Home Seller Tips March 8, 2022

Should You Remodel or Sell Your Home As Is?

Homeowners who are preparing to sell are often faced with a dilemma about whether to remodel or sell their home in its current state. Each approach has its respective advantages and disadvantages. If you decide to remodel your home, it will likely sell for more; but the increased selling price will come at the cost of financing the remodeling projects. If you decide to sell without remodeling, you won’t spend as much money putting your home on the market, but the concern is whether you’re leaving money on the table.

 

Should I Remodel or Sell My Home As Is?

To answer this question, it’s important to understand the factors that could influence your decision and to work closely with your agent throughout the process.

 

Cost Analysis: Home Remodel vs. Selling Your Home As Is

Home Remodel

When you remodel your home before selling, you’re basically making a commitment to spend money to make money. So, it’s important to consider the kind of ROI you can expect from different remodeling projects and how much money you’re willing to spend. Start by discussing these questions with your agent. They can provide you with information on what kinds of remodels other sellers in your area are making and the returns they’re seeing as a result of those upgrades. This will help you determine the price of your home once your remodel is complete.

Then, there’s the question of whether you can complete you remodeling projects DIY or if you’ll need to hire a contractor. If hiring a contractor seems expensive, know that those costs come with the assurance that they will perform quality work and that they have the skill required to complete highly technical projects.

According to the Remodeling 2023 Cost vs. Value Report for Seattle (www.costvsvalue.com1), on average, Seattle-area homeowners paid $32,861 for a midrange bathroom remodel and $30,023 for a minor kitchen remodel, with a 54.4% and 73.2% ROI respectively. This data shows that, for these projects, you can recoup a chunk of your costs, but they may not be the most cost-effective for you. A more budget-friendly approach to upgrading these spaces may look like repainting your kitchen cabinets, swapping out your old kitchen backsplash for a new one, refinishing your bathroom tub, or installing a new showerhead. Other high-ROI remodeling projects may allow you to get more bang for your buck, such as a garage door replacement or installing stone veneer. To appeal to sustainable-minded buyers, consider these 5 Green Upgrades that Increase Your Home Value.

 

Cost vs. Value for Remodeling Projects in Seattle

 

Selling Your Home As Is

Deciding not to remodel your home will come with its own pros and cons. By selling as is, you may sell your home for less, but you also won’t incur the cost and headache of dealing with a remodel. And since you’ve decided to sell, you won’t be able to enjoy the fruits of the remodel, anyway. If you sell your home without remodeling, you may forego the ability to pay down the costs of buying a new home with the extra money you would have made from making those upgrades.

 

Market Conditions: Home Remodel vs. Selling Your Home As Is

Local market conditions may influence your decision of whether to remodel before selling your home. If you live in a seller’s market, there will be high competition amongst buyers due to a lack of inventory. You may want to capitalize on the status of the market by selling before investing time in a remodel since prices are being driven up, anyway. If you take this approach, you’ll want to strategize with your agent, since your home may lack certain features that buyers can find in comparable listings. In a seller’s market, it is still important to make necessary repairs and to stage your home.

In a buyer’s market, there are more homes on the market than active buyers. If you live in a buyer’s market, you may be more inclined to remodel your home before selling to help it stand out amongst the competition.

 

Timing: Home Remodel vs. Selling Your Home As Is

Don’t forget that there is a third option: to wait. For all the number crunching and market analysis, it simply may not be the right time to sell your home. Knowing that you’ll sell your home at some point in the future—but not right now—will allow you to plan your remodeling projects with more time on your hands which could make it more financially feasible to complete them.

For more information on how you can prepare to sell your home, connect with one of our local agents—we’re always happy to chat about your situation and offer advice.

 

1©2023 Zonda Media, a Delaware corporation. Complete data from the 2023 Cost vs. Value Report can be downloaded free at www.costvsvalue.com.

Adapted from an article that originally appeared on the Windermere blog January 10, 2022. Written by: Sandy Dodge.


