It’s late, and it’s limited, but for borrowers who feel their homes were wrongly or inappropriately foreclosed upon in 2009 and 2010, there is now recourse.

As part of a larger enforcement action (so-called “consent orders”) taken last April against fourteen of the nation’s largest mortgage banks/servicers following the so-called “robo-signing” scandal, the Office of the Comptroller of the Currency is beginning a “multi-faceted independent review of foreclosure actions.”

The major banks will have to fund these independent reviews to evaluate, “whether borrowers suffered financial injury through errors, misrepresentations, or other deficiencies in foreclosure practices.” If they did, those borrowers get some kind of “remediation.”

“The challenge is substantial, but the steps we have required the servicers to take are vitally important to resolving these issues in a way that respects the rights of those who have been harmed and helps to restore confidence in the system,” said John Walsh, Comptroller of the Currency in a statement.

The major mortgage servicers began sending out letters to eligible borrowers this week to explain the process. The requests for the reviews must be received by April 30, 2012. So how many do they expect will request these reviews, given that there are potentially four and a quarter million eligible borrowers according to the OCC?

“It could be hundreds of thousands,” Walsh told me in an interview this morning. “We are certainly hopeful they will have the capacity to handle it,” he added with regards to the servicers. Walsh also admitted that if the volumes are very high, it could have an impact on the current foreclosure process at major servicers, “to the extent that capacity that servicers have that they’d otherwise devote to other parts of the business are affected.” But he stressed that this is a backward looking, remedial piece and “shouldn’t” affect current foreclosure cases.

So could a borrower get his or her home back? It’s not out of the realm of possibility, although that is pretty unlikely given the home was probably already legally sold to someone else. Remediation would more likely involve fees that could be paid back or some other type of monetary compensation. No question it will be highly case-specific.

“The participating mortgage servicers remain committed to helping borrowers remain in their homes and have been working with federal banking regulators to resolve the issues raised in the consent orders,” explained Paul Leonard of the Financial Services Roundtable in a release. The reviews, he adds, could take several months to complete.

Challenge Your Foreclosure Now was provided by CNBC.com.

If you are currently trying to sell your home, you have my sympathy. The housing market still hasn’t recovered from its collapse, and foreclosures are still running rampant. Who knows where interest rates will end up.

You’re not without recourse, however. If you’re a seller, you can use these six steps to make your home more attractive to potential buyers.

1. Price Your Home Competitively
First, you have to know the current values of other properties in your neighborhood. Try visiting Zillow, where you can enter your address and instantly get a report with estimated values of homes near you. When I first tried out the site, I was shocked to learn that some homes in my development were worth $50,000 or less. These homes are likely foreclosures, and they probably need major work before they’re “livable.”

Another question to ask yourself: Do you have to sell, or do you want to sell? Answering that question and evaluating your sense of urgency will help you determine your negotiating stance.

2. Improve Your Home’s Curb Appeal
Try this helpful exercise: Get in your car, drive around the block, and try to erase any preconceived ideas of the condition of the exterior of your home. Take an unbiased, objective look at your home, and ask yourself these questions:

• How does the driveway look?
• Is your landscaping, including all trees, plants, and shrubs, attractively maintained?
• What does the front exterior of your house look like? Is it something you would want to purchase?
• What does your front lawn look like?

Think about the fact that prospective buyers have probably been shopping around for a while. They’ve seen some great homes and some average ones, and they’re getting pickier as they go along. Get some fresh perspective on the first impression your home is making, and do all that you can to improve the exterior.

3. Don’t Over-Customize the Interior of Your Home
If you’re like me, you have that one room that’s designed or painted in a way that you absolutely love. Well, guess what? A prospective buyer may hate it.

One of the biggest selling points for me when I bought my current home was that the walls in the entire house were painted white. It was like a blank page that I could make my own. The seller actually did this for this exact effect. For a potential buyer, purchasing a home that has a clean slate for re-decorating is an absolute plus.

4. Make Necessary Repairs
If you have a leaky faucet, a cracked windowpane, or a carpet stain, get these things fixed now. Don’t wait. You’re probably going to have to spend on repairs before you close on the home, so you might as well do it in time to improve the “appeal” of your home to a potential buyer.

