Recession and Expansion
There are times when the economy is brisk and everyone feels confident about his or her prospects for the future. As a result, they spend money. People eat out more, buy new cars, and….
…They buy houses.
Then, for one reason or another, the economy slows down. Companies lay off employees and consumers are more careful about where they spend money, perhaps saving more than usual. As a result, the economy decelerates even further. If it slows enough, we have a recession.
During such a time, fewer people are buying homes. Even so, some homeowners find themselves in a situation where they must sell. Families grow beyond the capacity of the home, employees get relocated, and some may even find themselves unable to make their mortgage payment - perhaps because of a layoff in the family.
In the business cycle of real estate, there are buyers' markets and sellers' markets...and some markets in between. It is all based on supply and/or demand.
http://www.realestateabc.com/homebuying/cycle.htm
Monday, May 28, 2007
Reasons to Delay Buying a Home
Assuming you have the financial resources and the desire to eventually own your own home, there are very few good reasons to put off the purchase. You can miss out on years of appreciation if you do.
The main thing you want to avoid when buying a home is being put in a position where you will have to sell it too soon. If you have to sell a home before it has appreciated enough to cover the costs and commissions of selling, you could find yourself in a financial bind. This is especially true for those who buy a home with a down payment of ten percent or less.
Real Estate commissions traditionally run around six percent of a home’s sales price. The seller’s closing costs generally come to about one and a half percent. You can see how this can easily exceed the first year’s appreciation. If you made a minimal down payment, you could actually have to come up with cash out of pocket to sell your home.
New to the Area
A very good to reason to delay buying a home is if you have just moved to an unfamiliar area or region of the country. It makes sense to rent for a number of months before deciding on exactly where you want to live. Often when people buy a home immediately they find that they might have made a better decision if they had waited awhile.
Uncertain Job Future
You could be right out of college or expecting a promotion and a transfer. Or your company has announced an impending "restructuring." If any of these apply, it might be best to wait to buy a home. When you have a more accurate picture of what your next few years will be like, that will be the time to buy.
Marital Problems
Real estate agents see a lot of life unfold before their eyes. One of the saddest occurs when former clients divorce and are forced to sell a recently purchased house. It happens all too often when a family in turmoil decides that buying a new home may help resolve their problems. Perhaps it is inevitable that such problems occur, but selling a home before it appreciates can create an additional financial burden in an already difficult situation.
http://www.realestateabc.com/homebuying/delay.htm
The main thing you want to avoid when buying a home is being put in a position where you will have to sell it too soon. If you have to sell a home before it has appreciated enough to cover the costs and commissions of selling, you could find yourself in a financial bind. This is especially true for those who buy a home with a down payment of ten percent or less.
Real Estate commissions traditionally run around six percent of a home’s sales price. The seller’s closing costs generally come to about one and a half percent. You can see how this can easily exceed the first year’s appreciation. If you made a minimal down payment, you could actually have to come up with cash out of pocket to sell your home.
New to the Area
A very good to reason to delay buying a home is if you have just moved to an unfamiliar area or region of the country. It makes sense to rent for a number of months before deciding on exactly where you want to live. Often when people buy a home immediately they find that they might have made a better decision if they had waited awhile.
Uncertain Job Future
You could be right out of college or expecting a promotion and a transfer. Or your company has announced an impending "restructuring." If any of these apply, it might be best to wait to buy a home. When you have a more accurate picture of what your next few years will be like, that will be the time to buy.
Marital Problems
Real estate agents see a lot of life unfold before their eyes. One of the saddest occurs when former clients divorce and are forced to sell a recently purchased house. It happens all too often when a family in turmoil decides that buying a new home may help resolve their problems. Perhaps it is inevitable that such problems occur, but selling a home before it appreciates can create an additional financial burden in an already difficult situation.
http://www.realestateabc.com/homebuying/delay.htm
Sunday, May 27, 2007
Buying a Home With Resale Value - the House
Buying a Home With a View
Homes with a pleasant view of the horizon often sell at a premium above similar homes without the view. However, if a view is important to you, buy it mostly for your own pleasure and not as an investment. Though you may place a considerable dollar value on the view, future buyers may not be so like-minded. It may take you longer to find a buyer when it comes time to resell the house. Or you may end up dropping your price to more nearly match other sales prices in the neighborhood.
In short, if you are buying a house with a view, try to pay as little extra as possible. Otherwise, you might not get your money back.
Lot and Landscaping
Even though most real estate value is usually concentrated in the building, the lot is important, too. Obviously, it should be as level as possible. Assuming the property is in a typical neighborhood, the lot should be rectangular – no odd shaped lots or oddly situated lots.
Yard sizes are smaller in modern homes than in older homes, but there should still be a decently sized front and back yard. Do not buy a house where the entire back yard is taken up by a swimming pool, for example.
