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If you plan from the beginning to approach the buying process intelligently
and with confidence, you are more likely to emerge at the end of the
day with the right home and the knowledge that you made the right
decision. The more you know about why you should buy a home, the less
scary the entire process will appear to you. Here are eight good reasons
on why you should buy a home. |
| PRIDE OF OWNERSHIP |
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Pride of ownership is the number one reason why people yearn to own
their home. It means you can paint the walls any color you desire, turn
up the volume on your CD player, attach permanent fixtures and decorate
your home according to your own taste. Home ownership gives you and your
family a sense of stability and security. It's making an investment in your
future.
| APPRECIATION |
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Although real estate moves in cycles, sometimes up, sometimes down,
over the years, real estate has consistently appreciated. The Office of
Federal Housing Enterprise Oversight tracks the movements of single family
home values across the country. Its House Price Index breaks down the changes
by region and metropolitan area. Many people view their home investment
as a hedge against inflation.
| MORTGAGE INTEREST DEDUCTIONS |
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Home ownership is a superb tax shelter and our tax rates favor homeowners.
As long as your mortgage balance is smaller than the price of your home,
mortgage interest is fully deductible on your tax return. Interest is the
largest component of your mortgage payment.
| PROPERTY TAX DEDUCTIONS |
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IRS Publication
530 contains tax info for First time homebuyers. Real estate property
taxes paid for a first home and a vacation home are fully deductible for
income tax purposes. In California, the passage of Proposition 13 in 1978
established the amount of assessed value after property changes hands and
limited property tax increases to 2% per year or the rate of inflation,
whichever is less.
| CAPITAL GAIN EXCLUSION |
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As long as you have lived in your home for two of the past five years,
you can exclude up to $250,000 for an individual or $500,000 for a married
couple of profit from capital gains. You do not have to buy a replacement
home or move up. There is no age restriction, and the "over-55"
rule does not apply. You can exclude the above thresholds from taxes every
24 months, which means you could sell every two years and pocket your profit--subject
to limitation--free from taxation.
| PREFERENTIAL TAX TREATMENT |
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If you receive more profit than the allowable exclusion upon sale
of your home, that profit will be considered a capital asset as long as
you owned your home for more than one year. Capital assets receive preferential
tax treatment.
| MORTGAGE REDUCTION BUILD EQUITY |
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Each month, part of your monthly payment is applied to the principal
balance of your loan, which reduces your obligation. The way amortization
works, the principal portion of your principal and interest payment increases
slightly every month. It is lowest on your first payment and highest on
your last payment. On average, each $100,000 of a mortgage will reduce in
balance the first year by about $500 in principal, bringing that balance
at the end of your first 12 months to $99,500.
| EQUITY LOANS |
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Consumers who carry credit card balances cannot deduct the interest
paid, which can cost as much as 18% to 22%. Equity loan interest is
often much less and it is deductible. For many home owners, it makes
sense to pay off this kind of debt with a home equity loan Consumers
can borrow against a home's equity for a variety of reasons such as
home improvement, college, medical or starting a new business. Some
state laws restrict home equity loans.
Tips for First Time Homebuyers
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| FIGURING OUT THE BENEFITS |
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You should buy a home. That's what you've been hearing from friends
and family, right? So, by now you have likely already weighed the benefits
and decided that home ownership was the best decision for you. That's a
major hurdle now passed. You are focused and certain.
| DEFINING SEARCH PARAMETERS |
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Almost 80% of all home searches today begin on the Internet. With
just a few clicks of the mouse, home buyers can search through hundreds
of online listings, view virtual tours, and sort through dozens of photographs
and aerial shots of neighborhoods and homes. You've probably defined your
goals and have a pretty good idea of the type of home and neighborhood you
want. By the time you reach your real estate agent's office, you are halfway
to home ownership.
| HOW LONG SHOULD IT TAKE TO FIND WHAT YOU
WANT? |
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In a buyer's market, you will have many options to chose from.
A motivated buyer will find a home within two weeks. Good real estate agents
will listen to your wants and needs and arrange to show only those homes
that fit your particular parameters. Your agent should preview homes before
showing them to you as well.
| HOW MANY HOMES WILL YOU SEE? |
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The average number of homes that I show to a buyer in one day is seven.
Any more than that, and the brain is on overload. Therefore, don't expect
to see 20 or 30 homes; although it's physically possible to do so, you probably
will not remember specific details about any of them.
| HOW TO RATE INVENTORY |
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Bring a digital camera and begin each series of photos with a close-up
of the house number to identify where each group of home photos start and
end.
Take copious notes of unusual features, colors and design elements.
Pay attention to the home's surroundings. What is next door? Do 2-story
homes tower over your single story? Do you like the location? Is it near
a park or a power plant? Immediately after leaving, rate each home on a
scale of 1 to 10, with 10 being the highest.
| VIEW TOP CHOICES A SECOND TIME |
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After touring homes for a few days, you will probably instinctively
know which one or two homes you would like to buy. Ask to see them again.
You will see them with different eyes and notice elements that were overlooked
the first go-around.
At this point, your agent should call the listing agents to find out more
about the sellers' motivation and to double-check that an offer hasn't come
in, making sure these homes are still available to purchase.
| MAKING THE SELECTION |
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I'll let you in on a little secret. I generally know which home a
buyer is going to choose, and I suspect most other agents operate
the same way. It's an intuition. But I make it a practice not to steer
buyers, and I insist that buyers choose the home without interference
from me. It's not my choice to make.
Real estate agents are required, however, to point out defects and
should help buyers feel confident that the home selected meets the
buyer's search parameters.
Please click here to contact Marc Wizman & Associates
or call (310) 746-8444. Thank you and we look forward to hearing from you!
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