Sellers • May 19, 2022

What Happens When a Buyer Backs Out of a Real Estate Transaction?

by Don Koonce

Yes, the dream scenario for selling a home is that the entire process goes off without a hitch. But the reality is that sometimes there will be bumps in the road, and the best thing you can do is work closely with your agent to be prepared for them. One such obstacle is when a buyer decides to terminate their contract to purchase your home after all the terms have been agreed to. So, what’s a seller to do? Here’s a quick overview of how to prepare for this situation and the important role contingencies play when selling your home.

What Happens When a Buyer Backs Out of a Real Estate Transaction?

To be clear, a buyer can back out of a real estate transaction. The outcomes of doing so vary greatly. In certain cases, the buyer walks from the table with all their money intact. In others, they will have some fiduciary responsibility to the seller. If a buyer is hesitant about purchasing a home, the best time to back out of the deal is before their offer is accepted. As things progress, the ramifications of a buyer backing out can get messier. Once the purchase agreement is signed by both parties, it becomes legally binding, and the sale of the property can proceed.

After your agent and the buyer’s agent agree on purchasing terms, the buyer will place their earnest money—a deposit of funds to indicate that the buyer is serious about their offer and intends to pay the seller—in escrow to make sure they distribute properly when the deal goes through. Whether the buyer is on the hook for the funds in escrow depends on the terms of the contract, how far along you are in the selling process, and the corresponding state laws where the home is being sold. If a buyer backs out of the deal for a reason that was not stipulated in the real estate contract, then the funds will typically go to the seller. Still, this scenario can leave sellers scratching their heads. It’s not as if they’ve done anything wrong, and they thought they had found the right buyer, only to have the carpet ripped out from under them at the last minute. So, how can you protect yourself when selling your home?

The Importance of Contingencies

This situation highlights the importance of contingencies. Contingencies exist to protect buyers and sellers from the unknowns of a real estate transaction. Buyers will typically include contingencies in their offer to specify the criteria that will allow them to walk away from the deal unscathed and the timeframes for doing so. As a seller, it’s critical that you work closely with your agent to understand the terms of the buyer’s offer. Read about Common Real Estate Contingencies to understand the ins and out of the different contingencies buyers will generally tie to their offer.

What to Do After a Home Buyer Backs Out

Backup Offers

Backup offers are made with the knowledge that an existing offer is already on the table. They stipulate that if the first offer falls through, the second buyer’s offer is accepted. Talk to your agent about the possibility of accepting backup offers when you sell your home. Whether a buyer backs out due to buyer’s remorse, something they discover in the home inspection process, or for any other reason, backup offers can act as a remedy for their indecision by keeping the line moving to the next buyer.

If a backup offer isn’t on the table, the seller is left with the decision of whether to sell again. It’s true that a relisted home may elicit questions from buyers. They will want to know why the home is being relisted and what went wrong with the previous offer. It’s important to coordinate your relisting strategy with your agent and discuss what disclosures are appropriate. It may be discouraging to deal with a buyer backing out but remember that selling a home is all about finding the right fit. A buyer walking away doesn’t mean your home isn’t worthy of a winning offer, it just means that you haven’t found the right buyer yet.

Design • May 17, 2022

Asian-Inspired Home Décor and Design

by Don Koonce

In the pursuit of designing a home just the way you envision, there are countless sources of inspiration to pull from. Asian-style interiors are known for their ability to bring a sense of calm into a space. This helps to create something everything homeowner can see the value in—a relaxing home environment. In recognition of Asian Pacific American Heritage Month, we’ve compiled a short list of popular Asian-inspired home décor and design themes to consider incorporating into your home.

Asian-Inspired Home Décor and Design

Connection to Nature

One of the principal tenets of Asian design is a connection to nature. Using natural materials, a nature-influenced color palette, and houseplants in your home are all ways you can begin to create an interior that borrows from themes of Asian design. The bathroom is often a focal point for incorporating Asian-inspired natural materials. Using stone, wood, pebbles, and other materials will help your bathroom feel like it’s out in nature. Light stone tile in the shower will help to create the backdrop for a cascading water effect over smaller rocks and pebbles, while decorative wood elements can help tie the space together. These are just a few Asian-inspired design themes that can help take your bathroom to the next level.

