You need a tax break. The mortgage interest deduction can make home ownership very appealing.
	You are not counting on price appreciation in the short term.
	You can afford the monthly payments.
	You plan to stay in the house long enough for the appreciation to cover your transaction costs. The costs of buying and selling a home include real estate commissions, lender fees and closing costs that can amount to more than 10 percent of the sales price.
	You prefer to be an owner rather than a renter.
	You can handle the maintenance expenses and headaches.
	You are not greatly concerned by dips in home values.

How do you choose between buying and renting? 
Home ownership offers tax benefits as well as the freedom to make decisions about your home. An advantage of renting is not worrying about maintenance and other financial obligations associated with owning property.

There also are a number of economic considerations. Unlike renters, home owners who secure a fixed-rate loan can lock in their monthly housing costs and make prudent investment plans knowing these expenses will not increase substantially.

Home ownership is a highly leveraged investment that can yield substantial profit on a nominal front-end investment. However, such returns depend on home-price appreciation.

"For some people, owning a home is a great feeling," writes Mitchell A. Levy in his book, "Home Ownership: The American Myth," Myth Breakers Press, Cupertino, Calif.; 1993.

"It does, however, have a price. Besides the maintenance headache, the amount of after-tax money paid to the lender is usually greater than the amount of money otherwise paid in rent," Levy concludes.

As for evaluating the risk associated with home ownership, David T. Schumacher and Erik Page Bucy write in their book "The Buy & Hold Real Estate Strategy," John Wiley & Sons, New York; 1992, that "good property located in growth areas should be regarded as an investment as opposed to a speculation or gamble."

The authors recommend that prospective buyers spend a few months investigating a community. Many people make the mistake of buying in the wrong area.

"Just because certain properties are high-priced doesn't necessarily mean they have some inherent advantage," the authors write. "One property may cost more than another today, but will it still be worth more down the line?"

How is a home's value determined? 
You have several ways to determine the value of a home.

An appraisal is a professional estimate of a property's market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $300 for a $250,000 house. 

A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analyses in the hopes of winning your business. 

You also can get a comparable sales report for a fee from private companies that specialize in real estate data or find comparable sales information available on various real estate Internet sites. 

What is the difference between market value and appraised value? 
The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300. 

Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth. 

What home-buying costs are deductible? 
Any points you or the seller pay to purchase your home loan are deductible for that year. Property taxes and interest are deductible every year. 

But while other home-buying costs (closing costs in particular) are not immediately tax-deductible, they can be figured into the adjusted cost basis of your home when you go to sell (any significant home improvements also can be calculated into your basis). These fees would include title insurance, loan-application fee, credit report, appraisal fee, service fee, settlement or closing fees, bank attorney's fee, attorney's fee, document preparation fee and recording fees. Points paid when you refinance an existing mortgage must be deducted ratably over the life of the new loan. 

What contingencies should be put in an offer? 
Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. 

A buyer could forfeit his or her deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. 

The purchase contract must include the sellers responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property. 

Do sellers have to disclose the terms of other offers? 
Sellers are not legally obligated to disclose the terms of other offers to prospective buyers. 

How do you find a good agent? 
Getting a recommendation from a friend or work colleague is an excellent way to find a good agent, whether you are a buyer or a seller. Be sure to ask if they would use the agent again. 

You also can call the managers of reputable real estate firms and ask them for recommendations of agents who have worked in your neighborhood. 

A good agent typically works full-time and has several years of experience at minimum. 

If you are a buyer, you don't usually pay for your agent's services (in the form of a commission, or percentage of the sales price of the home). All agents in a transaction usually are paid by the seller from the sales proceeds. In many states, this means that your agent legally is acting as a subagent of the seller. But in some states, it's legal for an agent to represent the buyers exclusively in the transaction and be paid a commission by the sellers. You also can hire and pay for your own agent, known as buyer's brokers, whose legal obligation is exclusively to you. 

If you are a seller, you should interview at least three agents, all of whom should make a sales presentation including a comparative market analysis of local home prices in your area. The best choice isn't always the agent with the highest asking price for your home. Be sure to evaluate all aspects of the agent's marketing plan and how well you think you can work with the individual. 

What are the benefits of seller financing? 
Seller financing offers tax breaks for sellers and alternative financing for buyers who can't qualify for conventional loans. 

