10 Things to Know When Buying a House

Life is full of exciting firsts. Your first steps. Your first day of school. Your first job. Your first place. Whether you want to move out of your parents’ home for the first time, own a home after renting for years or buy a place with a spouse or partner, making the decision to purchase your first property is a big step. It takes a lot of preparation when you’re in this stage of your life, and a little luck never hurts.  However, banking on luck can leave you making a series of blunders that can seriously affect your home buying experience.  Here are Ten things to know to make the process a lot easier.

1. Figure out what you can afford

Determine your budget based on what you can afford to repay now, not the maximum you’re allowed to borrow. Even if you’re pretty certain that you’ll be earning more in a year or two, you might also find that circumstances increase the other expenses in your life. Children, schools, new cars and travel plans are substantial costs. Make sure there will be room in your budget for you to live the life you want. So what’s the best ratio to use? Some lenders suggest that you can afford mortgage payments totaling about 1/3 of your gross income but others suggest closer to 28% for housing related costs including mortgage, insurance and taxes. There are a number of factors including your projected income, interest rates, type of mortgage and the market. Ask your mortgage broker to help you understand what’s in play.

2. Know Your Costs

The purchase price is just one piece of owning a house, be sure to consider all of the costs associated with your potential new home.  That includes the cost of insurance, utilities, homeowner association fees, upgrades, maintenance, yard upkeep, and real estate taxes, and depending on where you live those can quickly add up.  It’s a good idea to ask questions about upkeep for extras like swimming pools, fancy heating and cooling systems, and detached home additions.  Also, when you’re comparing apples to apples: a condo with a large fee that’s priced low may be more costly than a higher priced one with lower fees while a cheap home with high taxes may cost you more a month than a more expensive one with lower taxes.  Also, if you’re moving to a new part of town or a new city, it’s important to consider the cost of living for that area. Transportation, school tuition and everyday living expenses can also make home ownership more expensive than it initially appears.

3. Pick the Right Realtor

One of the most important steps in buying a home is hiring the right real estate agent. We all know that realtors get a cut of the sales price of a home which makes some buyers hesitant to use them thinking that it will drive up the purchase price, but keep in mind that the seller, not the buyer, pays the commission. But with so many agents out there how do you know which one is right for you?  It all starts with an interview process.  You should have high expectations of the real estate professional you hire, and top producing agents possess qualities and skills that set them apart from the rest. A great agent should be savvy in all aspects of real estate, whether it be buying or selling, market trends, legal obligations, documentation, or advertising techniques. And YOUR perfect agent should go even further. He or she should have in depth market knowledge of the neighborhoods you are interested in, should work within a sizable and reliable network of agents (this goes a long way in finding the right home for you on or off the market), and can take into account your personal buying wants and needs thus finding your perfect house and maneuvering the transaction accordingly. Adversely, nothing can kill a deal fast than an incompetent or lazy agent that doesn’t do much or fumbles through the whole ordeal.

Knowing how to interview a realtor is the key in finding the right one, and it could take some practice. Luckily, our agents here at Levine Homes would be more than happy to help!  With multiple successfully and smoothly executed property transactions all over the South Bay and a Top Producer ranking within Re/Max (the largest brokerage worldwide) our agents embrace technology and are always ahead of the game when it comes to find today’s best marketing tools and ideas. We would love the opportunity to help you hone your agent interviewing skills by starting with one of our trusted an dedicated staff, and if in the process we turn out not to be the right fit, we can, through the vast network of agents that we closely work with, help you find who is right for you.

4. Location

A bargain is never really a bargain when located in a bad neighborhood. Sometimes lightning will strike and gentrification of certain areas will result in skyrocketing property value – but that’s rare. It’s better to take a chance on a smaller home, or one in need of repair, in a great area where the value will only rise.  Additionally, examine your lifestyle. Do you long for pasturelands? Feel energized by urban cityscapes? Or look forward to a family-friendly suburban lifestyle? It’s important to think of the limitations each locale places on your lifestyle and the perks each has to offer – before making the commitment to buy.  Suburban lifestyles are flexible, offering children the opportunity to play outdoors and enjoy a neighborhood environment. Urban areas offer greater social, culture, educational and career opportunities. Rural environments offer privacy, room to roam and the ability to pursue hobbies – such as gardening – on a larger scale.