Using natural colors will help to create a timeless aesthetic in your home. Whether your use of this color palette is exercised in large surfaces areas, such as wall paint, or in smaller accent pieces, such as complimentary décor items, natural colors will help deliver the serenity you’re looking to curate in your home. When decorating with indoor plants, organize them throughout your home based on their needs. For example, place plants that require more sunlight exposure in open areas and plants that have greater watering needs in easy-to-reach locations.

Feng shui

Feng shui, a practice that has existed in Chinese culture for thousands of years, has been largely influential to Western home design. Feng shui was founded on the idea of balancing oneself with their environment. In the modern world, the practice of feng shui has evolved into a relationship between humans and the objects with which we share our living spaces. Feng shui can often have the greatest impact in the bedroom. If there’s something off about the orientation of your bed, it can be tough to get consistent, healthy sleep. A slight change in your bedroom’s feng shui may be just the adjustment you need to revitalize the space.

Minimalism

The connection between Japanese Zen philosophy and Western minimalism goes back centuries. Tenets of Zen culture such as simplicity, open space, and removing unnecessary features directly influenced America’s own minimalist design pursuits. Nowadays, minimalism in home design is most often exemplified in the way we arrange our spaces, in eco-friendly decoration, and through the use of clean geometric lines. This focus on the essential not only has aesthetic value, but can also have greater environmental benefits, such as reducing waste.

For more information on design inspiration from across the globe, learn more about the influence of Spanish architecture:

What is Spanish Style Architecture?

Design • May 12, 2022

7 Ideas for Creating a Beautiful Yard

by Don Koonce

Spring is in the air and homeowners everywhere are preparing for a season of tending to their yards. Whether you’re looking to tackle a complete makeover, boost your home’s curb appeal, or simply make a few DIY upgrades, these ideas will help you make the most of your home’s landscaping.

7 Ideas for Creating a Beautiful Yard

1. Remodel Your Patio

The best patios are durable and long-lasting. If your patio requires repair, a remodel can play a significant role in creating the beautiful backyard you envision. Think about how your patio will be used before choosing materials. For example, if you plan on using it as a dining area, an uneven material like cobblestone may not be the best choice. Design your new patio pattern, including gaps between pavers for loose materials, before getting started.

2. Upgrade Your Deck

Decks can often be the focal point of a backyard. A few upgrades can easily transform the look and feel of the space. If you are building a new deck, take your local climate into account when deciding on materials. To upgrade your existing deck, create a seating area using chairs or a bench and decorate the area with plants to make it feel more welcoming. Pergolas and patio umbrellas will help to keep the area shady and cool while adding some color to the space. If you are rebuilding, consider building in seating during construction.

3. Start a Vegetable Garden

Gardens don’t just pop up in your backyard overnight, they take time to grow. Start by building your garden beds, aligning them north to south for maximum sunlight. Choose an area of your backyard where your veggies will have direct access to sunlight, without being blocked by shade from trees and shrubs. Research your local climate to determine which vegetables you should grow and what kind of yield you can expect. To protect your garden from weeds, insert a barrier in the bottom of the beds.

4. Edge Your Walkways

Nothing catches the eye in the garden like clean, crisp edging. Edging comes in a variety of materials, from plastic to more durable options like aluminum or steel. Before you install the edging, use a lawn edger or spade to make the cuts and shape the pattern. Tap the edging it into the ground with a mallet to solidify it into the ground and to protect it from animals.

5. Add Landscape Lighting

A beautiful backyard deserves to be enjoyed around the clock. Landscaping lighting can extend those days spent in the yard well into the nighttime. There is an array of landscaping lighting options to choose from, including spotlights, floodlights, in-ground lighting, outdoor post lights, and more. Choose the one that best highlights the features of your yard.

