Yes. A comparative market analysis and an appraisal are the two most common and reliable ways to determine a home's value. Your real estate agent can provide a comparative market analysis, an informal estimate of value based on the recent selling price of similar neighborhood properties. Reviewing comparable homes that have sold within the past year along with the listing, or asking, price on current homes for sale should prevent you from overpaying. A certified appraiser can provide an appraisal of a home. After visiting the home to check such things as the number of rooms, improvements, size and square footage, construction quality, and the condition of the neighborhood, the appraiser then reviews recent comparable sales to determine the estimated value of the home. Lenders normally require an appraisal – which runs between $200 to $300 – before they will approve a mortgage loan. This protects the lender by ensuring the home is worth the money you want to borrow. You also can check recent sales in public records, through private firms, and on the Internet to help you determine a home’s potential worth.

The short answer.. a home is ultimately worth what is paid for it. Everything else is really an estimate of value. Take, for example, a hot seller’s market when demand for housing is high but the inventory of available homes for sale is low. During this time, homes can sell above and beyond the asking price as buyers bid up the price. The fair market value, or worth, is established when “a meeting of the minds” between the buyer and the seller takes place.

A certified appraiser who is trained to provide the estimated value of a home determines its appraised value. The appraised value is based on comparable sales, the condition of the property, and several other factors. Market value is the price the house will bring at a given point in time, once the buyer and seller establish a “meeting of the minds” on price.

The list price is a seller's advertised price, or asking price, for a home. It is a rough estimate of what the seller wants to complete a home sale. A seller can price high, low – (which seldom happens), or very close to the amount they want to get. A good way to determine if the list price is a fair one is to look at the sales prices of similar homes that have recently sold in the area.

There are a few things to consider, including cost, individual needs, and what will add value down the road. Also important.. your emotional attachment to the existing home. As designer and builder Philip S. Wenz, the author of Adding to a House.. Planning, Design & Construction, notes, an addition is much cheaper than building a new home and can offer a “new” home without the heartache of moving. Other considerations.. Can you finance the home improvement with your own cash or will you need a loan? How much equity is in the property? A fair amount will make it that much easier to get a loan for home improvements. Is it feasible to expand the current space for an addition? What is permissible under local zoning and building laws? Despite your deep yearning for a new sunroom or garage, you will need to know if your town or city will allow such improvements. Are there affordable properties for sale that would satisfy your changing housing needs? Explore your options. Make sure your decision is one you can live with – either under the same roof or under a different one.

The general rule is that you can buy a home that costs about two-and-one-half times your annual salary. A good real estate agent or lender can determine how much you can afford and estimate the maximum monthly payment based on the loan amount, taxes, insurance and other expenses. Your real estate agent can help you to figure out now how your income, debts, and expenses can affect what you can afford, and how much you may be able to borrow to purchase a home, and even prepare an estimated settlement sheet for homes you like.

It can take a long time to save for that perfect dream home. Meanwhile, the market has been flooded with some of the most favorable mortgage interest rates in years. Low rates make housing more affordable, which is why so many buyers have jumped on the home buying bandwagon. Home-price appreciation has also been strong, making very solid gains in communities across the country. In fact, home prices are expected to increase 2.5 percent to 3 percent annually over the next five years. If you purchase a starter home today, you can potentially begin to build value that can lead to the purchase of a larger, or more desirable, trade-up home in the future.

There are many. Among the most appealing.. you own it, which gives you, instead of a landlord, control of your living space. Other benefits stem from potential tax savings and the buildup of equity as your property likely appreciates in price over time. Equity can be used to help put children through college, purchase a second home, or make home improvements. The mortgage interest paid on a home loan is tax deductible, as is the local property tax. If you get a fixed-rate home mortgage loan, you also can invest more wisely knowing your monthly mortgage payment, unlike rent, will not change substantially.

