What's the difference between market value and appraised value?

What are the standard ways of finding out what a house is valued at?

How do you choose between buying and renting?

Will a neighbor problem reduce the value of my property?

What is a home equity loan?

Where do I get information on homes with historic value?

What is the difference between an "attached" and "detached" home?

What are the steps in purchasing a home?

What is the best time to buy?

How do Property Taxes work?

How do I save on taxes?

What's the difference between market value and appraised value?

Appraised value is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300.

Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker.
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What are the standard ways of finding out what a house is valued at?

A comparative market analysis and an appraisal are the standard ways consumers, lenders and realty agents deterimined what a home is worth.

Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. You also can research "the comps" yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location.

This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet.

An appraisal, which generally cost $200 to $300 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.
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How do you choose between buying and renting?

Home ownership offers tax benefits as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property.

There also are a number of economic considerations. Unlike renters, home owners who secure a fixed-rate loan can lock in their monthly housing costs and make prudent investment plans knowing these expenses will not increase substantially.

Home ownership is a highly leveraged investment that can yield substantial profit on a nominal front-end investment. However, such returns depend on home-price appreciation.

"For some people, owning a home is a great feeling," writes Mitchell A. Levy in his book, "Home Ownership: The American Myth," Myth Breakers Press, Cupertino, Calif.; 1993.

"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," Levy concludes.

As for evaluating the risk associated with home ownership, David T. Schumacher and Erik Page Bucy write in their book "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."

The authors recommend that prospective buyers spend a few months investigating a community. Many people make the mistake of buying in 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?"
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Will a neighbor problem reduce the value of my property?

While it may not reduce the actual value, a cluttered landscape can detract from the positive aspects of your home. Review your local laws, which should be on file at the public library, county law library or City Hall.

A typical "junk vehicle" ordinance, for example, requires any disabled car to either be enclosed or placed behind a fence. And most cities prohibit parking any vehicle on a city street too long.

It also may be worthwhile to check into local zoning ordinances. An operator of a home-based business usually is required to obtain a variance or permanent zoning change in residential areas.

In addition, if a neighbor's repair work produces loud noises, he may be breaking local noise-control ordinances, which are enforced by the police department.

Before bringing in the authorities, you may want to make a copy of the pertinent ordinance and give it to your neighbor to give them a chance to correct the problem.

Resources:
* "Neighbor Law: Fences, Trees, Boundaries and Noise," Cora Jordan, Nolo Press, Berkeley, Calif.; 1991.
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What is a home equity loan?

Home equity loans are basically the same as a mortgage though they are generally structured as a credit line secured against a portion of the appraised value of your home. The term "second mortgage" is used interchangably.

Example: You have a home that is appraised at a value of $100,000 and have a mortgage loan of $80,000. That leaves you with $20,000 of equity in your home. Some of that $20,000 could be used as collateral for a home equity loan.

An advantage of a home equity loan is that you may be able to deduct the interest paid on the loan on top of the deductible interest from your primary mortgage.
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Where do I get information on homes with historic value?

For information about homes with historic value, contact the National Trust for Historic Preservation, Washington, D.C. at (202) 673-4000.
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What is the difference between an "attached" and "detached" home?

A standalone property, for a single family/dweller, with no sharing wall (ie no wall is shared with another property) is detached. An attached property has at least 1 shared wall... if there are only 2 houses sharing 1 wall, this is semi-detached, if there are 4 houses linked in a chain, this is sometimes called a townhouse, and if there are more daisychained together, then this is a terrace.
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What are the steps to buying a home?

Step 1: What kind of home and where?
Given your price range, decide what kind of home you want/need: size, location, special features (such as fireplace or fence), etc. You will also want to consider school districts and other factors that are important to you and your family. Consider your home as an investment. What will make your home attractive to purchasers when you are ready to sell? A couple without children would not be interested in local schools for themselves, but the quality of local schools may be an important factor when they want to sell the house. There are good resources available at bookstores, your library and through real estate agents on what factors are especially important for buyers and for sellers.

