Free Money For A New Home Isn’t Exactly Free

Part of the Housing and Economic Recovery Act of 2008 is a tax credit for first-time buyers purchasing a home between April 9, 2008 and July 1, 2009. The government will hand over up to $7,500 to you, if you qualify. The catch is that you have to pay back the IRS over the next 15 years.

The deal sounds pretty good on the surface. Sure, the money is really a loan, rather than a tax credit. But you get a whole 15 years to pay it off and there’s no interest. But is that free money really a good choice?

The National Association of Home Builders certainly thinks you should take the credit. If you look at their home page, you’ll see that they’re describing the temporary tax credit as “the opportunity of a lifetime.” The government did create the tax credit, after all, to boost sales of both existing and new homes. NAHB’s membership has had a rough year, too.

But just because a loan is interest-free doesn’t mean that you should take it. If you can’t afford to pay back a loan, you shouldn’t take it. It doesn’t matter how good the terms are. After all, you’ll be making mortgage payments as you try to pay back your ‘tax credit.’ If you miss a payment or don’t repay the loan, you’ll get hit with the IRS’ standard penalties and fees for outstanding tax debt. That’s 0.5 percent each month just for the penalty, and there is no maximum penalty. On top of that, the IRS charges another 5 percent per year on unpaid taxes. It just gets scarier and scarier.

There’s another catch that comes with the tax credit: if you sell your new house, the balance becomes due immediately. If you buy a house now, do you really think you’ll be in the same house 15 years from now? You may think so, but statistics say no. You’ll probably be moving in the next six years or so.

You can’t just move what you owe on your tax ‘credit’ over to a new home. The IRS expects you to pay off the balance out of your profits from the sale. If your sale isn’t profitable enough to cover it, the money comes out of your pocket.

Now that I’ve scared you with all the details of the the temporary tax credit, though, I’d like to say that it’s not necessarily a bad deal. If you really do need the money, this loan has much better terms than adding to the debt on your credit card. If you wound up in a mortgage that is less affordable than you thought and you qualify for the tax credit, I’m all in favor of taking it. Pay down your mortgage with the money. Yes, you’ll still owe that $7,500, but there won’t be any interest accruing on it.

It’s really a question of whether you need the money — not want it. Don’t take the credit if you plan to use the money for anything that loses value. But if you plan to use it for paying down debt or something similar, go for it.

Homeowners Assume the Best About Home Values

Real estate website Zillow released the results of a survey on homeowners’ perceptions last week. While we’re all aware of the difficulties facing the housing market these days, Zillow’s survey revealed some nuances that you should be aware of — especially if you’re thinking of buying a new house any time soon.

According to the survey, 62 percent of US homeowners believe that their home’s value has increased or stayed the same in the past year. That’s a phenomenal number, especially when you consider that 77 percent of US homes have declined in value in the last 12 months. Homeowners realize that house prices have dropped, but the majority of the same set of homeowners just don’t think it could happen to them.

This can cause some problems when these homeowners decide to sell. It seems like every seller thinks that they can get at least what they paid for their home — and they’re willing to hold out for it, at least for a little while. For buyers, it’s an added complication in the process. It’s not a good idea to be the first person to put in an offer these days.

There is also a problem for homeowners themselves: many are counting on their home value to help when they take out a second mortgage, home equity line of credit or refinance their mortgage in an effort to handle other financial issues. Zillow’s survey also showed that over half of homeowners are planning home improvements — ranging from minor projects like repainting to major projects like installing a new roof.

The same perceptional problem is reflected in where most homeowners think the market is going, as well. Zillow reports that 75 percent of homeowners expect their home’s value will increase or stablize in the next six months — but 42 percent think that home values in their area will decrease. It will happen to the neighbor’s house — not mine.

Whether or not you currently own a home, these numbers are worth considering. Plenty of people think that right now is a great time to buy a house, due to the lowered prices. But these same people seem to believe that there will be a fairly immediate rebound in the housing market.

If you’re shopping for a new home, it’s worth focusing on a long-term plan rather than thinking about the current low prices. You don’t want to wind up in that 62 percent of homeowners that really don’t know what’s going on with their home’s value (and don’t want to know). You want to make a solid financial decision and make a plan that will allow you to ride out the bumps in the housing market with minimal worries. That means doing some research before buying a house.

