Home ownership offers tax benefits as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property.
There also are a number of economic considerations. Unlike renters, home owners who secure a fixed-rate loan can lock in their monthly housing costs and make prudent investment plans knowing these expenses will not increase substantially.
Home ownership is a highly leveraged investment that can yield substantial profit on a nominal front-end investment. However, such returns depend on home-price appreciation.
"For some people, owning a home is a great feeling," writes Mitchell A. Levy in his book, "Home Ownership: The American Myth," Myth Breakers Press, Cupertino, Calif.; 1993.
"It does, however, have a price. Besides the maintenance headache, the amount of after-tax money paid to the lender is usually greater than the amount of money otherwise paid in rent," Levy concludes.
As for evaluating the risk associated with home ownership, David T. Schumacher and Erik Page Bucy write in their book "The Buy & Hold Real Estate Strategy," John Wiley & Sons, New York; 1992, that "good property located in growth areas should be regarded as an investment as opposed to a speculation or gamble."
The authors recommend that prospective buyers spend a few months investigating a community. Many people make the mistake of buying in the wrong area.
Important Buying Tips
Planning to buy a property?
Take the strain out of buying your home with step-by-step guide to property-purchasing.
What's important to you?
One of the first things you have to do is decide where you want to live and what sort of property you are looking for.
Think about which features are essential to you and which ones you could do without.
A practical way of doing this is to think of every conceivable feature in a property and put them into three lists, 1, 2 and 3 - where 1 is for essential features and 3 is for "nice to have" features.
Deciding these matters in advance will not only help you rate houses when viewing, but also help put your ideals into perspective when you come to make the big decision.
How much can you afford?
Think about what you can afford. Remember to take into account the other costs you will incur apart from a mortgages loan, i.e. the deposit on your new home, the cost of any surveys, your solicitor's fees, stamp duty as well as your normal outgoings.
If it is a first home you may need to buy a lot of furniture and kitchen appliances at once. Also be realistic about your outgoings: it is easy to underrate how important a holiday is to you!
Seek a mortgage
Arrange a meeting with a mortgage broker or financial advisor. Discuss how much you want to borrow and what your options are.
You should always try to get an agreement in principle before you start searching for your new home, although if the perfect property appears it may be possible to put an offer in and quickly source a mortgage. There are no guarantees with this approach, however.
Search with commitment
Try to view at least six properties that match your price, feature and location criteria. Try not to get too emotionally involved with a house until it is definitely yours. With the specter of gazumping hovering, it can be dispiriting to see your plans come to nothing in the wake of a higher offer.
Also, even when you've found a good property, there is no harm in continuing to look for something else, perhaps something even better.
Location, location, location
Make enquiries at the local police station about the level of crime in the neighborhood. Find out about the property tax in the area and quality of local amenities such as schools and public transport.
They can offer you advice and details on these issues. Ask the estate agent how long the house has been for sale. This may tell you something about the asking price or potential of the property.
If possible try to view places in daylight and at night. If you like a property makes at least two visits - and find out what fixtures and fittings will be left by the seller.
Ask about the neighbors. Even hang about the street and get a feel for the local environment for yourself.
Can you really imagine yourself living here?
More Information/Tips on Buying a Home
Here are some tips to help you become your own landlord.
Hire a real estate professional.
The first step is to select a professional to help you find your dream home and fine-tune your financial expectations. Working with a buyer agent is worth consideration since he or she is legally responsible for representing the buyer's interest in a real estate transaction. Before making a decision, however, have a Realtor explain the pros and cons of using a buyer agent versus a sales or dual agent. Your Preferential Associate can guide you through every step to buying a home.
Shop for mortgage rates and terms.
A difference of even half a percentage point can mean a huge savings over the life of a loan. For example, the difference in the monthly payment on a $100,000 mortgage at 8 percent vs. 7.5 percent is about $35 per month. Over 30 years, that's $12,600.
Prequalify for a loan.
Your third step should be to get prequalified, which determines how much you can afford. It allows you to move swiftly when you find the right home, especially when there are other interested buyers. It also indicates to the seller that you are serious and really can afford to buy the property.
Define what you want.
The next step is to create a realistic idea of the property you'd like to buy. What features are most important to you? Make two lists: one of the items you can't live without and one of the features you would enjoy. Refine the lists as you house hunt. It is also helpful to search online to see what is currently available on the market. Your real estate professional can then show you houses that meet your expectations.
Visit properties.
Now you're ready to visit houses. Ask your Preferential Associate to arrange showings, and keep track of the properties you've seen.
Know the features that help or hurt resale.
In some areas, a swimming pool actually detracts from a home's value and makes it harder to sell. In neighborhoods with two-car, attached garages, a single-car or detached garage may impact the home sale and future value. Your Preferential professional can point out features that hurt or help resale value.