Do not purchase an over-landscaped property, either. You would normally pay a premium for that, which you may not be able to recover when you sell. You will get your best value if the house is moderately landscaped or under-landscaped for the area. You can always improve the landscaping during your ownership by improving the grass and adding bushes and trees. Just do not spend too much.
House Size
In each residential neighborhood, houses will vary in size and rooms, but they should not be too different. If resale value is an important consideration, you should not buy the largest model in the neighborhood. When determining market value, the homes nearest to yours are most important. If most of the nearby houses are smaller than your house, they can act as a drag on appreciation.
On the other hand, if you buy a small or medium house for the neighborhood, the larger homes can help pull up your value. This is one of those times where determining your "wants" versus your "needs" can be extremely important. Buying what you need in a more prestigious neighborhood may provide more financial reward than getting what you want in a less desirable neighborhood.
Bedrooms and Bathrooms
Three and four bedroom houses are the most popular among homebuyers, so if you can stick in that range you will have more potential buyers when it comes time to resell. Five is okay, too, as long as you do not have to pay too much extra for the additional bedroom.
There should always be at least two bathrooms in a house, preferably at least two and a half. One bathroom with a place to wash up for day-to-day visitors, one for the master bedroom, and at least one to be shared by the other bedrooms.
Closets, Garages and Laundry
Walk-in closets are extremely desirable for the master bedroom. For the rest of the house, just be sure there is plenty of closet space. Don’t forget space for linens and towels.
Garages add to the resale value and you should always make sure to get at least a two-car garage. Lately, three-car garages have become desirable in some areas of the country.
The laundry facilities should be located somewhere convenient on the main floor of the house, but not in a place it will create an eyesore. Think about whether you want to walk up and down stairs when carrying loads of laundry.
The Kitchen
Family activity centers around the kitchen, so this is the most important room of the house. Larger kitchens are better, and they should be provided with modern appliances. Obviously, the dining room and breakfast nook should be located adjacent to the kitchen. In newer houses, the family room should also be extremely close to the kitchen.
There should be easy access to the back yard, as there will be occasions for barbecues and outdoor entertaining. In addition, it should be a short trek between the garage to the kitchen so hauling groceries in from the car does not become a horrendous chore.
Fireplaces
The only room where you absolutely have to have a fireplace is the family room. A fireplace in the living room may be nice, but you pay extra for it and will probably rarely use it. At best, it serves as a focal point of the living room, but does not add much in real value.
Swimming Pools
Swimming pools do not provide as much added value as they once did. Safety issues about families with younger children have become more publicized than in the past, so families with small children tend to avoid homes with pools. As a result, having a pool may actually reduce the number of potential homebuyers when you try to resell the home.
Buy a home with a pool for your own enjoyment, not as an investment.
Since we are on the subject of swimming pools, here is a word of advice: If you want a pool, buy a home that already has a pool. Paying a contractor to install one for you is like throwing money away. You will never get a dollar-for-dollar return on your investment
http://www.realestateabc.com/homebuying/house.htm
Homes with a pleasant view of the horizon often sell at a premium above similar homes without the view. However, if a view is important to you, buy it mostly for your own pleasure and not as an investment. Though you may place a considerable dollar value on the view, future buyers may not be so like-minded. It may take you longer to find a buyer when it comes time to resell the house. Or you may end up dropping your price to more nearly match other sales prices in the neighborhood.
In short, if you are buying a house with a view, try to pay as little extra as possible. Otherwise, you might not get your money back.
Lot and Landscaping
Even though most real estate value is usually concentrated in the building, the lot is important, too. Obviously, it should be as level as possible. Assuming the property is in a typical neighborhood, the lot should be rectangular – no odd shaped lots or oddly situated lots.
Yard sizes are smaller in modern homes than in older homes, but there should still be a decently sized front and back yard. Do not buy a house where the entire back yard is taken up by a swimming pool, for example.
Do not purchase an over-landscaped property, either. You would normally pay a premium for that, which you may not be able to recover when you sell. You will get your best value if the house is moderately landscaped or under-landscaped for the area. You can always improve the landscaping during your ownership by improving the grass and adding bushes and trees. Just do not spend too much.
House Size
In each residential neighborhood, houses will vary in size and rooms, but they should not be too different. If resale value is an important consideration, you should not buy the largest model in the neighborhood. When determining market value, the homes nearest to yours are most important. If most of the nearby houses are smaller than your house, they can act as a drag on appreciation.
On the other hand, if you buy a small or medium house for the neighborhood, the larger homes can help pull up your value. This is one of those times where determining your "wants" versus your "needs" can be extremely important. Buying what you need in a more prestigious neighborhood may provide more financial reward than getting what you want in a less desirable neighborhood.
Bedrooms and Bathrooms
Three and four bedroom houses are the most popular among homebuyers, so if you can stick in that range you will have more potential buyers when it comes time to resell. Five is okay, too, as long as you do not have to pay too much extra for the additional bedroom.
There should always be at least two bathrooms in a house, preferably at least two and a half. One bathroom with a place to wash up for day-to-day visitors, one for the master bedroom, and at least one to be shared by the other bedrooms.
