Buying a home? Get good advice.
Whether you are a first-time home buyer or an experienced real estate investor, the same basics rules apply:
- Know what you can afford;
- Know what you are buying;
- Know what you are offering is accurately written in the purchase agreement.
Know what you can afford … realistically.
Unless you are buying with cash, get prequalified by a mortgage lender. A lender can tell you the maximum amount they will lend to you. That’s the first step.
The second step is to review your monthly budget. How much money do you bring home as take-home pay? How much do you spend on groceries, utilities, clothing, commuting, school tuition, pay-to-play athletics and entertainment? Do you go out to eat often or really enjoy going to the movies over renting a DVD?
The most common mistake buyers make is they over-commit to a house payment. They interpret a lender’s prequalification as the price of home they will be looking for without regard to their lifestyle.
Know what you are buying … thoroughly.
When you find the home you like, make sure you know what you are buying. Pay for inspections and review a Seller’s Disclosure Statement before proceeding with the sale.
Just because the seller had the furnace cleaned three months ago doesn’t mean it is working properly now. Have the home inspected by a professional for structure, electrical, plumbing, air conditioning, termite damage and radon exposure – without exception!
Require an updated boundary survey. A “mortgage sketch” is not a survey; only a survey is a survey. Period. Before you close, know exactly where the iron corner stakes are located which identify the boundary of your property.
Why? Imagine this: A seller tells a buyer the property line is “over there, where I have it mowed,” only to discover (after paying $5,000 to install a fence) the line is actually 20 feet closer than that. Get a survey before closing on the sale and understand exactly where the property lines are, whether there are public or private easements, and if any part of any of the property’s “improvements” (house, garage, driveway, pole barn, fence, etc.) is on your neighbor’s property — or vice versa.
Nowadays, pay special attention to environmental issues: Is the property near a landfill, toxic-waste dump, farming operation, shooting range? Do not rely solely on a seller’s representations regarding environmental issues; they are oftentimes unaware of them. Check with the city or township where the property is located. Call the Department of Environmental Quality or Environmental Protection Agency in your state. Check with the local planning board to see if there are plans to build a new mall or expressway interchange right behind the house. A Realtor who specializes in the areas you are shopping might know many of these facts already.
Again unless you are paying cash, your mortgage lender will require you purchase title insurance. Title insurance companies review public records to determine whether easements are recorded on the property, who is the owner of record, whether there are unpaid taxes, utility bills or assessments. Even if you are paying cash, title insurance is worth the cost.
Know what you are offering is expressed in the purchase agreement … accurately.
An experienced, knowledgeable Realtor who can express concepts in writing is worth his or her weight in gold. Even better is an agent who can help you articulate what you want and translate those “wants” to paper.
What are you offering in price and terms? What personal property are you asking to stay with the home? Are there any conditions you have which would delay a closing or nix the deal entirely? For example, is your purchase contingent on the sale of a home you already own? Is it subject to you getting funds from a 401K? Does it depend on whether your landlord is willing to release you from your lease? How soon do you want to close? Do you need possession immediately after closing or are you willing to rent-back to the sellers for 30 days?
A knowledgeable Realtor will address everything in writing. In many states, “verbal agreements” regarding real estate will not hold up in court. Remember this cliche; “If it isn’t in writing, it doesn’t exist.”
Personal property negotiation is the most frequent miscommunication between buyers and sellers.
What is personal property and what is real estate? As a rule of thumb, anything permanently affixed to the property is real estate; anything you can pick up and carry away — even with a hand truck — without detaching is personal property.
Don’t assume the refrigerator and stove are staying with the home – put it in writing! Don’t assume it is okay to take the mirror screwed into the wall because it is a family heirloom passed down from your Great Aunt Helen – put it in writing.
Have your purchase agreement reviewed by an attorney. Remember, Realtors are not attorneys. Only attorneys are attorneys. While I have a pretty fair understanding of contract law, I welcome the expertise of an equally knowledgeable real estate attorney. It is in my buyer-client’s interest to have the best talent working in their behalf.
