Buying your home can be one of the most exciting and one of the most stressful times of your life. We've compiled a few suggestions to help guide you along the path, and sometimes through the forest, of home ownership.
The days of making incredible profits off short term investments are gone (for now). A buyer needs to adopt a long term strategy in real estate. Be prepared to commit to remaining in your home for at least a few years. With the market fluctuations and the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner.
Be careful of getting caught trying to outsmart the market by looking for the bottom. You won’t know it is there until the market starts to rise and inventories start to decline. Right now, a buyer can usually shop for the home they want and not take what the market gives them. Unless a buyer is looking for an investment property, they ultimately should be looking for a home in which they want to live in for awhile. If you find that home that meets your needs and strikes your fancy, make an offer and negotiate. Don’t provide an opportunity for another buyer to start negotiations. There is nothing worse than regretting the house that got away.
Get a full taste of what a home has to offer by doing some simple reconnaissance of the neighborhood. Visit the potential property and neighborhood at different times of the day and different days of the week. That way you can get an unvarnished view of what’s going on, the feel of the neighborhood and community, convenience to shopping (check out our WalkScore feature on our website), traffic patterns, safety or any other issues that may be important to you.
Be sure to investigate all of the costs of buying a particular home. A low priced home is no bargain if the maintenance and upkeep costs are prohibitive. At the height of the market, many buyers were willing to purchase homes in need of TLC and either never got around to or never had the finances to accomplish the work. While the previous seller was able to pass on these tasks to an eager buyer, the current market rarely provides this opportunity.
While reviewing costs find out when the house was last painted and re-roofed. Check with the seller to review copies of utility bills to allow you to estimate the ongoing cost of your home purchase. If the house has a large yard, trees, a swimming pool or a spa, and you don't have the time or expertise to do pool cleaning or yard work, find out what the current owner pays for those services. Be sure to get contact information for service providers that the seller has used in the past and then confirm they will be willing to charge the same price for a new client.
You should start speaking with mortgage brokers early in your home buying process. You may find that you can afford more, or less, home than you think. Knowing your true buying power will save you time and frustration. There is nothing worse than finding the perfect home and realizing that the payment would be out of reach for your budget.
Many buyers have been considering adjustable-rate and interest-only mortgages. While these loans may save you money initially, be sure that you can comfortably make your mortgage payments should interest rates increase after the initial fixed or interest-only mortgage period expires. Understanding common mortgage terms will help you have a knowledgeable conversation with your lender about the options available to you.
Don’t be afraid to ask questions! Your mortgage broker and Realtor are there to help you.
Have a home inspection from a qualified and respected local inspector. It is their job to look under the hood and conduct a visual, noninvasive examination of the home, including the overall structure, construction and mechanical systems, and appliances. Inspectors will generate a report covering all of the areas inspected with an overall analysis of the condition of any given system or portion of a home. This report will cover existing or potentially future issues that should be of interest to a homeowner. With this information a buyer can make an informed decision whether to complete the purchase of the property. The charge for a home inspection generally runs from about $300 to $500 or more. Buyer’s should be present during the home inspection as this is a great opportunity to learn about any ongoing maintenance issues and overall care and feeding for your new home.
Be sure to fully understand the closing costs that you will be required to pay. Among these costs are your good faith deposit, total down payment, inspection fees, loan charges, escrow and title fees (ask if they have a first time home buyer discount, if this is your first home), local taxes (if any), local inspection fees, HOA transfer fees, etc.
During your inspection timeframe you should shop for homeowner’s insurance. Lenders require that you have homeowner’s insurance. If you don’t have any, your lender will be happy to sign you up for their very expensive policy. You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. You may also receive discounts if your home’s electrical, heating and plumbing systems are less than 10 years old. Discounts may be provided for home security systems or having multiple coverages (life, auto, etc.) through the same carrier.
A standard homeowner’s policy does not cover many items such as flood insurance and earthquake damage. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at FloodSmart.gov. In California the California Earthquake Authority (www.earthquakeauthority.com) provides earthquake coverage.
While this is not meant to be a complete list for every transaction, you should be getting a pretty good idea of the things you need to think about. As you can see, the normal real estate transaction utilizes the services of a number of individuals. The amount of communication and coordination that is required for successful transactions can oftentimes be overwhelming. With proper planning and the resources of a great Realtor, you will soon be enjoying your new home.