Closets, Garages and Laundry
Walk-in closets are extremely desirable for the master bedroom. For the rest of the house, just be sure there is plenty of closet space. Don’t forget space for linens and towels.
Garages add to the resale value and you should always make sure to get at least a two-car garage. Lately, three-car garages have become desirable in some areas of the country.
The laundry facilities should be located somewhere convenient on the main floor of the house, but not in a place it will create an eyesore. Think about whether you want to walk up and down stairs when carrying loads of laundry.
The Kitchen
Family activity centers around the kitchen, so this is the most important room of the house. Larger kitchens are better, and they should be provided with modern appliances. Obviously, the dining room and breakfast nook should be located adjacent to the kitchen. In newer houses, the family room should also be extremely close to the kitchen.
There should be easy access to the back yard, as there will be occasions for barbecues and outdoor entertaining. In addition, it should be a short trek between the garage to the kitchen so hauling groceries in from the car does not become a horrendous chore.
Fireplaces
The only room where you absolutely have to have a fireplace is the family room. A fireplace in the living room may be nice, but you pay extra for it and will probably rarely use it. At best, it serves as a focal point of the living room, but does not add much in real value.
Swimming Pools
Swimming pools do not provide as much added value as they once did. Safety issues about families with younger children have become more publicized than in the past, so families with small children tend to avoid homes with pools. As a result, having a pool may actually reduce the number of potential homebuyers when you try to resell the home.
Buy a home with a pool for your own enjoyment, not as an investment.
Since we are on the subject of swimming pools, here is a word of advice: If you want a pool, buy a home that already has a pool. Paying a contractor to install one for you is like throwing money away. You will never get a dollar-for-dollar return on your investment
http://www.realestateabc.com/homebuying/house.htm
Saturday, May 26, 2007
How FHA and VA Loans Affect Your Offer
If you are obtaining a VA or FHA loan in order to finance your purchase, you must include that information in your offer. This is because government loans place additional financial and performance obligations on the seller.
Non-Allowable Fees
First, VA and FHA loans prohibit buyers from paying certain types of fees that are often charged by lenders, escrow companies, settlement agents, and title companies. They are called "non-allowable" fees. They still get charged anyway, but as the buyer, you are "not allowed" to pay them. The result is that the seller ends up paying them instead of you.
Most of these "non-allowable" fees come from your lender. By the time you are making an offer you should have already been pre-qualified by a loan officer, so you or your real estate agent can ask how much the lender’s non-allowable fees will be. Experienced agents should also have an idea of what non-allowable fees will be charged by the escrow or settlement agent and the title insurance company.
Since these are fees the seller would not pay on an offer with conventional financing, this information must be included in your offer. You should also realize that since the seller will be paying these additional fees, they may be a little less negotiable on the price.
VA and FHA Appraisals
Home appraisal inspections on FHA and VA loans are a little more detailed than on conventional loans (and more expensive). The appraisers are required to perform certain minimum inspections as well as evaluate the market value of the property. Although these inspections are not as detailed as a professional home inspection and should not be considered a substitute, sometimes repairs are required.
These are additional costs the seller would not be obligated to pay for someone obtaining conventional financing, so your offer should include a maximum figure for these repairs. Otherwise the seller is signing the equivalent of a blank check, and they do not want to do that.
At the same time, whatever figure you put in will most likely affect the seller’s willingness to negotiate on price. If you put $500 as an estimate, the seller may be $500 less negotiable on their price. If no repairs are required, you may have been able to get the house for $500 less than what you and the seller agreed on as the price. The solution is to add a clause to your offer that goes something like this. "If required repairs cost less than the maximum amount allowed, the excess will be credited toward buyer’s closing costs."
http://www.realestateabc.com/homebuying/FHAVA.htm
Non-Allowable Fees
First, VA and FHA loans prohibit buyers from paying certain types of fees that are often charged by lenders, escrow companies, settlement agents, and title companies. They are called "non-allowable" fees. They still get charged anyway, but as the buyer, you are "not allowed" to pay them. The result is that the seller ends up paying them instead of you.
Most of these "non-allowable" fees come from your lender. By the time you are making an offer you should have already been pre-qualified by a loan officer, so you or your real estate agent can ask how much the lender’s non-allowable fees will be. Experienced agents should also have an idea of what non-allowable fees will be charged by the escrow or settlement agent and the title insurance company.
Since these are fees the seller would not pay on an offer with conventional financing, this information must be included in your offer. You should also realize that since the seller will be paying these additional fees, they may be a little less negotiable on the price.
VA and FHA Appraisals
Home appraisal inspections on FHA and VA loans are a little more detailed than on conventional loans (and more expensive). The appraisers are required to perform certain minimum inspections as well as evaluate the market value of the property. Although these inspections are not as detailed as a professional home inspection and should not be considered a substitute, sometimes repairs are required.
