Sage Advice...Real Estate Questions and Answers

Some questions and answers on the local real estate scene:

Q. Someone has told us we should apply for a "homestead tax exemption" for our new home. Sounds like something out of the dark ages-what is it? P and S. Solomon, Daylesford, PA

A. Sounds like something out of The Grapes of Wrath, right? Originally, "homestead" laws were passed following the Great Depression to protect the family home from certain creditors. The term has come to have a broader usage, and was applied to the tax relief measures recently passed to take advantage of gaming revenues in Pennsylvania. Many people are not aware of this break.

So the short answer is that it is not that old and it depends on where you live. If your home in Daylesford is in Chester County (T/E or Great Valley School District) and is your "permanent" residence, then you should be able to obtain the exemption.

Under Pennsylvania's Taxpayer Relief Act (Act 1), which became law in July 2006, school district property tax relief is available to resident homeowners each year that the Commonwealth accumulates sufficient revenue from slot machine gaming. In order to qualify, you must file a homestead/ farmstead exclusion application with the county assessment office and your application must be approved. The deadline for filing this year is March 1, 2009. Whether you have to re-apply every 3 years or only once is conflicting depending on the source, but supposedly the county will automatically send renewal forms. Questions can be directed to the Chester County Assessment Office at (610) 344-4570.

To illustrate, last year, all T/E homeowners who qualified for a homestead tax reduction received $181.41 off their taxes. It was equally distributed, based on receipt of $2,099,814 in state gaming revenue by the T/E School District.

Most Delaware County Residents also qualify and can check on their status by selecting the "Public Access/Online Services" button of the County's website at http://www.co.delaware.pa.us/ and typing in the property address.

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Q. Do you have anything good to say about this market? Y. Ester, Ardmore, PA

A. Sure. I am thankful to live in the Philadelphia suburbs, which have seen only a modest downturn compared to parts of the South and West. And interest rates are great right now. People who have heard that loans are not available should at least look into that statement, as I have been able to get loans for my clients through a variety of sources.

According to the National Association of REALTOR®s, first time homebuying is up, to 41% of the total purchases, probably because of the low rates and because these buyers do not have a home to sell. In Pennsylvania the number is even higher, 46%.

Let's compare the market to last year. In our 3 county-area, the average discount off asking price was around 94%. For the same period this year, that number was about 92.5%. Not that bad. Of course, that is based on the original listing price and does not take into consideration whether those listing prices have reduced.

But Americans continue to believe in home values. Recent surveys recently found that 61% of home owners thought their home value would rise in the next 6 month, 91% thought their home was the best long-term investment they could have made and 51% thought now was still a good time to buy.

Even the cynical experts agree that house values should beat inflation over the next 10-20 years (James Hagerty, Wall Street Journal "The Future of Home Prices").

Unless you want to rent, live in an RV or put all your money in the stock market, home ownership in a good location still makes sense to me.

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Q. I am confused by the term "Good Faith Estimate". What is that and can I rely on it? T. Bradley, Paoli, PA

A. What is that expression about being from the government and here to help you? This particular form has been around a long time and causes me more headaches than any other form in the home buying process. It is supposed to be what a lender gives to a potential borrower to spell out all the costs of the loan, and many borrowers rely on it in selecting the lowest cost money, but until recently, there was no requirement that the lender then actually charge those amounts. Hence the name "Estimate".

When the trouble in loan land hit recently, many borrowers who thought they knew the terms of their loans were hit with revisions and changes. Under a newly-revised format for these Estimates, lenders will not be able to vary by more than 10% from the estimated costs and will also have to split them out in more detail to prevent overcharging. HUD estimates a typical borrower should save $700 with the new format. In our area, loan costs are about $1,000 to $2000 but in NYC, for example, they can run up to 2.5% of the loan.

Lenders do not have to use the new form until 2010, but you can download it from www.HUD.gov and request that your prospective lender use it.

Another form that is supposed to help home-buying consumers is the state Consumer Notice, also recently revised. This is to be given to anyone by an agent at the time they discuss possible representation to explain agency options. Many people think it is a contract or do not understand all the types of agency that can exist. They are not aware, for example, that an agent may legally represent both the buyer and the seller at the same time. No matter how many revisions that form gets, it is still destined to be confusing, in my opinion.

You should always ask to have documentation explained so that you feel you really understand it. Buying a home is a monumental investment with a lot of complicated parts. You deserve to have control over it.

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Q. Our agent warned us against spending too much time on the internet looking at homes. She wants us to go out and see them. Isn't that a waste of our time? D. and L. Salus, West Chester, PA

A. I think she should recognize that a majority of potential hone buyers now look online for homes, even though many end up buying through an agent. My website has all the multiple listings as do those of most of the area real estate companies, so the old paradigm of the listing company having control of the inventory is gone. People will shop online. I think it is a great way to get a general idea of the types of home and the range of prices in any given area. What people do not realize until they go out is that the photos do not begin to tell the whole story. I have seen countless listings where the shots look great until you get to the house and see they were all taken with a wide angle lens or the house is right next to a factory or the ceilings are so low you can't stand up.

I had one client whose mother lived in another part of the country who would "google- earth" along Philly streets. Then she would ask me to find out about houses that she liked that weren't even for sale! Her son made a good income and the houses she was finding were subsidized for low-income buyers. That was a foreign concept to her. She just liked the fact that the house had a garage.

On the flip side, I always tell people you should not eliminate a house that is the style you like in a good location at a reasonable price without going to see it. I have seen some really bad photography where the house was actually lovely.

You might schedule a phone call every few days with your agent to go over the ones where you liked the photos to see if she has any information one way or the other that would be relevant to you. Many agents will already have seen the house at an agent tour or will know the builder's reputation for quality. Having your own agent is very smart and costs you nothing, so you should take advantage of that resource when making such a large investment.