Your Take 
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Your Take: Is Homeownership the American Dream?

My parents came to the United States because it was the land of opportunity. It was a place where you could, on the basis of your abilities and hard work, make a good life for yourself and your family. It isn’t a utopia, it’s far from it, but it’s a lot better than a lot of other places in the world. We still have our issues and our problems but fundamentally the “dream,” as I always understood it, was that you could succeed through hard work.

Somewhere along the way the American Dream meant owning a home. I saw it mentioned a bunch of times as the housing markets fell and we stumbled our way into the financial crisis. When did that happen? Is that what most people think of when they see the American Dream?

I know that Fannie Mae and Freddie Mac were created, in part, to make homeownership easier. If you have someone willing to buy up pretty much any mortgage loan you create, you can continue to make loans and people can continue to buy homes (and then you can see where abuse comes into play). However, I don’t think that means that homeownership is the American Dream. It might be part of it, but I don’t think it embodies it.

What does the American Dream mean to you? And do you think it’s dead? Or just taking a breather?


 The Home 
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$8,000 First-Time Homebuyer Credit to be Extended for Military

Yesterday, the House of Representatives voted 416 to 0 to pass the Service Members Home Ownership Tax Act of 2009 which extends the current $8,000 first-time home buyer tax credit for another 12 months for members of the military, Foreign Service, and intelligence corp who served at least three months of qualified overseas duty in 2009. The program is set to expire on November 30th, 2009 for everyone else and the justification for the extension makes sense. If you’ve been serving abroad for our country, it makes it very difficult for you to look for a house and take advantage of the program. Extending it another year certainly makes sense.

At the moment the bill has passed only the House of Representatives, it or a similar bill needs to pass the Senate, then reconciled, then signed by the President before it is law.

“If you are in a conflict zone, you don’t have time to get together with your spouse and family to go house shopping,” says Rep. Ron Kind, a Wisconsin Democrat. Rep. Dave Camp, a Republican from Michigan, expressed similar concerns. “A lot of service members get called overseas at a moment’s notice,” Camp says. “And because of the time limit on the legislation now, they can’t always take advantage of it, not because of anything that they did or didn’t do but because of the unique nature of serving in our armed forces.”

It’s estimated that this will result in an additional 10,000 home sales, likely clustered around military facilities, at no extra cost. It’s revenue neutral because there are other revenue generating provisions included in the bill. The Senate received the bill yesterday and is set to vote on it fairly quickly.

As for the original credit set to expire on November 30th, there are discussions about extending the credit an additional six months.

House Votes to Extend First-Time Home Buyer Tax Credit for Service Members [U.S. News & World Report]


 Devil's Advocate 
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Your Home Is Not An Investment

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This is a Devil's Advocate post.

Farm House with Rising SunA few years ago, when the housing market was sizzling hot, everyone and their mother talked about how their home was a fantastic investment. They talked about how a home that sold ten years ago had quadrupled in value over the last five and cursed themselves for not buying more. I knew someone who owned four rental properties, all bought on ARMs, and was making a “killing” on the rents and appreciation. I knew someone else who was looking at his paper riches and marveling at how wonderful homeownership was.

Then the housing market stalled. ARMs reset. People were in rough shape. Those who overextended learned something the prudent have always understood, as much as your home is a great place, it’s not an investment.

(Click to continue reading…)


 Government 
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$8,000 First Time Homebuyer’s Credit

Are you sitting down? Do you have a pen and paper handy? Looks like the $15,000 tax credit to buy a new home has been scrapped, saving $35 billion from the stimulus package, and replaced with an extension to the $7,500 and an increase of that credit to $8,000. The $7,500 first time homebuyer tax credit was set to expire July 1st, this $8,000 provision would extend that. CNNMoney is reporting that the credit is available for those who buy a home between Jan. 1, 2009 and Dec. 1, 2009 (source).

The cost of the extension and modest increase is pegged at around $2-3 billion. Another key provision? The repayment requirement will be nixed. That means the $7,500 15-year loan at 0% interest will now become $8,000 cash money in your pocket. I believe existing borrowers would have that loan forgiven.

Home buyers who hoped for a $15,000 tax credit to buy a new home, as promised by the Senate, will be disappointed. A proposed $35 billion credit to support home sales was jettisoned in favor of a more modest $2 billion to $3 billion provision.