6. Install a Fire Pit

Fire pits help to tie a backyard together. The style of your fire pit should match other features in your backyard to bring cohesiveness to the space. Traditional fire pits are usually accompanied by circular seating, while more modern options like fire troughs provide a centerpiece to take in surrounding views. Wood fire pits provide a classic, crackling environment, gas pits burn cleaner than wood and come with an on-off switch, while gel-powered fire pits create a smaller frame and are typically used for accent lighting.

7. Add Garden Containers

Garden containers of all shapes and sizes can be very useful in the yard, especially for homeowners with limited garden space. By adding pots, wooden boxes, or bowls to your yard, you’ll provide a flexible home for a variety of plant life. Just make sure each container has proper drainage holes. If not, you’ll need to make the holes yourself, or you can opt for self-watering pots.

Living • May 10, 2022

Choosing the Right Fence and Gate for Your Home

by Don Koonce

Whether you are looking to improve your curb appeal, create more security or privacy, or cordon off a side garden, a fence or gate can be a practical and creative solution. With so many options to choose from, it can be difficult to decide which material is best for your home. By focusing on your budget and which materials best complement your home, you’ll eventually find your answer. Here are some options to get you started in your search.

Different Types of Fencing

Consider your priorities before choosing materials. Perhaps your fencing will serve the exclusive purpose of providing a designated area for pets and/or children to play, or you’re more focused on matching the wood grain with that of your home, or maybe you’ve simply always dreamed of having a white picket fence. When compiling your budget, account for materials and labor if paying a professional. If you plan to install on your own, know that a fence installation can be a physically demanding project. If your fencing is going into soft soil, you’ll have an easier time with installation. But for those who will be post-hole digging into rocky dirt or gravel, you can expect a challenge.

Natural Fences

Consider using a natural fence such as shrubbery, hedges, or trees to create a perimeter around your property. Natural fences create a barrier while bolstering your landscaping design and help to create a flow between your garden beds, yard, and the house itself. In comparison to other fencing solutions, natural fences may be a more affordable option, especially if you can plant them on your own. However, unless you’re buying full-grown shrubbery, natural fencing will take time to grow, whereas other types of hard-material fencing are functional as soon as they are constructed.

White Picket Fence

White picket fences, though traditional and simple in design, are effective. They are easy to maintain while complementing various home styles. Due to their sturdiness, they do well to keep pets in your yard and provide a safe designated area for them to roam. White picket fences reflect light and can make the colors in the shrubbery/plant life surrounding them pop. For the green thumbs that aspire to grow a flourishing garden, a white picket fence may be the perfect solution for magazine-quality grounds. However, with white picket fences, their strength is also their weakness. White is more prone to noticeable stains, meaning you can expect to set aside time for touch up painting at least once a year if you want to keep your fence purely white.

Wood Fences

There are many types of wood to pick from when choosing fencing. Local climate looms large in the decision-making process. It’s important to understand how the wood will hold up throughout the seasons and what kinds of treatments and/or stains are required to keep it from weathering. Wood fences work with many home styles. You’ll often see natural wood-colored fences used to reflect the aesthetic of Craftsman homes, while different paint colors and stains may be used to complement a more modern home style.

Different Types of Gates

Garden Gates

Ivy or Flower Archway: Use a simple wooden arch gate to allow flowers, ivy, or grape vines to grow along the gate creating a framed, lush entryway.
Vintage Gate: Use an old, wired gate to create a rustic vintage feel that leads to your personal garden.
Driftwood: Create your own gate by collecting wood or driftwood. You can then use twine, wire, or rope to create your own design.

Driveway Gates

Security Gates: Using a security gate is one of the easiest ways to make your home safer and more secure. There are many types of security gates, but steel provides protection without the need for much maintenance.
Side Yard Gates: If you don’t have a driveway gate, consider getting a side yard gate for added security and privacy.
Ornate Gates: Ornate gates don’t always create privacy but can create a beautiful entryway while also offering more control over who has access to the property.

