...buy a house

[Irol]

I would also suggest seeking out a place that specializes in people who are buying the first time. There's a business here that we went through who pretty much handles everything! They set up the realtors, the title settlement agency, they find you a bank with the terms you want, they have all the legal papers drawn up. Basically we found our house, looked at it A LOT, and then told our realtor our offer. Once it was accepted we had to wait about a month or more (ours was what is called a short sale). Then on closing day we went to the business I mentioned above. Everyone from the other businesses (title, lawyer, realtors, etc) showed up at the same time. Everything was ready and flagged for us to sign. After about an hour of signing and reading they handed us the keys. They set up an escrow (our insurance and taxes are tacked onto our monthly payment) and after we moved in, the payment started coming and we just pay it. No hassle, no stress. Everything was done for us.

 

[Primalex]

As the house itself was already quite covered, I try to add some other things:

The purchase and sale agreement:
Try to get as many statements about the house into the agreement as warranty as possible. There are things you can't check or prove in time, never ever assume that people tell you the truth. 9 of 10 realtors flat out lied to me about certain properties of the house (but I caught them all sooner or later, when I insisted on either a proof of the statement or having the "Of course"-statement as warranty in the agreement).

Get a draft of the agreement at least two weeks before the signing date to read it carefully and have enough time left, just in case, to have it cross-checked by a lawyer.

Bargaining:
Try to figure out why they want to sell. If they are forced to sell for whatever reason, your position is much better. Then, don't try to bargain without a justification - look for one and best, make it look like it's their fault. The good thing is, all sellers and realtors exaggerate. Use this as advantage. In example, they write something like "high quality flooring." Then the house has a very nice parquet. You can still use this and mention something like "Oh, parquet. I thought it's a marble floor, when I read high quality." and then later
"Well, you know, it's a really nice house, but I thought the house would have marble floors, I don't think I still can pay x with this new information.*sigh* It's a really nice house....well...oh well, I would still make the deal for y."

The best is of course, if you did catch them lieing about something that is actually not that important for you. You can pretend that this was the most important thing for you and that it was the only reason you actually visited the house.

Of course, all this still needs to be reasonable - you can't drop the price by 20k if all you found was a single broken faucet.

Another good justification for bargaining is when you can rid the seller of some hassle. I looked at a new house from a client who was about to get into financial difficulty in the not so distant future, if he wouldn't sell the house. The house was nearly finished, but - just nearly. He had stopped the construction when he was running low on money. A dozen more or less small things (like wiring of the fuse box) still had to be done. The client offered to finish all the things prior the sale and sell the house for x, because he thought nobody would buy a house without working electricity etc. anyway. Of course, he was quite busy with all the other problems he had.

I offered to pay x - 10k and take the house the way it is. He accepted and I was able to get all the things done for 4k.


Then one last advice - prior the hunt I made an agreement with my wife:"If either one of us is not sure about a house - it's a NO." This saved us a lot of headaches. If you spend hours debating and rating pros and cons - abort and turn it into a "No".

 

[subwannabe]

PMI is something to consider. Definetly put down 20% if you are able too. If you can't, you can't. PMI is a very big scam. I had a big drama concerning PMI on my first house, where I couldn't put down the 20%. PMI is insurance which is supposed to insure the lender and is only really needed up until you have 20% equity in the home. They will always tell you that once you achieve that 20% equity on your loan then you can apply to drop the insurance at a later date but that is a lie. The PMI will stay on there for the full entire 30 years (or whatever) so you will pay it for the entire length of the loan, even up to 99% equity. The only way to get rid of it is to refinance when you get that 20% but the catch is, it would be stupid to refinance to get rid of the PMI only to pay a higher interest rate on a refinance. So, you are stuck. The only other way to get rid of it is to sell the home. I discovered all of this before buying my first home and it really pissed me off. I did find a solution though. It takes roughly 7-8 years (this could obviously vary) to get 20% equity in a home so I paid up front for 7-8 years of PMI in one lump sum so that it wouldn't actually be part of the mortgage payment. Most places won't tell you that this can be done because they don't want you to know. They want you to pay for 30 years. They tried to pull a fast one on me at closing though, charging me the up front money and then sneaking PMI again into my monthly payment. Had a go around with them about that until they removed it.

 

[TypicalDeviant]

Thanks everyone for even more great advice!

I've contacted two realtors recently in order to get a walkthrough in houses that interested us. Both of them immediately went for the "hey, sign this exclusivity agreement before we go any further".

To be frank, I ain't signin' shit. What's the best way to make it (politely) make it clear to them that we're not signing any agreement like that?

