First-Time Home Buying

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Tortoise
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First-Time Home Buying

Post by Tortoise » Wed Jan 04, 2017 4:32 pm

If all goes well, I'm going to try to buy my first home later this year. I'm reading a couple of books on the topic, but I wanted to ask you folks as well:

Do any of you have lessons learned that you wish you would have known before you bought your first home, or things that you eventually learned are much more important than you initially thought?
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Re: First-Time Home Buying

Post by Mountaineer » Wed Jan 04, 2017 4:42 pm

If your new home is going to be a new build, be on site as much as practical to observe what is being constructed. Get familar ahead of time with construction techniques, quality of equipment/materials being used (e.g. HVAC, utilities piping, electrical, appliances, flooring, windows, roofing, etc.) as you can. Review blueprints (or electronic equivalent) and develop an understanding of them. Interview as you can previous buyers from the builder. Get EVERYTHING in writing.

If new home is a previous build, hire a reputable inspector who has no conflict of interest with the seller. Will be worth every penny you pay him/her.

Hire a lawyer to represent your interests (e.g. not the realtor's lawyer) in the purchase and have him/her review all paperwork before closing.

Obtain a warranty (preferably one or more years) for the new home.

Talk with neighbors if you can. Ask everything you can think of about the neighborhood and neighbors from several different people. Knock on doors. Be friendly.
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Re: First-Time Home Buying

Post by boglerdude » Wed Jan 04, 2017 9:58 pm

Checking sewer lines will cost extra. Look at the survey and read the deed for easements. Homes next door can have easements over your property that only appear on their deed, not yours.

Flood insurance, earthquake insurance...
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Re: First-Time Home Buying

Post by Tyler » Wed Jan 04, 2017 11:46 pm

Buy the smallest, most affordable home that you'll be happy in. Your future self will thank you later.
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Re: First-Time Home Buying

Post by barrett » Thu Jan 05, 2017 7:56 am

Find out as much as possible about the fiscal health of the town in which your potential home is located. LOTS (most?) of municipalities here in the US have a bad long-term financial position.

Also, buying in an area with a good school system - regardless of whether or not you have kids - is likely to keep the value of the home up over time (though it makes your home purchase more expensive as well).
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Re: First-Time Home Buying

Post by sophie » Thu Jan 05, 2017 8:20 am

If you are buying into a cooperative or condo, research the financials thoroughly. For my last purchase, I asked for building financial statements and always got them promptly. It saved me from buying into one building that was great in many respects, but turned out to be saddled with high debt (more than 5x my current building's debt/apt). The department of buildings website and Board meeting minutes, if available, are good info sources too. In fact, be wary of any building that refuses to post its Board meeting minutes. This is analogous to the municipality comment by Barrett - also good advice.

Don't rely on the bank or real estate broker to tell you what you can afford. Figure out a realistic monthly budget and take into account not only mortgage, taxes and insurance, but also money set aside for home improvements & repairs (rule of thumb is 1% of home value per year). And, how soon do you want to pay off that mortgage? It makes a difference to budget for a 15 year mortgage as opposed to 30 year.

Tortoise, best of luck!
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Re: First-Time Home Buying

Post by Maddy » Thu Jan 05, 2017 9:57 am

1. Don't scrimp on the inspections. Depending upon the property, a general inspection may not be enough. Inquire of the general inspector you hire what will be omitted from the inspection (e.g., drainage issues, electrical & plumbing, outbuildings, well, septic, appliances, etc.) A detail of what is excluded from the inspection is generally set forth in the prefatory section of the report. Consider hiring additional subspecialties to address any omitted areas.

2. Assume that the seller is withholding information, or that he is outright lying. Most sellers believe, contrary to the law of most states, that they do not have a duty to disclose all material defects. Many sellers will engage in considerable mental gymnastics to justify to themselves that they do not have to disclose a particular problem because the problem's been fixed, or because it really wasn't all that bad, or because you--the buyer--didn't ask.