Make sure you are ready – psychologically and financially. Ask yourself the following questions.. Do I have steady income? Is my debt lower than my total income? Do I have enough money to pay for the down payment and closing costs? Am I working hard enough to improve bad credit? A house needs constant care and attention. Also ask yourself if your budget will allow for unexpected repairs and upkeep. Once you can honestly answer “yes” to these questions, you are several steps ahead of the game and that much closer to becoming a homeowner.

Lenders require private mortgage insurance (PMI) on most conventional loans with less than a 20 percent down payment. They believe there is a correlation between borrower equity and default. They have found that the less money borrowers put down, the more likely they are to default on a loan. PMI guarantees the lender will not lose money if this happens and a foreclosure is necessary. The buyer pays this insurance, usually a small fee at the outset and a percentage of the face amount of the loan that is added to the monthly payment.

Title insurance protects the lender against unclear title to the property you are buying. It is almost always a requirement for closing on a home. If you desire coverage as well, buy an owner’s policy, which will protect you against any title-search errors and losses that arise from disputes over property ownership. The cost of title insurance is usually a set value per thousand of dollars of the total loan amount.

It protects against disasters – whether natural, manmade or mechanical. A standard policy insures the home, as well as your possessions. Because this insurance is packaged, it covers liability for any harm, loss, and property damage that you or your family members cause others. And it includes additional living expenses in case you are temporarily displaced because of damage from a fire or other insured disaster. While you are not legally required to purchase homeowners' insurance, mortgage lenders require you to do so." or "mortgage lenders stipulate that you must. If your mortgage is paid up - or you never had one - it is still a good idea to have homeowners’ insurance to protect your home and your belongings.

This insurance protects your investment and personal belongings from most disasters. As an owner, you will need two insurance policies – your own to cover liability, living expenses, your belongings and structural improvements, and a master policy provided by the condo or co-op board. The master policy covers the common areas that you share with others in the building. It is paid for using the monthly condo fee that you and other owners pay.

A standard policy will do in most instances. It protects against several natural disasters and catastrophic events. However, it will not guard against earthquakes, floods, war, and nuclear accidents. The policy can be expanded to include these disasters as well as coverage for such things as workers' compensation. In fact, the lender may require that you purchase flood or earthquake insurance if the house is in a flood zone or a region susceptible to earthquakes. You also can increase coverage beyond the depreciated value of personal property such as televisions and furniture by purchasing a replacement-cost endorsement. Home-based business-coverage, once overlooked, is an ever-increasing popular rider. It does not cover liability associated with the business but rather contents such as home office equipment and general liability to cover injuries to clients and employees. Other considerations.. an inflation rider, which increases coverage as the home’s value rises, and getting insurance that is equal to the full replacement value of the home. Insurance companies usually require an amount equal to at least 80 percent of the full replacement value. Otherwise, only a portion of the loss would be covered.

Any offer can be presented, but a low-ball one that is substantially less than the asking price can dampen a prospective sale and prevent the seller from negotiating at all. Unless the home is overpriced to begin with the offer will probably be rejected. Do your homework before making an offer. Compare prices of recently sold homes and new listings in the neighborhood. It also helps to know something about the seller’s motivation. A lower price with a speedy closing, for example, might motivate a seller who must move, has another house under contract, or must sell quickly for other reasons. Also recognize that while your low offer in a normal market might be rejected at once, it might motivate the seller in a buyer’s market to either accept it or make a counter-offer.

A few lenders will negotiate the mortgage rate and number of points on a loan. However, this is more the exception than the rule with established lenders. As always, shop around and know the market before you enter a lender’s office. Rates are often published in local newspapers and on Internet Web sites. You may have more luck when dealing directly with a seller who has agreed to finance your loan. He is likely to be more open to negotiation, particularly when motivated to make a quick sale.

A lot depends on the state where the property is located. Some require an attorney; others do not. Most homebuyers can generally handle routine real estate purchase contracts as long as they read the fine print and understand all the terms. But pay close attention to any clauses, contingencies, and other special considerations that will allow you or the seller to back out of the contract. When in doubt, consult an attorney. Ask relatives and friends, or your real estate agent, for recommendations. Call to inquire about their fees and to check their level of experience. Expect that more seasoned attorneys will cost more.

