Finding the Right Home - Q & A
Q: How does one choose between buying or renting?
A: One advantage you have, if you choose to rent, is that you do not have to worry about maintenance or any other financial obligations that are associated with the property. Unlike renters, home ownership offers you the freedom to make all decisions in regards to your home. The tax benefits are a plus too.
There are a vast amount of economic considerations as well. Home owners, who secure a fixed-rate loan, are granted the ability to lock in their monthly housing costs. This option allows them to make prudent investment plans for they know that housing expenses will not increase substantially. Renters are not given this option.
Substantial profits can be yielded on home ownership for it is a highly leveraged investment. The return on your investment, however, solely depends on the home-price appreciation.
Mitchell A. Levy states, "For some people, owning a home is a great feeling," in his book, "Home Ownership: The American Myth," Myth Breakers Press, Cupertino, Calif.; 1993.
Levy concludes, "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.”
David T. Schumacher and Erik Page Bucy write in their book in response to the risk associated with home ownership, "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."
Prospective buyers were recommended by the authors to spend a few months investigating the community before buying. Otherwise you may become one of the many people who made the mistake of buying into 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?"
Q: When buying a new home or adding on to an existing one, what are the pros and cons?
A: Before you make the decision of adding on to an existing home or investing in a much larger one, take these questions into consideration:
*When it comes to remodeling the current house, how much money is available from cash reserves or through a home improvement loan?
*Does the lot have room to expand on the ground level? Will the foundation be able to support a second floor? How much additional space is required?
*What do building ordinances and local zoning permit?
* How much equity already exists in the property?
* Are there affordable properties for sale that would satisfy housing needs?
Ultimately the decision boils down to the individual's needs, the extent of the work involved and what will enhance the property's value. According to the survey in the Remodeling magazine's annual "Cost vs. Value Report," if you choose to remodel your home it will not only improve it's livability factor but it will improve its curb appeal for potential buyers should you decide to sell it in the future. The survey also indicated that the highest paybacks have come form homes which have undergone kitchen and bath renovations and, most recently, home office additions.
For more information, check out "The Do-able Renewable Home," a free booklet available from the American Association of Retired Persons, Fulfillment Department, 601 E St., N.W., Washington, DC 20049; (202) 434-2277.
Q: Is there a way to find out the meaning of the real estate acronyms used in ads?
A: Do not be alarmed if you find yourself stumbling over the real estate acronyms used in ads. These acronyms are used in order for sellers to save money when it comes to advertising charges. Below you will find some abbreviations and the meaning of each one, which was taken from a recent newspaper classified section:
* assum. fin. -- assumable financing
* dk -- deck
* gar -- garage (garden is usually abbreviated "gard")
* expansion pot'l -- may be extra space on the lot, or possibly vertical potential for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase.
* fab pentrm -- fabulous pentroom, a room on top, underneath the roof, that sometimes has views
* FDR -- formal dining room (not the former president)
* frplc, fplc, FP -- fireplace
* grmet kit -- gourmet kitchen
* HDW, HWF, Hdwd -- hardwood floors
* hi ceils -- high ceilings
* In-law potential -- potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units so be sure the conversion is legal first.
* large E-2 plan -- this is one of several floor plans available in a specific building
* lsd pkg. -- leased parking area, may come with an additional cost
* lo dues -- find out just how low these homeowner's dues are, and in comparison to what?
* nr bst schls -- near the best schools
* pvt -- private
* pwdr rm -- powder room, or half-bath
* upr- upper floor
* vw, vu, vws, vus -- view(s)
* Wow! -- better check this one out.
Resources:
* "Real Estate's Ambiguous Language You Oughtta Understand," Glennon H. Neubauer, Ethos Group Publishing, Diamond Bar, CA; 1993.
Q: Should we settle for a starter home or dig a bit deeper and buy the dream home?
A: It's not easy when it comes to choosing between the brand new home, the smaller house in an affluent neighborhood or the bigger house in a more working-class community. If you happen to find yourself in a situation such as this, examine your priorities then ask yourself these following questions:
* Is the home itself the most important consideration or does the surrounding neighborhood matter as well?
* Are each of the neighborhoods safe?
*Are the qualities of the schools within the community an issue?
*Do certain areas appear to attract more families with children or more adult residents? And where do I fit in?
Home-price appreciation is hard to predict, when it comes to determining the return on your investment. The more expensive move-up housing developments appreciated wildly during the late 1980s, however, smaller homes held their value more than the expensive homes during the recession that followed.
Q: How do I obtain the real scoop on homes I am interested in?
A: The way to obtain the real scoop on the homes that have struck your interest is through home inspections, seller disclosure requirements and through the agent's experience. Disclosure laws vary by state, however, in some states, the seller is required, by law, to complete a real estate transfer disclosure statement. Below is a summary of things you can expect to see within a disclosure form:
* In the kitchen -- a range, oven, microwave, dishwasher, garbage disposal, trash compactor.
* Safety features such as burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens and intercom.
* The presence of a TV antenna or satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump.
* Amenities such as a pool or spa, patio or deck, built-in barbeque and fireplaces.
* Type of heating, condition of electrical wiring, gas supply and presence of any external power source, such as solar panels.
* The type of water heater, water supply, sewer system or septic tank also should be disclosed.
Significant defects or malfunctions existing in the home's major systems need to be indicated in the disclosure by the seller as well. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
Sellers need to note within the disclosure form the presence of encroachments or easements, environmental hazards, walls or fences shared with adjoining landowners, room additions or repairs that were made without the necessary permits or that may not be in compliance with the building codes . Zoning violations, property citations and any lawsuits against the seller which may effect the property also need to be noted.
When buying a condominium, people need to be told about covenants, codes and restrictions as well as any other deed restrictions. You may want to look for and/or ask about flooding or drainage problems, settling, sliding or soil problems and any major damage resulting from floods, earthquakes or landslides.
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 significantly to accommodate increased demand from cautious buyers. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.