The previous owner of my current home had to complete almost $2,000 in home improvements before I would agree to move in. If you start working on repairs now, you’ll sell sooner and avoid the expense of last-minute rush jobs.

5. Hire a Professional
This strategy falls under what’s called “professional home staging.” Home stagers perform duties that run the gamut from re-arranging furniture to advising you to re-paint entire rooms. They can also suggest replacing certain fixtures in your home. Their goal is to highlight the best features that your house has to offer, and also to make it easier for potential buyers to visualize themselves actually living in your home.

Hiring a stager can cost as little as a few hundred dollars, and they may be able to increase your home’s selling price by $5,000. That’s a pretty good return. Plus, if you’re utilizing a real estate agent for your home-selling process, you might be able to get your realtor to chip in or completely cover the cost of a stager. Remember, they want to sell the home as much as you do.

If you consider using a stager, do diligent research. Seek reviews, advice from neighbors, and referrals before deciding on one.

6. Use the Internet
In 1995, only 2% of potential home buyers used the Internet to search for a new home. By 2005, about 77% searched online, and of course the percentage is still rising. I suggest going as far as creating your own website for your home. Regardless of your level of computer literacy, you can create a web page pretty easily, and for a low cost.

It’s a great opportunity to stand out from other sellers, and highlight the features of your home and the benefits of your neighborhood. Whenever you find someone with even remote interest in your home, you can simply direct them to your house’s URL for more information and pictures. You’ll not only attract more potential buyers, you’ll save yourself time in the long run.

Final Thoughts
If you’re trying to sell your home, then you already know it’s going to be tough in this climate. But you don’t have to be held hostage by the hindered housing market or the state of our national economy. Get some fresh perspective on your home, get a jump start on repairs, and get your creative business and sales ideas flowing, and you can boost the speed of your sale.

What other ideas do you have to make your home more attractive to potential buyers?

David Bakke writes about real estate, investing, and saving money on Money Crashers, a multi-author personal finance blog with various perspectives on financial and lifestyle topics.

Heating your home this winter doesn’t have to cost a bundle. The six easy tips below can not only help you keep warm for less, but they can also make your home a little greener, too.

Adjust your thermostat. The easiest way to curb heating costs is already at your fingertips. Just adjust your thermostat by turning it down when you’re not home. The U.S. Department of Energy estimates that by turning your thermostat back 10 or 15 degrees for eight hours, you can save 10 percent a year on heating and cooling bills. Installing a programmable thermostat gives you more flexibility when you’re away from home.

Weatherize your home. It’s one of the best ways to keep heat from leaking out of your house – and keeping money in your wallet. Start now by looking for cracks and holes in your foundation, doorways and windows. Apply weatherstripping or caulk to drafty areas to keep the heat in, and it pays for itself in energy savings within a year.

Installing double-paned windows. Homes with old windows can be blamed for adding up to an extra 25% of your heating bill. So upgrade your windows to those made from double-paned glass. Some argon and krypton gas-filled windows have low emissivity coatings on the glass to reduce heat loss. Other specialized windows can help reflect heat back into the room during the winter months. The Department of Energy has a list of brands and models of double-paned windows that have been given its Energy Star brand of approval on its website.

Use fireplace inserts. If you have an older fireplace, you could be losing a good amount of money. That’s because many older fireplaces have open hearths that produce slightly more warm air than they consume, so most of them are only 5 to 10 percent energy efficient. Install a fireplace insert  made from steel plates, cast iron and/or glass to make your fireplace more efficient, and even more attractive.

Invest in a pellet stove. A cousin to the wood-burning stove, pellet stoves are the newest way to heat homes at a wallet-friendly price. Because many are direct-vented, they don’t require a chimney, making them inexpensive to install. The Environmental Protection Agency considers them among the cleanest-burning heating appliances around and exempts them from smoke-emission testing requirements. Pellets made from compacted sawdust or wood chips have higher combustion efficiencies than wood and other fossil fuels. Instead of worrying about the cost of oil deliveries, you can arrange for trucks to deliver pellets, typically sold in 40-pound bags and costing between $120 and $200 a ton (households that rely on pellet-stove heat normally use two to three tons a year).

Use a space heater. In some homes or apartments where central heating may not be practical, you can use a space heater as an alternative. If you’re only looking to heat one room, a space heater, which runs on electricity, can deliver warmth at a fraction of the cost of oil or gas. It also eliminates the risk of overheating a home and wasting costly heating oil.