For more on home improvement, read our guide to home lighting: How to Find the Right Lighting for Your Home

Real Estate News & Information • May 5, 2022

Q1 2022 Western Washington Real Estate Market Update

by Don Koonce

The following analysis of select counties of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

Regional Economic Overview

The post-COVID job recovery continues. Though data showed the number of jobs dropped in January, February saw gains that almost offset the jobs lost the prior month. As of February (March data is not yet available), the region had recovered all but 47,000 of the more than 300,000 jobs lost due to the pandemic. Of note is that employment levels in Grays Harbor, Thurston, San Juan, and Clallam counties are now above their pre-pandemic levels. In February, the regional unemployment rate rose to 4.1% from 3.7% in December. Although this may be disconcerting, an improving economy has led more unemployed persons to start looking for a job, which has pushed the jobless rate higher. I expect the regional economy to continue expanding as we move into the spring and summer, with a full job recovery not far away.

Western Washington Home Sales

❱ In the first quarter of 2022, 15,134 homes sold, representing a drop of 5.8% from the same period a year ago, and down 31.7% from the fourth quarter.

❱ Yet again, supply-side constraints limited sales. Every county except Snohomish showed lower inventory levels than a year ago.

❱ Sales grew in five counties across the region but were lower across the balance of the counties contained in this report. Compared to the fourth quarter, sales were lower across all market areas.

❱ The ratio of pending sales (demand) to active listings (supply) showed pending sales outpacing listings by a factor of 6.7. Clearly, the significant jump in mortgage rates in the first quarter has not yet impacted demand. Rather it appears to have stimulated buyers partly due to FOMO (Fear of Missing Out)!

Western Washington Home Prices

❱ Although financing costs have jumped, this has yet to prove to be an obstacle to buyers, as prices rose 16.4% year-over-year to an average of $738,152. Naturally, there is a lag between rates rising and any impact on market prices. It will be interesting to see what, if any, effect this has in the next quarter’s report.

❱ Compared to the same period a year ago, price growth was again strongest in San Juan County, but all markets saw prices rising more than 10% from a year ago.

❱ Relative to the final quarter of 2021, all but Kitsap (-2.7%), Mason (-1.5%), Skagit (-1.8%), Jefferson (-6.3%), and Clallam (-0.1%) counties saw home prices rise.

❱ The market remains supply starved. While increases in “new” listings suggest that more choice is coming to market, it remains insufficient to meet demand.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

Western Washington Days on Market

❱ It took an average of 25 days for a home to go pending in the first quarter of 2022. This was 4 fewer days than in the same quarter of 2020, but 2 days more than in the fourth quarter of 2021.

❱ Snohomish, King, and Pierce counties were the tightest markets in Western Washington, with homes taking an average of 11 to 15 days to sell. The greatest drop in market time compared to a year ago was in San Juan County, where it took 23 fewer days for homes to sell.

❱ All but five counties saw average time on market drop from the same period a year ago, but the markets where it took longer to sell a home saw the length of time increase only marginally.

❱ Quarter over quarter, market time dropped in Snohomish, King, and Pierce counties. Jefferson and Clallam counties also saw modest improvement. In the balance of the region the length of time a home was on the market rose, but seasonality undoubtedly played a part.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The numbers have yet to indicate that demand is waning amid rising interest rates, but this is sure to become a greater factor as we move into the spring. A leading indicator I pay attention to is changes to list prices and, in most counties, these continue to increase. This suggests that sellers remain confident they will be able to find a buyer even in the face of higher borrowing costs. If this pace of increase starts to soften, it may be an indication of an inflection point, but it does not appear to be that way yet.

Given all the factors discussed above, I have decided to leave the needle in the same position as the last quarter. The market still heavily favors sellers, but if rates rise much further, headwinds will likely increase.

