NEW YORK – The higher your credit score, the better your chance to snag a lower mortgage rate and potentially save tens of thousands of dollars over the life of a loan. But one missed payment or a default can instantly bring a credit score down.

“Depending on your credit history, a 15- or 20-point shift could mean the difference between being approved or declined – or better terms or higher costs,” says Rod Griffin, the director of public education at Experian.

The top way to increase your credit score: Pay your bills on time and reduce your credit card balance. That habit alone can improve a score as quickly as within a few billing cycles.

“As a rule of thumb, you could see an appreciable difference in six months,” says Ted Rossman, an industry analyst at CreditCards.com.

However, “if a missed payment has dragged your score down, your score could rebound in a month or two; a series of late payments will take longer to make a full recovery,” Griffin adds.

The recovery for a late mortgage payment can take about nine months for a credit score to recover. Filing for bankruptcy could take as long as five to 10 years.

The overall credit history of the borrower plays a significant role in how fast they can recover from financial mishaps, says Griffin. But “the better your scores are to start with, the more difficult it is to improve them.”

A lower credit score reflects a pattern of missed payments, so adding one more missed payment isn’t as significant. But a person with a clean credit report who misses a payment will see a bigger impact, Miron Lulic, founder and CEO of SuperMoney, told CNBC.

However, the goal needn’t be a perfect score, but “the goal is to have a score that qualifies you for the best terms of rates, generally 750 or above,” Griffin says.

Overall, credit scores recently have been at an all-time high, according to FICO. FICO credit scores range from 300 to 850.

Source: “Here’s How to Improve Your Credit Score Right Away,” CNBC (Feb. 25, 2020)

© Copyright 2020 INFORMATION INC., Bethesda, MD (301) 215-4688

WASHINGTON (AP) – U.S. long-term mortgage rates declined this week as growing concern over the economic impact of China’s viral outbreak spurred a steep downturn in global stock markets.

Mortgage buyer Freddie Mac said Thursday the average rate for a 30-year fixed-rate mortgage fell to 3.45% from 3.49% last week. Rates are far below year-ago levels: the benchmark 30-year loan averaged 4.35% a year ago.

The average rate on a 15-year fixed mortgage slipped to 2.95% from 2.99% last week. The slide in stock prices pushed investors to buy up U.S. Treasury securities, viewed as a safe haven in the event of an economic downturn.

The rush of investors toward U.S. government securities pushed the yield on the 10-year Treasury note sharply lower. It marked a record low of 1.28% Thursday morning. Long-term mortgage rates usually follow the yield on the 10-year note.

The decline in mortgage rates in recent months and the solid economy have pushed up demand for housing. Americans signing contracts to buy homes jumped 5.2% in January from the previous month, the National Association of Realtors reported Thursday.

Real estate brokerage firm Redfin said its agents are seeing an escalation in competition and bidding wars among would-be homebuyers. “As buyers snatch up available homes, we see more competition and higher prices on the horizon,” said Daryl Fairweather, Redfin’s chief economist.

Freddie Mac surveys lenders nationwide between Monday and Wednesday each week to compile its mortgage rate figures. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates.

The average fee on 30-year fixed-rate mortgages was unchanged from last week at 0.7 point. The average fee for the 15-year mortgage also was steady, at 0.8 point.

The average rate for a five-year adjustable-rate mortgage fell to 3.20% from 3.25% last week. The fee remained at 0.2 point.

Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

ORLANDO, Fla. – Dear Anne: I sat through a four-hour arbitration with my broker and, to my shock, the arbitration panel found in favor of the cooperating agent. I was the listing agent on this deal, and I am the procuring cause of the sale.

You would think a panel of five experienced real estate agents could get it right. But apparently not. It should have been a slam-dunk decision in my favor.