Normally. This is because the fixtures – personal property that is permanently attached to a home, such as built-in bookcases or a furnace – automatically stay with the house unless noted otherwise in the sales contract. Anything that is not nailed down is negotiable, including appliances that are not built in, such as washers and dryers.

Certainly, but do not hold your breath. It takes a lot of determination and time to find a real bargain. But if you are adamant, here are some likely targets to pursue.. foreclosed property, a fixer-upper, hard-to-sell new homes in a housing development, tenant-in-common partnerships. With the latter, you may be able to buy a partial interest in this form of title to property owned by two or more individuals because the partners often sell at a discount. However, bargains are easier to come by in a soft real estate market, when the economy is in a recession, and when homeowners, and builders and sponsors of condominium conversions, are desperate to move unsold units.

Know the seller's motivation to sell. This will enhance your negotiating position. Sellers who must move quickly due to a job transfer, divorce, or contract on another home, are more inclined to accept a lower price to speed the process along. Remember, too, that the listing, or asking, price is what the seller would like to receive for the home. It is not necessarily what the seller will settle for. So know value. Before you make an offer, check recent sales and listing prices of comparable neighborhood homes and compare them to the seller's asking price. Other tips.. Be flexible. Never say, “take it or leave it.” That can sour negotiations and ruin the deal. Never show your hand or reveal your next step. Each time you increase your offering price ask for something in return, such as repairs, appliances, even lawn furniture. If you plan to pay cash or have a tentative commitment for a loan, use your strong financial position as a negotiating tool. Don’t let emotions such as pride, fear, love, and anger get in the way of negotiating the best deal. Leave irrational feelings at home.

When you look to purchase a home, anticipate potential problems. But protect against them so that if something does go wrong, you can cancel the contract without penalty. This is what contingencies allow you to do. They should be included in any offer you present to buy a home. Most offers include two standard contingencies.. a financing contingency, which makes the sale dependent on your ability to obtain a loan commitment from a lender, and an inspection contingency, which allows you to have a professional inspect the property.

Generally not because they are considered personal living expenses. But if an association has a special assessment to make capital improvements, condo owners may be able to add the expense to their cost basis when the property is sold. Another exception may apply if you rent your condo – the monthly condo fee is deductible every year as a rental expense.

Yes, thanks to the many city and county governments that offer Mortgage Credit Certificate (MCC) programs, which allow first-time homebuyers to take advantage of a special federal income tax write-off. The credit reduces the amount of federal taxes paid by the buyer each year, if he keeps the same loan and lives in the same house.

Many of the costs paid at closing are not immediately deductible. The exception is points you pay to purchase your home loan. They are deductible for that year. Points paid when you refinance an existing mortgage must be deducted over the life of the new loan. Some fees – including loan application, appraisal, document preparation and recording fees – that are assessed when purchasing a home can be recouped by adding them to the adjusted cost basis, the starting point for figuring a gain or loss when selling the home. Significant home improvements also can be calculated into your cost basis.

A home provides many tax benefits, literally from the time you buy to the time you sell. The mortgage interest paid on a home loan up to $1 million for a primary residence or second home is tax deductible every year, as is the local property tax. Other mortgage costs – including late-payment charges and early-payment penalties – are also deductible. And if you use a portion of your home for business purposes, you can take a depreciation deduction as well. Many federal tax benefits are also available from local and state tax agencies. Contact your local tax agency for more information.

They are a good way to enter into homeownership. The high price of single-family homes and the influx into the housing market of more single homebuyers have made condos relatively hot national investments. They have held their value as an investment despite economic downturns and problems with some associations. Condominium associations have also worked hard in recent years to clean up their image. Disputes and lawsuits were once rampant. But now associations have become savvier about property management and have taken steps to prevent legal problems and disputes.

