Four Reasons to Buy a Home
Purchasing a House can be a Dream Come True
Home ownership offers incredible opportunities for a better quality of life, and for this reason alone many should plan to purchase.
Owning a home is great! It creates an ability to realize personal dreams and participate in a community full of other home owners. Home owners have a vested interest in the neighborhood they live in and owning a home can be a very valuable and profitable endeavor.
Buying a Home is the Addition of a Large Asset to One’s Personal Holdings
A common statement that is heard on television and the radio these days is “your home is your biggest asset.” It is true. Most people do not have the raw cash to put enough money into the stock market for it to be worth nearly as much as a home, especially those who are under the age of 30. Like buying a home, purchasing stocks and bonds for an IRA or personalized investment account is part of a long term plan.
The difference between the stocks and bonds and a home is that the value of the home is there at first purchase. When a person buys a $150,000 home they can do so at the cost of under $2,000 a month over 15 years. In that time a home is likely to increase in value while the payment over that time never increases. In contrast, an investor putting the same amount into the stock market would have to do so with funds after paying for a roof over his head.
If the stock increased in value/price the investor would not have received all of his gains from the first moment he purchased as he did not purchase all $150,000 of the stock up front.
Owning Offers More Freedom and Flexibility Than Renting
Renters do not have the freedom to transform their living space to suit them unless they have the express permission of the owner. This includes adding or taking away greenery to add curb appeal, painting a room a non-neutral color, and replacing a faulty fixture, such as a dripping shower head.
Home owners can do all of these things while adding to the value of their asset allowing them to enjoy where they live even more so. In economic terms, this is referred to as utility. A home owner has the ability to maximize his utility whereas a renter does not.
A Home Owner can Increase the Value of his Asset
Aside from fixing small things, a home owner can add a room onto a house (most landlords would seldom complain if a tenant did this), paint the bedrooms everyone’s favorite colors, and update the appliances in the latest, most efficient manner. As a result he could possibly turn his $150,000 home into a $200,000 home overnight.
Peace of Mind
Getting back to maximum utility, home ownership provides peace of mind to the many who have purchased within their means. Knowing that a landlord cannot come onto the property, or into the home uninvited, or unscheduled (as some may) can be a relief. And so, while the children play outside on a playground built just for them, and a hammock is swinging between two trees as steaks and chicken are on the grill, owning a home can offer a completely different feeling than paying to borrow one from someone else.
Between it all, owning a home can be a dream come true.
Four Reasons Not to Buy a Home
Why Renting May be Better
Contrary to popular belief owning a home is not all wine and roses. It is expensive and, for some, not worth the cost.
Many renters will hear from their friends who own homes that owning is the only way to go. Real estate agents, though happy to help a client find a place to rent, will often come out with the canned “why rent when you can buy?”
Here are some reasons why renting can be preferable to buying:
- Buyers includes he addition of a large liability to personal holdings
- Tax benefits often do not offset costs
- There is a lawful allowance that allows lenders to offer borrowers more than they should take
- Real estate belongs to the government
A Home is an Asset That Comes With a Liability
For many, a home is the biggest asset they own. What they fail to realize is that it’s also the biggest liability as well. A $150,000 home bought with a 20% down payment leaves a $120,000 mortgage. According to bankrate.com, a 30-year mortgage of this amount at 5.75% would result in the borrower paying over $252,000, more than twice the amount loaned leading to the origin of the word mortgage.
The word mortgage, according to dictionary.com, originated between 1350-1400. Its root comes from the Latin word mortus, meaning dead. Thus a mortgage is intended to be an engagement until death, explaining the incredible long term cost and the recent advertising of the 40-year loan.
Doesn’t Owning a Home Give Great Tax Benefits?
The tax benefits of owning a home are almost always associated with money spent for which a fraction is returned. For example, a home owner with a mortgage of $120,000 at 5.75% will pay approximately $700 in principle and interest. Over the course of the first year of the mortgage nearly $7,000 will go to interest.
If the home owner earned $50,000 that year, then he would only pay taxes on $43,000, meriting a refund of $1,750, or 25% of $7,000. The refund would not likely cover the insurance and maintenance costs of the home, crossing off the possibility of it subsidizing improvements.
