The Age Old Question Rent vs. Buy

For as long as I have been covering Real Estate, and even decades before that, the question has been pondered, whether it was a better time to rent or buy a home. You would imagine that most Realtors would always say it is better to buy – but truth be told, 6 years ago, it really was a better time to rent. Oh, but how the tides have changed since!

According to CNN Money, “There are several reasons. Home prices are falling. Mortgage interest rates are at historically low levels and rents are on the rise. Of course, many renters are not in a position to buy. For one, it's hard to get a mortgage these days, despite low rates. And paying rent can push them further away from being able to afford to buy.” Overall, cost is down for home purchases while rental prices are continuing to rise – if you can even manage to find a property to rent. It’s partly as simple as supply and demand. More homes available to sell – prices are lower, while fewer rentals available to rent- prices are up.

“Rising rents make it harder for people to save for a down payment, which is the biggest barrier to buying a home that aspiring homeowners face,” Jed Kolko, Trulia’s chief economists says.

While supply and demand are indeed a large part of the equation, low interest rates and tax benefits cannot be ignored. Although we have heard many times over the last few years that mortgages are being offered at historically low rates, there really hasn’t been a time in recent history where they have been offered at these current low rates. Most lenders agree that there is no further room for them to decrease.

In addition, with tax day fast approaching, tax deductions have never been more important. A homeowner can gain tax benefits for their property taxes and interest paid on the first one million dollars of a first mortgage and interest paid on an additional $1,000,000 of a second mortgage. When you rent your home, you will not have access to these write offs. On top of that, you will not build equity in your property since you don’t own it.

Ken H Johnson, a professor of real estate at Florida International, who has extensively studies the “rent vs buy” quandary believes home prices nationally have bottomed out. “The ship has turned,” he says. “Markets should slowly start to recover. Housing will return to its traditional role of a safety investment.”

There are so many great incentives to buy a home right now. Whether for a tax benefit, low borrowing rates of the ability to build equity through ownership, buying a home continues to be a wonderful investment in your family’s future.

Is it Time for an Appraiser ?

One of the most important jobs for your real estate agent is to determine the value of your home by developing a Comparable Market Analysis, which will be used to price your home correctly.

If your property isn’t attracting serious shoppers, your agent may recommend that you invest in an appraiser to get a second pricing opinion, as the appraiser will come in with an independent, unbiased opinion to help ensure your price will hold its value with a bank “An appraisal is important in today’s market especially, because it’s an objective and unbiased source of information,” says Matt Ernest, president of Ernest Appraisal Service Inc. “The appraiser is an independent professional who performs a service for a fee rather than for a commission and is therefore not as invested as others are who are making pricing decisions.”

Appraisals allow for homeowners and buyers to establish “fair market value.” In addition, an appraisal allows a lender to know how much they can safely lend. “Credible opinions of value can help to stabilize the real estate market,” says Joseph C. Magdziarz, president of Chicago-based Appraisal Institute, a global membership association of professional real estate appraisers. “Appraisers today are doing the same thorough, fact-based research and analysis they have always done.”

A home appraiser will compare the condition of your house in relation to the comparable properties in the neighborhood and will give you a reasonably good idea where your house fits in relation to recent sales.

According to Ernest, a home appraisal can range in length from two pages to more than 100. It will include details about the house, a description of the neighborhood and side-by-side comparisons of similar properties. It will also contain an evaluation of the area’s real estate market, notations of major problems with the property that will affect its value and an estimate of the expected time it will take to sell the property.

In addition, earlier this year, the Appraisal Institute released several tips for consumers and guidance for homeowners and buyers seeking to ensure their sales are completed in a timely manner. These will be important when selling your home.

• Make sure the lender hires a qualified appraiser (such as a designated SRA, SRPA or MAI member of the Appraisal Institute). The lowest-priced appraiser does not necessarily equate with the most qualified. This is a time to get the numbers right.

• Accompany the appraiser during the inspection of the property if possible. The more active of a participant you are in the process, the more you will understand it, and be able to catch any errors.

• Request a copy of the appraisal report from the lender. Federal law requires that you receive a copy of the appraisal within 30 days.

• Appeal the appraisal if appropriate. Market conditions do change, especially in these economic times. If you feel that new information may change the appraisal, be sure to speak up.

• Have your agent ask the lender to order a second appraisal by a qualified and designated appraiser.

• File legitimate complaints with appropriate state board or professional appraisal organizations.

Remember, you don’t need to agree with the outcome of an appraisal. You and your agent can work with the figures and determine if you should change the sale price or not. A home appraisal, no matter how scientific, still ends up being the opinion of the appraiser and to some degree is a judgment call.

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