I Want To Buy A New Home

[The Rick]

I'm ready for a new home and am looking for some advice.

Our current home is/was our first, and we've lived in it for about 4 years now. It was something to get us started at the time, but I'm ready to move on to something bigger and better.

First of all, my income situation is much better than it was 4 years ago. A nice promotion a couple of years ago has bumped my income up by over 40%. We've added one new child to the mix with another on the way.

In addition to the increases in income and children, there are other reasons. This house feels too small now. Now that I'm older and wiser, there are things I want like a bigger garage, an attached garage, a bigger yard, bedrooms all on the same floor, etc. My oldest child will be starting kindergarten in fall 2009, so I want to be in a better school system.

We bought our house for $167,000 and currently owe about $153,000 on it. Our tax bill for last year showed an assessed value of $180,000.

My first question is, does this mean that we should be able to sell our house for $180,000 if not more since that's what the city assessed it at? What's typically the correlation between assessed tax value and actual value?

Also, we've remodeled one bathroom and finished off the basement since that assessment, which means the value should be even higher, correct?

Finally, the last part of my post is this:

I'm trying to figure out a gameplan.

I think for the type of house I'd like to have in the area I'd like to be in, we'll probably be looking in the $250,000 range. I'd like to put 20% down to avoid PMI, so $50,000.

We just bought a vehicle, so our savings account is down right now. I figure we could save up at least $20,000 over the next year. That combined with the equity in our current home would hopefully provide us with that 20% down I'm looking for. That would mean that we'd wait another year to start shopping around. At least, that's kind of what I'm thinking.

I guess the purpose behind this post would be to ask the following:

1. What's the correlation between assessed tax value and what we could actually get out of it (with the remodeled bathroom and newly finished basement)?

2. Would it be better to simply save that $20,000 over the next year, or put it towards improvements on the home (new windows, remodel kitchen, etc.) to increase the value?

3. What does the current housing market mean to me and my situation? I'm thinking it's a good time to buy, but in the same regard, it's not necessarily a good time to sell. What about when you take in to consideration the $20,000 I think I could have at this time next year?

I'll be the first to admit that I'm pretty elementary when it comes to housing, the housing market, etc. Like I said, our current home is our first, so I've never sold a house before. Any advice would be appreciated.

[The Rick]

So is there a general opinion anywhere that next summer might be a better or worse time to make a move than this summer?

As I said, I'm guessing that now is a great time for first time home buyers. But, since I'd have to sell in order to buy, the same doesn't hold true.

[tyton75]

Originally Posted by The Rick

Really? I thought it was lower...

I make that statement based on this period in the market.. most of the assessed values are based on what the market was doing and not its current state.

I just bought a house from my parents and they had a licensed appraiser say it was worth 162k and the "assessment" on the house had it for 188k...

just passing along my nugget of experience

[SBK]

Only use realtors who sell TONS of stuff. 99% of them are useless idiots. Make sure they give you a very professional presentation, and keep in mind that the majority of what they're telling you is a lie. The only way they make money is if you work with them, so their motivation isn't you, it's your money. Get the pros who present themselves that way and have a huge track record of doing exactly what they're telling you they'll do.

I would also plan on the sale of your home taking awhile, and getting more now than I would next year. The market is on the way down, and the end is much further away than "a few months."

When you buy, especially if you want a new home, find homes by builders that have gone bankrupt. Offer the bank that owns the property a very fast close for a huge discount. A discount on % basis, not $ basis. Personally if I was looking in the $250,000 range I'd either be looking for a $400,000-$500,000 home, or spending about $125,000-$150,000 on that $250,000 house. You need to be flexible if you want to do that, so if your perfect home is more important than one that's almost perfect but way cheaper, or way bigger and better, then disregard what I said. Homes aren't investments, they're where you're going to live and your personal satisfaction is far more important than the return on your money. But if you can get a big return on your money and enjoy the crap out of it all the better!

[The Rick]

Originally Posted by Donger

Nope. Three different values:

1) Assessed value. What the tax man thinks your property is worth.
2) Appraised value. What the appraiser thinks your house is worth.
3) Market value. What a potential buyer thinks your house is worth.

So in other words, my city is claiming that my house is worth more than it really is?

