House Purchase Advice

[ViPER1313]

I know a lot MM'ers have purchased houses over the past few years and was wondering if you could share some of your advice on the process:

-Things you wished you had known when you started the process.
-Mistakes you made / how to avoid them.
-Bargaining tactics
-What to look for in / how to pick a realator. Necessary?
-How did you select your lender?
-Any other things I should look out for in the process / n00b mistakes I'm likely to make.

[Jewels]

Probably the most important thing is to pick a good realtor. Someone you can trust (if you think trusting a realtor is a good idea) Ours is great, she came highly recommended from Rex's co-workers and she's become a friend. Plus she's busted her ass for us for almost 6 months now. Luckily we go to closing on the 20th. Also, I'm sure Dave will have a lot of insight to offer when he and Linds get back from Jamaica, since he's a finance guy.

[CaptainHenreh]

Overbudget money. Everything will cost more money than you anticipate.

Everyone says "It's a buyer's market!"...That's bullshit. For what most of *us* are looking to buy, there's alot of activity, and you'll be competing with alot of investors. If you wanted a half million dollar home, you can get one for 350 grand. Since I doubt you want one of those, be prepared to be beset by evil men at every turn.

Realtors are in the same box as lawyers and politicians. Trust them only as far as you can throw them.

Add lenders to above box.

Don't bother 'looking' for yourself. You will always arrive too late, especially if the price is good. Be prepared to take off work, look at a house, and make a decision in the same day, if you really want a good deal.

Overbudget time. Everything will take longer than you anticipate.

[WRXtranceformed]

If you remember I used to work in new home sales, so if you have any really specific questions that come up just PM me or call me.

Now is still a pretty good time to buy, interest rates are relatively low, you get that ridiculous tax advantage of I think $8,000? You can also apparently apply for it in advance to use it as part of your downpayment. I don't know all of the details on that though because that's relatively new. When I bought my home, I had to put at least 5% down. The guidelines may be even stricter now so make sure you're prepared to put down a good lump sum and don't forget to account for your closing costs... or have those taken care of by the lender like I did if you can find a good mortgage deal.

DON'T necessarily be turned off from IO loans. I always laugh when people say that ARMs / IOs are the reason why the housing bubble burst. This is not true, it was the no doc, NINA and balloon loans that really allowed people to fuck themselves. If you're not planning on living in the home for a long time or are purchasing it as a mid-range investment, an IO is not a bad way to go as it allows you to keep your payment lower so that you can either reinvest that money elsewhere or put more into your principle. In reality, with a 30 year fixed you hardly pay any principle at all for at least the first seven years anyway.

You can definitely still negotiate pretty heavily like I was able to, but be realistic. My buddy Trevor is a really well-known realtor down here and he has said that a lot of people are unrealistic about what kinds of deals they think they can negotiate. He's seen a lot of people turn down ridiculous deals because they think they can get more out of the sellers, when in fact they lose out and end up having to look at higher price points.

You don't necessarily need to use a realtor, if you don't it will give you roughly ~3% more negotiating room. They can be helpful though if you a really a n00b to the market and have no idea even where to begin. A really good realtor (there aren't many of them out there, let me know if you want the number to a good one) can get you involved with short sale properties and foreclosures which are your absolute best deals by far... so if you're looking to go that route you'll definitely want to consult one.

Hope that helps. Oh, and make sure that whoever you use for the mortgage process sets up an escrow for your yearly property taxes and make sure you constantly follow up with them. Mortgage people can be total retards, srsly.

[HAULN-SS]

You probably don't want to waste your time going after foreclosures and short sales. This will lead to quite a bit of headache if you don't have patience. The only kind of sale i'd go after that was not a direct, legit sale, is an REO. This means it already went through the foreclosure process, and no one bought it, and now the bank actually owns it, and can decide what to sell it for. No 3rd parties involved. I don't think you need a realtor, if you're comfortable reading documents on your own, and want to put in some legwork to find properties.

[BLINGMW]

looks like most of what I'd say has been covered, I can add:

Check out VHDA for the mortgage, as long as you don't make too much $, don't have 20% down, and you're a first time homebuyer, their rates should be the best and are very flexible. Unless my calculations were misguided, if you're going to stay in the house for at least 2 years, use whatever $ you have to buy points to lower the rate further instead of putting more down.

