AskDong

Is there any disadvantage selling your home in a buyer’s market if you are going to buy in the same market? In reality, isn’t a wash if you sell and buy in a slow market?

How would you go about finding comps for a condo? Does it cost to ask a realtor to do a price analysis and are you bound to use them when you sell your place?
-stevie

I’ll answer the 2nd question first. Unless you sign a contract you’r not bound to do anything. When a realtor does a price anaylsyis, he or she’s really making a sales pitch. Getting a price analysis is not a obligation to work with that broker. That said, you should be clear on your position. Always deal in good conscience. Don’t tell a broker that you’re definitely going to work with him or her if know you won’t. As for finding comps, the Internet really has really made things much easier. Websites such as Zillow not only give it’s estimate on prices, but will also report the last sale. I find the best way to get a sense of comps is to start monitoring listing in the area you’re interested in. That way you have all the info from the listing, and then it’s easy enough to determine what those properties eventually sell for.

As for selling your home in a buyer’s market is trickier question. In buyer’s market, buyers have more leverage and that makes selling harder. In a perfect world buyers would only buy in buyer’s markets, and sellers would only sell in a seller’s market. In this non-perfect world of ours, we usually buy and sell homes not because of the market but because of life. The best you can do is try to manage the process smoothly.

You do bring up a good point about selling and buying once you already own a place. Given that you’re selling and buying into the same market, the changes in price is less relevant. If anything if you’re looking at upgrading, it’s most likely that you’re better off, all else the same. Let’s say your home is worth 200k, and you want to buy a place that’s worth 400k, and the market comes down 10%. In absolute terms your house is worth 20k less but the house that you’re buying is 40k less.

The far bigger difference that people often lose sight of is that the housing market is incredibly inefficient, and non-objective. Outside of the cookie cutter developments, homes are unique. One person may pay 300k for a house that I wouldn’t think of paying more 250k for. So if you’re looking to make a change, I would spend time on thinking about how you want to sell your home, and carefully assessing the market rather than worrying about timing.

With the deregulation of the auto insurance industry in Massachusetts, I’ve decided to take a fresh look at my auto and home insurance policies. What dosee as the pros and cons of going through a broker versus a direct carrier? Are the carriers that brokers work with able to offer better rates so that the total cost to the consumer is the same (or less?) when adding in the (undisclosed) broker’s commission? I used to have a negative view of brokers in general (still do for real estate), but recently I had a positive experience with a mortgage broker. I wonder if the same principles of better customer service, flexibility and rates apply to the insurance market as well…

Thanks,
Noah S.

In a perfect world, you should always be able to save money by avoiding a broker. Brokers are in the end just middle men. They take a cut, a cut that could be yours. However, in reality it’s much more complicated. Like Noah, I share his good experience working with a mortgage broker. I ended up getting a much better rate than I could find direct. For that service I indirectly paid $4300, the broker’s cut on the transaction. You would think I should’ve been able to directly talk to the bank and get the same rate. I couldn’t. Most of the time when you talk to the banks directly, they actually give you a fairly non competitive rate. Don’t think just because you’re a good customer, they’ll cut you a break. Banks are often in the business of treating their most loyal customers poorly.

Because the best rates are often not directly available to the average consumer, I’ve found in my own experience that mortgage brokers do often provide a valuable service. This is not to say that one wouldn’t be able to do extra legwork and find a better rate directly from a Bank, but at least sometimes a good broker can uncover rates that you might not be able to dig up. I found this true the last time I shopped for a mortgage. I was recommened a broker, and found he had the best rates I could find. I called half a dozen banks directly, and number of other online mortgage brokers. By far the best rates I found came from the brokers and in particular the broker I was recommened. My broker was great. It wouldn’t suprise me that Noah and I worked with the same guy.

The question is however if this experience can be translated to other brokers, especially in the Insurance world. Given that I have limited experience with insurance brokers, I don’t really know. Complicating the matter is that in the world of insurance is made up to two separate spheres. There is the property and casualty world on one side, and on the other health and life. I would imagine the broker experience really depends on the type of insurance. Given the varied number of insurance providers and products, the competitive landscape is far from clear cut. If a broker truly can shop around amongst many different providers, I would imagine the more useful the broker. If on the other hand there are only a few providers, and or very aggresive direct insurance providers, then it’s likely the cost of the broker does not outweigh the potential savings. That said good insurance brokers (and agents for that matter) are able provide a valuable service not on the basis of just cost, but information. Insurance is a complicated product that people deserve sage advice on.

A Reader asks,
How can I find out what bank or lending institution holds a mortgage to a property that is not mine?

I got this question about 2 weeks ago and at the time I had no idea. However my own real estate travails have made me more knowledgeable. Apparently who holds title to mortgage is publicly available information. As a resident of Massachusetts, I’m fortunate to be access this information online. Massachusetts is on the cutting edge of the online deed information, I didn’t know this until I did some quick research and found that most states do not offer this information online. There are commercial sites such as landaccess.com which offer this information for some areas of the country like Michigan, Ohio, and Texas. Who holds a mortgage is part of the deed and title information and as result needs to be filed with the registry of deeds (or so it seems to me).

