3 things you NEVER or ALWAYS should do when purchasing a home

[Wealth Health]

Given the EXCELLENT response to the last thread I started, thought I'd toss this one out to the board.

I'm looking to purchase this year and for some reason and falling in love with homes in the $300 - $400 M range. (income $102,000/yr)

Am I off the RE rocker?
What would be the best way to go about financing -- interest only, 30 yr, 40 yr, 50 yr?

Remember...I'm a newb!

This board is great!!!!!

 

[Texas Proud]

3 Nevers....

> Never tell the RE agent anything about what you are thinking. (ie. 'Lets offere X, but I am willing to go up an extra Y dollars because my wife MUST have that house'. in Texas, they work for the seller BY LAW and they go back and tell the seller whatever you told them)

> Never buy more house than you can afford. The general rule is 2.5X to 3.0X your salary. (looks like you are breaking this rule.... and it is a continuing cost.. utilities, upkeep etc...)

> Never get into a bidding war on a house.


3 Always...

> Go to the neighborhood at various times and various days to see what it is like 24 X 7. My friend found out that the neighbor has three big dogs that LOVE to bark all night long... but don't do much during the day...

> Get a professional to check out the house. The money spent might save you MANY times more in cost or headaches

> Always buy a house for a place to live, not an investment. If it goes up and you will sell when you retire... great... but a nice place to live is more important.

 

[kcowan]

TP has a good list and I will add some more:
Never
- Buy a house because of emotion. Make a list of must haves and nice to haves then go through the house and complete the checklist. Don't buy it if most of the must haves are not there.
- Buy based on finishing or decor because that is the easiest thing to change.
- Buy the most expensive house on the block - cheapest is good or in the middle.

Always
- Check out the status of the local schools even if you don't have kids. This will influence future market values.
- Buy what you expect you will need in 5 years so you are not forced to move too soon (moving can be very costly).
- Budget for 3% to 5% of the purchase price for unexpected expenses such as closing costs, title transfer costs, and ongoing maintenance costs like the weekly trip to home depot and other incidental enhancements - if you don't spend it in a given year, use it for a holiday or to pay down the mortgage.

 

[TromboneAl]

Never use the home inspector recommended by your real estate agent.

Always remember the the agent is not your friend, even though he/she seems to be.

What would be the best way to go about financing -- interest only, 30 yr, 40 yr, 50 yr?

15 year mortgage.

 

[linkerbink]

One thing to watch out for...check the area around your possible purchase to find out the status of any empty land that might be nearby. That vacant field behind your development might be nice and peaceful now, but it could end up as an industrial area or junkyard. I'm lucky...I've got a country club on two sides and an existing development on the other two.

 

[Linney]

Good tips by others so far.

I'll add: make sure your mortgage loan does not come with a prepayment penalty.

 

[Niko]

Never . . . .

1. If this is your first house, do not buy the first house you look at. We just purchased our first, and we dragged "our" realtor around to 25+ houses, and we drove by 50+, over 4 months before making up our mind. Our realtor earned his pay, and we couldn't be happier with the house.

2. Never let your realtor suspect you like a house. As others have mentioned, their primary interest is in selling the house, even if you're in a state that has "buyer's realtor" who owe fiduciary duties to the buyer. At the end of the day, they don't get paid unless you buy a house. And the more you spend, the more they make. Of course, if you hire a fee-based realtor, they may be more honest with you.

3. Never get emotionally attached to the house. Unless you live in Ord Nebraska, or someplace smaller, there will ALWAYS be another house that you like. Just wait.

ALWAYS . . . .

1. Spend a lot of time in the house before making an offer. Preferably do more than one walk through. Turn on water, heater, lights. Open doors, windows, turn locks. If the appliances are included, test em.

2. Drive around the neighborhood. Is there a fire station 250 feet down the road? That might get annoying. If you prefer to walk places, can you do so, or will you have to drive 20 minutes to get anywhere?