While most condominiums are apartments, a townhouse is attached to one or more houses and can run the gamut from duplexes and triplexes to communities with hundreds of homes. Buyers separately own their homes and the land on which the houses sit. With a condominium, the unit owners jointly own the land and this common interest cannot be separated from the others. Townhouses can be structured in many ways. Some, particularly huge communities, have common areas – such as swimming pools – that are similar to condominiums.

Seek ownership in a well-maintained building, and pay special attention to the financial health of the condo association. Lax maintenance may be a sign of financial trouble, which could result in higher maintenance fees and problems trying to resale the property later. Things to consider.. Get a copy of the latest financial statement from the condo association. Ask the board of directors – which is elected by the unit owners from among themselves – if major repairs or improvements are imminent. If so, find out how much they will cost and whether there is enough money in the reserve to cover them. Check the by-laws, rules and the covenants, codes and restrictions (CC&Rs). You may find, among other things, that they prohibit or restrict pets and the renting of units. Some may require that the board have the right of first refusal on the sale of any unit. Learn everything you can about the homeowners association, including legal disputes and conflicts. Start by reading the minutes of the association meetings. Find out the owner-to-tenant ratio. Because many condominiums are often purchased as investments, there could be a high percentage of tenants in the building.

On the plus side, exterior maintenance and repairs are minimal; there are no neighbors above or below the home like in an apartment; and because the homes are attached, they may offer a greater sense of security. As for the disadvantages, if there is a homeowner’s association, buyers will have to pay a homeowner’s fee. There is also less privacy than with a detached single-family home. And there are limits on how you can make exterior changes to the home.

Condominiums are buildings in which individuals separately own the air space inside the interior walls, floors and ceilings of their unit, but they jointly own an interest in the common areas that they share – such as the land, lobby, hallways, swimming pool, and parking lot. In addition to paying a mortgage, each owner is responsible for paying a monthly fee to the condo association, which is made up of the unit owners. The fee covers maintenance, repairs, and building insurance. Most housing condominiums are apartments, although there are mobile home condominiums as well.

They are an appealing way to enter the housing market if the cost of a single-family home is out of your reach. Condos are especially popular among single homebuyers, empty nesters, and first-time buyers in high-priced housing markets. Unlike a house, condos offer a lifestyle that is free of yard work and exterior maintenance and repairs. Many condominium communities also offer amenities such as exercise rooms, tennis courts, and swimming pools that you might otherwise be unable to afford if you purchased a single-family home.

Certified historic structures now enjoy a 20 percent investment tax credit for qualified rehabilitation expenses, if they are income producing properties. A historic structure is one listed in the National Register of Historic Places or so designated by an appropriate state or local historic district that is certified by the government. The tax code does not allow deductions for the demolition or significant alteration of a historic structure. For more information, contact the National Trust for Historic Preservation at (202) 588-6000, or visit its web site at www.nationaltrust.org. Many states offer tax incentives, reductions and abatement programs for owners of residential historic homes. These programs are described on the National Trust’s web site. Does the federal government offer home improvement programs? Yes. Among the most popular.. Title 1 Home Improvement Loan. HUD insures the loan up to $25,000 for a single-family home and lenders make loans for basic livability improvements – such as additions and new roofs – to eligible borrowers. Section 203(k) Program. HUD helps finance the major rehabilitation and repair of one- to four-family residential properties, excluding condos. Owner-occupants may use a combination loan to purchase a fixer-upper "as is" and rehabilitate it, or refinance a property plus include in the loan the cost of making the improvements. They also may use the loan solely to finance the rehabilitation. VA loans. Veterans can get loans from the Department of Veterans Affairs to buy, build, or improve a home, as well as refinance an existing loan at interest rates that are usually lower than that on conventional loans. Rural Housing Repair and Rehabilitation Loans. Funded by the Agriculture Department, these low-rate loans are available to low-income rural residents who own and occupy a home in need of repairs. Funds are available to improve or modernize a home or to remove health and safety hazards.

