Free Money Finance

How Much Time is Involved in Being Your Own Contractor (And Giveaway!)

This month we're talking about the book Be Your Own House Contractor. Today, we'll discuss how much time it takes to be your own contractor:

How much time is involved in being your own contractor? This will differ for each individual, but you'll spend more hours planning and preparing than you will on the construction site.

You may spend a month or several months of your spare time in the planning stages, depending on how quickly you are able to make decisions on all the various aspects of the project.

You won't need to spend a great deal of time on the project after construction starts. Your maximum time commitment ought not to exceed two hours a day.

Here's my translation: in order to save the 25% on your house, you're going to need to work for it. You'll spend a good amount of time planning and managing the process and that's your investment in the project. That 25% savings doesn't come for free.

Want to know more? You can win a free copy of Be Your Own House Contractor. Here's how it works:

1. Leave a comment below -- any comment.

2. Sometime Monday, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see if they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Who's to Blame for America's Mortgage Mess?

There's been a ton of finger-pointing going on in regards to the subprime mortgage mess here in America. Banks are to blame -- investors are to blame -- the government is to blame -- individuals are to blame. No one wants to take responsibility for their own actions (what's new about that?) but sure can tell you why it's someone else's fault.

Here's a piece from Money magazine that says the right (or wrong) mortgage broker can make or break a loan and the people getting the loan. Let's start with the facts:

In the next five years, 1.4 million Americans will see their mortgage payments more than double. Already, half a million homeowners are 90 days behind on their payments. Foreclosure rates are up 30 percent from 2006.

Yep, the news isn't good. We've heard it over and over again.

Then Money asks the "blame" question I noted above and pins the tail on the broker donkey:

How did so many end up in trouble? Was it consumer overreaching or a bull market in bad advice? Many consumer advocates and legislators believe that the latter played a big role - and are blaming mortgage brokers, the independent agents who in the past few years have sold nearly 70 percent of the nation's home loans.

"We think brokers bear a lot of the responsibility for placing borrowers into these unaffordable loans," says Allen Fishbein, director of housing and credit policy at the Consumer Federation of America. Critics like Fishbein warn that the system gives brokers powerful incentives to push consumers into toxic loans and little to fear if their customers can't handle them.

If you want to see what else they say, click through and read the article. But I'm stopping here at this point and making a few comments:

1. All financial planners, advisors, brokers, investment advisors, tax planners -- all the groups set up to "help" you with your money -- are compensated for doing so. Some (most?) are knowledgeable and fair (that's not to say their services are worth the cost, but that's a different post). But because money is involved, many will do close to whatever it takes to get you to buy whatever they are selling. And if that means setting up a deal that's good for them and bad for you, they'll do it. That's why you need to educate yourself about personal finances -- so you can at least understand the basics of what any advisor might recommend.

By the way, if you want more of my thoughts on this line of thinking, see these posts:

• Why Your Planner Wants You in Debt

• Would You Take Advice from a Financial Planner Who was Doing Poorly Financially Himself?

• Thoughts on Financial Advisors

• Make Sure Your Financial Advisor is Not a Loser

• Another Financial Advisor Can't Manage His Own Finances (Don't Worry, No One Else Can Either)

2. As such, I have no doubt that some mortgage holders were "duped" into signing up for a bad mortgage. Maybe even a good amount -- 20% or so (this number is a big guess on my part -- it's just my sense of how high this part of the problem could be.) But who's fault is that?

Consider this scenario: I go to the car dealership and see a great car I've been wanting. I decide to buy it and I give them $30,000 for it. I drive away happy. Four months later, my friend Bill tells me about his new car. It's the same car I bought and he bought it at the same time I bought mine. But his price was $20,000! I'm outraged! Obviously, this is the fault of big business taking advantage of the small guy! We need to get the government involved! We need legislation! It's everyone's fault that this happened to me, right?

No. The reason this happened was that I was an uninformed consumer who did something stupid. I didn't check around for prices. I didn't research the car-buying process. I didn't educate myself prior to buying the car. Whose fault is that? It's mine, of course!

So whose fault is it when people buy mortgages that are stacked against them? I think you know my answer to that. Why can't people admit they made a stupid mistake and take some personal responsibility for heaven's sake?

Now before I get a ga-zillion "but what about this case" or "what about these sort of people" comments, let me say that I'm sure there are some people out there who may have tried everything possible to do it the right way and still ended up burned. But these (and others) in my opinion are the exception. Let's not rationalize away the fact that most people got into this mess by themselves by citing exceptions in the situation. Exceptions are just that -- exceptions to the rule (or, stated another way, opposite of what happens in the majority of the cases.)

3. My experience in counseling people is that the majority of people will spread themselves as thinly as they can financially to buy the biggest house they can. Then if something impacts the perfect scenario they set up in order to afford the house (which it always does) -- something like an accident, job loss, layoff, child birth (and one parent quitting work), and so on -- the financial house starts to crumble.

Yes, I'm sure many brokers aided people in their efforts to stretch as far as possible to get that "dream" house, but again, whose fault is that for agreeing to such terms? And don't say they didn't know what they were agreeing to. That argument simply reinforces my point that they should know what they're agreeing to before the commit to it.

4. Besides, who needs a mortgage broker anyway? Don't people know you can simply make a few calls to get competitive rates and get a mortgage without a broker?

5. Now it's likely that the government is going to step into the fray. That's just what we need. If there's any way to make a bad situation worse it's to get the government involved. We'll end up with a mish-mash solution that's better for the political careers of those in Washington than for the people that need help.

Yeah, I've got an opinion on the issue, huh? ;-)

Sorry to rant, but it seems like much of this could have been avoided if people simply spent as much time managing their finances as they spend deciding what to have for dinner.

How to Find a Good Carpentry Crew (And Giveaway!)

This month we're talking about the book Be Your Own House Contractor. Today, we'll discuss how to find a good carpentry crew:

A personal visit to a few lumberyards or building supply houses (especially smaller, locally based ones) to ask for recommendations will give you more than enough leads to find a good carpentry crew. Asking friends and acquaintances who have been through the building process or a major renovation is another way to gather names of good carpenters (and to avoid bad ones). If the first carpenter you find is too busy, ask him to recommend another. But usually another house can be worked into the first carpenter's schedule, and it is worth waiting for a good crew. Your carpenter will be one of your best sources for finding many of your other subcontractors.

After selecting a good candidate for this job, but before hiring him, check him out. He should give you a list of four or five jobs he's handled. Talk to the owners. Look at the work he did for them. Other sources to check for references with are building suppliers that have dealt with him.

If I decide to build my own home, I already have my carpenter picked out. He has worked on several homes of friends and comes highly recommended. I've also met him and he's a great, personable, honest guy.

Want to know more? You can win a free copy of Be Your Own House Contractor. Here's how it works:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Key Step in Building Your Own House: Find a Good Carpentry Crew (And Giveaway!)

This month we're talking about the book Be Your Own House Contractor. Today, we'll highlight a key step in the process:

Perhaps the most important step in building your own home, and maybe even in helping you make the decision to do so, is finding a good carpentry crew. Also known as a framing contractor or framer, the carpenter, along with his crew, is your key subcontractor. An experienced, reliable carpenter, hired at the beginning of the process, will help you make many intelligent decisions and will help your local lender make a decision to lend you money.

Want to know how he suggests you find a good carpenter? Check back tomorrow. ;-)

Want to know more? You can win a free copy of Be Your Own House Contractor. Here's how it works:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

No Special Skills Needed When Building Your Own House (And Giveaway!)

This month we're talking about the book Be Your Own House Contractor. Today, we'll highlight the fact that you don't need to have any building skills yourself to build your own home:

You need to know very little about the actual building process to be a general contractor. You don't need to have technical knowledge about framing or bricklaying or wiring. Your subcontractors will know their business just as mine do.

Your roles as a general contractor is to be an organizer and a manager, not a tradesman. Your responsibility is to get the job done by other people. If you can estimate your costs, control those costs, and deal with people in a fair manner, you can build your own house!

Your job of planning, estimating costs, and organizing will be 90 percent complete when you break ground.

He makes it sound so easy, doesn't he? Personally, I'm glad building your own home doesn't require any special knowledge or skill since I have none. :-)

Want to know more? You can win a free copy of Be Your Own House Contractor. Here's how it works:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Rule of Thumb: Expect to Sell Your House for 10% to 17% Below Appraisal Value on Average

Here's a rule of thumb from Bankrate on what you can expect to sell your house for these days:

Assuming the home is in excellent condition and your local housing market is suffering from the widespread weakness we've seen in the past year or so, you'll probably list the house around 5 percent off the appraisal price and get offers from 5 percent to 12 percent below that.

A few comments on this:

1. First of all, this rule is valid if your home is in "excellent" condition. And "excellent" is defined by the potential buyers, not by a seller who usually has biased thinking (they often think their home is in better shape than what it actually is.)

2. Local housing conditions vary from place to place -- one area can be way down, another one can be at the national average, and another can be way up -- all within the same city. This rule of thumb is for a market going through the same dynamics our nation is as a whole.

3. In my recent house hunting, I've seen some big drops. A house was initially listed at $675,000 (not that we were looking at buying it -- it's way above what we want to spend -- I just found it on a website while browsing) but had sat on the market for a year and was now at $579,000. Another house we looked at dropped its price by 5% after three months on the market and no action. Our agent said she think it could go down another 15-20% before it is sold. (And they didn't price it THAT high out of the gate.) I'm estimating our home is worth 20% less than it was a couple years ago. It's crazy!!!!!

The Economics of Building a House (And Giveaway!)

This month we're talking about the book Be Your Own House Contractor. Today, we'll highlight the basic costs associated with building a house:

Say that as a contractor, I build a house that I am offering for sale to the general public. My costs would typically break down as follows: the land usually costs 25 percent of the selling price, with labor and materials taking another 50 percent. That gives me a gross profit of 25 percent.

