Photo Credit: Matt Champlin/Flickr/Getty Images
Double Check the Facts
Do not take the information contained in the listing as absolute truth. Be a skeptic and double check all of the facts. “Most financial information contained on the actual MLS (Multiple Listing Service) listing is entered by the listing agent manually. This leaves a lot of room for error, so make sure the buyer’s agent double checks these facts directly with the source, like HOA offices, county tax pages and the like,” says Daryl B. Hanna of Meridias Realty Group in Las Vegas.
Know the Value of the Home
It’s super important now -- maybe more so than ever before -- that a buyer work with an agent who is very familiar with pricing homes. Hanna says, “A buyer’s agent can cost a buyer hundreds of dollars in inspection costs and appraisal fees if they are not 100 percent familiar with the value of a home. Banks and sellers are not willing to reduce price on low appraisals like they have in recent years. Buyers need to be aware of this.”
Interview Multiple People
Just as you might get multiple estimates for car repairs or second and third opinions from doctors, do your homework to ensure you get involved with the right lender and agent off the bat. “We are working in a financial market that is very strict with guidelines, and if the loan officer and buyer’s agent are not on their game, they can waste a buyer’s time and money," Hanna says. "I tell my clients up front to interview a minimum of three agents. We are not all created equal. You need to go with the agent and loan officer who are going to get it right the first time."
Consider All the Expenses
Yes, your new mortgage will be the biggest chunk of your new expenses when you close on a home. But it’s far from the only one -- and you’ve got to work all the numbers into a budget you can afford. “Have enough income and a budget, with money set aside not just for your monthly mortgage payments but also for insurance, association fees, possible repair work that may be needed and as always for the unexpected expenses that are guaranteed to surprise you,” says realtor Lee Dworshak, who also manages the blog At Home Sense. And don’t forget about pricey property taxes!
Check for Outstanding Permits
Make sure you check for any outstanding permits on properties you may be considering. “Every house has had some renovations, and many renovations are done without permits,” says Mike Holmes, the much-beloved, widely trusted contractor and host of HGTV’s Holmes on Homes. “No permits means no one inspected the work. You want to know if it has been inspected.”
Hire a Home Inspector
Even if you feel you can trust the seller and your own inspection skills, hire a professional home inspector. “Make sure they’re a member of the American Society of Home Inspectors,” advises Holmes. “It’s also a good idea to avoid home inspectors recommended by your real estate agent. The real estate agent wants to make a sale. Any problems the inspector finds will delay this. If the inspector wants to get clients through the agent they might turn a blind eye to a few issues.”
Check for Asbestos
Any home built before 1980 might contain asbestos, so make sure you check for it to protect your family’s safety. “Get tiles, plaster and attic insulation tested -- especially if you plan on doing any renovations,” says Holmes.
Check the Wiring
Check for knob and tube wiring in any home you’re considering. “If a home was built before 1930, there’s a good chance it still has knob and tube wiring. If it does it could affect your insurance policy,” says Holmes. “And bringing it up to code is an expensive job.”
Check for Water Issues
“Look for potential water concerns, both inside and outside the home,” advises Holmes. “That includes the roof, grading around your house, downspouts, moisture in your basement, trees near your roofline and tree roots around your foundation. They’re all signs that could lead to bigger problems down the road.” And better to know about them now -- before they’re officially your problem and expense.
Settle on a Price You’re Comfortable With
Just because you qualify for a loan doesn’t mean you’ll be happy with your lifestyle if you’re forced to pay it off. So figure out what works for your family financially independent of that. “The first and most important thing I tell first-time buyer clients is before looking at houses, before meeting with a loan officer, to look at their overall financial picture and determine a monthly payment that they are comfortable with,” says Capitol Realty Group’s Dave Harris.
Consider HOAs Carefeully
In community living situations like condominium buildings, you’ll encounter “HOA” -- homeowner association -- fees. Make sure you factor these into your financial plans, and consider the prospect carefully. “You have to understand everything included in that payment. Most first-time buyers want or don't mind being able to cut their own grass and shovel snow,” says Capitol Realty Group’s Harris. Furthermore, he advises, you should know whether the association is financially healthy before you get involved. “Many associations are struggling because of the foreclosures and poor economy. If the roof needs to be replaced, is there money available from the association to do so, or will you be assessed and have additional, unexpected expense?”