If you are a seller, the risks you face are the same as those facing any lender: Is the borrower a good credit risk? Will the property hold enough value over time to allow for the repayment of all loans made against it? 

You should run a full credit check on the borrower, require hazard insurance on the property and include a due-on-sale clause. There also are financing, disclosure and repayment-term requirements that need to be met. It is wise to consult a lawyer when putting together this kind of transaction. 

How do I figure out the homeowners association? 
Learn everything you can about the homeowners association before you buy into a development governed by one. The association's financial, political and legal conditions are very important to your investment and quality of life. 

When run properly, homeowners associations maintain the common grounds and keep civility in the complex. If you follow the rules, the association should not intrude on your privacy or cost you too much in association dues. 

Poorly managed associations can drag down property values and make living there difficult for residents. Start by studying the association's covenants, codes and restrictions, or CC&Rs, and find out if you can live by them. For example, if the rules prohibit loud music after a certain hour and you like to play your CDs late at night, this may not be the place for you. Don't move in thinking you can get away with violating the rules or change them later because you may find yourself in turmoil with determined neighbors firmly in control of the association board. 

Find out all you can about the association's finances. Beyond reviewing the budget, talk to the association treasurer and find out if dues are expected to increase and if any special assessments are planned. Ask if special inspections have revealed problems with roofs or plumbing that may cause a dues hike or special assessment later on. 

Call and meet with the association president. If you are the type of person who despises intrusions into your private life and the president seems more interested in gossip about the residents than maintaining the property, this may not be the right condo complex for you. 

Speak with residents to get their views on the association's finances, its property manager, how it operates and any politics. Associations are volunteer organizations with elected boards, like a mini-government, so politics can enter the picture and spoil a good thing. 

Lastly, take some time to understand how homeowners associations are organized and how they conduct business. Like all real estate investments, the more you know the better off you are. 

Whose obligation is it to disclose pertinent information about a property? 
In most states, it is the seller, but obligations to disclose information about a property vary. 

Under the strictest laws, you and your agent, if you have one, are required to disclose all facts materially affecting the value or desirability of the property which are known or accessible only to you. 

This might include: homeowners association dues; whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice, such as a dog that barks every night or poor TV reception; any death within three years on the property; and any restrictions on the use of the property, such as zoning ordinances or association rules. 

It is wise to check your state's disclosure rules prior to a home purchase.

How is the price set? 
It's very important to price your home according to current market conditions. Because the real estate market is continually changing, and market fluctuations have an effect on property values, it's imperative to select your list price based on the most recent comparable sales in your neighborhood. 

A so-called comparative market analysis provides the background data upon which to base your list-price decision. When you prepare to sell and are interviewing agents, study each agent's comparable sales report (the data should be no more than three months old). 

If all agents agree on a price range for your home, go with the consensus. Watch out for an agent whose opinion of value is considerably higher than the others. 

What are the standard ways of finding out how much a home is worth? 
A comparative market analysis and an appraisal are the standard methods for determining a home's value. 

Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. Be sure you get listing prices of current homes on the market as well as those that have sold. You also can research this yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location. This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet. 

An appraisal, which generally costs $200 to $300 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality. 

Is there a secret to good negotiating? 
There are several cardinal rules to negotiating effectively. One is do your homework, and learn as much about the seller or the buyer as you can. Another is to play your cards close to your vest and not reveal too much information to the other party or their agent. Don't let yourself get rushed into any decision, no matter how tempting it may be. Finally, if you have doubts about your negotiating skill, hire someone to help. 

Are low-ball offers advisable? 
A low-ball offer is a term used to describe an offer on a house that is substantially less than the asking price. 

While any offer can be presented, a low-ball offer can sour a prospective sale and discourage the seller from negotiating at all. Unless the house is very overpriced, the offer will probably be rejected. 

You should always do your homework about comparable prices in the neighborhood before making an y offer. It also pays to know something about the seller's motivation. A lower price with a speedy escrow, for example, may motivate a seller who must move, has another house under contract or must sell quickly for other reasons. 

What is the difference between list and sales prices? 
The list price is how much a house is advertised for and is usually only an estimate of what a seller would like to get for the property. The sales price is the amount a property actually sells for. It may be the same as the listing price, or higher or lower, depending on how accurately the property was originally priced and on market conditions. 

If you are a seller, you may need to adjust the listing price if there have been no offers within the first few months of the property's listing period. 