Rental sites like Airbnb.com let anyone put their spare couch, bed or house up for rent. The upsides for hosts: Greet people from all over the world, and pocket some cash for their efforts. The benefits for guests: Stay at unique places for a fraction of the price of a hotel room.

But staying at someone’s home isn’t quite the same as a hotel. There’s etiquette for both host and guest to follow so that both parties get the most out of the experience.

For Hosts:

Charge less first, then raise your rates, but be realistic. Figuring out how to price your place can be tricky. Charge too much and you won’t get any bookings; charge too little and you won’t be making as much as you could. Keep in mind that Airbnb earns its cut by doing a 6 to 12 percent markup on the listing price, so if you list a room for $100, Airbnb lists it for $106 to $112 and takes that extra money. But because it can be tough to get bookings on a site like Airbnb without a solid base of reviews, you may want to undercharge at first.

Jane Hodges, a business journalist whose new book about renting versus buying a house will be published this spring, listed the basement of her West Seattle home in April. Initially, she charged $55 per night and immediately got a ton of interest. Now her rate is $61, with a two-night minimum. She probably could charge more but the basement is not completely finished, particularly in the walk between the bedroom and bathroom, and she’s upfront with guests about that.

Chris Williams, a retired teacher in the former gold mining town of Nevada City, California,  decided to list the granny flat and a few spare rooms in her home on AirBnB to create extra income. She, too, started low on the pricing, but as her guests left rave reviews on the website, her rooms started showing up higher on the search listing, and she eventually had a full calendar of bookings. Still she keeps her rates lower than she could — $35 to $45 per room, with a two-night minimum – because the kitchen, living room and outdoor patio are all common areas, and she doesn’t serve meals. “I realize that the rooms aren’t as private as hotel rooms, so I don’t feel I can charge as much.”

Use the professional photographer. Airbnb offers to send one to new listings so that quality photos of your room appear on the site. Both Hodges and Williams had photographers who routinely shoot for realtors’ property listings come to their homes. Take advantage of that. Because the photographers know what they’re doing, they generally will do a better job emphasizing the assets of your home better than you can. Also, Airbnb-commissioned shots feature a “Airbnb.com Verified Photo” watermark on the site, which makes potential guests believe that your killer apartment actually exists.

Consider a two-night minimum. Of course, if you’re starting out as a new listing, it’s wise to go short to build up your list of reviews. Once you earn those, it’s better financially to go for longer-term guests. “I’ve turned down requests for people who need a place to stay for a night, will arrive at 11 p.m. and leave for the airport at 6 a.m. Ditto for people who want the place on the same day. It takes time for me to get the place ready — wash up, dust, vaccum, shop for breakfast” says Williams. It’s not worthwhile to do that day-in, day-out, especially if you’ve got a life, and daily maintenance will eat into those rental fees.

Ask guests to contact you first. At the top of your listing, ask that people send you a note inquiring about availability before trying to book.  This serves as a test for whether they actually read your listing before attempting to book, or were simply dashing off requests to everybody in a five-mile radius. It also allows you to communicate with potential tenants, so you can decide whether or not you feel comfortable taking them as guests. But respond to every message, even if it’s only to say that your place isn’t available. Airbnb tracks and publishes what percentage of messages you reply to as your “Response Rate,” so having a high number makes you look like a more receptive host, and it puts you higher up in the search rankings.

Fill out a detailed profile. That means a real photo of you (smiling, of course), and a bit of information about who you are. A filled-out profile reminds potential guests that you’re a real person. Also, make sure you list your neighborhood. Airbnb listings allow you to tag your place by neighborhood. It allow users who are searching for particular neighborhoods (say, the neighborhood of Williamsburg in the vast borough of Brooklyn) to find you.

Screen potential guests. If somebody who contacted you via Airbnb has no reviews or an incomplete account, ask them to send a bit of info about themselves. You want to know as much about a potential tenant as possible because you are letting them into your home, after all.

Also, you want to make sure it’s a good host/guest fit. Some hosts like to hang out with their guests and show them around town, other prefer that guests be as self-sufficient as possible. Williams is the former. She asks guests what brings them to town, so she knows what advice to give them to make their trip more fun. “I’ve found that just about everybody is happy to share that info. If they refuse or ignore the request, I consider that a warning sign, and I move onto the next person.”