You don’t need to be a real estate expert, but it’s worth your while to learn some of the factors that contribute to a house’s value — including the fact that if there is a downward trend among housing prices in a certain neighborhood, it applies to all the houses in that area. Your home-to-be will not be an exception, unfortunately. But there are also other factors that contribute to the value of a home.

The Secret to Understanding Your Local Housing Market

A real estate agent in my area has been running a TV commercial telling prospective buyers that just because other parts of the country are having housing market problems not to worry about. “You wouldn’t want a weather report for the whole country,” this agent announces, “So why do you listen to national real estate news?”

Despite my belief that now probably isn’t the best time to be buying in our real estate market, the man does have a point. The housing market in New York City has some major differences from the housing market in Albuquerque. Not all housing markets are struggling, and not all housing markets are going to have the same rate of recovery.

How do you know when your housing market will recover?

Being able to time a home purchase is crucial — you want to get the best deal, but you also want to make sure that your situation will be comfortable after you buy the house. The same is even more true if you’re trying to sell a house. It may be difficult to sell your house at what you consider a reasonable price right away. If you know a little more about your local housing market, you can decide whether it’s worthwhile to wait to sell your house.

While there is plenty of data that you can use to try to decide on what your local housing market is going to do next, there is one statistic that makes it simple: the number of for-sale homes. This number is usually measured in months — the number of months it would take to sell all the homes on the market at the current sales rate. As a rule, a larger number — more than a few months — means that the housing market in your area is weaker. Usually, it means that sales are slow. It can also mean that a large number of houses are going on sale, but that occurs less often.

If you want to do a back of the napkin calculation to determine if your area is starting to recover, just compare the last several months’ numbers. You can get those numbers from your local realtors’ association. Try searching Realtor.org if you aren’t sure where to start.

Looking over the numbers and checking for an upward trend isn’t a great statistical analysis, admittedly. If you have the time, taking a close look at some of the other numbers you can get from your local realtors’ associations, as well as the more professional statistics. The purchase or sale of a house is a big deal — you want to have as much information as possible. The number of for-sales homes is really only a starting point — a general idea of whether it’s time to start doing that more in-depth research or if you will want to wait a few more months before moving forward on your real estate plans.

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The Dangers of Buying a Flipped House

Even with the rough spots in the housing markets these days, ‘flippers’ are still buying houses. These folks buy houses in poor condition, fix them up and sell them at a profit. Home buyers often like them because flippers need to sell their houses as fast as possible to avoid paying more than a month or two on the mortgage. If a house isn’t selling, flippers can get nervous and lower their prices.

But flipped houses aren’t necessarily good buys for homeowners that plan to stick around. If you’re shopping for a new home, there are a few reasons to skip the flip.

1. Flippers limit costs when fixing up houses. Not all flippers go for the cheapest building materials, but they do try to minimize costs wherever possible. To bring a house up to your standards, you might wind up tearing out some of a flipper’s work and paying for an additional remodel.
2. Flippers focus on the visible. Most flipped houses have awesome fixtures, beautiful paint jobs and other accents that convince buyers that the house is a beautiful piece of work. But slapping a fresh paint of coat on a wall doesn’t repair cracks or bring wiring up to code. And it’s the non-visible problems that can mean expensive repair work down the road.
3. Flippers do as much themselves as possible. Most flippers aren’t professional electricians or plumbers, but odds are they’ll try their hand at some wiring or plumbing, just to keep from having to call in a professional. That doesn’t mean that their work is bad but there won’t be any sort of guarantee.

If you’ve got your heart set on a house that was flipped, there are a few things you can do to protect your investment. The first is to check with the local permit office. If a permit hasn’t been closed, walk away. That means that the inspector doesn’t think the house is ready to sell. In some locations you can even get a copy of the inspector’s notes. You might also find that no permit was taken out. Maybe the flipper did only cosmetic work — maybe the house only needed some touch ups. But it’s more likely that the flipper went without a permit, which is illegal. That also means the work isn’t up to code and could be dangerous.

