases or land contract will then be options, if the property is not mortgaged. If it is mortgaged then, usually, only an outright buy-out with new mortgage will work.

Whatever the case, get the advice of a good Realtor and a good estate lawyer then listen to their advice.  

Monday, January 19, 2015

The polls are open - Tweet, re-Tweet and Tweet again…

We have all witnessed the power of a 144-character Tweet to change the course of history in recent events in the Middle East and in Eastern Europe. Now a Tweet has the power, not to change, but, to preserve history. Your Tweets, using the hashtag #DigMilford, can help the Huron Valley History Initiative win a grant from the Clarke History Library at Central Michigan University. That grant will allow the groups that have united behind this project to begin a project to digitize the back issue of The Milford Times that currently exist only on microfilm.

The Milford Times is a local, weekly newspaper that began publishing in 1871. The Milford Times has chronicled important events ever since in the Huron Valley area, which is made up of the Townships of Milford, Highland, Commerce and White Lake and the Village of Milford. Every issue that has been published since the beginning in 1871 is available on microfilm and the Milford
Historical Museum and the Milford Library. That’s great, but the microfilm technology is very long in the tooth and does not allow sharing of the information, unless one is sitting in front of the microfilm reader. The proposed project will digitize the entire microfilm library, index it and make it available on-line at all of the participating libraries and historical societies of the four Townships. Eventually it will be widely available on-line, along with other materials houses in each of the museums runs by the four Township historical societies. 

A key to making this happen is a grant from the Clarke History Library, which is associated with Central Michigan University. Each year Clarke solicits grant applications for worthy projects concerning history. The Clarke staff narrows things down to five finalists and those five projects compete for the grant by proving that they support for their project from the local communities and elsewhere. That proof comes on the form of post cards and Tweets. I want to focus upon the Tweets here, because I believe that there is great power in the Tweet, once unleashed.

The voting will take place from Jan 19 until Jan 25. Clarke Library has established a site where people can go to vote – Clarke Library Voting Site. The site has all five grant finalist shown, so remember to vote for the Milford project – hashtag #DigMilford. You can also just Tweet using that hashtag (#DigMilford) within your Tweet or re-Tweet a Tweet that contains the hashtag #DigMilford. Did I mention that our hashtag is #DigMilford? I’ll be sending out a Tweet on Monday, Jan 19 with that hashtag in it, so that you can re-Tweet it, if you’d like.

Is this as important as a revolution playing out in Tahrir Square during the Arab Spring or the loyalist forces who are using Tweets to communicate about Russian troop movements in the Ukraine? Of course not; but it can demonstrate again the power of the Internet and of Twitter to influence history. We will be able to track the number of Tweet votes that come in for each of the finalists. Using the simple power of my Twitter followers list and then asking them to pass this on to their followers’ lists, I believe that we can get 10,000 or more Tweets during that week for our project. Together, let’s demonstrate the power of the Tweet. You can Tweet as many times as you wish during the voting period, just remember to use the hashtag #DigMilford. Let’s rock the world this week! I Dig Milford, do you?

And if you can’t or just don’t Tweet or want to go to the Clarke Library web site to vote, remember that you can send a Michigan-themed postcard (a postcard with a picture of something or someplace  in Michigan or a map of Michigan on it)  to Clark Library, Central Michigan University, Mount Pleasant, MI  48859 and those postcards will each count as 100 votes.  The post card should have the hashtag #DigMilford written on it somewhere to be counted.