Offer the basics. Good linens and towels (including washcloths) are a must. Hodges recommends good bedside lighting and a table or stand to put a book and a glass of water down on at bedtime. She also includes a coffeemaker and a cold breakfast of granola bars and fruit (cheap and easy to purchase). Williams puts hairdryers in every room, and takes mini bottles of shampoo and conditioners from her hotel trips to put in her guest bathrooms. “I can’t tell you how many guests told me that I just saved them luggage space. Anything you can do to lighten their luggage load is a plus, and makes them feel like they are staying in more of a hotel-like environment.”

For Renters:

Do not try to book without communicating first. Airbnb is not Expedia or Travelocity. Just because a date appears to be available on the calendar does not mean you can stay there that night. Message the host, introduce yourself , tell them what brings you to town, then ask politely if your requested dates are available.

Read the entire listing before messaging. Don’t waste the host’s time by asking questions with readily available answers like “are you near the airport?” or “do you have a kitchen?” You look like a undesirable guest and you’re far more likely to have your request rejected. “I don’t want to be their mom,” says Hodges. “If they book decently in advance and do research on the area, I am happy to fill out the cracks.”

It’s not a hotel. That means you should have some basic courtesy when it comes to cleaning up after yourself and making noise. Remember that your hosts have lives, too. One of Hodges’ biggest annoyances is guests who don’t say what time they’ll arrive. “Some people are not specific when they’re coming, so I’m stuck in the house waiting for them. Now when they book, I ask them to give me a two-hour window so I know what time to be here when they arrive.”

Williams’ pet peeve is guests who bring “extra guests” home at night. “You’re a few steps up from being a stranger in my home. I don’t want total strangers as well.”

Fill out your profile. The same rules apply to guests as hosts. “If your profile makes you look friendly and decent, I’ll usually allow you to book,” says Williams. That means a real (non-threatening) photo of you, and some information about who you are and where you’re coming from. More than anything else you do, this will raise the percentage of your reservation requests being accepted.

Vanessa Richardson is a freelance writer in San Francisco who writes about small business and personal finance.

While counties vary in how and when property values are re-assessed, most have a process that takes place at least every five to eight years. You’ll know it’s underway when you receive notification from the county auditor’s office by mail. If you’ve been paying taxes on the inflated home values that dominated the market before the housing bubble burst, your notification may actually lead to a lower tax payment.

Nevertheless, despite the continued lull in the housing market’s recovery, some homeowners are receiving news from their county auditor that property values are slated for an increase. As a result, property taxes go up, too. Here is an explanation of your options if you are notified that your home value has been reassessed to an amount higher than what you believe the property is worth:

Your Options

All counties allow the option for homeowners to react to reassessed values, whether up or down.  Start by doing a little sleuthing of your own, and use your county auditor’s website to research the home values of similar properties in your neighborhood (this information is free and public record). Gauge the “going rate” in your market by researching comparable home sales in your neighborhood, ask neighbors what value the county auditor has newly proposed for their property, and explore sites like Zillow and Trulia.

Once you’ve gathered real value data, compare it to the new figure your country auditor has determined—and keep in mind that short sales and foreclosed property figures are typically not considered as a valid form of value comparison. If you still feel confident that there is a discrepancy between the “real” and reassessed value of your property, Marsh Bilby of Marsh Bilby Appraisers & Consultants, LLC says the first step is to understand how the appraisal process works, and the potential costs that it carries.

Unlike the home inspection that was conducted when you bought your property, Bilby explains that appraisal is actually based on a math-appraisal technique using statistics-based evaluation models, and at times, walking audits in a neighborhood.  The appraiser will likely never see the inside of your home in determining the appraised value, but instead bases the figure on a variety of data points like square footage, county information, and the other fees that accompany a home sales transaction, like tax and title, real estate and broker fees.

When considering challenging a property reassessment Bilby advises using a simple cost-benefit analysis approach, much like you would when considering whether or not to refinance a property.

Costs and Savings to Consider

Start by figuring the difference between what you feel the value of the home is, versus the reassessed value proposed by the county. For example, if your home’s proposed “new value” is $300,000 but you believe that it’s worth $225,000-there is a sizeable discrepancy of $75,000.

