Smart ways to spend your tax refund in real estate

Smart ways to spend your tax return

and reach your real estate goals faster.

TAX SEASON is upon us!

Many of you are anticipating a refund this year and are as excited as a kid anticipating Christmas. You may be bookmarking retailer pages, low-key eyeing that designer bag you’ve been waiting for, or maybe you’re more like me and adding items to your Amazon cart with reckless abandon. 

Then you check your calendar and realize you are an adult and spending money like that is no longer on your radar. Instead, you type in the Orlando zip code in Zillow for the 500th time this month and look at that one listing.

The one that makes your heart beat faster. As a potential buyer you see yourself walking in the front door, dropping your keys in a dish by the front door and breathing in the air of a home you  OWN.

As a seller you look at your listing and imagine the buyers down payment hitting your bank account. You imagine packing that last box and finally, FINALLY smile at the fact that the next stage of your life is here.

But saving for a down payment may be harder than you thought it would be. Maybe you promised yourself you’d cut back on eating out and put that extra $100-$200 into a savings account, but then your car broke down. Perhaps you had been saving and had stockpiled $3k but then your laptop finally coughed it’s last breath and since you work from home and are a die-hard Apple fan… bye-bye savings.

Alternatively, if you’re selling your home, maybe you’ve had a few interested people, but no one has committed just yet. You know that the outside of your house could use some fresh landscaping and maybe a power wash, but parting with $2,000 when you’re trying to save a few extra bucks towards your new home just felt like it wasn’t worth it.

Most people begrudge the deductions that come out of their paycheck. Wishing, throughout the year, that the money could just stay in their pocket so they could have a little extra from week to week. Then tax season comes and you file your returns and learn that you are entitled to a refund.

As your wise, seasoned, real estate agent, I’d like to share some suggestions on smart ways you can use that federal tax refund towards real estate.

For buyers

Option number one: 

If you’re in the early stages of preparing to buy a house my suggestion is to put the money into a savings account and let it earn a little interest while you shop for a home. If you’re the kind of person who can’t keep their hands off money when they have it, then I’d suggest opening a bank account separate from your day-to-day checking or savings and keep the money separate. Make sure you do not get a bank card for the account or link it to your Venmo. Treat that account like Fort Knox until it comes time to actually make your down payment.

Option number two.

If you’re in the final stages of buying a home and you’re getting ready to finalize your financing, you might want to consider putting your tax refund toward your closing costs in lieu of rolling the costs into an interest bearing mortgage payment.

Option number three:

Although mortgage rates are currently the lowest they’ve been in three years, it’s possible to pay discount points in order to lower your rate even further. Typically, one discount point equals 1% of your loan amount. If you plan to borrow $300,000 and purchase one discount point for $3,000, you could wind up saving far more than that over the life of your loan. Knowing how long you plan to stay in your home will help make this decision.

For sellers

It’s no secret that sprucing up your home prior to selling it typically results in faster sales at list, or close to, list price. Depending on how much your tax refund is there are several ways you can spend just a few hundred dollars to $2,000 that would make a HUGE impact on selling your home.

Option one:

Refresh the outside of your home (aka curb appeal) with power washing, paint, and vibrant plants. Repair anything that is obviously in disrepair, things like replacing dead light bulbs, new garage door openers, add a new mailbox, and some outdoor lighting. Potential buyers will feel right at home the second they step foot out of their car.

Option two:

Use your tax return to hire a professional home stager. Someone experienced in design can stage your home to maximize its potential for buyers. Staging can be as simple as rearranging your own furniture and items, removing decor to improve the feel of a space, and making suggestions on scents to have in your home during open houses and showings. Going all in on staging could include renting furniture that fits the home perfectly and creating a space that is simultaneously neutral and perfectly comfortable. This could be especially useful if you’ve already moved out of the home and it’s currently empty. 

Option three:

Invest in high quality media for your listing. They say a picture is worth a thousand words and that could not be any more true when it comes to adding your home’s photos to an online listing. Investing in a photographer who understands light and can showcase your home in the best possible way is worth every penny of the investment. Opting to add an evening photo highlighting outdoor lighting and the warmth of your homes interior lights will make your listing photos stand out. Finally, including drone video and walk through videos of your property will give potential buyers a far more detailed view than photos alone.

No matter what you decide to do with your tax return, if you use any portion of it toward your real estate goals you’re already taking a step in the right direction.

I’d be happy to provide a consultation and discuss your real estate goals as well as your current financial position and craft an individualized plan for purchasing or selling your home.

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Lianna D’Angelo is the owner and principle broker of Sotera Living, a real estate agency and brokerage located in Central Florida. Sotera Living serves home owners and home buyers throughout all of Central Florida including Winter Park, Baldwin Park, College Park, Orlando, Lake Nona, as well as the Space Coast. Any advice or suggestions provided in this article are a courtesy to our visitors to help them make an informed decision when buying or selling a house, but do not represent ALL information available. Readers should conduct their own research and ask additional experts when making any real estate decisions.