The book goes on to say that the builder has to pay overhead costs and possibly a sales commission out of this 25%. This leaves him with about 9% net profit before taxes. These are costs you won't have as your own contractor, hence you don't have to pay them -- and thus save 25% building your own house.

Want to know more? You can win a free copy of Be Your Own House Contractor. Here's how it works:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Home Foreclosures Up Big -- Michigan in Top 5

Here's what the nation is facing regarding foreclosures:

A data firm says the number of U-S homes facing foreclosure surged 58 percent in the first six months of the year.

And here's how it's hitting home for me and the rest of my fellow Michigan residents:

Michigan had the nation's 5th highest rate of foreclosure filings with 40,000. California, Florida, Texas and Ohio had the highest number of homes receiving foreclosure-related notices.

Ahhhh. But yet another reason to love living in Michigan. ;-)

Actually, this is a great opportunity -- if you're a buyer (which I am.) But I need a way (preferably free) to find out what foreclosures are available in my market. Anyone know of a site that offers foreclosure info free?

Free Cost Estimating Software (And Giveaway!)

This month we're talking about the book Be Your Own House Contractor. I just received the following message the other day from the book's author:

I have made my cost estimating spreadsheet software program free on my newly designed website.

For those who don't have Excel or don't know how to format Excel spreadsheets, it's a boon! (There is also a free formatted Excel download for folks).

We'll talk more about how to use the spreadsheet as we get further into the book. But for now, if you want to check out the spreadsheet, click this link.

FYI, Carl also has a blog in case you're interested.

Want to know more? You can win a free copy of Be Your Own House Contractor. Here's how it works:

1. Leave a comment below -- any comment.

2. Sometime on Monday, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Is It Really that Easy to Build Your Own Home? (And Giveaway!)

This month we're talking about the book Be Your Own House Contractor. The book's basic premise: you can save 25% on building your home by being your own general contractor and you don't need specialized knowledge to do so. Most people love the "save 25%" part but are leery of the "it's easy to do" part. But here's what the author says:

Just remember, every builder in the world started with their first house. Most of us didn't have a book or a website to guide us. You do.

[The book] won't teach you about wiring or plumbing, because you truly don't need to know. It will teach you how to find, hire, supervise, and pay the professional electricians and plumbers who do know how, and at builder's cost. That's the role of the general contractor.

Want to know more? You can win a free copy of Be Your Own House Contractor. Here's how it works:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Forget Biweekly Mortgage Payment Plans

For people wanting to pay off their mortgage early, a biweekly mortgage payment plan is a popular solution. Some details on these plans:

Normally, you make twelve mortgage payments a year. Since there are fifty-two weeks in a year, a bi-weekly mortgage equals 26 half-payments a year. The equivalent would be making thirteen mortgage payments a year instead of twelve. By applying that extra payment directly to the loan balance as a principal reduction, your loan amortizes more quickly, requiring fewer payments.

But Bankrate that suggests we all forget biweekly mortgage payment plans and simply make the extra payments ourselves:

I'm not a fan of biweekly mortgage payments. They don't do much for you, and they tend to cost a lot in fees and expenses. You can do as well on your own by making an additional principal payment each month with your current mortgage.

This is what we did when we paid off our house. We simply added an extra payment here and there as money came in from bonuses, gifts, savings and the like. Yes, this approach does take discipline (you need to make the payments when you have the money), but it's not all that hard is it?

Why pay for a biweekly service when you can be more flexible and have no cost by paying it off yourself?

You Can Save More than 25% on Building Your Own Home (And Giveaway!)

Here's a thought from Be Your Own House Contractor:

Over the past 30 years, I've been involved with thousands of owner/builder projects and have seen some people save more than 25 percent. It all depended on how well they shopped and how well they controlled the costs. If you want to save a little more money, you can even do some of the labor yourself, if you know what you're doing. If you don't, just settle for a 25 percent savings as the general contractor.

This is what my co-worker did. He's very handy and did a significant portion of the work on his own home -- and he saved a ton (he estimates he saved $70,000 through good shopping and doing part of the labor himself.)

Me? I'd need to settle for the 25%. I'm fairly handy, but I'm not sure I'd want to live in a house I helped to build. ;-)

Want to know more? You can win a free copy of Be Your Own House Contractor. Here's how it works:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and

won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Save Money By Paying Your Mortgage Bi-Weekly

Here's a piece courtesy of the e-book Banking Secrets Revealed:

Most people are accustomed to making one mortgage payment each month, usually on or about the 1st day of the month.  Did you know that you can save thousands of dollars over the life of your mortgage by making one-half of your payment every two weeks instead of your whole payment once per month?

When you pay your mortgage once per month, you’ll make 12 payments during the year.  By paying your mortgage every two weeks, you’ll make 26 bi-weekly payments or the equivalent of 13 monthly payments.  You’ll be making one extra monthly payment per year which shortens the term of your mortgage and saves you thousands of dollars. 

The savings using a bi-weekly payment schedule can be substantial.  Assuming a $200,000, 30-year mortgage at 6.5%, your savings would total over $60,000 and the term of your loan would be reduced by six years. 

Call your credit union or bank about bi-weekly mortgage payments.

What's It Cost to Build a Home? (And Giveaway!)

Here's a thought from Be Your Own House Contractor:

What is the actual cost to build a house?

About 75 percent of what new homes sell for in your area.

This is where the author gets his opinion (which has been proven to be fairly accurate through many years he's advised people) that you can save 25% on building your own house by being the general contractor. Here's a quote from his experience:

Back in the 70's, a friend who was a home designer suggested that I build my own home. I told him he was crazy, that I didn't know anything about building...I was skeptical, but I tried it. I saved more than 25 percent, and it was so easy that I changed careers.

Want to know more? You can win a free copy of Be Your Own House Contractor. Here's how it works:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Home Sellers Yield High Returns Investing in Curb Appeal

Here's a piece courtesy of ARA Content on how to easily add value to your home (in preparing it for sale):

When selling a home it pays to perk up where you park.

“A remodeled kitchen and bath can help sell a home, but curb appeal is what gets buyers through the door,” says Betty Jane Garrett, a licensed agent with Paradigm Realty in Oklahoma City. “If they don’t like what they see from the street chances are they won’t waste time going inside.”

An old worn out garage door, even on the cutest house, can change “Honey, stop the car,” into “Keep driving,” in an instant.

Realtors in a nationwide survey say replacing your garage door prior to listing your home can increase its curb appeal and the asking price -- anywhere from one to four percent. That's no surprise considering homeowner demand for more storage space has made three-car garages an architectural standard, not to mention, a major design focal point.

If you are thinking of upgrading your home’s garage appeal you may want to consider something more than a standard steel panel door. According to “Professional Builder” magazine, designer garage doors are one of the "50 Must-Have Features for Today's Home Buyers."

“We had a seller last fall who replaced existing 70s style flush panel garage doors with Clopay carriage house style doors and it changed the entire look of the house,” adds Garrett. “It sold for full asking price the first day on the market and the owners made a profit. The interior had been upgraded -- but it was the exterior that the buyers fell in love with at first sight.”

Garrett offers these additional suggestions to help take your home from “for sale” to “sold.”

1. Paint the front door a bright color. Nothing says welcome home like a cheerful front entry. It’s an easy affordable way to freshen up a paint scheme without having to repaint the entire exterior.

2. Change out-dated light fixtures -- or add lights if you don't have some already. Light up your doorways, driveway and walkways. Better to have more lights at lower wattages than one, very bright one. Spotlights angled to highlight trees and bushes create a dramatic nighttime effect. Solar lights that charge during the day are easy to install yourself.

3. Mulch. It makes landscaping and beds look tidy, crisp and well maintained and helps minimize weeding.

4. Plant flowers. This is always money well spent because it adds charm and life to any exterior. Even if you don’t have a green thumb, invest in some planters and have a local nursery fill them with annuals that thrive in your climate and place them at major entry points.

5. Re-surface your driveway. Instead of a black top or smooth concrete, consider stained or stamped concrete patterns. This can do wonders for curb appeal.

To obtain a free Ideas & Inspirations book and learn more about how you can transform your home in less than a day with a new garage door log onto www.clopaydoor.com or call (800) 225-6729.

Interview with Carl Heldmann, Author of Be Your Own House Contractor, Part 3 (And Giveaway!)

Here's part 3 of my interview with Carl Heldmann, author of Be Your Own House Contractor.

Free Money Finance (FMF): How much time and effort will people need to put into being their own contractor?

Carl Heldmann (CH): This will differ for each individual, but you will spend more hours planning and preparing than you will on the construction site.  You may spend a month or several months of your spare time in the planning stages.  Plan well and shop well.  Find the pieces of the puzzle that will become your home and have fun doing it.

FMF: Is there additional information you have available other than what’s in the book?

CH: Indeed there is.  The website has affordability calculators, cost estimating spreadsheets, and current cost to build anywhere in the United States. 

FMF: What are the highlights of the website?

CH: On the website are construction photos with tips, to show you the different facets of construction that will probably be unfamiliar to you.   There are also links to valuable recourses, such as the better house plan sites, design software, free contract forms, and construction lenders.

FMF: Your book has been quite popular.  Can you talk about how many you've sold through the years and where they are currently selling now?

CH: Over 500,000 aggregate sales and growing as housing affordability sinks to record lows.  All my books are available at any bookstore (brick and mortar and online) and public libraries.

FMF: Do you have any personal testimonies from people who read your book and then built their own home?

CH: The best testimony I can give you is that in financing owner builders in Michigan for 20 years, I have had many who have done this more than once. They so enjoyed the process and were so happy with the resulting savings that they built another home, or a second home, or a bigger home.

FMF: Is there any other advice you’d like to give Free Money Finance readers?

CH: Don’t get discouraged. It’s not as complicated as most people think. There are a lot of people out there who will help you in all the phases of being your own general contractor. Many offer free help.  I am one of them. My web site is free and so is my book…at the library (be sure to return it).
-----------------------------
Or, you can win a copy here!

