Five Best-Kept Secrets for Negotiating the Best Home-Buying Deal

For most of us, a home is the most expensive single asset we’ll ever purchase.  Because home purchases are usually financed, purchase price differences can sometimes be hidden in what appears to be a minimal increased monthly note.  But when it comes time to sell your home, having an additional 5%, 10% or more in equity translates into big money in your pocket.  The best time to get that equity: when negotiating the purchase.  Here are five of Athena’s best negotiation tactics for buying a home.

  1. Find out how much the seller paid for the home and the balance owed on a note.

Regardless of the market forces that may have affected the value of a house after the seller purchased it, the seller is likely convinced that the house is worth more — probably a good bit more — than the price he or she paid. The seller’s “bottom line” is driven by how much he or she “clears” after paying the balance on a mortgage note, commission, and closing costs. These factors — the seller’s purchase price and the mortgage note balance — will likely drive his or her flexibility in purchase-price negotiations. Before you invest a lot of time negotiating, learn what drives the seller’s decision-making process.

Your realtor should be able to provide you with the last purchase price of the home, particularly if the seller bought it through an agent. Otherwise, in most parishes in Louisiana, purchase-price information is published on the tax assessor’s website. The Orleans Parish tax assessor, for instance, offers a public database that lists the purchase price of houses, the names of current owners, and property tax information.

In contrast, the balance on a mortgage note is generally not public information. However, with a little detective work, you can usually “guesstimate” with fair accuracy.

If the seller took out a loan to purchase his or her house, the lender filed a mortgage in the public records. Ordinarily, this mortgage states the exact amount of the loan and includes a copy of the note, which states the interest rate. With this information — assuming regular payments — you can calculate the current balance.

But how do you get a copy of the mortgage papers? There is always the old-fashioned way: go to the Clerk of Court’s office in the parish in which the house is located and ask to see the records for the property (using its municipal address).

If you’re not inclined to spend a few hours sifting through public records, note that most clerks of court make their conveyance and mortgage records available online. To access the records, you will need to pay for an account, as well as for each page you want to print. If you are friends with an attorney, consider asking him or her to access the records for you.

  1. Find out why the seller is selling.

Any particular reason for selling can substantially drive how much of a “haircut” the seller is willing to accept off the listing price. A couple going through a divorce, for instance, likely has to sell quickly to avoid redundant housing expenses. On the other hand, an “empty nester” looking to downgrade may have little incentive to sell quickly (and may, in fact, resist selling the family home that invokes fond memories). Knowing why a seller wants or needs to sell can be invaluable in your purchase-price negotiations.

But how do you find out what drives the seller? In many situations, if you (or your agent) ask, the seller’s agent will tell you. A “broker’s open” is often a good opportunity for your agent to chat casually with the seller’s agent and conduct subtle fact-finding.

Otherwise, investigate online. A seller’s social media page often leaves “clues” as to his or her reasons for selling. Was there a recent death in the family? Is the seller moving for a new job? Did the seller have a new baby, necessitating a bigger pad? Learning the seller’s motivations — and potential time pressures — can help an informed buyer gauge how hard to push for a rock-bottom purchase price.

  1. Search for properties with multiple listing-price reductions.

Reducing a listing price several times — especially in rapid succession — is often a sign the seller is motivated to sell. To get the best deal, look for properties with multiple listing-price reductions. Also, agents for sellers willing to negotiate for a substantial “discount” on the listing price often leave clues for buyer agents in the listing of the property. A seller’s agent might remark, for instance, that the seller is “motivated” or that a buyer should “make an offer.” Unfortunately, these remarks are usually made only in the “agent remarks” section of the Multiple Listing Service, so you will have to ask your agent to specifically look for them.

  1. Don’t get into bidding wars. Just don’t.

When a seller aggressively prices an attractive property, buyers often get into a “multiple-offer” situation. When that happens, the seller’s agent frequently calls for the buyers’ “highest and best” offers. The seller then accepts the highest offer made, without countering.