You can also ask your real estate agent to help you check out this particular house flipper. What other houses has he or she sold? Are the new owners happy with their purchase? A house flipper’s reputation is a good indicator of the work you can expect. Make the effort to learn about the house flipper in question. If necessary, ask them to show you around the house and give a detailed explanation of what work was done. Give them a chance to prove that their work really is worth an extra $50,000 or however much on top of the previous sale price.

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The One-Third Rule For Housing

There’s a fairly fixed amount you should pay on housing, whether you buy a house, rent an apartment or otherwise obtain shelter. Most personal finance experts will tell you that you will wind up spending one-third of your income on housing.

As a general rule, one-third of your income is a good number to use when you’re shopping for a house or an apartment. But it may be a bit over-simplified. There are a few facts you should keep in mind when planning your housing budget.

Are you calculating that one-third before taxes?

When you are calculating just what one-third of your income is, don’t use the number that your boss told you when she hired you. That’s your gross income. You want to spend one-third of your net income on housing — that’s after taxes, benefits and everything else that both your employer and Uncle Sam take out of each paycheck.

Furthermore, your mortgage payment or your rent shouldn’t precisely equal one-third of your income — even if it’s one-third of your net income. You need to budget in maintenance, insurance and all of the other costs of owning a home. It can add up surprisingly fast, too. People who assume that they can handle a mortgage payment of one-third of their gross income can face some nasty financial surprises down the road — much worse than the surprise that you can’t afford quite as much house as you previously thought.

Feel free to ignore me, though.

In some real estate markets, spending one-third of your net income on housing is a pipe dream. Much of the East Coast suffers from this situation: housing that is affordable if you stick to the one-third rule has far worse problems than small size. And it is possible to comfortable pay a higher portion of your income for housing, if you’re willing to bit the bullet and budget carefully. Living frugally is an absolute must — if you’re paying more for your home, there’s less in your bank account for food, utilities and entertainment.

In contrast, some people can afford to spend less than one-third of their income on housing. I’ve noticed that many people in this group, though, chose to spend that full third anyhow — partially as a lifestyle choice, partially out of the habit of keeping up with the Jonses. If you’re in the sort of tax bracket where you can get a perfectly comfortable house for less than one-third of your income, I fully encourage you to live beneath your means. You will wind up ahead of the game if you can put that money into savings. The wonders of compound interest can translate a smaller house into early retirement surprisingly quickly.

No matter your income and location, you do have an element of choice when it comes to housing. Take a long look at your housing budget before you make a choice and go for the best option for your lifestyle. I just recommend making every effort you can to keep your housing costs below that one-third mark.

Can You Avoid A 6% Real Estate Commission?

When you sell a house, an office building or any other type of real estate, you usually wind up handing
over 6 percent of the final price to real estate agents. That money is divided between the buying and selling agents. If you’re buying property, you don’t officially have to pay either agent, but that commission will drive up your buying price.

It used to be that the only easy way out of dealing with these fees was to buy and sell through your cousin the real estate agent. But this week, the U.S. Department of Justice informed the National Association of Realtors that they need to change a few of their policies. Specifically, the judgment requires that the NAR offer online real estate brokers the same consideration as other real estate agents.

Up until now, real estate agents listing a house with the various services that help agents connect buyers and sellers could choose to exclude online brokers. They did so because online brokers, such as ZipRealty, have reduced commissions. The DoJ decision found that refusing to work with online brokers prevents consumers from saving money. Essentially, the NAR must give online brokers access to over 800 multiple listing services on the grounds of anti-trust concerns.

There are plenty of ramifications for both buyers and sellers after this decision. Sellers using online brokers may be willing to accept lower prices, as long as they don’t have to put a full 6 percent of the price towards commissions. And since the number of people using the internet to find new homes continues to rise, buyers may find more homes available on their favorite real estate brokerage site. The immediate effects will be limited, I think. There are a few other reasons that houses are staying on the market in most areas and online brokers won’t change that. Overall, however, I think that consumers will get a much better deal on both ends of real estate sales from here on out. They even have a better opportunity to find the perfect piece of real estate, considering that online brokers have innovated new real estate search techniques that the average agent just can’t compete with.