5. Know Your Needs

Chances are that buying a house will be one of the bigger financial commitments you’ll make in your lifetime. Before you agree to buy what you think might be your dream house, consider your needs both short and long-term. Are you planning on staying at your current job? Getting married? Having kids? Depending on the market and the terms of your mortgage, you may not actually pay down any real equity for between five and seven years. So if you aren’t sure that your house will be the house for you in a few years, you may want to keep looking.

6. Look Beyond the Paint

It’s often the case that your dream house has that one room that you’re already fantasizing about changing.  Remember that it’s fairly inexpensive to fix cosmetic issues (a bit of paint or some wallpaper) but making changes to kitchens and baths can be expensive. People tend to focus on the cost of cabinets, appliances and counters but sometimes forget about the cost of labor which can double to triple the cost. Take into account that although buying a fixer can be a daunting project, owning a personalized home in your ideal location that fits all of your needs is as close to home perfection as you can get. A remodel can often be expensive and in the end finishing a project yourself, without experience, can result in the purchase of costly tools and the loss of your valuable time.  Here at Levine Homes, we have a Construction division that specializes in remodels and additions for a highly competitive market price. If you are unsure of which direction to take, give us a call. We’d be happy offer a free consultation to help you find your best option.

7. Loans

When in search for a home, in order to get ahead of the pack in this seller’s market it is important to have a loan, with set loan amount, pre-approved and ready in wait. A loan rate can look great in an advertisement, but once bankers have drawn you in to the branch office, what will you really pay? Points, PMI (private mortgage insurance) and closing costs can drive your mortgage cost up.  Some programs allow buyers to have smaller down payments. But how long are you required to stay in the home without penalty? And how much more will you pay each month? Be sure to read all the clauses and fine print before getting a mortgage. And don’t be afraid to shop around for the best rate.

8. Inspect All Issues

The only way to truly know what’s going on inside (and over and under) a home’s structure is to secure the services of a reputable home inspector. Hire the most thorough, licensed home inspector you can find to pinpoint any issues that could potentially end up becoming costly repairs. Expect to pay $300-600 for the inspection. It seems like a lot of money, but consider the thousands it could save you if the home isn’t up to code or has major issues.  Additionally, don’t be afraid to snoop around yourself.  Smell for mold, and animal-related odors. Knock on walls to see if they sound hollow. Open the dryer and the dishwasher – you never know if pests are living in there. Does the toilet flush properly? Does the heating/air-conditioning work? Is the fireplace functioning and up to code? Is the water pressure okay? Most states require that a home seller disclose potential problems with the property, but the homeowner may not always know or reveal existing structural problems (despite the legal requirement).  Also, to avoid conflict, make sure your lawyer (if using one) is not also representing the seller.

9. Negotiate

When buying a house, there are papers to sign. And more papers to sign. Bottom line, lots of paperwork. Many of those papers – which are actually legal contracts – look like “standard” home buying agreements with no room for negotiation. That isn’t true. Contracts are meant to be negotiated. You don’t have to sign a standard agreement. If you want to counter a counter offer on purchase price, do it. If you want more time to review your inspection, wish to waive a radon test or want to make a purchase subject to a mortgage approval, you can also make that part of the deal. This is where a savvy realtor can help. And if you don’t like the terms, don’t be afraid to walk away from a bad deal. There will be other properties, maybe even better ones. So don’t feel pressured to continue a negotiation. Remember that this is a financial transaction and your terms must either be met or an agreeable compromise made.

10. Be Patient

Finding the right home can take time, especially in this market. Don’t operate on someone else’s timeline and don’t make commitments that will make things challenging if your property hunt takes a few months longer than you anticipated. If you’re renting, stay on a month-to-month agreement so that you are able to move without penalty. But if you do find your dream home, a few last words of advice are: 1) Make sure you get EVERYTHING in writing.  In addition to all negotiations and contingencies, if there is anything you want to keep in the home, such as appliances or that gorgeous chandelier that made you fall in love with the place, get it in writing! Also 2) make sure the your title is “free and clear” and there is no problems with assuming ownership.

Happy Searching!!!