Don't skimp on the home inspection/inspector. I'd do some digging, see if you can find someone who's a family friend or who comes highly recommended. Getting a home inspector license doesn't require much, so it'd be easy to end up with someone who really isn't capable of doing a good job.

I 2nd getting a realtor, especially since it's a first time purchase. It's amazing how many hoops you have to jump through, and they'll help keep you on track.

Pick up a book like "Home buying for dummies" and actually read it. I found that helped a LOT. Though even after that, there was still quite a bit I didn't know and wasn't prepared for.

[Evan]

<!-- w --><a class="postlink" href="http://www.redfin.com">www.redfin.com</a><!-- w -->

<3

You get a great realtor, but at very cheap commission rates (you get back a big chunk of $$ from them after closing, mine was $8k)
The seller's realtor was an absolute clueless pain in the ass (never use fairfax realty) with lots of issues that came up and my redfin realtor handled it all like a pro, even working with me after 11pm when we were negotiating the contract.

redfin realtors are not paid by commission so they dont pressure you to buy just anything.
I had a regular realtor (actually a good friend) when I went house shopping back in 2006 and she clearly didnt give 2 shits if a home was what I was looking for, she just wanted me to buy any house so she could get her commission, and then gave me a guilt trip when I decided not to buy anything. She was then surprised/ offended when I went with redfin this time around.

[Evan]

btw, my coworker just bought a short sale. The whole process took over 7 months. fuck that.

[Evan]

Don't bother 'looking' for yourself. You will always arrive too late, especially if the price is good. Be prepared to take off work, look at a house, and make a decision in the same day, if you really want a good deal.

if you set up alerts with a good MLS site, you can get a good jump on stuff as soon as it goes on the market without having to wait for your realtor to tell you about it. thats how I found my house, looked at it the day after it went on the market, wrote up a contract that night, and had to compete with at least 10 other contracts on the table.

[Jewels]

We are buying a short sale. We signed the contract on June 1st and we will close on August 20th. Not the norm, but if you have a realtor who knows what they are doing involved you won't wait that long. However, we also started house shopping in February.

[JustinG]

Find out what your approved for first. We went with a smaller mortgage place, but it was "sold" to CHASE after our first 2 payments.
Casey works for Wachovia now, I can get her to check on some rates if you want. Just ask around from people you know who recently purchased a home. We looked at a house and put in our offer that same night, cause people were coming in to look at the house, we felt a little panic, because we loved our house and didn't want it snatched up.

Don't forget home inspection costs, check how new the water heater and A/C look. I love our Gas Water heater BTW highly recommend one. Ill think of some other stuff.

I would be sure you are absolutely happy with everything, cause your gonna be there a while. Personally i would go for a renovated older house, cause i feel construction is better. when we were looking at NEW houses, I could yell on one side of the house and it sound like I was standing next to you, cause the walls were paper thin. Our house, built in the late 70s and it just feels sturdy.

We found our realtor because he was a JMU alum.

[WRXtranceformed]

You think the construction was better 30 years ago than it is now? What are you smoking son?!

Construction quality has always been spotty at best, it just depends on who the builder was. The older of a home you look at, the more likely it is that stuff is going to have to be replaced. AC units, furnaces, HWHs, the roof, the windows, etc. These are HUGE expenses that can come up literally a few years after you move in. Homes were not nearly as energy efficient in the past as they are now as well, so your monthly energy bills generally tend to be higher in older homes.

[Steve85]

And perhaps it goes without saying, but, be careful about "approved for" and afford. Only tell the realtor what you can afford. If you are approved for 350K but can only afford 250K, your realtor will take you to 325K houses all day long trying to push your budget for the increased commission. Home buying is emotional and it is easy to convince yourself that you can afford it. They know this. If you don't think it's emotional, look how many people plopped down several hundred thousand after spending probably less than an hour in the house they bought.