3. If your state requires a form disclosure statement, ask for it as early in the process as possible. State law may require that you receive a copy of the disclosure statement within a certain number of days after your offer is made or accepted, but by then it's too late for all practical purposes. Study the disclosure statement carefully, paying particular attention to any "I don't know" answers. Most real estate agents representing sellers advise their clients that an "I don't know" answer is a safe harbor, and many sellers use this answer to avoid disclosing either a known defect or facts suggesting the existence of a defect.

4. Nothing prevents you from asking additional questions. If the answers provided by the seller on the disclosure form are ambiguous or warrant further inquiry, ask away! E-mail is a nice way of asking additional questions, since you can be casual and friendly in tone while, at the same time, be constructing a written record. If necessary, make yourself unavailable to be reached by phone so that the seller and his agent have no choice but to respond to you by e-mail.

5. Since most states' disclosure forms are directed only to existing (rather than historical) problems, asking about past problems can be a very worthwhile inquiry. Many sellers will avoid disclosing even very significant historical problems with the property if they can somehow convince themselves that the problem has been fixed. However, the seller's idea of what constitutes an adequate "fix" may be very different than yours.

6. Make sure that the purchase and sale agreement gives you adequate legal recourse for negligent errors and omissions in the disclosure form. Fraud (intentional nondisclosure or misrepresentation) is very difficult to prove. Proof of negligent misrepresentation, on the other hand, simply requires that you establish that the seller knew or should have known of the existence of a material defect--a much more realistic standard.

7. Don't assume that the form purchase and sale agreement used by your real estate agent contains sufficient terms to protect you--particularly with regard to disclosure issues. These forms are drafted by real estate brokers whose Number One concern is to insulate themselves from liability, and this objective is often achieved by using contractual language that contracts, rather than expands, your right to sue.

8. Consider writing an alternative dispute resolution clause into the purchase and sale agreement, such as an arbitration clause with a provision for mandatory mediation. Absent an arbitration clause, the cost of litigation can make even the most meritorious case unaffordable to pursue.

9. Talk to the neighbors! Politely knocking on the door of neighboring homes with the objective of meeting potential neighbors is a perfectly acceptable thing to do in most neighborhoods. You may not learn anything useful about the property you're considering, but you'll learn a lot about who your neighbors will be. Also, if there are boundary issues or other ongoing disputes relating to the property, they're likely to mention them.
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Re: First-Time Home Buying

Post by Pointedstick » Thu Jan 05, 2017 1:54 pm

At a minimum, budget for replacing the water heater, the roof, and the HVAC equipment. These are expensive and the builders or previous owners typically spend the minimum they can in the hopes of pawning costs onto the next owner.

Buy a house with at least one "wow" feature that you fall in love with or else you will find a difficult time being emotionally invested in it, and may have trouble selling it to anyone other than a cheapskate.

Before doing any energy-efficiency retrofits, do a real cost-benefit analysis. Many such jobs have a negative ROI.

Anything you decide to fix/install/do yourself will take 5-10 times as much time as you think it will (though the cost savings will be real, assuming you don't botch the job).

Balance out the sane choice of a smaller home with the need for a good neighborhood. Don't buy a smaller home in a shitty neighborhood to save money. You will be unhappy.

A home probably isn't an investment or likely to significantly appreciate on an inflation-adjusted basis unless it's expensive and in a nice area. A house that's cheap will deflate or lose value, on average. "Affordable housing" is affordable because of such a high supply that there is little pressure to drive up home values. Buy an affordable house to live in it, not to profit.
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Re: First-Time Home Buying

Post by tennpaga » Thu Jan 05, 2017 2:28 pm

Pointedstick wrote:Balance out the sane choice of a smaller home with the need for a good neighborhood. Don't buy a smaller home in a shitty neighborhood to save money. You will be unhappy.
+1