Should I include an inspection contingency in my offer? 
An "inspection contingency" protects you as a buyer in a purchase offer by allowing you to cancel closing on the deal if an inspector finds problems with the property. 

As soon as the seller accepts a written offer, the document becomes a legally binding contract. The purchase contract can be written to include a contingency for any repairs found to be needed or related items the seller must take care of before closing. If these are not dealt with, and you have such a clause in your contract, you can delay or possibly cancel the closing. If it's not stated in the contract, you could face losing your deposit. There also may be costly legal implications stemming from backing out of a contract. 

You usually will have the right to choose the inspector (and be responsible for paying for the inspections). In addition to an overall inspection for structural soundness, you can request a satisfactory pest control inspection report, roof inspection report or contingency for no potential environmental hazards such as asbestos or radon gas. 

Contingency clauses should satisfy the concerns of both the buyer and seller. Buyers also can protect themselves by inserting additional necessary contingencies. Indicate which items like curtains and appliances are to remain with the house. Then stipulate you have the right to personally inspect the home 24 hours before closing to make sure all is in order. 

Can you negotiate the price on new homes? 
It can be difficult to negotiate the sales price with a developer because they may claim their prices are based on fixed construction costs. But it doesn't hurt to try. 

Experts say builders more likely to be flexible on price at the very beginning and the very end of a development project. Early on, most developers want to move people in quickly so the project picks up momentum. Later, developers may be more inclined to accept lower offers when only a few units remain. 

If negotiating the price doesn't work, buyers commonly negotiate for better amenities (upgrade carpet, light fixtures, etc.) or lot location. Experts say a developer will rarely pass up a deal over a couple hundred dollars' worth of carpeting, for example. 

Who gets the furnishings when a home is sold? 
It depends. Fixtures, any kind of personal property that is permanently attached to a house (such as drapery rods, built-in bookcases, tacked-down carpeting or a furnace) automatically stay with the house unless specified otherwise in the sales contract. But anything that is not nailed down is negotiable. This most often involves appliances that are not built in (washer, dryer, refrigerator, for example), although some sellers will be interested in negotiating for other items, such as a piano. 

Are there tax credits for first-time home buyers? 
Many city and county governments offer Mortgage Credit Certificate programs, which allow first-time home buyers to take advantage of a special federal income tax write-off, which makes qualifying for a mortgage loan easier. 

Requirements vary from program to program. People wanting to apply should contact their local housing or community development office. 

Here is a list of four general requirements to keep in mind:

	Some credit may be claimed only on your owner-occupied principal residence.
	There are maximum income limits, which vary by locality and family size.
	You must be a first-time home buyer, which means you must not have had any kind of ownership interest in a principal residence during the past three years. This restriction may be waived, however, if you are buying property within certain target areas.
	Allocations must be available. A local MCC program may have to decline new applications when it runs out of funds.

How do you qualify as a first-time buyer? 
In general, lenders define a first-time home buyer as someone who has not owned any real estate -- whether a personal residence, vacation home or investment property -- during the past three years. 

Lenders verify an applicant's status by examining their income tax returns, checking to see that the individual did not take any deductions for mortgage interest or property taxes. 

How can I save on closing costs? 
Studies show that the closing costs, which can average 2 to 3 percent of a total home purchase price, are often more costly than many buyers expect. But there are some ways to save: 

Negotiate with the seller to pay all or part of the closing costs. The lender must agree to this as well as the seller.

Get a no-point loan. The trade-off is a higher interest rate on the loan and many of these loans have prepayment penalties. But buyers who are short on cash and can qualify for a higher interest rate may find a no-point loan will significantly cut their closing costs.

Get a no-fee loan. Usually, though, these fees are wrapped into a higher interest rate though it will save you on the amount of cash you need upfront. * Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.

Rent the property in which you are interested with an option to buy. That will give you more time to save for the upfront cash needed for the actual purchase.

Shop around for the best loan deal. Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application.

Do I have to disclose a parent's gift? 
Having generous parents is nothing to hide. An estimated one-third of first-time buyers purchase their home with a loan or a money gift from their parents. 

Lenders will ask for a gift letter stating that no repayment of the "gift" is expected. In addition to the letter, a lender can ask for two or three months' worth of statements for the account where the down payment funds are located. If the money was recently placed into that account, the lender may ask where it came from and request verification of that source as well. 