[bogey]

Originally Posted by The Rick

Nope, there really isn't anything that would keep the house from selling.

Kitchen, master bed and bath have great return on your money but that's still 80-90% right now. If you're getting out soon, and like Donger said it doesn't increase your value over 80 - 90% save that money for your next place.

[Donger]

Originally Posted by The Rick

So in other words, my city is claiming that my house is worth more than it really is?

Yes. They get more money from you that way.

[Bugeater]

Originally Posted by The Rick

So in other words, my city is claiming that my house is worth more than it really is?

Not necessarily. It sure as hell doesn't work that way here in Omaha. Check and see if your county assessor has a website, most of them have one where you can find out assessed values of any home and the sale price of homes that have sold recently.

[Stewie]

Wait until the market has bottomed. If you're looking at buying a $250K home and selling a $180K home you'll be far ahead when the market drops another 10%. There's a reason prices have dropped (credit crunch, stoopid buyers/banks), so be patient and you'll be glad you did. Cramped quarters aren't so bad when you can save several $1000's.

[DaneMcCloud]

Originally Posted by The Rick

So in other words, my city is claiming that my house is worth more than it really is?

Originally Posted by The Rick

Really? I thought it was lower...

It really depends on where you live, the current housing market, etc. The tax assessment is based on prior sales price.

So if you bought your home for $150k, the city will begin assessing property taxes roughly around that figure. The city will increase the tax ever so slightly on a yearly basis. In Los Angeles, it's .012% of the sale price. If you don't know, you should check with your accountant or with the city as to the actual assessment tax.

As for the current real value, as many have mentioned, have a reliable agent give you comps in the neighborhood. Only then will you know the true value in the current housing market in your area. There could be many factors involved that could make the value higher, lower, substantially higher or substantially lower than the city's assessed value.

Just be sure to pick THE best realty agency in your area. Otherwise, it's really a waste of time. No one likes cleaning the house every Sunday only to have 2 people show up.

Good luck!

[Bugeater]

Originally Posted by DaneMcCloud

So if you bought your home for $150k, the city will begin assessing property taxes roughly around that figure. The city will increase the tax ever so slightly on a yearly basis.

Again, not necessarily. I wish they did that here, but instead they'll leave it alone for years and then nail you with a huge valuation increase. My valuation jumped from $116K (the same it had been since I bought it in '99) to $144K last year.

[ClevelandBronco]

I've been a real estate investor since 1995, and I've bought, sold, and held several properties in up, down and flat markets. I'm saying that only so you know where I'm coming from.

To answer your direct questions:

Originally Posted by The Rick

1. What's the correlation between assessed tax value and what we could actually get out of it (with the remodeled bathroom and newly finished basement)?

There is no important correlation between assessed tax value and sale price. The county isn't looking to buy your house, so their opinion of its value doesn't matter. The only thing that matters is the price that a willing buyer will offer for the property.

Originally Posted by The Rick

2. Would it be better to simply save that $20,000 over the next year, or put it towards improvements on the home (new windows, remodel kitchen, etc.) to increase the value?

Don't spend $20K on improvements with the hope that you'll get it back a year from now. If you can spend $10K to gamble that it will increase your home's value by $20K, go for it, but don't count on it. If you want to sink $20K into the home, you'd better be relatively certain that you are making improvements that will get you $30K at least. You don't want to lose money on improvements. Hell, you don't want to break even. There's an enormous amount of time that you'll spend in improvements, even if you're not doing the work yourself.

If you aren't a home design and construction professional, you'd probably be better off saving the money. Still, you'll have to make sure that the home looks its best when it's time to sell.

Originally Posted by The Rick

3. What does the current housing market mean to me and my situation? I'm thinking it's a good time to buy, but in the same regard, it's not necessarily a good time to sell. What about when you take in to consideration the $20,000 I think I could have at this time next year?

All real estate decisions should be based on local information and immediate timing. There's no way that anyone could answer this question.

[DaneMcCloud]

Originally Posted by GoBo

Again, not necessarily. I wish they did that here, but instead they'll leave it alone for years and then nail you with a huge valuation increase. My valuation jumped from $116K (the same it had been since I bought it in '99) to $144K last year.

I originally had Los Angeles in my reply, then re-worded and forgot to mention that.

That's a drag.