According to the Millennial Housing Commission created by Congress, few lenders are willing to administer home improvement loans. Most prefer to make home equity loans or unsecured consumer loans because they are easier to manage. Home improvement loans usually require inspections and irregular draws on the loan amount as work is completed, which requires regional or national lenders to find local partners to provide oversight. Financing repairs and improvements with home equity is okay for most homeowners, but it is difficult for many first-time buyers. They have lower-incomes, smaller savings, and have made lower down payments on their homes than first-time buyers a decade ago. So they have little equity to borrow against. Unfortunately, it is often lower cost older homes purchased by first-time buyers that need the most work. Unless you have a cash reserve, you will have to shop around for the best borrowing terms. In addition to the options listed above, you can ask relatives for a loan. Borrow against your whole life insurance policy. Refinance your existing mortgage. Get a second mortgage. Contact the government about home improvement programs. And – only as a last resort – borrow from a finance agency, which generally tend to charge high rates.

One of the best ways is to get your hands on a comparable market analyses. See what price similar properties have sold for in the past and find out the listing price of others currently on the market. It is important to examine the fixer-upper carefully and figure out how much it will cost to fix any defects or repairs. If you are unable to get in, talk with nearby neighbors about the home’s condition. You can also do your own cost comparison by researching comparable properties recorded at the local county recorder's and assessor's offices, or at Internet sites specializing in property records. If the property is in foreclosure, you should get as much information as possible from the lender.

It depends. So-called “bad” areas – often described as those that are residentially unstable or poor – have offered an affordable means of homeownership for many – particularly young, first-time buyers and low- to moderate-income families interested in a home they can call their own. Whether it is right for you to buy a fixer-upper will depend on your personal threshold for risk and your level of tolerance. That said, however, many run-down neighborhoods, particularly those close to downtown, are benefiting from a residential resurgence as an influx of newcomers jump-start what were once staid, unsafe, or depressed areas.

Just about every state now offers loans for renovation and rehabilitation at below-market interest rates through its Housing Finance Agency or a similar agency. Call your governor’s office to get the name and phone number of the agency in your area. At the municipal level, many cities also have programs for special improvements to certain blocks and neighborhoods they are trying to spruce up. Call City Hall, as well as a Community Development Agency in your city.

Chances are you will need plenty of help making those major repairs and additions. But the last thing you will need is someone who fails to complete the job or botches it up. Finding good, responsible help is imperative. Here’s what you can do.. Avoid the Yellow Pages. Check with family, friends, neighbors and co-workers for recommendations. Deal only with licensed contractors. The state licensing board and local Better Business Bureau also can tell you if there are any outstanding complaints against the license holder. Interview each contractor, request free estimates, if possible, and ask for recent references. Ask for proof of worker's compensation insurance and get policy and insurance company phone numbers so you can verify the information. If the contractor is not covered, you could be liable for any work-related injury that takes place during the project. Also check to make sure the contractor has an umbrella general liability policy. Never hand over a deposit at the first meeting – you could end up losing your money.

This will vary depending on the type of work that is done. Remodeling magazine publishes an annual "Cost vs. Value Report'' that can answer this question in more detail, based on the top 15 home improvements. A recent study it conducted says the highest remodeling paybacks have come from siding and window replacements, major kitchen remodeling, bathroom and family room additions, and mid-range master bedroom suites. An important point to remember is that remodeling not only improves a home’s livability, it also enhances its curb appeal with future buyers.

