Tax Reform and Real Estate: Who Are the Winners and Losers?

By January 11, 2018 @ 8:23 am

It’s a new year filled with new laws – from the useful, to the quirky, to the expensive. Pot is legal now in California, public diaper-changing stations must be accessible to men as well as women, the state minimum wage rose $.50, and President Trump signed a major federal tax reform bill.

For property buyers and sellers, we boiled down the 1,097-page federal “Tax Cuts and Jobs Act” into this simple chart so you can see how tax reform impacts you:

How Tax Reform Impacts Real Estate

Answers to Common Questions:

When will I feel the effects of the tax overhaul? Spring of 2019, when you file taxes for 2018, if you itemize deductions.

Which real estate markets will be most affected?

West and East Coast metro areas like ours, where real estate is most expensive. For example, homeowners used to be able to deduct the interest paid on a mortgage loan worth up to $1 million. Now the mortgage interest deduction (MID) cap is $750,000. Nationally, most people’s home mortgages don’t exceed $750,000. But in the pricey Bay Area, you could be hit. (If you’re one of these homeowners, you used to be able to deduct up to $33,260. Now it’s $24,945.)

Here’s another reason why the Bay Area could be hit harder than other parts of the nation: You used to be able to deduct the amount you pay in state and local taxes – property, income and sales — from your federal tax return, without limit. But now your SALT deductions are capped at $10,000. California has some of the highest taxes in the nation. According to the National Association of Realtors, about 20 percent of homeowners in the SF-Oakland-Hayward metro area pay more than $10,000 in real estate taxes alone.

Does the new MID cap affect me if I took out a loan before 2018?
The cap applies to new mortgages, not existing ones. Loans before Dec. 15 are grandfathered into the previous $1 million cap.

Will the changes affect housing prices? No one knows for sure yet, but Moody’s Analytics estimates that housing prices will drop about 4 percent nationwide by the summer of 2019. This Washington Post article quotes other economists who think the changes will slow price increases in expensive housing markets but not lower prices.

How long will these changes last? Most of the changes expire on Dec. 31, 2025.


To learn more about how tax reform will affect buyers, sellers, and the Bay Area real estate market in general, contact us at krista@kristashouse.com.

Buying a Home as a Real Estate Agent: Unsolicited Advice for Buyers and their Agents

By January 9, 2018 @ 12:16 pm

Homebuying as an agent, it’s still a process…

I’ve been a real estate for 5 years and this past July my husband and I had the opportunity to buy a home for ourselves. We had been renting for the past 10 years partly because of neighborhood issues and partly because of the recession. After years of saving and some serious luck we were finally in the position to purchase in the Bay Area – Oakland specifically. In the last five years, Krista and I have have helped over 100 families purchase or sell a home but being on client side of the transaction gave me some invaluable insights.

First a little bit about our experience and strategy. Like everyone else in the Bay Area, we had to get our financing figured out first. We got pre-approved with our lender and once we knew how much we could spend we were on the hunt. Our strategy at first was to go after houses on the open market like anyone else — we had a list of things we were looking for like bedroom count, indoor/outdoor living, neighborhoods we were willing to live in and a price limit.  Being an agent, I thought this would be easy.  Afterall I am already out touring houses for my clients and I have a successful track record of getting my clients into contract.  Boy was I naive.  

So happy to have a new home!

We quickly found that there were a lot of houses that would work for us and we started putting in offers.  Just as I would advise my clients to do, we would offer 20-30% above the listed price, because that is where it would likely sell.  We would painstakingly figure out if this was a house we could live in, what were the pros and cons and ultimately what each house was ‘worth’ to us, meaning what price we were willing to pay. Time and time again we got out-bid, 11 times to be exact. Clearly being an agent didn’t mean squat.  We figured out very quickly that if we liked something that usually meant that a lot of other people liked it too. Moreover, most of those people were willing to outspend us. It was during this intense period of making offers (12 in total over a 3 month period) that I really began to understand and fully appreciate the stress that buyers go through when making a purchase.