Now for today's giveaway of a copy of Be Your Own House Contractor. Here's how it will work:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Set the Stage for a Quick Home Resale

Here's a piece courtesy of ARA Content on staging your home to sell it:

In this buyer’s market, how do you make your home stand out in a sea of “For Sale” signs? According to the International Association of Home Stagers, investing in small improvements that make your home look more inviting and appealing to prospective buyers can increase its ultimate sale price by 7 percent and make it move up to 100 days faster.

Experts say that it’s the little touches -- like a fresh coat of paint, updated window coverings or a new floor -- that make all the difference. And since the decision to purchase a home often is made within eight seconds of walking in the front door, it’s crucial that spaces where the eye automatically rests (such as walls, windows and floors) are impeccable.

Follow these quick and simple tips from the experts to increase your home’s chances of selling sooner rather than later:

Lighten Up

Light is the second most cited reason -- behind location -- for a buyer to choose a property. One easy way to illuminate your home’s interior is through paint. Neutrals always make a safe choice, but nothing says sunshine and warmth like yellow. While this shade won’t work for every area, it can be beautifully incorporated into public spaces like living and dining rooms.

According to Barbara Richardson, director of color marketing for ICI Paints (maker of the Glidden brand), yellow has the natural ability to elevate our mood and make us think of opportunities and possibilities. Richardson suggests pairing yellow hues with complementary shades of blue-violet on a home’s walls to make the color truly sing.

Combined with dark woods or white accents, the color takes on a classic look and adds a sunny disposition to an interior. And for an even quicker way to inject a touch of vibrancy to any room, Richardson recommends yellow accessories -- such as pillows, artwork, rugs and vases.

Create a Clearer View

Prospective buyers are curious to know how a new home will change their perspective on the world. Don’t obscure the view of a beautiful natural landscape or a charming street with heavy curtains. Consider replacing draperies with sheer or solar shades. For instance, LightWeaves from Graber allow light to be filtered and diffused, while maintaining a clear view to the outside and reducing glare on television and computer screens.

And once you’ve installed shades that let the sun shine in, don’t forget to make sure all of your windows are sparkling and dust free prior to an open house. It also helps to add a breath of fresh air and reduce stuffiness by opening up windows an hour before visitors are expected to arrive.

Put Your Foot Down

Scuffs, stains and scratches under foot can make a home appear older and unkempt.

Cover worn carpet and torn vinyl with laminate flooring. According to Don Cybalski director of design for Pergo, laminate is inexpensive, durable and easy to install in just a weekend. Not only does it closely replicate the look of real woods -- from cherry to oak to maple, and even the hottest exotics like merbau, jatoba and bamboo -- but it also maintains a “like new” appearance for longer. Laminate is guaranteed to effectively stand up to the wear and tear of hundreds of footsteps that may track through your home while it’s on the market.

For more information on home staging, visit www.iashp.com.

Interview with Carl Heldmann, Author of Be Your Own House Contractor, Part 2 (And Giveaway!)

Here's part 2 of my interview with Carl Heldmann, author of Be Your Own House Contractor.

Free Money Finance (FMF): What are the keys/steps needed for people to save at least 25% (what do they need to do)?

Carl Heldmann (CH): People wanting to build have to visit as many new homes under construction as they can to get ideas on style, size, and quality.  Whatever a particular house is selling for they should be able to build it themselves, on a comparable lot, for approximately 25% less. This is the initial step. Then, they can start looking at house plans, estimating, etc., as explained in my book and web site.

FMF: Where do people save the 25%? (Can you break it down into sections like: save 10% on materials, 5% on labor, etc?)

CH: The breakdown of the selling price (market value) of a house is ideally: 25% material, 25% labor, 25% land cost, 12.5% builder profit, & 12.5% builder overhead. All builders must juggle the material, labor, land & overhead costs. This is what it’s all about. If you absolutely must have a certain expensive material item or subcontractor, you have to compromise and spend less on something else. A builder does all this in the planning stage on paper (a spreadsheet), not after construction starts. If it doesn’t work on paper, it surely won’t in reality.

What you are saving is the builder's profit and overhead.  Your savings are based on the difference between what the house will sell for when finished (the market value) and what it cost you to build. If it costs you more than a professional builder to build, your savings will be less. But even a 15% or 20% savings is a lot of money.

FMF: Can anyone really do this? Even someone with no building/do-it-yourself skill at all?

CH: I did it on my first house and thousands of people like me do it every year.  I am involved in their construction financing and I know this to be a fact.  Remember, all builders started with their first house.  They come from every walk of life, bankers, teachers, trades people, housewives, etc.  It’s not being skilled at construction that matters, it's being able to hire those who are (subcontractors).

FMF: The biggest issue I see is people thinking they can’t do it. Can you tell me why they can?

CH: The reason they think they can't is fear of the unknown.  My book and website should remove this fear.  If you love to shop, you will do well.  That’s what construction boils down to.  Finding the right materials (and labor) and putting them together to fashion the home of your dreams.

-----------------------------
That's it for today. Stop by on Monday and we'll have more.

Now for today's giveaway of a copy of Be Your Own House Contractor. Here's how it will work:

1. Leave a comment below -- any comment.

2. Sometime Monday, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Builders Taking a Hit in Michigan

To add a bit more information to the situation/opportunity we find ourselves in as we look for a new home, here's a recent report on what's happening to builders in our area:

Single-family home starts through the first half of the year are down a combined 36 percent in Kent and Ottawa counties from last year, and down 56 percent from two years ago.

The industry is being hard hit by Michigan's sluggish economy, with some of the highest unemployment in the country as well as a swelling inventory of existing houses for sale.

Down 36% and 56%? Ouch! I'm not sure how these guys can stay in business. Either there's just so much profit in each house that they can survive on a fraction of what they used to make or maybe they've simply had to let some workers go.

A builder friend of mine told me that he's doing a lot of add-on and remodeling work these days simply to keep his guys busy.

Now the question is, as a buyer, what's the best way to capitalize on this situation? Is it to wait? Or to buy now knowing there's a drop still left but that no one buys at the bottom? Or is the drop off so bad that there's a long, long time (a couple years) left before we see positive movement again?

So many factors to consider...

Interview with Carl Heldmann, Author of Be Your Own House Contractor, Part 1 (And Giveaway!)

Here's part 1 of my interview with Carl Heldmann, author of Be Your Own House Contractor.

Free Money Finance (FMF): Tell us in your own words what “Be Your Own House Contractor” is about.

Carl Heldmann (CH): My book and web site teach you to act as your own general contractor, the person who organizes the whole project, not the one who actually does the work, swinging the hammer, thus saving 25% without lifting a hammer (thus the subtitle).

FMF: Who should read this book?

CH: Anyone who wants to save a lot of money on a new house.  Even if people don't build their own house, the knowledge they gain about construction is invaluable. Dean Johnson of PBS’s Hometime says, “It provides an excellent overview to the business of building a house, and we recommend it to anyone building a house, whether you self-contract or not.”

FMF: What will readers get out of the book?

CH: Knowledge is power and reading this book helps you take charge of the largest purchase you make in your life.  It gives an insight into the construction process and demystifies homebuilding and debunks its myths.

FMF: You say that people can save 25% on building their own homes. Is this really realistic?

CH: It is very realistic.  Some people will save more, some will save less depending on how well they shop for labor and materials.

-----------------------------
I'm cutting it off here for today. Tomorrow we'll get into the specifics on how you can save 25%. Be sure to come back and find out!

Now for today's giveaway of a copy of Be Your Own House Contractor. Here's how it will work:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Selling Your Home in a Buyer’s Market

Here's a piece courtesy of ARA Content on how to sell your home in a buyer's market:

Selling a home can be a daunting task for any homeowner, and in a “buyer’s market” the process can feel overwhelming. While many sellers think that homebuyers have the upper hand, with a little patience and a few helpful tips from GMAC Real Estate, you can successfully sell your home.

The Price Is Right

The number one factor in the sale of your home and one of the most critical elements of the sales process is setting the asking price. While you want to get the most appreciation from the sale of your home, you also want to be realistic when setting your price.

“Sellers need to work with an experienced real estate professional who can help them establish a realistic value and price for their home”, said Lane Barnett, president and CEO of GMAC Real Estate franchise operations. “Setting a price that is unrealistic and too high can reduce agent and buyer interest, and can make other competing homes look like a better value.”

On the flip side, it’s critical to not underprice your home when looking to sell. Your real estate agent will research and provide you with data on current market conditions in your area.

Remodel

Remodeling is a great way to increase your home’s value in a more challenging market. Remodeling a kitchen or bathroom generally offers the highest percentage return on your initial investment according to numerous industry surveys. Another rule of thumb is to decorate your home so it appeals to the broadest number of potential buyers. Buyers generally prefer neutral, mainstream designs, so avoid bold colors or patterns or out of date designs that can make it harder to sell. New paint, a nicely mowed lawn and attractive landscaping can go a long way in enhancing your home's curb appeal.

Identify Potential Problems

Hire a home inspector to help you identify any potential problems before you put your house on the market. Also, make sure your home complies with all local housing codes.

Presentation Is Key

The presentation of your home when you are listing it plays an important role in attracting a buyer. As with choosing an asking price, look at the condition of your home through a buyer’s perspective.

“Sellers need to understand the importance of how their home looks to prospective buyers and really need to put themselves into the shoes of the buying public,” said Barnett. “Potential buyers will examine every nook and cranny of your house as they begin to think about making a purchase.”

Overall Marketing

Your real estate agent will prepare your listing for the multiple listing service as well as create an advertisement for the Internet and any materials that will be made available to those who visit your house. More and more, the first impression of your home that many potential buyers have comes from it being seen by buyers using the Internet. It is important to offer a wide variety of photos of both the inside and outside of your home. 360 degree virtual tours of your home are another popular choice to consider. Also, the description of your house needs to be accurate and complete to grab the attention of the potential homebuyer.