About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Living • May 3, 2022

Tips For Emergency Preparedness

by Don Koonce

With homeownership comes the responsibility of having to plan ahead for life’s unknowns. Emergencies come in many forms, depending on your local climate. So whether its more likely that you and your household need to prepare for the potential of a wildfire, a flood, or a winter storm, it’s crucial to have resources on hand to limit the damage to your home and to protect your household.

Tips for Emergency Preparedness

A good place to start when putting together your emergency kit is to compile basic resources you and your household will need to support yourselves outside of your home. Keep all items together in an easily accessible location. The general rule is to have at least one gallon of water per person, per day. This is useful for drinking, food preparation, and general hygiene. The Red Cross suggests keeping a two week’s supply of water at your home and three days worth in the case of evacuation. The following information is based on the American Red Cross’s emergency preparedness website.

What to include in your home emergency kit

A two-week supply of non-perishable food that is easy to prepare
Flashlight and extra batteries
Battery-powered or hand-crank radio
2 absorbent compress dressings (5 x 9 inches)
25 adhesive bandages (assorted sizes)
1 adhesive cloth tape (10 yards x 1 inch)
5 antibiotic ointment packets (approximately 1 gram)
5 antiseptic wipe packets
2 packets of aspirin (81 mg each)
1 blanket (space blanket)
1 breathing barrier (with one-way valve)
1 instant cold compress
2 pair of non-latex gloves
2 hydrocortisone ointment packets (approximately 1 gram each)
Scissors
1 roller bandage (3 inches wide)
1 roller bandage (4 inches wide)
5 sterile gauze pads (3 x 3 inches)
5 sterile gauze pads (4 x 4 inches)
Oral thermometer (non-mercury/non-glass)
2 triangular bandages
Tweezers
First aid instruction booklet

To-Go Bag

Keep a to-go bag on hand to ensure that you and your household have easy access to essential items such as medication, toiletries, chargers, cash, and more.

If you or family members have medications, make sure you have at least a seven day supply
Multi-purpose tool (Swiss army knife)
Sanitation and personal hygiene items
Hand sanitizer
Toothbrushes and toothpaste
Personal wipes

Personal documents

Copies of personal documents (medication list and pertinent medical information, proof of address, deed/lease to home, passports, birth certificates, insurance policies)
Family and emergency contact information
Extra cash
Extra cell phone chargers
Emergency blanket(s)

Car Kit

In the case of an evacuation or car emergency you should have a supply kit that can last up to three days.

A three-day supply of water in the case of an evacuation (one gallon per person per day)
Three days’ worth of non-perishable food
First aid kit
Flashlight with extra batteries
Extra phone charger
Emergency blanket
Map of your area

Pets

If you have pets, you will want to pack additional supplies to ensure their safety in the event of an emergency. It’s a good idea to have a week’s worth of food for each pet, a gallon of water per day, medication on hand, an additional leash, a crate, and any relevant sanitation materials (pet bags, litter, etc.).

Keeping Your Sanity

If you have small children, you may want to include activities for them to stay occupied without the help of electricity. Small games, coloring books and supplies, and other items can be stashed in the emergency kit to keep the family occupied.

For more information on preparing for potential emergencies and disasters, read our blog post about preparing for a fire at home.

Fire Safety: Preventing & Preparing for Fires at Home

SOLD • April 28, 2022

SOLD: Homes in Seattle, Puyallup, Tukwila & Auburn

by Don Koonce

Pending Listings:

14642 8th Avenue SW
Seattle, WA 98166
$490,000

Beds: 4
Baths: 1
1,360 sqft
Days on Market: 5

Squeaky-clean rambler in excellent location! Walk to fun coffee shops, bakeries, restaurants & shops in downtown Burien, or stroll to beaches at Seahurst Park when you’d rather recharge with water-sky-trees than Starbucks. This home has been gently lived in, everything newly polished for next owner. Freshly painted interior, hardwood floors, cozy wood-burning fireplace, big picture windows for lots of light, formal dining plus bistro kitchen seating, modern dble-paned windows and doors, easy-care siding. Huge fenced yard with patios and deck for entertaining and/or gardening. 4 real bedrms, 1 located in its own zone for flex use: recroom, home office, more private guestroom, etc.