Under these circumstances, buyers often adopt an auction mentality, wanting to “beat out” the competition. Because the property is viewed as “hot,” buyers are in danger of overvaluing it in their desire to win the auction. In our experience, multiple-offer situations often result in an overzealous buyer overpaying for the property. Don’t get into bidding wars.

  1. Negotiate in stages.

Any real estate transaction presents the opportunity to negotiate in multiple stages. Of course, the first stage involves offers and counteroffers for the purchase price. After that, property inspections may reveal defects in the property that allow for further negotiations and a purchase-price reduction. Likewise, if the property doesn’t appraise for the contract value, the seller would be hard-pressed not to reduce the price in accordance with the appraisal. Take advantage of such opportunities.

If you’d like to learn more about these and other strategies Athena’s highly trained agents use in representing buyers and sellers, give us a call or shoot us an email. We’d love to work with you.

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Transferring Brokerages: Rules and Tools for Louisiana Real Estate Agents

Louisiana real estate agents considering a move to another real estate brokerage may find themselves intimidated by the process.  With potentially numerous listing agreements in place, deals under contract, ongoing relationships with buyers, and contractual obligations to a current broker, there is certainly a lot to consider.  But the logistics of a transfer—and the rules that govern—aren’t really as complicated as they may seem.  This article will walk Louisiana real estate agents through the process of transferring to a new real estate broker.

What happens to my listing agreements?

Under Louisiana law, a listing agreement must be between a client and a broker—not an individual agent.  In this regard, the Louisiana Real Estate Commission’s rules say:

Listings and other agreements for real estate brokerage services must be solicited under the name of the broker corporation or supervising broker. These agreements shall be signed by the broker or by a sponsored licensee acting under written authority of the sponsoring broker.

See LREC Rules and Regulations (“LREC Rules”), Ch. 18, §1801.  Technically, what this means is that the brokerage has all rights to listing contracts and can prevent an agent from taking a listing with her.

In practice, however, many brokerages do not want to enforce listing agreements with clients who want to work with their agent—not the brokerage he happened to be with when signing the listing agreement.  Reputable brokerages, therefore, ordinarily make it a policy that agents can “take their listings” with them if they decide to move to another Louisiana real estate brokerage.  Athena Real Estate’s policy, for example, is generally that agents can take their listings with them if they leave the brokerage.  (One exception is often for listings currently pending/under contract.  Brokerages generally won’t allow agents to take those with them, so most agents choose to “close out” any pending deals before making a move.)

What do I tell my clients?

Even the most inflexible brokerages are often reluctant to enforce a listing agreement with a client who has expressed the desire to “stick with” his agent.  Although clients are entitled to make such an assertion, agents must take care not to give a client advice on how to convince a brokerage to cancel a listing agreement.  The LREC rules say agents basically cannot “coach” a client on how to “get out” of a listing agreement:

It is unlawful for any person, licensed or unlicensed, to interfere with the contractual relationship between a licensee or registrant and a client by counseling a client or another licensee or registrant on how to terminate or amend an existing contractual relationship between a licensee or registrant and a client. . . .

See La. Rev. Stat. § 37:1447(C)(2017).

But this provision does not prevent an agent from announcing to clients the agent is moving to a new brokerage.  Indeed, it would be unprofessional for an agent to vanish without communicating a move to a new brokerage to a client.  Such communication crosses the line, however, when the agent suggests ways to convince the existing brokerage to cancel a listing agreement.

What if I’m under contract and what if I signed a non-compete?

Many brokerages require that agents sign contracts with a defined term, often one year.  Some of these contracts even include non-compete provisions that prevent an agent from working for any other brokerage in the area.

The enforceability—and application—of the period of time a contract requires an agent to stay with a particular brokerage will depend on the provisions of her contract.  Often, contracts allow agents to cancel early “for cause”—meaning that the broker did not do what it said it would, as stated in the contract.