These are additional costs the seller would not be obligated to pay for someone obtaining conventional financing, so your offer should include a maximum figure for these repairs. Otherwise the seller is signing the equivalent of a blank check, and they do not want to do that.
At the same time, whatever figure you put in will most likely affect the seller’s willingness to negotiate on price. If you put $500 as an estimate, the seller may be $500 less negotiable on their price. If no repairs are required, you may have been able to get the house for $500 less than what you and the seller agreed on as the price. The solution is to add a clause to your offer that goes something like this. "If required repairs cost less than the maximum amount allowed, the excess will be credited toward buyer’s closing costs."
http://www.realestateabc.com/homebuying/FHAVA.htm
Service Providers When Buying a Home
You and the Seller Must Agree
Buying a home does not occur in a vacuum, involving only you and the seller. There are all kinds of people and services involved behind the scenes to make it happen. Since some of these services affect both you and the seller, there will have to be be agreement on which companies you will use for them. When you make your offer, you should request your favorites for these services. If you are unfamiliar with these service providers, you can get recommendations from your agent.
Escrow and Settlement
For example, you are going to need an escrow or settlement company to act as an "independent third party" between you and the seller. Without having a third party involved, how do you know that when you fork over the money, you are going to get the deed? This is the type of service provided by escrow and settlement. They will hold your deposit and coordinate much of the activity that goes on during the escrow period.
Since this third party is very important to both you and the seller and both of you will pay fees to this company, it is important to agree on which service to use. Therefore, your choice should be part of the offer. Since you do not buy a home every other week or so, you are probably unfamiliar with companies that provide this service. Your agent will make a recommendation. You have the authority to accept this recommendation and include it in your offer, or make your own choice.
Keep in mind that the seller will also have a preference and this may be a point of negotiation in a counter-offer. It has become customary that one side will choose the escrow/settlement agent and one side chooses the title insurance company. Even so, everything in real estate is negotiable.
Title Insurance Company
Title insurance is important because, by providing you with an Owners Policy, they insure that you have clear title to the property. If there are any problems later, you can always go back to the title insurance company and have them clear it up. Since it is customary for the seller to pay for the owner’s policy, they have an interest in which company is used.
However, you are going to pay a fee to the title insurance company, too. This is for the Lender’s Policy. The lender’s policy insures your mortgage lender that there are no liens or judgments against the property and that the mortgage will be in first position. In other words, should you sell the property or refinance it, their mortgage gets paid first, before any other claims against the property.
The lender’s policy is less expensive than the owner’s policy.
Termite and Pest Inspection
As part of your offer, you may require a termite and pest inspection. This company not only inspects for termite damage and pest infestations, but also inspects for dry rot and water damage, among other things. The company that performs the inspection is important to you as a buyer, because you want to be sure they do a good job. It is important to the seller because it is customary that they pay for the inspection and some types of repairs that may be required.
You should determine which company you want to perform this inspection and make it a part of your offer. Otherwise the seller will choose. If you do not know which company to hire, your agent will make a recommendation.
http://www.realestateabc.com/homebuying/services.htm
Buying a home does not occur in a vacuum, involving only you and the seller. There are all kinds of people and services involved behind the scenes to make it happen. Since some of these services affect both you and the seller, there will have to be be agreement on which companies you will use for them. When you make your offer, you should request your favorites for these services. If you are unfamiliar with these service providers, you can get recommendations from your agent.
Escrow and Settlement
For example, you are going to need an escrow or settlement company to act as an "independent third party" between you and the seller. Without having a third party involved, how do you know that when you fork over the money, you are going to get the deed? This is the type of service provided by escrow and settlement. They will hold your deposit and coordinate much of the activity that goes on during the escrow period.
Since this third party is very important to both you and the seller and both of you will pay fees to this company, it is important to agree on which service to use. Therefore, your choice should be part of the offer. Since you do not buy a home every other week or so, you are probably unfamiliar with companies that provide this service. Your agent will make a recommendation. You have the authority to accept this recommendation and include it in your offer, or make your own choice.
Keep in mind that the seller will also have a preference and this may be a point of negotiation in a counter-offer. It has become customary that one side will choose the escrow/settlement agent and one side chooses the title insurance company. Even so, everything in real estate is negotiable.
Title Insurance Company
Title insurance is important because, by providing you with an Owners Policy, they insure that you have clear title to the property. If there are any problems later, you can always go back to the title insurance company and have them clear it up. Since it is customary for the seller to pay for the owner’s policy, they have an interest in which company is used.
However, you are going to pay a fee to the title insurance company, too. This is for the Lender’s Policy. The lender’s policy insures your mortgage lender that there are no liens or judgments against the property and that the mortgage will be in first position. In other words, should you sell the property or refinance it, their mortgage gets paid first, before any other claims against the property.
The lender’s policy is less expensive than the owner’s policy.
