Let's Chat Indianapolis!: August 2009

Show me the money!  How much do you walk away with after the sale of your home?   That's what you really want to know -- right?  Here's the calculation:

Sales Price - Your Mortgage Payoff - Expenses  =  Net Proceeds. 

A good listing agent will provide you with an estimate of these Net Proceeds based on different sales prices prior to placing your home on the market.    Later, when you receive an offer, your agent will revise this estimate based on the specific variables in the offer. 

Examples of common seller expenses are:  Brokerage Fees (covered in Part 1), Pro-rated Property Taxes, Title Insurance, Home Warranty, Recording Fees, and other Misc Fees which vary with each transaction.

In part 2 of this series, we're tackling the subject of pro-rated taxes.  If you live in almost any other state...it's probably no big deal.  But if you live in Indiana, where taxes are billed one year in arrears.....it's a crazy big deal!  So, here's a brief and hopefully easy to understand explanation of how pro-rated taxes work in the state of Indiana ("easy" and "property taxes" -- now that's truly an oxymoron!)

In Indiana, property taxes are billed twice a year, in May and September for the prior year.  It works like this:  In May of 2009 a tax bill was mailed, from the county where the property is located, for payment of property taxes for the period of January 1 through June 30 of 2008.  In September 2009 a second tax bill will go out for payment of taxes for the period of July 1 through December 31, 2008.  This continues each year until a homeowner decides to sell their home.  At the time of closing, since the seller has been paying a year in arrears, they will need to "catch up" on taxes through the date of closing.  Understand, the homeowner isn't behind in their payments.  The county hasn't billed them yet! 

Let's look at an example of how this affects a seller:  It's June 1, 2009 and you've just successfully negotiated an offer to sell your home and the closing is scheduled for June 30.  The purchase agreement specifies taxes are to be pro-rated through date of closing, which is customary in Indiana.  You've already paid the May 2009 bill which was applied to the taxes for the first half of 2008, but you still owe taxes from July 1, 2008 through date of closing, June 30, 2009, even though these have not yet been billed. 

For our example, let's say that taxes on this property are $2000/half (every 6 months), as the seller you will be required to pay the buyer $4000 at closing in order to "catch up" to the date of closing.  Why does the money go to the buyer?  Why doesn't it go to the county?  Good question.    Because the seller has paid all of the taxes which have billed, the county won't accept "pre-payment" for future bills.  That means that the next bill in September 2009 will go to the new homeowner, even though it's for a time period prior to their purchase of the home.  Make sense?

This pro-rated tax amount can be a significant number and may seriously impact a seller's bottom line.  Here's the good news.    When you purchase your next home, the seller of that property will also be paying you a lump sum at closing to cover taxes which are due, but not yet billed.

Well that's a brief and over simplified explanation of pro-rated property taxes for Hoosiers.    Over simplified???? Unfortunately, yes!   For instance, not all counties bill at the same time of year, and many counties, like Marion (Indianapolis) are often billing an additional 6 months or more behind.   The good news? -- You don't need to understand every scenario, that's why you hire a knowledgeable agent to guide you through the process!

For more detailed information regarding Indiana Property Taxes:

• General Property Tax Information
• Property Tax Deductions
• Property Tax Appeals Process
• Learn Where Tax Dollars Are Spent in Indiana

If you're behind in your mortgage payments or facing foreclosure, please read this blog written by Rick D. Misitano, Senior Paralegal,Law Offices of James M. Bosco & Associates in Massachusets.  I've heard of homeowners using this strategy and wanted to pass this along to our readers as well.

You don't have to look too far to find lots of information for "First Time Home Buyers" -- but what about First Time Sellers? 

Meeting with many first time sellers in the Indianapolis area over the last several years, we've discovered they have lots of questions.  They're ready to move, but often don't understand how the process works, how long it takes, what to expect and how much it costs.   Often, after chatting for awhile, they come to the conclusion that it's not the right time for them.  Maybe they owe more than their home is worth.  Maybe their credit score isn't adequate to qualify for a new loan to purchase their next home.  Many don't realize the impact of Indiana's pro-rated property taxes which bill one year in arrears.  Yes, one year..... and unfortunately, several central Indiana counties, like Marion (Indianapolis) are currently billing as much as 2 years behind.  This can make a dramatic impact on the seller's bottom line.

 So this is the first blog in a series dedicated to answering the questions of the first time seller.   Maybe you're thinking you won't be ready to sell for another year or so.  Don't stop reading!  Now is exactly the right time to learn what it takes to effectively prepare not only your home, but also your finances. 