We ultimately had to change our strategy – we were getting outbid over and over again. Several times the experience was so gut wrenching that I (the Realtor) was ready to throw in the towel. Heart broken and a little disillusioned, my husband and I both realized we needed to start thinking creatively (something that I am very good at helping my clients with). So we started to look for houses that had been sitting on the market longer than 14 days or ones that had fallen out of contract for some reason. The house we ended up getting was listed way above what we were willing to pay but the listing agent had it priced too high so it had been sitting for 40 days. The seller’s had to sell and even though we came in way below where they were listed, they had an incentive to sell to us (mainly, the fact that I didn’t take a commission to make the purchase and we were the only offer that had come in). As a result, our offer was accepted.  Relief!  We are in a neighborhood that we wanted to be in, the house is the size we were looking for, and even though it’s not perfect we still feel like we got a “deal” given how much we could spend. So like all other buyers we had to give some stuff up (there is no indoor/outdoor space) but we feel super lucky to actually have pulled off purchasing a home in Oakland.

Rosie, her 10 year old, and Boo the Cat, hanging in the new house.

So what did I learn? Some unsolicited advice for buyers:

1. Figure out what’s important to you in a home. For me it was sq footage, flow, location, etc AND I wasn’t going to be pay $1.2mil for a 1000 sq feet. For my husband it was not paying 50% more than the list price, outdoor space, and location.
2. Figure out how much you are comfortable paying and get comfortable thinking about how much a particular house is “worth” to you. Of course look at comps to get a sense of fair market value. In a market as hot as the Eastbay’s, it turns out there is always someone who has more money than you and who wants the house more than you so it’s important to know what price you are willing to walk away for each particular property.
4. Be patient – the right house WILL come along. Stick to your principles and work with your agent to change strategies if you need to. Be willing to move fast and make a decision quickly.
5. Getting into contract is the hard part, once you are in contract and going through the transaction (usually 20-30 days), things really get quite a bit easier. Of course it is stressful if you are getting a loan but be sure to stay abreast of where the loan making parties are in their process. It made me feel better to know when the appraisal had come in, when it was the underwriters, etc. Actually closing and buying the house is pretty anti-climatic. There are no balloons or fireworks. You get an email from your title rep (or your agent most of the time) saying you are on record- that’s it. We obviously didn’t have an agent show up with wine and keys but still I was surprised at how anti-climatic the close was.

Some unsolicited advice for agents (myself included):
1. Prep buyers for the the emotional nature of the process and help them clarify what is really important to them and what they are willing to nudge on.
2. Provide a more emotional support when an offer doesn’t get accepted. Stay positive and keep encouraging your buyers to make smart offers that are based on their principals (financial and otherwise).
3. Be creative and quick – stay on top of the market for those houses that go unnoticed or fall through the cracks for some reason.
3. Explain the purchasing process really clearly so buyers know what to expect, especially once the transaction is with the lender. Make sure they know where they are in the process and what is coming next.
4. Be the fireworks and balloons at the end of the transaction – this is a huge feat your buyers have accomplished – they should be celebrated.

On the first night in our house, we had ramen from a local ramen shop on the floor of our new kitchen and even though we still haven’t fully moved in – there are boxes everywhere- we couldn’t be happier.

Client Success Story #202

By November 9, 2017 @ 11:37 am

Albany Gem on Stannage

Judy Shelton lived in her Albany home for over 50 years. Having raised both her children and her grandchildren in this home, she had accumulated decades of memories and possessions.  Her grandson had just graduated high school and was heading up north to attend college; Judy no longer needed such a big house and wanted to move to be near her grandson and one of her daughters. The thought of selling her family home seemed overwhelming and she knew she needed to find support to help with the physical and emotional aspects of the move.  Judy had originally consulted with a friend who is a Realtor in Walnut Creek so she had an idea of what would be involved in the process. Concerned that her Realtor friend didn’t know the Albany market well enough, she talk talked to some friends who referred her to us. She gave us a call and quickly realized that having a local agent would in fact be in her best interest.  We seemed a good fit as and liked each other from the beginning so we started to work together.