When selling your home, remember that an experienced real estate professional can not only help you sell your home for the highest price, but also in the shortest time. Your agent should serve as your trusted advisor, your skilled negotiator and your marketing coordinator every step of the way. From pricing to closing day, these professionals can make you a pro at selling in a buyer’s market. For more information or to find a realtor in your area, go to http://www.gmacrealestate.com.

Review: Be Your Own House Contractor (Free Giveaway Too)

If you're thinking of building a house, buying a house, selling a house, adding on to a house, living in a house or doing anything house related, August is your month at Free Money Finance. Or, if you simply like FREE STUFF, August is your month too!

I'll get to the free stuff in a bit, but for now I want to talk to you about an absolutely great book. Be Your Own House Contractor is simply about what it says it's about -- how you can (and should) be your own house contractor.

Why? Because you can save a TON of money.

But you have no experience? Doesn't matter.

I first came in contact with this book when I checked it out from the public library (because we're looking at homes and may want to build our own place.) When I brought it home, my wife said something like, "Wow, you're really ambitious" or some sort of related "yeah, like you're going to do that" comment. I told her I just wanted to know more about the building process in case we decided to build a house.

But as I got into it, Be Your Own House Contractor convinced me that I could be my own contractor. And even if I didn't do everything the book said, I could do a lot of it quite easily and save a ton of money.

I was so taken with the book that I decided to contact the author. I went to his website and discovered he lived in the same city I do! I emailed him, he sent me his phone number, we talked, and we decided to bring you some great content and freebies related to Be Your Own House Contractor over the next month.

Here's what to expect:

1. I'll be posting every week day on the book -- giving just a snippet of it's wisdom and commenting on it. I'll do this after I run parts of an email interview I did with the author. Believe me, there will be lots of good stuff here!

2. In the same post, I'll be giving away a free copy of Be Your Own House Contractor to one lucky reader. Since there are 23 week days in August, that means I'll be giving away 23 copies of the book. Plenty of chances to win!

Let me conclude with the book review before I get to today's giveaway. I'm not going into detail on what the book says other than what I've said above -- you can save a ton of money building your own home if you become your own contractor. And no experience is necessary. Don't believe me? Stick around through August and see what you think then.

As you can tell, I love the book and I'm giving Be Your Own House Contractor 8 Stars.

And, for you cynics out there, let me say that I have NOT received any money for promoting this book -- I really do love it. I have received some free copies, but I'll be giving those away.

Now for today's giveaway. Here's how it will work:

1. Leave a comment below -- any comment.

2. Sometime tomorrow, I'll stop by the post, stop the submissions, and name the winner.

3. It will be that person's responsibility to check back to see they are a winner and then email me their contact information.

4. I'll send all the winners their books in one mass mailing going out the second week in September.

A few rules for these giveaways:

1. You can not win more than one prize.

2. I will be the complete and final judge.

3. Legal disclaimer: I can not guarantee safe delivery of the items. I'll send them via US Mail, so it's likely they'll be fine, but I can't control it and won't be held accountable if the mail system messes up.

4. If you win something and do not contact me within a week of winning, I reserve the right to give your prize away to another winner. Note again: I won't track down the winners -- it's your responsibility to come back and see if you won.

Good luck! Post a comment below for a chance to win this book!

Do’s and Don’ts to Finding the Right Real Estate Agent

Here's a piece courtesy of ARA Content on the do's and don'ts of finding the right real estate agent:

Many Americans are thinking about moving, for any number of reasons from seeking a home with more space to moving because of a job change. Buying or selling a home is likely one of the biggest financial transactions you will ever have, and it can often be a complicated and time-consuming endeavor. By enlisting the help of a real estate professional, the process can be made considerably less stressful and much more enjoyable.

So what’s the benefit of using a real estate agent? A full-service real estate agent can provide you with suggestions for getting your home ready for sale and information on prices of comparable properties to help you establish an asking price. When it comes time to list your house, an agent can advertise and market your home and show it to prospective buyers. Once you have an interested buyer, a real estate agent can help you negotiate with interested buyers as well as make arrangements for the closing.

As you begin the process of buying or selling a home, look for a seasoned, knowledgeable real estate professional who understands local market conditions and has the specific experience to best meet your needs. With a little upfront research and some helpful hints from GMAC Real Estate, you’ll be on your way to finding the best real estate agent for you and your family in no time.

• DON’T -- Go with the first real estate agent you meet. Take the time to interview several agents to figure out which agent will best meet your needs.

• DON’T -- Let family members or friends “give it a go” at selling your home. While it would be nice to help a loved one or friend get a foot in the door and a commission, it is best to go with a real estate professional with experience and a proven track record in your marketplace.

• DON’T -- Use part-time agents; those who practice real estate in their spare time. Real estate transactions are complex endeavors and you need agents who are committed to your transaction (and their career) and who know the ins and outs of transactions.

• DO -- Check with family and friends for the names of agents they would recommend.

• DO -- Find agents who specialize in your neighborhood and your specific type of home. Interview agents with experience that matches your needs and make sure to ask whether they have a comprehensive customer satisfaction plan in place. Find out what their customer satisfaction rating is and whether they will put in writing, up front, the services they will provide for you.

• DO -- Ask agents for a market analysis that allows you compare your house to others to ensure that the agent you choose has done his or her homework and fully understands the nuances of your market.

• DO -- Ask each agent to share a list of past houses he or she has sold, including the list price and the price at which the house was sold. Also, ask for the average length of time it took to sell these houses as compared to the average length of time for other houses in your market.

• DO -- Carefully compare the proposed marketing plans for your home that each agent presents to you. How your home is marketed will play a central role in its sale. Be sure to pay extra attention to how your property will be marketed online. Ask your agent how he or she plans to drive traffic to your home to generate multiple offers.

• DO -- Ask agents for references from their last three clients. If they hesitate, they are likely the wrong agent for you.

• DO -- Check for the personality “click factor” of your prospective agent. In addition to choosing the agent who offers the kind of experience you need to help you buy or sell a home, select someone whom you will enjoy working with.

Impressions from House Hunting

As most of you know, we're currently looking at buying a new house. We've been at it for a couple months now, so I thought I'd share some impressions I've had so far with you:

• Some agents are desperate to make a sale. You can see it on their faces, hear it in their voices, and (almost) smell it on them. Seems to be lots of very nervous/panicky real estate agents out there.

• Then there's the "why are they even agents" group. I've had several agents that I've called -- some a few times -- and they never even call back. What's that about? You'd think that in this market they'd all be calling back in 15 seconds or less.

• There are lots of choices for us as buyers -- existing homes, foreclosures, building a new house and several options on even how to build. Lots and lots of choices. But we're in no hurry, so we're sorting/working through all those bit by bit. (BTW, anyone know a GREAT resource/tip for finding out foreclosure information?)

• There aren't as many choices for us as sellers. We've seen some houses in our neighborhood and nearby sell for unbelievably low prices. Either the sellers are trying to unload their houses for personal reasons (pending foreclosure, divorce, job relocation) or they've discovered the house is built on a toxic waste dump. Or maybe the market is just that bad. If so, all I can say is "yikes!"

• It takes a TON of time and effort to find the right place. It's worth it, of course, but boy does it suck time out of a week.

How to Sell Your House in a Bad Market

Here's a piece that recently ran in our local paper (I hope the link works -- they sometimes are quick on the trigger to take pieces down) that give some success stories on how people have sold their houses in a bad real estate market. And when I say bad, I mean bad:

At the end of June, there were 11,643 homes for sale in this area -- a 32 percent increase over the past two years.

And estimates have that the average home price is down 6% to 9%. Believe me, it's bad.

If the article remains up, you can read all the stories, but the tips included basically come down to these:

• Make your home look as good as possible (complete cleaning, staging, small repairs, remodeling terrible areas)

• Price it competitively -- for what it's really worth in the current market

Simple? Sure. Followed? Not usually.

I've been in several houses recently as we may be buying a new house, and I can tell you that most people ignore both of these tips. Sure, they run the vacuum over the carpets and dust a bit, but there are still nicks in the walls, bad paint, cracks in the ceiling and the like -- all simple things that could be repaired and make the house look a 100 times better.

Furthermore, most people are pricing their home at what they'd like to get out of it -- not the actual market selling price. We've seen several properties that we looked at two months ago already come down $10,000 or so. And there's more room to drop. As such, our strategy is just to keep looking and take our time doing so -- prices are going nowhere but down.

Home Prices Take BIG Drop in My City

Here's a piece that's almost a month old (don't know how long the link will last -- they change them frequently) on how home prices have dropped significantly in my city. The details:

The average price of a home sold in the Grand Rapids area during June was $151,142 -- nearly 6 percent lower than last June and 8 percent lower than two years ago.

But this information is actually better than the real selling prices. What do I mean? Well, sellers are offering all sorts of incentives to get people to buy and these incentives are not reflected in the final selling prices:

If a seller offers three months worth of mortgage payments, $10,000 cash back, free propane heat for a year, a plasma TV or a two-year lease on an H-3 Hummer -- all things that have been offered with homes in the past year -- their value would not be reflected in the price used to calculate area statistics. If they were subtracted from the final figure, the home's actual sale price would be lower.

So, the questions remain of how often incentives are used and how much they're worth. Here's an educated guess:

By the first six months of 2007, the incentive values had risen substantially. Out of 36 homes sold, 19 had a seller contribution and those were worth 6 to 7 percent of the price.

"And even beyond that, not all brokers are reporting if there is a seller contribution," Carlson said. "You're supposed to, but I'm telling you that they don't."

So let's be conservative and say that 50% of the homes had extra incentives worth 6% tacked on. This would impact overall prices by another 3% down (50% of 6%) and result in "real" house prices being down 9% versus last year (6% they are documented being down plus another 3%.) Ouch!!!!!

Man, now it's getting REALLY brutal.

The Ins and Outs of Finding an Apartment

The following is a guest post from Well-Heeled -- a recent college graduate living & working in a big city:

After finding a job with a 401K and graduating college, I have experienced another rite of passage: hunting for my first apartment.

