Deadly Mistake #1: Thinking you can’t afford it

Today, buying the home of your dreams is easier than ever before. Many people who thought that buying the home they wanted was simply out of their reach are now enjoying a new lifestyle in their very own new home.

Buying a home is the smartest financial decision you will ever make. In fact, most American and Canadian home owners would be financially broke at retirement if it weren’t for one saving grace - the equity in their home. Furthermore, mortgage rates are more flexible today than ever and tax allowances favor home ownership.

Real estate values have always risen steadily. Of course there are peaks and valleys, but the long term the trend is a consistent increase. This means that every month when you make a mortgage payment the amount that you owe on the home goes down and the value typically increases. This owe less-worth more situation is called equity build-up and is the reason you can’t afford not to buy.

Even if you have little money for a down payment or credit problems, chances are that you can still buy that new home. It just comes down to knowing the right strategies, and working with the right people. See below.

Deadly Mistake #2: Not hiring a buyer’s agent to represent you

Buying property is a complex and stressful task. In fact, it is often the biggest single investment you will make in your lifetime. At the same time, real estate transactions have become increasingly complicated. New technology, laws, procedures and competition from other buyers require buyer agents to perform at an ever-increasing level of professionalism. For many home buyers, the process turns into a terrible, stressful ordeal. In addition, making the wrong decisions can end up costing you thousands of dollars. It does not have to be this way!

Work with a buyer’s agent who has a keen understanding of the real estate business and who is on your side. Buyer’s agents have a fiduciary duty to you. That means they are loyal to only you and are obligated to look out for your best interests. Buyer’s agents can help you find the best home, the best lender and the best inspector. Best of all, in most cases, the buyer’s agent is paid out of the seller’s commission, even though he/she works for you.

Trying to buy a home without an agent at all is, well… unthinkable.

Deadly Mistake #3: Getting a cheap inspection

Buying a home is probably the most expensive purchase you will ever make. This is no time to shop for a cheap inspection. The cost of a home inspection is very small relative to the home being inspected. The additional cost of hiring a certified inspector is almost insignificant. As a home buyer, you have recently been crunching the numbers, negotiating offers, adding up closing costs, shopping for mortgages and trying to get the best deals. Do not stop now. Do not let your real estate agent, a patty-cake inspector or anyone else talk you into skimping here.

NACHI front-ends its membership requirements. NACHI turns down more than 1/2 the inspectors who want to join because they can’t fulfill the membership requirements.
NACHI certified inspectors perform the best inspections by far. NACHI certified inspectors earn their fees many times over. They do more, they deserve more, and yes they generally charge a little more. Do yourself a favor…and pay a little more for the quality inspection you deserve.

Nearly 28% of homes bought last year were for investment purposes, and an additional 12% were vacation homes, the figures show. Most of the buyers were baby boomers in their top earning years, looking toward retirement and hoping to build wealth or find a more desirable place to live.

“Baby boomers are such a powerful economic force,” said Dave Jenks, co-author of The Millionaire Real Estate Investor. “They’re using their wealth to go buy second homes.”

The typical investment buyer last year was 49 years old with annual income of $81,400. He or she paid $183,500 for the median-priced investment home, up 24% from 2004.

“Real estate, over the past five years, has outperformed virtually every other investment vehicle,” said Ron Peltier, president and chief executive of HomeServices of America, the country’s second-largest residential brokerage firm. “A lot of people have just speculated in real estate.”

The trend really started after 1997, when Congress changed the tax code, allowing most homeowners to duck capital gains taxes when they sold their homes. The exemption is $500,000 for married couples, $250,000 for singles, if it was their primary residence for two of the past five years.

Under the old system, the only way to avoid the tax was to “roll” the gains into another home of equal or greater value. Americans bought bigger and costlier homes. But now, they can downsize and use the equity built up in their homes to buy second homes.

“That’s what spurred all this on in the beginning,” says David Lereah, the NAR’s chief economist. “It’s like all the stars are aligned. The tax situations helped, but at the same time, baby boomers were entering their peak earning years. That’s why we just boomed in second homes.”

He thinks the trend crested in 2005. With rising interest rates, tighter lending standards and slower price appreciation, Lereah expects second-home sales to drop this year to 30% of all existing-home sales, and maybe into the 20% range.

“What’s going to be leaving the market right now are the speculative investors who came into the market and were trying to flip homes,” he said. “They were buying one, two, three or four properties at a time, and that was distorting the numbers.”

Sales of vacation homes, though, are expected to stay strong for years, because the youngest baby boomers are only 42 this year.

