There are some basic rules of Real Estate: Location, Location, Location. Buy the least expensive house in the neighborhood. Purchase what you can actually afford…etc. One rule has faced challenge, particularly from the Wall Street Equity ‘gurus’ like Jim Creamer: “It is better to own than to rent.” Some ‘experts’ suggest that it is better to rent now than to own, particularly with prices dropping. As with all rules, they need to be qualified and explained. It is, in fact, better to own rather than rent over the long term. . Lawrence Yun, the chief economist for National Association of Realtors reported the following data from the Federal Reserve: "The median wealth accumulation for renters from 1995 to 2004 was $4,000. The median wealth accumulation of a homeowner was $184,000." Obviously, owning, over the long term, is better than renting. The qualification is important. If you are going to move within 18 to 24 months, it may not make sense to own given the cost to acquire and the cost to sell. However, if you are going to be in a place for few years it is foolish not to own. There is an income tax deduction. Assuming you pay principle in your mortgage payment, you are increasing equity in your property. Both of these fact happen, even if the property does not appreciate, increase in market value, at all.
So in a correcting market what should you do? First, get some expert advice from a professional, ideally a Realtor. This person can help you find, negotiate, obtain financing and complete the acquisition of a home under preferred terms. You want to buy the best value, in the strongest location, with the least risk of detrimental conditions, at the best price. A Realtor can provide you with comparable sold information and price trends within neighborhood and towns. Make certain to study this information. Secondly, make certain that you can afford to own the house. Do not purchase more than you can afford. Pre-qualification with a mortgage originator is critical. Also, remember to look at the maintenance and repair costs of owner ship. Think about negotiating a home warranty like, AHS or HFS, into the purchase price of your new home. If you negotiate a buy down for the payments for the first couple of years, you need to make sure that you can afford the actual cost. We just negotiated at 2.1 buy down for a client. The monthly payment should have been $1400 per month, but with the buy down it is $1050 the first year and $1175 the second year. The seller pre-paid the difference for the buyer. It was great for the buyer, but the buyer was ABLE to pay the full amount. This is important that you be able to pay the ‘real cost’ of the monthly payment. Third, you must do a home inspection to make sure the property is in good condition. It will cost around $400. plus, but it is very important. A roof repair could cost thousands. You want to know what you are buying and what its condition is. Agents and most homeowners do not really know what the overall condition of property is. Bring in a pro! Finally, do not rush the process. Have a criterion for purchase. The most effective buyers have alternative properties. They avoid becoming emotionally committed to one possible choice. It will take time, so be patient and take the time necessary.
The market has great selection and prices have come down. In short, there are some great buys available right now. Take advantage of the market: it is better to own rather than rent.
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