Step 2: Find a real estate agent
You may want to use a real estate broker/agent to help you with your search. This is the selling broker/agent. Interview several brokers/agents to find one you are comfortable working with, who will answer your questions and help you find a property that meets your specifications. A listing broker lists the property for sale and actively markets the property. The selling broker or agent shows the house to the buyer. Sometimes, the listing and selling brokers are the same agency. The fees for the listing and selling broker/agent are generally paid by the seller, usually as a percentage of the purchase price.

Step 3: Pre-qualification
If possible, get "pre-qualified" for a loan. This means the lender or real estate broker will informally qualify you for a loan by getting basic information on your income, debts and credit. By getting pre-qualified, you can usually estimate how much you could borrow for a home.

Step 4: Begin house hunting
Allow time (up to several months) to see a number of houses, so you have a good basis for making a final decision.
When you find a home you like, carefully give it your own personal inspection. You will also want to tour the neighborhood and perhaps see the house at different times of day or on weekends to check traffic patterns and other amenities that may affect your decision.

Step 5: Find a Real Estate Attorney
The use of attorneys for real estate transactions varies by state. In some states, you won’t need to hire an attorney to assist you with purchasing your home since your real estate agent will be trained to prepare the necessary contracts and the closing will be conducted by a title insurance or escrow company. In other states, you’ll need to hire an attorney to prepare the documents and conduct the closing. As with all transactions involving legal documents, it’s important to read and understand any documents your are asked to sign. If you are unsure about the meaning of any documents, it is a good idea to consult an attorney who specializes in real estate transactions.

Step 6: Make an offer and sign a Purchase Contract
If you're comfortable with the home, make an Offer to Purchase, including an "earnest money" deposit. You should make sure the Offer allows you to get your money back if a professional inspection reveals problems with the house, or if you aren't able to get approved for a mortgage.

Step 7: Get professional inspections
Your Purchase Contract will permit you to have various professional inspections and will govern your rights if the inspections show problems. Before you make an offer and sign a purchase contract, ask your real estate agent or attorney which inspections are best for your area. For example, standard purchase contract forms often do not provide for radon inspections. Have the necessary inspections included as a contingency for your offer.

Step 8: Select and apply for a mortgage
Mortgage interest rates, fees and other terms can vary widely. Research what is available by calling several mortgage lenders or using the internet. When you have selected the mortgage terms that are right for you, apply for a mortgage loan at a bank or other lending institution.

Step 9: Final Walk-Through
A day or two before closing, do a final walk-through of the property to make sure there are no new problems. This may be a good time to have the seller show you how to operate major systems and appliances.

Step 10: Closing
Close the loan (also called "Loan Settlement"). This is also when you make the rest of your down payment, pay loan fees, sign all necessary legal documents, and get the keys to your new home.
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What is the best time to buy?

Many buyers prefer to move in the spring or summer, the market starts to heat up as early as February. Families with children are eager to buy so they can move during summer vacation, before the new school year begins.

The market slows down in late summer before picking up again briefly in the fall. November and December have traditionlly been slow months, although some astute buyers look for bargains during this period.
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How do property taxes work?

Property taxes are what most homeowners in the United States pay for the privilege of owning a piece of real estate, on average 1.5 percent of the property's current market value. These annual local assessments by county or local authorities help pay for public services and are calculated using a variety of formulas.
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How do I save on taxes?

Here are some ways to save money on taxes:

* Mortgage interest on loans up to $1 million is completely deductible for the year in which you pay it to buy, build or improve your principal residence plus a second home.

* Points, or loan origination fees, also are deductible no matter who pays them, the buyer or the seller.

* Most homeowners, except the wealthy and those living in high-priced markets, no longer need to worry about capital gains taxes. The exemption has been raised to $500,000 for married couples and $250,000 for single owners. It can be taken every two years. Homeowners should always keep all receipts of permanent home improvements and of mortgage closing costs. If you do have to pay capital gains taxes, these costs can be added to your adjusted cost basis. Consult your tax adviser for more information.

Resources:

* "Tax Information for First-Time Homeowners," IRS Publication 530, and "Selling Your Home," IRS Publication 523. Call (800) TAX-FORM to order.
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