According to David Bach, author of the best-selling "The Automatic Millionaire Homeowner: A Powerful Plan to Finish Rich in Real Estate," buying a home is still a wise move.
"We're seeing home ownership become accessible to more people," says Bach.
But owning a home isn't for everyone. Those that don't want the expense of maintaining a home and the commitment it involves may consider continuing to rent. The renter is able to move quickly and has little responsibility in the long run. And they have less of a financial interest in the property.
If you are convinced that your area is still in a housing bubble that will start to go down soon, you might consider waiting to purchase until conditions are more favorable to you.
If you have doubts whether owning or renting is best for you, you should consider all of the costs, pros and cons and long term consequences.
One pro that is rarely brought up is the net worth of a homeowner. American homeowners have a median net worth of $184,400, while renters are worth $4,000, according to the National Association of Realtors.
"For most people, it truly is their best asset, their most valuable asset," Bach says of homeownership.
"People work their whole lives and save, save, save, but buying a home and living in it will make them more money than anything else they do."
Bach suggests to ask yourself some questions before making up your mind.
First, how much home can you afford? The basic rule from the FHA is that your total housing costs, including mortgage, insurance and taxes, should not exceed 29% of your gross income. Your total debt, including credit cards, alimony, child support, student loans and car loans, should not exceed 41%.
Then ask where you will find the money. Mortgages come at a cost.
"You have to find some money," says Bach. "You can't borrow everything. But you can go in with pretty little. With $2,000 to $5,000, in many communities you can afford to buy a house."
Finally, look at ways to save money after buying. Look into the total cost of the mortgage. Bach recommends cutting that cost by paying your mortgage off early.
You can do this by paying biweekly, instead of monthly. Or simply add an extra payment to each year, for a total of 13 payments. This could cut your mortgage by years.
Bach says the average person can save between $50,000 and $100,000 on their mortgage by simply looking for ways to save.
"That's a lot of money," he says.
Most homes are sold ?as is." In fact, the form Residential Purchase Agreement used by most brokers has a pre-printed ?as is' clause stating that the property is sold ?as is' without any warranty and in its present physical condition. In a recent purchase, I was asked by the seller to also sign a special lawyer-prepared document which reiterated (in a full page of legalese) that the property was being sold ?as is.' My first instinct was to ask: What is wrong with this property and am I losing all of my rights by agreeing to buy it ?as is?
There is no clear-cut answer but a quick explanation of the law should put your mind at ease when buying a property ?as is.'
What is wrong with This Property?
As the Agreement notes, ?as is' means that the Seller is not making any warranties about the condition of the property. Selling ?as is' does not necessarily mean that anything is wrong with the property. The Buyer, however, should have a professional inspector look at the property and accompany the inspector as he examines the property. The inspector's trained eye will catch items that you may not notice.
Am I losing All of My Rights?
If it turns out that a problem arises with the property after the deal has been closed, what remedy does a Buyer have in an ?as is' sale? The ?as is' clause works in concert with other laws, most notably California Civil Code ?1102. This section requires that the Seller provide the Buyer with a detailed Real Estate Transfer Disclosure Statement.
The Disclosure Statement addresses almost every conceivable defect with the property-from the presence of contaminants to lawsuits against the property. In general, the Seller is under a duty to disclose any and all facts materially affecting the value or desirability of the property which are known only to him and which he knows are not known to, or reasonably discoverable by, the Buyer. Even loud or obnoxious neighbors must be disclosed.
If the problem has been disclosed by the Seller, the Buyer has no cause to complain at a later date. He could have walked away from the deal or renegotiated. However, if the Seller knew about the problem but did not disclose it, the Buyer may have a claim against the Seller.
In a recent case, our client purchased a multi-million dollar home only to find that the winter rains brought extensive leaking. The professional inspection had noted that the roof should be maintained yearly and would have to be replaced in three years. However, it had not uncovered any leaking, and the Seller made no mention of roof leaks in the Disclosure Statement. However, the gardener and housekeeper, both of whom had worked for the Seller, remembered numerous roof leaks while the Seller lived in the house.
The Seller argued that (1) the house was being sold ?as is' and (2) the inspection put the Buyer on notice that the roof was in bad shape, thereby absolving her of any liability. In any event, she also claimed to have repaired the leaks and thought that they had been fixed.
While the inspector may have noted the limited life of the roof, the Seller was still required to disclose the leaking. The leaks were a material fact affecting the value (and habitability) of the home. In this case, neither the Buyer nor the inspector could have discovered the leaks in a visual inspection of the property. (Interestingly, because of liability issues, professional inspectors often will not allow the Buyer to follow them up to the roof, at least not on the inspector's ladder!) The Seller settled with the Buyer, and the roof was replaced.
So, rest assured, although you may be buying the house ?as is,' the Seller is not excused from disclosing material problems in the Disclosure Statement. And in the event the Seller fails to make these required disclosures, the Buyer has a legal remedy, despite the ?as is' provisions of the Agreement.
Both Rateempire & Laine T. Wagenseller are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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