Given that this information is required to be accessible by the public, getting it is a matter of convenience. Individuals interested in properties in Massachusetts can easily find information online, but it seems like those in other areas of the country have to either pay to access it online or trudge down to the country registry of deeds. Given my own experience at the registry of deeds, it’s much better when you can do it online.

I have a question from a reader of AskDong.

i’m doing my own taxes this year for the first time in my life. what is the best software to help me? i would like to download turbotax, but want to get the right one. my taxes should be very simple. i have one salaried job, and a few bank accounts earning interest. will the free version of turbotax be enough, or should i get deluxe?

thanks!

-R

Intuit in effort to increase sales and extract extra margins had 4 different versions of TurboTax, and the online cost vs purchasing a physical copy of the software.  The physical versions are more expensive but allow those who are concerned with privacy to hold their own data, and also allow the completion of different returns. Using TurboTax online is cheaper than buying the actual turbotax software for the computer, but limits you to filing only one return.  For a family that might have many different taxes to file, the online solution might not make sense.  Intuit still charges for each electronic filing, so it still profits from each additional tax filing unless of course you decide the mail the filing.

Free - $0/Not Available. The free version of Turbotax is only available online.
Basic - $14.95/$19.95
Deluxe - $29.95/$44.95
Premiere - $49.95/$74.95
Home & Business - $74.95/$89.95

This year I got premiere, but in years past I’ve stuck with Deluxe. I know from experience now that Deluxe doesn’t differ much from Premiere. Premiere does handle rental properties, investments, and business income slightly better than Deluxe.  However for most individuals especially those who don’t have rental or business income,  Deluxe is more than adequate.

The real question is when is standard enough? Since I’ve never used either the Free or Basic version before, I decided to give them a quick run though online. There’s hardly any difference between the Free and Basic version. The Basic version has a slightly more interactive interface, and guides the user better with questions.  In terms of content I believe they are identical. I would say if you’ve used the 1040EZ in the past, and/or rent instead of owning then the free version of TurboTax is probably enough. I don’t see much of point in ponying an extra $15 for the basic version.  The big addition to the Deluxe version of TurboTax is that it handles mortgage interest deductions.

We are in the season of giving, so in that vein I’m answering this question from a reader.

I am thinking about putting money in a Donor Advised Fund, but don’t really know what the pros and cons are of using a Donor Advised Fund versus givingn money directly to charity. What do you think?

-S

I looked into Donor Advised Funds a few years ago as vehicle for my charitible giving, but decided I didn’t have enough of idea of how I wanted to give to warrant setting up such a fund. I imagine many of you are scratching your heads just like I did a few years ago. Donor Advised Funds? A Donor Advised Fund is basically a mini foundation. It used to be purely the tool of the very rich who wanted to be like the uber rich. However Donor Advised Funds are actually relatively affordable to get into today. Fidelity let’s you open a account with the Fidelity Charitable Gift Fund with as little as $5,000. Schwab recently followed Fidelity’s lead and lowered their minimum on their Schwab Charitable Fund. from $10,000 to $5,000 as well. Vanguard lags behind both Schwab and Fidelity, requiring $25,000 to open account with the Vanguard Charitable Endowment

While the charitable funds are “run and operated” by the likes Schwab, Fidelity, and other financial institution, the accounts work very much like a standard brokerage account that you might have. You pick what funds you want to invest in, and you pick what charities you want to give gifts to. However, once the funds which can be cash, stock shares, and mutual funds are handed over, they are turned over irrevocably. The gift is made, and the money is no longer yours. This is both a minus and plus. Technically speaking the money is “owned” by the the charitable fund/endowment, and as a donor one only make recommendations for grants. One of the big benefits is that fund takes care of the paperwork of giving, and will also research different charities to make sure they meet minimum standards.

Because the gift is irrevocable, the deduction can be taken immediately. Like a standard gift of shares, the full value of securities is tax deductible. Being able to take the deduction immediately is great if you want to make a charitable gift, but haven’t decided to whom. In addition once the funds are in the account they are sheltered from any tax complications. A donor can effectively buy and sell without tax consequences to him or her personally and more importantly the money available for giving.
So what are the drawbacks to a Donor Advised Fund? The main one is that you can’t change your mind about giving. The money is gone. I don’t think this is actually a big drawback, however, as this is always the nature of giving (or at least it should be). However when most people set up Donor Advised Funds, they are often handing over money that they plan on giving for years to come. That fact highlights the major difference between giving to charity year to year and a Donor Advised Funds. Setting up Donor Advised Fund is sustained commitment to giving. It’s not a tool to be used to give gifts in any one year, but rather for a lifetime of giving. In addition there are some restrictions on grants. Grants cannot for instance be used for admittance to Galas, or used as part of personal commitment to ride or walk event. Generally speaking the limited and reasonable restrictions are in place from preventing donors from using the funds for his or her own benefit.