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Harvard’s 5 Financial Reasons to Buy a Home

by Eric Belsky

Harvard’s 5 Financial Reasons to Buy a Home

Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. Last year, he released a paper on homeownership - The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home.

Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You're paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income...On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line

We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially.

6 Pricing Mistakes Every Seller Can Avoid

by Elite Asset Management Team
6 Pricing Mistakes Every Seller Can Avoid

Tue, November 4, 2014

If you’re getting ready to sell your home, you want to get the most money for your investment, right? One of the key factors that will sell your home is price, and having a sound pricing strategy is a must if you want to find the right buyer.

Here are six common pricing mistakes all sellers should avoid.

1. Overpricing from the start – You might think your home is the best on the block and should command a price relative to the value you see. Wrong. You have to appeal to the value homebuyers see. Overpricing your home at the onset could leave out strong potential buyers, especially if recent sales and other factors in your neighborhood don’t justify your listing price. You also run the risk of needing multiple price reductions, which keep your home on the market that much longer.

2. Leaving out potential buyers in online searches – Entering a price range is the first search parameter most homebuyers use to narrow down their options. If a buyer’s price range is, say, $250,000 to $300,000, they won’t see your home if it’s listed at $305,000. It might make sense to list it right at $300,000 so that you capture potential buyers in the ranges above and below. Ultimately, this is up to you and your agent, but the range your home's price falls into is certainly worth thinking about – especially if you're teetering between price ranges anyway.

3. Not considering recently sold properties – To arrive at a listing price that will generate buyer interest, you can’t base your price solely on the prices of other homes in your area that are listed for sale. You also need to consider recent sales in your neighborhood and the final sale prices. An experienced agent can provide you with information on recent sales to help you see the bigger picture.

4. Getting too creative with your asking price – Make it easy for buyers and pick round numbers. Listing a home for $512,477, for example, will give potential buyers pause about your intentions and divert attention from your property to you, as the seller. Maybe it's best to save the creative juices for the property description.

5. Not being open to negotiation – The quickest way to kill a sale is to dig in your heels on asking price before the for-sale sign even goes in the yard. Negotiation is a two-way street, and if you refuse to budge on pricing or other conditions, you might be in for very bumpy (and long) ride. Ask yourself: Is it more important to get full asking price, or can you make a few concessions to find common ground that will ensure a closed sale?

6. Ignoring your agent’s insights – The best route to the right price starts with picking a great agent and then listening to his or her advice. Your agent will look at your situation from all angles – your home's features, the local market, recent sales and more – to help you make an informed decision about pricing. 

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Elite Asset Management
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