Out to buy my first house. Would to have everyone input. (1 Viewer)

[Mark Leiter]

Hey,

My living situation is going to be changing in the next few months. I've decided now is the time to buy my first porperty rather than go the rental route again. This is a totally new experience for me and i'd love any advice anyone could give.

I'm single, 35, have plenty of cash on hand, and have reasonable though not perfect credit. My feeling is that I am not going to want to live in the Orlando area for more than 5 more years or so. That being the case one thing i'd like is to be able to do is buy now and be able to sell pretty easily in a few years time. I have thought about condo's but would rather get into a free standing structure.

But these are just kinda random musings. My real question is "Where and how do I start?"

Thanks anyone for your help.

Mark

 

[Philip_T]

If you don't mind close neighbors and thin walls, a condo would do, but if you could swing a single family detached home, definately go that route.

Good Luck!

 

[Eric_L]

no less than three bedrooms

Location - location - location

the better the location, the better your profit will be.

 

[Leila Dougan]

I just closed on my first house last Friday and spent all this past weekend moving.

Anyway, the place to start is with a mortgage company. First, go see a someone to find out exactly what they think of your cash and your credit score. Find out what they're willing to lend you, what interest rate (approx.), etc. Then, go see several other mortgage places to get the best deal.

The easiest way to house hunt is to get a realtor. Ask friends and coworkers for recommendations since there are a whole lot of bad (read: lazy) ones out there. If you get stuck finding one on your own, talk to your loan officer and surely they'll recommend someone.

Then, just do a lot of research into the parts of town you're looking into. Crime rates, tax assessments, shopping centers, etc can all be found on the internet. Visit the neighborhoods you're interested in during different days of the week and at different times. Get to know the route you'll be commuting so you don't get surprised with high traffic areas or extra long commute times. The little things can make a difference. For instance, last night I realized that the closest 24-hour drugstore is 20 minutes away (really sucks when you need cold medicine at midnight)! There's only one grocery store in this part of town as well. Just some things to consider.

Basically, do all the research you can and ask everyone who knows the area for recomendations and suggestions. Even if you don't take them, other people can really offer insight, especially if they've purchased a house in your area.

 

[Philip_G]

my only advice is DOOOOOOOOOOOON'T BUUUUUUUUUY A TOWNHOUSE!
sorry I can't be of much help, only bought one so far, a da,n townhouse.

 

[TomK]

My Advice: get a buyers realtor. He/She works for you but is paid for by the seller. He/She will find you the best deal and look out for your best interest. We bought our first home about five years ago and he was on top of everything, telling us what's what and to be truthful, the first time through you don't know all the questions to ask but your realtor will.

Also make sure the home is inspected by a reputable inspector and get everything that needs repair written up. Have the cost of those repairs deducted from the price of the house or have the seller fix them before the purchase.

Tom

 

[andrew markworthy]

Don't know much about the American market, but for someone in the UK, I'd give the following advice, most of which I think translates to the USA:

(1) The advice to buy as much as you can posibly afford is fine if house prices are going to continue to rise. However, the gloomier prediction is that although house prices are skyrocketing at the moment, the bubble will burst one day. Above anything else, avoid negative equity (where your house is worth less than any loan you've taken out). Otherwise, don't worry too much about rising and falling prices as the properties you might want to buy in the future are likely to fluctuate in tandem.

(2) A small house in a good area will generally rise in value better than a big house in a poor area (it's the usual thing about location, location, location). *But* the really smart move is to find an area that is currently cheap but is about to become fashionable. Yeh, I know, we'd all like that, and easier said than done. However, there are usually several pointers to an up and coming area:

(i) borders a very fashionable area that people are saying is getting too expensive
(ii) is due for major regeneration/is getting an extension of a popular commuter rail line/is location of a new major out of town amenity, etc
(iii) already shows signs of 'gentrification' (stores are a bit more upmarket than you'd expect for the price of the local housing)
(iv) trendy businesses are moving into the area

Trouble in going for a property hot spot is that it can be a flash in the pan. However, if you do find such a spot, you can really reap the dividends.

(3) Only take on a wreck of a house and renovate it if: (a) you have no family history of nervous breakdowns and stress-related illnesses and you have lots of friends in the construction trades - it's a lot tougher than it looks; (b) the other houses in the locality are already of a high standard; (c) you're prepared to decorate to a standard that will appeal to a large market (i.e. if you have idiosyncratic taste, you shouldn't let it show if you want to resell quickly).

Good luck!

 

[Chris]

Of course, if you're willing to move to Kansas rural, you can get land for free and no income tax:

http://apnews.myway.com/article/20040323/D81G8K7O0.html



But in the realistic world, always get a good appraisal and check the property tax values of homes surrounding your home. It will tell you a good deal of the value and potential value of the property.