What about real estate agents? I think that there might be some changes in how they do business. Buying agents, especially, might need to consider selling their services for something other than a commission. Xin Lu on Wisebread has a great post that points out the flaws in the commission arrangement, and she has me convinced that changing the compensation scheme might make buying agents offer better service. Real estate agents are looking at a new world. They’ve managed to avoid changing their way of doing business for years, but the DoJ’s ruling has introduced a whole new level of competition into the industry.

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Homebuying Newbies

We’ve heard the news about the failing housing market, how prices are plummeting and sales are stagnant. Now is the time if you’re looking to buy, but be careful. Even in this buyers market you can still trip up. Here are a few tips and things to consider before signing on the dotted line.

More Than Just Rent

Looking to move beyond renting? This is without a doubt an excellent time to buy. With interest rates so low and home prices finally coming back down to earth, the time is now. Before you go diving in headfirst however, sit down with your local lending officer or financial advisor and really plan out your next step.

Always remember that you’re going to be paying a lot more than just your mortgage when you buy a home, and those payments can fluctuate. Depending on your financial situation, a steady rent might be better than an adjustable loan with taxes, utilities, maintenance costs, insurance, etc. In order to see if your income can support a mortgage, calculate your Debt to Income Ratio.

Debt to Income (D/I), is calculated (to a point) by your lender, but you can do a more accurate one yourself. Obviously you take your monthly income (I suggest the net amount, after taxes), then subtract the bills you have to pay each month. These include your car payments, any credit cards, utilities, etc. What is left is how much you are able to put towards your mortgage payment, and hopefully your own savings and use. By doing this you can work backwards to see what price range you can afford.

While your credit score and report are important parts of getting a home loan, your D/I is just as important. When the bank looks at your credit score, they are looking to see if you have a history of paying back your loans. If your history is good, they are more likely to approve you. But however good your credit is, if your income can’t support the monthly payments (which, if you’re a first time homebuyer are probably adjustable) you still won’t be approved. By paying down your credit cards and other debt you not only increase your credit score, but you also lower your D/I. The lower your D/I, the more cash you have on hand to put towards the mortgage, and therefore the banks feel better about writing you a check for several hundred thousand dollars.

While this all sounds a little scary for first timers, sitting down and getting your expenses on paper will help take a lot of the guesswork out of buying a home. Many don’t realize exactly how in debt they are until they list every expense they have during a month. If you calculate your D/I, you’ll know whether you need to get a higher paying job, pay down credit cards, or simply skip the mocha latte every morning in order to achieve your goal of buying a home.

4 Ways to Think Outside the Homeowner’s Box

We face enormous societal pressure for buying a house: it seems to be the major goal for just about every family. And those houses that we’re supposed to buy seem to all look pretty similar: a single family home with a nice back yard in the right neighborhood and with the right appliances. But if you’re planning to slap down a big stack of dollar bills, it may be worth thinking outside of that single family box. After all, that sort of home is guaranteed to be expensive — while it is an asset, beyond a little appreciation it won’t make you much money.

But there are some housing options that might be a better fit for you. Consider these four ideas.

1. Consider a multi-unit property. Most of us aren’t in the financial situation where we can afford to make payments on an entire apartment complex, but you may be able to find a duplex or other building with just a few apartments in it in your area. Then, while you live in one unit, you can rent out the others. In most areas, rent from another unit may be enough to cover your monthly mortgage payment. And depending on the size of homes in your area, you may even be able to convert a large single family home into multiple units. The house I grew up in was actually divided this way: the basement was a separate apartment from the main level.
2. Combine living space and office space. If you run your own business — depending on the type of business, of course — you may be able to use one property as both your home and office. Doing so even gets you an extra write off on your taxes. Having worked out of my home for several years, though, I do have one piece of advice: maintaining boundaries between ‘home space’ and ‘office space’ is crucial. Ideally, you shouldn’t even need to walk clients through your ‘home space’ to get to your office space.
3. Look at non-traditional living spaces. While most people seem to look for the largest house they can get for their money, it’s worth considering going for an unusually small home or even a space that wasn’t originally built as a house. A small house, for instance, is cheaper to maintain, heat and power. And if you were to choose a building with multiple purposes (a friend of mine lives in a converted garage, for example), you may have an easier time selling the property later on.
4. Join forces on a home. Rather than limiting your home to you, your spouse and your children, you have the option of sharing space with a few other people. In the past, it was perfectly normal for Grandpa or Grandma or Auntie to move in, and it’s still an option today. You may choose to make financial arrangements or agree on services, like childcare, that your new roomie might take on. But don’t limit your house to just you.