Counties use a “millage rate,” or the amount per $1,000, to calculate taxes on property. To analyze your unique situation, you’ll need to identify the exact millage rate for your area. For the sake of example, assume that a millage rate of two percent for the above scenario. The $75,000 discrepancy in value would lead to an annual property tax increase of about $1,500, if the homeowner choses to accept the reassessed value. You should also consider any special exemptions that you qualify for, such as homestead exemptions, or owner-occupied exemptions, which vary by homeowner situation and location.

Once you’ve run the basic numbers, consider how long you plan to live in the property to determine whether the proposed new amount is worth challenging. In the scenario above, a homeowner who intends to live in the home for the next five years would potentially pay about $7,500 more in property taxes.  If you decide to move forward once you’ve considered the long-term costs, the next step is to seek a qualified, licensed appraiser.

Bilby says that a typical appraisal fee is around $400, and could potentially be higher for complicated properties, like those with pools or located on a waterfront. Bilby also stresses the importance of finding an appraiser who has several years of experience, and understands that the property is being appraised because of a new county auditor value. Securing an appraiser who is well versed in challenging county auditor appraisals is critical, as it may be necessary for the appraiser to accompany you to county auditor board hearings, to defend the results of his or her appraisal, and reasons for the variance from the county’s value.

Bilby says to keep in mind that you have no way of determining the outcome of contesting a reassessed value (and that the fewer comparable properties there are, the less certain the answer becomes). Should the county decide that their figure is accurate—you’ll have spent at least $400 for an appraisal, in addition to any additional time that the appraiser will bill for attending any required auditor hearings and preparatory fees- but still pay more taxes. On the other hand, not contesting an amount you believe is unfair could lead to paying thousands more dollars in taxes.

If you do intend to sell in the next few years, it’s also important to understand that your property value as determined by the county won’t play much of a role in terms of your sale price. Should you contest the value and win a lowered home value with the auditor, but your neighbors accept the higher value, you won’t be “haunted” by the lower value down the road. Bilby says that a true real estate professional will recognize that there are a lot of inaccuracies in the process, and will use many data points to determine the fair market value of a home.

Stephanie Taylor Christensen is a former financial services marketer based in Columbus, OH. The founder of Wellness On Less, she also writes on small business, consumer interest, wellness, career and personal finance topics.

Photo: iStockphoto

Last week, my wife and I bought a house near Boston. The negotiations lasted a week, then ended badly.

Let’s talk mistakes.

1) Not negotiating

Ever wonder whether something’s negotiable? The higher the price, the more wiggle room. Houses and cars are negotiable; your dry cleaning bill isn’t (unless the job got botched). That leaves a lot in-between. Consider hotel rooms. The rates must be negotiable; no two people ever pay the same thing, and no one ever pays the price that’s listed on the door of their room. Why not ask, “Is there any flexibility?” That’s a good negotiating question for lots of ambiguous situations. Flexibility sounds like a virtue. Who doesn’t want to be flexible? But with houses, you assume flexibility. No one takes the asking price literally.

The house we bought was priced at X. I wish I could tell you more about X, but I can’t because X is a ridiculous number, unless you live in a place like Boston where everyone is insanely convinced that a price like X is a steal. Actually, the price was X + $34,900. The $34,900 part seemed negotiable. We bid X minus $35,000. That allowed the seller to say, “Let’s just split the difference.” Unfortunately, the seller must have had a different script; he only lowered his price by $1,000. Our plan wasn’t going well.

2) No reservation price

Your reservation price is your limit. If you’re buying a house, it’s the most you’ll spend; if selling, it’s the least you’ll accept. Without a reservation price, you’ll be swept away by emotion, and buy something you can’t afford. Then, years later, when you have no money, and there’s another housing crisis, and the entire U.S. economy collapses, it will all be your fault. In addition to knowing your reservation price, it’s good to estimate the seller’s. That tells you about the zone of agreement, the range where you can strike a deal. In our case, the zone of agreement was razor thin.

3) No leverage

Who’s got power? Because the housing market is so bad, we assumed we did. On the other hand, the seller had just listed the house that day. And it was a great house. Also, he turned out to be a real estate attorney. He knew some tricks. Mid-week, the seller increased his leverage by scheduling an “open house.” That attracted buyers, and netted him two more offers. So much for leverage.