Some contracts go a step further than a basic “term” and include non-compete provisions.  As such provisions are disfavored under Louisiana law, non-compete clauses in Louisiana brokerage contracts must strictly comply with certain statutory requirements.

First, the rules require that a non-compete provision in an agent’s contract be in bold faced letter of a font size of not less than 10-point type, and the provision must give the agent the right to “back out” within three days of signing the contract:

[A non-compete provision in a real estate agent’s contract] shall be unenforceable and an absolute nullity unless the licensee shall have the right to rescind the non-compete agreement until midnight of the third business day following the execution of the non-compete agreement or the delivery of the agreement to the licensee, whichever is later. In any agreement between the broker and licensee, which includes a non-compete agreement, the non-compete agreement shall be prominently displayed in bold-faced block lettering of not less than ten-point type.

See La. Rev. Stat. § 37:1448.1(A)(2017).

In addition, the general non-compete statute in Louisiana, La. Rev. Stat. § 23:921, applies to agreements between real estate salespersons and brokers just like all other contracts.  Under the statute, non-compete clauses are valid only if (1) the non-compete obligation is for a maximum of two years; (2) the provision specifies specific parishes in which the salesperson can’t compete, and (3) the broker who required the non-compete actually does business in the specified parishes.

If the non-compete agreement doesn’t comply with any of the foregoing, then it is completely unenforceable.  Even so, before assuming your broker won’t enforce a non-compete, it often makes sense just to ask.  Even if unwilling to allow an agent to entirely “walk” from a non-compete obligation, a broker may be willing to negotiate for an early departure on certain terms.

Logistics – what paperwork do I need to file to get my Louisiana real estate license transferred to a new broker?

The paperwork required to transfer a Louisiana salesperson’s license to a new brokerage is relatively basic.  An agent just needs to file two forms (both available on the LREC web site):

  • Termination of Sponsorship Form. This form must either be signed by the existing broker, or the agent must send the LREC a copy of proof that notice was sent to her existing broker by registered or certified mail.  In either case, the form must be returned to the LREC within five days of when it is signed.
  • Request to Transfer License to New Broker Form. This form must be signed by the agent AND the new broker.

In addition, there is a $35 fee for transferring to a new broker.  If you are considering making a transfer, ask your new broker if they will send you copies of the forms to sign electronically.  The broker might even pay the transfer fee for you.  Athena does.


For most, the prospect of change can cause unease.  But often a move away from a stale, stodgy operation to a fresh, enlivened one can be invigorating.  Of course, in the end, everyone’s situation is different, and only you can decide if—and when—a move is right for you.  It certainly takes courage to step out of your comfort zone, even if you know it will be for the best long-term.

At Athena, we understand how intimidating a move to a new broker can seem.  So we do everything we can to make the transition as smooth and seamless as possible.  Run by a pair of corporate attorneys, Athena provides helpful guidance on the paperwork and steps necessary to complete a transfer.  And each lateral agent is assigned a transition team to help with preparing new marketing materials, developing a marketing plan, making announcements to existing clients, photo shoots, and other steps necessary to hit the ground running.  Often, we may pay for the cost of replacement signs and materials, and for established agents we offer a sign-on bonus, in addition to the aggressive commission compensation structure we offer to all our agents.

Give us a call or send us an email if you want to learn more.  We’d love to talk with you.

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Papering the Deal: Record Keeping Requirements for Louisiana Real Estate Agents

As real estate agents, we know all too well about the mounds of disclosures, agreements, forms, and other documents used in our trade.  It’s not unusual for a real estate deal to involve over a dozen documents, not to mention internal paperwork that a broker may require.  But what documents are Louisiana agents required—by law—to keep, and for how long?

In 2017, the Louisiana Real Estate Commission (“LREC”) substantially expanded the obligation of brokers to maintain transaction-related and other documents for a period of five years.  As brokers are now required to institute policies to ensure compliance with these provisions, the law will “trickle down” to agents to require that they maintain sufficient records.

