Friday, September 26, 2008

Is It Always Better to Buy Than to Rent

My husband and I rented our last home for fourteen years. Yes, you heard me right. Fourteen years. Well-meaning friends and family would often chastise us for renting, telling us that we were just throwing away our money.

Is it always better to own than rent? Are you really just throwing away your money when you rent? I would say no. Sometimes it's better to own and sometimes it's better to rent. You need to look at your own personal situation as well as the current economic situation in your geographical area.

In my case, the rent was cheap. Half of our current mortgage. In fourteen years, our landlord only raised our rent once. Yep, only once. We were good tenants and he wanted to keep us. Now, that's not to say that he was the best landlord. He wasn't. It would often take several phone calls to get him motivated to make repairs. But for the most part he wasn't too horrible.

One downside to renting was the inability to decorate my house as I wished or make changes that would have made our lives more comfortable. Plain white walls was all my landlord would allow. If I had owned the house, I would have made some improvements such as a room addition or knocking out a wall or two. Or just put in decent carpet. But really that's a small price to pay for cheap rent. Home owners can paint their walls any color they like, knock out walls, put in gorgeous carpet . . . and they get to pay for it.

When I rented, my landlord paid for repairs. Sure, it took him forever, but it came out of his pocket, not mine. Today, I pay for my own repairs. A recent discovery of a major problem with the structure of our home set us back $4500. I don't even want to think about the cost of the new roof, or the trees that need to be removed, the grading of the driveway, and the boiler repair. But, hey, I can pick my own paint colors!

Today my husband and I own our home. Or do we really? Most Americans have 30-year mortgages. Do they own their own homes? No they don't. The bank owns their homes. A few missed payments and out in the street they go. Down payment and house payments out the window.

We haven't even talked taxes yet. For the privilege of owning my own home I get to give the government a huge chuck of change twice a year in the name of property taxes.

Then there's home owners insurance -- considerably more costly than renters insurance.

Am I saying that I'm sorry I purchased my current home? No, I'm not. This house is our life's dream come true. We're out of the city, surrounded by wildlife, and I can decorate any way I wish. But I still believe that my husband and I were NOT throwing away our money for those fourteen years. By renting and living frugally we were able to save enough to make a very healthy down payment and buy just the right house for our family.

So, the next time someone tells you that you need to buy instead of rent, just nod your head politely and then do what's best for your family. It may be buying and then again it may be renting. I wonder if this country would be in our current financial mess if more people weren't in such a hurry to own their own home.

Tuesday, September 23, 2008

How To Buy a Foreclosed Home

I am often asked about the process we went through in buying our home -- a foreclosure.

First off, when my friends ask me, "So, how do we go about finding foreclosed homes too?" I tell them, "Run! No! Don't go looking for trouble!"

The truth is, the market is sinking. At least here in Michigan. Prices are dropping everywhere, not just on foreclosures. And, you don't need to go looking for foreclosures. We were not looking specifically for foreclosures, but in the area we were house hunting, 75% of the homes we looked at were either foreclosures or in short sale.

A short sale is when the bank tells you that you have to put your house on the market to keep it from foreclosure. It is similar to a foreclosure for the buyer as the bank is in control -- you deal with the bank not the family. For the family it's different from the foreclosure in that their credit is not as badly damaged. We once found ourselves in a terribly uncomfortable situation where the family was heated about not wanting to sell and here we were in their house -- with them across the street looking in at us. When we were done they had a screaming match with our real estate agent because we took an hour and a half instead of an hour to look at the house (we were planning to make an offer).

Before I share how to navigate a foreclosure sale let me say this, "Do NOT pay anyone to find foreclosed properties for you!" You don't need to go looking for them. They'll find you. And remember, in this market a lot of people are ready to price their house to sell. Translation: cheap. So, don't think that a property has to be in foreclosure to get a deal. If a house has been on the market a long time, you have the upper hand in negotiations.

We've found that foreclosed homes come in two varieties. The first is the family who doesn't give a hoot. They don't care about their property and they don't care about their credit. They milk the system for all they can. You'll know their homes -- they're falling apart and not worth a second look. The other scenario is the family who loved their home and took good care of it, but simply fell on hard times. Sometimes their money trouble started because they kept refinancing the house to fix it up. Those homes are the ones you'll be interested in. It's very sad, and I admit feeling guilt walking through foreclosed homes, but there isn't anything you can do. In fact, you may be helping the family by getting their house sold and taking good care of it.