Termite and Pest Inspection
As part of your offer, you may require a termite and pest inspection. This company not only inspects for termite damage and pest infestations, but also inspects for dry rot and water damage, among other things. The company that performs the inspection is important to you as a buyer, because you want to be sure they do a good job. It is important to the seller because it is customary that they pay for the inspection and some types of repairs that may be required.
You should determine which company you want to perform this inspection and make it a part of your offer. Otherwise the seller will choose. If you do not know which company to hire, your agent will make a recommendation.
http://www.realestateabc.com/homebuying/services.htm
Friday, May 25, 2007
Home Equity or Debt Trap?
Are you using the equity from your home to purchase everyday things? This is a
dangerous trend growing more popular every month as millions of Americans tap into
the value of their home to fund a lifestyle.
How many times have you heard the saying “Your home is the best investment you’ll
ever make”? How many times have you also heard that your home will be the most
valuable asset you will ever own?
Both of these are as true, if not truer, today than at any time in the past. Unfortunately,
spend happy Americans are looking at their home as just another type of ATM, and
they are visiting it way to often. These homeowners are using money borrowed against
their house to finance expensive vacations, new vehicles, even daily visits to the corner
coffee shop.
Our parents wouldn’t think of buying furniture with money borrowed against their home.
So why is this form of borrowing becoming so popular? Three events have converged
to create this dangerous trend.
1. Cheap interest. The past two or three years have seen interest rates unheard of
since the 1950’s. These low rates encourage people to think they have basically free
money to spend however they want to.
2. Real estate value increases. The Office of Federal Housing Enterprise Oversight
(OFHEO) reports that their data shows market value of the average home increased
nearly 13% in 2004. That is more than any time in the last 25 years. Some areas saw
the value of homes double in less than 5 years. This increase in value is perceived by
some people as being a bonus – they didn’t have to work for the money, so it doesn’t
cost them anything. They are right about it not costing them anything, except they
forgot that when they borrow money it has to be paid back. That is when the true cost
of the debt appears!
The U.S. Department of Commerce reports in 2003 nearly half of the $8 trillion in
outstanding mortgage debt was in new mortgage originations. This doesn’t mean home
equity loans are necessarily bad ideas. Using equity in your home to remodel and make
additions can result in solid returns. Even debt consolidation can be a good choice,
provided you have solved the problem that caused the debt in the first place.
3. Ease of borrowing. Twenty years ago, lenders wouldn’t think of giving you a loan,
even against your home, if it would cause your equity to become less than 20%. Some
insisted in a percentage closer to 50% equity. Those days are long over.
Today you can go online and find a lender willing to give you a loan equal to 125% the
value of your house! If you have a credit of repayment, hold a job, and are still
breathing you can probably find a lender willing to let you borrow against your home
equity.
The risk created by the convergence of these three factors is the loss of your safety
net. As people buy homes at the top end of their range and base mortgages on two
incomes something has to give.
This “something” has been their savings. Putting aside part of each paycheck has
become the low priority in the pile of demands barraging a family’s income.
Data released by the Employee Benefit Research Institute reports nearly 45% of all
workers hold assets of less than $25,000 (excluding their home). Barely 67% of today’s
workers are currently saving money in a 401(k) or some investment program, according
to a Thrivent Financial Survey. Does any of this sound familiar to you? The looming
debt of mortgage, college, and credit card can seem overwhelming. How can you tip
your financial life back into favoring a secure future for yourself and family? Here are
five steps to escape the home equity debt trap.
1. Keep track of expenses. Keep a spending record of everything you spend for one
month. The next month, do it again, and the next month too, until you see areas of
spending you can cut back and use that money to fund your lifestyle goals, i.e.
vacation, college, or a new lawn mower.
2. Create realistic debt reduction goals. List all of your debts with interest rates,
outstanding balances and minimum payments. Create a plan to pay down the debt,
preferably pay the same set amount each month no matter what the minimums are.
Anything extra you pay should go to the smallest debt first. When a credit card is paid
off, get rid of it. Perhaps a small reward like a special meal when a goal is reached will
help keep you motivated.
3. Preserve your home equity. Having home equity untapped in your house can provide
a level of reassurance. Making wise uses of this equity will help you to not exhaust it.
When you do tap into your home equity, make sure it is not used to pay for daily living.
4. Pay as little debt interest as possible. Consolidation of debts into low, or no interest
loans i.e. credit cards, is acceptable as long as you refrain from incurring new debt and
you are paying down the debts you do have each month.
5. Start saving regularly. A fund of money for emergencies will help avoid debt when life
throws you a problem. If you consider saving a “non-optional” bill each month, you will
develop the find habit of saving. The result is a growing asset base.
The end result of taking these five steps? A minimal-debt life spent living in an
affordable home of your own.
Roger Sorensen is America’s Financial Guide. Learn more at his website
http://www.Slave2Work.com – ask and receive answers to your personal finance
questions, read his writings, or join the newsletter Money Basics. “How-To Be Debt
Free!” is now for sale, read about it today at http://www.Slave2Work.com/debtfree.htm
http://www.homesolutionssandiego.com/homeequity.html
dangerous trend growing more popular every month as millions of Americans tap into
the value of their home to fund a lifestyle.