Under the new LREC rules, brokers (and agents) must keep the following records for a period of not less than five years:

  1. disclosures;
  2. listing agreements, buyer representation agreements, other written agreements that authorize licensees to advertise or represent property for sale or lease, other written agreements that authorize licensees to receive compensation;
  3. contracts and related addenda;
  4. receipts and disbursements of compensation for services as defined under R.S. 37:1431(24) (i.e., those constituting “real estate activities”);
  5. property management agreements;
  6. appraisal, broker price opinions, and comparative market analyses;
  7. sponsorship agreements and termination paperwork; and
  8. independent contract agreements between brokers and sponsored salespersons.

See 46 LA AADC LXVII, § 1803.

While the rules do not require that they be kept electronically, records must be in a format “readily available” for the LREC.  Documents kept scattered throughout emails and printed out likely would not be “readily available” under this provision, but hard copies kept in a file categorized by transaction likely would.

These rules were published in the Louisiana Administrative Code (and on the LREC’s web site) on May 20, 2017 and apply only going forward.  For records kept before publication of the rule, the prior LREC rules would apply to basically require that agents maintain agency disclosure records and any records of compensation.

Athena recognizes that the new rules adopted by the LREC impose substantial additional requirements on agents that will make their jobs more difficult.  That’s why we developed our Agent Dashboard system that allows agents to upload and track documents for each transaction, submit documents to Athena’s management, and even request payment of a commission check by ACH transfer.

To learn more about the technology Athena offers its agents and other support that sets us apart, give us a call or send us an email.  We’d love to talk with you.

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Getting Your Real Estate License in Louisiana: New Agent Hacks

So you’ve decided to get your Louisiana real estate license.  Maybe you’re embarking on a new career.  Maybe you’re employed full time and want to get started investing in real estate and handling your own deals.  Maybe you’re a stay-at-home parent and want the flexibility to make your own hours and go at your own pace.  Whatever is driving your decision, this article will walk you through the process of getting your real estate license in Louisiana so you can hit the ground running.

Who’s in charge?

Most Louisiana agents have three “big brothers” always looking over their shoulders:

  1. The LREC. The governing authority for real estate agents in Louisiana is called the Louisiana Real Estate Commission (the “LREC”).  The LREC handles applications for new real estate agents, monitors compliance with continuing education requirements, and penalizes and disciplines agents for violations of real estate laws and rules in Louisiana.  Fear the LREC.  Seriously.
  2. Brokers. There are two types of real estate agents in Louisiana: salespersons and brokers.  Everyone starts out as a salesperson, and every salesperson has to be affiliated with a broker.  Think of it like an apprenticeship: new agents in Louisiana “attach” to a broker, who is supposed to guide them through the regulatory, operational, and marketing steps involved in being an agent.  After four years as a salesperson—and a bunch of extra courses—a salesperson can apply to become a broker.
  3. Realtor associations. The general public thinks of “agents” and “realtors” as the same thing. Technically, though, an agent can call herself a “realtor” only if she is a member of the National Realtor Association (through one or more of its local chapters).  And one of the great prizes of being an agent—access to the multiple listing service—requires that you belong to a realtor association.  So, though it’s technically not mandatory, almost all Louisiana agents are members of a realtor association, and most Louisiana brokers require it.

The local realtor association for the Greater New Orleans area is called the New Orleans Metropolitan Association of Realtors (“NOMAR”).  It costs good money to belong to NOMAR, the MLS, and the “lockbox” services that NOMAR offers.  You can learn more about the process for becoming a realtor with NOMAR by clicking here.

What do I have to do to get my real estate license in Louisiana, and how much does it cost?

Prerequisites for becoming a real estate agent in Louisiana are pretty straightforward.  New agents must:

  • be over 18 years old;
  • have a high school diploma (or GED equivalent);
  • complete 90 hours of pre-licensing education from a certified instructor in Louisiana;
  • pass a criminal background check;
  • pass standardized testing; and
  • sign up with a Louisiana real estate broker and provide proof of errors and omissions insurance.

