By: Andrea Hartmann
There are several advantages and disadvantages to owning a home. Some of them are pretty common knowledge but some are less well-known. Here are a few things to consider if you are looking to buy:
Advantages:
Multiple tax incentives: mortgage interest deduction, property tax deduction, first time homebuyer credit
Equity: ability to make money on the investment; your money goes into something YOU own as oppose to paying someone else’s mortgage with your rent money
Freedom: the ability to customize the property to fit your lifestyle/tastes
Space and Privacy: especially in a single family home- gaining square footage and some distance from your neighbors
Payments: especially in 2+ unit homes but also for anyone who finds roommates- there is the ability to reduce your payments even to less than you were previously paying for rent!
Pride of home ownership: it does feel good to have your name on a deed! And most people will take better care of something they own as opposed to something they rent
Stability: especially for families with young children- an owned home provides stability and comfort for family members
Disadvantages:
Cost: mortgage payments, etc and when something breaks, you have to pay to fix it
Illiquidity of investment: not something you can liquidate quickly /easily if you want to move the capital into another investment or if you need to move somewhere else
Instability of market: historically the real estate market has been a very safe, solid investment option, but as we’ve seen lately it’s not a guarantee of profits. It’s also something that takes some time to appreciate
Maintenance: Performing all the necessary duties to “keep up the property” or having enough money to pay someone else for these services
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Many Sellers think they want to wait until after he first of the year to list there homes. Some Buyers put off looking for a home during the holidays.
Christmas 2009 is different!
For Sellers, there are all those “Home Buyer $8,000 Credit” Buyers that are on a deadline. Now, add to that the $6,500 credit for people who currently own a home. Why wouldn’t you want to be in the available searches.
Sellers, your home looks wonderful during Christmas…all decked out and delightful. Who wouldn’t want to live in your home when they see the Christmas tree up and all those lights outside. You have to put up all that anyway, so get some selling benefit out of it.
Sellers, your competition is less…all those other Sellers are waiting until after the first of the year!
Sellers, there are Buyers coming home for Christmas and New Years vacation that want to move here. They have the time on their vacation to look at homes. “Home Buyer Credit’ Buyers have more days off during this time to look at homes.
Buyers, there is a rumor that after January 1, new Fannie Mae automated underwriting will be released with tighter guidelines…this has to do with debt ratio. You won’t be able to buy as much house for what you make.
Buyers, perhaps credit score requirements will go up. What used to be 620 two years ago was all you needed to get the best rate in a conventional loan; now 740 is needed…who knows what happens after the first of the year.
Buyers, Private Mortgage Insurance (PMI) is harder to qualify for. A minimum 700 credit score is required. What if that changes after the first of the year.
We at Living Dimensions Real Estate have all the elves standing by during this blessed season to show you homes and to list your home the Real Estate ¢a la carteâ way. Let’s get working!
The Homebuyer Tax Credit that was supposed to expire in mid-November has now been expanded until April of 2010. A reduced credit has also been made available to those that are not considered first time home buyers.
Income and cost of purchased house limits are still being enforced. To get up-to-date, check out this great overview. You can also checkout these Frequently Asked Questions. Otherwise, please feel free to email me with any questions: judyrae@sbcglobal.net
If you are a Seller or a Buyer, the Offer to Purchase determines everything! Be careful and aware and make sure your Realtor is a great negotiator and explains the contract carefully. Conditions in the Offer are set in stone and cannot be changed without being mentioned in the original Offer or Amendments.
Exact dates are set in the Offer. Dates like when the earnest money has to be in; when the Building Inspection must be completed (and that includes time for negotiating if something is found to be wrong); when the Financing Contingency ends so the Buyer’s mortgage is verified via a commitment letter.
The date of closing is set in the Offer and this date determines the amount of the real estate taxes, utilities and mortgage payoff the Sellers & Buyers pay. Closing day determines that the Seller will have to be moved out and left her home in clean shape for the new Buyers. It means the Buyers’ mortgage starts that day.
The Offer determines the price! The price paid for the home, the conditions of the mortgage the Buyer will pay, any closing costs either will pay, who pays for the Home Warranty, if any, who pays gap insurance, who pays for testing or who pays to fix (cure) what is found to be wrong in the Building Inspection.
The Offer determines the exit strategy for the Buyer…if you find something in the Building or testing inspection that is too big (material adverse fact), if you can’t sell your current home in time (home sale contingency), if you cannot get financing (financing contingency). It determines if the Buyer defaults and what happens if they do.
The Offer determines the stuff you keep and the stuff included in the sale…like the appliances, the $5,000 stair runner (yes, I had to pay for that one once), the hot tub. If it’s not in the Offer, it doesn’t count.
These are the general terms of the Offer. There is much more especially having to do with legal processes. Be sure you know what you are signing and accepting!
Yes, it really is the incredible Offer to Purchase!
You are on the fence trying to decide if you should sell your home…Will I get some profit out of this? What do I need to do to get ready? Is the market soft now? What if I don’t find another home I like? I think my basement is damp so I can’t sell…
It’s time to try…AS IF.
Acting AS IF you are going to sell your home means you get things in a row and make the decision later.
You get a Building Inspection to see what your home really needs so there are no surprises…AS IF you were selling.
You fix the list the Building Inspector comes up with…AS IF you were going to sell.
You sort, go through the basement stuff and all the closets; you paint and clean…AS IF you were going to sell.
You find your Realtor and she will send you active and sold listings of your area and you will become familiar with the market… AS IF you were going to sell.
You have your Realtor send you active listings of where you want to live…just in case you sell! Now you are looking forward in life.