How many times have you heard the saying “Your home is the best investment you’ll
ever make”? How many times have you also heard that your home will be the most
valuable asset you will ever own?
Both of these are as true, if not truer, today than at any time in the past. Unfortunately,
spend happy Americans are looking at their home as just another type of ATM, and
they are visiting it way to often. These homeowners are using money borrowed against
their house to finance expensive vacations, new vehicles, even daily visits to the corner
coffee shop.
Our parents wouldn’t think of buying furniture with money borrowed against their home.
So why is this form of borrowing becoming so popular? Three events have converged
to create this dangerous trend.
1. Cheap interest. The past two or three years have seen interest rates unheard of
since the 1950’s. These low rates encourage people to think they have basically free
money to spend however they want to.
2. Real estate value increases. The Office of Federal Housing Enterprise Oversight
(OFHEO) reports that their data shows market value of the average home increased
nearly 13% in 2004. That is more than any time in the last 25 years. Some areas saw
the value of homes double in less than 5 years. This increase in value is perceived by
some people as being a bonus – they didn’t have to work for the money, so it doesn’t
cost them anything. They are right about it not costing them anything, except they
forgot that when they borrow money it has to be paid back. That is when the true cost
of the debt appears!
The U.S. Department of Commerce reports in 2003 nearly half of the $8 trillion in
outstanding mortgage debt was in new mortgage originations. This doesn’t mean home
equity loans are necessarily bad ideas. Using equity in your home to remodel and make
additions can result in solid returns. Even debt consolidation can be a good choice,
provided you have solved the problem that caused the debt in the first place.
3. Ease of borrowing. Twenty years ago, lenders wouldn’t think of giving you a loan,
even against your home, if it would cause your equity to become less than 20%. Some
insisted in a percentage closer to 50% equity. Those days are long over.
Today you can go online and find a lender willing to give you a loan equal to 125% the
value of your house! If you have a credit of repayment, hold a job, and are still
breathing you can probably find a lender willing to let you borrow against your home
equity.
The risk created by the convergence of these three factors is the loss of your safety
net. As people buy homes at the top end of their range and base mortgages on two
incomes something has to give.
This “something” has been their savings. Putting aside part of each paycheck has
become the low priority in the pile of demands barraging a family’s income.
Data released by the Employee Benefit Research Institute reports nearly 45% of all
workers hold assets of less than $25,000 (excluding their home). Barely 67% of today’s
workers are currently saving money in a 401(k) or some investment program, according
to a Thrivent Financial Survey. Does any of this sound familiar to you? The looming
debt of mortgage, college, and credit card can seem overwhelming. How can you tip
your financial life back into favoring a secure future for yourself and family? Here are
five steps to escape the home equity debt trap.
1. Keep track of expenses. Keep a spending record of everything you spend for one
month. The next month, do it again, and the next month too, until you see areas of
spending you can cut back and use that money to fund your lifestyle goals, i.e.
vacation, college, or a new lawn mower.
2. Create realistic debt reduction goals. List all of your debts with interest rates,
outstanding balances and minimum payments. Create a plan to pay down the debt,
preferably pay the same set amount each month no matter what the minimums are.
Anything extra you pay should go to the smallest debt first. When a credit card is paid
off, get rid of it. Perhaps a small reward like a special meal when a goal is reached will
help keep you motivated.
3. Preserve your home equity. Having home equity untapped in your house can provide
a level of reassurance. Making wise uses of this equity will help you to not exhaust it.
When you do tap into your home equity, make sure it is not used to pay for daily living.
4. Pay as little debt interest as possible. Consolidation of debts into low, or no interest
loans i.e. credit cards, is acceptable as long as you refrain from incurring new debt and
you are paying down the debts you do have each month.
5. Start saving regularly. A fund of money for emergencies will help avoid debt when life
throws you a problem. If you consider saving a “non-optional” bill each month, you will
develop the find habit of saving. The result is a growing asset base.
The end result of taking these five steps? A minimal-debt life spent living in an
affordable home of your own.
Roger Sorensen is America’s Financial Guide. Learn more at his website
http://www.Slave2Work.com – ask and receive answers to your personal finance
questions, read his writings, or join the newsletter Money Basics. “How-To Be Debt
Free!” is now for sale, read about it today at http://www.Slave2Work.com/debtfree.htm
http://www.homesolutionssandiego.com/homeequity.html
Fixing Houses for Resale:
Real estate investors specializing in fixers make higher profits when they have a detailed work plan
and know how to get around the future resale appraisal issues.
Before you begin your fixer makeover, taking a few extra steps helps you make more money, avoid
future appraisal pitfalls, and have more fun.
