Monday, October 24, 2011

Shakespeare Question

“TO BE OR NOT TO BE? …” The famous opening line from William Shakespeare’s play, Hamlet, could easily be turned into another memorable question if Shakespeare was a Real Estate agent in Freeport: “TO BUY OR NOT TO BUY?” That is the question today. Many people have asked themselves this question, especially in these uncertain economic times. While both the options of renting or owning have their benefits, the decision to purchase a duplex, condominium, or house (rather than renting), is complex, and based on a number of factors. Nearly everyone believes buying a home today is a good financial decision. The question that remains is whether or not now is the right time to purchase a home for you!

For most people, deciding to purchase a home is the largest financial decision of their lifetime. Before making the jump into homeownership, potential homebuyers should consider the “soft” lifestyle issues as well as the “hard” financial ones. In Rotary clubs, we have the 4-way test of questions for guiding wise thoughts, communication, and action: Is it the truth? Is it fair for all concerned? Will it build good will and better friendships? Will it be beneficial for all concerned? In Real estate we also have four financial and lifestyle questions to consider when determining if buying a home is the wise decision for you:

1.     Do you have a steady income? At or near the top of every potential homebuyer’s mind is whether or not they can afford to buy a home right now. Buying a home remains a sound financial decision for those with documented income and a good credit history. A steady income can also provide a strong backbone for the initial down payment and future mortgage payments. Don’t hesitate to speak with your real estate broker to determine all the “other” costs of home ownership, such as insurance, pool maintenance, power, cable, water, gardener, and general upkeep. Your real estate broker can help you answer and uncover questions about the cost of homeownership. Make sure you know what your monthly operating costs will be, including your other living costs so you can budget properly.  Don’t fool yourself.

  1. Do you plan to stay in a home for an extended period of time? With proper planning, a home purchase has historically proven to be one of the strongest investments you can make. Along those lines, it’s imperative to understand that investing in a home is much different than investing in a stock portfolio. Homes typically appreciate in value over time, while the owner builds his or her equity through monthly mortgage payments. If you anticipate staying in a home for only one or two years, it doesn’t necessarily mean buying is not for you, but you are less likely to see a significant financial return on your investment. Based on the current market and closing costs, you need to be prepared for a long term investment, otherwise it does not make sense. Remember, you will be responsible for half the government stamp tax (2% to 6%, based on the price) and your legal fees (2.5%).

  1. Do you plan to sell a house in order to buy a house? Your local real estate agents can help you understand current local market conditions, and will help you make smart decisions when listing a home on the market. If you do not currently own a home that needs to be sold prior to purchasing a new one, now is a particularly smart time to buy. Even with lenders becoming increasingly more thorough in their approval process, mortgage financing is still widely available for those with a steady income and solid credit. High inventories and low interest rates give first-time homebuyers a tremendous amount of opportunity and flexibility in our market.

  1. How do your other options compare? For renters, calculating month-to-month housing expenses is as easy as inquiring about the monthly rent and average utilities. The calculation gets a bit more complicated when considering the monthly cost of owning a home. A real estate professional can help you understand a range of financial considerations from annual service charges, to hurricane insurance, to property taxes if you buy outside of the “bonded area”. And in 2015, we might be faced with property taxes like Nassau.

There is no one right decision when it comes to renting versus buying a home.  Each individual should take the time to look at their own personal and financial situation to decide what will work best for their needs and lifestyle.  To Buy or Not to Buy?: that is the question worth answering in today’s real estate market.  (And a side note for Shakespeare fans—“Did he or didn’t he?” is the question asked in a new movie called Anonymous, asking who really penned some of the world’s greatest plays—a suspense-thriller that opens in U.S. theatres October 28th!)

Until Next week. — James Sarles



1 comment:

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