Rate the houses you tour.
After touring each home, write down what you liked and didn't like. Develop a rating system that will help narrow the field down. For example, pick the house you like best on day one and compare all other houses to it. When you find a better one, use the new favorite as the standard.
Make an offer.
Once you've pinpointed your dream house, it's time to get serious about the financial and contractual side of the purchase. Your PREFERENTIAL Associate will be a strong advantage since you and the seller have different goals.
Arrange for a home inspection.
After your offer is accepted, set up a home inspection. It's common to find problems, including leaky roofs, cracked walls, insect infestations and foundation problems. Your real estate professional can help find a reputable inspector, and will negotiate to get you the most for your money once the inspector's report is final. If you negotiate repairs as part of the purchase, ask for a "walk through" before finalizing the paperwork. Ask your real estate expert about home protection plans, which may save you money in the near future.
Close.
Before your closing date, make sure you've made all necessary deposits and completed the paperwork - including mortgage, title, homeowners insurance and any other paperwork required by local or state governments.
Prepare for life in your new home.
Before rolling out the welcome mat, consider some moving basics: arranging for an alarm company, turning on electricity, water and gas, cleaning or replacing the carpet, and notifying your local post office of your new address. The best time for renovations is often before you move in.
Buying Properties
The offer
Once you've found a property that matches your criteria, make an offer. The estate agent will inform the seller. Offering to put down a deposit as an act of good faith can significantly increase the chances of your offer being accepted.
Make sure your offer is subject to survey and contract meaning that you are not obliged to proceed until the conclusion of the survey and the exchange of signed contracts. We would seriously recommend that you do not get involved in bidding wars for a property.
If you're emotionally attached to a property there is a chance that someone else is too, and it is all too easy to spend over-the-odds for a property in those circumstances.
The offer is accepted
If your offer is accepted, it is time to get the whole legal and financial process moving. If you have not yet arranged a mortgage, do it now. See our guide to mortgages for help deciding on which mortgage is right for you.
Arrange for a survey of the property (usually your lender will carry out a survey which you pay for but this is for valuation purposes only and will not examine the structure and general state of the house).
Find a solicitor
You need to find a solicitor to conduct the conveyance. This means checking the legal aspects of the sale, for example that the seller has the legal right to sell the property, that no one has right of way over it and that there are no land disputes. Your solicitor will also carry out a local authority search which looks for planning proposals such as new roads, changes to road layouts, building developments in the vicinity and alterations to land use or public rights of way which might affect your chosen property.
Exchange contracts
Once all the legal arrangements have been undertaken, your mortgage has been agreed and you have had a positive survey (if the survey indicates a lot of work needs doing, be prepared to negotiate with the seller) you will be ready to exchange contracts.
This will be done by the lawyers acting for you and the seller and once contracts have been exchanged, both of you are committed to the deal. If for any reason, you pull out, you will lose your deposit. Conversely, the seller is bound to sell the property to you and cannot accept a higher offer.
This is also when the completion date - when you get the keys and can move in - is set.
Arrange completion date and move in
You've exchanged contracts and are getting ready to move. Use our guide to moving to see what you should be doing and when. You can also get quotes for removals and storage. Make sure you have arranged the necessary insurance for your new home.
Viewing Property Tips
Questions to ask the seller
What you should ask when looking at properties for sale.
Why are you moving?
How long has it been on the market?
Is it chain-free?
What are you leaving behind?
How much are the average heating/electricity bills?
How much is the council tax?
How much ground rent/service charges do you pay?
What are the neighbors like?
Have you ever been burgled?
Have you made any improvements? Do you have the relevantwarranties?
How easy is it to park outside? Any permits needed? If so, how much?
What are the local schools like?
Is it in a neighborhood watch area?
What are the local public transports links like?
What local amenities are there?
The First Step
What is the first step to buying a home?
Finding out what you can afford is one of the first steps, which can be done by pre-qualifying for a home loan. This step will help you narrow your search for both a neighborhood and particular houses. A pre-qualification is a simple calculation that considers several factors, but primarily your income. There are no guarantees with a pre-qualification, but it will be expected of you when you make an offer on a home.
It can be difficult to negotiate the sales price with a developer because they may claim their prices are based on fixed construction costs. But it doesn't hurt to try.
Experts say builders are more likely to be flexible on price at the very beginning and the very end of a development project. Early on, most developers want to move people in quickly so the project picks up momentum. Later, developers may be more inclined to accept lower offers when only a few units remain.
If negotiating the price doesn't work, buyers commonly negotiate for better amenities (upgrade carpet, light fixtures, etc.) or lot location. Experts say a developer will rarely pass up a deal over a couple hundred dollars' worth of carpeting, for example.