12301 133rd Avenue E
Puyallup, WA 98374
$999,999

Beds: 4
Baths: 4
3,676 sqft
Days on Market: 15

A unique lodge style retreat on a private peaceful shy acre. Owners have worked tirelessly to create a luxurious home built with platinum quality inside & out. Big Mt. Rainier views from most every room, soaring cedar T&G vaulted ceilings, rich wood floors/millwork, new hi-end 2022 kitchen barely unwrapped, new baths, Primary 5-piece ensuite w/jetted tub & steam shower. Huge view decks w/multiple interior entries, 5 skylites, most systems updated within 0-6yrs, state of the art technology, deluxe media rm, gas heat & appl, A/C, tankless H20. Breath-takingly beautiful park like grounds, pond, lighted fountain, etc., all just 10 min to major commute routes & Sumner Sounder transit station. Pamper yourself -destination living year round!

Sold / Closed Representing Buyer:

5671 S 150th Place
Tukwila, WA 98188
$875,000
Listed For: $777,999
Sold for 12.5% over asking

Beds: 5
Baths: 3
2,545 sqft
Days on Market: 2

Centrally located craftsman home tucked away in a quiet cul-de-sac, with an easy drive to freeways, Seattle, Seatac Airport & Westfield Mall. Come enjoy the exquisite touches including one of a kind Brazilian cherry floors. Solid oak stairs with wood inlay designs. Beautiful crown moulding accents throughout with many arches and pillars. Downstairs boasts 2 bedrooms & bath as well as a large living space with new laminate floors, new led lighting package and freshly painted walls. So much to see and enjoy! Central vac system, wood burning fireplace in the main living space and 3-4 cords of firewood to warm your home. In the summer bring your outdoor furniture and enjoy meals while relaxing under your gazebo!

5103 S 360th Street
Auburn, WA 98001
$450,000
Listed For: $439,950
Sold for 2.3% over asking

Beds: 3
Baths: 2
1,536 sqft
Days on Market: 18

This lovely Auburn/Federal Way rambler sits on an oversized lot w/detached 2 car garage! This open concept updated 3-bedroom, 1.75-bath rambler features a large kitchen with refinished backsplash, built in front deck, ample storage space, vinyl plank flooring and extra entertainment room. All appliances come with home, including washer and dryer. The backyard is ready for entertaining with a built-in deck and fire pit. This is a great home to live in and has great potential as an investment or first-time buyer.

Pending Representing Buyers

9021 21st Avenue SW #A & B
Seattle, WA 98106-2202
$810,000
Listed For: $800,000
Sold for 1.2% over asking

Days on Market: 7

Outstanding investment opportunity in rapidly appreciating West Seattle neighborhood! Unit A features 3 beds, 2 baths, in spacious 1, 500 sqft floorplan plus a full 1, 500 sqft unfinished basement. Unit B features 2 beds, 1 bath with territorial and Olympic Mountain views. Both units have a carport spot plus there is room to park additional cars off the street. Both units have new gas forced air furnaces and separate washer and dryers. Large flat lot with garden space and the covered back deck is west facing to enjoy stunning sunsets. Located just blocks to Westwood Village – Walk Score is 89 – and multiple transit options make this easy to lease. The duplex is well managed and maintained! Please do not disturb tenants.

Sellers • April 26, 2022

Selling Your Home: Capital Gains Tax

by Don Koonce

When you sell your home, you stand to receive an influx of cash. Though there are several costs associated with a home sale, you can likely still bank on the fact that you’ll be depositing a lump sum in the near future. But before you start planning how you’ll use the money or start looking for a new home, you’ll want to understand whether you fall under the criteria of the capital gains tax. If so, the profit from your home sale could end up being smaller than you expected.

What is a capital gains tax?

