Introduction to Housing
Renting vs. Buying
Most people first enter the housing market as renters when they move out of their parents' home. Renting a home is more accessible than buying one because renting usually costs far less than buying a home in terms of initial outlay of money, and because the application process for renting a home is much shorter. There are a number of advantages that renters have over home owners. When you rent a home, you are not responsible for paying for maintenance, taxes, or insurance on that home. You also have the option of moving at the end of your lease without the burden of having to sell the property. Renting can be good for younger people and for those who do not intend to live in a city permanently. From a financial perspective however, renting is generally good only in the short term. In the long run, the financial benefits of homeownership generally far outweigh those of renting. Owning a home is an investment. Homeowners are using their money to build equity (increased value) in a home. Additionally, homes generally (usually, but not always) appreciate in value over time. Homeownership also has tax advantages. The real estate taxes and interest paid servicing a mortgage on a primary residence (the home where you live) are tax-deductible. Another major benefit under current tax laws is that the first $500,000 earned on the sale of a home that has gained in value over time (e.g., which has appreciated in value) is tax free for married couples ($250,000 for a single person). Renting, in contrast, has none of these benefits.
Real Estate Brokers
If you are considering the purchase of a house, you will likely want to speak with a Real Estate Broker. A Real Estate Broker is a professional who facilitate the process of buying and selling homes in exchange for a percentage of the money paid to the seller when each house is sold. There are many reasons for prospective home purchasers to work with a broker:
- A broker's services are paid for by the seller; they are free to purchasers.
- Brokers know the local market and neighborhoods and can match you to housing in a neighborhood that fits your interests and needs.
- Brokers have access to the local Multiple Listings Service (MLS) which is an up-to-date database of houses on the market for sale. It can be hard to homes for sale if you don't have access to the MLS, especially in competitive housing markets.
- A broker is knowledgeable with regard to the process of purchasing a house, and the various inspections, procedures and forms that have to be completed before a sale is final. This is particularly helpful for first time buyers.
You can buy a house without a broker, but it is often a good idea to use one. However, it is vital that you feel comfortable with the broker you select. Like any professionals out there, some brokers are better than others. Brokers earn their money on commissions that only occur when they make a sale. This compensation structure can motivate them to pressure you into purchasing a home when it may not be in your best interest to do so. On the other hand, in competitive housing markets, a broker may pressure you to make a bid on a particular house based on knowledge that that house uniquely fits your needs and offers advantages that will not be otherwise easy to obtain. Be sure that you select a broker you are comfortable with, and don't hesitate to switch brokers if you feel that you are being taken advantage of.