Homeowner chat with Eric Tyson

Deedee: We've been looking to move. What we find is that the houses we are looking at often list for hundreds of thousands of dollars above the assessed value. A realtor that did a market analysis on our house told us to price around the assessed value. I know the variables about condition, updates and ammenities. We have done a lot of work on our house, new kitchen, new heating system, electrical, painting, etc. How do you explain this discrepancy?
Eric_Tyson: The listing price for your home that you would like to sell should be based upon the best estimate that you have for its value in the current marketplace. What you paid for the house, the amount of improvements, the assessed value, are not what should determine listing price. Get out and look at what other comparable homes are currently or recently selling for. Interview several agents and have them complete and explain a comparable market analysis for your home (House Selling for Dummies explains how to find a great agent).

beantownchick: Hi Eric, I am a single woman and just purchased my first condo a few months ago. It was recently renovated (kitchen and bath only) but I'm curious if it is worth it to spend money to make other improvements (ie: an exhaust fan in the bathroom, recessed lights)?
Eric_Tyson: I presume by "worth it" you mean in terms of resale value. But you should also think in terms of protecting your investment. An exhaust fan will do more of the latter since it will reduce paint damage from excessive moisture in the bathroom. Most buyers value recessed lighting so that seems fine too. Just be sure you can afford this all in the context of your budget and future financial plans.

Robb: Hi, when purchasing pre-contruction condos, what are your rights when the closing date keeps getting pushed back?
Eric_Tyson: My co-author on Home Buying for Dummies, Ray Brown, uses the expression RTC - for Read The Contract! Your contract should stipulate how this is to be handled. If necessary, write a letter to the builder to document your questions and concerns and if that doesn't work, you may need a real estate attorney.

Dweller: My wife and I live a south shore community that has home prices that have sky rocketed over the past 12 years. We want to live in home with a different layout, but can't afford a similarly sized home. My wife wants to buy a smaller home in town and then build it out to reach our goals. Is this strategy practical?
Eric_Tyson: Not really unless you know some secret to do construction work cheaply. Also, don't underestimate the enormous hassle and stress of living through construction.
Eric_Tyson: I would question your statement that you can't afford a similar size home. What do you say that? How are you factoring in using the equity from the sale of your current home.

Dweller: Good question. We're trying to cut mortgage expenses and the difference after selling our house, paying off the mortgage and equity loan, buy a new home at around $875K would put us into a higher debt situation
Eric_Tyson: Use the worksheets in Home Buying and House Sellinf for Dummies to help you work through the numbers to see what you can actually can and can't afford

agb: This may have been more appropriate for the mortgage chat, but I thought I'd give it a go. Once you secure a mortgage, is there any value add to asking the lender to keep the mortgage, if it's a local firm, rather than resell it on the open market? I've been told this helps with building a relationship with the bank.
Eric_Tyson: I don't think so. Actually, the reselling of mortgages helps lenders increase their profits and specialize which ultimately keeps (your) lending costs down presuming you shop around and get the best deal

Richard: Home affordability calculators scare me. The boston.com one suggests that I, who have an above average salary and above average savings cannot come close to affording the average home in the Boston area. How accurate are these calculators?
Eric_Tyson: Well, who says you should buy the "average home?" You may well buy a home that is priced below average is this is your first home. You really must look at your overall financial situation and then make the determination as to how much home you can afford.

Jim: How much of a mortgage am I able to afford
Eric_Tyson: Lenders and agents use simplistic criteria which ultimately tells you the maximum you can borrow but as we say in Home Buying for Dummies, that's not necessarily what you can afford. You've got to examine all of your spending, what your goals and current savings are to determine what you can afford to spend on housing