 

[Gary Seven]

I bought my first house a year ago. My first route was to find a realtor. However, the ones I went to, were of little use. Apparently, they were unable to find a house in my price range for what I wanted.

So instead, knowing the Ft. Lauderdale/WPB area pretty well, I went out on my own, driving through neighborhoods that were what I was after. This was better than using the net or newspaper since I could actually see the neighborgoods and houses. About a month later, I found the perfect house, a 4/3 with pool and jacuzzi, within my price range. A month after that, I closed.

The whole deal was done without any realtor involved at both ends. So at this point, for me, my attitude towards realtors are like salesmen in a hi-fi store... superfluous.

 

[Jeff Ulmer]

By law, any realtor has to work in the best interests of the seller, not the buyer, even if they are representing you as the buyer. That isn't to say a good realtor is a bad idea, just that you need to know that their advice may not be in your best interest.

First and foremost, get your lending in order. Find out how much money you can borrow, and under what terms. That will allow you to set your budget - however, I would highly recommend being conservative in what you are spending, as there are ALWAYS hidden costs associated with buying a new house, some for personal taste, others that just need fixing. These can add up quickly.

Get any potential house inspected by a qualified inspector, and make any offer subject to that inspection. If you are serious about a house, spend some time there - many people invest in a property after only having spent a few minutes in the house. Don't fall in love with anything until you own it!

 

[Michael Mathius]

You may want to consider a new community with preconstruction prices.

 

[Mark Leiter]

Hey thanks so far for all the tips. I'm just now surfing around the web just to learn what all of these terms relating to house buying are. I did find this web site that has a good deal of info on it:

http://www.ourfamilyplace.com/homebuyer/index.html

According to this site there is such a thing as a "buyers agent" that the buyer would pay for and would work in the best interest of the buyer. How common they are and what the law in my area allows however, may restrict whether or not this could be an option for me. What would I need to pay for a reputable one anyway?

My first incliation is to find something lower than what I could theroeticaly afford. Maybe even something that needs some minor work I could do my self.

Another question. What do "closing costs" consist of and as the buyer, am I responsible for any of them?

Thanks again

 

[Eric_L]

I hear also that income tax is not constitutional, so you can skip paying tax any more! W00T-W00T!

Where do you come up with something like this? It is complete hogwash regarding a BUYERS Realtor, as opposed to a SELLERS Realtor. That's the kind of misinformation that leads to things like 'New Coke'.

 

[Leila Dougan]

All sorts of stuff. In addition to your downpayment, there's things like the home inspection, title recording fee, underwriting fee, several months of taxes, 1 year of homeowners insurance, blah blah blah. There's a whole page of all these little fees. These costs are generally split between the sellers and buyers, typically each paying for their part of the deal. However, it's all negotiable and when you write up your offer you can say which fees you want them to pay for. They don't have to oblige, but you can always counter-offer and work to an agreement. When your offer gets accepted and you write up the purchase agreement, it will all be written out what fees you will be responsible for(though the final total won't be known until later).

My closing costs came to about $1800 or so. I had to bring that money plus my downpayment with me to closing.

However, if you have financial issues in which you don't have much of a downpayment or need to use a special program to help you out, then all these costs can be rolled into the mortgage. Generally you'd want to be able to pay them upfront but loan officers can do magic to get you the money you need to buy a house. If you've got the money, going with a conventional mortgage and paying the downpayment and closing costs upfront is the best way to go.

 

[Brad Porter]

I close next Wednesday on my first home. (Woohoo!)

Step Zero is save up some money for the down payment. There are lender programs for zero money down, but it is to your financial advantage to pay down if you can.

My first step was to scan the house listings until I actually found properties that interested me. Fortunately, there's a good website for local property (www.coloproperty.com) that made this task very easy. I did this for over a year, because I wanted to see if the local home prices would ever drop noticeably. And since it is Boulder, of course they didn't.

The second thing I did was figure out how much money I've been spending on my rock and roll lifesyle. I went through the previous year's bank statements and categorized all of my expenses. I then budgeted each of these categories for the coming year and increased the budgets for things that a new homeowner spends money on (furnishings, natural gas, trash, lawn care, etc.). This gave me an idea of what I could realistically afford while not being "house-poor".

When I got to the point of being ready to buy, I got pre-approved by a mortgage lender and hired a buyer's agent. My lender approved me for the exact value that I had expected. For some people, they will approve you for more than you can realistically afford. Since I don't have a wife or kids or any debt to speak of, they easily approved me for 36% of my gross income. The general approval level is around 28%.

