Rent vs Buy puzzle

For some, committing to buying a home is an easy decision. However, some struggle rationalizing homeownership. Adding to the confusion are the attempts to persuade tenants to be home owners by flaunting its benefits and financial savvy. To be sure, there are personal and financial factors that go into deciding Rent vs Buy. However, the reality is that the Rent vs Buy question is a complicated personal puzzle.

Are you weighing the decision of Rent vs Buy? Consider that homeownership does have benefits over renting. Besides having a place to live, the consensus is that homeownership provides stability and belonging to a community. Numerous studies have associated being a home owner with increased well being and better health outcomes. Research by the Harvard University’s Joint Center for Housing Studies concluded that homeownership and growing wealth are associated (Herbert, McCue, and Sanchez-Moyano; Is Homeownership Still an Effective Means of Building Wealth for Low-income and Minority Households? Was it Ever? Joint Center for Housing Studies Harvard University, September 2013).

But frustrated home buyers are returning to their rentals because of inventory shortages, intense competition, and increased home prices can be aggravating.

The latest National Association of Realtors (nar.realtor) press release indicted a 1.5 percent decrease in home sales from the previous year. Although home sales were weak for the previous four months, home prices have increased for the 70^th consecutive month! Nationwide median existing home prices increased 4.6 percent from the previous year to $264,800. The lack of home sale inventory is partly to blame for the decreased home sales, which increases the upward pressure on home prices.

The Greater Capital Association of Realtors (gcaar.com) release of August housing data for Montgomery County is not much different from the national figures. Single-family home sales in the county decreased 0.7 percent from the previous year. Inventory is 8.3 percent below last year’s available homes for sale at the end of August. But median home sale prices jumped to $443,000, which is an increase of 4.2 percent.

Those who are dissuaded from buying a home because of increasing home prices are facing rent increases. The median rent for Montgomery County is $1,647. But according to Healthy Montgomery (healthymontgomery.org), there is upward pressure on rent. This is not just a local phenomenon, it is nationwide. According to the Census Bureau (census.gov), some metropolitan areas and cities have experienced increases well over $300. Rent increases are in part due to inflation and the increasing cost of owning a rental property. However, tenants are mainly experiencing rent increases because of supply and demand. Rental inventory is just as tight as home sale inventory. The Census Bureau reported that the vacancy rate decreased year over year. Additionally, the Census Bureau reported last year that the percentage of renters who moved during 2017 was the lowest recorded since 1988.

The robust economy has prompted the Fed to increase interest rates this year. Another rate hike is expected this week. According to Freddie Mac (freddiemac.com), mortgage rates have increased in anticipation of the Fed’s rate hike. According to Freddie Mac’s Mortgage Market Survey, the average 30-year fixed rate mortgage is 4.65 percent. Although mortgage rates are the highest in several years, rates continue to be historically low.

For many who continue to rent, they’re perspective may be justified by comparing housing costs. The Trulia Rent vs Buy Calculator (trulia.com/rent_vs_buy) is a tool that compares these factors. Paying rent for a long term may make sense if your rent is low. However, buying can be a better long-term decision when comparing similar size properties and housing costs.

Consulting with Realtor can help too. You can find out which is feasible Rent vs Buy. You can see if there are any homes for sale in your affordability range. You can also find out what rentals are available in your rent range. Regardless of your Rent vs Buy decision, your real estate agent can assist you with housing and the process for home buying or renting.

By Dan Krell.
Copyright © 2018.

Original located at https://dankrell.com/blog/2018/09/27/rent-vs-buy-puzzle

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

August 28, 2014July 5, 2019

When landlord-tenant relations go wrong

Although renting your basement out may seem like a great way to generate extra income to help pay the bills, it can also become a point of conflict that could spiral out of control if not handled correctly. The recent report of the arrest of local landlord highlights the issues of being a landlord, as well as being a tenant.

The arrest seems to be the outcome of events that climaxed when the landlord allegedly forced the tenants out of the apartment earlier this month because the tenants were allegedly late paying their rent. According to an August 21^st Montgomery County Police press release (mymcpnews.com), the police responded to calls of woman screaming for help and banging on a neighbor’s window. The woman reported to police that five individuals were in an interior room and prevented her from closing her bedroom door. The woman and her son were allegedly grabbed and were told that the “landlord said they had to, ‘go and pack their stuff.’” It was reported that the individuals yelled at the woman to take her belongings and get out of the apartment; and the suspects “pushed” the woman and her son out of the home.

Another tenant, who spoke to investigating officers, stated that the landlord allegedly told them that they should stay in their room because he was going to pay people to force the tenants out. Another tenant stated that the landlord told them to not come out of their residence because there would be people “yelling and screaming.”