Lenders are Legally Allowed to Bury Their Clients in Debt
When renting an apartment, the general rule of thumb is that a renter must earn their rent money in one week, or earn four times their payment. This ensures that the landlord will receive his money from someone who can afford to pay it and is an excellent practice to follow in mortgage payments. Lenders, however, do not agree.
According to the Mortgage Reference Library at brokeroutpost.com many lenders are allowing their clients to borrow up to a 50% debt to income ratio (DTI). This means that if a person earns $50,000 a year before taxes a lender will encourage him by way of qualification to put $25,000 a year into long term debt.
The result is that the borrower will be left with less than $15,000 in discretionary income to pay for groceries, car, life, health and dental insurance. And then there is the possible need for clothes, which may suffer in some seasons as the price of energy fluctuates.
Additionally, a home owner can be forced from their home by the government.
What Does “Real Estate” Mean
When home owners achieve the dream of purchasing a piece of property it is called a real estate transaction. If one was to think about the term real estate they would most likely conclude that it means an estate that is actual, or real.
Returning to words and their origins best selling author Robert Kiyosaki explains in his Rich Dad series that the world real in real estate comes from the Latin word royal, meaning that the land belongs to the King or the government.
This is the reason home owners pay taxes to the government, which then uses the raised funds to make improvements as they see fit, rather than home owners pay taxes for improvements at their own discretion.
This is also the reason the government can enforce eminent domain upon a property owner without his or her permission. According to the law website nolo.com, eminent domain falls under the Fifth Amendment of the US Constitution granting the government permission to take a piece of property for the public good, such as a highway, park, or hospital, for which the owner will be compensated fair market value.
In the end, home ownership can be extremely costly, and buyers should be aware of and weigh all of the positives and negatives before buying.
Four Top Tips for Home Sellers
Here ‘s Advice for Folks Who Want to Sell Their Homes Fast
Let’s face it – it’s difficult to sell a house these days. There are buyers, but they want the most for their money. So, how can one sell quickly for the best price?
Jayne Camlin, a real estate agent with Gloria Nilson in Middletown, New Jersey, has some advice for people who are selling their homes.
1. Start with the Best Advice- Pick the Right Agent
“If you really want to sell your home, you’ve got to work with a realtor/broker who understands the market inside and out,” Camlin says. “If you had a serious legal matter, you wouldn’t go to a lawyer who never won a case, would you?”
The best advice is going to come from realtors who know how to market homes, find the right buyers, and negotiate the best deals. Check out a realtor’s credentials before hiring him or her. How many homes have they sold, and how long are their homes on the market?
2. See the Home Through a Buyer’s Eyes- Get it Ready to “Show”
“You cannot sell a home the way you live in one,” says Camlin. “It is important to see it through the buyer’s eyes, and that is what an experienced agent can help you do,” Camlin says. Buyers find it hard to see past clutter, family photos, and unusual paint colors. Camlin often recommends renting a storage unit and packing everything away (extra furniture, photos, books) that won’t be needed.
Consider investing a little money in a fresh coat of paint, and apply warm, neutral colors to maximize space. Replace the carpets if they are old and worn, and if there are hardwood floors, consider refinishing them. “Hardwood floors provide a huge ‘wow’ factor to today’s buyers,” Camlin adds.
3. Don’t Chase the Market- Set the Right Price from the Beginning
“Many sellers have a particular price in mind for their home, so they list their house at a higher price thinking they can always come lower,” says Camlin. “Set the price correctly from the start – don’t waste your time chasing the market,” Camlin says.
With today’s stricter financing guidelines, appraisals are the key to a successful sale, and the appraisers look closely at the most recent sale prices of homes in comparable areas with comparable attributes. “Homes that are priced right will draw interest away from homes that are overpriced. Then, if the right priced-home gets enough attention it is possible, even in this difficult market, to get multiple offers,” Camlin notes.
4. Don’t Just Put a Sign on the Lawn- Market the Home Extensively
Home buyers take great advantage of today’s technology, with nearly 84% searching for homes on the internet. “It is imperative to have total exposure to get the best results,” says Camlin.