Review Your Credit Score
Know your credit score before you set out on your search, CitiMortgage pros advise. You can borrow more money the higher your score is, and you’ll pay less over the life of it, too. To take advantage of the lowest possible rates, aim to have your score 700 or above (on a scale of 350 to 800). And if you’re not where you want to be, consider pausing the home search until you can work your score up a bit by paying all your bills on time (your track record accounts for 35 percent of your total score) and lowering your debt-to-credit limit ratio.
Get Pre-Approved for a Loan
CitiMortgage advises would-be buyers to get that loan approval ahead of time. That way, when you walk into a home you love, you lower the risk of losing it to a buyer who looks more serious to the seller. Pre-approval puts you ahead of other buyers when it’s time to negotiate and put down a bid. And it helps you understand your limits so you can go in only when you’re serious.
Find a Hyper-Local Agent
Locate and work with a real estate agent who is an expert in the precise neighborhoods that interest you, advises CitiMortgage. Those agents are most likely to know the comps and help you pounce on the right opportunity at the right price with no delay.
If your top priority is getting into a new home, try to avoid any other major changes around the same time. A large change, like moving to a new job, could affect your mortgage approval, according to CitiMortgage. And even a small change, like changing banks, stands to slow down the process of verifying your checking and other monetary assets.
Don’t Get Hung Up on Small Stuff
It’s tempting to consider a home just as it is and decide whether or not you love it or hate it. But don’t miss an opportunity just because you can’t get past a small issue that can easily be changed to suit your tastes or needs -- or even because you can’t stand the way the seller’s clutter looks in the house. “When visiting potential homes to purchase, look behind the furniture and decor of the existing owners,” says SAS Interiors’ Jenna Burger. “Once they've moved out, you're left with the shell and your furniture and belongings can be brought in.”
Envision a Fresh Coat of Paint
Maybe that hot pink former kids’ room or what-were-they-thinking neon green bathroom doesn’t appeal on first glance. But don’t dwell on that. A fresh coat of paint can instantly enliven a space and transform it to your personal tastes affordably. “Paint can truly change a space, so look beyond the existing wall colors, and instead focus on the layout and the space plan,” advises SAS Interiors’ Burger.
Consider Your Existing Furniture
If you just bought a new house and unexpectedly have to buy all new furniture to go along with it, you could be blowing your budget right off the bat. So if you intend to move with your existing furniture, make sure you have a plan in place to make that feasible. “Measure and write down sizes and configurations before searching for homes,” says SAS Interiors’ Burger. “The last thing you'd want is to buy a home that doesn't fit your needs.”
Focus on the Kitchen and Bathrooms
The two most important spaces to focus on when buying a home are the kitchen and bathroom. “Look at the condition and wear of the cabinetry, plumbing, appliances, et cetera in the space,” says SAS Interiors’ Burger. “Questions to ask yourself are: Are the spaces in good condition? Do I have a budget to renovate the space? If not, can I update the space with do-it-yourself projects?”
Consider Your Personal Priorities
When my husband and I bought our first house in Los Angeles this year, we knew we could get a lot more space -- maybe even a pool -- for less money if we were willing to head a little bit away from the heart of the city, like to nearby San Fernando Valley. We expanded our search, but in the end determined that being in the center of things was more important to us than a larger lot. There’s no objective right answer, but a thoughtful investigation of your family’s own priorities is required to come to the right decision for you.
Consider Your Investment Potential
After close to two years of looking for homes on the Westside of Los Angeles -- which remained expensive in spite of the economy -- we finally found a small home in a great area that we loved right away. It was in our price range because it was the smallest house on the smallest lot on the block. For us, this seemed like the perfect way to get into a more expensive, desirable, central neighborhood. Since we bought, we’ve seen several other homes on the block listed for $200,000-plus more than we paid. If you buy the largest, most expensive home in an area, know that there may be little potential for your investment to grow.
Be Patient -- If You Can
Our first home was a “short sale,” meaning the sellers owed more on the home than it was worth. Because of that, the bank was involved with the sale, and that meant it took six months between our initial offer and close of escrow. This paid off for us because we were able to secure the home we loved at what we considered to be a good price, but we were only able to pull it off because our living situation didn’t require that we moved urgently. Short sales and foreclosures can lead to great deals if your situation allows you to wait out the bank delays.