Home Buying Advice

[SweetErika]

We're finally at that point, and have learned a ton so far, but I'd love to hear your experiences and advice on the subject.

Any tips, things you wish you'd known/done differently, possible pitfalls, anecdotes, indispensable resources, etc., on mortgages, hunting, and buying would be great.

Hopefully others will benefit from the info, and are welcome to ask their own questions, as well.

Thanks in advance, guys!

 

[silverwhisper]

the only thing i really know is that getting someone you're paying to do the building inspection is absolutely critical.

ed

 

[wicked woman]

When you've found a house you want to put an offer on...get your lawyer to read the contract BEFORE you sign it. Make the offer conditional on an inspection, financing, and the ability to get insurance. My son just bought his first house and he was advised to add the condition of insurance because with some older houses it's impossible to get insurance if the wiring etc. isn't up to code.

Good luck. Enjoy your search.

 

[Succulent-one]

I bought a house 3 months ago. In Oregon, your initial offer is conditional on it being able to pass inspection. So make sure it is a reputable inspector. Get pre-qualified for a loan, so you know how much they are going to lend you. Buy in the best neighborhood you can afford. And kind of think of re-sale value. If you buy a house next to a gas station and mini mart or on a flag lot, your resale value will not be as high. Also when you find one you like, look at your street and neighbors during different times of the day. Mornining, evening, weekends? I changed my mind about a neighborhood when I found that there were an over abundance of cars at night and a lot of kids. If you have young kids, look at the schools and safety for kids.

Have fun!

 

[Succulent-one]

Sweet Erika, You can PM me if you want to know the name of a mortgage broker. They were fantastic and quick and easy and got me the best rates! They can work with anyone.

 

[Norajane]

I've done the buying and selling thing twice - once with my condo, and once with a house that I rented out to tenants...stay organized to make it easier on yourself!

Designate a place where you will keep ALL home-buying and maintenance related documents. Start a file drawer with folders for everything from your bank statements and loan documents to the contract and Title to real estate tax bills - believe me, start your system now and stick with it! You will be dipping into those records over and over from now until you sell that place, including during tax season, so get it together while it's still manageable. Buy and selling generates so much paper.

Be prepared to move quickly. Once you start looking, a dream house can catch your eye at any moment. Depending on the market, you might need to make a fast decision - it might seem really fast because the realtor will need to make an offer soon before the sellers accept another offer. Even if the market isn't that great, if you spot a perfect place, you'll want to make an offer to make sure you get it, so you'll want to have your financial stuff in order and are ready.

Finally, emotions kick in when you see the place that just seems perfect for you, and that's not a bad thing - you want to feel good about it. But try not to get your heart set on any one place until after your offer is accepted, the inspection is satisfactory, and the financing is in place.

Most of all - have fun! This is one of the coolest things - buying your first place for is a real thrill!

 

[Guest]

 

[midwestyankee]

In his book Freakonomics, Steven Levitt points to a study of several thousand home sales transactions where the real estate agents sold their own homes. On average, they kept their homes on the market nearly two weeks longer than sellers who were represented by agents. The conclusion is obvious: there is a monetary advantage to patience, but only for the seller.

Here's why: the agent typically takes home only about one quarter of the total commission because it is shared with their office and often with the seller's or buyer's broker. The agent's take on a $300,000 house might be $4,500 and not the $18,000 total commission. So, on a sale of this size, if waiting 10 to 15 days brings the seller an extra $10,000 the real estate agent's incremental gain is only $150 above the commission for selling the house for 10G less.

Moral of the story: it pays to know what incentives are driving people's actions.

So how does this affect a buyer like Erika? Be patient and insist that any agent you work with keep looking for houses on your behalf until you find what you want. Do the math: there are countless homes in a major metropolitan area and they change hands fairly regularly. One that is very close to what you want will come on the market - and most likely a lot sooner than you might think. Your agent may say all sorts of things to persuade you to make a quick decision - but bear in mind that his/her time is money and the agent's primary motivation is to make as much commission as possible in as little time as possible. Finding the perfect house for you is of no concern whatsoever.

One other thing to consider as a buyer: you do not want to own the smallest or the largest house in a neighborhood. In the case of the larger home, the averaging function will hurt you in that the house's value will be diminished because it is more house than most people looking in that neighborhood can afford. For the smallest house, the value will be diminished because it's less house than people looking in that neighborhood are interested in owning.