One huge “hack” you need to know about: the LREC will often accept college coursework or other education in lieu of some or most of the pre-licensing education requirement.  For many, this could mean shaving off 40-60 hours of pre-licensing education requirements. To get credit for prior coursework, simply submit your school transcripts to the LREC with a letter requesting credit.  Here is the LREC’s contact information:

  • Phone: (225) 925-1923
  • Email: info_licensing@lrec.state.la.us

After you get credit lined up for your prior coursework, submit the following paperwork (available online) to the LREC to get your Louisiana real estate license:

  • Salesperson License Application “Part A”: With this form, you tell the LREC all about yourself and authorize a background check.  Technically, you can submit this “Part A” form before or after you complete your pre-licensing education, but you have to submit it before you take the Louisiana real estate exam.
  • Salesperson License Application “Part B”: This is the “Sponsorship Affidavit” form that your new real estate broker needs to fill out. You can submit this form before or after you complete your pre-licensing education and before or after you take the Louisiana real estate exam.

Next, you will need to take the Louisiana real estate exam.  A company called PSI administers the real estate exam in Louisiana.  To schedule the exam, go online to PSI’s site, create an account, and schedule it (for a fee).

Speaking of fees, you should know that it can be somewhat of an investment to get your real estate license in Louisiana and pay for everything you need to get started.  Here are the typical fees you will be facing as a new real estate agent in the New Orleans area:

 Item Cost
1LREC Application: $90 (one-time fee)
2Initial licensing fee:$45 (one-time fee)
3Mandatory E&O Insurance:$190 (annual fee)
4Realtor Association:$484 (combined annual fees)
5MLS Fee:$84 (quarterly fee)
6Total First-Year Fees:$893

Choosing a Louisiana real estate broker and brokerage

As a new real estate agent in Louisiana, you have to affiliate with a licensed broker.  Although you will report to your broker—and your broker will be responsible for monitoring what you do—the broker is not your “boss.”  Except in very rare circumstances, Louisiana real estate agents are independent contractors—not employees—of brokers.  This means that you have more flexibility in how you run your business and what hours you work.  But it also means that you don’t get a regular paycheck: real estate agents “eat what they kill” and earn money only when they do deals.

In return for the support and guidance your broker is (supposed) to provide, you split a portion of the commission you earn on any deal with your broker.  The commission split with Louisiana real estate brokerages can vary substantially—from 25% or less to as much as 60%.  In other words, if you do a deal for a $10,000 commission, your broker might keep somewhere between $2,500 to $6,000 of that commission.

Beware, too, that many Louisiana real estate brokerages charge their agents fees in addition to commission splits:

  • many Louisiana real estate brokerages charge monthly fees (supposedly for things like email accounts, your own “personal” web page, and other “cutting edge” technology);
  • many Louisiana real estate brokerages charge transaction fees for things like “national dues,” general marketing services, and local “royalty” fees that effectively increase the commission split you pay as an agent; and
  • many Louisiana real estate brokerages pass the entire cost of basic support services like graphic design work and electronic fax service onto their agents.

Like an airline that offers “cheap” flights but then charges passengers for soft drinks, carry-ons, and “upgrades” for things included on other flights, real estate brokerages can be pretty slick about hiding fees in addition to the commission splits they advertise.  To make sure you’re comparing “apples to apples” when choosing a real estate brokerage in Louisiana, you need to consider the hidden costs of doing business with that brokerage.

Of course, commission splits aren’t everything.  If the option were either to get zero support for a lower commission split or full-service support for a higher split, then it would be a no-brainer to cough up more cash to your brokerage.   But, unfortunately, agents often end up worse off on both accounts: attracted by “big brokerage” marketing, they sign up with a national brokerage, agree to a higher commission split (and ridiculous hidden fees), and end up getting little additional support than a smaller shop would offer.