 

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Home Buyer Tips July 1, 2021

What is FIRPTA Certification?

A complete overview on why you need to know about it…

 

If you are purchasing property from a non-US individual or entity, you may be required to withhold taxes under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”), 26 U.S.C. 1445 (unless one of the exceptions in the Act applies). The seller must complete a certification to inform both you (the purchaser) and the closing agent (typically the escrow company) whether tax withholding is required.

The above law applies to foreign corporations, partnerships, trusts, estates and other foreign entities, as well as to foreign individuals.  If the seller is a corporation, partnership, trust, estate or other entity, the terms “I” and “my” in the doc refer to the entity rather than an individual. A “real property interest” includes full or part ownership of land & any improvements; leaseholds; options to acquire any of the foregoing; and an interest in foreign corporations, partnerships, trusts or other entities holding U.S. real estate.

Under IRS code, the certification must include the property address, seller’s citizenship status, taxpayer identification number, and home address. Note that while the certification is delivered to the buyer prior to closing, social security numbers are not inserted until after the seller signs closing papers in order to prevent fraud.

Obtaining this completed certification is of critical importance because a home buyer can be personally liable for the full amount of FIRPTA withholding tax required to be withheld, plus penalties and interest. When a seller is a foreign person, the buyer and seller are advised to seek the guidance of an accountant or tax attorney to determine the best steps forward. Closing agents and real estate brokers are not qualified or permitted to provide tax advice or guidance.

 

What the FIRPTA Certification says about Required Withholding if the Seller is a Non-Resident Alien under IRS Guidelines

“If the seller is a non-resident alien, and has not obtained a release from the IRS, then the closing agent must withhold 15% of the amount realized from the sale and pay it to the IRS, unless the buyer certifies that the selected statement below is correct:

Amount Realized ($300,000 or less) and Family Residence= No Tax. (a) I certify that the total price that I am to pay for the property, including liabilities assumed and all other consideration to Seller, does not exceed $300,000; and (b) I certify that I or a member of my family* have definite plans to reside on the property for at least 50% of the time that the property is used by any person during each of the first two twelve-month periods following the date of this sale. If the buyer certifies these statements, there is no tax.

Amount Realized (more than $300,000, but not exceeding $1,000,000) and Family Residence= 10% Tax. (a) I certify that the total price that I am to pay for the property, including liabilities assumed and all other consideration to Seller, exceeds $300,000, but does not exceed $1,000,000; and (b) I certify that I or a member of my family* have definite plans to reside on the property for at least 50% of the time that the property is used by any person during each of the first two twelve-month periods following the date of this sale. If Buyer certifies these statements, then Closing Agent must withhold 10% of the amount realized from the sale and pay it to the IRS.

* (Defined in 11 U.S.C. 267(c)(4). It includes brothers, sisters, spouse, ancestors and lineal descendants).

Under penalties of perjury, I declare that I have examined this Certification and to the best of my knowledge and belief both statements are true, correct and complete. I understand that this Certification may be disclosed to the IRS and that any false statement I have made here could be punished by fine, imprisonment or both.”

 

Exceptions from FIRPTA Withholding

The IRS lists eleven exceptions to FIRPTA withholding listed on the IRS website. Of these, there are three that are more typically seen in residential real estate transactions:

OWNER-OCCUPIED BUYER: Sales price is $300,000 or less, and the individual buyer or a member of their family has definite plans to reside in the property for at least 50% of the number of days the property is used by any person during each of the first two 12-month periods following the sale.

NOT A FOREIGN SELLER: Seller signs a FIRPTA certification (form 22E) stating that the seller is not a foreign person.

WITHHOLDING CERTIFICATE: Before closing, seller obtains a withholding certificate from the IRS which reduces or eliminates the FIRPTA tax for the foreign person. The seller or transferor should also work with an accountant or tax attorney.