Everything that Scaly said is dead on, btw. Beware the incentives that drive people's actions.

 

[Guest]

 

[TBKahuna123]

You know as negative as Scaly's post about Real estate agents was, I thik it illustrates what I was going to say. Make sure you find an agent who is right for you. It's all about attitude. Does his personality match yours? When we bought our first house we had a horrible agent, she was worthless! Not only did she not do the work for us up front, she was worthless on the back side too.

This last time we found a dream agent. This guys was energetic, accomodating and actually listened to what we wanted to buy. He took us out and showed us a couple things we hadn't thought of (Townhouses and a new construction development) so we could see the other side. He didn't push anything on us, but showed us the whole spectrum that first night. Then we narrowed in on what we wanted.

When we found the house we wanted the guy was a pitbull. The only time he said anything about letting it slip away was when we got into the 4th round of offers. He had told me to set a price, but not tell him. When we got to that point, we were within 1000 bucks of the price I wanted and I said I wasn't going to lose it over $1000. He agreed, though he had been hoping to get it for $2000 less. Sheesh he'd already jacked em for 20 grand on a house that had just hit the market. It was like a game to see how low he could get it. It was wierd, he was hurting his commission, but was workin hard for us. There's a reason though, he said he was in it to build a long term relationship. Sometime we're gonna sell this house and buy a new one, and he wants to be sure we come back to him. We get a card every 6 months too, just to remind us he's there, even though he knows we aren't selling yet. Still, when we do sell and move on, we're going through him. It's that kind of agent that is successful because he takes care of his clients. That's what you need to find, so don't be afraid to meet with an agent and if they aren't right for you, to sever ties and find someone else. It's your money.

The other advice I can tell you is to be realistic. We could have gotten what we really wanted, but we'd have been house poor. Don't spend so much on your home that you can't do anything else, it's just not worth it. We bought a house that we can turn around and sell in 5 years, make money on, and move up to what we really wanted.

The other thing is you have to be willing to walk away from your first choice. If you can't get the price you want, move on. There are other houses out there. This is really hard with your first house because you think you'll never find anything so wonderful ever again in your life, but it's not true. For every dream house there is another one even better out there.

The last piece of advice I can give you is don't build your first house. Until you've owned a home you don't really know what you want in a house. Often what you think you want isn't exactly right. Even if you've rented, home ownership is different.

Lastly, have fun!

 

[Guest]

 

[SweetErika]

When you've found a house you want to put an offer on...get your lawyer to read the contract BEFORE you sign it. Make the offer conditional on an inspection, financing, and the ability to get insurance. My son just bought his first house and he was advised to add the condition of insurance because with some older houses it's impossible to get insurance if the wiring etc. isn't up to code.

Good luck. Enjoy your search.

I knew there could be conditions, but wouldn't have thought one of them could be insurance. Thanks for the tip, WW!

 

[SweetErika]

I bought a house 3 months ago. In Oregon, your initial offer is conditional on it being able to pass inspection. So make sure it is a reputable inspector.

I'm pretty sure that's how it works in WA too. We're consulting with the realtor who gave our first time home buyers class tonight, so I'll make a note to ask him.

Get pre-qualified for a loan, so you know how much they are going to lend you.

We should get pre-approved (or at least start the process) tonight as well.

Buy in the best neighborhood you can afford. And kind of think of re-sale value. If you buy a house next to a gas station and mini mart or on a flag lot, your resale value will not be as high. Also when you find one you like, look at your street and neighbors during different times of the day. Mornining, evening, weekends? I changed my mind about a neighborhood when I found that there were an over abundance of cars at night and a lot of kids. If you have young kids, look at the schools and safety for kids.

Have fun!

With the price of housing here, we definitely have our eye on resale value, but these are details I can see easily slipping by with all of the excitement. Excellent, thanks!

Hey-- what's a flag lot?

 

[SweetErika]

I've done the buying and selling thing twice - once with my condo, and once with a house that I rented out to tenants...stay organized to make it easier on yourself!

Designate a place where you will keep ALL home-buying and maintenance related documents. Start a file drawer with folders for everything from your bank statements and loan documents to the contract and Title to real estate tax bills - believe me, start your system now and stick with it! You will be dipping into those records over and over from now until you sell that place, including during tax season, so get it together while it's still manageable. Buy and selling generates so much paper.