A capital gains tax is a fee on the profits gained from the sale of an asset. This tax appears in transactions involving various assets—bonds, stocks, boats, cars, and real estate. In real estate, it’s common for homes to appreciate, often leading to a situation where the seller sells the property for more than they originally purchased it. The capital gains tax on the sale of a home is assessed on the difference between those two prices.

Avoiding Capital Gains Tax on a Home Sale

The 2-in-5 rule: If you have owned the home and it has been your primary residence for two of the five years leading up to the sale, you can exclude up to $250,000 of gains if you’re single, or $500,000 if you’re married and file a joint return. If the profit exceeds these amounts, then the excess is reported as a capital gain. The two years of living in the home don’t have to be consecutive, nor do they need to be the final two years leading up to the sale.
Two-year window: You can claim the $250k or $500k exclusion as long as you haven’t already claimed it on the sale of another home in the past two years.
Cost of repairs/improvements: In the context of the capital gains tax, the “cost basis” of your home includes the purchase price, certain legal fees, improvement costs, and more. Including the expenses incurred making repairs and improvements to the home will increase the home’s cost basis, thereby reducing the capital gains.

Paying Capital Gains Tax on a Home Sale

Sometimes, avoiding the capital gains tax may not be possible. If these criteria fit your situation, the gains from the sale of your home may be fully taxable:

The home you sold is not your primary residence
You owned the home or lived in it for less than two years in the five years leading up to the sale
You purchased the property through an investment exchange (known as a 1031 exchange)
You are subject to expatriate taxes
You sold another home within the previous two years and used the capital gains exclusion on that sale

Capital Gains Tax Rates

Capital gains tax rates break down into two basic categories: short- and long-term. Short-term capital gains tax rates apply if you owned the home for less than a year. The rate is usually the same as your ordinary income. For example; if you purchase a home, home values in your area go through the roof within the first few months, and you decide to sell right away to take advantage of the competitive market, you’ll be required to pay capital gains tax on the sale. Long-term capital gains tax rates apply if you own the home for longer than a year, and are taxed at 0%, 15%, and 20% thresholds.

For more information on the financial characteristics of a home sale, read A Guide to Understanding Escrow.

Buyers • April 21, 2022

Renting vs Buying: Which is better for you?

by Don Koonce

Deciding whether to rent or buy can be a difficult decision, but with the right analysis, you can determine which is best for you. Knowing whether it’s the right time to rent or buy depends on your buying power, what you’re looking for in a home, your local market conditions, your plans for you and your household, and the responsibilities you’re prepared to take on at your residence.

Renting vs. Buying: Which is Better for You?

Renting gives you greater flexibility to relocate, fewer home maintenance responsibilities, and can often be more the more affordable option, depending on where you live. The extra costs associated with owning a home—interest payments, taxes, repairs—may be too much for some renters to handle. Becoming a homeowner has its respective advantages. You’ll have stable monthly payments and greater freedom to customize your living space. Advocates of buying will contend that purchasing a home is an investment in equity, which can increase in value every year you live in the home, whereas if you rent a property, you’re essentially paying for someone else’s mortgage.

Ultimately, the right decision depends on your situation. If you don’t plan to be living in the same place for at least five years, renting might be more logical, as it allows you more flexibility when it comes time to move again. If you’re looking to settle down for the better part of a decade or longer and can afford to buy a home, becoming a homeowner may be the better option. Here are a few additional considerations to guide your renting-versus-buying decision making process.

What are the local real estate market conditions?

Investigate the local sales and rental markets. Industry groups put out reports every quarter stating the average national sales price for a home and the average monthly payment for a rental. These reports are typically based on an average of all the cities in the U.S. But what really matters is what the numbers show when you dig into them on a local level. When looking at these reports, you’ll see there are some cities that fall below that average, while others rise above it. When comparing housing costs, be sure to base your evaluation on what’s happening in your city and neighborhood, not the nationwide averages.