4) Deadlines and ultimatums

If you need drama, deadlines are good. Recently, the U.S. threatened to shut down the government unless there was a budget agreement—by midnight. It worked. But sometimes deadlines just annoy people. After the seller got more offers, he notified all the bidders: “Final offers due by noon tomorrow.” We offered our reservation price: X + $5,000. Then we waited. By 3 pm, we realized the seller might be using our offer to get a better deal from another bidder. So we set a deadline: our offer expired at 6 pm. At 6 pm, the seller accepted our offer; we signed some papers and felt good to be done. The next day, the seller backed out, then sold to someone else. So much for deadlines.

4½) Getting desperate

It’s good not to get too attached to things like houses. There can’t be just one house, or one job, or one __(whatever it is that you think will make you happy). I believe there’s always another house. And if you happen to be living in it, and it’s for sale, please let me know.

4 1/2 Mistakes When Negotiating Something Big was provided by CNBC.com

Photo: sean_dreilinger

The bad news just keeps piling up for homeowners. Home values, according to the most recent data from Zillow.com, dropped by 3% in the first quarter of 2011: the largest decline since the first quarter of 2008.

In fact, thanks to the decline in values in the first quarter this year, Zillow has pushed back its expectations for housing recovery. Previously, the company expected home values to bottom out by the end of this year. Now, it envisions that to happen in 2012, at the earliest.

But the news isn’t all bad: depending on where you live, you may be able to dig out of the hole sooner. You just need to follow several critical indicators that will give you an idea of where your real estate market is headed. (And you know that when it comes to real estate, it all depends on three things: location, location, location.) Here are four factors to watch.

1. Foreclosures in your area

Many parts of the country are still in the middle of a deep foreclosure crisis that floods the market with low-priced housing. But once the number of new foreclosures in a particular area starts slowing down and those homes get absorbed by deal-seeking buyers, homeowners can reasonably expect that the value of their properties will at the very least stop going down. Since the value of any given home derives in part from the sale price of similar homes nearby, after all, fewer or no foreclosed homes will help the values of all other properties in the area. Track foreclosure listings and trends through RealtyTrac.com.

2. Indicator cities

With any cyclical trend, including housing prices, certain areas inevitably see the impact earlier than others. San Francisco and Miami were two of the first markets to see house prices crash back in 2006 and 2007. As a general rule, the areas hit the earliest also tend to be the first to recover. Miami and San Francisco are doing just that, experiencing an upturn in home prices during first quarter 2011, according to a report by Calculated Risk Finance & Economics. Some of the later-hit areas like Arizona, on the other hand, will likely continue to see stormy weather for a while.

3. New home sales

New homes have always been a problem for people trying to sell their current houses. After all, why would a home buyer pick a used home when they can buy a new one in a better-groomed neighborhood? Real estate, like most markets, responds to supply and demand. As a result of the real estate crisis, the supply of new homes to the market since 2008 has slowed down considerably — though, of course, in foreclosure-flooded neighborhoods that doesn’t matter much. As soon as you see those foreclosed and new properties in your area start selling out, hope is near that your own home’s value will start recovering.

4. Interest rates

Many people in an upside-down mortgage fear that when their home values do finally rise, the interest rates will go up right along with them. If that happens, a new loan or an interest rate reset (if they have an ARM) might actually increase their mortgage payments — leaving them in the same tough situation they’ve lived with for years. Robert Ward of the Economic Intelligence Unit does not anticipate a significant rise in US interest rates during 2011 or 2012. This means advantageous interest rates are likely to still be available when home values reach a point that qualifies for refinancing — or putting your home on the market.

The relief boat hasn’t sailed yet

Gradually rising home values is good news for some, but for those caught with untenable mortgage payments it may be a case of too little, too late. Fortunately for those in that position, foreclosures are expensive for banks and bad for the economy at large. Credit and mortgage counselor Tony Saenz reports that private banks are continuing, and are expected to continue, to negotiate with home buyers and settle with lower interest rates and partial forgiveness of the principal on home loans.

Four signs that your housing market is recovering was provided by CreditSesame.com, a free tool that helps people manage their credit, mortgage and debt.