Mrs. TPG and I made this mistake with our 2012 home purchase. Well, we're not exactly "unhappy", but, in retrospect, we both wish we had made a different choice.
A home probably isn't an investment or likely to significantly appreciate on an inflation-adjusted basis unless it's expensive and in a nice area. A house that's cheap will deflate or lose value, on average. "Affordable housing" is affordable because of such a high supply that there is little pressure to drive up home values. Buy an affordable house to live in it, not to profit.
+1
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Re: First-Time Home Buying

Post by rickb » Fri Jan 06, 2017 11:17 am

Mountaineer wrote: Hire a lawyer to represent your interests (e.g. not the realtor's lawyer) in the purchase and have him/her review all paperwork before closing.
A little more on this. When you first start looking for a home you may end up with a realtor who "helps" you find what you're looking for. Unless you specifically contract with a realtor to act as a "buyer's agent", this realtor is actually working for whatever seller you end up talking to (i.e. they are paid by and acting in the best interests of the seller, not you).
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Re: First-Time Home Buying

Post by Tortoise » Fri Jan 06, 2017 6:06 pm

Thanks, everyone, for the great tips so far!
Tyler wrote:Buy the smallest, most affordable home that you'll be happy in. Your future self will thank you later.
That's what my wife and I hope to do. Unfortunately, since we now live in San Diego, the concept of an "affordable" home doesn't really apply out here. (Same deal with all of coastal California.)

Our hope is to find a 3-bedroom, 2-bath single-family home for around $500k, but it's looking like in San Diego that's going to be very hard to do unless we buy a house that's (a) an old "fixer-upper", (b) in a not-so-nice neighborhood, or (c) a very long commute from my job in the city.
sophie wrote:If you are buying into a cooperative or condo. . .
Unfortunately, our experience living in our current rental condo for the past six months has almost completely turned us off to the idea of ever owning a condo.

A few months ago the tenant directly above us moved out, and a new tenant moved in. One night around 2:00 AM, we heard loud banging upstairs, as if someone was walking from room to room hitting the walls with a baseball bat. We heard a guy from inside that condo shout at the top of his lungs, "Open the FUCKING DOOR, or I'm going to rip it off its FUCKING HINGES!" Then, immediately after that, we hear soft moaning coming through our bathroom vent, with a man's voice quietly saying, "Help me, help me..." over and over again.

So I called the cops, thinking someone up there was being attacked. The cops arrived and had to use a battering ram to break his front door down since he wouldn't open up. Turns out the guy was all by himself in there, and he was just having a psychotic episode or something (multiple personalities, etc.). They took him away in a stretcher, but he was back less than 48 hours later.

Every night between about midnight and 2:00 AM, the guy stomps around like crazy and drags heavy pieces of furniture across the floor, I kid you not. Every. Single. Night. Literally dragging dressers, desks, etc. around his apartment.

So yeah, we've pretty much decided we are never going to buy a condo. There's always that chance you could share a wall, ceiling, or floor with a lunatic.
Pointedstick wrote:Buy an affordable house to live in it, not to profit.
Yes, that's the way I'm approaching it. The main reasons we want to buy are (1) so we can fix things promptly and properly instead of having to rely on cheap, flaky landlords, and (2) so we can have a relatively fixed housing payment instead of having to pay higher rent every few years.
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Re: First-Time Home Buying

Post by Pointedstick » Fri Jan 06, 2017 9:39 pm

You will probably be paying ever higher and higher property taxes every year, though. Prop 13 limits the increase, but 3% a year on $15k property taxes will add up fast.

Unless it's your dream job or it's paying you so much you're literally rolling in money, my strongest piece of advice is to get out of California. It's not worth it, and the right time to buy into any competitive housing market in that state was several years ago. Texas is swimming in jobs right now. So's Georgia, Colorado, and a ton of other places that are chock-full of reasonably-priced housing and sane social policies that won't see you stuck with lunatics for neighbors.
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