Resources:
* "The Homebuyer's Survival Guide," Kenneth W. Edwards, Dearborn Financial Publishing, Chicago; 1994.

What are some tips on negotiation? 
The more you know about a seller's motivation, the stronger a negotiating position you are in. For example, seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called "motivated sellers" include people going through a divorce or who have already purchased another home. 

Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up. 

Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all. 

What if there is a credit reporting mistake on my report? 
There is no fast and easy way to repair damaged credit that took months or years to occur. The law allows negative information to appear on an individual's credit record from seven to 10 years. 

Credit problems are the main reason would-be home buyers are denied a loan. The first step to clearing up your credit is to get a copy of your credit report to make sure that the negative credit information is indeed accurate. Some states now have mandatory timelines to respond to your inquiry or remove the blemish. For a copy of your report, contact one of the three major credit reporting agencies: Experian at (800) 311-4769, Equifax at (800) 685-1111 and Trans Union at (312) 408-1077. 

The bureaus should provide instructions on how to read the report and how to dispute any inaccuracies it contains. 

If your credit report is correct, take care of any outstanding delinquent obligations first. Lenders usually won't consider any borrower who has had a delinquent payment in the past year. 

What is seller financing? 
Seller financing is when a seller helps to finance a real estate transaction by taking back a second note or even financing the entire purchase if the seller owns the home free and clear. Usually sellers do this when a buyer has difficulty qualifying for a conventional loan or meeting the purchase price. 

Seller financing differs from a traditional loan because the seller does not give the buyer cash to complete the purchase, as does a lender. Instead, it involves extending a credit against the purchase price of the home while the buyer executes a promissory note and trust deed in the seller's favor. These special circumstances must be acceptable to the lender who makes the first mortgage on the property. 

The necessary paperwork is prepared by the title or escrow company after the terms are worked out between the buyer and seller. 

If you are a seller considering such an arrangement, it is critical to thoroughly evaluate the creditworthiness of the buyer first. Fear of default makes many sellers reluctant to take back a second. But seller financing can bring a higher price plus complete the sale sooner in some situations. For more information, contact the Internal Revenue Service for a copy of its Publication 537, "Installment Sales." Order by calling (800) TAX-FORM. 

What's a house worth? 
A home ultimately is worth what someone will pay for it. Everything else is an estimate of value. To determine a property's value, most people turn to either an appraisal or a comparative market analysis. 

An appraisal is a certified appraiser's estimate of the value of a home at a given point in time. Appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools. Appraisers also take lot size, topography, view and landscaping into account. Most appraisals cost about $300. 

A comparative market analysis is a real estate broker's or agent's informal estimate of a home's market value, based on sales of comparable homes in a neighborhood. Most agents will give you a comparative market analysis for free. 

You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor offices, through private real estate information companies or on the Internet. 

What can I afford? 
Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. In general, lenders don't want borrowers to spend more than 28 percent of their gross income per month on a mortgage payment or more than 36 percent on debts. 

It pays to check with several lenders before you start searching for a home. Most will be happy to roughly calculate what you can afford and prequalify you for a loan. 

The price you can afford to pay for a home will depend on six factors: 

gross income

the amount of cash you have available for the down payment, closing costs and cash reserves required by the lender

your outstanding debts

your credit history

the type of mortgage you select

current interest rates

Another number lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (or PITI as it is known). If you have to pay monthly homeowners association dues and/or private mortgage insurance, this also will be added to your PITI. 

This ratio should fall between 28 to 33 percent, although some lenders will go higher under certain circumstances. Your total debt-to-income ratio should be in the 34 to 38 percent range. 

How much will I spend on maintenance expenses? 
Experts generally agree that you can plan on annually spend 1 percent of the purchase price of your house on repairing gutters, caulking windows, sealing your driveway and the myriad other maintenance chores that come with the privilege of homeownership. Newer homes will cost less to maintain than older homes. It also depends on how well the house has been maintained over the years. 

What does PMI cost? 
PMI costs vary from one mortgage insurance firm to another, but premiums usually run about 0.50 percent of the loan amount for the first year of the loan. Most PMI premiums are a bit lower for subsequent years. The first year's mortgage insurance premium is usually paid in advance at the closing. 

Should I put more or less down, if we can afford it? 
Putting down as little as possible allows buyers to take full advantage of the tax benefits of home ownership, many experts say. Mortgage interest and property taxes are fully deductible from state and federal income taxes. Buyers using a small down payment also have a reserve for making unexpected improvements. 