At Athena, we believe that our agents shouldn’t have to choose between coughing up half (or more) of their commission splits to their brokerage or getting little or no support in return for a lower split.  We view our agents as our partners and firmly believe that your success will mean our success.  By pumping our resources into our agents—and allowing them to keep more of their own commissions—our model has allowed new agents to quickly rise as stars.  And when our agents win, we win.  As the old saying goes, “a rising tide lifts all boats.”

We are also transparent about our commission split and don’t knick our agents for hidden fees:  you keep 75% of your commissions—every time, on every deal.  No annual “dues,” marketing “assessments,” or monthly “subscriptions.”  No hidden fees.  We truly have one of the best commission splits of real estate brokerages in the New Orleans area and Louisiana at large.

To learn more about Athena—and see if our brokerage would be a good fit as you embark on your new career in real estate—check out our web site, give us a call, or send us an email.  We’d love to talk with you.

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Negotiate Your Best House Buy

Keep your emotions in check and your eyes on the goal, and you’ll pay less when purchasing a home.

Buying a home can be emotional, but negotiating the price shouldn’t be. The key to saving money when purchasing a home is sticking to a plan during the turbulence of high-stakes negotiations. A real estate agent who represents you can guide you and offer you advice, but you are the one who must make the final decision during each round of offers and counter offers.

Here are six tips for negotiating the best price on a home.

1. Get prequalified for a mortgage

Getting prequalified for a mortgage proves to sellers that you’re serious about buying and capable of affording their home. That will push you to the head of the pack when sellers choose among offers; they’ll go with buyers who are a sure financial bet, not those whose financing could flop.

2. Ask questions

Ask your agent for information to help you understand the sellers’ financial position and motivation. Are they facing foreclosure or a short sale? Have they already purchased a home or relocated, which may make them eager to accept a lower price to avoid paying two mortgages? Has the home been on the market for a long time, or was it just listed? Have there been other offers? If so, why did they fall through? The more signs that sellers are eager to sell, the lower your offer can reasonably go.

3. Work back from a final price to determine your initial offer

Know in advance the most you’re willing to pay, and with your agent work back from that number to determine your initial offer, which can set the tone for the entire negotiation. A too-low bid may offend sellers emotionally invested in the sales price; a too-high bid may lead you to spend more than necessary to close the sale.

Work with your agent to evaluate the sellers’ motivation and comparable home sales to arrive at an initial offer that engages the sellers yet keeps money in your wallet.

4. Avoid contingencies

Sellers favor offers that leave little to chance. Keep your bid free of complicated contingencies, such as making the purchase conditional on the sale of your current home. Do keep contingencies for mortgage approval, home inspection, and environmental checks typical in your area, like radon.

5. Remain unemotional

Buying a home is a business transaction, and treating it that way helps you save money. Consider any movement by the sellers, however slight, a sign of interest, and keep negotiating.

Each time you make a concession, ask for one in return. If the sellers ask you to boost your price, ask them to contribute to closing costs or pay for a home warranty. If sellers won’t budge, make it clear you’re willing to walk away; they may get nervous and accept your offer.

6. Don’t let competition change your plan

Great homes and those competitively priced can draw multiple offers in any market. Don’t let competition propel you to go beyond your predetermined price or agree to concessions—such as waiving an inspection—that aren’t in your best interest.

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Are Mortgage Points Tax Deductible?

When you took out a mortgage to buy your home, did you pay points? You may be able to deduct that prepaid interest on your federal tax return — but only if you meet a long list of rules.

The points you paid when you signed a mortgage to buy your home may help cut your federal tax bill. With points, sometimes called loan origination points or discount points, you make an upfront payment to get a particular rate from the lender.

Since mortgage interest is deductible, your points may be, too.

If you itemize your deductions on Schedule A of IRS Form 1040, you may be able to deduct all your points in the year you pay them.

Some high-income taxpayers have their total itemized deductions limited, including points. You can read more about that in the instructions for Schedule A.

Lucky for you, the IRS doesn’t care whether you or the homesellers paid the points. Either way, those points are your deduction, not the sellers’.