3. Always hire a home inspector. Be there with him, even if he doesn't want you there. If he won't let you, hire another. Ask questions about everything he does.

 

[KB]

I second the home inspector.

 

[jazz4cash]

I like these two from Texas Proud...............

3 Always...

> Go to the neighborhood at various times and various days to see what it is like 24 X 7. My friend found out that the neighbor has three big dogs that LOVE to bark all night long... but don't do much during the day...

> Get a professional to check out the house. The money spent might save you MANY times more in cost or headaches

I would add going to the house and thru the neighborhood during rush hour to assess traffic problems and right after a big storm to assess potential water drainage problems.

 

[spideyrdpd]

Real estate is a local issue . So saying the house your looking at is 300k could mean your looking at a mansion. In texas or a slum in California.

Hmm are there rules?
I would go one further with the inspector. Ask for referals for the guy thats really going to dig.

 

[Buckeye]

"Practice" making estimated PITI payments on whatever size/type of mortgage you are looking at to finance a home costing $400,000 (hopefully, the term is no longer than 30 years). Make monthly payments now to your savings account (minus your current housing costs) to see if you really want to be locked into that size of an obligation.

I can't imagine purchasing a $400,000 home only making $102,000 per year unless you are going to be making one heck of a down payment.

 

[Zoocat]

I'd like to add that, if you have a real estate agent you like and trust, hire him/her as your buyer's agent.

Also, after you do buy a house, and you do the "walk though" on closing day, make sure you do a thorough walk through, carefully looking at those items that were slated for repair/replacement in the contract but also making sure all the appliances work.

 

[NinjaPigeon]

Never use the home inspector recommended by your real estate agent.

Always remember the the agent is not your friend, even though he/she seems to be.

15 year mortgage.

Agree 100% on point one. Our RE agent's recommended inspector ended up costing me thousands of dollars over the first two years because he didn't catch the problems with the AC.

However, I disagree very much with the 15 year mortgage. You never know when your job might go away. Get a 30 year mortgage and if you want to pay on a 15 year schedule, do it. But only after you've built up a nice emergency fund! If you fall on hard times, you still have the lesser payment each month to help you get through it.

 

[donheff]

3 Always...

> Go to the neighborhood at various times and various days to see what it is like 24 X 7. My friend found out that the neighbor has three big dogs that LOVE to bark all night long... but don't do much during the day...

Absolutely -- know thy neighborhood. I would add and know thy neighbors but that can change. When we got our weekend place 15 years ago DW and I were checking out carious locations on the Potomac River. On a weekday, we saw a nice development with a pretty, quiet beach that would have been perfect for windsurfing (one of my requirements). I noticed a security system with lights on one of the houses and thought that seemed extreme for the area. We came back on a Saturday and discovered that was the beach all the local boaters anchored off. There must have been 25 boats parked right off shore, drunks splashing around; it was a zoo.

 

[kcowan]

Never believe what the realtors says if you considering buying a place next to open land. Once his answer was Greenbelt. We checked and it was hydro right-of-way. Two years later the trees were all removed and a huge tower was right behind the subject property. Even worse, a few years later a new toll highway was built beside the hydro lands in the "greenbelt".

Another time the realtor extolled the benefits of a school just 1/2 block away. The school board informed us that they were closing that school at the end of the current school year. All remaining student would be bussed 5 miles because the closer schools were already full.

Do your homework and never accept anything at face value. The stakes are too high for the realtors.

 

[Sue J]

When we were shopping for our first, and only, house my Dad pointed out the advantages of a 2 car garage. Our neighborhood was built in the 50's and many of the homes have only a 1 car garage. We have the 2 car garage and also 2 lanes from the street to the garage. This is especially important now that we have 4 people with 4 cars on 4 schedules.

We can also park on the street unless we have a snow ban. I've noticed some residential streets in our town have no on-street-parking. That makes for a lot of car shuffling.

