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Q&A
Here are some of the most frequently asked questions in real estate. If
you have a question that has not been included in this comprehensive list,
please e-mail Mike and he will get back to you as quickly as possible.
Is there a difference between market value and appraised value?
The main difference between appraised and market value is that the former
is an opinion, while the latter is based on a comparative market analysis.
A certified appraiser's opinion of property value is based on comparable
sales within the last six months with fees ranging from $200 to $300.
Lenders require appraisals as part of the loan application process. A
comparative market analysis is an estimate of value based on sales of
comparable properties, and is usually provided by an agent or broker.
Are property taxes deductible? What about taxes on second homes or
investment properties?
Property taxes on all real estate transactions are deductible against
current income taxes. Interest and property taxes are deductible for second
homes if expenses are itemized. The best advice to follow can be provided
by your accountant or tax adviser.
What are, and why do we pay, property taxes?
Property taxes are the annual fees that property owners pay for owning
real estate - usually 1.5 percent of the property's current market value,
although they are calculated in many different ways. The county or local
government uses the money to help fund public services.
What are closing costs?
Closing costs are the fees for services, taxes or special interest charges
that surround the purchase of a property. They may include upfront loan
points, title insurance, escrow charges, document fees, and prepaid interest.
Unless these charges are included in the loan, they are paid at the closing.
What kind of home insurance should I get?
An "all inclusive" policy is standard fare when dealing with home insurance.
This type of policy will usually cover claims involving:
-Lightning, wind, storms, hail
-Fire, explosions, smoke
-Electrical damage and water damage from plumbing
-Heating or air conditioning systems
-Floods
For personal property, homeowners can increase coverage beyond the depreciated
value of items such as televisions or furniture by purchasing a replacement
cost endorsement. Another option is to purchase an inflation rider, which
automatically increases coverage as the property value increases.
Do I need a home inspection?
Absolutely. For example, roof, plumbing, and electrical repairs are major
problems and can amount to tens of thousands of dollars or more. Think
twice before signing a contract to purchase property "as is."
When is the best time to buy?
Here are some great reasons to buy:
-You need a tax break.
-The mortgage interest deduction can make home ownership appealing.
-You plan to use the property long enough for any appreciation to cover
your transaction costs.
-You want to own, not rent.
-You can afford it!
How does one choose between buying and renting?
While homeowners have the freedom to make decisions regarding their property,
most renters do not worry about maintenance and other financial obligations
associated with property ownership. Homeowners that secure a fixed-rate
mortgage, are better able to plan financially because monthly housing
expenses will not increase dramatically. This way, wise investments can
be made, and, hopefully, yield long-term profits on the initial investment.
However, such returns depend on value appreciation. Aside from maintenance
costs, the monies paid to the lender is usually greater than the total
amount paid in rent. To determine whether a property is a long-term investment,
prospective buyers should spend some time investigating potential communities
or neighborhoods.
How do I hire a contractor?
Most people rely on referrals when hiring a contractor, but even in a
referral situation the contractor should be subject to a background check.
Inquire with the state regarding a licensing board for contractors. Then,
call to learn whether any complaints have been filed against the contractor.
The Better Business Bureau will also keep complaints on file. Both of
these agencies are excellent resources for determining whether a contractor
is reliable.
Next, you want to interview all candidates, being sure to ask whether
they carry worker's compensation benefits as well as an umbrella general
liability policy. If contractors do not have coverage, you could be responsible
for worker injuries incurred on your property. Further, obtain the policy
number, insurance company name and phone number to verify coverage. Take
your time while making this important decision, and never pay a deposit
at your first meeting.
How do I determine the price of my property?
The best way to determine the price of a property is to refer to a comparative
market analysis, which is a report based on recent sales of comparable
properties in your neighborhood. Although the real estate market fluctuates,
it is still important to base the list price on current market conditions.
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