The proposal would eliminate the repayment requirement in an existing tax credit for first-time home buyers, and raise the credit to $8,000 from $7,500. Congressional aides cautioned Wednesday that the credit’s size was still subject to negotiation.

Congress Strikes $789 Billion Stimulus Deal [Wall Street Journal]


 Personal Finance, The Home 
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Lessons Learned Replacing Our Roof

Earlier last week we finally had our roof replaced to the tune of $4,450, which included replacing all the plywood, shingles, installing a ridge vent (all standard stuff), and replacing the facia board on the front of the house. The replacement was absolutely necessary right now, and probably overdue for quite some time, because there was a leak. A couple months ago we had to tear down some drywall in my office, I’m staring at the gaping hole right now, and toss out the waterlogged insulation too (we waited this long because of weather and the wedding).

One of the unfortunate parts about replacing your roof is that you can only passive enjoy it. It’s not like granite counter tops that you see every day, it’s not like carpeting that you can feel under your toes, and it’s not like windows you open with ease. It just sits atop your house, protecting you from the elements, and the only time you remember it if it leaks and hopefully it won’t do that for quite some time.

Spending $4,450 on something, anything, is always difficult and here are some lessons I learned in the process.

Importance of 3+ Quotes

When I started, I didn’t know how much the job should cost. If I accepted the first quote I received, $5,750, I would’ve easily overpaid by $1,300 for the same exact product (minus differences in labor installation). I’ve always made it a point to get at least three quotes for anything I get and I usually try to get five. On this project, I only received three quotes ($4500, $4750, $5750) but I felt comfortable enough with the contractors to move on from here. (I bolded the initial quote of the company I worked with, A-1 Roofing KangaRoof).

Three quotes will give you a good idea of how much the job should cost, which created a range of $1,250 from $4750 to $5750. In an ideal situation, I would’ve gotten five but I wanted to get a roof installed as soon as possible (Lesson here: Try not to put pressure on yourself, but don’t be too relaxed about it).

Negotiating Price

Of the three contractors, I felt that Maurice of A-1 Roofing KangaRoof had the best mixture of personality and professionalism of the three. He wasn’t a polished salesmen, which I thought was a plus, but he gave me all the information I needed to make an informed decision that his company was the best of the three (and he didn’t insult me with a “special offer today of $X, have to sign today!” type of offer). Since I decided I was going to work with him, my next step was to make it a financially smart move. I called him up and told him that the next competitor, a firm recommended to me by someone I knew, had given me a quote of $4500 for the job and asked him to beat it. I actually asked him for $4400 and we met halfway. Once the numbers were right, I signed.

I’m hardly a seasoned negotiator but I don’t think price is the only important factor in a contracting job. I decided I wanted to use Maurice and A-1 Roofing KangaRoof if the numbers made sense, which they did, but I also know that in home improvement contracting there is a bit (or a lot) of wiggle room available.

Here are some other lessons regarding price:

  • If it’s a larger company, they have more freedom in the price because they perform more jobs. There’s also less downside risk that the firm will do a poor job to cut corners because referrals are very important to contractors.
  • Don’t go with a small company unless it has very strong referrals and growing. On a roof with long warranties, we have a 10 year labor warranty, it doesn’t help if the business stop operating in three years.
  • Don’t be afraid to negotiate the price and use every tactic you can think of. Clearly the best one is to use other quotes against the one you want, but you can also use delaying tactics (“Oh, I’m not sure I’m ready yet…”). They want your business, they are willing to take a little off the price to do the job now (hence those “special” offers).

Referrals Are King

I don’t know how the commission structure of those companies work but when I looked up whether I should tip the contractor, I was surprised at what I found. On one contractor forum, everyone (after joking you should tip 15-20%) said that tips aren’t necessary and aren’t expected, but to refer more business to them if the job was well done.

Here’s my referral for Maurice of A-1 Roofing KangaRoof: This guy went above and beyond for me. I mentioned to him that I had squirrels running up the side of the house and into the attic before the roof was replaced. I asked if his guys could screw in some wood in there to close off the hole (I realized the squirrels would eat through it but I wanted a temporary solution) and he recommended I get some quick setting mortar instead. It turned out that his crew was one shingle square short and had to return the next day, so he showed up the next morning with quick setting mortar to plug up the hole for me. I can’t speak highly enough of him and if you’re in the Baltimore-Washington DC area, make sure you give them a call as one of your three-plus. Maurice’s number is 410-746-4227, tell him Jim from Columbia sent you and he’ll give you a good deal (I don’t get anything for referring people and I have no idea if you’ll get a good deal but it’ll be fair).

