Monday, April 04, 2011

Pinching Abe's home buying tips: Learn from my mistakes, please!

This blog post is inspired by a blogging prompt at SocialMoms.  A fellow member wanted home buying tips and I felt uniquely qualified to offer some sage advice!

I'm not a first timer, though I was at one point.  My first legal assistant job was actually as a real estate closing secretary.  I learned lots of tips and tricks merely from observation.  I used them to help us get the best deal on a house when we finally decided to buy.  Here are a few home buying tips from someone who's been there before, having bought, sold, and actually worked behind the scenes on real estate closings.

1.  Avoid Dual-Agency at all cost!  What's dual agency?  That's when your real estate professional is affiliated with the other side's real estate professional.  Usually this means they work at the same real estate company.  Why you should avoid this?  Though they disclose this to you, there's a chance that an issue will crop up that will bring you to loggerheads.  You want to know that your agent has 100% your best interests at heart.  So if the appraisal comes back low, your agent will work on a price reduction versus working vigorously to get the appraiser to jack it up to make the seller happy (I speak from real-life experience on this one.)

Why they like to do it?  Because of the real estate commission.  This is traditionally paid by the sellers as a percentage of the sales price.  It is then split between the real estate agencies representing both parties.  So half for your guy, half for theirs.  If they represent both sides, they get both halves.  You need to know your agent is in YOUR corner, not theirs. When push comes to shove, you need someone you can confidently know is working for your best interests and can help you negotiate the best deal.

2.  Don't cheap out by not getting a home inspection

Unless the home is super new, and even then, you should opt for a home inspection.  A home inspection might cost about $200 or so dollars depending on the area of the country where you live.  Why should you get one?  These guys are actual contractors or are otherwise experienced in home construction and repair.  They will tell you if you need more insulation, if that hot water tank is on its last legs, when you'll need a new roof, etc. so that you will have a clear view of what the future holds when you buy a house.  These people will spot problems that you can negotiate with the sellers to cover the cost if the repair is serious enough to warrant fixed immediately.

For newer homes, I still believe that a home inspection is a good idea.  Do you trust who built your home?  Even if you are buying something just a few years old, it is worth the cost.  I can tell you that my neighbors, both with homes built within the past few years, have had issues with construction, HVAC and other things.  These newer homes shouldn't have had the issues they did, but a lot of builders cheap out and hire inexperienced labor to boost their profit margin.  Don't just assume that a newer construction is without defects.  The roof may look pristine, but your HVAC may not have been installed correctly (been there, done that too and my house is perhaps 8 years old.)

3.  Mind your closing date!

If money is tight, plan to close near the end of the month.  If you close on the 3rd of the month, you will pay, upfront and on your closing sheet as part of your closing expenses, interest on the loan through the end of the month.  If you aren't pressed for time, close closer to the end of the month to save interest.  This is of particular importance if you are borrowing a lot of money.  Remember, the first years of your loan repayments are mostly interest, not principal.  So why pay $1,000 in interest if you can close at the end of the month and save a lot of money? 

4.  Taxes

Depending on where you live, there's some benefit to tax pro-ration.  In Pennsylvania where you pay school tax, it is often assessed on a Fiscal basis from July to July.  Depending on what time of the year you buy, you can ask for pro-rations that benefit you.  When we bought our first home, it was more beneficial to ask for the school taxes to be pro-rated on a calendar year basis vs. fiscally.  This trick may or may not be an available option to you, but is worth considering. 

5.  Save time, shop online!

Back when we bought our very first home, we were alerted to homes meeting our needs by our Realtor, and then we were carted hither and yon in her minivan to look at houses.  Many clearly would not have met our tastes.  Fast forward to just a few years ago and we shopped for our home online.  Yes, our Realtor still gave us leads, but these were links to a site that gave us lots of pictures to look at.  We could view the virtual tours and then decide from there whether or not we wanted to see the home.  This saved us tons of time and our Realtor too.  We only viewed homes that we felt were worth investigating further to see if the home and neighborhood were a good match.

6.  Love the house, hate the school district

This is one of those things that I wish we'd have considered more carefully.  When we moved to our current home, our children were not school age.  We never considered the school's academic performance when we looked at homes.  Our town is a quiet, traffic free place to live, albeit kind of far from amenities.  The school, however, is one of the last two town run schools in Virginia.  The town constantly is at odds with the school system and it is the kids that suffer most.  Our new superintendent is making strides to bring our school system out of the quagmire it has been wallowing in for years and we can only hope that the school system continues to improve.  Our high school is at the bottom 5% of the state.  With a 10 year old, you can imagine that the rock bottom rating scares us greatly.  We hope the housing market makes a turn-around to allow us to move to a better district.  Even if you don't have children or they aren't of school age, consider the school district when you are looking for homes.  Aside from affording your children (or potential children) a good education, homes in well-performing districts do have a better re-sale value.

Those are just a few of my ideas off the top of my head.  I hope that you learn from my mistakes and advice and make the most of your home buying experience.
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