Other real estate experts, however, advise that it is more prudent to make a larger down payment and thereby reduce the amount of debt that must be financed. 

What about nothing down? 
Though some real estate experts advise against it, home buyers interested in buying a house with nothing down can do so. But it's not easy finding these loans and in some cases they can be risky. Occasionally, a builder will offer no-down loans to induce sales in an otherwise slow-moving project. Desperate sellers also may agree to finance the full purchase price to get out from under a property. The Department of Veterans Affairs, or VA, loan program is one program that allows buyers to qualify for a no-down loan. 

What are the standard contingencies? 
Most purchase offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. 

As a buyer, you could forfeit your deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. 

The purchase contract must include the seller's responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property. 

Will bad credit prevent someone from getting a home? 
There are numerous types of credit report problems (which may or may not be your fault) that would cause a lender to reject your application for a loan. 

Such problems include: missing a credit card payment, defaulting on a prior loan, filing for bankruptcy in the past seven years or not paying your taxes. Other black marks on a credit report include a judgment filed against you (perhaps for non-payment of spousal or child support) or any collection activity. 

If you feel that your credit report is wrong, experts say it's best to take it up with the organization or company claiming you owe them money. 

But if you've been late paying your bills, regroup by paying in full and on time for six months to a year to prove to the lender that the late payments were an aberration. 

You can order a copy of your own credit report by calling the three major credit reporting agencies: Experian at (800) 311-4769, Equifax at (800) 685-1111 and Trans Union at (312) 408-1077. 

What are closing costs? 
Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless, these charges are rolled into the loan, they must be paid when the home is closed. 

Why do I need a title report? 
As much as you as a buyer may want to believe that the home you have found is perfect, a clear title report ensures there are no liens placed against the prior owners or any documents that will restrict your use of the property. 

A preliminary title report provides you with an opportunity to review any impediment that would prevent clear title from passing to you. 

When reading a preliminary report, it is important to check the extent of your ownership rights or interest. The most common form of interest is "fee simple" or "fee," which is the highest type of interest an owner can have in land. 

Liens, restrictions and interests of others excluded from title coverage will be listed numerically as exceptions in the report. 

You also may have to consider interests of any third parties, such as easements granted by prior owners that limit use of the property. Some buyers attempt to clear these unwanted items prior to purchase. 

A list of standard exceptions and exclusions not covered by the title insurance policy may be attached. This section includes items the buyer may want to investigate further, such as any laws governing building and zoning. 

What is a gift letter? 
If someone is willing to make a gift of funds in order for you to purchase a home, lenders will ask for a gift letter stating that no repayment of the "gift" is expected. The amount of the gift and the date funds were transferred should be spelled out in the letter, along with the donor's name, address, telephone number and relationship to the borrower. 

In addition to the letter, a lender can ask for two or three months' worth of statements for the account where the down payment funds are located. If the money was recently placed into that account, the lender may ask where it came from and request verification of that source as well. 

Gifts -- with the proper documentation -- can be from relatives, friends, an employer, church, municipality, or nonprofit organization. Lenders often have stricter restrictions on gifts from friends and relatives other than parents. 

Also, if you put less than 20 percent down, some lenders may require that a portion of the down payment be your own cash, not a gift. If you want to use a gift as part of your down payment, check with individual lenders to learn the restrictions of specific private or government-insured mortgage programs. 

How do I find a real estate agent? 
Getting a recommendation from a friend or work colleague is an excellent way to find a good agent. Be sure to ask if they would use the agent again. You also can call the managers of reputable real estate firms and ask them for recommendations of agents who have worked in your neighborhood. In any case, whether you are a buyer or a seller, you should interview at least three agents to give yourself a choice. 

A good agent typically works full-time and has several years of experience. If you are a seller, you should expect to review a comparative market analysis, which includes recent home sale prices in your area, when you talk to a prospective agent. 

What standards do appraisers use to estimate value? 
Appraisers use several factors when estimating a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value. For detailed information on appraisal standards, contact the Appraisal Institute at 875 N. Michigan Ave., Suite 2400, Chicago, IL 60611-1980; (312) 335-4458. 

Who pays the closing costs? 
Closing costs are either paid by the home seller or home buyer. It often depends on local custom and what the buyer or seller negotiates. 

