I want to sell my house and buy or build a new one. I decided to put my current house out on Facebook on a local homes for sale page. I’ll list it with a realtor later. I know I shouldn’t be insulted by some of the low ball offers I get, but the most insulting part of these offers is the ignorance behind them. Buying a house is a serious investment. It’s not like going to Walmart and buying a TV or Christmas tree… I know people that put a lot of research into purchases like that, so why wouldn’t you research buying a house? You can Google it for cripes sake! There’s even articles with pictures! Despite the fact that there are already articles out there about this, I’m going to add my own list to the mix. So here ya go, what you need to know about buying a house before you go out and start insulting people.
- Check your credit. If there are any delinquent marks out there, try to get them fixed. A good credit score means better rates.
- Know what you’re looking for and what part of town you want to live in. Make a list of make or break items like the number of bedrooms and bathrooms. Make a list of optional items like a fenced in yard or how many garage stalls. Look at where the schools are in town. You want to be happy with what you buy, and you want to have good re-sell potential.
- Be prepared to stay in one place for the next three to five years. That is how long it will probably take to build enough equity in your house to be able to sell it for a little profit.
- Save up some money. Ideally, you want to have 20% of the value of the home to put towards a down payment. If your loan to value ratio is more than 80%, then most banks will require private mortgage insurance on your loan. That can be pricey, so having 20% down can save you a lot of money.
- Get pre-approved. I don’t mean going out onto a bank website and using a mortgage calculator. Sit down with a bank and go over your finances and find out what they are willing to lend you. This gives you an idea of what houses you can realistically look at and will give you a firm number for negotiating.
- Find out what closing costs the bank will roll into your loan. Most of the time, the buyer is required to pay for an appraisal and inspection. The bank will choose the appraiser, but the buyer can choose who inspects the house. This will run you upwards of $1,000 and sometimes you have to pay all of that out of pocket. Also check to see if the realtor’s commission will be rolled into the loan.
- Ask the home inspector questions. Find out what they think about any issues they found with the house. Are the problems mainly cosmetic, or are their major issues with the house? Small cosmetic fixes can be used when you’re negotiating the price of the house (things like a flooring allowance or exterior paint) but large issues like a mold problem or a bad foundation are not quick fixes.
- Find a good realtor. Ask around and see what kind of reputation the realtors in town have. Meet with them and see if you’re comfortable enough with them to ask them questions. They will be like your business partner for at least the next one to three months, so you want to find someone that you work well with.
- Don’t look at houses that are more than $20,000 out of your price range. You’re setting yourself up for disappointment by looking at a house that is way out of your price range. You’re also wasting the seller’s time and the realtor’s time. Most sellers have a good idea of what their house will appraise for, and they set the list price accordingly. If you can’t find a house within your price range that has all the things you want, then it’s time to reevaluate what you want for features in your house.
- Know the market. Is it a buyer’s market, or a seller’s market? How many houses are on the market right now and what are they selling for? What selling price is typical for the homes in certain neighborhoods or with certain features? What is a typical price per square foot for homes sold in the last six months? Are there restrictive covenants in place in certain neighborhoods? Is there an HOA that you will have to belong to? What are the property taxes like? Do you have to get flood insurance? A good realtor can answer these questions for you.
- Be prepared to negotiate. A good realtor really comes in handy when you’re ready to make an offer on a house. Your initial offer can be less than the asking price for the house, and the seller will usually counter your offer. Things like closing costs can be used as part of the negotiation.
- Don’t expect to find the house of your dreams right away. Buying a house is a process that takes several months. You may need to compromise on certain things.
Those are the big points I wish people knew before they started looking for a house to buy. It’s a big waste of time to start looking at houses before you have all your ducks in a row. Most realtors won’t want to work with you if you’re not pre-approved for a loan. Most buyers won’t take you seriously if you make an offer on their house that is $50,000 below their asking price. So don’t just jump into this whole buying a house and being an adult thing. It isn’t a video game. Do your homework. Find a realtor. And happy hunting.