I won’t bore you with the details, but I found it offensive when I learned my local board is helping the so-called “winners” collect their commission. My broker received an email from board staff reminding him to deposit my commission into the board’s escrow account so they can hold the money while I decide if I want to file a procedural review or take this thing to court. If I don’t do either, they will disperse the money to the complainant.

I’m going to file a procedural review that I understand is an appeal of sorts for arbitration because the board needs to be put on notice their arbitration panel got it wrong. But one thing is for sure: Neither the board nor the complainant will see a dime of my commission under any circumstance. I earned it, it’s spent, end of the story.

There is nothing they can do to me. So, what do you think of this escrow debacle? Signed, It’s My Money

Dear, It’s My Money: Apparently you like using “I” and “my” a lot. You’re right there is nothing they can do to you, assuming the “they” you are referring to is your local board. Here’s an overview of the process:

• Arbitration is between brokers because compensation is offered and accepted by brokers; therefore, your broker is the one on the proverbial hook – not you. And yes, you participated in the arbitration hearing only because you have a financial interest in the outcome, but you are not a party to the arbitration. Filing for arbitration and procedural reviews must be done by your broker.
• Your broker has 10 days from the transmittal of the award to pay the prevailing party or deposit the disputed funds into the board’s escrow account for safekeeping. Absent a request for a procedural review or notice of intent to initiate a legal challenge within the timeframes specified under the National Association of Realtors®’ (NAR) Code of Ethics and Arbitration Manual, the award becomes final and the board releases the money to the prevailing party.
• Failure to deposit the funds into the board’s escrow account will result in your broker receiving an invitation to appear before the board of directors to explain why they did not comply with this policy, which means your broker could be found in violation of a membership duty and the Board of Directors may impose disciplinary sanctions or be given more time on the clock to pay the award or deposit it into the Board’s escrow account. If the deposit isn’t paid within the time set by the Directors, discipline may be imposed automatically. If you don’t believe me, click here to learn more.

A lot of folks seem to think a procedural review is a second chance to have their case heard all over again before a new panel. It is not.

Quite the contrary, the purpose of the procedural review is to address alleged procedural deficiencies or irregularities that could constitute a deprivation of due process. The question is: Did something go wrong that resulted in depriving your broker of his due process rights? The laundry list of procedural deficiencies or irregularities could include:

• • Fraud
  • Coercion
  • Bias
  • Prejudice
  • Evident partiality and more

For example, your broker is entitled to have his case heard before an impartial panel. If a panelist’s manner of questioning appeared to bias in nature, the board of directors could overturn the award and send the matter to a new hearing panel or release the parties to go to court. Another possible flaw: The arbitration hearing officer didn’t allow your broker enough time to review and prepare for evidence he was not aware of prior to the hearing.

When your broker files for a procedural review, the board president or his/her designee will review the request to see if there is a legitimate basis (procedural deficiencies) for the review, like those I have already identified. If the request for a procedural review is based on the undesired outcome of the arbitration, it will be returned to your broker because it’s not a legitimate basis for the procedural review.

Hint: A procedural review is just that – a review of procedures and not a review of the decision itself.

However, if your broker insists that the request goes as written, the matter will be forwarded to the board of directors anyway. Why? Because it is the broker’s due process right to appear before the board of directors. If the board of directors concludes that there was no significant deprivation of due process, the arbitration panel’s award will more than likely be upheld.

The board is not trying to be difficult or take sides. It’s simply following NAR’s policies of enforcement. I suspect, if the tables were turned and you were on the side of the prevailing party, you would be in favor of the board having an escrow account.

Your comments about those who sat on the arbitration tribunal are unfair. These members take time away from their businesses to serve on tribunals. They attend annual training and want to make a positive difference by making the best decision possible based on the facts, testimony and evidence you presented to them.

The quality of your presentation before a panel falls on your doorstep, not the panel’s. And who knows what the outcome of the arbitration will be. One thing that is sure: The panel didn’t see this as a slam-dunk case in your favor.