And I don't know if you're buying with someone or not, but if I had to do it again, I would buy a house we could afford on one income or come damn near close. Oh, and if you are planning to buy "with someone" and kids are in the near future (5-7yrs) you will spend at least 1000/month on daycare if you both have to work to afford the house. I only mention that because it's almost like buying a second house, a huge expense that can't be traded in for a lesser model (i.e.car payment).

I guess my point is, if you start stretching now, it can be hard to catch up as life moves along. This is one of those purchases that easily becomes emotional and isn't necessarily easily undone. Think long and hard about what you want/need in a house vs life.

[Steve85]

You think the construction was better 30 years ago than it is now? What are you smoking son?!

Construction quality has always been spotty at best, it just depends on who the builder was. The older of a home you look at, the more likely it is that stuff is going to have to be replaced. AC units, furnaces, HWHs, the roof, the windows, etc. These are HUGE expenses that can come up literally a few years after you move in. Homes were not nearly as energy efficient in the past as they are now as well, so your monthly energy bills generally tend to be higher in older homes.

+1
Be afraid of old windows and heat pumps. Heat pumps are ineffective below 42 degrees. The supplemental heat comes on and dolla dolla bills fly out out the old crappy windows. They should not have been installed above the NC/VA border. I can't wait to switch to propane...

Of course you could bargain with it I guess, 8-12K for windows and an updated furnace..

[.RJ]

You think the construction was better 30 years ago than it is now? What are you smoking son?!

Most houses I've been in that went up during the housing speculation boom are pretty poorly built. The house we're in now in falls church is a prime example - shitty parts (windows, hvac, water heater, etc), doors are not square, electrical fiascos, moldings/counters/pipes/hvac/etc not installed correctly, and on, and on, and fucking on. Its really a disaster - and its supposed to be a $600k house with the prime location. If i were buying I'd probably leverage on at least $20-30k to get all this shit fixed up.

[Evan]

And perhaps it goes without saying, but, be careful about "approved for" and afford. Only tell the realtor what you can afford. If you are approved for 350K but can only afford 250K, your realtor will take you to 325K houses all day long trying to push your budget for the increased commission.

and dont forget to factor in property taxes and home owners insurance. For me this adds about $600 to my monthly mortgage payment. Not chump change.

[.RJ]

adds about $600 to my monthly mortgage payment.

Holy shit thats more than my car payment.

I'm going to go back into my "home ownership is stupid" corner now.

[HAULN-SS]

adds about $600 to my monthly mortgage payment.

Holy shit thats more than my car payment.

I'm going to go back into my "home ownership is stupid" corner now.

That does seem a bit high..but my taxes add about 130$/month to my mortgage, another 120 or so for homeowners insurance. Also - screw propane heat...unless you like the idea of 4 - 600$ fillups of the tank, every month in winter. Averages 150$/month for me on a budget plan. Electric is cheap as shit in WV though. Mine averages about 40$/month.

Also, you'll get most of those "taxes" back in the form of tax breaks at the end of the year. I paid 1500$ish in taxes for the year on the property, and my tax refund was over 5k...i'll take those numbers..though that will diminish as i pay more principle and less interest

[WRXtranceformed]

You think the construction was better 30 years ago than it is now? What are you smoking son?!

Most houses I've been in that went up during the housing speculation boom are pretty poorly built. The house we're in now in falls church is a prime example - shitty parts (windows, hvac, water heater, etc), doors are not square, electrical fiascos, moldings/counters/pipes/hvac/etc not installed correctly, and on, and on, and fucking on. Its really a disaster - and its supposed to be a $600k house with the prime location. If i were buying I'd probably leverage on at least $20-30k to get all this shit fixed up.

The ones I built were fine, and I was building 14 houses at a time

Again it depends on the builder. Some were noticeably better than others.

[JustinG]

And perhaps it goes without saying, but, be careful about "approved for" and afford.

completely agree, we were approved for a bit more than what we could afford.

Again it depends on the builder. Some were noticeably better than others.

I said my house was recently renovated, IE UPDATED. New windows, A/C, Heat pump, siding, shingled, etc., gutted and put back together. Being half brick, like alotta the houses out of that time period are I feel it is better built than all the subdivision houses I have been in/seen that were in my price range, built brand new or 2-3yrs ago.