New Home Inspection?
Q. What is a “Home Inspection”?
A home inspection is an objective visual examination of the physical structure and systems of a home, from the roof to the foundation. The standard home inspector's report will include an evaluation of the condition of the home's heating system, central air conditioning system (temperature permitting), interior plumbing and electrical systems; the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement, and visible structure.
Having a home inspected is like giving it a physical checkup. If problems or symptoms are found, the inspector will refer you to the appropriate specialist or tradesperson for further evaluation.
Q. Why do I need a home inspection?
The purchase of a home is probably the largest single investment you will ever make. You should learn as much as you can about the condition of the property and the need for any major repairs before you buy, so that you can minimize unpleasant surprises and difficulties afterwards.
Of course, a home inspection will also point out the positive aspects of a home, as well as the maintenance that will be necessary to keep it in good shape. After the inspection, you will have a much clearer understanding of the property you are about to purchase, and will be able to make a confident buying decision.
If you have owned your home for a long time, a home inspection can identify problems in the making and recommend preventive measures which might avoid costly future repairs. In addition, home sellers may opt for having an inspection prior to placing the home on the market to gain a better understanding of conditions which the buyer's inspector may point out. This provides an opportunity to make repairs that will put the house in better selling condition.
Q. What will it cost?
The inspection fee for a typical one family house varies geographically, as does the cost of housing. Similarly, within a given area, the inspection fee may vary depending upon the size of the house, particular features of the house, its age, and possible additional services, such as septic, well, or radon testing. It is a good idea to check local prices on your own.
However, do not let cost be a factor in deciding whether or not to have a home inspection, or in the selection of your home inspector. The knowledge gained from an inspection is well worth the cost, and the lowest priced inspector is not necessarily a bargain. The inspector's qualifications, including his experience, training, and professional affiliations, should be the most important consideration.
Q. Can't I do it myself?
Even the most experienced home owner lacks the knowledge and expertise of a professional home inspector who has inspected hundreds, perhaps thousands, of homes in his or her career. An inspector is familiar with all the elements of home construction, their proper installation, and maintenance. He or she understands how the home's systems and components are intended to function together, as well as how and why they fail.
Above all, most buyers find it very difficult to remain completely objective and unemotional about the house they really want, and this may affect their judgment. For the most accurate picture, it is best to obtain an impartial third-party opinion by an expert in the field of home inspection.
Q. Can a house fail inspection?
No. A professional home inspection is an examination of the current condition of your prospective home. It is not an appraisal, which determines market value, or a municipal inspection, which verities local code compliance. A home inspector, therefore, will not pass or fail a house, but rather describe its physical condition and indicate what may need repair or replacement.
Q. How do I find a home inspector?
The best source is a friend, or perhaps a business acquaintance, who has been satisfied with, and can recommend, a home inspector they have used. In addition, the names of local inspectors can be found in the Yellow Pages where many advertise under "Building Inspection Service" or "Home Inspection Service". Real estate agents are also generally familiar with the service, and should be able to provide you with a list of names from which to choose.
Whatever your referral source, be sure to ascertain the home inspector's professional qualifications, experience, and business ethics before you make your selection. You can do this by checking with the local consumer affairs office or Better Business Bureau, as well as by verifying the inspector's membership in a reputable professional association.
Since there are no licensing requirements for home inspectors [except in Texas], you will want to make certain that such an association has a set of nationally recognized practice standards and a code of ethics. This provides members with professional inspection guidelines, and prohibits them from engaging in any conflict of interest activities which might compromise their objectivity, such as using the inspection as a means to obtain home repair contracts.
The association should also have rigorous membership and continuing education requirements to assure consumers of an inspector's experience and technical qualifications.
Q. When do I call in the home inspector?
A home inspector is typically called right after the contract or purchase agreement has been signed, and is often available within a few days. However, before you sign, be sure that there is an inspection clause in the contract, making your purchase obligation contingent upon the findings of a professional home inspection. This clause should specify the terms to which both the buyer and seller are obligated.
Q. Do I have to be there?
It's not necessary for you to be present for the inspection, but it is recommended. By following the home inspector around the house, by observing and asking questions, you will learn a great deal about the condition of the home, how its systems work, and how to maintain it. You will also find the written report easier to understand if you've seen the property firsthand through the inspector's eyes.
Q. What if the report reveals problems?
No house is perfect. If the inspector finds problems, it doesn't necessarily mean you shouldn't buy the house, only that you will know in advance what to expect. A seller may be flexible with the purchase price or contract terms if major problems are found. If your budget is very tight, or if you don't wish to become involved in future repair work, this information will be extremely important to you.