If you go in believing you’ve got a win in the bag, you’re likely doing yourself a disservice. It’s an attitude that could end up getting you where you are today.

Anne Cockayne is Director of Local Association Services for Florida Realtors

© 2020 Florida Realtors®

NAPLES, Fla. – The Sunshine State can offer more than just sunshine for prospective homebuyers. While the climate has always been a big draw for new residents, another element has led many in recent years to relocate to Southwest Florida: taxes.

Local professionals say that the Southwest Florida real estate market has seen a significant boost thanks to people migrating from northern states with much harsher tax environments. Residents who have lived for decades in states such as New York have taken advantage of an opportunity to find relief in Florida, where the tax burdens are less heavy.

“Nobody, as far as I know, likes to pay more taxes if they can pay less,” said Tony Lachowetz.

Lachowetz, 61, moved down to Florida in November 2018 after retiring as a University of Massachusetts Amherst business professor. He lives in Florida about six and a half months of the year, which allows the educator to establish residency in the state. The remaining months of the year, he spends in Massachusetts where he still has family and a second home. Lachowetz also continues to remotely teach a few online courses for the university.

He said the decision to move was, in part, motivated by the savings he could find to the south.

“It’s just a cost of living move,” he said. “You immediately get real estate tax breaks through the homestead (exemption). You also immediately get a state income tax break.”

Homeowners in Florida can claim an up to $50,000 homestead exemption on their primary residence, which reduces the assessed value of the residence and the property tax that the owner pays.

Lachowetz said he’s also been able to save about $7,000 per year thanks to the fact that Florida has no personal income taxes.

According to New York City-based personal finance technology company SmartAsset, “homeowners in Massachusetts face some of the largest annual property tax bills of any state in the country,” and the state has an average effective tax rate of 1.22%, which is higher than the national average of 1.08%.

Florida’s average effective property tax rate sits at 0.98%, lower than the national average, according to SmartAsset.

“I was excited about the prospect of not having to pay (income tax) anymore and paying a real estate tax that, as a percentage of the value of my home, is about half of what I’m paying in Massachusetts,” Lachowetz said. “The prospect of coming down here and eliminating some taxes or reducing some real estate taxes by quite a bit, that certainly got my attention.”

And while Lachowetz just has the refrigerator and heat on in one room of his Massachusetts house, he’s still dishing out more in electric bills than in the Florida house that he is fully utilizing.

“I pay about half in utilities as I do in Massachusetts right now, and I’m not using my house in Massachusetts,” he said of the northern home that is about half the size of his residence in Florida. “That’s just how high the electric rates are right now.”

Lachowetz said he’s noticed that states like Massachusetts and New York are losing population “every year.”

“California is losing so many people and so many businesses every year, and people are moving to low-tax, low cost-of-living states like Idaho, Texas and Florida.”

Between 2017 and 2018, almost 23,000 people moved to Lee and Collier counties, and most of those people migrated from somewhere else in the U.S, according to U.S. Census Bureau estimates.

“There’s a reason (for the population growth),” Lachowetz said. “It’s not just the weather.”

Pros and cons of Florida’s tax environment

“Other states are getting less tax-friendly,” said Katherine Loughead, a senior policy analyst with the Tax Foundation, a Washington, D.C.-based think tank. “Florida has been pretty competitive for a while now, having never had an individual income tax. Other states are increasing their income taxes or creating new, more burdensome taxes, and that drives a lot of people out of state.”

In fact, the Sunshine State ranks fourth in the nation on the foundation’s 2020 State Business Tax Climate Index, which Loughead said measures how competitive state tax structures are.

“There are only three states that have a more competitive overall tax code that is friendly to businesses and makes taxpayers feel they are being treated fairly,” she said. One of the most prominent reasons for Florida’s high ranking is the total lack of an individual income tax, she said.

Loughead noted that taxes on income are generally more harmful to economic growth than taxes on consumption or on property “because income taxes penalize that next dollar of investment.”

