Medicare Surtax in 2013: Impact on Real Estate Transactions
Do you own real estate as an investment? Are you looking to sell any of your investment properties during the next 12 months? You may wish to consider selling them in 2012 as it may be more expensive to do so beginning in 2013.
According to the National Association of REALTORS® (NAR): "Beginning January 1, 2013, a new 3.8 percent tax on some investment income will take effect. Since this new tax will affect some real estate transactions, it is important for [you] to clearly understand the tax...Understand that this tax WILL NOT be imposed on all real estate transactions, a common misconception. Rather, when the legislation becomes effective in 2013, it may impose a 3.8% tax on some (but not all) income from interest, dividends, rents (less expenses) and capital gains (less capital losses). The tax will fall only on individuals when an adjusted gross income (AGI) above $200,000 and couples filing a joint return with more than $250,000 AGI."
A short video from Putnam explains how the tax works:
The NAR prepared the following PDF to provide additional information regarding the Medicare Surtax as well as case examples under various situations:
Please leave a comment and let me know if you have any additional questions or concerns regarding the Medicate Surtax and its impact on your next real estate transaction.
If You're Not Selling In This Market, Then You're Doing It Wrong
There are many factors in real estate that determine value. Zestimates are not one of them. Some of the key components for successful valuation include: Location, condition, size, room count, floor plan, age of home, view, builder/developer reputation, unemployment, mortgage rates, consumer confidence, etc. For units located in condominium associations, you can also add the financial strength of the association. Every property will excel in a few areas; but, it is unrealistic to think that every property will excel in all.
I recently analyzed inventory levels of condominium units located in the 53202 zip code (which is the main zip code of downtown Milwaukee). I wasn't looking at any particular price point during this analysis; therefore, this analysis includes units as small as efficiencies and units as large as penthouse units in luxury high-rise buildings. (Disclaimer: The results discussed throughout this blog was supplied by Metro Multiple Listing Service ("MLS"))
If you are attempting to sell your unit in today's market and you're not successful in attracting a buyer to your unit, then you're not doing something right. It might be that you incorrectly valued your unit. It might be that you implemented inappropriate negotiating skills when you received an offer and it failed to come together.
A condominium owner who attempted to sell his or her unit in 2010 was twice as likely to fail than an owner in today's market.
July 2010
* 53 new listings entered the market during the month
* 10 owners were successful in closing their deal
* An owner who was trying to sell his or her unit joined 537 other owners who were trying to attract a buyer
Metro MLS computed 53.80 months of inventory in July 2010. In other words, based on our inventory levels in July 2010, it was projected that our inventory levels would have cleared in roughly 54 months assuming that none of the other owners entered the market.
July 2011
* 34 new listings entered the market during the month (36% fewer new listings than reported in July 2010)
* 20 owners were successful in closing their deal (twice as many as reported in July 2010)
* An owner who was trying to sell his or her unit joined 410 other owners who were trying to attract a buyer (23% fewer competitors than reported in July 2010)
Metro MLS computed 20.55 months of inventory in July 2011 (four-plus years of inventory to less than two years in one year's time).
June 2012
* 27 new listings entered the market. Typically, the summer months are considered the "busy season" for real estate. Encouraging condominium owners to enter the market has been a challenge during the past 12 months. Financially, many owners will be taking a loss on the sale of their units. On the other hand, condominium unit owners are likely to succeed in selling their units in today's market as there are fewer owners to compete.
* 33 owners were successful in closing their deal. During the past two years, there were three months when closed deals exceeded new listings (December 2011, April 2012, and June 2012). Although, supply of available condominium units are decreasing, units sold are increasing. Today's buyers have fewer options available to them than buyers who were in the market in July 2010. The key difference is that today's buyers are buying.
* An owner who was trying to sell his or her unit joined 285 other
owners who were trying to attract a buyer (nearly half as many competitors than
reported in July 2010)
Metro MLS computed 8.67 months of inventory last month (four-plus
years of inventory to less than a year's worth in two year's time).
If you were one of the 33 unit owners who succeeded in closing your deal last month, then congratulations!
If you're still on the market, then you should review your marketing plan and pricing strategy to determine if any changes are needed.
If you're on the fence about selling your unit, then the results of this report should provide you with a sense of cautious optimism. We're not out of the woods yet, but it appears that we're moving in the right direction and leveling the playing field. The balance of power shifted slightly in favor of sellers during the past few years. It is still a buyer's market and buyers are still influencing the direction of negotiations. However, with an aggressive marketing plan and implementing an appropriate pricing strategy, you may find that you're more likely to sell in today's market than your counterpart a year ago. With buyer demand on the rise, you may even experience a bidding war.
This analysis looks at one particular sub-market in Metro Milwaukee. The downtown condominium market has experienced some significant swings in values over the past decade. Your sub-market may reflect different results.
Please contact me at dray@shorewest.com if you have any questions regarding the real estate market in Metro Milwaukee.
Based on most recent mortgage rate sheet from Wisconsin Mortgage Corporation
(www.wimort.com).
Disclaimer: Posted rates are subject to adjustments based on Customer Credit
Score and Loan-To-Value. Terms are subject to change without notice. This is
not an advertisement to extend consumer credit per Sec. 226.2 of Regulation Z.
Please leave a comment if you need any additional information.
Blog dedicated to news and information about Milwaukee's growing condo market. Information maintained by David Ray of Shorewest Realtors, specializing in condos in Milwaukee's downtown, East Side, Third Ward, Brewer's Hill, and Walker's Point. For more information about buying or selling real estate in Milwaukee, please contact David Ray at 414.961.8314 X148, dray@shorewest.com, or DavidKnowsDowntown.com.
Real Estate Broker Associate / Realtor® / CSRS / CPA ***** I am a lifetime resident of metro Milwaukee Area. I enjoy the restaurants, activities, events, and nightlife in Milwaukee's downtown and surrounding areas including the East Side, Third Ward, and Walker's Point. I am a Real Estate Broker Associate, Realtor®, and Certified Shorewest Relocation Specialist specializing in the downtown Milwaukee condominium market, although I represent buyers and sellers through the greater Milwaukee area. When not listing, showing, or selling real estate, I enjoy walking my two Shiba Inus (a Japanese breed) and relaxing with family and friends.