This weekend we were trying to get everything together for the mortgage consultation and income taxes , and realized just how much stress our disorganization was starting to cause, even with the measly amount of files we currently have. It'll be vastly better once we have a good place to store stuff, but until then (and on your advice), I'm going to pick up one of the portable filing boxes for the house stuff.

Be prepared to move quickly. Once you start looking, a dream house can catch your eye at any moment. Depending on the market, you might need to make a fast decision - it might seem really fast because the realtor will need to make an offer soon before the sellers accept another offer. Even if the market isn't that great, if you spot a perfect place, you'll want to make an offer to make sure you get it, so you'll want to have your financial stuff in order and are ready.

Yeah, the average time for an offer here is less than a week on the market, and the time until closing average is 28 days, I think. Quick is right!

Finally, emotions kick in when you see the place that just seems perfect for you, and that's not a bad thing - you want to feel good about it. But try not to get your heart set on any one place until after your offer is accepted, the inspection is satisfactory, and the financing is in place.

Most of all - have fun! This is one of the coolest things - buying your first place for is a real thrill!

More wonderful advice, as always, Nora. Keeping a certain amount of distance is going to be tough (we've already found several "perfect" houses just by looking at the ads and outside ), but we'll make a concerted effort this time.

 

[Emerald Eyed]

Buying a home wasn't as stressful as when I took possesion!!

I had an inspection, roof to foundation and it did well.

However, inspectors do not move furniture. I found that my fully finished basement had water seepage at some point in time and molded the drywall about 3 inches up...Not a huge deal as the lady never had drainspouts on the house, but it was missed by the inspector. I have installed downspouts and plan to re grade around the foundation.


Also radon inspection is critical if you ask me. My guess it will be mandatory within the next 5 years.

My home failed (like most in my area) . I had a Radon mitigation system installed for $1300 since our lower floor with have kids sleeping in it.

Also you find things like badly stained carpet, pet smells etc once the furniture is removed.

Allow yourself 2-3 weeks to get things where you want them. I paid an extra Month in my rental to ensure time. I am glad I did since getting a drywaller to fix the basement wall took a couple weeks, Then mudding and texturing it, allowing it to dry and repainting.

 

[Norajane]

More wonderful advice, as always, Nora. Keeping a certain amount of distance is going to be tough (we've already found several "perfect" houses just by looking at the ads and outside ), but we'll make a concerted effort this time.

Thanks, sweets.

My parents moved houses last year - they moved in between Thanksgiving and Christmas, so the holidays were filled with lots of HGTV in the background. If you haven't ever watched HGHTV, they have tons of home buying and home decorating shows...it's not a bad idea to check some of them out, as you'll see features and floor plans and get a sense for what you can do with spaces that don't seem like much to begin with (yards, for example, or rooms with odd features). They might also help you prioritize the home features you can't live without. Careful, though, you might get hooked, like me.

 

[Ezzy]

When you have the home in hand and are in the swing of paying the mortgage, try and get into the habit of overpaying by $50.00 a month and have it taken off your principle. (Of course this is dependent on having no penalty for early payment).

It may not seem worth doing but at $600.00 per year it will soon save you thousands in interest payments, over the 30 year life of your mortgage you will have knocked down the principle by $18,000.00 and as you pay around 3 1/2 times the principle on a cheap mortgage that equates to $63,000.00 in interest payments.

So a mortgage of $1,000.00 per month would be paid off, free and clear 63 months ahead of schedule.

This little technique saved my folks just under 7 whole years of payments (6 years and 10 months) on their last mortgage; they moved into their retirement home with the new home paid for in cash, nothing left to find except their living money.

If your mortgage is smaller or you can afford to increase the overpay the savings are higher.

 

[Guest]

 

[NaiveOne]

I agreee with what people have said about realtors. They are working for YOU. So make sure you feel comfortable. Ask friends who they went with and if they did good job. My realator was great, and was in for the long haul like someone mentioned before. She would always meet me at my job when there were things for me to sign. She evn made fliers for me, because I needed to rent my apartment out before I could buy. So when I sell in a few years, I'll definately go with her. A good realator will know about all the inspections and contingencies.

If you belong to a credit union, try there for your mortgage. They had the best deal by far for me!

Definately don't forget to figure in property taxes.

