Tips for the First Time Buyer

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Be a Well Informed First Time Buyer!
By Robert Weinstein, MAIN St. December 30, 2014 (With comments from Tom in red)

For many first time buyers, buying a house can be a daunting task.  However, if you follow these ten critical rules of buying a first home, you’ll put yourself in a position to avoid many of the common (and often expensive) traps. You’ll also have the satisfaction of knowing you’re in the minority that bought a home the smart way.

One caveat before beginning: I saved the most important and easiest rule for last so you’ll remember it. These are the rules professional real estate buyers use that you should also follow.

10. Shop Around — On Interest Rates And Beyond

For most homeowners, the most expensive component of a home is the interest expense on a mortgage. Before you begin shopping for a home, your first step is to shop for a mortgage. A natural first place to begin your mortgage loan search is at your current bank or financial institution that you already have a relationship with, but it certainly shouldn’t be your last.  (I have contacts at most of the major banks and credit unions. Ask me for a referral to a mortgage specialist at your bank.  I can also put you in touch with knowledgeable independent mortgage brokers.  All of my mortgage referrals are cost conscious and they all take good care of my clients. -TB)

Depending on your situation, you may qualify for a government loan program which would make it possible to buy your house with a lower down payment and/or with reduced credit score requirements. Never assume you can’t qualify for one of these programs before inquiring. Many lenders don’t participate in the government’s special financing programs and have little or no incentive to tell you about them. When it comes to finding the best loan for you, surfing the Internet is a good way to find information about that programs that may be available for you. (Talk with me about your situation and I will help you find an appropriate mortgage professional. -TB)

9. Do Your Research and Homework

Perform your homework before you start looking at homes you may actually purchase. Fortunately, most buyers follow this step to a limited degree but often not as much as hindsight dictates is wise. Some homework is not only easy; it’s fun. Netflix and HGTV have many shows dedicated to home buying and improvement.

If you do nothing else than watch Netflix and HGTV real estate shows, you’ll learn how easy it is to go over budget on improvement projects. You’ll also gain insight on the sometimes emotional roller coaster ride real estate brings. By watching others in your same situation, you’ll help to reduce the mystery of the process. Netflix is especially useful, because the streaming channel allows viewers to watch one episode after another; you can learn a considerable amount in a short period. All while enjoying popcorn.  (Fun, but not a substitute for calling your real estate agent with ANY and ALL questions or concerns that you may have. -TB)

8. Check Your Emotions At the Door

Leave your emotions behind or, at least, let them be one of the last considerations. A potentially expensive mistake is falling in love with a property and ignoring red flags. The emotional influence is often underrated and not discussed, but it’s rare to find a buyer that isn’t excited at the closing table.

To minimize getting swept-up in the moment, calculate your total maximum price and monthly payment remembering that the total cost of living in the house isn’t the same as the home price alone. You have to add in insurance, taxes, maintenance and planned upgrades. After you find a loan officer you’re comfortable with, he can help you determine the appropriate amounts.

7. Get an Outside Professional Inspector

Hire a qualified, insured/bonded, and licensed home inspector. Don’t think for a minute that a half-hour walk-through is sufficient to find every possible defect a typical home inspector can find.

Homes less than 20 years old are up to code in most situations. (Not at all a true statement! You still need to hire a professional licensed property inspector. – TB) If you’re planning on making alterations, improvements, or changes, newer home projects usually cost less for any given improvement, especially if it includes plumbing, electrical, or climate control.All else being equal; newer homes are less expensive to insure, heat, cool and initially maintain. For first-time homebuyers that may not fully understand the ongoing costs of owning a home, keeping expenses manageable is often the difference between having the home serve you or having you be a servant to it.

6. Consider the Costs and Burdens of Renovations

Few buyers find the perfect home they would build. For the rest of us, unless you’re building brand new, it’s unlikely that you’ll find the perfect place that you don’t want to make changes to.