Tip: Tax law treats home purchase mortgage points differently from refinance mortgage points. Refinance loan points get deducted over the life of your loan. So if you paid $1,000 in points for a 10-year refinance, you’re entitled to deduct $100 per year on your Schedule A.

The Fine Print for Deducting Points

The IRS rules for deducting purchase mortgage points are straightforward, but lengthy. You must meet each of these seven tests to deduct the points in the year you pay them.

1.  Your mortgage must be used to buy or build your primary residence, and the loan must be secured by that residence. Your primary home is the one you live in most of the time. As long as it has cooking equipment, a toilet, and you can sleep in it, your main residence can be a house, a trailer, or a boat.

Points paid on a second home have to be deducted over the life of your loan.

2.  Paying points must be a customary business practice in your area. And the amount can’t exceed the percentage normally charged. If most people in your area pay one or two points, you can’t pay 10 points and then deduct them.

3.  Your points have to be legitimate. You can’t have your lender label other things on your settlement statement, like appraisal fees, inspection fees, title fees, attorney fees, service fees, or property taxes as “points” and deduct them.

4.  You have to use the cash method of accounting. That’s when you report your income to the IRS as it comes in and report your expenses when you pay them. Almost everybody uses this method for tax accounting.

5.  You must pay the points directly. That is, you can’t have borrowed the funds from your lender to pay them. Any points paid by the seller are treated as being paid directly by you.

In addition, monies you pay, such as a downpayment or earnest money deposit, are considered monies out of your pocket that cover the points so long as they’re equal to or more than points.  Say you put $10,000 down and pay $1,000 in points. The downpayment exceeds the points, so your points are covered and therefore you can deduct them if you itemize. If you were to put nothing down but you paid one point, that $1,000 wouldn’t be deductible.

6.  Your points have to be calculated as a percentage of your mortgage. One point is 1% of your mortgage amount, so one point on a $100,000 mortgage is $1,000.

7.  The points have to show up on your settlement disclosure statement as “points.” They might be listed as loan origination points or discount points.

Tip: You can also fully deduct points you pay (for the year paid) on a loan to improve your main home if you meet tests one through five above.

Where to Deduct Points

Figured out that your points are deductible? Here’s how you deduct them:

Your lender will send you a Form 1098. Look in Box 2 to find the points paid for your loan.

If you don’t get a Form 1098, look on the settlement disclosure you received at closing. The points will show up on that form in the sections detailing your costs or the sellers’ costs, depending on who paid the points.

Report your points on Schedule A of IRS Form 1040.

There are two things related to points that you can’t deduct:

1.  Interest buy-downs your builder paid

Some builders put money in an escrow account (as a buyer incentive) that the lender taps each month to supplement your mortgage payment. Those aren’t considered points even though the money is used for an interest payment and it’s prepaid. You can’t deduct the money the builder put into that escrow account.

2.  Interest payments from government programs

You can’t deduct points paid by a federal, state, or local program, such as the federal Hardest Hit Fund, to help you if you’re experiencing financial trouble.

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Tax Credits for Non-Solar Water Heaters

Don’t get in hot water over fuel bills. If you installed an efficient water heater, you might be eligible for a tax credit.

Doing the dishes, taking a shower, or cleaning your clothes — you need hot water and lots of it. The government understood, and offers an energy tax credit for adding a more efficient hot water heater to your home.

Tax credit particulars:

  • 10% of expenditures, up to $300, for a non-solar water heater, including installation. (You can spend a lifetime total of 10% of expenditures up to $500 for all approved energy purchases combined. If you already claimed energy tax credits up to this limit, you’re done.)
  • Save receipts and labels for Uncle Sam.
  • File IRS Form 5695 with your return.

There are many different kinds of hot water heaters, so the Energy Star site is a good bet for info. It’s very specific on what is and is not credit-eligible. For instance, it must have a thermal efficiency of at least 90%. But it can run on gas, oil, or propane.

Don’t rely solely on contractors who may not know the details or who promise their products will get the credit in order to make a sale.

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