One of the five suspects who was subsequently arrested, was allegedly paid $1,000 to “scare and force” the tenants out of the apartment. The landlord reportedly turned himself in to police and was “charged with conspiracy to commit first-degree burglary, conspiracy to commit robbery, and conspiracy to commit second-degree assault.”

Another outcome of this incident is that the property was condemned by the Montgomery County Department of Housing and Community Affairs (DHCA) and all occupants were ordered to vacate the property. An investigation of the home by the 4^th District Community Service Officer and DHCA Housing Code Enforcement Inspectors determined that the landlord was “running a rooming/boarding home”; which “included four, illegal accessory apartments and five separate kitchens” and was “occupied by 15 people at the time of the incident.”

The unfortunate actions, events, and outcome of this incident are atypical. However, the plight of the landlord and tenant highlights the frustrations that can occur on both sides of the rental relationship, and may serve as a reminder to consult with an attorney before taking matters into your own hands.

Before you decide to become a landlord, consider familiarizing yourself with federal, state and local laws, rules and ordinances governing landlord-tenant affairs; as well as making sure your rental(s) conforms to licensing and zoning laws. Locally, the Montgomery County Office of Landlord – Tenant Affairs (housed within the Department of Housing and Community Affairs) is a resource for landlords and tenants on licensing, security deposits, evictions, leases, and rent increases. Besides publishing a Landlord – Tenant Handbook (a guide on informing of general rights and responsibilities of landlords and tenants), it also offers a free and quick avenue for tenants to seek amicable dispute resolution.

By Dan Krell
© 2014

November 8, 2012November 23, 2021

Consider rescheduling closing instead of a post-settlement occupancy

Home sellers and buyers look forward to closing day, when the deed to the home transfers; and in a perfect world, everyone moves on with their life. However, there are times when the seller asks to stay in the home after settlement. Ideally, a post-settlement occupancy can be avoided by adjusting the settlement date to accommodate the extra days needed to stay in the home. But alas, the world is not perfect and sometimes a post-settlement occupancy is quickly arranged. Whether you’re the home seller or the buyer, make certain you understand the post-settlement occupancy agreement: what you’re getting into, as well as your risk and liability.

Typically, when someone “rents” a home, a standard lease is used; but since the post-settlement duration is usually very short, the post-settlement occupancy agreement is mistakenly an afterthought to the home sales contract. Here in Maryland, there may be various forms that are specifically used in a particular region for this purpose; such as the one that is used here locally. Just like the sales contract, the post-settlement occupancy agreement contains terms and conditions, including duration and fee collected.

Additionally, a deposit is collected in case there are damages to the home during the post-settlement occupancy. The buyer usually has a walkthrough prior to the settlement, as well as at the end of the post-settlement occupancy to ensure that there is no damage and the home is conveyed in the condition that is expected.

Unfortunately, the risk of loss and liability to the home during a post-settlement occupancy can be vague. Even if the post-settlement occupancy agreement specifies who is responsible for such loss, there may be additional considerations.

It is usually expected that the seller repair any damage they caused during their post-settlement occupancy. But what about damage or loss caused by a fire or an extreme weather event (such as a tornado or a hurricane)?

Even if the post-settlement occupancy agreement is specific about risk of loss and liability, your insurance company might have a different view of risk of loss and liability in a post-settlement occupancy arrangement. Any insurance carried by the home seller may limit or exclude coverage from such damage/loss that occurs during the post-settlement occupancy. Furthermore, the buyer’s home owner’s policy may have exclusions and/or limitations for coverage if the home is vacant or occupied by anyone other than the policy holder. Consult with your insurance company.

Another consideration is that the buyer’s mortgage company may have restrictions about a post-settlement occupancy. The mortgage note may specify that the home be “owner occupied;” which means that the home is not to be rented. A post-settlement occupancy by the seller may infringe on the terms and conditions of the mortgage note. Consult with your mortgage company.

Even if your real estate agent is able to explain the post-settlement occupancy agreement to you, there are considerations other than what is written on the form – you should consult with your attorney before entering into such an agreement.

Due diligence is required before entering into a post-settlement occupancy agreement. Consult with your agent about rescheduling settlement, if possible. Additionally, consult your attorney, insurance agent, as well as your mortgage company to make certain you understand the terms and conditions of the agreement, as well as your liability and risk of loss.

Original published at https://dankrell.com/blog/2012/11/08/consider-rescheduling-closing-instead-of-a-post-settlement-occupancy/

By Dan Krell

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.
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