The typical vacation home buyer last year was 52 years old, earning $82,800 a year, and purchased a property that was about 200 miles from the primary residence. The median price was $204,100, up 7.4%.

More than three-fourths of the buyers had no interest in renting their property. About 20% said it would one day be their retirement home.

Joe Klein and his wife bought their first vacation home last year on Lake Wabedo in Minnesota, three hours from their primary residence. He says he might like to retire there but might have to persuade his wife.

“It’s something that we could hand down to the kids,” says Klein, 42, a program manager for a medical company. “But secondly, I see it as an investment. If we had to, we could sell it to help pay for their college.”

By Mike Lawrence

Steamboat Pilot & Today

Thursday, April 6, 2006

The Routt National Forest land is not included in a federal proposal to sell more than 300,000 acres of forestland to provide short-term funding for rural schools.

Sen. Ken Salazar, D-Colo., and local rural schools advocate Paula Stephenson oppose the proposal, which is included in the 2007 budget submitted to Congress by President Bush. The proposal would reauthorize the Secure Rural Schools and Community Self-Determination Act, or SRS, for five more years. That act is to expire in September, six years after its implementation in 2000 as a response to decreasing revenues from timber sales on federal lands.

Salazar and Stephenson criticize the proposal for providing only a temporary financial fix for rural schools at the cost of a permanent loss of public lands.

A document explaining the proposal on a United States Forest Service Web site states the reauthorization would “provide affected states and counties a short-term safety net of payments, which will be adjusted downward over time and eventually phased out.”

Last week, the forest service said public comment on the proposal will be accepted until May 1.

“Extending the public comment period for an extra month will not change my skepticism of this short-sighted proposal,” Salazar said in a March 29 statement. “I continue to be very concerned about the administration’s proposal to sell off pieces of America’s permanent heritage of public lands as part of a short-term budget issue. … I intend to do what I can to prevent the administration’s bill from becoming law from my seat on the (Senate’s) Energy and Natural Resources Committee.”

Although the proposal lists more than 21,000 acres in Colorado as eligible for sale, none of those acres are in Routt or Moffat counties. The list includes more than 300 acres of the Arapahoe and Roosevelt national forests in Grand County and more than 500 acres in the White River National Forest in Eagle and Summit counties.

The Forest Service estimates that the proposed sales would generate $800 million in revenue. The first six years of the SRS generated more than $2 billion.

Stephenson, executive director of the Colorado Rural Schools Caucus, said Wednesday that very little of those revenues have reached Colorado classrooms.

“Colorado currently receives only about 1 percent of the (SRS) money,” she said. Colorado land makes up more than 7 percent of the lands eligible for sale in the proposed reauthorization.

“Only four (Colorado school) districts have received any money from the act to date, and three of those districts are not even considered rural by Colorado standards,” Stephenson said.

A rural school district in Colorado is one with fewer than 3,000 students. The Aspen School District, Stephenson said, is the only rural district that has received funding from the SRS. Districts in Eagle, Summit and Garfield counties have received funding, but each has more than 3,000 students.

“I know Steamboat has never received any money from it,” Stephenson said. Stephenson is a former Steamboat Springs School Board president.

The rural caucus represents 115 Colorado school districts at the Capitol in Denver. Stephenson said that although the caucus has not taken a formal position on the proposal, informal discussions with caucus members have led to a consensus opinion against the land sale.

“We really don’t think this is the best approach,” she said. “Yes, we believe our rural schools are underfunded and need a solid revenue stream, but this seems to be a one-time fix. We really shouldn’t be getting rid of a public good and using one program to fund another.”

How SRS funding is distributed also has raised questions.

A March 3 letter from the Routt County Board of Commissioners, sent to the three Routt County school districts, disputes a claim made by the office of Colorado auditor Joanne Hill that Routt County schools have been “underfunded” from forest service receipts.

The dispute arises from language in SRS that allows county agencies to use some of the revenues from land sales for other needs, including forest-related projects and road maintenance.

Mark Rey, national Under Secretary for Natural Resources and the Environment, said in a March 29 media teleconference that funding allocations have “accomplished a lot of good” during the past six years and are used according to recommendations from committees that determine the greatest needs for a given county or region.

Not all of the 300,000 acres eligible for sale would need to be sold to reach the reauthorization’s goal of $800 million, Rey said.

The national forest system contains more than 193 million acres of public, federally owned land. According to the forest service, the areas selected for the sale are mostly isolated plots that are no longer fulfilling public needs and are expensive to maintain.

Local and state government agencies and nonprofit organizations would have the first right to buy the plots at market value, if Congress approved the proposal in coming weeks.