Before making a choice between adding on to an existing home or buying a larger one, consider these questions:
Choosing between a smaller house in an affluent neighborhood, an older, bigger house in a more working-class community, or a brand-new home is not easy. If you're in this situation, start by examining your priorities and asking the following questions:
As for the return on your investment, home-price appreciation is hard to predict. In the late 1980s, and again 10 years later, the more expensive move-up housing appreciated wildly. But during the recession that followed, smaller homes tended to hold their value better than more expensive ones.
Homeownership 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, homeowners 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. Homeownership 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 homeownership, 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. "Just because certain properties are high-priced doesn't necessarily mean they have some inherent advantage," the authors write. "One property may cost more than another today, but will it still be worth more down the line?"
Home inspections, seller disclosure requirements, and the agent's experience will help. Disclosure laws vary by state, but in some states, the law requires the seller to complete a real estate transfer disclosure statement. Here is a summary of the things you could expect to see in a disclosure form:
Sellers also are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as electrical and plumbing systems. The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also, look for, or ask about, settling, sliding or soil problems, flooding or drainage problems, and any major damage resulting from earthquakes, floods, or landslides.
People buying a condominium must be told about covenants, codes, and restrictions or other deed restrictions. It's important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown.
If you find yourself stumbling over weird acronyms in a real estate listing, don't be alarmed. There is a method to the madness of this shorthand (which is mostly adopted by sellers to save money in advertising charges). Here are some abbreviations and the meaning of each, taken from a recent newspaper classified section:
Stay up to date on the latest real estate trends.
Lenders require appraisals as part of the loan application process; fees range from $200 to $300.
One survey by the NAR shows that resale homes do have an edge over new homes.
Closing costs are the fees for taxes, or special interest charges that surround the purchase of a home.
How much money is available, either from cash reserves or through a home improvement loan?
Homeowners association dues; whether or not work done on the house meets local building codes.
In the late 1980s, and again 10 years later, the more expensive move-up housing appreciated wildly.
Jacqueline possesses the sophistication to handle the wide range of situations that real estate agents face in today’s market, while her business background has helped her to develop the exceptional communication and problem-solving skills that an agent needs to be successful.