Some things I've learned from my search:

1. Define my negotiables and non-negotiables. In other words, separate the "needs" from the "wants." I detest commuting, so first priority was to find a place within 3 miles of the office. Everything else was secondary. So that meant that the 2 bedroom with hardwood floors & indoor pool 10 miles away was never in the running.

2. Set aside a sum of money for the security deposit, application fee, broker's fee, etc. I didn't use a broker, but the application fees ($25-$35 a piece) can really add up. Apply to 3 apartments and it's almost $100. Having cash equal to 2 month's rent ensures that I wouldn't lose out on an apartment because I couldn't afford the holding deposit.

3. Send certified mail, preferably with signature receipt. If I'm sending $2,000 in money order to a landlord I've met once, I DON'T want the money to get lost.

4. Find a good roommate. For a recent grad such as myself, living with a roommate allows me to 1. lower my rent, and 2. have someone to talk to when I get home from work. I lucked out that my good friend and I will be renting together - we are both responsible and credit-worthy. Having a roommate that I can 1. depend on to pay her share of the rent and 2. be friends with is a huge plus.

5. Have a basic agreement to prevent hurt feelings and misunderstandings. My roommate and I are both fairly low-key. We've agreed to not have cable or housekeeping service. The apartment doesn't have AC, and it doesn't get that cold until the middle of winter, so I don't foresee a lot of arguments over electricity or gas usage ('cause, honestly, who'd want to fight over 2 degrees over the thermostat?). The only "want" we want is high-speed DSL.

Housing around my work area is quite expensive, but so far the process has been fairly painless because of both luck and preparation.

Mind Over Money -- My House is Worth More if I Think It's Worth More

Here's a very interesting fact I found on Yahoo -- people seem to think their houses are worth more this year than last year. The details:

Although existing homes are selling at their slowest pace in four years, most Americans are confident their homes are worth more now than they were a year ago, according to a survey released on Thursday.

A poll conducted by the Boston Consulting Group found that 55 percent of Americans believe their house would sell for more money now than last year, compared with 59 percent who felt the same way last summer.

What are these people smoking? Sure, in some localities home prices will increase versus last year. But 55% of the country? Seems high to me. I think people are just 1) optimistic, 2) emotionally attached to their home (and thus not able to make a reasonable valuation) and 3) not wanting it to sell for less because they couldn't afford to sell it for less.

Consider these facts in support for my thoughts:

Homeowners remain optimistic even though existing home sales last month hit their lowest rate since June 2003.

While record rates of homes entering foreclosures and weak sales figures have troubled analysts, 63 percent of the 1,007 homeowners surveyed still see real estate as a solid investment.

Then again, maybe they are right after all:

National surveys of home prices seem to bear out at least a degree of optimism, showing prices still rising, if only slowly.

According to the Office of Federal Housing Enterprise Oversight, the average U.S. home price rose 4.3 percent over the year ended in the first quarter, the smallest gain in nearly a decade.

I'm wondering if these averages are being driven by higher-priced homes that are skewing the results upward. I wonder what the median price increase (or decrease) is.

In the end, I think we'll be fine. The piece comments:

Eighty-five percent expect their home to be worth even more in five years than it is now.

I agree with this. In the long-term, I think housing prices will go up. But for the next couple years or so, I'm not so sure -- especially in my area of the country where things are worse than average. Great time to buy, though. ;-)

Here's How You'll Know When the Housing Rebound Has Started

We all know that real estate has had a less than stellar performance of late (I can tell that by looking at the estimated value of my home -- not to mention the dire reports on the housing market in my city). And most people are wondering when we'll hit rock bottom. No one knows the answer to this question, but Money magazine does take a shot at telling us the signs we should look for to see that the real estate market has turned around. Their list:

• Inventory is declining
• Houses are selling faster than they used to
• Realtors are feeling better
• Sellers are acting less desperate

Looks like a good list to me.

Unfortunately, it looks as if my city will be a bit behind many parts of the country in a rebound. Michigan has been hard-hit by job losses and the lack of any reasonable performance by U.S. automakers. But, of course, that means it's a buyer's market. And since I'm a buyer, that's good news for me.  Unfortunately, I'm a seller too. :-(

Is It Better to Rent and Invest Rather than Buy a House?

Here's a very, very interesting argument from a Smart Money writer. He looks at the returns people have historically seen on real estate versus those in stocks and concludes it's better to rent a place to live and invest in stocks than it is to buy a house. His thoughts:

So to sum up why I rent: Shares right now cost 16 times earnings and over long time periods return 7% a year after inflation. Houses right now cost 19 times their "earnings" and over long time periods return zero after inflation. And they look likely to return less than that for a while.

If I understand this correctly, he's saying that buying a house is more expensive (you have to include taxes, insurance, repairs, etc. in the total costs). So if you rent and invest the difference into stocks, you'll be much better off financially in the long run. By extension he's also saying that it's a bad idea to pay off your mortgage early (you have more money into a non-producing asset) and to buy a huge house (again, the more expensive it is, the more money you have tied up in an asset returning 0%.)

But it seems to me that if you buy, at least you get part of your "rent" back (even though it may earn 0% -- according to his analysis.) So if I'm paying $1,500 on a mortgage, a certain part of that is money that I'll see again (it doesn't go towards interest but to the principal of the loan.) So my effective "cost" of owning is less than $1,500 -- making the spread between renting and buying even lower.

Hmmmmm. I'm not sure what to think of this. The numbers seem to support his conclusion (if he's using the right information) and he even addresses major questions people will have about his thinking. Anyone have a perspective on whether this guy is on target or a complete looney? I know that at least Lord will have something valuable to comment. ;-)

BTW, one of the points he makes in his answers sections deals with the mortgage interest tax deduction. It's used as an argument for not paying off your mortgage early, but he says:

The tax breaks aren't really breaks at all. Moreover, a majority of homeowners don't claim them. Their incomes are low enough to make the standard deduction a better deal.

Precisely the argument I use for paying off your home early. However, he'd disagree with this as well.

So, what do you think? Is it really better to rent and invest rather than buy a home? It's such a radical concept for me, but it does seem to at least have some validity.

How Much Your Monthly Mortgage Should Be

Here's a Yahoo piece on debt, but the part that stood out to me was the section that gave guidelines on how big a monthly mortgage should be. The details:

A general rule of thumb is that no more than 28% of gross monthly income should go toward house-related debt (including taxes and insurance). Besides first mortgages, this includes home-equity loans, which allow people to take out a lump-sum loan against the house, and home-equity lines of credit, which allow people to borrow against the house over time, taking out money when needed.

A person who makes $5,000 a month before taxes, for example, wouldn't want the monthly bill for house debt to exceed $1,400.

Just to emphasize: it's 28% of GROSS monthly income, it includes taxes (which may be wrapped into your mortgage) and insurance (which probably isn't wrapped into your mortgage), and includes all types of loans against the house.

In addition, there are rules for total debt too:

Note that the 28% guideline has a caveat: Monthly debt payments for everything -- house, credit cards, car loans, student loans, etc. -- shouldn't be above 36% of gross monthly income. So if you spend 28% of your monthly pay on house debt, you have only 8% left for the remainder of your debt payments. In the example of someone who earns $5,000 a month, 8% would come to $400. Many car payments are more than that.

In other words, if your credit cards and car loans take up 12% of your gross income, then you only have 24% left to spend on you house. These are the HIGHEST numbers you should see:

And those percentages -- frequently called debt-to-income ratios -- are maximums, not recommendations for healthy living. People who spend 36% of their pay on debt are "teetering on the edge of being financially unstable," says June Walbert, a financial planner with San Antonio-based USAA, a financial-services company that largely focuses on military families.

So what's a more-realistic level of debt? Yahoo says:

She counsels clients to limit total debt payments to 20% of pretax income, so they have a buffer for surprise expenses.

A few thoughts/comments from me on this:

1. We're currently at 0%, though that could change if we buy a new home.

2. I wonder how many people stick to the 20%. Or even the 36%. Probably not many -- especially in high-cost markets. (Note: the piece says there are ways to get around these percentages with lenders.)

3. I have a specific formula for buying a house that I recommend. Key tips to make sure you can buy a house and keep below the 20% level: Live in an area of the country you can afford to live in, buy a house you can afford, and make at least a 20% downpayment when you buy.

Seven Landscaping Ideas That Can Add Value to Your Home

Here are seven landscaping ideas from Money magazine that can help add value to your home:

• Edge the beds
• Nourish the grass
• Scatter color throughout
• Cut back the jungle
• Add drama with foliage
• Consider new angles
• Cover your rear

Here's where we stand on each of these:

1. Why is it that it's hard as heck to get grass to grow in the yard but it's more than willing to over-grow bedding edges and into flower beds?

2. I fertilize a few times a year. i used to do so five times a year but all that seems to accomplish is set me up for more lawn mowing and dumps unneeded chemicals into the ground.

3. They're right -- for almost nothing you can go and buy flowers that will make your yard look great. My wife spent $30 this year and our front yard is exploding with color.

4. I'm in a battle for the corner of our house with a tree that was small several years ago and is now towering over the roof. I'm winning so far, but it's keeping me busy. ;-)

5. The one caution I'd give here is don't be too unique. When we bought our place the owner had a couple huge rocks in the front yard overgrown with a juniper bush. It took me three years, bit-by-bit, but I eventually turned it into a rose garden.

6. Same comments as #5 above.

7. We live in a sub-dividsion but we still have woods behind our house -- one of a few homes to have this. Our kids love hplaying there and we love the privacy in the summer (when the trees have leaves, you can't see the neighbors behind us.)

How much value can this stuff add? Actually, a decent amount:

A recent Michigan State University study found that depending on where the house is located, high-quality landscaping adds 5 percent to 11 percent to its price.

As stated above, I've added a small rose garden to the front of our house and my wife has added other flowers around the front too. The roses save us money and all the flowers make our house have more curb appeal, something we'll be thankful for if we ever decide to sell it.

Your House is Foreclosed On -- Congrats, You Now Owe More Taxes!