steve: Hi Eric- We have been waiting to buy a house for over a year. In your opinion will prices continue to fall? When is the best time to jump-in and buy? Should we wait? Danni77: My husband and I are looking to buy by Spring 07. We will have about 30 grand to put down and want our payment to be less then 1700 a month? What can we afford? What price range should we be looking in?
Eric_Tyson: I have never professed to have a crystal ball. Now certainly looks better as a time to buy than it was one or two years ago. A good measure to determine if home prices in the area you're considering are out of whack or not is to compare the monthly, after-tax cost of buying a given home to the monthly cost of renting that same home. These two numbers should be pretty close. If owning costs much more than renting in your area, that may be a sign that prices may go through a bit more of a correction.
Eric_Tyson: Remember - of the course of your adult life, you will end up owning for decades. Don't sweat buying at a 5 percent difference if it means getting you into a home you like and gets you settled.
Eric_Tyson: I couldn't possibly answer that - and neither can you - without considering the rest of your financial situation. Home Buying for Dummies has lots of worksheets to help you determine this and other important issues. disco2k: My husband and I own a 2 bedroom condo in cambridge that we rent out, we're currently living in a 1300sf duplex in a neighboring city. Since the market is very soft right now, we were thinking of maybe buying a 3rd property, this time a single family using a no-down payment mortgage. Are we asking for trouble?
Eric_Tyson: Possibly if you're looking at a no-down mortgage because you lack the money for a down payment! What if the market gets softer and the rental market softens too? What would that do to your financial situation. Also be careful not to overinvest in real estate in one small area. Are you diversified with other investments like stocks?

Jim: Would you recommend going with an agent or will I have more success with a FSBO or isoldmyhouse.com? What are the Pros and Cons?

PD: Hi Eric, Just wanted to ask you how important is an age of house while looking to buy first home. We always look at it from re-sale prespective is it a big deal for most buyers?
Eric_Tyson: We cover this extensively in House Selling for Dummies. You should definitely interview several agents for their proposal and approach. Even if you decide to sell on your own, you will learn something. Since most buyers are working with agents, you will still end up owing 1/2 commission to an agent even with a FSBO. Invest the time to find a good agent and their value added should pay the cost of their services. Also, negotiate their commission.
Eric_Tyson: Not necessarily. Depends how update the home is. Some people like older homes that have architectural charm and details.

Red: My wife and I are buying a 3-br house in Nashua, NH - a fantastic alternative to MA, if you can swing the commute. Any thoughts on people looking for opportunities like us in bordering states?
Eric_Tyson: Just be sure you're considering all of the costs and realities like how much time you'll be spending commuting and the added costs because of that (car expenses, need to purchase other services due to lack of time, etc.) Also, while housing may be cheaper, how about grocery costs and other things you spend money on. Don't guess - get the facts!

Red: How low is too low on an offer in this area these days?
Eric_Tyson: You should always determine what a given property is worth. Be aware that if you're offering far less than list price, you may be dealing with an unmotivated seller. Try to find out before offering why they are selling and how motivated they may be

sportcork: i own a older house and needs some work done. But don't have the finances to do it. i am about to put on the market. it's in a desiable location. any suggestions on what to expect.
Eric_Tyson: Price it realistically - not based upon what you could have maybe gotten a year ago. Also, clean it up and declutter as best you can. See House Selling for Dummies for more ideas.

rshone: Do you have suggestions on how to improve your credit enough to be able to buy a house?
Eric_Tyson: Depends on what the "problem" is. Start by getting copies of credit report. Pay down consumer debt. Make your other payments on time. Scrutinize your monthly spending and find ways to cut the fat.

Red: How much should closing costs be? My mortgage person is telling me $5800, but that seems high.
Eric_Tyson: First, it depends upon the purchase price of the home and the size of the mortgage. For an average price home, $5,800 wouldn't be high but that doesn't mean these can't be reduced. Question everything and educate yourself.

Jim: Eric, in your book, do you discuss the differences and need for Pre-Approval and Pre-Qualifications? I feel a little unsure of what is the best way to go about it.
Eric_Tyson: Yes, we do. Pre-approval is more meaningful to a seller and more valued in a tight market. It also shows a seller you're more serious about buying.

rickd: I live in a relativelt affluent area that has historically always had aggressively increasing property values. The first home i bought was 2.5 years ago using an Interest Only ARM. I am starting the selling-buying process again. Assuming I only plan on staying in this house for 3 years is that still a good idea (albeit risky by comparison to fixed rate)?
Eric_Tyson: Can you afford the risk?
Eric_Tyson: Why are you buying homes and only staying for a few years? There are large transaction costs with real estate and your spending a lot of money on such costs

docjr: please explain differences between condo, condex, coop. We're selling single family home for a condo and are baffled by range in fees, rules, etc. Any advice?
Eric_Tyson: We're not generally fans of coops. If you're looking at this type of housing, condos are generally a better way to go. Coops can be far more restrictive in terms of who can buy and sell and approvals needed to do so.
Eric_Tyson: We cover this extensively in Home Buying for Dummies.