Photo: iStockphoto

Renting was once a temporary housing situation until one could save money to buy their own home. But, today’s renters are increasingly former homeowners who no longer believe that owning a home is a wise investment. The Fannie Mae Q4 2010 National Housing Survey indicates that 28 percent of renters surveyed believe that renting makes more financial sense than owning a home, up eight points from January 2010. There’s also been a five-point rise since January 2010 in current renters who say they’re more likely to rent for the long-haul.  Survey respondents also expect that rental prices will increase by 2.8 percent, on average, over the next year.

For homeowners unable to sell their property at a reasonable price, renting could be the way to waiting out a lagging housing market. But, becoming a landlord involves far more than handing over the keys and watching the rental checks roll in. Here are five things you must consider before renting your home.

Your Objective

If you are saddled with two mortgages, renting your vacant property may prove more lucrative than letting it sit vacant. But, if you’re renting your property for the income alone, there are many financial factors to weigh.

As a landlord, you are responsible for upkeep of your rental property, which may a property management company. Expect to pay about ten percent of the monthly rent you charge for such services, and remember that in most cases, you are responsible for the costs of repair and maintenance—even if the tenant caused the issue.

Remember that you’ll spend about two percent of the purchase price of your home each year on basic home maintenance. Consider the cost of your monthly mortgage, remembering that expenses associated with renting, mortgage interest and depreciation, are all tax deductible. (However, the IRS considers renting a home a “passive activity,” meaning that losses are limited to $25,000 a year). Decide whether you are willing to “sweeten the deal” by paying any utilities, and consider that you will incur living expenses for your own housing.  Taking all those factors into consideration, establish a base figure that you would need to charge for rent, just to break even.

With that figure in mind, Joanne Cleaver of ForSaleByOwner.com recommends getting a full appraisal by a professional, and requesting that comparable rents be included, not just comparable market values. Third-party verification of the market rents will enable you to hold firm in negotiations, and will prove invaluable when resetting your property insurance to cover the rental.

Your Future Plans

Tax laws around capital gains vary based on amount of time you live in a property before it is sold. Further, rental properties that are sold at a profit may be subject to repayment of any depreciation deductions that you claimed on the property prior to the sale. If you plan to sell the property in the next few years, make sure that you are aware of the tax implications and time limits.

Keep in mind that renting is generally not a wildly profitable business if you’re only in it for the short-term, and that rental income is taxable and must be reported on a 1099-MISC tax form. However, the long-term financial benefits  of renting are the tax breaks, and opportunity to build home equity using someone else’s money.

Tenant Laws in Your State

Chantay Bridges of Clear Choice Realty & Associates stresses the importance of understanding tenant laws in your state, especially if you live in one where laws skew in favor of the tenant. She explains that many states deem it illegal to evict a tenant without proper documentation and up to 90 days of notice, even if they have caused damage or failed to pay rent. Further, establish legally binding contractual boundaries to protect yourself against any contents that the renter may take with them after moving, like wall coverings or small appliances. (This becomes especially important if you sell the home, and the buyer purchases it on the condition that all contents are included).

Bridges also points out that some landlord/tenant laws state that once a person has lived in a property for a 12 month period or have utilities turned on in their name, they have established tenancy; it can one to two years to remove their name from the property. Further, if they find ways to illegally secure utilities like cable, you may be liable for damages. Always conduct a credit and criminal background check on prospective tenants, and require a refundable security deposit that will cover damages the tenant may cause.

Your Legal Landlord Responsibilites.

Michael Koshet, CEO of Help Me Rent magazine, also advises landlords to understand what services they are legally obligated to provide, to maximize return on investment.  While laws vary by state, Koshet says that landlords are generally not obligated to perform cosmetic repairs that do not impact safe living conditions. Of course, the happier your tenant is, the longer they’re likely to stick around, but knowing your rights can minimize unnecessary expenses. If a demanding tenant seeks new carpeting, landscaping or window coverings, you may not be legally required to comply, as long the current condition does not pose a hazard. Further, tenants are required to replace certain damages they cause, like a broken window.

Worst-Case Scenarios

Consider worst-case scenarios before deciding to rent. How long can you afford for the unit to sit empty in the case that you can’t find a renter? How much money can you afford to dedicate to court costs or litigation if a renter doesn’t pay, causes damage that requires legal proceedings, or fails to pay for several months? Renting a property can be a wise home investment while waiting out the home market, but it’s also a game of chance. Understand the risks and rewards associated with renting, and then decided if you’re ready to take on the role of landlord.