1) Planning for Profits
Visualize your final home presentation for sale. Write out a description of the future home you
imagine for your sales flyer. Name your home something other than just the street name; calling
your fixer "Edna Street" doesn't inspire like "Sugar Plum Cabin." Your overall design plan helps you
when shopping for building materials with choosing design details that go together for a harmonious
whole house theme.
2) Take Photographs for Your Future Appraiser
You may have taken photographs during the escrow process, showing the seller’s possessions in
the home. If your property was occupied during escrow, it will be worthwhile to take "before"
photographs again, both for your own satisfaction and to show appraisers when they ask why you
expect to sell the house for so much more than your original purchase price.
Detailed photographs substantiate the original condition of the property, compared to the final
result. Avoid possible complications by showing the appraiser all the improvements that you made
to the property, in order to get the full amount you deserve in your upgraded appraisal. This is a
crucial step, because the appraiser must give you credit for your work and expenses, and not use
your purchase price as the basis for the updated home’s true market value.
3) Hold a Doghouse Open House Party
We like to invite friends and family for a preview open house before we begin major work on the
house. We ask them to bring any unwanted household fixtures or supplies and to offer any fix-up
ideas, wild or practical, that may occur to them during their visit. We jot those ideas into a
"transformation journal," and refer to them when we need fresh inspiration.
Here’s an example of our invitation:
Your presence is requested at Jeanette and Brian’s Doghouse Open House. Come view our latest
project and understand why we'll be busy for the next month.
Please bring cuttings from your garden and any unwanted paint. Any household or building material
hand-me-downs will also be greatly appreciated!
Sunday afternoon, noon to four.
Another reason for a preview party is that the amount of work a doghouse may need sometimes
seems overwhelming, and a fun event like an open house helps to overshadow the crushing weight
of the work we have waiting for us.
Taking these first three steps helps you ultimately make more money, avoid appraisal problems,
and have fun fixing houses for profit.
(c) Copyright 2005 Jeanette J. Fisher. All rights reserved.
Professor Jeanette Fisher, author of "Doghouse to Dollhouse for Dollars: Using Design Psychology
to Increase Real Estate Profits" and other books teaches Real Estate Investing and Design
Psychology.
For more articles, tips, reports, and newsletters see
http://www.doghousetodollhousefordollars.com/pages/5/index.htm
Real estate investors specializing in fixers make higher profits when they have a detailed work plan
and know how to get around the future resale appraisal issues.
Before you begin your fixer makeover, taking a few extra steps helps you make more money, avoid
future appraisal pitfalls, and have more fun.
1) Planning for Profits
Visualize your final home presentation for sale. Write out a description of the future home you
imagine for your sales flyer. Name your home something other than just the street name; calling
your fixer "Edna Street" doesn't inspire like "Sugar Plum Cabin." Your overall design plan helps you
when shopping for building materials with choosing design details that go together for a harmonious
whole house theme.
2) Take Photographs for Your Future Appraiser
You may have taken photographs during the escrow process, showing the seller’s possessions in
the home. If your property was occupied during escrow, it will be worthwhile to take "before"
photographs again, both for your own satisfaction and to show appraisers when they ask why you
expect to sell the house for so much more than your original purchase price.
Detailed photographs substantiate the original condition of the property, compared to the final
result. Avoid possible complications by showing the appraiser all the improvements that you made
to the property, in order to get the full amount you deserve in your upgraded appraisal. This is a
crucial step, because the appraiser must give you credit for your work and expenses, and not use
your purchase price as the basis for the updated home’s true market value.
3) Hold a Doghouse Open House Party
We like to invite friends and family for a preview open house before we begin major work on the
house. We ask them to bring any unwanted household fixtures or supplies and to offer any fix-up
ideas, wild or practical, that may occur to them during their visit. We jot those ideas into a
"transformation journal," and refer to them when we need fresh inspiration.
Here’s an example of our invitation:
Your presence is requested at Jeanette and Brian’s Doghouse Open House. Come view our latest
project and understand why we'll be busy for the next month.
Please bring cuttings from your garden and any unwanted paint. Any household or building material
hand-me-downs will also be greatly appreciated!
Sunday afternoon, noon to four.
Another reason for a preview party is that the amount of work a doghouse may need sometimes
seems overwhelming, and a fun event like an open house helps to overshadow the crushing weight
of the work we have waiting for us.
Taking these first three steps helps you ultimately make more money, avoid appraisal problems,
and have fun fixing houses for profit.
(c) Copyright 2005 Jeanette J. Fisher. All rights reserved.
Professor Jeanette Fisher, author of "Doghouse to Dollhouse for Dollars: Using Design Psychology
to Increase Real Estate Profits" and other books teaches Real Estate Investing and Design
Psychology.
For more articles, tips, reports, and newsletters see
http://www.doghousetodollhousefordollars.com/pages/5/index.htm
http://www.homesolutionssandiego.com/fixinghouses.html
and know how to get around the future resale appraisal issues.
Before you begin your fixer makeover, taking a few extra steps helps you make more money, avoid
future appraisal pitfalls, and have more fun.