 

[kcowan]

We can also park on the street unless we have a snow ban. I've noticed some residential streets in our town have no on-street-parking. That makes for a lot of car shuffling.

That reminds me of the blond who responded to the notice from the city: park on the north side on even dates and the south side on odd dates to facilitate snow clearing. After dutifully moving the car each night to the appropriate side of the street, a friend finally asked her why she didn't just leave it in the garage!

 

[Milton]

1. Never fall in love with a prospective purchase. No matter how desirable a house may seem, there is always another train, and you don't want to pay more than whatever limit you have carefully established.

2. Never buy a house without a professional home inspection. I second the advice about being physically present when the inspection takes place. Typically, a good inspector will provide lots of useful verbal advice and will be happy to answer specific questions that you may have.

3. Never buy a house located next to a rendering plant, jet engine test facility, reform school, or outlaw biker club. Who needs the hassles?

 

[saluki9]

HIRE A PLUMBER TO INSPECT A HOUSE BEFORE BUYING IT!!!!!!!!! (sorry for yelling)

Unless your home inspector was a plumber first I woud spend the $2-300 and hire a plumber before closing to inspect the house.

We bought a house in December and DID NOT hire a plumber to inspect the pipes. We had faulty copper in the basement, a bad sewer pipe, and tree roots growing into the drain. In addition, a faulty toilet flooded our house several times in the first week we owned it. Thankfully we had a home warranty which so far has paid in excess of $6,000 in plumbing repairs.

2. Never tell your realtor your real budget (give them a 10-20% lowball)

3. Save money for furniture, man is it friggin expensive!

 

[Achiever51]

Check with the city/community planning department to find out about proposed developments, road projects, flood plains, etc. We nearly bought a home that had a lovely open space behind it -- until we found out it was the designated flood plain.

 

[riskadverse]

Don't be afraid to negotiate. Don't trust your realtor or their realtor - but play like you do. Tell your realtor "confidential" information - which will soon be told to their realtor. If you're good at DIY improvements, buy the worst house in the best neighborhood. When negotiating, forget your ego and remember you can always make another offer, even after a final offer.

Personally I have always overextended when buying real estate. In less than two years the price has always looked downright cheap. Consider real estate as an investment that pays you the dividend that you can live in it.

 

[Nords]

Personally I have always overextended when buying real estate. In less than two years the price has always looked downright cheap. Consider real estate as an investment that pays you the dividend that you can live in it.

The other side to that thumbrule... we found an incredible bargain in what turned out to be the first year of a 10-year housing bear market. Upgrading to that home would have surely changed our lives, and not for the better!

 

[Financial Jungle Guy]

Not necessary top 3, but these are what I can think of:

1. If you're the type to keep up with the Jones, then don't buy in an upscale neighborhood.

2. Make sure to factor in non-mortgage related costs, like maintenance, property tax, home insurance and etc.

3. Don't "split the difference" until you're the one offering it. If the seller is asking a ridiculously high price, splitting the difference works in his favor.

 

[Milton]

Don't "split the difference" until you're the one offering it. If the seller is asking a ridiculously high price, splitting the difference works in his favor.

If the seller is asking a ridiculously high price, generally speaking I wouldn't even bother making an offer. There are plenty of fish in the sea, and usually no need to waste time negotiating with someone who is obviously unrealistic and/or doesn't really want to sell.

 

[kcowan]

If the seller is asking a ridiculously high price, generally speaking I wouldn't even bother making an offer. There are plenty of fish in the sea, and usually no need to waste time negotiating with someone who is obviously unrealistic and/or doesn't really want to sell.

We got a good deal on a place that was listed at 20% over market and was getting no action. We offered 65% of the asking price and settled at 69%. (Also threatened to change realtors because she said such a lowball would embarrass her.) Had to fix it up but sold it 2 years later for 50% higher. That got us on the merry-go-round! Sometimes overpriced homes are a gold mine. But look for extenuating circumstances.