Expert: Connie Wildasinn-Broker,GRI,Realtor® - 12/30/2008

Question
QUESTION: We are interested in buying our second home. The first home is in a new sub-division and the home of interest is the model home. The asking price is 279,900. The basement is finished and there are lots of perks i.e.. Appliances are included, HVAC system, and roomy. The problems are high taxes (told to us by one of the neighbors) and the surrounding area is not so nice. We saw graffiti on one of the homes 1 block away when it was warmer outside. The second home is in a perfect neighborhood. The houses are classy. The house we want was sold to the buyer for $460,000 in 02/07. He has dropped the price to 291,999. It has everything we want except a finished basement and appliances. We think the buyer is in pre-foreclosure not sure. Home#1 is 3,375 sq ft. Home #2 is 3,100 sq ft. without finished basement. We need help!

ANSWER: Hi Tanya,

As you can see pricing is down trending sharply... you did not mention where you home is located, but in general...

the 275' difference is not large, in California where I am we do not have basements, but as with most appraisals, livable space is of value, unfinished non-livable you will have a hard time getting the real value, an appraiser looks at the actual of what he is seeing today, not some future project that may or not ever happen...

I would have concern on the graffiti issue... one block is very close if you are looking to future values... the neighborhood could be worsening so you need to find that out... or it could be an isolated incident ... kids... what ever and does not happen in general...

Tax structures are set differently around the country, in California we pay off the purchase price in general... other parts of the country pay what the tax payers vote into law... that can be scarry ... since many renters also vote, they get a say in what the homeowner is charged on taxes...

If you could clarify the question further and let me know what you really need help with I would be glad to answer...

Make sure you are using a realtor... even in new home sales tracks... get an outside opinion and make sure your contracts are written to your benefit... not just the seller as many times they are in new track sales...

Let me know... I will get back with you...

---------- FOLLOW-UP ----------

QUESTION: I need help with deciding is home #1 or #2 a smarter move and a better value. I'm from Illinois and am talking about a southern suburb of Illinois. Home #2 seems great because it's a house that we would not be able to afford if not for the market. As for taxes in Illinois, We pay taxes yearly for our property. Your taxes are based on the price of the home and the area. More expensive and better homes typically have higher taxes. Taxes are used to fund schools in the area and maintain your neighborhood. I'm not sure if renters vote into laws here. Home #1's taxes (as told to us from one of the neighborhood dwellers) were $9,000 but went higher or lower depending on the price of the home. The $9,000 taxes were based on a home $250,000. In home #2 the taxes for the area are $9,000-$12,000 yearly. Taxes are in addition to your mortgage. Although home #1 has more livable space and includes a good number of perks I wonder if we will be sorry we bought the home because this new subdivision is 1 block of nice homes, the surrounding neighborhood is older and the class level is slightly lower. I hope that's clearer.

Answer
Hi Tanya,

sounds like home #2 is the better situation for the house, taxes and family except a little upgrades and couple hundred square feet.  I have always advocated the best neighborhood you can afford for the home you will live in.  This determines who your children play with and who becomes your neighbor friends in coming years.  You can always find a beautiful home in a slum neighborhood... that is easy... find the best you can with in your budget and buy the best neighborhood... better to live in a slightly smaller home, without the upgrades (you can do them later your self) ... The tax situation is what it is for an area... Be smart in your purchase and keep in mind that if you are going to live in this home for the next couple of decades... home is where the heart is... not always the check book... did that help...

PS.. then start saving your money to buy an investment property... this is where the renters live! doesn't have to be the best neighborhood and the best returns on money usually are the adjoining adjacent neighborhoods... where the rents are...look for the return on that one...

Good luck