Well, that was easy… Not long ago I noted that we were appealing our property tax re-assessment. For those that don’t recall, we renovated last fall and were slapped with an increase that placed our home’s assessed value well beyond fair market value. [more]

As many of you know, we renovated our house this past fall. The work that we had done included an addition, replacement of our deck, conversion of our old laundry room into a powder room, and the construction of a small outbuilding.

Over this past weekend, our property tax re-assessment showed up in our mailbox. While I was expecting to see an increase, I wasn’t prepared for what I saw when I opened the envelope, especially given current market conditions. [more]

Finally, some positive news on the economic front… According to the National Association of Realtors, existing home sales rose in February for the first time in six months. The downside is that the 2.9% increase in sales was accompanied by a continued fall in prices. In fact, the median price tumbled by the largest amount on record during February. For what it’s worth, experts are still predicting that the real estate market won’t bottom out until later this year.

The following is a guest post by Lynnae of Being Frugal. If you like what you see here, please consider subscribing to her RSS feed.

I was watching the show Property Virgins for the first time the other night, and I was shocked at what I heard on that show. Let me give you a rundown…

The buyer was a single woman who wanted the best quality in a house, but didn’t want to spend a lot of money. She knew exactly what she wanted and how much she wanted to pay, and she wasn’t willing to budge much on either issue.

The property expert seemed nice enough, and she was a saint for dealing with the opinionated buyer, but halfway through the show, she said something that stopped me cold. She had just shown the buyer a home that was brand new and had everything the buyer wanted. The problem? It was $40,000 more than the buyer wanted to pay.

The ensuing conversation went something like this. These aren’t exact quotes, but you’ll get the idea.

Expert: The price on this property is $240,000.

Buyer: What? I definitely can’t afford that!

Expert: That’s about $1700 a month, not including insurance and HOA fees.

Buyer: The insurance and HOA fees are extra? I really can’t afford that. This is what I want, but I’m not paying that price.

Expert: Well, there is another option. We can do a 35 year loan and bring your payments down to $1500 a month.

Buyer: That’s just so much money! I can’t take on that much debt! (I was cheering for her at this point).

Expert, talking privately to the camera: She’s only thinking about the big number here. She can easily afford the monthly payment. That’s what she should be looking at… Whether or not she can afford the monthly payment.

That’s the point at which my jaw dropped open. She shouldn’t consider the total cost? Are you kidding me? I’m no expert, and I don’t own a home yet, but there are a few rules I’m going to stick to when I do buy.

Know What You Can Afford

When I finally take the plunge to buy a house, I’m going to figure out how much I can easily afford per month. If the bank tells me I can afford to put 30% of my income toward my mortgage payment, but I know I can only fit a payment of 25% into my budget, I’m going to figure out my target price based on what I think. I’ll figure out the approximate amount of insurance, taxes, and any other fees, and work that into the number as well. I’ll also decide what mortgage terms I want. A fixed rate, 15 year mortgage would be ideal. From there, I’ll come up with a target house price. And I won’t look at anything more expensive.

Human emotions are powerful, and when we see something we really want, we can often talk ourselves into buying it, even if we can’t really afford it. The amount of credit card debt in this country is indicative of that. I’m not going to put myself into a situation where I might be enticed into making a stupid decision that will cost me for the next 30 years.

Never Look at a House Before You Know the Price

I couldn’t believe the buyer even walked into that house without knowing how much it cost! She set herself up for disaster. As predicted, she fell in love with the house, and deeply desired to buy it, even though she couldn’t afford it. That made her vulnerable to taking on a less than ideal mortgage. I imagine that’s how many people got caught up in the mortgage crisis we have today.

Be Willing to Do Some Work

After looking at house #2 (the dream house), the buyer was shown a third house. It was a modern house, like she wanted, but it needed a little work. It was bargain priced at $174,000 and, for an additional $30k, the buyer could do enough work to bring the house up to her standards. But our naive buyer balked at the thought of doing the work.

Take Time to Think If You’re Unsure

A tactic that the property expert used on the buyer was to tell her that the properties were flying off the market like hotcakes. She kept stressing that the buyer needed to make a decision quickly, or avoid losing the property. While that may be true, if you’re hesitating about signing on the dotted line for any reason, take time to think it over. It’s better to lose out on a property than to make a $200,000 mistake. There will always be other properties, but once you buy a house, it’s difficult to undo your mistake.

So what did the buyer end up doing?

Much to my chagrin, our buyer went with expensive house #2. She negotiated the price down to $233,000, and she went with a 35 year loan. If it were me, I would have taken house #3 and gotten the same quality of home for $33,000 less. It just makes better financial sense.

The bottom line is, if you’re a new buyer, do your research. Don’t blindly trust the “experts”. Their job is to sell you a house, so they can make a commission. Though I’m sure there are many honest and helpful realtors out there, they do have a financial interest in making a sale. It’s always wise to figure out what’s best for your financial situation on your own, rather than trust someone else to do it for you.

On the heels of our mortgage refinance, I thought I’d put together a rundown of all the things we did two years ago to get our old house ready for sale. What follows is a rundown of all the ‘major’ stuff that we did just prior to putting our house on the market… [more]

After nearly pulling the trigger and refinancing our home last spring, we finally decided to go ahead and pull the trigger on a refi yesterday. We’re currently about 1.5 years into a 30 year fixed mortgage at 6.375% (yes, rates bumped up right around the time we moved in 2006). Besides getting a lower rate, we’ve been thinking about moving to a shorter term (15 years instead of 30 years). [more]

“If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” - J. Paul Getty

Unless you’ve been living under a rock, you’ve no doubt heard that the White House has plans for a subprime bailout. In order to stem the tide of foreclosures, the Bush administration has unveiled plans to freeze the ultra-low teaser rates that were dangled in front of borrowers that shouldn’t have been lent money in the first place. [more]

Last week I saw an interesting interview with Alan Greenspan, former Chairman of the Federal Reserve Board, on The Today Show. He has a new book out, and thus appears to be making the rounds in support of its release. While I can’t cover everything he said in painstaking detail, I did jot down a few of the more interesting tidbits… [more]

I just received an interesting question from a reader that relocated from New York to Denmark in 2003. They have since decided to make the move permanent, and have a question about using IRA funds to help with the purchase of a home overseas:

“Can we withdraw from our traditional IRAs to use as a down payment on a house (we are first time buyers) if that house is in another country? I know that you can do this in the United States, but am curious if we can withdraw the money without penalty if our first time purchase is overseas? Any help would be greatly appreciated!”

Let’s first set aside the issue of whether or not using IRA funds to purchase a house is a good idea. Rather, let’s take a look at the rules… [more]

It’s fairly well know that if you’re not at least 59-1/2 years old, you can’t generally take a distribution from your traditional or Roth IRA (or SEP-IRA, for that matter) without incurring a 10% penalty (note that Roth IRA contributions can be withdrawn at any time, for any reason, without incurring a penalty). There are, however, a number of exceptions to this rule, and one of them has to do with buying a home. [more]