Tuesday, March 25, 2008

Buying your home: Top 10 things to do to get ready

The biggest purchase any given person on the street is likely ever to make will be their home. Most people will never even imagine shelling out for an investment property or purchase any appreciable amount of stock. Which is fine. Some people just don't want to be bothered with big, sometimes unwieldy investments. They just want to work a nine to five job and put away a good chunk of their income toward retirement and enjoying themselves. And so long as they manage their finances properly, their financial lives will typically long outlive the foolish investor.

So, your very own home. It's the American dream. I know that at this point in my life it's the one thing I want the most. There's a good reason why a lot of people shell out a lot of cash on their homes, they spend a lot of time there. Your home is your castle, your sanctuary after a hard days work. If you own it, you can do with it whatever you'd like. Paint it whatever colors you'd prefer, furnish it with whatever furniture you find the most comfortable and decorate it however you want.

In the real estate industry I see a lot of clueless first time buyers. This serves to simply irritate everyone nine times out of ten. The buyers get frustrated because people are talking over their heads, the real estate agents get frustrated because they have buyers trying to behave in ways that are unrealistic and the lenders get annoyed because they're not getting their money when they're supposed to because everyone is all confused and frazzled.

When you're doing something for the very first time it's okay to be a little ignorant. But whenever you're getting ready to purchase a home it's always prudent to know as much about the subject as you can possibly know. You try to be savvy when you're buying a car, right? Well, even the most expensive car is about thirteen times less costly than the dumpiest single family home. And when the going gets tough, an expensive car is far easier to get rid of than an over priced home.

To make it short and sweet, a bad buy on your first home can ruin you for years if a couple of things go wrong. I've drawn up a short list of points you should keep an eye out for, but it's always a good idea to ask a local realtor in a no pressure situation, or check out the appropriate book at your local library.

  1. Don't screw around. Get a real estate agent and stick with them. Real estate agents don't make a dime unless you find something to buy. And even then it's a commission check from the guy selling the property. It is in their best interest that they find a fair price for you.

    Driving around looking for "For Sale" signs isn't going to do you any good. You won't have anyone to represent your interests. So you're far more likely to get ripped off by the guy selling the home. Real estate agents are trained professionals. They know what needs to be done in order to make a fair sale. They know to ask about home inspections, conditions that may be concealed, tax rates, whether or not the price is accurate, et cetera.

    In short, it'll save you time and money. Would you enter a civil lawsuit without a lawyer?

  2. Real estate books are crap. You see those glossy little books sitting outside grocery stores, chuck full of homes. Yeah, they're garbage. Why? They're published once or twice a month. A month is a huge time frame in an industry as fast moving as real estate. Homes get price changes, sell, expire, get withdrawn, go under contract, get renovated and changed all the time. I used to manage several real estate book accounts. By the time the book was in print, half of all the properties showcased were typically either sold or appreciably changed in some way.

    They only serve to make sellers happy. That's it. Nothing else. Don't waste your time.

  3. If you have to look all by your lonesome, use the internet. Use realtor.com's search engine if you're looking within the United States. Don't bother with the search engines maintained by the real estate books, they're not going to be any more up to date than the paperback books.

  4. Consider your savings account. You're going to need to make a down payment in some form in order to qualify for any type of loan that isn't going to rake you over the coals. It's a simple fact. It's usually a good idea to save up twenty percent of the amount you are looking to spend. This won't be going to the guy selling the home, his real estate agent, or yours. It will be going to the bank that you're getting a home loan from.

  5. Consider what you can afford for a monthly payment. If a house has a price tag of $250,000 you're not going to pay that and that alone. The vast majority of people get home loans. That means you're going to have to pay interest until the home is paid off in full. It's almost exactly like a car loan.

  6. Consider what you can afford for taxes. Owning private property means paying taxes. Taxes are paid yearly to the town or city you live in. They pay for things such as waste water treatment plants, police and schools. Very few people realize this fully before signing a binding contract. Taxes are typically paid yearly. So living on the outskirts of a ritzy town may sound appealing in theory, but you're going to be shelling out more than your fair share of hard earned cash. Before considering a purchase, call the town hall in question and ask them for their tax rate.

    Tax rates are usually per $1,000 dollars. So, if the tax rate in Lazytown is $25.05 and your home is $100,000 you'd simply divide 1,000 into 100,000 and get 100. Then you'd multiply that by the tax rate, $25.05 and you'd get $2,505, which means you'd have to pay $2,505 annually to Uncle Sam.

  7. Don't get emotional. Keep it loose and easy. If you find a home you absolutely must have, you're far more likely to be manipulated and wind up paying more than you really should have to. If the seller isn't willing to compromise enough to make you happy, walk away from the sale.

    Nothing is final unless your name is on paper.

  8. Wait it out. The market fluctuates. Right now as you may have heard the real estate market is tanking in the United States, due to some rather unsavory activity on the part of shady banks. This means the market is what they call a "buyers market." Buyers have the advantage because there are far more homes that need to be sold than there are people willing to pay for them.

    This means competition. And if you're looking to buy a home, it's your best possible scenario.

    In a buyers market homes are more likely to either be fairly priced, or below market value. People are also far more willing to compromise should you bring an offer to the table that suits your best interests more, versus their own. But even in a market that's declining, there's always a couple of extra bucks to be saved. As a rule of thumb, late fall is when prices typically start to fall even further.

    People want their homes sold before the holidays. But people don't want to buy, because they're busy with the holidays. So it's a win-win situation. You'll get your lowest prices of the year around late winter and early spring. Why? Because the properties on the market are probably still left over from the fall and winter. They've been on the market for months, and their sellers have probably authorized a number of price changes.

    Your real estate agent can find out just how much the price of any given home has fallen since it's been on the market.

  9. Consider a bank owned property. There have been a lot of foreclosures all over the United States. These are homes that people couldn't afford when their shady banks got over zealous about their monthly payments.

    Banks are in the business of selling loans, not homes. So while you can't exactly see a bank and talk to a bank like you would a normal, average Joe looking to sell his home you're far more likely to get a better deal. Why? Banks want to wash their hands of the property. They want it gone and out of their mess of problems as soon as possible. This doesn't mean you need to attend foreclosure auctions, but keep an eye out for newspaper ads that contain the following language: bank owned, reo owned, real estate owned, foreclosure, foreclosed, lender owned

  10. Be wary of "concessions." Occasionally someone selling their home will offer "concessions" to potential buyers. This sometimes mean they'll pay condo association fees for your first couple of months, they'll pay your first years taxes, they'll pay for your moving costs, et cetera. They're doing this because they want to sell the property, but don't want to really lower the price a substantial amount.

    Like a "sale" at your favorite retail outlet this can be good. But it might mean the home is over priced to begin with.
So long as you do your research, get a respectable real estate agent on your side and take your time to make a decision you'll wind up with the best possible home you can manage with as little possible hurt to your bank account.


Nikki said...

My husband and are are in the process of looking for a new home. It's pretty difficult. Your article is pretty well written. It needs more details!

How about "#100 tips for buying a new home?"



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