You now have a clean, staged, beautiful home ready to sell. You know the value of your home and you know where you want to live. Grab a glass of wine and think about it…AS IF the decision is already made.
The first few weeks your home is for sale are the most important. There is a certain momentum and enthusiasm created with the newness. Once your MLS listing hits the internet, the whole world can have your listing in front of them. Hundreds of hungry Buyers will see your new listing as it arrives in their email searches. This is the broadest showing it will have. This is why it is essential to price your home to sell and do it from the start.
So many home Sellers think they will start high just in case…just in case there is an uniformed Buyer who just happens to walk in and buy their home. This phantom Buyer will not have looked at the competition, has never watched HGTV, has extra money in his pocket and really cares that you raised your whole family in this home and so is willing to pay you thousands of dollars for the same feeling. They can see with their mind’s eye how the walls could be painted, how the floors would look carpeted and how the kitchen would look with painted cabinets. Oh, by the way, they like the cat smell.
Sellers, it will never happen. As weeks go by you will have to lower your price but by then you have lost the momentum and as a result have lost money paying for holding costs, have lost time looking for your new home and have lost your negotiating power.
Listing price is so important. If you are still considering a higher price than your Realtor advises, get more information…get a building inspection before you list, do your homework to pack and stage, study the comparable sales and active listings, talk to your bank and be prepared to come “out of the gate” (as we say regarding a Montana rodeo) with a great competitive price.
A question to ask yourself…”Would you buy this house and could you afford it?”
What is the process to sell your home? The process that a Seller goes through to sell their home is broken down into these steps:
- Prelisting period
- Listing
- Marketing
- Intermediate Services
- Contingencies to Closing
It is in the Prelisting Period that so much work has to be done by the Seller. They have to have a complete change of prospective for this home that they have lived in and perhaps have a strong attachment to.
Their home becomes a house! That house is a commodity that competes with others on the market at the same time for a price that someone is willing to give.
In this stage the Seller has to change their mindset to sell, clean, pack, sometimes remodel and stage their home. This can take a long time or a short time depending on the motivation and many other variables such as physical help with all that packing and attitude of the kids as well as money to bring things up do date.
The way you live in a home is different than the way you sell a house! Take all the photos off the refrigerator! If it’s smaller than your fist pack it! Not everyone accepts dog smell like you do!
It’s work and commitment and inconvenience, but if this stage is not completed in grand style, it will cost the home seller thousands of dollars.
That is where Realtors come in! If you choose Real Estate á la carte! ® we can assist you via workshops and personal coaching in this stage. You will also have to:
- Choose the commission you will give a Buyer’s Realtor (and be sure you ask your Realtor what they will offer if you are using a full commission Realtor). If you are using Real Estate á la carte! ® you will be familiar with this step;
- Choose the price you want to market your home. No, it’s neither what you owe on the mortgage nor what it meant to raise all your children there; it is the competitive price that a buyer is willing to pay at this time in the market. Remember, it is not a home now; it is a commodity to sell;
- Choose the contractors to help you remodel or paint or fix what needs to be done. It is advised to hire a Building Inspector during this first stage who will tell you what needs to be done before that Buyer eventually does only now it’s after the Offer and after you have been negotiated down in price because you didn’t fix something!
Now you are the savvy Seller who has watched enough HGTV and is motivated and has cleaned, remodeled, staged talked to Living Dimensions Real Estate about Real Estate á la carte! ® and you are ready to go to the next steps…listing and marketing your property!
These savvy Sellers used Living Dimensions Real Estate in the first 2 marketing levels…a walk through with staging advice (though they didn’t really need it), MLS, Realtor.Com, awesome photos, Coaching Manual, professional signage, Open House signage and scheduling.
Someone saw the for sale sign and called Judy (whose name is on the sign) and she called the Savvy Sellers. Yes!…this Buyer eventually bought the house. Moral of this part of the story is that signage works!)
The Sellers held their own Open Houses, negotiated their Offer, took care of their contingencies and arranged their own closing! This is an example of two savvy people who were very aware of pricing right, staging their home and were confident in negotiating their Offer and working through Building and Financing contingencies themselves. They arranged closing…all within a little over a month.
They paid 2.4% to the Buyer’s Realtor and still saved the $9,146!
There was always the chance that someone from an Open House would walk in without a Realtor…and then they would have saved an additional 2.4% or $6898 for a total of $16,044!
The Sellers said, “ The a la carte option you offered was perfect for us. We had some time to spend preparing and showing our home, and leveraged your expertise taking great pictures, and putting up a professional sign and listing. The combination worked. We sold our home in less than a week, and saved over nine thousand dollars from a conventional selling agent’s fee. I also want to extend you a special thanks. Although we only chose your basic a la carte service, you were always available for us when we had questions. We both feel you exceeded our expectations in helping us sell our home. We plan to recommend you to all our friends and relatives selling homes in the future. Thanks so much!”
http://bit.ly/oiRXY
From the Wisconsin Realtors Association:
Here is the new addition from the IRS on their Q and A page at http://www.irs.gov/newsroom/article/0,,id=206291,00.html.
QUESTION:
Re: Land Contracts and the first-time homebuyer tax credit …Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example, a contract for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer’s payment obligations?
ANSWER: If the taxpayer obtains the “benefits and burdens” of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (New 7/2/09)
READ MORE ABOUT IT:
For more information about the homebuyer tax credit visit the WRA’s new Wisconsin Homebuyer Microsite @ http://www.wisconsinhomebuyer.org/taxcredit.html and the IRS information @ http://www.irs.gov/newsroom/article/0,,id=206291,00.html.