Today's blog answers the question "What are brokerage fees and how much are they"? 

Brokerage fees are the amount a Brokerage Company charges you, the homeowner, to sell your home.   Each Brokerage Company may charge whatever the market will bear.  In Indiana, it's not unusual for the fee to be between 6 -7% of the sales price.  For example, if your property were to sell for $250,000, and the fee were 7%, the charge by the broker would be $17,500. 

Wow!  That's a lot of money!  Where does that all go? 

Well in a typical Indiana listing contract a large portion of it, usually at least half, or $8,750 in our example, is paid to the broker & agent representing the buyer of your home.  Your listing agent cooperates with not only other local companies in Indianapolis, Greenwood, Center Grove, Whiteland, etc., but also brokerages and relocation companies from around the country to find a buyer - any buyer - to purchase your home. After all, you don't care who brings the buyer, or where they come from -- as long as someone does!   Providing a full share of the brokerage fee to the buyer's agent insures that agents from all companies are incented to show, and sell, your home.

Where does the other portion go?  It funds all of the marketing and advertising used to promote your property - signs, flyers, on-line advertising, print media, newspapers, Open Houses, virtual tours, photography, etc...  It also compensates your listing agent who has been working diligently to promote the sale of your home and who will guide and represent you through the entire transaction from putting the sign in the yard to the closing, or as the Hoagland Team prefers to call it....The Celebration Table!

An interesting thing about brokerage fees is that they are never paid if the home doesn't sell.  They also don't change if the home sells in 2 weeks, 2 months, or 2 years.  Imagine going to the doctor and not paying until you were cured!

So all of the expenses of selling are brokerage fees - right?  Well, not quite.   Future blogs in the series will delve into some of the other costs like Title Insurance and pro-rated taxes along with other topics like staging, pricing, marketing and.....

Posted by Steve & Tonda Hoagland, www.PerfectPlaceForYou.com

Park Forest, Whiteland  -  Announcing a price reduction on 590 Cynthia Lane, a 3,406 sq. ft., 3 bath, 5 bdrm 2 story "2bdrms down, 3 bdrms up".   Now  $220,000

Property information

Originally Posted: Monday, August 10, 2009 1:27 PM by Tonda & Steve Hoagland at www.PerfectPlaceforyou.com

Hill Valley Estates, Indianapolis  -  Announcing a price reduction on 42 E Hill Valley Dr, a 1,482 sq. ft., 2 bath, 3 bdrm ranch. Now MLS® $124,900 - Popular Hill Valley!.

Property information

Originally Posted: Monday, August 10, 2009 1:29 PM by Tonda & Steve Hoagland at www.PerfectPlaceForYou.com

When you're looking for a new home, you're searching for  the Perfect Place for You (Yes, that's the name of our website-- sorry about the shameless plug!) ... But in addition to the "perfect" home, what other special places, activities, restaurants, etc. help to make where you live "perfect"?

We would love to hear about your favorite "local" hangouts or activities!  How would you complete the following sentence for someone new to the Indianapolis or Greenwood area?   "You know, the perfect place for you to visit is....."

Here are a few of ours:

• Hamptons Market - located in the heart of the Center Grove area, Hamptons is convenient and carries the very finest meat products in Indiana!  Looking for a filet mignon for a special occasion?  Don't walk - run to Hamptons Market!
• The Monon Trail - we enjoy catching the trail in Broad Ripple and riding our bikes north.  Nice to catch dinner on the return to Broad Ripple too!
• Mallow Run Winery - just off Whiteland Road Mallow Run features good wine - appropriately priced, and Saturday nights with music and pizza make it a destination for you and your friends!
• The Willard - downtown Franklin's best pizza and beer joint!  Great pizza, good draft beer selection, outdoor dining, and a small town feel.  Trust us - you'll enjoy your visit.
• Louie's Bar & Grill - located in the Center Grove area - it's the closest thing to Sam Malone's Cheers that northern Johnson County has to offer.  Great food, good prices (dinner for under $10), and a fun atmosphere.
• Rick's Boatyard - watch the sailboats as you dine on the edge of Eagle Creek Reservoir.  It's kind of like going on vacation for the evening.
• Augustino's - at Stop 11 and Emerson Avenue Augustino's is great Italian food!  We have never been disappointed!  Be certain to start your meal with the cheesy bread - That's Italian!  Yum!

These are just a few of our favorites.  Share yours and tell us why you love them!  We'll publish the findings at www.PerfectPlaceForYou and a future newsletter.

Posted: Thursday, August 06, 2009 3:14 PM by Tonda & Steve Hoagland