In most cases, the buyer or closing agent is the withholding agent. If you are the transferee/buyer, you must find out if the transferor is a foreign person by obtaining the FIRPTA Certification. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax. For cases in which a U.S. business entity such as a corporation or partnership disposes of a U.S. real property interest, the business entity itself is the withholding agent.

 

Delivery of the FIRPTA Certification is Required in NWMLS Purchase Agreements

Because this could be a significant aspect of a home purchase, our local MLS requires all sellers to disclose if they are a foreign person at the time of listing a property for sale. The seller’s real estate broker will also ask the seller to complete the FIRPTA Certification on a NWMLS Form 22E at that time.

The seller or their real estate broker must then deliver the completed NWMLS Form 22E (as part of the contract or separately to the closing agent) within 10 days after you have a mutually agreed upon contract. Failure to do so can create an out for the buyer.

The contract further requires seller to warrant their citizen status to buyer, provides instructions to the closing agent, and outlines the termination process in the event the FIRPTA Certification is not timely delivered.

Seller Citizenship and FIRPTA. Seller warrants that the identification of Seller’s citizenship status for purposes of U.S. income taxation in Specific Term No. 14 is correct. Seller shall execute a certification (NWMLS Form 22E or equivalent) under the Foreign Investment in Real Property Tax Act (“FIRPTA”) and provide the certification to the Closing Agent within 10 days of mutual acceptance. If Seller is a foreign person for purposes of U.S. income taxation, and this transaction is not otherwise exempt from FIRPTA, Closing Agent is instructed to withhold and pay the required amount to the Internal Revenue Service.

If Seller fails to provide the FIRPTA certification to the Closing Agent within 10 days of mutual acceptance, Buyer may give notice that Buyer may terminate the Agreement at any time 3 days thereafter (the “Right to Terminate Notice”). If Seller has not earlier provided the FIRPTA certification to the Closing Agent, Buyer may give notice of termination of this Agreement (the “Termination Notice”) any time following 3 days after delivery of the Right to Terminate Notice. If Buyer gives the Termination Notice before Seller provides the FIRPTA certification to the Closing Agent, this Agreement is terminated and the Earnest Money shall be refunded to Buyer.”

 

Definitions and Resources Related to FIRPTA

The IRS provides a Definitions of Terms and Procedures Unique to FIRPTA web page with helpful information, including how executors of estates, partnerships, corporations, and spouses (where only one spouse is a foreign person) should proceed.

In addition, there is also Individual Taxpayer ID Guidance for Foreign Property Buyers/Sellers to provide documentation requirements for individuals seeking an ITIN.

If you are looking for information on Reporting and Paying Tax on U.S. Real Property Interests or general Real Estate Tax Center guidance, you’ll find it on the IRS.gov website as well.

 

Final Thoughts…

Obtaining FIRPTA Certification in your home purchase and, when your seller is a foreign person, verifying that any required withholding is made is an important step you can take to provide peace of mind. This article is provided solely to inform you of the need to be alert to this issue. It does not replace competent legal or tax advice. You should also seek the guidance of a qualified professional regarding your individual situation.

 


 

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We earn the trust and loyalty of our brokers and clients by doing real estate exceptionally well. The leader in our market, we deliver client-focused service in an authentic, collaborative, and transparent manner and with the unmatched knowledge and expertise that comes from decades of experience.

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mercerisland@windermere.com

© Copyright 2021 Windermere Mercer Island

Home Buyer TipsHome Seller Tips May 11, 2020

What You Need to Know about the Washington State Seller Property Disclosure – Form 17

Washington State requires sellers of residential real property to thoroughly disclose material facts on a form called the Residential Real Property Disclosure Statement (often referred to as Form 17). Unless the buyer has expressly waived their rights, the seller must deliver this completed disclosure with 5 days after mutual acceptance.  The buyer then has a window of time to walk away with their earnest money at their discretion.