What is the standard debt-to-income ratio? 
A standard ratio used by lenders limits the mortgage payment to 28 percent of the borrower's gross income and the mortgage payment, combined with all other debts, to 36 percent of the total. 

The fact that some loan applicants are accustomed to spending 40 percent of their monthly income on rent -- and still promptly make the payment each time -- has prompted some lenders to broaden their acceptable mortgage payment amount when considered as a percentage of the applicant's income. 

Other real estate experts tell borrowers facing rejection to compensate for negative factors by saving up a larger down payment. Mortgage loans requiring little or no outside documentation often can be obtained with down payments of 25 percent or more of the purchase price. 

Should I hire a home inspector for a new home? 
Most experts recommend having a home inspected, new or old. For new home, ask the builder to provide copies of any inspection reports on the property, architectural plans, surveys and pertinent construction documents for your inspector to review. Your inspector should either be a professional home inspector, an engineer, an architect or a contractor. 

If you hire a professional inspector, look for one who belongs to one of the home inspection trade organizations. The American Society of Home Inspectors (ASHI) has developed formal inspection guidelines and a professional code of ethics for its members. Membership to ASHI is not automatic; proven field experience and technical knowledge about structures and their various systems and appliances are a prerequisite. 

Rates for the service vary greatly. Many inspectors charge about $400, but costs go up with the scope of the inspection. 

Can I use an agent for a new home? 
Yes, however buyers should be aware of the differences inherent in working with sales agents who are employed by the developer, rather than traditional real estate agents. 

Builders commonly require that an outside agent be present, and sign in, the first time a prospective purchaser visits a site before payment of commission even is discussed. At times when buyers use an advertisement to find the development themselves first, builders can refuse to pay any commission regardless of how helpful an agent may become later in the process. It is advisable to call the development first and inquire about their policy on compensating real estate agents if you are using one. 

What are some new-home cautions? 
When you buy a resale home, you can find out a lot more about the property and the neighborhood before you buy than when you buy a new home. 

Land to support new-home developments usually is located on the outskirts of town. Potential buyers should ask the developer about future access to public transit, entertainment activities, shopping centers, churches and schools. Find out how far it is to the nearest library, for example. 

Local zoning ordinances also should be reviewed. A rather remote area can turn into a fast-food-chain haven within a couple of years. Try to ensure that the neighborhood, if not strictly residential, will not begin sprawling out of control. 

What about new versus previously owned? 
Although new homes typically have a higher sales price than comparable existing homes, buyers are willing to spend more upfront with an understanding that part of what they are paying for is assured low maintenance costs. A builder's warranty, along with brand-new roof, appliances, furnace and other operating systems that make major repairs unnecessary, work together to counteract possible slower appreciation initially. 

Data from the U.S. Census Bureau's American Housing Survey suggest that operating costs per house are lowest for brand-new homes, slightly higher for relatively new existing homes but lower on average for older existing homes. Measured per square foot of living space, however, operating costs are consistently higher for progressively older existing homes. 

Utility costs are the largest component of operating costs. Energy consumption per square foot depends on size of the home, insulation, window quality, air leakage and efficiency of the furnace. Operating costs also include expenditures for both routine maintenance and major repairs. 

What are considerations to buying a new home? 
Builders may have a target market in mind for their new-home projects. Some may tout communities as glamorous to upscale urban professionals seeking amenities such as a golf course, hot tubs and tennis courts. Yet a playground and swimming pool might be central to a project geared toward families while the next one offers seniors a walking trail and an easy-to-care-for yard. 

Do not be tempted to move into a "glamorous" community where you might be able to afford the house but not the lifestyle. In addition, similar-looking new houses often come complete with restrictions imposed by the developer on house color, landscaping, renovations and anything else a homeowner possibly could do to make their house deviate from the preferred look. 

Marketing experts try to appeal to buyer's tastes by their promoting images for their developments. Don't buy into it. Form your own opinions and only buy a home where you feel comfortable. After all, you're going to have to live there. 

What is the return on new versus previously owned homes? 
Buying into a new-home community may seem riskier than purchasing a house in an established neighborhood, but any increase in home value depends upon the same factors: quality of the neighborhood, growth in the local housing market and the state of the overall economy. 