Here's a real kick-them-while-they're-down note from Kiplinger's. They note that under certain circumstances (ones that are not that unlikely to happen), you may owe additional taxes if your house is foreclosed on. The details:

If the bank sells your home for less than the amount left on your mortgage, any forgiven debt can be treated as taxable income. The IRS even has a special form for reporting this windfall: the 1099-C. The C stands for cancellation of debt and the law says cancelled debt is taxable just the same way salary is.

No one ever said that the IRS played nice, but this seems way below the belt. Talk about piling on when someone is down on their luck!

Just one more reason, I guess, to buy a house you can afford -- which is one of the keys in my formula for buying a house.

More on Buying and Selling a Home in This Market

Since we're home shopping, these next pieces really caught my attention.

The first is from MSNBC and asks how low can housing go. The piece is about opportunistic buyers who are looking over the price declines in search of a great deal. A few thoughts:

“Somebody else’s misfortune could be my happy ending,” said Montufar, 27, a resident of suburban Los Angeles.

“At this point, I’ve got no choice but to wait and see ... how low they get so that it gets to a point where I can afford it,” he said.

Those numbers have left many people trying to “time” the market to take advantage of the slump. But experts said that can be risky because there is little consensus on how long the current doldrums might last.

Ah, yes. Just where is the bottom? That's a GREAT question. Wish I had an answer for it. It would make my home-buying experience much, much better. Not to mention easier and more profitable. ;-)

On the other hand, Yahoo thinks that home prices won't go that low. Here are their eight reasons why:

1. The Sky isn't falling. The real estate market always fluctuates.
2. Real estate is unique.
3. There is no bubble.
4. Value is a complicated cocktail.
5. There is always a baseline of demand.
6. There is always a baseline of mortgage defaults.
7. There is no risk.
8. Real estate is a great way to build wealth.

They make a compelling argument. And certainly there is a bottom. But just where that bottom is is yet to be determined.

And finally, a piece from my local paper telling us how to sell a home in this market. Their thoughts:

Lesson No. 1 is finding the bottom in the bottom line. Home prices are dropping across the United States, and the Grand Rapids area is no exception.

Lots of insight from our local paper, huh? ;-)

But look at what's happening with prices:

In Kentwood, the Das family put their four-bedroom colonial at 2265 Old Dominion Court SE on the market for $245,000. Since then, they have slashed the price. "At $215,000, it's a good bargain," said Salila Das, whose family moved to Connecticut.

They are not alone. Kentwood saw an average 6.3 percent drop in prices since 2005, when the Das house first went on the market.

Yikes! Down $30,000 and on the market for two years.

Now that doesn't mean that $245k was a realistic price in the first place. But still, if it was even close, that's quite a hit.

And buyers are smelling blood -- but may be getting too confident:

Buyers can lose out if they are too picky.

Starner recounted a recent listing that sold above the asking price after a bidding war.

"I've heard buyers say, 'We'll offer 25 percent less, and they'll take it because what choice do they have?'" he said. "The choice is they can keep it."

"There is an attitude out there that is getting out of touch with reality."

Getting out of touch with reality is the first sign of 1) a deep drop coming or 2) a turn in the market. But which is it? ;-)

10 Retirement Pitfalls, Pitfall #6: Buying More House Than You Can Afford

Yahoo has a list of 10 retirement pitfalls and I'm going to list and comment on them all. Here's today's pitfall:

Buying more house than you can afford: Purchasing a bigger house than you can afford can do huge damage to your retirement fund. This is because you're placing all your money into your mortgage instead of investing a portion of it for retirement. While a house does have some tax advantages on the mortgage loan, they are not nearly as good as the tax advantages of a 401(k) plan or an IRA. It's also much more difficult to get your retirement money out of the house than from a retirement fund. While housing as an investment is something you might want to consider to create more wealth, your own house should not be viewed as a retirement investment, and you should make sure that you can pay your mortgage and contribute to your retirement fund at the same time.

Ha! They're singing my song now!!!!!

Buying a house you can afford is a key part of my formula for buying a house and is also recommended by several financial "experts" including Suze Orman.

Now I must admit that it's tempting to try and buy the biggest house you can afford (we're going through this process now as we look at homes -- trying to balance needs and wants.) But for the sake of your long-term financial health, you must control yourself, take a realistic look at your finances and then decide what size of mortgage you can afford. Because if you stretch too far, you're be tied to a financial anchor for the next 30 years that will pull you down, down, down.

Click here to read part 7 of this series.

Click here to read part 1 of this series.

Maybe I Should Rent My Home Rather than Sell It

We're in the process of looking for a new house -- an adventure that may take us a couple years or more (do we buy now, do we wait for prices to go lower, do we build, how do we sell our house -- so much to decide, especially in today's down market.) But here's an idea on the selling side I hadn't considered before (at least not seriously) -- not selling our house but renting it out instead, waiting for prices to go up (could be a few years) and then selling at that point.

What are the pros and cons of renting a house? Kiplinger has some thoughts on this, starting with the benefits:

On the plus side, you'll be entitled to tax breaks, including depreciation (you can write off a portion of your home's cost basis, or the price you paid, each year over 27 and a half years), plus deductions for maintenance and repairs (see IRS Publication 527, Residential Rental Property). And it's important to time the rental to preserve your exclusion from capital-gains tax on any appreciation in the home at the time you sell. If you lived in the home for two years out of the previous five, you can exclude $250,000 of profit if you file a single return and $500,000 if you file jointly.

The negatives seem to be two-fold: 1) can we afford this financially and 2) do we want to spend the time and effort to make it work?

The answer to the first is that we're in pretty good shape since we own the home outright and have enough for at least a 20% downpayment on the new home already saved. So for awhile, we could afford to keep both houses.

The second issue is the bigger problem in my book, but there's a decent solution for this:

Unless you want to become a landlord, hire a property manager. For a fee of 6% to 12% of the rent, a property manager will find and screen a tenant, negotiate the lease, collect the security deposit, take the tenant's 2 a.m. distress calls and ensure that you adhere to a raft of landlord-tenant laws. You may be able to find a property manager through your real estate agent, or search for a local member of the National Association of Residential Property Managers.

Hmmmm. If I could turn over much of the hassle associated with renting to someone else, would it be worth it then? Of course I'd still need to pay for replacement items such as the furnace, water heater, etc. and having someone live in the home who doesn't own it may rough it up a bit in case we want to sell. But to me it at least seems worth considering.

What do you think? Anyone out there have experience with being a landlord? Any advice you'd give me?

Foreclosures Abound in My City

Here's where a couple of my posts come together into one.

It started when I wrote that I was considering buying a foreclosed home. (No news on that by the way -- I can't get the agent to call me back.) Then I asked if the worst of the housing slump was over. Soon after I posted that second piece, I found this one from my neck of the woods saying that the housing market (and associated foreclosures) was as bad as ever. Here are the details:

Foreclosure filings in Kent County are coming in at a record pace not seen for many years. In the 1990s, there were roughly 500 foreclosures a year. In 2006, 2,500 homes foreclosed in Kent County - up 74 percent from 2005. So far this year, the Register of Deeds told 24 Hour News 8 more than 60 foreclosures per week are being filed, more than 1,000 total through April. The county projects more than 3,200 for 2007.

As I noted in my post on the housing slump, I'm in a particularly hard hit market. Michigan as a whole is in a rough place now and in our area of the state we've had several big firms close shop or announce massive layoffs.

Nationally, there are a lot of foreclosures on the horizon:

The Center for Responsible Lending said, while the subprime market produced more than $2 trillion in home loans over the past nine years, it's forecasting almost 1 million American families will fail to make payments and lose their homes.

And I found this quote particularly insightful:

Realtor Kerrie Idema told 24 Hour News 8, "I showed seven homes between $180,000 - $220,000, and three of the seven were in some state of foreclosure."

As we look for a new house we have issues both as buyers and sellers. But the buying end seems clear -- there's still room for price declines and waiting it out will probably save us a good chunk of money.

The True Cost of Owning a Home

If you've owned a home for more than five minutes you know that paying the mortgage is only the beginning to a long list of expenses we all incur when we own a home. Since I've never listed those other expenses in one place here at Free Money Finance, I thought I would today by highlighting a recent Kiplinger's piece on the true cost of owning a home. Here are the other costs they list as being part of home ownership:

• Insurance
• Property Taxes
• Utilities
• Appliances
• Furniture
• House Repair and maintenance
• Yard care
• Pest control
• Remodeling

So how much does all this add up to? Here's what the author found out:

Add this all up and -- brace yourself -- we've spent $43,555 over four years. That breaks down to an average of about $10,900 a year for Alex and me to be homeowners, and that doesn't include mortgage payments. The regular costs such as taxes, insurance and utilities are fairly easy to anticipate, depending on the home's size and location. It's your home's start-up costs and life's little surprises that you need to watch out for.

Once you've been in a home for awhile, you won't have start-up costs, but the others will be with you as long as you own a place. I've never added up all these costs (I track them in Quicken -- just never added all of them up) but it would be an interesting number to know.

If you'd like some tips on how to SAVE on home ownership costs, check out these posts:

• Save Money by Planning Your Home Improvements in the Off-Season

• Save Money and Increase Your Home's Value with a Carpet Steam Cleaner

• Getting Homeowner's Insurance (And Saving Money Too)

Is the Worst of the Housing Slump Over?

As you may know, we're house shopping so I'm really keeping in touch with the real estate market in our area (just in the beginning phases now, but I'm ramping up quickly). The latest reports nationally show that the market continues to decline, but it appears that real estate rates of decline may have hit bottom. First, the bad news from CNN Money:

U.S. home prices fell for their third straight quarter, according to an industry report released Tuesday. The median price of a single-family home fell 1.8 percent to $212,300 for the three months ended March 31, compared with the first quarter of 2006, according to the National Association of Realtors (NAR). It was the third consecutive quarter of decline, and prices are now down 6.5 percent from their peak of $227,100 in 2006.