While sellers have always been required to disclose material facts, the Form 17 has been required by law (RCW 64.06.020) since January 1, 1995. It has undergone ten revisions since its inception, the last of which will go into effect in January. In addition to the residential disclosure, the state added an unimproved property (land) disclosure in 2007 (RCW 64.06.015) and a commercial property disclosure in 2012 (RCW 64.06.013). The current form is 6 pages long and includes most of the typical property issues requiring disclosure with a catchall question for anything left out.

 

Is every seller required to complete this form? Are there exemptions?

The statute allows very limited exceptions RCW (64.06.010) to completing the disclosure statement. They include transfers…

  • by foreclosure or deed-in-lieu of foreclosure
  • that are gifts to a parent, spouse, domestic partner, or child
  • related to marital dissolution or dissolution of a state registered domestic partnership
  • to buyers who had a prior ownership interest in the property in the last two years
  • of an interest that is less than fee simple
  • made by the personal representative of the estate or by a trustee in bankruptcy
  • in which the buyer has expressly waived the receipt of the seller disclosure statement

However, if the answer to any of the questions in the section entitled “Environmental” would be “yes,” the buyer may not waive the receipt of the “Environmental” section of the seller disclosure statement.

 

What happens after delivery of the disclosure statement?

The buyer has three business days from receipt of the disclosure statement to cancel the agreement for the purchase of the property (unless they waived their rights to do so in writing).

This right to rescind is statutory, and the decision to revoke the offer may be made by the buyer at the buyer’s sole discretion. If the buyer elects to rescind the agreement, the buyer must deliver written notice of rescission to the seller within the three-business-day period.

Upon delivery of the written rescission notice the buyer is entitled to immediate return of all earnest money deposits and the agreement for purchase becomes void.

If the buyer does not deliver notice the disclosure statement is deemed approved and accepted by the buyer. The full provisions of this right are found in RCW (64.06.030).

 

What happens if the seller doesn’t deliver a completed disclosure?

If the seller fails or refuses to provide a disclosure statement to buyer within 5 days, the prospective buyer’s right of rescission extends until the earlier of three business days after receipt of the disclosure statement or the date the transfer has closed (unless the buyer has otherwise waived the right of rescission in writing). After closing, per RCW 64.06.040 (3) the seller’s obligation to deliver the disclosure statement and the buyer’s rights and remedies related to it terminate.

 

Some sellers are more forthcoming than others…

When sellers claim there are no issues to explain, you should be wary…very wary. In 34 years of practice, I have yet to see a perfect house. Whether a 10-million-dollar estate, a newly constructed home, or a $300,000 starter home, every house has a story and every buyer has a right to know about it so they can knowledgeably complete their due diligence.

Making full disclosure actually benefits the seller, too. By disclosing a condition, the seller shifts the burden of investigation to the buyer under Washington law. By remaining silent, a seller risks the appearance of concealment and a lawsuit.  Think of it this way: disclose an issue and if the buyer accepts it you move forward with no worries since they are barred from seeking compensation later; fail to disclose it and you could be looking over your shoulder for years.

I like to see issues disclosed on a disclosure statement. It makes me feel like the seller has been honest and transparent. When I see a “perfect” disclosure, I know the seller is either in total denial or has decided not to disclosure the little (or big) issues they know about. Most buyers expect far more disclosure from the seller than the law requires. While sellers don’t have a duty to inspect their home or look for defects, they do have a duty to disclose defects that affect the value, physical condition, or title to the property. Sellers should consider disclosure to be a form of insurance.

Instead of minimizing disclosures, a prudent seller will try to consider the property from the perspective of a buyer and then disclose what a buyer would want to know. Many of the conditions that lead to lawsuits would have been acceptable to the buyer if they had been disclosed in advance. Other conditions simply are not important enough to the buyer to fully investigate before purchasing a property. To maximize the benefit of disclosure law, sellers may want to make full disclosure of the property and neighborhood even if they have no legal duty to do so. It is usually better to be over-insured than not insured at all.