House Hunting: Starting With What You Can Afford

I went out to dinner with my grandparents this week. Today, they live in a six bedroom house (it seems huge, but it’s just enough to bed down all the aunts, uncles and cousins when everyone comes to town). But they started out, about two miles down the road and fifty-five years earlier in a house with four rooms total. It was tiny, built out of flimsy materials and they put everything they had towards paying it off. Within just a few years, they’d paid off the house, sold it and used that equity to buy something a little bit better. And they did that over and over again, eventually winding up in their dream house.

Even I am guilty of wanting to start at the top. I’d love to find a house that will hold the family I plan to build, rather than just me and my significant other. I’d love to build a house with little nooks and crannies that will be perfect for our hobbies and get a place with enough land to grow my ideal garden. But, even if we could get the requisite mortgage for such a lovely spread, we couldn’t afford it and we know it.

Instead, we’re starting small. Today, we don’t need rooms for kids or space for a big garden. We want to go a bit better than my grandparents’ original four rooms — I need a fifth room for a home office. But we’re following the new trend of smaller homes: we don’t need extra rooms, or to pay for them.

So think long and hard about what you need now and what you’ll need in your immediate future. In the next five years, do you really need to plan for separate rooms for your planned three children, especially if you aren’t planning to have them for another three years? Or can you count on the fact that, assuming nature conforms to your schedule, your children won’t quite require rooms of their own yet?

There is a lot to be said about planning for the long-term, for picking a home that you will spend the rest of your life in. But the fact is that, today, the average family spends perhaps four years in a house before moving. So plan for those next four years when selecting a new home rather than the next twenty. While you might not get into your perfect home quite as quickly as you would like, you will be able to find something a little kinder to your budget.

9 Guides to Preventing Foreclosure

Right now, a lot of home owners are struggling to handle their mortgages: we’ve all heard the stories of rising foreclosures. But Bankrate.com has put together an excellent resource for homeowners trying to figure out the procedures for dealing with their bank and learning just what they need to do to keep their homes by bank. They conducted a series of interviews with nine top lenders to learn the precise steps necessary. These guides are especially useful because each bank follows different steps. They’ve even gone to the effort of including phone numbers. However, the guides are a bit scattered, so I’m including a table of contents here, as well as links to the lenders’ specific websites, which were omitted from the guides.

1. Bank of America: Guide. Website.
2. Chase: Guide. Website.
3. Citigroup: Guide. Website.
4. Countrywide: Guide. Website.
5. IndyMac: Guide. Website.
6. National City: Guide. Website.
7. Wachovia: Guide. Website.
8. Washington Mutual (WaMu): Guide. Website.
9. Wells Fargo: Guide. Website.

Beyond these guides, there is one simple rule of thumb that you should keep in mind when thinking about your mortgage: stay in touch with your lender. If you’re worried about your ability to make payments or about interest rates, or really anything at all, give your lender a call. Keeping in close contact will let your lender see that you really are making an effort, and, in general, that makes your lender more willing to exhibit a little flexibility if you have a problem. Many foreclosures are preventable in early stages, but borrowers might avoid contact with lenders because of embarrassment or other concerns. But avoidance is pretty much the worst approach one can take when trying to handle a problem with a mortgage or other loan.

If your bank or lender isn’t listed, you might want to consider reading through the information from at least one or two lenders. While your lender’s procedures will probably differ, everyone has at least a few similar steps. Then, start making phone calls. It’s a matter of getting in touch with someone in your lender’s office — preferably an individual with the authority to set up a repayment or forbearance plan, or otherwise able to help you make modifications to your current mortgage.