 

[Primalex]

I've contacted two realtors recently in order to get a walkthrough in houses that interested us. Both of them immediately went for the "hey, sign this exclusivity agreement before we go any further".

To be frank, I ain't signin' shit. What's the best way to make it (politely) make it clear to them that we're not signing any agreement like that?

Well, it might be difficult to avoid this. It might be better to compromise and limit the term of the contract. You might also try to say that you would first want to check out if you two get along at all before making a commitment and after an afternoon of visiting homes together, you will sign the contract before you visit more homes.

 

[SweetErika]

Well, it might be difficult to avoid this. It might be better to compromise and limit the term of the contract. You might also try to say that you would first want to check out if you two get along at all before making a commitment and after an afternoon of visiting homes together, you will sign the contract before you visit more homes.

Exactly.

I called a bunch of realtors that had good reviews for quick phone interviews, then we went and sat down with the one who sounded best with a good list of questions. He turned out to be very helpful and honest with us. He knew a lot about repairing homes and problems, so he freely pointed those out and gave us estimates on upgrades and repairs when we were touring homes.

The economy is still tough in most places, so one thing you COULD consider negotiating into your contract is your realtor's commission. Some are fine doing 2% or 2.5% on their end, instead of the typical 3%, particularly if clients are easy and pull most of the houses they want to look for themselves. You can even use the commission point when you're shopping around for realtors - certain independents and brokerage firms actually use their lower commission as a selling point to potential clients.

 

[NippleMuncher]

To be frank, I ain't signin' shit. What's the best way to make it (politely) make it clear to them that we're not signing any agreement like that?

That is the kind of bullshit that I personally have never put up with, regardless of what you're trying to buy. I had a strict "no bullshit" agreement with the agents I worked with when I was in the repair industry. While my relationship with the agents was a bit different than yours, that doesn't mean you have to put up with their nonsense.

All you have to do to see a home is either contact the listing agent OR wait for an open house and go look for yourself. You do not need to sign any agreements with any agent to find you what you're looking for, that is what their commission is for.

Commission negotiation is a fairly fine line because the broker, buyer's agent, and seller's agent are splitting the commission. You might get a little wiggle room, but it will depend on the strength of the market in your area. A good market and they won't budge on their fees, a crappy market and you might get 1/4 or 1/2%. You'll never know unless you try, but don't expect much.

First, you can do your own searches and comps using the same service that realtors do, the MLS. You might also try looking at http://www.zillow.com/ for homes in your area. With this list you've created, you can drive by and assess the properties you're most interested in, then either contact the selling agent directly for a walk-thru or look at hiring your own agent.

I would recommend hiring your own agent when purchasing, the reason is that a single agent handling both sides of the sale does not have YOUR best interests at heart, which is the best price on the property. When you walk in the door of an agency to hire someone with a list of homes in hand, most of them should be eager to take your business without any "retainer" bullshit.

 

[OnceFuturePoly]

Thanks everyone for even more great advice!

I've contacted two realtors recently in order to get a walkthrough in houses that interested us. Both of them immediately went for the "hey, sign this exclusivity agreement before we go any further".

To be frank, I ain't signin' shit. What's the best way to make it (politely) make it clear to them that we're not signing any agreement like that?

If you are buying a house, you have no reason to sign a contract with a Realtor. If you walked into Best Buy to purchase a TV, would you sign a contract with the sales person before entering the door?

There is only one reason for a buyer to contract with a Realtor. If you buy a "for sale by owner" house, then a Realtor may be helpful organizing things and guiding you around the pitfalls. This contract is NOT a listing contract.

Except for this one case, EVERY Realtor works for the seller, including when you ask a Realtor to help you find a house to buy.

If you are selling a house (and I believe you are not), you still have no reason to sign a contract until you are 101% satisfied that they will find a buyer and close the transaction to your total satisfaction.

Of course, a Realtor will not list your house without a contract, but there is no reason against several Realtors each submitting a proposal to list your house. Get a couple different companies involved and do homework before selecting one.

Commission, as well as term and anything else, is all negotiable. You can also exclude certain buyers from triggering commission, for example people you offered to sell the house to before you broke down and employed a Realtor.

Unfortunately, the one thing that most Realtors stick together on is commission. If you are correctly positioning your home for an easy sale, they should be willing to give a little -- it's worth it to have a easy, high probability sale. Most every city has a cut-rate firm with a rate you can quote while negotiating.

Also ask for a reduced rate if the sale is interoffice, i.e. both Realtors work for the same broker. The standard contract would pay that broker twice, and the broker should only be paid once.