She stated that the corporate income tax is also “pretty competitive compared to a lot of other states.” Florida’s corporate tax has a relatively low rate and is a flat tax, meaning that it’s not a graduated rate that will charge higher amounts for those who earn more, she said. Compared to states such as New Jersey, which has a top statutory corporate tax rate of 10.5%, Florida’s 4.458% is relatively affordable for businesses.

According to Loughead, Florida is also for wealthy retirees as it doesn’t have estate or inheritance taxes, commonly referred to as “death taxes.” Therefore, “it’s a good place for retirees to go if they don’t want taxes levied when they transfer their estates or make big gifts to their descendants.”

Despite all of Florida’s advantages, she noted that there is still plenty of room for the state to be even more tax-friendly. She mentioned the tangible personal property tax, which applies to the value of tangible property such as equipment used in a business. The Florida Department of Revenue defines tangible personal property as “all goods, property other than real estate, and other articles of value that the owner can physically possess and has intrinsic value.” Therefore, the tax commonly applies to assets such as business equipment, furniture, and automobiles, according to the Tax Foundation.

“It’s really the land and improvements and buildings that should be subject to the property tax,” she said.

Loughead also referenced the bonus depreciation deficiencies that Florida has. Bonus depreciation is an incentive in which businesses can deduct a large percentage of the price of certain assets, instead of writing them off over the life of those assets.

She said that under the Tax Cuts and Jobs Act of 2017, when a business invests in machinery and equipment, it can write off 100% of that investment in the first year, while Florida code only allows 14%.

“Businesses are getting more of a benefit on the federal level than they are on their Florida corporate income tax returns,” she said. “That basically increases the cost of capital and makes it harder for businesses to invest in machinery and equipment. It’s kind of an added penalty for in-state investment. It’s levied the hardest against those that have big capital expenditures in the state of Florida.”

Lastly, she said that the sales tax in the state should be “broadened and modernized” based on the fact that it currently does not apply to a numerous amount of services. She said that services such as dry cleaning, barbershops, parking, landscaping and others are exempt from the sales tax.

“It would make sense for the sales tax to apply neutrally to a broad base of final consumer goods and services,” she said. “That would generate more revenue to bring down the overall sales tax rate or other tax rates.”

Local real estate market sees boost from ‘tax refugees’

“It’s definitely been a positive for our market,” said Bob Quinn, a Realtor with The Re/Max Realty Team Office in Cape Coral who represented Lachowetz in his home purchase. “If someone can save enough in taxes, it becomes a big plus for them, especially in retirement if you can reduce your income taxes by moving from a high-tax state to Florida. It just makes a lot of sense for people.”

He said he’s met more buyers in recent years who have relocated to Florida to escape some of those conditions.

Quinn moved to Southwest Florida in the late ‘70s and said that back then, the population of Cape Coral and throughout the region consisted of mostly retirees from the Midwest. The reason for making Florida their new home was to escape the harsh winters, and often, their Southwest Florida home was a second, seasonal residence. Many of these buyers would still maintain their primary residence up north.

This has changed, however, in recent years, Quinn said, as the cost to maintain two homes rose and residents opted to just keep their Florida locations due to the lower taxes.

“This is especially true as northern property and income taxes kept rising,” he said. “Over time, it became a tax issue. People are still moving here to get out of the cold and snow, but escaping from a high-tax state has become another priority for people.”

He also mentioned that technological advances have allowed people to keep their jobs from the North, work remotely from their new homes in Florida and still receive the tax benefits.

Quinn stated, however, that some of these high tax states are taking a “close look” at people who migrate to Florida or other southern states. He said due to this, residents who relocate need to “go about it the right way.”

“You start seeing a lot more of these really intrusive residency audits,” he said. “There’s a growing probability that their former high-tax states are going to take a real close look at them to make sure they’re legitimate Florida residents. They are trying to grab that tax revenue back from all the people who have left their states.”

