Things to Remember When Selling a House

The temperatures outside are hot and so is the current real estate market.  It is a seller’s market.  Just speak with a realtor or a real estate attorney.  Kelly Dugan, real estate attorney at Capehart, has shared that despite her years of handling real estate transactions, she is seeing new situations almost daily.  There are bidding wars resulting in sellers receiving more than the asking price, buyers are taking short cuts and are waiving inspections unless required by lenders, closing dates are accelerated and there are unique terms being part of the deal. 

Kelly’s involvement usually starts when someone has placed an offer on a house and the contract is ready for review.  The contracts are boilerplate but it is important that they be reviewed before the attorney review period expires to protect the interest of either the buyer or the seller.  Sometimes there are added provisions that may benefit one party but not the other.  Having an attorney’s input is highly recommended as this may be one the largest investments you have transacted in your life – buying or selling. 

If you are selling your home, it is important to remember that your income taxes could be impacted.  Here are some considerations to make:

  • Who owned the home and how was it used?  Was it owned solely, as husband/wife or other joint ownership, or perhaps by a business entity?  Was it a personal residence or a rental property?  If a rental property, was it used for personal purposes at all during the year (i.e., a shore or mountain home)?
  • Why are these important factors to consider?  Well, if you owned a home for five years and used it for at least two years as your principal residence, you may qualify for some or all of a capital gain exclusion.  Sorry, but rental properties or vacation homes aren’t eligible for exclusions. 
  •  If your gain is in excess of an eligible exclusion, you MUST report the gain on your income tax return.  You will receive a Form 1099-S – Proceeds from Real Estate Transaction that should be placed with your income tax information for the current year so it is readily available when it is income tax preparation time.
  • Also, keep your settlement statement with the Form 1099-S for income tax purposes of the deductibility of certain closing expenses. 
  • Additionally, did you make major capital improvements to the house during your ownership?  These may be advantageous for income tax reporting.  Don’t wait until tax time to pull this information together.  You will want to provide your tax preparer with as much information as possible to enable the evaluation of your gains/losses in the sale.

New homebuyers – even though you are a new homeowner, keep the above items in mind during your ownership as it could be to your advantage in the years to come. 

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About the Author

Kay Sowa is a paralegal in the Trusts and Estates Group at Capehart & Scatchard, P.A. She is an IRS Enrolled Agent, an Accredited Estate Planner®, and a Certified Trust and Fiduciary Advisor. She oversees the trust and estate administration practice for the firm. She is an accomplished author and lecturer who has frequently spoken on behalf of a number of organizations including the National Business Institute and the Institute of Paralegal Education.

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