1) Planning for Profits
Visualize your final home presentation for sale. Write out a description of the future home you
imagine for your sales flyer. Name your home something other than just the street name; calling
your fixer "Edna Street" doesn't inspire like "Sugar Plum Cabin." Your overall design plan helps you
when shopping for building materials with choosing design details that go together for a harmonious
whole house theme.
2) Take Photographs for Your Future Appraiser
You may have taken photographs during the escrow process, showing the seller’s possessions in
the home. If your property was occupied during escrow, it will be worthwhile to take "before"
photographs again, both for your own satisfaction and to show appraisers when they ask why you
expect to sell the house for so much more than your original purchase price.
Detailed photographs substantiate the original condition of the property, compared to the final
result. Avoid possible complications by showing the appraiser all the improvements that you made
to the property, in order to get the full amount you deserve in your upgraded appraisal. This is a
crucial step, because the appraiser must give you credit for your work and expenses, and not use
your purchase price as the basis for the updated home’s true market value.
3) Hold a Doghouse Open House Party
We like to invite friends and family for a preview open house before we begin major work on the
house. We ask them to bring any unwanted household fixtures or supplies and to offer any fix-up
ideas, wild or practical, that may occur to them during their visit. We jot those ideas into a
"transformation journal," and refer to them when we need fresh inspiration.
Here’s an example of our invitation:
Your presence is requested at Jeanette and Brian’s Doghouse Open House. Come view our latest
project and understand why we'll be busy for the next month.
Please bring cuttings from your garden and any unwanted paint. Any household or building material
hand-me-downs will also be greatly appreciated!
Sunday afternoon, noon to four.
Another reason for a preview party is that the amount of work a doghouse may need sometimes
seems overwhelming, and a fun event like an open house helps to overshadow the crushing weight
of the work we have waiting for us.
Taking these first three steps helps you ultimately make more money, avoid appraisal problems,
and have fun fixing houses for profit.
(c) Copyright 2005 Jeanette J. Fisher. All rights reserved.
Professor Jeanette Fisher, author of "Doghouse to Dollhouse for Dollars: Using Design Psychology
to Increase Real Estate Profits" and other books teaches Real Estate Investing and Design
Psychology.
For more articles, tips, reports, and newsletters see
http://www.doghousetodollhousefordollars.com/pages/5/index.htm
Real estate investors specializing in fixers make higher profits when they have a detailed work plan
and know how to get around the future resale appraisal issues.
Before you begin your fixer makeover, taking a few extra steps helps you make more money, avoid
future appraisal pitfalls, and have more fun.
1) Planning for Profits
Visualize your final home presentation for sale. Write out a description of the future home you
imagine for your sales flyer. Name your home something other than just the street name; calling
your fixer "Edna Street" doesn't inspire like "Sugar Plum Cabin." Your overall design plan helps you
when shopping for building materials with choosing design details that go together for a harmonious
whole house theme.
2) Take Photographs for Your Future Appraiser
You may have taken photographs during the escrow process, showing the seller’s possessions in
the home. If your property was occupied during escrow, it will be worthwhile to take "before"
photographs again, both for your own satisfaction and to show appraisers when they ask why you
expect to sell the house for so much more than your original purchase price.
Detailed photographs substantiate the original condition of the property, compared to the final
result. Avoid possible complications by showing the appraiser all the improvements that you made
to the property, in order to get the full amount you deserve in your upgraded appraisal. This is a
crucial step, because the appraiser must give you credit for your work and expenses, and not use
your purchase price as the basis for the updated home’s true market value.
3) Hold a Doghouse Open House Party
We like to invite friends and family for a preview open house before we begin major work on the
house. We ask them to bring any unwanted household fixtures or supplies and to offer any fix-up
ideas, wild or practical, that may occur to them during their visit. We jot those ideas into a
"transformation journal," and refer to them when we need fresh inspiration.
Here’s an example of our invitation:
Your presence is requested at Jeanette and Brian’s Doghouse Open House. Come view our latest
project and understand why we'll be busy for the next month.
Please bring cuttings from your garden and any unwanted paint. Any household or building material
hand-me-downs will also be greatly appreciated!
Sunday afternoon, noon to four.
Another reason for a preview party is that the amount of work a doghouse may need sometimes
seems overwhelming, and a fun event like an open house helps to overshadow the crushing weight
of the work we have waiting for us.
Taking these first three steps helps you ultimately make more money, avoid appraisal problems,
and have fun fixing houses for profit.
(c) Copyright 2005 Jeanette J. Fisher. All rights reserved.
Professor Jeanette Fisher, author of "Doghouse to Dollhouse for Dollars: Using Design Psychology
to Increase Real Estate Profits" and other books teaches Real Estate Investing and Design
Psychology.
For more articles, tips, reports, and newsletters see
http://www.doghousetodollhousefordollars.com/pages/5/index.htm
http://www.homesolutionssandiego.com/fixinghouses.html
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