He said that the extent of this doesn’t just include states going after people while they’re alive but also going after their estates and heirs after they pass away.

Quinn suggested that new residents consult with a Florida-based certified public accountant and a Florida-based estate planning attorney when they relocate.

Bill Earls, a John R. Wood agent who regularly handles some of the priciest listings in Naples, agreed that the escape from tax burdensome states is boosting the local market.

“It’s no question that ‘tax refugees’ coming here is another shot in the arm for us,” Earls said. “I think a lot of these people who are smart, economically successful people, they see the writing on the wall. Those northern governors where they see income flights from their states, they’re going to raise taxes again. The fact that people are moving here to get away from the tax burden in northern states is palpable.”

He said that while some of the less wealthy individuals may be moving down to Florida to capitalize on the financial opportunity, some of the wealthiest are also getting involved in the trend.

Earls stated that some titans of industry are fed up with the tax burdens of other states and are making a statement by moving to the Sunshine State. He mentioned President Donald Trump, who recently switched his primary residence from Manhattan to Palm Beach. The president tweeted after the news was released, noting the “millions of dollars in city, state and local taxes” he pays each year in New York.

“Did he do that because he needed to and couldn’t afford to pay?” Earls asked. “No. But I think he’s just had it. It’s almost like a protest movement, not buying into New York’s debacle anymore.”

Demand bringing more development to Southwest Florida

Pablo Veintimilla, the Southwest Florida market president for Centennial Bank, said that Florida commercial and residential construction came to a “screeching halt” when the 2008 financial crisis hit, leading to a lack of new residents.

Now, with the economy’s recovery and the cost of living rising in northern states, the building has begun again, Veintimilla said. “Now we’re back to migration,” he said. “There’s still a lot of land in Florida. And they’re building all these homes and now they’re coming down. And we see now a lot of construction happening here again. They’re anticipating this demand, and they’re continuing to build.”

Along with the demand, the current low-interest-rate environment for mortgages allows new residents to purchase more than what they anticipated, he said. This, combined with the lower cost of living in Florida, makes the area even more appealing.

“The people who are moving here and looking to buy a home, because the interest rates are so low, they can afford more of a home,” he said.

This great Florida migration does have some unintended consequences, however.

“That migration here is causing the rise of real estate prices,” Veintimilla said. “You have a large segment of the population – teachers, firefighters, policemen – starting to get priced out of the market.

“Affordable housing is a big challenge here.”

© 2020 Journal Media Group, Andrew Wigdor. This article will be available for 30 days following publication.

CHICAGO – Remind sellers to ask their financial advisers about tax deductions they’re eligible for in a home sale. One of the big ones they may qualify for: selling costs. As long as a cost is directly tied to the sale of a home, it qualifies for tax breaks.

Also, sellers who have lived in their home as their principal residence for at least two out of the five years prior to selling it can earn tax advantages. “You can deduct any costs associated with selling the home – including legal fees, escrow fees, advertising costs and real estate agent commissions,” says Joshua Zimmelman, president of Westwood Tax and Consulting in Rockville Center, N.Y.

But tax experts say these costs can’t be deducted in the same way as mortgage interest. They’re subtracted from the sales price of the home. That turns into a capital gains tax.

Other potential deductions for sellers are home improvement and repair costs. Sellers who performed renovations to make their home more marketable may be able to deduct those costs from their taxes too. Renovation projects could include painting the house or repairing the roof or water heater, for example.

“If you needed to make home improvements in order to sell your home, you can deduct those expenses as selling costs, as long as they were made within 90 days of the closing,” Zimmelman says.

Source: “5 Sweet Tax Deductions When Selling a Home: Did You Take Them All?” realtor.com® (Feb. 24, 2020)

© Copyright 2020 INFORMATION INC., Bethesda, MD (301) 215-4688