Judy’s home, while structurally sound, was in need of some updating.  Though the kitchen and one of the baths had already been worked on, there was a lot of work left to be done.  Before we could focus on prepping the house we needed a plan to move Judy out and empty out the well-loved house.  With the help nearby family, we were able to both find her a temporary place to live near her grandson and clear out the house.  Judy gave us a healthy budget of $50,000 and based on our advice, she  set an additional 10% in reserves to cover the unknowns.  We used our resources to gather bids and then assessed which updates would give her the highest return on investment.  Together we decided on new floors, new interior and exterior paint, a facelift to the bathroom, landscaping both the front and backyard, and rebuilding a two-car garage. We brought in our incredible team of contractors, painters and plumbers and transformed the entire house into beautiful cohesive space that would be attractive to many Albany buyers.  

Judy’s step-daughter called and said “I cannot believe what you have done to her house, it looks absolutely incredible!”  Judy called and was practically in tears, she couldn’t believe the transformation.  She was so appreciative of the care and consideration we put into each decision. We designed a space that was modern, efficient and bright, and made the backyard an extension of the house.  It was simply gorgeous!

With the design in place, we discussed the list price and the many different kinds of pricing strategies used in the East bay.  In Albany, like much of the East bay, the list price matters!   Happily,  we received multiple offers within days of coming on the market.  To our surprise, the sales prices far exceeded both Judy’s expectations and our predictions. The best part is that with the additional proceeds, Judy was able to move out of her rental and purchase a home with cash where she now lives.  When we asked Judy about her overall real estate experience the thing that stood out in her mind was the sales price – she was so grateful. She was also appreciative of our local knowledge, great ideas, and excellent communication throughout the process.

We love working with clients like Judy.  We are so happy to know that Judy is now living comfortably in her new home, near her family.  If you know of others like Judy and her family, we would love to help them too.  Just call us at 510-612-5546 or visit our website at www.kristaandrosie.com and we promise to give them the same great service that we gave Judy.

Restaurant Review: Juanita and Maude

By November 6, 2017 @ 2:24 pm

HOT AND NEW TO ALBANY!

The newest addition to the local restaurant scene is the hot and trendy “Juanita and Maude,” which made its debut in October. Former Corso chef Scott Eastman, with his wife, Ariane Owens, takes New American cuisine to the next level. The setting is warm yet classy, the food is creative yet comforting, and the cocktails are inventive yet classic. Although the menu changes daily you can find dishes like ahi tuna carpaccio, carrot + ginger soup, roasted pumpkin gnocchi or house-made bratwurst. There isn’t a kid’s menu, but my two girls were more than happy to share the warm bread with rosemary butter and the lasagna, plus a house-made beverage. The dessert menu features seasonal ingredients, and the chocolate torte (covered in sea salt and cacao nibs) is not to be missed. Juanita and Maude is open for dinner Tuesday – Saturday for dinner and is located at 825 San Pablo in Albany. Bon Appetit!

Food Drive For The Alameda Community Food Bank

By November 1, 2017 @ 8:15 pm

Feed Me!

Every year, Berkeley Hills Realty commits to filling up a food barrel from the Alameda Community Food Bank to help them in their mission to provide healthy meals to those who are in need.

We would like to invite our friends and family to get involved in giving back to the community by helping us fill the food barrel with their most needed food drive items: canned tuna and chicken, natural peanut butter, nuts and beans, brown rice, quinoa, low sodium soups and stews, whole grain cereal and oatmeal. We could pick up your donations if you live close by or you may drop them off at our office on 1714 Solano Ave.

Thank you for your generosity.

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Welcome to Krista + Rosie, Realtors

Hi friends! We are Krista + Rosie, the brains behind the Krista + Rosie Team. Powered by Abio Properties we are a top producing real estate team working {and having fun} in Berkeley, Oakland and the surrounding areas. From buying + selling to DIY + home decor to plumber + gardener recommendations we are your one-stop-shop for all things real estate.

Recent Posts

Buying a Home as a Real Estate Agent: Unsolicited Advice for Buyers and their Agents
January 9, 2018
By Rosie Papazian
Client Success Story #202
November 9, 2017
By Krista Miller
Restaurant Review: Juanita and Maude
November 6, 2017
By Krista Miller
Food Drive For The Alameda Community Food Bank
November 1, 2017
By Krista Miller
The Heat of the Market
October 4, 2017
By Krista Miller

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