Tips for Buying a Home
Cash After Close
Most buyers are so focused on the cost of acquisition that they forget about the overall cash requirements of buying the home of their dreams. Money is Money whether or not paid on the front end. After all, fifty bucks is fifty bucks.
Martha and George went to the County Fair every year, and every year George wanted to take a helicopter ride. Every year they asked the pilot how much it would cost and the pilot always responded fifty bucks, to which Martha replied, shaking both her finger and her head, "No, George. Fifty bucks is fifty bucks."
After the fifth year, when George again asked how much the helicopter ride cost, the pilot responded, "You've asked me that for the past five years, and every year you decide not to fly. It's slow today, so I'll make you a deal. The price is still fifty bucks, but if you keep quiet throughout the whole flight and don't utter a sound, I'll fly you for free."
George looked at Martha and she nodded consent, saying to George, "You better keep your dadgum mouth shut George, 'cause fifty bucks is fifty bucks."
They took off and the pilot did his best to get them to speak, swinging violently sideways and up and down, but no sound came from the back seat. When the awed pilot landed, he went to shake the hands of his victorious passengers, only to find that Martha was not there.
He asked George where Martha went, to which George replied, "When you made one of those exciting sideways sky turns, Martha fell out. I almost said somethin', . . . but fifty bucks is fifty bucks!"
What repairs can I afford and when will I have to pay for them?
There are two types of repairs:
Required, either to make it safe and sound or required by a lender prior to funding
- Repairs required by a lender must be made prior to funding of the loan and close of escrow
- Lender required repairs can be made in one of three ways
* Paid in cash by the buyer - this is problematic as;
a. The buyer is making repairs to a property they do not yet own
b. What happens if escrow does not close?
c. Has the seller given permission to make repairs, thereby acknowledging responsibility for liability
of injury or lack of workmanship?
d. Contractors cannot successfully lien properties unless the owner contracts for repairs.
* Paid by the seller as a credit to the buyer.
a. Repairs must be approved by the seller with the same liability as above
b. If repairs are lender required, must be done prior to funding and close
c. If escrow does not close, seller takes on the responsibility for payment
* Paid through escrow
a. Funds are set aside in escrow specifically designated for repairs, work is completed and
contractors paid through close of escrow. (This is typically how section 1 termite work is done)
b. Funds are held by escrow after close and are then paid to make lender required repairs.
Some lenders will agree to this, some will not, but it is the only safe way of doing lender required
repairs for both buyer and seller.
Wanta's - repairs that make it your home can be done later BUT,
* Such repairs will have to be done out of your valuable cash or high rate credit cards
* When you buy a house that already has the landscape, interior and exterior you want, it may have a slightly higher,
but not significantly more, price tag, but you are financing the improvements over thirty years in your home loan.
What repairs am I willing to do myself?
Before making this decision there are a few questions you should answer for yourself.
- Can you afford to pay a professional to do the work or will you have to save money by doing it yourself?
- When was the last time you pulled out your toolbox? If you don't like doing repairs, how likely is it that they will actually happen?
- Do you have a toolbox? Most repairs require a significant amount of tools which you will have to buy, rent, borrow or steal. Stealing is not recommended and borrowing can be almost as bad. Are you willing to wait? Professional work takes time, but self done repairs can take even longer.
- Do you have the talent and knowledge? Though Home Depot and Lowes would like you to believe you can do it together, most agents have seen enough homes to know the difference between self-done and professional work. That said, the line continues to blur as places like those named above give classes and there are self-help books that can help. Also, "professional" work isn't always what it used to be.
What is my price range?
- List price is not always sale price
- Look at homes priced a little higher and a little lower than you think you can afford
- Well priced, good condition properties in good locations can go for more than asking price.
Which neighborhood?
Selecting an affordable neighborhood is probably the most difficult decision a buyer can make and is purely subjective. A neighborhood in a bad school district may make all he difference in the world to a Mom with school age children, but means nothing to DINKS (Double Income No Kids) or retirees. Some people prefer the city, others may like the farm. There is no real good way for an agent to pick the criteria out for you. Think about what will be important to you over the next few years and write it down. Your REALTORŪ will help you find the neighborhood you describe.
What neighborhoods do I like or dislike?
- If you are driving around and find a great neighborhood, or have friends or family that live in specific areas of interest, let your REALTORŪ know.
- Your REALTORŪ will know about similar neighborhoods and whether or not your price criteria will allow you to be there.
- If you have special needs (hospital, prescription, shopping, transportation proximity) let your REALTORŪ know.
- If you have a preference for urban, suburban or rural, ditto.
- Is age of the property, therefore neighborhood, an issue?
Things to think about in a neighborhood:
- How long is my commute? How close to the freeway?
- Do I want a historical neighborhood, something newer than 2005 or something in between?
- Schools - proximity, district and ranking. If there is a specific school district in which your children must be, also let your REALTORŪ know.
- Relative age of occupants - will there be kids for my kids to play with?
- Where is the closest grocery store? Starbucks? Baskin Robbins?
- Are their little leagues, soccer leagues, dance clubs, etc. nearby?
- How close to, far away from the closet park do I want to be?
- Do I want an HOA with a pool? Do I want an HOA?
PLEASE: You cannot ask how many LGBT, Muslim, Jewish, Christian, Black, Hispanic, Asian or White families live in any given neighborhood. Answering that question can cost an agent their license, and is something we do not allow at Elevate.
Taking the Heat
JOB CHANGE, DIVORCE , MARRIAGE, BIRTH, ILLNESS, DEATH, and MOVING are the most stressful experiences in life. Often most of the list works in tandem with moving. Try not to add a third element. You will already be under some stress with any two of the above.
Apologize to your significant other and family daily. It is a surety that you have somehow stepped on their toes will focusing on your pursuit of a home. Looking for a home is like dating, both stressful and exciting, but the end result is worth the temporary pain.
Minimize stress:
- Set achievable goals. Don't strive to find the perfect house. It doesn't exist. Find one that suits you.
- Limit either the time you have for a search or the number of homes you want to see before making a decision. Your REALTORŪ can help with this. You don't have to see them all.
- Be sensible and be careful about greener grass. Don't pass on a home that meets 80%-90% of your criteria. The biggest let-down buyers normally experience is when they let one get away.
- Be true to your heart. Before continuing your search or making a low offer, ask yourself, will you be heartbroken if someone else buys this house instead of you?
- Listen to, but do not let the criteria of others make your decision. It is nice to have friendly or familial input, but limit the decision-making to those who will live in the home. Advice is a double-edged sword, particularly from family who may have a very different life-style from yours. Listen to their advice, as it may have value, but make the decision on what you think is best for you. They probably won't be living there.
- Rely on the advice of your REALTORŪ. Family and friends may have knowledge, but unless they are full time agents, may not be familiar with the latest real estate nuances. Those who work in the business everyday have a good working knowledge of both the housing market, real estate legal requirements, disclosures and benefits or pitfalls of present day finance.
- Understand your options. Seldom do purchases go completely smooth. When an issue pops up, and it will, ask your REALTORŪ what your options are. Sometimes what seems logical does not apply to real estate.
- Get educated BEFORE YOU BEGIN. There are many useful tools and links on the Pacific Shield website that can help you make a more informed decision.
- Don't let ego get in the way. Good deals for both seller and buyer have been torn apart over $500. If it is a home you want, be willing, within reason, to do what it takes to get it. There is no winner or loser there is only HOMEOWNER or not.