The first-quarter drop follows an overall 2.7 percent slump in the fourth quarter of 2006, which was the biggest year-over-year drop on record.

But there's a silver lining in those clouds:

NAR President Pat V. Combs said in a statement that the flattening in home prices is encouraging.

"It appears the worst of the price correction is behind us," she said. "More stable home prices and declining mortgage interest rates are increasing buying power, which should encourage potential buyers who've been on the sidelines."

NAR's senior economist, Lawrence Yun, also took an optimistic view of the report. "Essentially, we see that the existing-home market is stabilizing in a broad cyclical trough and moving in the right direction," he said in a statement.

Yet it's not all rosy:

The trade group is still predicting a recovery during the second half of this year but overall, it has forecast that prices will end 2007 down, the first time prices fell over a full calendar year since NAR began compiling records in 1967.

So maybe the worst is over -- but that doesn't mean prices won't keep declining (even if they do so at low levels.)

And in my neck of the woods, things are much worse off. The national average was off 1.8% and yet my city was down 3.1%.

I guess I still have some time before I can buy at rock-bottom prices.

What Sellers are Doing to Sell Houses in a Bad Market

I'm seeing article after article on buying and selling houses now that I'm house shopping (and I'm saving many of them to be sure I follow the tips.) In the May 21 issue of BusinessWeek magazine, they gave several interesting facts dealing with sellers offering incentives to get their houses sold. Here are a few of the comments from the piece that stood out to me:

• The latest trend is cash enticements to the tune of tens of thousands of dollars.

• The incentives, which don't figure into the national home-price data reported by industry groups, may be masking a steeper downturn.

• Buyers often find a subsidy more appealing than a lower price, since it means they don't have to put up as much cash.

• Sellers offer to pay a year's worth of association fees, annual property taxes, or closing costs.

They also don't say it outright, but they imply that some people are selling the houses with the furniture included.

We're looking at this from two sides -- what will we get when we buy and what will we need to offer when we sell. The buying side is still TBD, but as far as selling goes, we'll be starting with a reasonable price on the house (something many people have yet to come to grips with -- they think their houses are worth way more than market price) and then cover the basics -- a little painting, some flowers in the front, clean the house from top to bottom, and so on. If that doesn't work, we'll see. ;-)

Anyone out there seeing anything really extreme? (Like buy a house and get a car as part of the deal.) I'm sure there are some very interesting stories out there.

Savings Smackdown: Which is Better -- Pre-Paying a Mortgage or Saving for Retirement?

I've gone on record quite a few times saying that I'm in favor of people paying off their mortgages. That's what I did personally, it's worked for me, and that's why I recommend it. In addition, I've seen numerous people who have decided not to pay off their mortgage and "invest" instead blow it by spending the extra money instead of investing it. Come to think of it, I've NEVER seen anyone successfully do it. So, while in theory it may be better to invest extra money versus paying off a mortgage (I'm not saying it is or isn't at this point), the practicality of the issue tilts in favor of the mortgage pre-payment option.

That said, I recommend several other financial moves that take priority over paying off your mortgage. Like what, you may ask? Like contributing to your 401k to get the full employer match, paying off your credit cards, and paying off any other debt that has a higher interest rate than your mortgage. After these, paying off your mortgage is a viable option.

But which is better even at this point -- saving more for retirement or pre-paying the mortgage? Well, a new study attempted to answer this question and they came to this conclusion:

Although mortgage rate, income tax brackets, and 401(k) contribution limits varied among households, in about 40 percent of the cases putting the money in a retirement fund beat paying the mortgage off early, the study found.

Said another way, the pre-payment option was better in 60% of the cases.

But the results aren't totally clear. Consider the following:

Amromin says the study probably underestimates the number of households that would benefit from switching a mortgage prepayment into a tax-deferred retirement account, because the researchers made a number of conservative assumptions:

• They assumed investors didn't get a 401(k) match from their employers. In reality, more than 90 percent of plans managed by Vanguard, one of the largest 401(k) administrators, offer a match.

• They presumed the investor would put the money into a low-risk investment -- Treasury bonds or highly rated mortgage-backed securities. Someone investing in equities would likely do better: Between 1926 and 2003, stocks returned an average of 10.5 percent a year on investment, while government bonds averaged 5.45 percent, according to Ibbotson Associates.

• They assumed individuals had a constant income tax rate over time. But retirees often slip in a lower tax bracket, making 401(k) contributions during peak earning years even more valuable. According to Federal Reserve data, 41 percent of households are in the top tax bracket before retirement, while only 18 percent are after retirement.

• The researchers excluded state tax obligations, which would also make the tax-advantaged features of the 401(k) more worthwhile during peak earning years. Currently, 43 states impose an income tax.

In the scenario I propose, item #1 wouldn't apply since I recommend contributing to get the full match before pre-paying a mortgage. But the other three are good points -- and are ones that likely make the saving/investing option a much better option financially for most people as long as they can actually do it (in other words, as long as they can save the money versus just spending it.) It's all good in theory, but from what I've seen it's not executed well practically. I'm not sure I could do it (and keep up with it) and I'm pretty disciplined. Maybe if I made the savings automatic there would be no way to mess this up.

And then there's the "touchy-feely" benefit of feeling better because your house is paid off. This is not a big issue for me (though I must admit that not having a payment every month is great) but is huge for some people.

So which is better? Well, if you have the discipline to save/invest the money you would be using to pay off the mortgage, it's likely that saving/investing is the better option. But if you're more the "average" person out there managing your money, I still believe it's a better option to pre-pay your mortgage.

Buying a Foreclosed Property

As most of you know, we're currently house shopping. A few days ago we looked at a house that had been foreclosed upon by a bank. The owners had trashed the place (broken out light fixtures, driven through the yard, smashed a couple windows, etc.) as they moved out, but the place was decent. With a little work, it would be very nice. And depending on the price the bank will sell it at, it could be a steal. We'll see -- we still have a lot of looking to do.

As you might imagine, foreclosure sales are up recently. The details from CNN Money:

Business, according to Webb, is jumping; it grew 20 percent during the first quarter of 2007, usually a slow period for the company, compared with the fourth quarter of 2006. He anticipates even better times for the next year or two.

I bet. We're at the beginning of this whole real estate mess (where people have over-extended themselves to buy houses they can't really afford -- taking out risky loans in the process) and there are going to be a lot more foreclosures before we see a slowdown.

I'm not sure if there's any "baggage" associated with a foreclosed home or not (maybe some of you can tell me if there is or isn't.) I'm assuming as long as the title is clear (which we'd check) and the house is sound (which we'd have inspected), then the buyer would be ok. And, of course, we could be really ok if we got a great deal. Consider this:

But most of the houses do sell for less, and about 15 percent of time "shockingly" so, said Williams.

I'm looking to be in that 15%. ;-)

Any pros or cons associated with buying a foreclosed property that I should know of? I know that I have regular readers who are more experienced in real estate than I am. Please pass along any knowledge you have to the rest of us.

Five Times Renting is Better Than Buying a House

Generally, I believe that buying a house is a better deal than renting. That said, the difference isn't really that much from a cost/return standpoint and the way things are dropping in the housing market, renting is looking like a better deal every day. Parade magazine claims that renting is actually a better financial proposition for 30% of American households. In particular, they claim that people in the following circumstances are especially likely to find renting to be a better deal than buying:

1. Your finances are a little shaky.   
2. Housing prices are rising much faster than rents in your area.
3. You don’t plan to stay long in one place.
4. Your main motive for buying is long-term gain.
5. You’d rather be traveling than fixing your toilet.

None of these really apply to me, but I can see their point on each one and agree that the more of these that are true for you, the closer renting will be to being the better deal.

The one thing I'm surprised they didn't mention was falling housing prices. After all, if prices are dropping 10-20% per year in a given market, isn't it a better deal to rent (at least until you feel the market is turning around?) Then again, if you're looking for a great return, just remember item #4 -- there are better returns to be had elsewhere.

How To Make Your Home Sell Faster

Parade recently ran an article suggesting how to make your home sell faster. Here are some of their tips:

• Scrub till it sparkles! When things sparkle, houses sell.

• Clobber the clutter. The less stuff you have, the bigger the house will seem.

• Pay attention to details. That means patching any holes in the walls, fixing leaky faucets and replacing burned-out light bulbs.

• Camouflage with paint. Paint not only makes a house look better, it also helps with odor. Pick neutrals.

• Entice buyers to enter. Go across the street to get a good look. Your eye should be drawn to the door, not to the grass that needs mowing, the overgrown weeds or that old rain gutter that has been sitting in your driveway since 2005.

• Define each room. Don’t force buyers to guess a room’s purpose.

• Use furniture wisely. And sparingly. See if you can pare down a quarter to a half of the furniture in every room. Think about visual weight as well. Big furnishings make a room seem smaller.

• Highlight key architectural elements. “The biggest mistake I’ve seen is wonderful features—moldings, leaded glass, beautiful fireplaces—hidden by drapes, cabinets and clutter,” says LaPorta.

• Let there be light. Turn on every light in the house—even in the daytime. In general, use 100 watts per 50 square feet of floor space, says LaPorta.

We're smack dab in the middle of deciding which of these to take on. As I've said, we're house shopping, but it could take us months to find what we're looking for (and as long as the market is dropping, we're in no hurry to buy or sell.) So we're now discussing a list of items we probably need to do anyway -- the main ones being repainting here and there and getting the deck re-stained. But once we do put the house on the market, you better be sure that we'll pull out all the stops. And in a month or so, my rose hobby will come in quite handy as it will make the front of our house a thing of beauty and help to spice up the inside with cut flowers here and there.

Five Tips on Getting the Best Deal in Today's Housing Market

Parade magazine recently ran a piece on whether it was time to buy or sell a home that I found interesting (especially since I'm thinking of both buying and selling right now). In particular, they listed five tips on getting the best deal in today's housing market:

• Home prices are likely to continue their decline. In most parts of the country, houses are lingering longer on the market.

• Buyers with good credit will have the upper hand. They have a bounty of homes to choose from and ample time to negotiate a better deal.

