By Carline Martin
Q: I am really interested in home decorating. I keep hearing so many conflicting opinions about pain colors. Is white really the best choice for paint color?
A: Thank you for your question and the answer is a resounding NO. And YES. This all depends on whether you are settling into your home or preparing to sell. Whether you have just moved into your new dream home or sprucing up the home you have lived in for decades, if you plan on staying put for a while, putting your stamp on the décor and making the home feel comfortable for you should be your objective. Your home should be your sanctuary and your personal touch will make it so. Additionally, you home is where memories are made, so welcoming friends and family into a warm expression of yourself will create wonderful memories for years to come. Whether your personal style leans toward deep, cozy tones or more of a bright, flamboyant flare, make it yours.
However, if you are repainting to freshen up your interior to prepare for selling, you should take yourself out of the equation and view your home through the lens of the prospective buyer. Just as you put your own personal stamp on your home’s palette, the future owners will want to do the same. Not everyone has the same idea of what a home should feel like and many do not have the vision to see beyond what’s right in front of them. If your style doesn’t match theirs, they may discount the home because they are unable to imagine themselves living there. This is why, before listing your home, it is advisable to freshen up the interior with neutral shades of white or light gray. On first impression, the interior will not only convey a message of fresh and new but it will allow your home’s more important features to be highlighted. For example, you wouldn’t want to overshadow a beautiful chef’s kitchen with bold, loud wall color.
I’ve spoken with many decorators over the years and the underlying message from almost all of them is precisely this. If you plan on remaining in your home for several years, make it an expression of yourself. However, as soon as you decide to sell, neutral will appeal to everyone.
Q: I will be retiring next year and I have begun planning for some changes I’d like to make as I move into my golden years. Downsizing my home is my main focus but I am overwhelmed, not only with what’s involved with clearing out 32 years of accumulation and making overlooked repairs but I cringe at the thought of what capital gains tax will mean for me. Any advice?
A: Thank you for your question. Let’s start with the more “cringeworthy” part of your question. While any tax advice you receive should come directly from your accountant, I will be happy to explain how the capital gains tax process works. For specific information as it pertains to you and your particular situation, you should reach out to your tax professional.
Capital gains no longer has anything to do with the price of what you buy, it has to do with the cost basis in the property you are selling. Normally, the basis is the purchase price plus capital improvements. A capital improvement is an improvement you have made to your home that increases its value, not necessary repairs. For example, Kitchen and bath remodeling will add to the value of your home and would be considered a capital improvement. Replacing a refrigerator that no longer works would be considered a repair.
You have not indicated whether you are an individual or half of a married couple. As long as you have resided in the home for at least 2 years during the past 5 years prior to sale, as a couple you would receive a $500,000 capital gains exemption. As an individual, you will receive $250,000. For example, a married couple purchased a house for $100,000 plus $50,000 capital improvements over the years plus $500,000 exemption. In this scenario, capital gains will be paid on the difference between $650,000 and the selling price. Closing costs will reduce capital gains, as well, as will broker commissions, conveyance taxes (state and local). The caveat is if the property you are selling was ever rented, a portion or in its entirety, there is forced depreciation for the rental income received, which reduces your cost basis. One last thing that I would like to add is that it is important that you save receipts for any capital improvements you make to your home. If you are unsure whether work done to your home falls into the category of capital improvement or necessary repair, check with your tax professional.
Now for the fun stuff (or not). Clearing out a home with decades of memories and accumulated “stuff” can be onerous, at the very least. It’s often difficult to know where to start. I would suggest tackling this one room at a time. Sort out and separate what you would like to keep, what you would like to pass on and what has exhausted its lifespan. Anything that has no future use to anyone should be immediately tossed in the trash or taken to the dump. If you will be disposing of large, heavy items such as a spare refrigerator in your garage that no longer works, you may want to considering hiring a handyman or junk collector
The less you have starting you in the face, the less overwhelming the process will feel. Next, decide if and what memorable items you would like to pass onto family members. Offer the items to them with a deadline for retrieval. Once you have the contents of your home pared down, you should begin discussions with your Realtor to determine what your home may sell for in its current state and what improvements/repairs may increase its value and position it for a quick and easy sale. I like to suggest to clients that they consider conducting an inspection prior to listing so there are not hidden surprises. If a homeowner knows what issues should be addressed, they can discuss with their Realtor whether it’s wise to make the repairs or offer a financial concession.
Once you have agreed on a marketing plan with your Realtor, get your home listed. Your Realtor will coach you through the selling process and how you should present your home for sale. If you have not yet located your new residence, discuss a plan with your Realtor that will simplify the transition. Whether you are remaining local or relocating to another town or area of the country, your Realtor can, most likely, assist you with buying your next home or can refer you to a local agent familiar with the market on the other end.
From where you are standing right now, you may be feeling overwhelmed by what is staring you in the face. Allowing yourself time and breaking the process into steps will help it feel more manageable. I have guided several clients through this process, from the clearing out stage, through the remodeling and repair stage, straight through the sale. They always extend profound appreciation for my assistance and guidance. Your Realtor can be your most valuable resource so be sure to take full advantage of their expertise.
SEND ME YOUR QUESTIONS – If you have a real estate or home related question for which you would like a professional opinion, please email me at carlinemartin@bhhsne.com with “Sentinel” in the subject line. Each month, I will provide answers to one or two selected questions. Email me your Real questions. I look forward to hearing from you!
This article does not offer the opinions of Berkshire Hathaway/New England Properties and is not intended to provide legal, medical or tax advice.