Aggressive marketing on sites such as Realtor.com, Trulia, and Zillow will increase buyer interest. “You must impress buyers from the first glance in order to pique their interest to want to see the home in person.” The right agents will know exactly how to get the most exposure for the home listing.
A tough economy can make selling a home a challenge. But, despite the obstacles, they can be overcome. Following these home selling tips is a good beginning.
Holiday Home Sales
Selling During the Holiday Season
Traditional homes sales are stressful all by themselves. However when include the holiday season in the mix you have added a whole new component to add stress.
Vendors typically look at the month of December as a writes off when it comes to selling your home. However deals continue to be transacted throughout the month and because the traditional market slow down at this time year vendors will sometimes be rewarded with a sale.
How do you combine the mad scramble of Christmas activities and the constant care and upkeep your home requires to successfully sell? Well simply put you put in double duty and will likely have to do twice the work. This is a major part of the reason vendors will take their homes off the market in December. The increased effort and stress of combining a sale with the holidays is exceptional.
It is best to be upfront with your realtor if you have one. Be clear about when you have family functions, and days you will be away. If you prefer to be home for showings then they should not be taking place during your families turkey dinner.
I personally have had buyers call me on Christmas day trying to get a showing appointment for that same day. I was able to persuade that buyer to view the property at another time, but there are instances when a buyer will view a property on Christmas day.
If you are anything like me then your home is impeccably clean during the holiday season. Unexpected houseguests, impromptu visitors are all part of our holiday traditions.
However a showing on short notice could have buyers seeing unwrapped gifts or a hastily tidied dinner mess. So extra care needs to be taken in order to present your home at its holiday best.
Finally don’t allow the sale of your home to take over the holiday season. Limit the number of open houses you have. If there is a conflict with your schedule and a showing, put your schedule first and ask the potential buyer if they can see the property another time.
Buyers looking for a home at this time of year understand that they are putting the seller out of there home during this festive season and should be willing to reschedule their appointment.
Ultimately a Christmas sale is very difficult; the best solution is to enjoy the holidays as you normally would. Taking that little extra care will allow both aspects of your life to flow smoothly together.
Is Short Selling Better Than Foreclosure?
Does an Agreement with a Mortgage Lender Protect Your Credit Score?
Missed mortgage payments are a clear sign of money problems. Is short selling better than foreclosure? Do agreements with mortgage lenders really protect credit scores?
Figures produced by the US Labor Department showed that unemployment has now reached a 26-year high of 8.5 percent. To put this into perspective, it means that 663,000 US jobs were lost in March 2009 alone. Rising unemployment and unsustainable personal debt are at the very heart of the housing crisis. Missed mortgage payments are leading to increased short selling and foreclosure numbers.
The Scale of Foreclosure in America
Figures produced by RealtyTrac showed that there were 861,664 foreclosures during 2008. James Saccacio, CEO of RealtyTrac, said: “The big jump in December foreclosure activity was somewhat surprising given the moratoria enacted by both Freddie Mac and Fannie Mae, along with programs from some of the major lenders and loan servicers aimed at delaying foreclosure actions against distressed homeowners.”
How Does Short Selling Work?
Short selling is a viable alternative to foreclosure when making mortgage payments becomes a problem. With the permission of the mortgage lender, it is possible to sell a house for less than the mortgage owed on it. For example, short selling allows someone to sell a house with a $400,000 mortgage for just $325,000.
Why Do Lenders Prefer Short Selling to Foreclosure?
The main proviso behind short selling is that the mortgage lender agrees to accept this reduced sum of money in order to prevent the need for foreclosure. Mark Boyland, an associate broker at Keller Williams NY Realty, said that short selling is “a way to help out both the homeowner and the bank, and make a bad situation better”. It helps to maximise the price attained on the open market and prevents the need to go through the courts.
How Does Short Selling and Foreclosure Affect a Credit Score?
Foreclosure will negatively affect someone’s credit score for a period of seven years. However, the credit score will improve after each passing year. Those who have missed mortgage payments are likely to already have a bad credit score so foreclosure may not affect things as much as anticipated.
Due to the agreement of the mortgage lender, short selling may not affect someone’s credit score at all. However, a short sale showing as “settled for less than the full amount due” will have the exact same affect on credit score as foreclosure. It is important to check this with the mortgage lender before opting for a short sale.