If a Realtor will not deal, they may be a firm that collects listings, puts them on MLS, and makes no effort to actively market them. In a stronger market, this was an easy job -- other agents brought them buyers and they just worked on the closing/transfer where they collected their check.

 

[Luvtofly2012]

The wife and I just bought our first house at the end of April. Only advice that I can give that I haven't seen on here is to trust your gut. If something seems too good to be true it probably is.

We were able to use a friend of ours who does realty work on the side as our Realtor so that saved us some hassle trying to find someone. If you haven't found a Realtor yet I would highly recommend visiting several open houses of people who you might be interested in using as your agent. This would give you the opportunity to speak with them and get to know them and how the interact with you and the missus without feeling like you "have" to use them.

I would also highly recommend a home inspection, someone who will crawl into the attic to check for proper insulation, dig in the yard to check septic system, etc. One of the guys from our church does a lot of construction work so I paid him to come over and give the house a good inspection. We were here for 4 hours checking behind switch covers, inspecting the well/septic,crawling into the attic, and everywhere just looking for all of the flaws. Of course during this time there were some things that came up that I hadn't noticed myself already, but fortunately nothing that was serious enough to cause us to not want the house. If you don't get a home inspection or have someone you know who would help you out at the very least walk through the house several times because each time you tend to notice different things that you may not have the time before.

Keep in mind that this is really a buyers market (ever more so in the winter months at least in Ohio) and if they really want to sell they may be willing to barter a little in order to sell their house. Case in point we made our offer just a little below their asking price, but then asked them to pay for closing costs and all of the inspections and leave all of the appliances plus we wanted possession in 45 days. When they came back and weren't willing to work with us AND wanted 120 days before they had to move out we decided that they really didn't want to sell and that this wasn't the house for us especially considering our pre-approval and loan interest rate could only be locked to 60 days so we walked away. Of course two days later they agreed to meet 90% of our stipulations and the paperwork was signed.

As far as closing on the house and getting the keys make sure everything is in writing down to the time of day that you want/need the keys, to close etc. We were originally scheduled to close on the 30th of April but our Realtor and their agent kept pushing us to sign the papers on the 27th and promising that we would get the keys 4 days sooner. After some investigation if we had signed papers 4 days earlier the house would have been in our name and our sole responsibility until they moved out 4 days later. I'm ok with letting someone stay a few days later or something IF they had worked it out with us prior to a week before closing and if they had been up front in that even if we closed early we wouldn't get keys early. Fortunately I figured this out and we closed at the end of the month like we had planned and it all worked out without a problem.

Only other thing I can really add is to run the water for a minute or two and then taste it! I would have NEVER thought of doing this, but one of the guys I worked with reminded me that the house has well water and that not all wells are as deep and tasty as the mother in laws house. So before we bought the house we ran the water for a few minutes and found that lovely sulfur smell! Fortunately it wasn't bad enough to be a deal breaker, but it's always better to know before you sign on the dotted line!

 

[CoyoteTales]

Stuff people haven't mentioned yet:

* Check to see if Redfin has coverage in your area. (www.redfin.com). Great way to look for places on specific criteria without involving an agent --AND find out when there are open houses.

* While we're on websites, try crimereports.com. Key in the potential address you want to live at and see how bad the crime is in that neighborhood. Don't live next door to a registered sex offender if you have kids.

* Use Google Streetmaps to 'drive' around the block in a few directions. Look at the houses in the neighborhood and the types of cars people are driving. Barred windows and broken down cars can indicate a bad neighborhood.

* Do NOT go for a 5/1 or 3/1 ARM if your payments are at the max payment you can afford right now. A big reason a lot of people are underwater and being forced to foreclose is because they got suckered into a 5/1 or 3/1 ARM and their payments went up to higher than they could afford. I had someone try and sell me a house without telling me what the higher payment could be.

* If the realtor claims that your payment will be lower because you get it back in taxes later, WALK. They are lying through their teeth. You must pay taxes on the property up to six months at a time, and you only get the taxes back at tax time.

* If you are buying a condo or a townhouse, find out how much the HOA (Homeowners Association fees) are, because you will be paying for that on top of the mortgage payments. Some shady realtors will not tell you that and only show you the P&I (Principal and Interest) and not the extra payments you'll be making -- taxes and HOAs.

* Do not buy any property offered 'as is' or 'contractor special. That's a big red flag that not only will it need fixing, but was so expensive to fix that the people who owned the house couldn't do it.

* Budget at least $10K on top of your down payment for closing costs, and at least $5K for moving and setup costs on top of that.