For a quarterly breakdown of local market conditions, explore our Market Updates page. With data analyzed by our Chief Economist Matthew Gardner, each report breaks down the latest figures in home sales, home prices, and days on market for regions throughout Windermere’s footprint. Gardner also provides his estimation of where each market sits on the buyer’s-market-to-seller’s-market spectrum.

What can you afford?

Making the jump from renter to homeowner is often a question of affordability. Your mortgage rate will depend on your financial strength, your credit score, and other factors, so make sure to talk to a loan officer before you start looking for a home. Getting pre-approved for a mortgage will identify what you’re able to afford and helps strengthen your offer when the time comes.

To get an idea of what you can afford, use our free Home Monthly Payment Calculator by clicking the button below. With current rates based on national averages and customizable mortgage terms, you can experiment with different values to get an estimate of your monthly payment for any listing price. By using the Home Monthly Payment Calculator, you can make a well-informed estimation of whether it’s the right time to buy.

Will you need to make repairs to your new home?

Buying a fixer-upper may seem like a great way to get a deal on a house, but if the money you spend on the repairs is too great, your profit could be diminished when it comes time to sell. The same is true for remodeling and improvement projects. There are various renovation financing loans available to you that can help with the costs of home repairs, though extra consultations, inspections, and appraisals are often required in the process of securing these loans. Ultimately, if you can only afford a home that demands major improvements, and you don’t have the skills to do much of the work yourself, you may be better off renting.

Can you rent part of the house you’re buying?

If you buy a house with rental-capable space (extra bedroom, mother-in-law unit, etc.), you could use the rental income to pay off your mortgage faster and contribute more to your savings. But, of course, you need to be willing to share your home with a tenant and take on the responsibilities of being a landlord or working with a professional property manager to help you with those duties. Renting out a space in your home will also require you to purchase landlord insurance on top of your existing homeowners insurance policy.

Making Your Decision to Rent or Buy

At the end of the day, the decision is up to you. Based on the conditions laid out above, it simply may not be the right time for you to buy. Fortunately, when it comes to being a homeowner, it’s not now or never. A real estate agent will be your ultimate resource in gauging whether it’s the right time to buy and guiding you through the process toward homeownership.

Design • April 19, 2022

What is Industrial Design?

by Don Koonce

Although primarily found in lofts, large apartments, commercial buildings, and other industrial spaces, you can easily borrow elements of industrial design when decorating your home. Born out of the Industrial Revolution, industrial’s unique style can create dynamic and visually striking interior spaces that feel clean, minimalist, and above all, modern.

What is Industrial Design?

The industrial style is based on the revolutionary concept of showcasing the building materials themselves as a design element. It creates an atmosphere akin to that of shipyards, places with reclaimed and repurposed materials, ports, etc. The common thread between all these places is openness. Industrial design prioritizes open spaces and a minimalist approach to filling the negative space. Whereas craftsman and cottage style homes were designed to evoke comfort, industrial design seeks to highlight architecture.

Industrial Design Elements

When you walk into an industrial space, you know it right away. The ceilings are higher than your typical single-family home. This stretches the scale and proportion of the space, which opens up new possibilities when decorating. Industrial spaces allow for vertical décor: ladders, vertically arranged gallery walls, and loft beds. A tenet of industrial design is the harnessing of natural light, so you’ll often see a preference for floor-to-ceiling windows. Features like weathered wood floors, bare ceilings, prevalent light bulbs, and structural beams help to tie industrial spaces together. These features are generally exposed, which helps the room from feeling too empty. Go-to materials for industrial décor include wood, aluminum, copper, steel, brick, and stone.

In modern and contemporary residential design, there has been a shift toward fusing elements of industrial design with other styles, such as mid-century modern or farmhouse, to create edgy yet comfortable living environments that look and feel sustainable. This is further proof that even if your home doesn’t have typical industrial features, you can blend in pieces of it to create something unique.

For more information on using modern design elements in your home, read out blog post on modern color design trends.

Colorful Modern Design Trends for Your Home