They are literally everywhere, even in wealthy enclaves. What sets them apart is price. They have lower market value than other houses in the immediate area because they have either been poorly maintained or abandoned. To determine if a property that interests you is a wise investment will require a lot of work. You will need to figure out what the average home in the area sells for, as well as the cost of the most desirable ones. Experts suggest that novices avoid run-down properties needing extensive work. Instead, they recommend starting with a property that only needs minor cosmetic work – one that can be completely refurbished with paint, wallpaper, new floor and window coverings, landscaping, and new appliances. Also, keep in mind that a home price that looks too good to be true probably is. Find out why before pouring your hard-earned money into it. When looking for a fixer-upper, some experts suggest you follow this basis strategy

In real estate, almost everything is negotiable, so it is certainly worth a try. Now, this does not mean the builder will fall down and roll over. It is very common for builders to claim that their prices are based on fixed construction costs. Perhaps, but timing is everything. A builder is more likely to be flexible on price at the very beginning and end of a project. Early on, most developers want to move people in quickly so the project builds momentum. In the end, they may be more inclined to accept lower offers when only a few units are left. If you are unable to negotiate on price, negotiate for a better lot location or amenities, such as a carpet upgrade or light fixtures. A developer will rarely pass up a deal over a few hundred dollars' worth of carpeting.

Many builders offer financing incentives to help move more buyers into a project. In fact, major building companies often have their own mortgage brokerage subsidiaries, while many other builders routinely refer buyers to "preferred" local lenders. If it is a buyer's market in your area, you can be sure developers will offer incentives such as low-down-payment financing or interest rate subsidies.

The second home market has more ebbs and flows than the primary home market. Sales are iffy in a bad economy except, perhaps, on the high-end. That said, there is a growing trend toward the purchase of vacation homes. They are being bought for investment purposes, enjoyment, and/or retirement. In the latter instance, some people are buying with the idea of turning a vacation home into a permanent retirement haven down the road, a move that puts them ahead of the game now. Some of the tax benefits mirror those for a primary residence. Mortgage interest and property taxes are deductible, which helps to offset the cost of the home payment. And if you treat your second home as a rental property, you can fully depreciate it as well. But you are only allowed to occupy it for two weeks a year, or 10 percent of the total rented time, whichever is less. Before taking the leap, ask yourself if you can afford to carry two mortgages, maintain two households, and pay the extra utilities and maintenance costs. Also, learn about financing requirements and options, which can differ slightly from those on a primary residence.

You would think not since it is new and the developer has to adhere to local construction guidelines. However, err on the side of caution – always hire an inspector, whether the home is old or new. You can 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. The inspector should either be a professional home inspector, an engineer, an architect or a contractor. When hiring a professional inspector, look for one who belongs to a home inspection trade organization, such as the American Society of Home Inspectors (ASHI). This group has developed formal inspection guidelines and a professional code of ethics for its members. Membership in ASHI is not automatic. Proven field experience and technical knowledge about structures and their various systems and appliances are required. As for rates, they vary greatly. Many inspectors charge about $400, but costs increase based on the scope of the inspection.

Like any investment, it can be risky. Location and current market conditions are extremely important when deciding whether to buy. Other things to consider.. Will you be able to afford repairs, maintenance, insurance, and utilities? What about fees to pay agents who rent the property for you? If you live several miles away from your vacation home, who will clean up between tenants and take an inventory of household items once the tenants leave? What if you are unable to rent your second home? Can your pocketbook withstand the strain of paying the mortgage?

You can find out more about an existing property and neighborhood before you buy than you can a new home in a newly developed community. When the home is on the outskirts of town, ask the developer about future access to public transit, entertainment venues, shopping centers, churches, and schools. Also review local zoning ordinances. A remote area can quickly turn into a fast food haven. You want to ensure the neighborhood will not spiral out of control and lose its residential appeal. Other things to consider.. Ask homeowners already living in a development about the builder. If none currently live there, find out where the builder has previously built and speak to those owners to find out if the builder followed through on promises and needed repairs. Ability to make changes. Most homes in a development resemble each other. But the developer may impose restrictions on house color, landscaping, renovations, and other items that a homeowner may want to alter. Do not buy into the glamorous images created by marketing experts. Form your own opinions about a property and only buy where you feel comfortable. After all, you are the one who will be living there.