And if there are major things you don't like, really consider how much time, money, and energy it will take to fix them. I hate my kitchen floor, but the condo is close to school and in my price range, so I figured I would change it myself. Now I doubt that will happen. No time and no money.

Good Luck SweetErika!!!!

 

[TBKahuna123]

I'm pretty sure that's how it works in WA too. We're consulting with the realtor who gave our first time home buyers class tonight, so I'll make a note to ask him.

Always explicitly state that the offer is contingent on inspection, appraisal and financing. Insurance isn't usually a problem, but if there is any doubt about flood plains, etc. I would make that a contingency too. Also if something does come up be prepared to walk away. Ever seen the movie the Money Pit? I lived it! Thank God we were only renting, I would have stepped in front of a bus if we'd owned that house.

I was also going to ask about a first time home buyer course. We took a great one and used a great program which scored us a sweet interest rate. It was a state program, something to check into. We were lucky and slid just under the income level to get it, and it saved us almost 3% on our mortgage, plus at least half our closing costs.

 

[glynndah]

I would spend a little time investigating the general neighborhood you'd like to live in. We found a great little house in the country. It met all our expectations and passed our inspector's checklist. When we went back a few days later to begin negotiations, we found about twenty-five farrowing houses (sheds where pigs are raised for market) had been moved into the meadow next door.

 

[Eilan]

I would spend a little time investigating the general neighborhood you'd like to live in. We found a great little house in the country. It met all our expectations and passed our inspector's checklist. When we went back a few days later to begin negotiations, we found about twenty-five farrowing houses (sheds where pigs are raised for market) had been moved into the meadow next door.

Ah, the joys of suburban sprawl.

The people who used to live in the Columbus (OH) suburbs are starting to move into neighoring counties, where there are still quite a few farms. I laugh my ass off when a huge development goes up and the residents start bitching about the farm smells. I don't know what they expected to smell when they moved to an area knowing there was a farm nearby.

 

[SweetErika]

You guys are awesome! Hubby and I are taking everything in, and learning a ton from this!

So we met with a lender last night, and got pre-approved for far more than we need or want, with an offer for their lowest possible rates (though we'll definitely shop around and check with our bank and CU). TBK, there ARE state programs like you talked about, but we don't qualify for those because we don't have the documentation necessary and have too much cash.

We also met with a realtor (the guy who gave the class). Your advice is really helping us in this area, as I may have seen a few of the red flags you all warned about. I'm sure he's a good agent, but three things left me with a bad taste:
- He didn't seem to be listening and responding to us as a unique couple. He knew we've been looking at what's available for many months, and may be a little more informed than average, yet he still went over everything (including how to read email and listings) like we were clueless.

- This was a no obligation consultation, but he kept trying to "earn our business." I felt a little pressured to commit to him, and that pisses me off.

- He was negative about what's available in the areas we favor, saying we'd really have to compromise to get something in our price range. That's fine, but we KNOW there are many houses that meet our requirements in those areas because we've been looking for so long. I really believe it's important to go with someone with a positive and "There are definitely options, and we'll seek out the perfect ones for you" attitude. Maybe this guy just isn't as up on the current market in our target areas, but he should have said as much if that's the case.

Scaly, thank you so much for sharing your experiences and knowledge! I feel far more confident, and have a much better idea of what to do if we're dissatisfied and look for throughout the process.

Yank, those are fresh, much-needed perspectives. I can see falling into the smallest/largest house trap easily; just about everyone wants a nicer neighborhood or the best in certain areas. Freakonomics just went on my book list as well.

TBK, you're right, it's great to hear the contrast between the best and worst agents. Your description has given me some ideas for interview questions.

Thanks for the ideas, E_E and NaiveOne! We haven't considered Radon, and will check out our credit union (they pay 3% on savings and checking, so I bet they have good deals, but the nearest branch is 200 miles away).

We'll be sure to check them out at various times. That's something my mom stressed sometime ago, but I'd forgotten and am glad to have the reminder.

Ezzy, our parents have paid their mortgages off very early using that technique. We're really lucky our parents did a fantastic job teaching us about debt, credit, mortgages, and investing; it's already proving valuable.

 

[Vixandra]

Thank you for posting this thread.

We're at least a year or two away from buying a home at this time but its still a lot of good information to keep in mind.

 

[Guest]