One survey by the National Association of Realtors shows that resale homes do have an edge over new homes. The trade group's figures show the median price of resale homes increased4.3 percent between 1999 and 2000, compared to 2.8 percent for new homes in the same period. 

What repairs should the seller make? 
If you want to get top dollar for your property, you probably need to make all minor repairs and selected major repairs before going on the market. Nearly all purchase contracts include an inspection clause, a buyer contingency that allows a buyer to back out if numerous defects are found or negotiate their repair. 

The trick is not to overspend on pre-sale repairs, especially if there are few houses on the market but many buyers willing to buy at almost any price. On the other hand, making such repairs may be the only way to sell your house in a down market. 

What tax benefits are there to homeowners? 
Homeowners benefit from several generous tax advantages. The most important benefit is the mortgage interest deduction. People may deduct interest paid on mortgage loans totaling up to $1 million used to buy, build or improve a principal residence plus a second home. The IRS calls such loans acquisition debt. 

Points paid by the buyer or seller on a new mortgage loan for the purchase or improvement of a principal residence are deductible for the year in which the home was purchased. 

Any points paid on a refinance mortgage, a loan to purchase a second home or a mortgage on income property must be spread over the life of the loan, according to Edith Lank and Miriam S. Geisman, authors of "Your Home as a Tax Shelter," Dearborn Financial Publishing, Chicago; 1993. 

Note that when obtaining a new mortgage, the borrower usually is asked to pay interest from the closing date until the first of the next month. Check whether that charge is included in the year-end report. 

Property taxes on all real estate, including those levied by state and local governments and school districts, are fully deductible against current income, say Lank and Geisman. 

"A homeowner cannot deduct maintenance expenses, nor can he take depreciation deductions on his personal residence," states the "Realty Bluebook," 30th Ed., Dearborn Financial Publishing, Chicago; 1993. 

Some moving expenses are deductible for people who changed jobs and relocated as a result. The IRS requires that the new employment be located at least 50 miles away, among other considerations, said Analisa Collins-Sears, a public affairs officer with the IRS' Bay Area office. 

Resources: * "Tax Information for First-Time Homeowners," a free guide published by the Internal Revenue Service. Order by calling 1-800-TAX-FORM. 

How much does my real estate agent need to know? 
Real estate agents would say that the more you tell them, the better they can negotiate on your behalf. However, the degree of trust you have with an agent may depend upon their legal obligation. 

Agents working for buyers have three possible choices: They can represent the buyer exclusively, called single agency, or represent the seller exclusively, called sub-agency, or represent both the buyer and seller in a dual-agency situation. 

Some states require agents to disclose all possible agency relationships before they enter into a residential real estate transaction. Here is a summary of the three basic types: 

In a traditional relationship, real estate agents and brokers have a fiduciary relationship to the seller. Be aware that the seller pays the commission of both brokers, not just the one who lists and shows the property, but also to the sub-broker, who brings the ready, willing and able buyer to the table.

Dual agency exists if two agents working for the same broker represent the buyer and seller in a transaction. A potential conflict of interest is created if the listing agent has advance knowledge of another buyer's offer. Therefore, the law states that a dual agent shall not disclose to the buyer that the seller will accept less than the list price, or disclose to the seller that the buyer will pay more than the offer price, without express written permission.

A buyer also can hire his or her own agent who will represent the buyer's interests exclusively. A buyer's agent usually must be paid out of the buyer's own pocket but the buyer can trust them with financial information, knowing it will not be transmitted to the other broker and ultimately to the seller.

What do all of those real estate acronyms in the ads mean? 
If you find yourself stumbling over weird acronyms in a real estate listing, don't be alarmed. There is method to the madness of this shorthand (which is mostly adopted by sellers to save money in advertising charges). Here are some abbreviations and the meaning of each, taken from a recent newspaper classified section: 

assum. fin. — assumable financing

dk — deck

gar — garage (garden is usually abbreviated "gard")

expansion pot'l — may be extra space on the lot, or possibly vertical potential for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase.

fab pentrm — fabulous pentroom, a room on top, underneath the roof, that sometimes has views

FDR — formal dining room (not the former president)

frplc, fplc, FP — fireplace

grmet kit — gourmet kitchen

HDW, HWF, Hdwd — hardwood floors

hi ceils — high ceilings

In-law potential — potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units so be sure the conversion is legal first.

large E-2 plan — this is one of several floor plans available in a specific building

lsd pkg. — leased parking area, may come with an additional cost

lo dues — find out just how low these homeowner's dues are, and in comparison to what?

nr bst schls — near the best schools

pvt — private

pwdr rm — powder room, or half-bath

upr — upper floor

vw, vu, vws, vus — view(s)

Wow! — better check this one out.