Q. What if I find problems after I move into my new home?
A home inspection is not a guarantee that problems won't develop after you move in. However if you believe that a problem was already visible at the time of the inspection and should have been mentioned in the report, your first step should be to call and meet with the inspector to clarify the situation. Misunderstandings are often resolved in this manner.
If necessary, you might wish to consult with a local mediation service to help you settle your disagreement. Though many home inspectors today carry Errors & Omissions liability insurance, litigation should be considered a last resort. It is difficult, expensive, and by no means a sure method of recovery.
Q. If the house proves to be in good condition, did I really need an inspection?
Definitely. Now you can complete your home purchase with peace of mind about the condition of the property and all its equipment and systems. You will also have learned a few things about your new home from the inspector's report, and will want to keep that information for future reference. Above all, you can feel assured that you are making a well-informed purchase decision, and that you will be able to enjoy your new home the way you want to.
Home Valuation
Can I find out the value of my home through the Internet?
You can get some idea of your home's value by searching the Internet. A number of Web sites and services crunch the numbers from historic public records of home sales to produce the statistics. Some services offer an actual estimate of value based on acceptable software appraisal standards. They also depend on historic home sales records to calculate the estimate.
Neither of these services produce official appraisals. They also don't factor in market nuances or other issues a certified appraiser or real estate professional might in assessing the value of your home.
Agent Selection - Real Estate 101
Working With Your Agent
Selecting the right real estate professional to help you buy or sell your home is essential to a smooth transaction. For the best possible experience, you should consider an agent's experience, personality and responsiveness in your overall evaluations.
Here are some tips to help you choose and work with your agent.
How to choose an agent
When it comes to choosing a real estate agent, consumers who do their homework can save thousands of dollars and experience a smooth financial and physical transition. So don't slack off - decide what is most important to you, and then find an agent who specializes in that field. Does location matter most? Do you need a townhouse with a garage? A four-bedroom home? A condo? A corner lot? No yard? Perhaps cost is your main concern. Or timing.
We will find the perfect home to match your desire and finances
If you've found the general area in which you'd like to move, do an informal survey by driving through neighborhoods and viewing yard signs.
Once you have your list narrowed down to about three real estate professionals, schedule interviews. Agents may ask to meet at your home if you are selling. If you are buying, expect to meet the agents at their offices.
If selling, ask the agent how he or she would establish a price. You may request a Comparative Market Analysis, also called a CMA, which shows the actual market value of similar homes in the area.
If selling, ask the agent how he or she would market your property.
Ask the agent how often you should expect to hear from him or her. Know how and when you will communicate to avoid unrealistic expectations. Pay attention to the agent's office hours and whether or not you will be invited to access them via a cell phone, pager or e-mail.
Ask how long the agent has been in real estate. While time is not the most important factor, it may demonstrate the agent's experience.
Ask about awards and designations.
Pay attention to the agent's listening skills. Does he or she cut you off before you've finished a sentence? There's nothing worse than looking at houses you have no interest in because the agent has not listened carefully to your needs or having your home on the market too long because the wrong buyers are being targeted.
Ask the agent what his or her fee structure is. Do they require a percentage of the sales price, do they work for a flat fee, or will they be paid by the seller (if you're the buyer)?
If you are dissatisfied with the agent's plan or personality, thank the agent for taking the time to meet with you, and repeat the process with another agent. It is time-consuming to meet with multiple agents, but it's worthwhile to find the right partner to purchase your home.
Once you've found the right agent to represent you, hold up your end of the relationship. There are simple things you can do to help your agent get you the best deal.
How to work with your agent
If you are selling, create an information sheet that lists your home's features and best qualities, especially those that people might otherwise overlook. Give this to your agent, who may be able to use the information when marketing or talking with potential buyers.
When selling, talk to the agent about upgrading. Your home may need fresh paint or new carpet. (Make sure you choose neutral colors.)
If selling, keep it clean. Eliminate cobwebs and dust. Keep the bathroom counters and mirrors wiped down. Vacuum and sweep daily during the selling process.
If buying, be clear about what you want. Make a list of your priorities numbered one through 10 and give it to your agent. You can always revise the list, but give your agent something concrete so he or she can research available listings effectively.
It depends. Fixtures, any kind of personal property that is permanently attached to a house (such as drapery rods, built-in bookcases, tacked-down carpeting or a furnace) automatically stay with the house unless specified otherwise in the sales contract. But anything that is not nailed down is negotiable. This most often involves appliances that are not built in (washer, dryer, refrigerator, for example), although some sellers will be interested in negotiating for other items, such as a piano.
Buying Your Home
Where can I get information on buyer agents?
For information on buyer agents, contact the your area's Realtor association or National Association of Exclusive Buyers Agents at 191 Clarksville Road, Princeton Junction, NJ 08550;
(800) 786-1570; www.naeba.org.