And, even if you are comfortable making your mortgage payments, you should look over this information. Consider it a preventative measure. I’ve actually printed out the information for my bank and tucked it into the file folder I keep for that institution — not because I expect trouble but because I want to be prepared for any eventuality.

The Cost of Doing Things Yourself

How many times have you driven past a fixer-upper and said to yourself, “I bet I could get that place cheap! And then I could slap a coat of paint on it, do some repairs, and have a real nice house?” I do it all the time. I like the thought of turning a so-so home into my own miniature palace and saving money doing so.

But, as I have to remind myself, there are plenty of ways that scenario can go very wrong. There are plenty of opportunities for a renovation to suck up your time and money — and still leave you with a less-than-great house.

Just what are the hidden costs, though? While every house is different, each time I talk to someone who’s done their own renovations, certain similar themes pop up:

• Plumbing. In many states, homeowners aren’t even legally allowed to work on their own plumbing — they have to call a professional. And, honestly, that’s not a bad idea. While I don’t like the idea of the government telling what I can and can’t do, plumbing is problematic. When something goes wrong with a house’s plumbing, it generally goes bad in a big way: even a small leak can mean that a wall rots and needs replacement, not a cheap proposition.
• Time. For many homeowners, the amount of time necessary to do home renovations on their own is prohibitively costly. There are a certain number of hours that have to go into doing renovations, no matter how you do them. There’s also the question of the value of your time: can you make more money working an hour than it costs a contractor to work on your house? If so, financially, it may just not make sense to do a lot of the work yourself.
• Paperwork. You’re just doing some rewiring on your house, or maybe building on an addition, right? There’s no paperwork involved, right? Wrong! Depending on just what renovations you’re doing and where your home is, you may need a building permit, an inspection, or some other bureaucratic paperwork. Taking care of permits and fees can add up quickly in terms of both time and money, especially if we’re talking about a big renovation project. And if you don’t take care of all the necessary paperwork, you may have to worry about a fine.

If you’re considering doing home renovations on your own — especially if you’re buying a house expecting to do some work on it — take the added costs into account. You should be thinking about more than the cost of materials and work: what happens if something goes wrong? That ‘if’ may very easily turn into a ‘when’ if you don’t have much experience with renovations, especially with more skilled work like plumbing.

Risking 401(k) Savings To Buy A Home

Last week, two of my friends closed on their first home. It’s a beautiful house, great neighborhood, big yard. It’s everything they could ask for, but that perfect home is coming at quite a price.

My friends decided that now was the ideal time to buy, because home prices have dropped significantly in our area. Their logic is easy to follow: no one really knows just how low the market is going to go, so why take the risk that prices might begin to rise before they lock in that low home price? Sure, they might miss out on a significantly lower price, but then again they might not.

But, despite the low price they’ve found, my friends aren’t in a good position to buy. They didn’t save up a down payment before buying, which is usually a red flag. The mortgage crisis has guaranteed that they couldn’t get a zero-down mortgage, but they’ve managed to find the next best thing. 401(k) programs (along with some other retirement savings programs) allow you to borrow money from your account for little things like major medical expenses and purchasing a home. There are a few catches, though:

• you have to repay that money, and fast! You may have only five years to get that money back in your account or face major tax penalties.
• you lose out on any interest your retirement savings was earning.
• you often have to pay taxes or penalties on your withdrawal.

Many homeowners used their 401(k) savings to help them make a down payment, but as a general rule, it’s not a good idea. Doing so puts a person on pretty shaky financial ground: not only would you need to make your mortgage payments but you’d be making another large payment to get that money back into your retirement account. Essentially you could be putting both your new home and your retirement at risk.

Even if you’re sure that you can handle double payments, you’ll probably be better off saving up money for a down payment. Yes, you won’t get into your dream house right now, but you’ll increase your ability to keep that perfect house. And with a little effort, you may be able to surprise yourself with how fast you can save up for a down payment. You’ll have less debt overall, as well: while money withdrawn from your 401(k) is yours, the need to repay it or face penalties can turn your retirement savings from an asset into straight out debt.

