Selling Crested Butte home is a big decision and whether or not you are ready, it may be useful to go through the analysis of adding up all the fixed and variable costs associated with owning and operating your second home in the mountains. Using a one-year time horizon is a good rule of thumb. Adding up all of your expenses for the past twelve to twenty-four months can be helpful in projecting out your expenses for the next twelve months. Below is a list of expenses that may help you pull this information together.
Fixed expenses include mortgage payments, homeowner’s insurance, property taxes, utilities (electric, gas or propane, water, sewer, trash, phone, Internet, cable or satellite TV, security system), hot tub service, homeowner association dues, and snow removal (plowing the driveway, shoveling the deck, walkways, shoveling the roof one to three times per year depending on the roof pitch and amount of snowfall). Variable expenses can include property management fees, appliance repair or replacement, hot tub repair, landscaping, window washing, maid service, etc.
If you have added up all of these expenses for a year, you will see what your opportunity cost of holding your home is. Once you have decided to sell it, you will have to evaluate any offers and negotiations against the possibility of delaying a sale and continuing to incur these holding costs. Sometimes in a final negotiation when I have represented sellers and there is yet another counter from the buyer, the seller can get frustrated. It is not uncommon for a seller to want to throw in the towel, and say, “The heck with this buyer.” I normally suggest my client sleep on it. It can be helpful to put the small gap in the counters into perspective, and usually it represents a very small amount compared with the overall transaction. As well, when I have reminded my client to consider their holding costs and the backdrop of the market conditions, they usually thank me for giving them clarity, and the deal gets done and they can move on with their life.
Get Your Financial Ducks in a Row Before Selling Crested Butte Home
Have you determined the capital gain or loss of the home? What was the purchase price, or the value of the home at the date of purchase (this should be the date that you were listed on the deed)? Add any costs for improvements to the property (you should have those receipts). What is the market value that the home will sell for? Subtract 7% for closing costs and commissions, and any debt amount from the sales price. Now subtract the purchase price + improvement cost from the net sales price. If the result is a positive number, then this is counted and taxed as a capital gain.
If the result is negative, then it is counted as a capital loss. Long-term capital gains taxes kick in if you owned it for more than one year. Short-term capital gains taxes apply if you owned it one year or less.
In addition to federal taxes, there may be state taxes as well as out of state taxes. (Colorado has a 2% non-resident tax on the profit of the sale of real estate.) Now, to complicate this discussion, if you used your vacation home for personal, rental, and business purposes, you must allocate your gains or losses to personal, rental, and business activities based on the activity during the twelve months before sale. So it may be a good idea to plan for a sale twelve months out and modify your use now to minimize your tax exposure then. Talk with your CPA or financial advisor regarding how the proceeds of your home will affect your tax liability and when may the best time given your situation for selling Crested Butte home (this year or next year?).
How can I help you? I have over 30 years of sales and marketing experience and am a top real estate agent in the mountain town of Crested Butte, Colorado representing affluent clients who are buying and selling their dream homes and ranch properties in the mountains. To see featured properties or search the MLS – visit chriskopf.com. How is the Crested Butte Real Estate doing? Click this link to see my monthly Crested Butte Real Estate Market Reports. I appreciate the opportunity to earn your business and would love to help you when selling Crested Butte home.
Previews® Property Specialist
Coldwell Banker Bighorn Realty