The Tax Consequences of Short Selling and Foreclosure
The IRS construes unpaid debt or ‘cancellation of indebtedness income’ as a taxable income. However, homeowners who default on their primary residence mortgage won’t need to pay income tax provided the debt was incurred between 2007 and 2012. This temporary exemption doesn’t apply with respect to mortgages over $1 million for single people and $2 million for married couples.
Individuals that are struggling to maintain mortgage payments should check to see if their mortgage lender is agreeable to short selling. If they are, make sure that the lender is prepared to report a short sale as ‘paid satisfactorily’. Organisations, such as nfcc.org, have received government funding to help struggling homeowners avoid foreclosure. Beware of companies charging fees for this service.
Those that found this article useful may also be interested in taking out critical illness insurance or life insurance to protect their families. Taking out pet insurance can also help save families thousands of pounds in veterinary bills.
Choosing the Right Real Estate Listing Agent
Sell Home with Marketing Agent who Understands Buyer Needs
You can minimize the time it takes to sell your home by thinking like a buyer and hiring a real estate listing agent who knows how to attract buyers for your home.
Hiring the right real estate listing agent can often mean a quicker sale for your home. The adage “time is money” was never more true than when you are selling your home. Before deciding which agents to interview, do your homework! The top agent in your city may not be the best choice for marketing your particular home. Your choice should depend on which agent is most successful in attracting buyers to homes similar to yours in price and amenities.
Some agents specialize in luxury or ocean-front homes, some in rural homes or farms, and some in a particular subdivision or price point. To optimize your selling success, choose an agent who is successful in selling homes similar to yours.
If your agent works as part of a team, it is probable that he or she works with a wide range of buyers and sellers and will have a member of the team who specializes in marketing homes just like yours.
Your Real Estate Listing Agent Must Have a Strong Web Presence
“Buyers look for homes on the internet. Period,” says Kathy Drewien in Straight Talk for Online Marketing Success. “Successful listing agents anticipate buyer questions and provide detailed credible answers across a broad internet base such websites, blogs, real estate forums and online community networking. Strategic online marketing attracts a large global pool of buyers to the agent and their homes for sale.”
Examine the Web Presence of Local Real Estate Agents
Start your search for a listing agent by conducting an internet search. Enter your town, subdivision, and pertinent key words such as golf, beach, ski, farms, real estate and homes. Examine several agent web sites and blogs to see how they attract families moving to your area. Buyers moving to your town will do the same search and you want to choose an agent who attracts relocating buyers.
Be sure to look at how the agents use real estate blogs and agent social networking sites. Agents across the country network to refer buyers from one area to another. Social networking sites are sources of business for agents, connecting them with potential buyers and other agents. Sandra Nickel of Montgomery, AL, uses all these tools to drive business to her real estate team.
Choose an Agent with a Proven Track Record
The best time to start the process of choosing an agent is as soon as you sense a move might be in your future. Note how many homes are currently listed in your neighborhood. Ask the owners how the process is going for them. Talk to anyone who has recently moved into your neighborhood and ask how they chose their agent.
After you have gathered all your information, it will become obvious who you want to interview. Schedule an appointment to interview your top two or three choices.
Questions to Ask a Real Estate Agent before You List:
- How many homes have you listed and/or sold in my community that fall within my home’s price range?
- What is the average number of days on the market for your listings compared to all community listings
- Do you work with a team? Who will be my team contact? How does it all work together? Who should I call first with a comment or question? How often should I expect to hear from you or a team member?
- How often is your web site updated? Can you show me how often my home is looked at on your site and other sites you use? What are the statistics for you web site views?
- What professional real estate designations do you hold? Did these require special training or are they open to all who apply? How will these benefit me in marketing of my home?
- How many advanced real estate courses do you attend each year? How many are out of town? How does that help you in the marketing of my home?
- What is your system for networking with top agents from around the country or around the world? How often are you in touch with them? How successful is this for you?
Even with the right agent, not all homes will sell in the time frame the owner wants.
But by doing your research before the appointment and asking specific questions when you interview the agents, you will be able to determine the best choice for listing and marketing your home.
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