Stephanie Taylor Christensen is a former financial services marketer based in Columbus, OH. The founder of Wellness On Less, she also writes on small business, consumer interest, wellness, career and personal finance topics.

Should you pay off your mortgage as quickly as possible? Or are you better off paying it over 30 years and investing any extra cash? A lot of misinformation can be found among the financial “experts,” and one of the favorite is this argument:

Keep your mortgage in place to maximize your tax deduction.

Why is this bad advice? The math simply does not add up. For example, a family paying a federal rate of 28% plus a state rate of 5% is liable for 33% of taxable income. So if your total mortgage interest is $12,000 this year, it comes out like this:

$12,000 interest – 33% tax liability of $3,960 =  $8,040 net after-tax interest

In other words, even after tax benefits, you are still paying 67% of the gross interest cost after allowing for the tax deduction. If you could eliminate the entire mortgage debt, you would save the after-tax interest of $8,040 per year.

A second myth is that you are better off investing your cash elsewhere. The argument is:

Invest any extra cash to increase your investment income.

There is also a problem with this argument. That extra investment income will be taxable, so even if you could match your 5% mortgage with 5% interest income, is the risk comparable? Your home is insured, you maintain it, and it provides many benefits beyond just being an investment. If you make 5% by investing elsewhere, what level of risk exposure do you accept? Chances are that the risk you take to earn 5% is not as valuable as the investment risk of paying 5% on your home mortgage.

Is that 5% cost really such a big deal? Yes. If you are paying 5% on a 30-year fixed rate mortgage starting at $100,000, your total interest cost is $93,259, so that your $100,000 mortgage costs nearly double to get paid off.

Some additional startling facts about your mortgage (all based on a $100,000, 30-year fixed-rate mortgage):

- At the end of five years, you have only paid off about 8% of your mortgage. Considering that most people move to a new home after five years, that means your 60 months of payments were almost entirely interest.

- At the end of 20 years, your mortgage is only one-half paid off. The other half is repaid over the last 10 years.

- Adding $50 extra to your payment each month takes five years off the repayment term, reducing it to 25 years and saving about $18,000 in interest.

Mortgage interest is calculated based on the remaining balance each month, so the higher your balance, the more of your payment goes to interest. This is why paying off as much as you can early on — a process called mortgage acceleration — is a valuable investment. If your mortgage is fixed at 5%, every dollar you prepay today yields you a reduced interest of 5% at a compounded rate. That is going to be a much smarter and safer investment than you can make anywhere else.

Michael C. Thomsett is author of over 60 books, including Annual Reports 101 (Amacom Books Press), Trading with Candlesticks (FT Press) and the just released new book, Getting Started in Stock Investing and Trading (John Wiley and Sons). He lives in Nashville, Tennessee and writes full time.

This post was provided by Minyanville.com.

Photo credit: woodleywonderworks

That said, relatively low home prices throughout the country have caused many people to consider the issue of buying versus renting. In some areas, prices have declined so much compared to rents that buying a house may actually make more economic sense. In others, despite price declines, renting is still more economically viable. Real estate listing website Trulia.com recently released its new Buy vs Rent index, ranking the top 10 cities in the United States where buying makes most sense, as well as the top 10 cities where you should rent. How did they decide? With the help of the so-called buy/ rent ratio, which is basically the average price of a home in an area divided by the average rent charged per year. If the result is 15 or lower, that means homes in that area are priced so low that buying is cheaper than renting. If the buy/ rent ratio is 20 or higher, the case is stronger for being a renter.

Ultimately, of course, the decision to buy or rent should be based on much more than plain numbers and statistics. Homeownership enables you to build equity over the long term, but comes with costs beyond a home’s purchase price (such as property taxes and maintenance, the broker commissions and other costs associated with selling that home) that require a committment of at least five or six years to be recouped. You build no equity by renting, on the other hand, but you have the freedom to move at a month’s notice. The debate could go on and on.

In the infographic below, we give you the results of Trulia’s analysis, along with some interesting facts on buying versus renting, including the average net worth of home owners compared with that of renters in recent years, from the Federal Reserve Board.