My friends decided to take the risk, and that’s their — and your — choice. But piling that risk on top of a problematic real estate market seems to be asking for trouble.

Zillow: An Interactive Real Estate Site

Zillow.com’s big selling point for house hunters is its real estate search function. Type in an address or a zip code and you can get information on houses — sale prices, number of bathrooms, and a slew of other tidbits. You can also get a good overall idea of how much homes are going for in a particular neighborhood.

There are a few tools beyond the standard information that a number of other real estate websites offer up:

• Make Me Move: Home owners can login into Zillow and set a “Make Me Move” price. These houses aren’t actually on the market, but the owners have decided that if a potential buyer offered a certain amount, they’d be willing to sell immediately. This information is valuable far beyond the ability to find out just what it would take to get your dream house. It also gives you a way to move to a particular neighborhood, even if no homes are actually for sale.
• Sellers’ Options: Not only can sellers list their homes for sale on Zillow, they can also edit information about their houses, add photos and generally better inform you, the buyer. All this information is made available with the idea that it will make it easier to sell a house.
• Mortgage Marketplace: Zillow allows potential buyers to request mortgage quotes from a variety of lenders. While I wouldn’t take any of these mortgage offers at face value — a mortgage requires careful scrutiny and one offered up through a site like Zillow needs even further examination — I do think that the “Mortgage Marketplace” can give you a starting point, and perhaps an idea of what you need to do to get a better mortgage (raise your credit score, reduce your debts, etc.).
• Real Estate Searches: Zillow has a wide variety of search options, making it easier to limit your house hunting to a very specific sort of house. You can limit searches by price, neighborhood, the number of bedrooms or bathrooms, or even the size of the lot the house sits on.

Overall, I think Zillow can be a useful tool for getting a general idea of what your options are as you are house hunting. You can get the information necessary to eliminate houses from your list — although there is no substitute for actually going and visiting prospective houses. I especially like the fact that you can save certain information by creating a free account; the less papers to misplace during a house hunt, the better.

But Zillow is not a one stop shop. While it can help you with a house hunt, there is plenty of information not available on this site. Even within the categories of data they make available, there are certain holes: there are, generously, perhaps as many as 3 million houses listed on Zillow, and in the grand scheme of things, that’s nothing. You’ll still have to do some legwork to make sure that you aren’t missing anything in your area.

Buy, With an Intent to Sell

Many first-time home buyers go shopping for a home thinking that they’ll find the perfect house and live in it happily ever after. It just doesn’t work that way. Even if a member of your family doesn’t get a job halfway across the country, it’s likely that you may want to change school districts, find a home with different amenities or move closer to family. Simply put, odds are that you’ll move at least once every five years.

As you look at homes, think long and hard about whether you’ll be able to sell it later on. For instance, is the design dated? There are plenty of homes that just scream “1970s” when you walk in — you might like that aesthetic, but it’s going to be harder to sell, without significant changes. (The current seller may be finding out just that, as well.)

A key question is whether you’ll need to do significant work on the house after you’ve lived in it for five years, or so. If the kitchen is brand new right now, it probably won’t need much effort to get it ready in a few years. But if the kitchen is already starting to seem a bit dated — older appliances, cabinets showing some wear — you may need to prepare yourself to spend some money down the road. You may be planning for such a remodel anyhow, for your own use of the kitchen, but a fairly new kitchen is practically a requirement when you plan to sell.

There are certain amenities that may be a must have today, but will make a house harder to sell down the road, as well. Consider the bathtub: there have been plenty of trends, such as whirlpool tubs, when it comes to bathtubs. And there’s plenty to be said for whirlpool tubs — they can be a nice luxury. But it’s much harder to sell a home with a whirlpool tub these days. Parents worry about their children’s safety, efficiency-minded buyers worry about the amount of water need to fill the tub, etc. You can always change out a tub down the road, but these sorts of amenities cost money, both to install and to remove.

Selling your future home shouldn’t be your primary concern when you are house hunting. However, it is a factor that you should take into account, just as you consider your wish list of amenities
in your new home: you may be willing to make significant changes to a house to make sure it meets your needs. Are you willing to make that level on investment in order to make sure that it also meets the needs of prospective buyers down the road?