Note that foreclosures are not always a deal. An important thing to remember is that they are almost always "AS IS." There is little to no negotiating once an offer has been accepted. For this reason, as we were later told by one of the bank's employees, you should consider paying for the inspection before placing a bid on the house. Then, when you go to put in your bid, you can include a letter explaining all the serious issues you found and why you offered far less than the asking price. Now you are in a negotiating position.

When dealing with human beings (as opposed to a corporation, i.e. a bank) you would have an inspection and then negotiate should any serious problems pop up. When dealing with a bank, they consider the inspection "for your information only." If you find something seriously wrong in inspection and therefore want to lower your offer, 99% of the time you will need to pull your offer and start all over again with a new offer.

That brings up another problem with dealing with banks. It can take months to get a response to an offer. Months. Three to six months is not unheard of. Though three to six weeks was our experience.

Ask your agent to help you negotiate extras up front. For example, you may want to ask for a one-year home warranty insurance policy on the appliances, etc. With foreclosures you have no history on the house. There are no disclosures because the person who lived in the house is not involved. The bank didn't live in the house so they don't know if the basement leaks after a hard rain or that the stove is on its last leg. The real estate agent should be able to suggest several other negotiable items up front.

Don't be afraid to underbid on a house. Unless you are in a desperate situation and have to find a house today, you are in the driver seat. The worst they can do is say, "No." There are plenty of houses out there. Rob and I put bids on multiple houses and were turned down. But that was a good thing because God was saving a special house just for us. We found the perfect house and got it for 40% less than it sold for four years ago.

What happened was that it was a foreclosure and had sat vacant for two years. There were some big ticket items to be fixed -- the roof and windows -- so it wasn't moving. But the basic construction is rock solid and the property gorgeous. In the end, it was a very good move on our part.

But it wasn't easy. There was some water damage done AFTER our bid had been accepted (the bank's agents didn't winterize it correctly) and we tried to re-negotiate the price. Remember what I said about banks not negotiating. Well, Flagstar bank told us, "No deal. It's 'as is' and that's that." We made the decision to pull the offer. In the end, they negotiated -- just an hour and a half before the scheduled closing! I never want to go through that again.

Then when closing time came, the bank's employee was no where to be found. There was a snafu that could have halted the deal and no one could find the guy. We ended up going forward with the deal, but it cost us an extra $1,000 in property tax. You see the bank employee told us that we would not have to pay the pro-rated property taxes. He was very clear on the phone that the taxes were paid through the summer and that was one thing we didn't have to worry about. That was an important lesson learned -- Get everything in writing!

In summary:
Don't pay someone to find foreclosures for you.
Foreclosures are not the only deals out there.
Foreclosures are "As Is."
Get everything in writing.
Negotiate up front for extras
Consider having the inspection before placing a bid.
Be prepared to wait -- banks don't work quickly.
Don't be a afraid to underbid -- you can always negotiate or move on to the next house.
Pray! Ask God to help you find just the right house.

Wednesday, September 03, 2008

Retail Me Not / The Teaching Company

If you're planning on making a purchase online, make sure to check for discounts and coupons first. You can do this at Retail Me Not.

If that doesn't work, Google the name of the retailer and something like "promotion code" or "coupon."

Today I made a purchase at The Teaching Company and used a code found at Retail Me Not (CVSC) to get another $20 off of the sales items I purchased. The courses I bought were already 70% off. The shipping and handling was $20, so it was like getting s/h free in addition to a huge discount.

BTW -- If you are interested in The Teaching Company's courses, each and every title goes on sale at least once a year for 70% off. If there is a course I would like to purchase for my homeschool then I wait patiently for it to go on sale. Other options for The Teaching Company? EBay, your public library, and Netflix.

Tuesday, September 02, 2008

Promotion Code Christian Books

I needed to order some last minute items for the school year from and got an additional 10% off using this promotion code: 251512PA. It's for a minimum order of $35 and it's good to September 30, 2008. Nice deal!