Is Buying Foreclosed Homes For Sale a Better Option Than Renting?

Before contacting a realtor and begin looking at homes for sale, there are a few things you need to do. Your realtor will assist you in discovering how much home price you can afford, but he/she needs information from you to do it. So, go prepared with your financial data to your first appointment with your realtor in order to begin looking at homes for sale immediately.

To determine a homes for sale price that you can afford, you need to review your financial situation to determine how much down payment you can afford and how large of a monthly payment you can comfortably handle.

Net Worth

So, before looking at homes for sale, put together a statement of your net worth. Begin by doing an inventory of all your assets (what you own that may be sold for cash). This includes all investments, savings accounts, household furnishings, your current home and any other real estate, vehicles, recreational vehicles and equipment, furs and jewelry, guns, electronic equipment, loans owed to you, any vested equity you own, cash and surrender values of insurance policies, collectibles, and precious metals and gems.

Now, list the value of each item. This is the amount you believe you could sell the item for cash within a reasonable timeframe. Deduct any money owed on the item from the sell price. For example, you might be able to sell your current home for $150,000, but you owe the mortgage company $75,000 (pay-off amount) and another $3,000 in property taxes that would come due before it could be sold.

Now, list all of your liabilities. They are anyone to whom you owe money for whatever reason. They include mortgages, loans and credit lines of any types (including credit cards), and even your Uncle Bob that loaned you $2,000 last summer.

Total your assets and liabilities. Then, subtract the liabilities from your assets to determine your net worth.

Down Payment

To determine your possible down payment for a homes for sale, take your net worth and subtract out the following: Savings for emergencies, education and retirement; settlement and moving costs of buying the homes for sale; and cash you will need to improve, decorate and furnish the new homes for sale. The remaining is your possible down payment.

Monthly Payment

Next, calculate the possible monthly payment you can afford for your homes for sale. List all of your actual and projected monthly expenses. Include all the monthly costs of your liabilities listed above, adding the following items: Insurance premiums, all household expenses (including cell phones and DSL costs), any taxes owed but not already withheld by your employer, all transportation costs (include maintenance, fuel, and licensing), clothing costs (new and maintenance), pocket money for family members, groceries, personal care, recreation and entertainment, medical and dental costs, charity, special expenses (such as tuition), and miscellaneous costs. Divide into monthly costs any expenses paid quarterly or annually.

Now, total your monthly expenses. Subtract out your monthly mortgage or rent. Subtract the remaining expenses from your total monthly household income. This is the amount you can comfortably pay for a monthly mortgage payment on a homes for sale.

If the monthly payment for a homes for sale seems a bit low, review all of your monthly expenses. Where can you decrease or eliminate expenditures? For example, paying off your high-interest credit cards to eliminate the high monthly payments.

Once you have this information in hand, your realtor can determine just what you can afford to pay for a homes for sale.

Better to Rent Or List Your Home for Sale? 3 Question Litmus Test

This seems to be a FAQ these days. As a property manager in Charlotte, we get many calls from people asking themselves this question.

I didn’t think there was a one-size-fits-all answer to this, but I was corrected. It just seems to come down to who you ask. If you ask a:

1. Realtor: “You should definitely put your house on the market! Interest rates are at all-time lows!”
2. Property Managers: “Nothing is selling in this market. You can either eat your mortgage every month as it sits or have a respectful renter pay it for you.”

So which is the right answer?

It really depends on your answers to these 3 questions:

  1. If you wanted to live in the area your home is located, would you buy your home at the price it would be listed at? Take an honest look at comparable homes for sale in our area. If “yes”, list. If “no”, rent.
  2. Does your house have a differentiator that would make it more appealing than cheaper, comparable houses (aka foreclosures and short sales)? If “yes”, list. If “no”, rent.
  3. Can you stomach a possible rogue renter and locking into a negative cash flow for a year or two? If “yes”, rent. If “no”, list.

These questions make it easy and really boil down to a simple question:

Is your home among the best of the best?

If not, it’s like trying to sell your clothes retail when everyone else is having a 50% off sale. If your home is special and you can communicate this effectively in your marketing, then list your home for sale and be confident it will sell. If it is not, then you must rent until banks starting lending to the masses again.