Summary

We’re very pleased with how the roof turned out and it came in at a reasonable price. It was one of the things we knew we had to replace in the near term (5 years) when we bought the house three years ago and one of the last things on our list of needs. I think we’ve moved onto our wants now, which might include a kitchen remodel in a few years or something else. As my friend Fred at One Project Closer has always told me, you’re never done, you’re just one project closer.


 Personal Finance 
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Four Appliances Worth Replacing Early

A few weeks ago we replaced a relic of a dishwasher (a Whirlpool made in the early 80′s) with a new Frigidaire model (the FDB2810LDC) for a mere $150. We weren’t in the market for a dishwasher at the moment but it was certainly on our To Do list. From a functional perspective, the Whirlpool was serviceable. It still worked, though the seals weren’t very good (ants could get inside, but no water leakage) and it was very loud. From an ecological perspective, it consumed a lot of water and electricity, since it was made in the Days of Yore™ before Energy Star was in vogue, so there was a financial incentive outside of the $150 price.

Dishwashers, if they are old enough, make a great candidate for replacement if you have the budget for it. Here are three other appliances you might consider replacing before their time.

Refrigerators

Refrigerators, among appliances, is the number one consumer of energy, so it makes sense to start with it. Everyone is aware that refrigerator technology has come a long way in the last ten years and the advice to replace your refrigerator, especially during our skyrocketing energy prices, is a solid investment that can pay off in a year or two. Consider this: Energy Star qualified units have to use at least 20% less energy than federal standards and 40% less than units sold in 2001, 7 years ago! If you have a conventional fridge made before 2001, expect a 40% savings in energy (of course, always check your unit’s manual or label for actual savings).

If you do replace your old fridge, remember to recycle it!

Freezers

If you have an standalone freezer or compact freezer, switching to an Energy Star model means that you will consume 10% less energy (or 20% for compacts). You can save 100% if you stop using a separate freezer altogether, but the bulk purchasing savings might make having a freezer a smart move. Remember, a Frigidaire GLFN1326GW, a 12.9 cubic ft Energy Star-compliant chest freezer consumes 326 kWh a year, so unless you’re saving more than that in grocery bills… it’s not worth it.

Water Heaters

Besides the energy savings that may come with a newer unit (Saladdin, I haven’t forgotten about the tankless water heater!), water heaters fail in one of two ways. One way is a nuisance, another is catastrophic. The annoying way they fail is by ceasing to heat water, so you’re stuck taking cold showers. The catastrophic way is if they leak or break, turning an otherwise dry room into a pool. Replacing an aging water heater could be a way to save some money and headache later. Replacing something on your own schedule is always more convenient than on someone elses. :)

Televisions

Want an excuse to get a new television? Energy Star compliant televisions use less than 30% of the electricity their non-compliant friends use. Also, effective November 2008, Energy Star compliance will be much stricter, broader, and cover all television types (LCD, plasma, etc). Right now, they are only test in off/standby mode (who knows why!?). So, if you have one of those ancient set top boxes and have been eyeing a new unit, consider a newer HDTV that might use less power.

For anyone looking to convince their significant other about the ecological friendliness of a new television, feel free to print this out and show them. :)


 The Home 
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Uncashed Closing Cost Checks

It’s not very often you get an unexpected check but this week I received one from my title company in the amount of $202.00. Apparently there were outstanding stale dated checks that weren’t cashed and, as required by law, were returned to me from the escrow account.

Thank you for choosing [Title Company] to handle your previous real estate transaction. During a routine audit of our files, we found funds from outstanding stale dated checks that remain uncashed past the statutory time.

Accordingly, we are refunding the excess amount that remains in the escrow account. Please check with your lender to be sure these funds are not required for your escrow account.

Again, thank you for choosing [Title Company] and … [blah blah blah]

Hooray for free found money! I thought it was particularly honest of the title company since I would have no way to confirm this.

Looks like it’s time to get a Wii Fit (I realize that’s not the responsible thing to do, but it’s for our health!), if only I could find it somewhere.


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