Resources:
* "Real Estate's Ambiguous Language You Oughtta Understand," Glennon H. Neubauer, Ethos Group Publishing, Diamond Bar, CA; 1993.

What is the difference between list price, sales price and appraised value? 
The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area. 

The sales price is the amount of money you as a buyer would pay for a property. 

The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors. 

Do we dig deep and buy a dream home or settle for a starter home? 
Choosing between a smaller house in an affluent neighborhood, an older, bigger house in a more working-class community or a brand-new home is not easy. If you're in this situation, start by examining your priorities and asking the following questions: 

Is the surrounding neighborhood or the home itself the most important consideration?

Is each of the neighborhoods safe?

Is quality of the schools an issue?

Do any of the areas seem to attract more families with children or adult residents? And where do you fit in?

As for the return on your investment, home-price appreciation is hard to predict. In the late 1980s, and again 10 years later, the more expensive move-up housing appreciated wildly. But during the recession that followed, smaller homes tended to hold their value better than more expensive ones. 

How do I get the real scoop on homes I am looking at? 
Home inspections, seller disclosure requirements and the agent's experience will help. Disclosure laws vary by state, but in some states, the law requires the seller to complete a real estate transfer disclosure statement. Here is a summary of the things you could expect to see in a disclosure form: 

	In the kitchen — a range, oven, microwave, dishwasher, garbage disposal, trash compactor.
	Safety features such as burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens and intercom.
	The presence of a TV antenna or satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump.
	Amenities such as a pool or spa, patio or deck, built-in barbeque and fireplaces.
	Type of heating, condition of electrical wiring, gas supply and presence of any external power source, such as solar panels.
	The type of water heater, water supply, sewer system or septic tank also should be disclosed.

Sellers also are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems. 

The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property. 

Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides. 

People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions. 

It's important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown significantly to accommodate increased demand from cautious buyers. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you. 

How many homes should I plan to view and how should I make the final decision?
Generally you should view a number of homes so you can become familiar with what you can expect to get for your money. When you find a home you really like, it’s a good idea to go back and look at it at a different time of day. This will give you greater insight into what it will be like living in the home full time.

How can I check my credit rating before I apply for a mortgage?
Your credit rating is based on a combined score generated from three credit bureaus who look at your credit history, amount of credit available, and recent inquiries to determine what’s called your FICO score. A smart way to go is to have your Mortgage Rep. check your rating for you and, if appropriate, suggest ways for you to improve your credit. For a small fee, you can get your score or review your credit report by going online to www.myfico.com or contacting the credit bureaus directly at:

   Equifax, www.equifax.com
   Experian, www.experian.com, (888) 397-3742
   TransUnion, www.transunion.com, (800) 916-8800

Why should I consider paying points?
Buyers often choose to pay a one-time charge called mortgage “points” in exchange for a lower interest rate. Usually paid at closing, each “point” costs 1% of the mortgage amount, or $2,000 on a $200,000 loan. The lower rate reduces the monthly mortgage payment, and points paid in conjunction with the purchase of a home are generally tax-deductible in the year they’re paid (see tax advisor). Monthly savings will often exceed what was paid in points in just a few years’ time.

What is the purpose of an attorney review?
In states where the real estate agent writes the contract, there may be an attorney review period. This specified period allows the attorney to cancel the contract or request it be altered. Both buyer and seller would then have to agree to the revised contract in writing. During this period, either party may void the contract without penalty.

What is title insurance and why do I need it?
Basically, title insurance assures that you have clear title to the home you’re purchasing. A title search is the primary component of “due diligence,” a process that will be started either by your attorney, if you are using one, or by the title company you choose. The title search determines whether the seller actually owns the property and if there are any claims against it.

What happens if the house I want to purchase does not appraise at the amount expected?
If the house doesn’t appraise at the amount expected, other alternatives are typically found. A second appraisal may be sought, the buyer may be willing to put more money down, the seller may adjust the price or offer other concessions, or the two sides may negotiate to split the difference between them.

Contact Smitha for any help, or to have your questions answered. There are no dumb questions!

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