 

Buyers have duties, too…

In addition to a thorough inspection, investigating issues raised in the seller disclosure statement is one of the most important parts of due diligence in a real estate transaction. Buyers have a duty of thoroughness and inspection that should not be taken lightly.

The buyer should evaluate each disclosed item, and (especially) those items not disclosed, but easily discovered during a walk-through and inspection. If there are many items identified and not disclosed, a buyer should be concerned about other unseen issues that might also not be disclosed. A savvy buyer will investigate a home with limited disclosure more thoroughly and/or make the decision not to purchase form a seller who is seemingly not transparent with the truth.

It is also important to note that sellers typically have no duty to disclose neighborhood conditions or past events at the property, even though these may be issues of concern to the buyer. For instance, sellers usually have no legal duty to disclose the following conditions either at the property or in the neighborhood:

  • Death, murders, suicides, rapes or other crimes
  • Ongoing criminal or gang activity in the neighborhood
  • Registered sex offenders in the neighborhood (RCW 64.06.021)
  • Future development in the area
  • Political or religious activities in the area

If these or similar matters are of concern, buyer should conduct their due diligence prior to submitting an offer or include an inspection and “Neighborhood Review” contingency in the offer to allow them time to complete it as part of their purchase agreement.

 

What is the seller’s responsibility after delivery of disclosure statement?

The disclosure statute (64.06.040) states that if after delivering a completed disclosure statement, the seller learns from a source other than the buyer or others acting on the buyer’s behalf such as an inspector of additional information or an adverse change which makes any of the disclosures made inaccurate, the seller shall amend the real property transfer disclosure statement, and deliver the amendment to the buyer. The buyer then has the right to rescind the purchase agreement within three business days after receiving the amended disclosure statement.

No amendment is required if the seller takes whatever corrective action is necessary so that the accuracy of the disclosure is restored, or the adverse change is corrected, at least three business days prior to the closing date.

 

The seller disclosure statement is not a warranty

RCW 64.06.050 says the seller shall not be liable for any error, inaccuracy, or omission in the disclosure statement if the seller had no actual knowledge of the error, inaccuracy, or omission. This includes disclosures based on information provided by public agencies, or by other persons providing information within the scope of their professional license or expertise, including, but not limited to, a report or opinion delivered by a land surveyor, title company, title insurance company, structural inspector, pest inspector, licensed engineer, or contractor. This applies to the seller’s real estate broker as well.

This should give a conscientious seller the assurance that the statute provides for property disclosure only and is not a warranty of current or ongoing condition. Provided a seller discloses everything they know, or that a reasonable seller should have known, about their property, a seller should feel good in knowing they are not held liable for its condition.

 

Here are a few great online resources to add to your knowledge base:

Current local Form 17 Real Property Transfer Disclosure Statement: https://windermeremicom/files/2019/08/17_SellerDisclosureForm.pdf

The complete text of the Washington State Real Property Transfer Act: https://app.leg.wa.gov/RCW/default.aspx?cite=64.06&full=true

NOLO Article: https://www.nolo.com/legal-encyclopedia/residential-home-sellers-washington-what-the-law-requires-you-disclose.html

 

Of course, nothing tops having an experienced pro to guide you through the process. They’ve seen hundreds upon hundreds of homes and can help you identify the solid finds from the duds with gorgeous looking veneer.

Choosing the right broker can save you thousands on your home purchase. Whether through local market knowledge and pricing analysis allowing you to make a smarter offer, recommendations and resources to thoroughly conduct your due diligence and avoid costly mistakes, or savvy contract negotiation to help you get the terms you need, having a Windermere broker on your side is an advantage you can’t afford to sacrifice.

 


Find a Home | Sell Your Home | Property Research | Neighborhoods | Market Reports | Our Team

We earn the trust and loyalty of our brokers and clients by doing real estate exceptionally well. The leader in our market, we deliver client-focused service in an authentic, collaborative and transparent manner and with the unmatched knowledge and expertise that comes from decades of experience.

© Copyright 2020 Windermere Mercer Island.