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Ch. 7

This lesson focuses on evaluating different housing options, including renting and buying. It covers the advantages and disadvantages of each option, as well as the costs involved. Additionally, it provides information on how to evaluate and finance a property, and create a plan for selling a home.

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Ch. 7

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  1. Ch. 7 The Finances of Housing

  2. Objectives • Students will be able to evaluate the various housing alternatives • Students will be able to assess the advantages & disadvantages of renting • Students will be able to identify the costs of renting • Students will be able to identify the advantages & disadvantages of owning a home

  3. Housing Options • Lifestyle • What are your needs in a home? • How close to work do you want to live • How long do you plan on staying in the city / town you are living in • How much privacy do you need • Are school districts important to you?

  4. Housing Options • Renting vs. Buying • Renting is usually good for young people beginning their careers • Provides Mobility • Generally cheaper than owning a home • Lose tax advantages of owning • Lose the privacy you would have if you owned a home

  5. Housing Options • Renting vs. Buying • Buying is wise for people looking for stability • Increases privacy • Gain tax advantages • Gain freedoms such as being able to paint & hang pictures on the wall • Generally houses appreciate in value

  6. Buying vs. Renting a Home • Short Video • Long Video

  7. Housing Information Sources • Libraries • Newspapers • Internet • www.siouxfallsrealestate.com • Friends & Family • Real Estate Agents • Government Properties

  8. Renting a Residence • Tenant – a Person who pays for the right to live in a residence owned by someone else • Landlord – A person who owns a property that is rented • Sources of Information • www.argusleader.com/apartments

  9. Renting a Residence • Legal Issues • Signing a Lease • Never sign a lease before you have read the entire document & understand what is in it • Protects both the landlord & tenant • Amount of lease • Length of lease • Ability to sublet • Security Deposit • P. 206 of your textbook

  10. Renting a Residence • The Costs of Renting • Location • Living Space • Utilities • Security Deposits • Renters Insurance • The landlords property insurance covers the structure but not what is inside (YOUR STUFF!) • You must get renters insurance to have your personal belongings covered in case of an accident

  11. Objectives • Students will be able to explain how to evaluate a property • Students will discuss the financing involved in purchasing a home • Students will create a plan for selling a home

  12. Buying & Selling a Home • Step 1: Determine your Needs in a home • Types of housing • Single Family Dwellings • Multiunit Dwellings • Duplexes & townhouses • May have HOA Dues each month on top of a mtg pmt • Condo’s • May have HOA Dues each month on top of a mtg pmt • Prefabricated Homes • Manufactured in a factory & transported to a lot • Mobile Homes

  13. Buying & Selling a Home • Tips on Buying a house Video • Step 1: Determine your Needs in a home • Affordability & your needs • Get Prequalified from a local bank or mortgage broker • Step 2: Find & Evaluate a Property to Purchase • Selecting a location • Hiring a Real Estate Agent • Have a plethora of information about local market

  14. Buying & Selling a Home • Step 2: Find & Evaluate a Property to Purchase • Conducting a home inspection • Never purchase a house without a home inspection • Can be used for negotiating the price of a home • Step 3: Price the Property • Listing Price (The Price the owner is asking for the home)

  15. Buying & Selling a Home • Step 3: Price the Property • When deciding what price to offer … consider the following items: • How long has home been on the market • What have similar homes sold for recently (comps) • Is it a seller’s market or buyer’s market • Do current owners need to sell in a hurry • Does home meet my needs • How easily can I arrange financing

  16. Buying & Selling a Home • Step 3: Price the Property • Negotiating the purchase price • Offer a smaller amt than list price & wait for acceptance, denial, or counteroffer • Once settled … you will have to sign a purchase agreement • Make sure this is conditional • Earnest Money – a portion of the purchase price that is refundable if conditions are not met • Typically will be applied toward the down payment • Negotiation Video

  17. Buying & Selling a Home • Step 4: Obtain Financing • Determining Down Payment • If over 80% CLTV … you will typically be required to pay Private Mortgage Insurance (PMI) • Qualifying for a Mortgage • Typically done in 10, 15, 20, or 30 year increments • House serves as collateral for the loan • Points • Each point = 1 % of the value of your home

  18. Buying & Selling a Home • Step 4: Obtain Financing • http://www.mortgagecalculator.org/ • You can buy your mortgage interest rate down by paying points • Determine how long you are staying in the house to determine if you should buy down your rate

  19. Buying & Selling a Home • Types of Mortgages • Fixed Rate Mortgages • Interest rate & payment are fixed for the length of the mortgage • Adjustable Rate Mortgages (ARM’s) • The interest rate & payment will adjust yearly • Ex: 7 year Arm = 4 7/8 APR • APR fixed at 4 7/8 for 1st 7 years then adjusts yearly thereafter • Mortgage Video

  20. Buying & Selling a Home • Adjustable Rate Mortgages (ARM’s) • Rate Cap’s • Limits the amount that an ARM can go up or down • Convertible ARM’s • Allows borrower to convert to a fixed mtg. during the life of the loan • Gov’t Financing Programs • FHA • VA • These agencies guarantee loan repayment to lenders

  21. Buying & Selling a Home • Home Equity Loans • A loan based on the equity of your home • Ability to use the borrowed money for virtually anything • Can potentially be tax deductible • Refinancing • Obtaining a new mortgage to replace my current one • Extra cash / Better Interest Rate

  22. Buying & Selling a Home • Step 5: Closing • Loan documents are signed, down payment is made, seller receives his/her dollars • Buyer pays a number of fees called closing costs • Appraisal fees / title fees / title insurance / recording fees w county (deed) • Escrow Account • You are required to pay your house insurance & real estate taxes into a special account & the bank pays these for you

  23. Buying & Selling a Home • Selling your Home • The nicer your home looks … the faster it will sell! • Make needed repairs • Repaint worn exterior & interior areas • Update light fixtures / floor coverings • Declutter • Stage your home!

  24. Buying & Selling a Home • Determining the selling price • Appraisal • Choosing a Real Estate Agent • Pick someone who knows your neighborhood • Choose someone who will provide you with a variety of services – Marketing, open houses … etc … • Real Estate Agent Video • For Sale by Owner • You take the role of Real Estate Agent • You must do your own Marketing • May be good to enlist a lawyer for contract help!

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