Information for Buyers & Sellers

Presented by Miami Condo & Florida Real Estate Expert Nell Kellett

Here is a collection of frequently asked questions that I have put together to help you in buying or selling a home. If you have any other questions, not listed here, feel free to contact me.
By clicking on any of the questions below, you may view the answer.
From Buyers

What standards do appraisers use to estimate value?
Are taxes on second homes deductible?
What is the return on new versus previously owned homes?
What are the rules on capital gains when inheriting a house?
What home-buying costs are deductible?

From Sellers

What is the difference between market value and appraised value?
What is the difference between list price, sales price and appraised value?
What's a house worth?
Are seller-paid points deductible?
Can I deduct the loss I suffered when I sold my home?

What standards do appraisers use to estimate value?

Appraisers use several factors when estimating a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value. For detailed information on appraisal standards, contact the Appraisal Institute at 875 N. Michigan Ave., Suite 2400, Chicago, IL 60611-1980; (312) 335-4458.

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Are taxes on second homes deductible?

Mortgage interest and property taxes are deductible on a second home if you itemize. Check with your accountant or tax adviser for specifics.

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What is the return on new versus previously owned homes?

Buying into a new-home community may seem riskier than purchasing a house in an established neighborhood, but any increase in home value depends upon the same factors: quality of the neighborhood, growth in the local housing market and the state of the overall economy.
One survey by the National Association of Realtors shows that resale homes do have an edge over new homes. The trade group's figures show the median price of resale homes increased 4.3 percent between 1999 and 2000, compared to 2.8 percent for new homes in the same period.

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What are the rules on capital gains when inheriting a house?

When children inherit a home, the Internal Revenue Service determines their basis in the property on the date of the owner's death. The cost basis is not the amount the owner originally paid for the house, but the property's fair-market value on the date of the parent's death.
Cost basis is a tax term for the dollar amount assigned to a property at the time it is acquired, for the purpose of determining gain or loss when it is sold. For example, one of the three siblings sold his or her share of a property to be divided equally, he or she must pay capital gains tax for whatever profit made over one-third of the new basis.
Other tax consequences include estate taxes. However, the estate must total $675,000 or more for tax year 2001 before tax issues become a concern. The IRS allow residents to pass on property, cash and other assets worth up to a total of $675,000 for tax year 2001 before charging the heirs any taxes. This figure will rise each year for the next several years.
Regarding the transfer of ownership, quit-claim deeds often are used between family members in situations such as this when an heir is buying out the other. All parties must be agreeable to dropping a name from the title. For more information, consult the IRS's Publication 448, "Federal Estate and Gift Taxes." Order by calling 1-800-TAX-FORM.

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What home-buying costs are deductible?

Any points you or the seller pay to purchase your home loan are deductible for that year. Property taxes and interest are deductible every year. But while other home-buying costs (closing costs in particular) are not immediately tax-deductible, they can be figured into the adjusted cost basis of your home when you go to sell (any significant home improvements also can be calculated into your basis). These fees would include title insurance, loan-application fee, credit report, appraisal fee, service fee, settlement or closing fees, bank attorney's fee, attorney's fee, document preparation fee and recording fees. Points paid when you refinance an existing mortgage must be deducted ratably over the life of the new loan.

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What is the difference between market value and appraised value?

The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300.
Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.

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What is the difference between list price, sales price, and appraised value?

The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area.
The sales price is the amount of money that a buyer is willing to pay for a property in an open market place It may be more that the appraised value in a rising market and less in a falling market.
The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors. It is the appraised value that lenders use to determine the amount they will lend

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What is a house worth?

A home ultimately is worth what someone will pay for it. Everything else is an estimate of value. To determine a property's value, most people turn to either an appraisal or a comparative market analysis.
An appraisal is a certified appraiser's estimate of the value of a home at a given point in time. Appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools. Appraisers also take lot size, topography, view and landscaping into account. Most appraisals cost about $300.
A comparative market analysis is a real estate broker's or agent's informal estimate of a home's market value, based on sales of comparable homes in a neighborhood. Most agents will give you a comparative market analysis for free.
You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor offices, through private real estate information companies or on the Internet.

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Are seller-paid  points deductible?

As of Jan. 1, 1991, homeowners have been able to deduct points paid by the seller. This deduction previously was reserved only for points actually paid by the buyer.

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Can I deduct the loss I suffered when I sold my home?

The Internal Revenue Service currently does not allow deductions for losses on the sale of your own home. In fact there's no way to use a loss on the sale of your principal residence to your advantage on your income tax return.

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