• Mortgages may be harder to come by. Banks are asking for higher credit scores and bigger down payments—but giving out smaller loans.

• A few areas of the country will see appreciation. Sales are relatively strong in places such as Utah, Texas, Wyoming and the Pacific Northwest.

• Refinancing will elude home owners who need it most. Anyone with a sub-prime mortgage may well be stuck with it.

Here's how each of these impact my wife and me:

1. Good on the buying side but bad on the selling side for us. Then again, if we're moving into a higher-priced home, we should be "saving" more on the purchase than we'll be "losing" on the sale.

2. We have excellent credit -- and no debt. So we're in a pretty good position here. And since there's no rush for us to make a deal of any sort, we're in an especially good situation.

3. We'll probably need a bridge loan at some point and then will end up with a mortgage of 20% of our new house or so. Of course, we'll work to pay that off quickly.

4. We're not in Utah, Texas, Wyoming and the Pacific Northwest. Sales are weak here.

5. Refinancing is not an issue for us.

Overall, the more I read about the housing situation the more it seems like things are really bad. I know how the media tends to over-dramatize many topics, but in the west Michigan area it seems like they're on the money and it's really, really difficult at this point for people that have to see or are locked into unfavorable mortgages.

Is Your House an Investment?

Since I'm in the market for a house, I've been writing a bit more about housing and real estate lately. In particular, I'm most fascinated by the returns on real estate as compared to stocks and with the financial advantages or disadvantages of buying a house versus renting. So when I ran into Knight Kiplinger's latest column and saw that he was addressing similar subjects, I dived right in.

In the June issue of Kiplinger's, Knight discusses the realistic expectations we should all have when it comes to the financial return on our homes (primarily, we shouldn't expect it to be a big earner in our portfolio.) Here's the last paragraph of the piece where he summarizes his thoughts:

My bottom-line advice: Don't over-invest in your home either when you buy it or when you make subsequent improvements. Buy only as much house as you need. Plan to stay a long time. Don't view your home as your primary retirement savings. Instead, invest regularly in asset classes with the best long-term results -- the stocks and bonds of dynamic businesses, both in the U.S. and around the world.

Here's my take on his suggestions:

1. I'm not sure what "over-investing" means in this context. If it means not buying more house than you can afford, I'm in 100% agreement with him. If it means it shouldn't be too much of a percentage of your net worth, I MAY be in agreement with him depending on what that percentage is. Personally, my house is 20% or so of my total net worth and that seems fine to me.

2. Again, I'm with him on the "buy a house you can afford" idea. I'm not sure if that's different than what you "need." To me, if someone wanted to buy more house than they "needed" and could afford doing so, I'd be fine with that. Our house is probably more than we "need," but we like it and the room it gives us.

3. Yes -- stay a long time. Buying and selling over and over again can be a big hit to your net worth. That and it's a real pain to move your stuff. Moving the contents of our house from one place to another is something I'm not looking forward to.

4. I'm not looking at my house as any part of my retirement savings -- other than rent free living space during retirement. I am saving in my 401k and other investment accounts to pay for our retirement.

5. Of course -- stocks are the way to go. For me, this means investing in index funds.

How about you? Do you have different views on this? Do you look at your house as a major part of your investment portfolio?

Six Steps to Avoid Foreclosure

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Here are six steps to avoiding foreclosure from David Bach:

1. Call your lender immediately.

2. Ask to speak to the "loss mitigation" department.

3. Be prepared to review your situation in detail with your lender.

4. Know the ways your lender can help you avoid foreclosure.

5. Know where to turn if you aren't getting the help you need from your lender.

6. Be aware of the foreclosure process -- and consequences.

I realize that some people who go through foreclosure are victims of unforeseen circumstances -- an illness in the family, divorce, loss of job, etc. -- but in most cases, I think people face foreclosure simply because they bought a house they couldn't really afford. That's why my formula for buying a house recommends doing what millionaires do: buy a house they can easily afford.

The WRONG way to borrow is to let a bank tell you what you can afford to borrow and then go ahead and borrow as much as they'll loan you. Run the numbers yourself, plan your budget out as best you can for several years in the process, resist stretching to the breaking point and then decide for yourself what you can easily afford. If you take these actions, you won't need the six steps David recommends.

For more on real estate, see these posts:

• Save Money When Selling Your Home

• Should You Pay Off Your Home or Not?

• Five Steps to Get Your Home in Shape for Summer

• How to Eliminate Housing Costs

Save a Ton of Money (and Potentially Financial Difficulties) by Buying a House You Can Afford

Here's a piece where Suze Orman gives some of her thoughts on protecting yourself from the wrong mortgage, but the part that stands out to me are her thoughts on buying a house you can afford:

I know this sounds un-American, but the best way to keep your mortgage costs in check is to start out with a smaller mortgage. Ideally, this is where I suggest you save up for a nice down payment of 20 percent or so. That's still my best advice, but I know patience isn't exactly in vogue these days.

Here's my second-best advice: buy a less expensive home. That is, a home you can easily handle the payments on, rather than a home that keeps you up at night worrying about the mortgage. That can mean rethinking where in the country you live, or what neighborhood you can afford.

Or reconsider exactly how much space you need. I find it fascinating that the typical square footage of a U.S. home has increased more than 40 percent since the mid-1970s, yet our family size has actually decreased slightly during the same period. A big reason housing is more expensive is because it's so much larger. Set your sights on a comfortable but not king-size home and you'll have a more affordable mortgage.

I think Suze is starting to read Free Money Finance. After all, her advice is getting much better as it's starting to mirror mine. ;-)

Anyway, buying a house you can afford (as well as making a good down payment) is a key part of my formula for buying a house. If you can follow the steps in this formula, you'll have your house paid off in 7-10 years. I know it's not popular (as Suze notes too), but this advice has worked for me and I recommend it to anyone who asks.

For more thoughts on home buying and selling, see these links:

• Save Money When Selling Your Home

• Should You Pay Off Your Home or Not?

• Details on How I Paid My Mortgage Off Early

We're House Shopping

Several months ago, I detailed my real estate investing plan for the housing decline. Since then I've been watching house prices in my target area of the city as well as general trends around western Michigan. Well, it looks like prices are getting just about where I want them. In addition, my wife and I would like to be closer to our church, closer to several friends, have a bit more land, and live in a bit of a better neighborhood. Put all this together, and we're off to races -- house shopping.

For us this means we need to sell our current house and buy a new one -- and manage all of the ga-zillion tasks associated with each of them. We took the first step last week when we met with a realtor to get his perspective on the housing market (FYI, we got him referred from a good friend in the business, so we figured he could do the job. After talking to him and seeing his sales accomplishments, we were sure of it.) Here are our initial learnings/thoughts from our meeting with him as well as our own thoughts on the move:

• The agent said that currently for every 10 homes on the market, one is sold. Ouch. That hurts us on the selling end. On the buying end, it helps us as people are much more willing to negotiate. (BTW, I just read in Money magazine that Grand Rapids home sales are down -22.7% from the previous year, so there are bound to be lots of motivated sellers and extreme competition on the buying side for us.)

• On the selling end, we are in an excellent position compared to many others. We own our house outright and we aren't locked into a specific number we "have" to have in order to meet a bank's obligations. We can look at the market and set a fair price -- not one dictated by finances that are stretched too thin because of a huge house mortgaged to the hilt.

• We have a decent amount of savings that will allow us to get into the new house without having to sell the old house. Of course, we'd prefer to sell the old house first, but if it doesn't work out that way, we can put at least a 20% downpayment on the new house without selling the old house.

• We'd be trading up in home values, which has a couple advantages. First, there are less buyers in this range, making sellers much more willing to negotiate. Second, even if they don't negotiate off going rates, the 15% price decline seen in the market overall will work to our advantage as we'll gain more on a house we buy than we'll lose on the house we sell. Look at it this example: a house that was worth $200,000 two years ago is now worth $170,000 -- we'll "lose" $30,000 if we sold such a house. But a house purchased for $350,000 today, was a house worth $412,000 two years ago -- we'd "gain" $62,000 in "worth" on the new house. I know this is fake math -- we'd still sell for the selling price and buy for the buying price, but you get the point: if there's an across-the-board 15% decline, then more-expensive homes are down more and thus "better values" in absolute dollars.

• That said, now a bigger portion of our net worth will be dedicated to real estate -- not something I'm particularly excited about. But there are some quality-of-life issues that make it worth it for now.

• The agent is willing to negotiate his commission. I'll write more on this in detail later, but since we are both a buyer and a seller, we can structure our deal with him so he still makes thousands of dollars but most of it won't be paid by us. ;-)

• We'll need to move ourselves -- not a pleasant task. The last time we move within a city was 15 years ago -- before kids, before tons more stuff, and before bad backs. ;-) It should be interesting as we balance cost versus convenience. We'll probably have movers take the big stuff and move the rest ourselves (with the help of friends.)

I'll be sharing more and more details of this move as we progress (including a few surprises for why we're moving) as time goes on. For now I wanted to tell you the basics and inform you all we're on the hunt. ;-)

Owning Versus Renting a House Nets You a 7.6% Return

In its May issue, Money magazine tackles the issues of what the annual return is on renting versus owning. Of course, they have to make some assumptions ($300,000 house in Raleigh, NC, stay in it six years, 3% annual appreciation) to work out the math (and these would be different for different parts of the country), but at least their analysis serves as an example. In the end, they come up with 7.6% being the rate of return on buying a home over renting.

What was interesting to me is that I've never seen an analysis done in this much detail and with a specific answer at the end -- 7.6%. It's good to give it some perspective, namely that it's a "good" deal usually to own versus rent, but it's not "outstanding." I guess if it was outstanding, there wouldn't be any debate now, would there?

As for the debate on renting versus owning, here's what I've written on the topic in the past:

• Why Homeowners Get Rich and Renters Stay Poor

• When to Buy versus When to Rent

• Is the Falling U.S. Housing Market Making Renting Better then Buying a Home?