Red: There's a tradeoff going on in this market. Those people who are moving to NH from the Boston area are trading a longer commute (in some cases) for more land. They also have to consider the fact that while there is no state income tax or sales tax, the property taxes are much higher (2100 sq. ft house on .25 acres, $5000). Is that amount directly proportional to MA property taxes, because you're ending up with more land?
Eric_Tyson: You've got to research the tax and other issues. Get the facts and compile the numbers.
Eric_Tyson: Also, really ask yourself what you're going to do with more land and if that's what you'll really value years from now.

rickd: Originally bought the house to get into the town, knowing that was a starter house. Now with a growing family it seems like I can "afford" more house with that type of mortgage, make some decent profit while upgrading and then settle down in a house 3 years or so from now. It just seems to me that even though there are no sure things the house is virtually guaranteed to increase in value so it seems like a risk worth taking. Thoughts??
Eric_Tyson: Virtually guaranteed? Not so my friend. Over the long term perhaps but a few years is not long-term.
Eric_Tyson: Also, my analysis has found that a home needs to appreciate about 15 percent just to cover the transaction costs of buying and then selling a home!

Red: What if he made a bundle, though? I'm thinking of taking a 30-year fixed loan, 5% down, with the first 10 years all at interest-only, because I only plan on staying in the house for a few years, fixing it up, and selling at a profit.
Eric_Tyson: Be very careful with interest only loans because when they do start amortizing, the payment leaps up. Be sure you can afford that jump in payment and you know when it's going to happen.
Eric_Tyson: Also, in a slow or down market as we seem to be in now, you may not be able to make a profit after a few years. Then what?

misterdangerpants: I was wondering if purchasing a home with no money down is a good idea?
Eric_Tyson: You will get worse loan terms.
Eric_Tyson: Advantage is that it can get you into the market sooner if you can find a seller willing to do this.

ameized: We are looking to be first time home owners, and are debating the cost (money and time and hassle) of buying a multi-family and becoming live-in landlords. Any advice or thoughts as first timers - any info onthe future of the rental market (so we can rely on rent to pay the mortgage as well)?
Eric_Tyson: It's a tradeoff. You will be able to get a bit more living space for your money. The downside is that you'll have some neighbors who are tenants close by. This can be stressful and at times, time consuming. Be sure you know what you're getting yourself into. It's certainly not for everyone.

Jack_Sprat: Any thoughts on this - just a general question - is it really possible the current market downturn will last as long as the roughly five to seven years we saw in the last cycle downturn that began in 1989-1990?
Eric_Tyson: Of course it's possible.
Eric_Tyson: I have no idea what will happen.
Eric_Tyson: Even though the economy seems stronger now than during that period, home prices relative to incomes and interest rates are higher.

x_2: Is there a way to figure out the "real" real estate appreciation in a given market? Say the official numbers say it's 6% a year but how can one figure out the costs of improvements that went in the "median house" during the year? Is there an official statistics on these so you can subtract them and find out what the appreciation of a median house that has not been improved be?
Eric_Tyson: Great question. I'm not familiar with such numbers. What is a median house today is different than 10 or 20 years ago as you well know. Don't forget that homes depreciate which offsets improvements

marshall: Hi, I was wondering what advice you would offer someone who is looking to be a first-time condo owner, (the catch is the credit background)?
Eric_Tyson: Understand that condo prices tend to appreciate less or go down more in a soft market unless you're in a highly desired urban area with little land. Get your credit situation improved and perhaps don't rush and buy something you will want out of in a few years

PD: Hey Eric, What should you be looking at when you go to see a home?
Eric_Tyson: Presuming it's a home you have a high level of interest in:
Eric_Tyson: *Check out the neighborhood at different times of the day and week.
Eric_Tyson: *Ask yourself and your agent what the negatives are - every home has them
Eric_Tyson: *Consider the layout and how it will work for you and how appealing it will be to most future buyers.

NB_2: In this market, how long should I plan to stay in a house as a first time buyer?
Eric_Tyson: You really should plan or hope to stay in a home at least five years and ideally seven to cover your transaction costs.
Eric_Tyson: Thanks for coming everyone! Great questions!
Eric_Tyson: - Eric Tyson
Eric_Tyson: Syndicated Columnist
Eric_Tyson: Best-selling author of Home Buying and House Selling for Dummies, Personal Finance for Dummies (Wiley) and Mind Over Money (CDS/Perseus)

Bostondotcom: The chat with Eric Tyson is now over. Thank you for participating. For more home buying information, please visit http://www.boston.com/realestate/bigmove/