* Do not open new credit cards, get a car loan, or get a new cellphone during the search for a house. Those things cause credit inquiries, which lower your credit rating, which means banks can charge you higher than the minimum rate.

* Figure out what your maximum affordable monthly payment is, and then reverse that equation into your maximum house price. Use Redfin's calculator to find out how much it'll cost you a month depending on your minimum down payment, but anything under 20% down will incur PMI costs as well in most cases.

* Check into Homebuyers Education classes through the city. It's a 3 hour class that will teach you way better than most of us can here. Not only that, but it makes you eligible for assistance in some cities for lower income housing assistance.

* If a house is listed as 'probate' sale, it means that someone died to put the house on the market. If it's listed as a 'short sale', check to see what the last person bought it for (Redfin has this info too). Short sales are sometimes listed at way lower than the bank will _really_ accept to bring in people. If a house is a mobile home or a pre-fab, look for a 'Site Fee' or 'Space Rent', which is pretty much rent.


Finally:
* Don't ever feel pressured into buying a house. I've been looking for a few years now, my rent is less than I would be paying in mortgage payments, and I've turned down houses that later went _down_ in value, houses that were bid by others up into more than I wanted to pay, and one time I got outbid by a Buddist monk who came in with all cash. If you can wait for the right house, save more money while doing it, and be happy with what you get? You'll be happier than if you jumped in on the first contract you won.


-CT

 

[sereneone4u]

What about using VA?

My husband and I are looking at buying next spring and we have never owned a home, only rented.

Realtors get excited when we mention it?

Also, is there bargaining when it comes to a new home when dealing with a builder?

thanks!

 

[Lord Pmann]

I think this is very important and most people say I'm an idiot for saying this, but most people are broke, so nuts to them. Get a fixed, 15 year loan. Put down 20% to avoid PMI. If you can't afford to do this, then don't buy a house. You know how many people I know that bought a home in this manner who are getting foreclosed? Zero. The difference in payment between a 15 year and a 30 year mortgage is almost negligible. A couple hundred a month. You'll save tens of thousands of dollars in interest.

My wife is a mortgage lender and we see broke people all the time. I would recommend your house payment be NO more than 25% of your monthly take home pay. This is much less than the lender will offer in financing. Dear god don't buy as much house as they will lend because you will be house poor.

Before you buy your house, make sure you have at least three months living expenses saved up. Things break. Stuff happens. If you have an emergency fund, you don't have to use a credit card when stuff happens.

If you listen to this advice you won't be broke and poor like the rest of the population. It's great to own a home, in the right circumstance.

 

[Dragonfire76]

As one who bought my first place in 2009,I have to say Don't buy into a HOA. They basically tell you what you can and can't do in your own property and make you pay for it. Had I known they would be as fussy as all get out then I never would have bought it and move on the a real home where you can do what you please. How you please and don't have to really answer to anyone except yourself and the local laws about things.

 

[NippleMuncher]

As one who bought my first place in 2009,I have to say Don't buy into a HOA. They basically tell you what you can and can't do in your own property and make you pay for it. Had I known they would be as fussy as all get out then I never would have bought it and move on the a real home where you can do what you please. How you please and don't have to really answer to anyone except yourself and the local laws about things.

HOAs are the worst thing thing man has conceived since the inception of attorneys. If you like being told what you can and can't do to the very home that YOU are making the mortgage payments to, then maybe a HOA is for you, otherwise you'll hate it. Basically it's apartment/condo dwelling at 10x the price. You can install your own security system, security fencing and gate for far less than what a HOA will cost you, and you'll STILL have the right to spit in your front yard if you want to.

 

[AdjectiveNounVerb]

I think this is very important and most people say I'm an idiot for saying this, but most people are broke, so nuts to them. Get a fixed, 15 year loan. Put down 20% to avoid PMI. If you can't afford to do this, then don't buy a house. You know how many people I know that bought a home in this manner who are getting foreclosed? Zero. The difference in payment between a 15 year and a 30 year mortgage is almost negligible. A couple hundred a month. You'll save tens of thousands of dollars in interest.

My wife is a mortgage lender and we see broke people all the time. I would recommend your house payment be NO more than 25% of your monthly take home pay. This is much less than the lender will offer in financing. Dear god don't buy as much house as they will lend because you will be house poor.

Before you buy your house, make sure you have at least three months living expenses saved up. Things break. Stuff happens. If you have an emergency fund, you don't have to use a credit card when stuff happens.

That's all good advice. Real good advice. I wish I'd received (and followed) more than just some of it before I bought my house.