If the home you’re considering buying is older, particularly over 50 years old, you can count on the local building inspector requiring electrical and mechanical systems be brought up to code during improvements. Before buying a home with a desire to make what appears to be a simple update, first find out what the worst case scenario is by a licensed and bonded contractor. (The property inspection period is the time to bring in contractors and get bids for any desired remodel work. -TB)

5. Lead Me Not Into Taxation

Because most property information sheets only include a total, buyers should check with the local tax collecting authority to find out what is included to arrive at a total tax bill. Recently passed referendums, and special assessments, may not show up in previous taxes as well. Be sure to determine if a tax increase is expected to avoid a surprise.  (In our local California market, all buyers will receive a Preliminary Title Report that will list all taxes, liens and any special assessments that may affect the property. -TB)

Condominium expenses typically including taxes, lawn care, common area costs and more. If you’re considering the purchase of a condo, make sure you know who you’re partners are because condominium owners truly are partners.  (When purchasing a condominium you (the buyer) will receive a report from the homeowner’s association (“HOA”) that will alert you to relevant issues that pertain to the condominium complex.  You will also receive minutes from past HOA board meetings. -TB)

4. Look Past Your Nose

Your nose knows. If you visit enough open houses and home tours, you’ll inevitably run across homes with the sweet enticing aroma of baked cookies or apple pie. When entering a home that has a pleasant smell, take note that if this home is otherwise desirable, another visit is required.

Also, take an especially close look at the pipes, drains, and the basement level for signs of moisture. Most advanced sellers will have a smell of baked goods in the air before an open house to help market the home. However, sometimes, the motivation is more nefarious, and the seller is attempting to mask a musty or otherwise unpleasant odor. Another warning sign is if the windows are open or the temperature is different than it should be based on the thermostat.  (This paragraph is kind of silly.  The bottom line is that the entire house must be inspected for potential issues during the buyer’s inspection period. Did somebody say there were cookies??? -TB)

3. Be Neighborly (This may be THE MOST IMPORTANT paragraph. -TB)

Meet your neighbors. Many buyers are uncomfortable knocking on a stranger’s door, but they may not be strangers for long. Do the neighbors have teenagers in a band that practice every Friday night? Do the neighbors own or rent? Do they have dogs that may bark every day at 5 a.m.?  (Do they smoke cigarettes? Is there a potential for the smoke (stench!) to bother you? -TB)

Neighbors will often let you know about problems the seller has “forgotten” and which other neighbors in the area you may not want to live near. (You will learn a lot of valuable information by speaking with the neighbors. -TB)

Remember, like it or not, the neighbors come with the house as a package.

If you still can’t bring yourself to talking to the neighbors, ask your real estate agent to do it for you.
(Meeting the neighbors is an important part of making your final purchase decision.  I strongly believe that it is important for YOU (the potential buyer) to meet the neighbors BEFORE signing that final document.  A lousy neighbor can quickly turn your dream house into a nightmare! -TB)

2. Get Intimate with the Bylaws

Find out what local laws, restrictive covenants, and regulations you’re subject to. Don’t assume if you have or want to buy a fishing boat, company truck, or travel trailer camper that you can park it in the driveway. Just because they are doing so on the other side of the street does not necessarily mean that you can too.

Make sure you know if the garden, fire pit or shed you want to add to the backyard is allowed beforehand. In some locations, the color of paint, the type of mailbox and style of outside lighting is limited.  (These will all be disclosed during the inspection period. -TB)

1. Use a Buyer’s Representative

The last and most important rule for first-time home buyers is that you use a buyer’s agent who represents your interests above all others instead of the typical real estate agent that owes his fiduciary duty to the seller.  (In other words, it is NEVER a good idea to have the listing agent represent you if you are a buyer.  The agent at the open house may be a nice person, but he or she represents the SELLER and has an obligation to get the highest sale price for his or her client THE SELLER. -TB)

A buyer’s representative, on the other hand, owes you the buyer a fiduciary duty and is obligated to help you negotiate the best possible price. You can expect a buyer’s representative to point out and highlight negatives on any given property that the seller’s (listing) agent never will.

A buyer’s representative will not only help find your dream home, but will tell you how to buy it as cheaply as possible. If you can already see the advantages of using a buyer’s agent, but are wondering what the catch is, then I have especially great news for you: The seller pays the buyer’s agent’s commission!  (That’s right. Your buyer’s agent is compensated by the seller.  It does not cost you (the buyer) anything to work with your buyer’s agent! -TB)