I gave my buyer's agent the listing numbers of the eleven properties that I had found during my internet search. These were the first places that I wanted to see. I narrowed the list down to four just based on the showings and then I did a trade study on those four. I needed to decide if I wanted to keep searching (my agent had 8 more candidate properties to show me) or make an offer on one of the houses I had seen. I scheduled a second showing on the house that had won the trade study and made an offer immediately afterward.

Part of the offer is an earnest money deposit. This is money paid by you to the seller's agent that says that you are serious about the offer you are making. For my place, this was $5000. Less expensive homes will be much less. Someone else I know had an earnest money amount of $1500. If they accept your offer then that money goes to your downpayment. If you screw around with them, they keep it.

They accepted my offer. I hired an inspector, noted my objections, and got credited $1000 to the final purchase price to get the objections taken care of myself (radon levels too high).

Here in Colorado, the agent representing the seller and the agent representing the buyer each get 2.8% of the sale price of the home. This obviously comes out of what the seller gets. It doesn't matter if the buyer's agent is a dedicated buyer's agent or just a regular realtor, they get compensated the same way.

Brad

 

[Dave Poehlman]

Well, you have to take into account that the realtor, regardless of representing you or the seller, stands to make a big chunk o' change in the transaction. Plus, a lot of them, even though they may sell homes, don't know much about how a house works and what to look for condition wise.

For that, you want to have an inspector go through the place, even if the place seems to be in perfect condition, having an inspection done will usually uncover a few things that need attention and give you an instant list on how to start making improvements. Or, may uncover something potentially expensive or dangerous that will change your mind about a house.

I'm working on buying my 4th house this month (don't ask... it's my gypsy wife who wants to move all the time). With each home, I've done some form of remodelling or improvement to boost my equity at selling time. Take that into account as well. You have to weigh a home's potential with how much work you're willing to put into it.

 

[Mark Leiter]

I had my first conversation with a agent this morning. She was refereed to me by a friend who had purchased her home using her services. The conversation was pretty short and I basically got two bits of information from her.

1) I need to get a pre-approved loan before she would be able to work with me. She supplied me with a phone number of a person that could help me. The first thing that went through my mind was she was passing me off to someone she thinks could make some money of me. I don't see much of a problem with this as long as i'm sure this person is working in my best interest. If this is the case then I might as well as start contacting my credit union and other sources for pre-approved loans.

2) The second thing sounded a little more problematic. She mentioned during our conversation that she would be my "buyers agent" and that the seller would pay for her costs. I asked her specifically "Are you a buyers agent?" and she replied with a firm "yes". After reading from this thread and from what I have found out on other web sites, this immediately aroused my attention. It was under my impression that if I used a buyers agent I would be responsible for paying that costs. Or at the very least the costs would be split between me and the seller. Is there a way to verify to which party her allegiance lies, beyond just taking her word for it? For all I know she could be still working for the seller and just adding her costs to the overall selling price of the home.

Any thoughts?

 

[andrew markworthy]

Ermm ... not quite what I meant.

 

[Leila Dougan]

Getting pre-approved is the first step. After all, you can tell her whatever price range you *think* you qualify for then find out later no one will give you that kind of money (as an example). Why should she bother wasting her time finding houses you may not even be able to buy?

Talk to several mortgage companies and see what they will do for you. Often times, they will ask you what you feel comfortable spending then just pre-approve you for that amount, assuming you qualify. The agent doesn't have to know what they will really give you. The agent just wants to know that you're good for what you want to spend.

For example, for the house we just bought the mortgage company was willing to lend me $250K but I didn't feel comfortable with a payment for more than 175K. So they just preapproved me for 175K and that's all my agent saw. If, on my own, I decided to increase my range I knew I could but the agent couldn't pressure me into going higher because she thought 175K was the most the mortgage company would give me.

The sellers always pay the commission. That's just how it is. The fact that she says she's a buyers agent is good and she will probably have you sign a contract with her that says you will user her exclusively for 60/90 days. That is, if you buy a house without using her then she can sue you. The contract tells you that she's working for you.

Most transactions involve two agents even when neither is a buyer's agent. We didn't use a buyer's agent but it didnt' make that big of a difference because our agent didn't have any houses listed that fit our criteria. The house we bought was listed by someone else, so the two agents split the commission. The seller paid for that and it wouldn't have mattered if my agents was a buyer's agent or not.

 

[Dave Poehlman]

The way it works up here in Wisconsin (and this may be nationwide, I don't know) all agent fees are paid by the seller. What being a "buyer's agent" does is basically allow her to give you her opinions on the homes you're looking at. Also, it means you're obligated to go through her when you do find a home.

The only tricky part about being represented by an agent is, some sellers may not be as flexible on their price if you bring an agent into the picture because they have to cover those agent's costs.