Personal Finance
20 Days of Real Estate: Days 6 to 10 in Review
TSC Staff
04/27/07 - 04:38 PM EDT
Editor's note: As a bonus to TheStreet.com's special 20-part series on real estate, TheStreet.com University is pleased to publish reviews of each set of stories in the series. This review covers the second set in the series, parts 6 to 10.
Part 6. Home StudyIn real estate, information rules. The more you know about every aspect of a property, the better your position will be when it's time to negotiate. Having a good grasp of a property's physical integrity will play a big role in helping you decide whether or not the property is worth your time and money. Key Points:
- A professional home inspection report can reveal property flaws that can help you estimate short- and long-term repair costs that you can use to inform your offer price.
- If a realtor only recommends one inspector, beware. An inspector that works too closely with a realtor might under-report potential problems, so carefully screen a few inspectors before you hire one.
- Your primary home inspector may need to subcontract follow-up inspection reports that look at specific areas, such as the insect situation and water treatment equipment.
During the recent housing boom, the increase in property taxes significantly outpaced the rate of income growth. However, even though the housing market is now softening, property taxes don't seem to be going down. The result: Many confused homeowners demanding a solution. Key Points:
- Local governments look to property taxes as a predictable income stream.
- With the consistent rise in property taxes, many homeowners find their once affordable homes now having a negative impact on their lifestyles and finances.
- There are a few federal and grassroots property tax reform initiatives that are starting to gain momentum.
New construction doesn't necessarily guarantee high-quality workmanship. The recent U.S. building boom of new houses has left some homeowners dealing with serious construction defects. Key Points:
- Poor insulation has been one of the most pervasive construction problems in many new homes, resulting in water intrusion and mold.
- Extended reconstruction can cost you a lot of wasted money on mortgage payments, taxes, insurance, homeowner's fees, and if it's an investment property, lost rental income.
- When buying a property directly from a builder, do your due diligence. Prudent steps include checking the builder's recent track record of quality, getting a professional home inspection before you buy, and making sure that the purchase contract protects you in case any major structural problems arise.
The cost of homeownership involves more than simply making your mortgage payments. The ongoing expenses of maintaining real estate have a direct effect on how much property you can really afford. Key Points:
- Broad and somewhat fixed ownership costs can include homeowner association or condo association dues, property taxes, and city or county taxes.
- More property-specific and variable costs can include utility bills, property insurance, regular maintenance and repair, and the eventual replacement of major appliances, components, and systems.
- When evaluating the size and cost of your potential home, include operating cost estimates in your calculations. Plan to set aside a reserve for major scheduled replacements.
Buying a condominium or a co-op apartment can be a unique real estate experience. Many times, a building's finances can be just as important as your own. Key Points:
- Buying a co-op may also require a strict co-op board approval process, which will usually involve a close look at your current financial status.
- Owning a condo or co-op entails mixing your finances with the other owners in a building. Depending on the property, important things to consider can include the percentage of the building that is owner-occupied, the underlying mortgage, and the reserve fund for capital improvements.
- If you're considering buying a condo or co-op, involve your realtor and attorney in the evaluation process.