Buying a house: a clip-and-save guide

#617 in a series of true experiences in real estate
March 2011, Hills Newspapers

Step one: Ask yourself, why buy?

What will buying do for you? Take time to imagine and consider your own house-buying motives. Specifically list all the good things owning a house will give you.

Some common reasons given for buying: To become master of one’s own hearth, wall color and moving date. To spread out, have a dog, and save on income taxes.

Step two: Selecting assistance

Your real estate agent will act as your clone, keeping your interest foremost in mind. She will help you find houses, give you information about them and act as your go-between.

She’ll write and negotiate your contract, oversee inspections and your loan and title documents as well as recommend experts and helpers. She will act as your confidante and allay your fears.

Usually the agent is paid by the seller but only when the sale is complete. Because she works for free in the meantime, she will make her priority the serious and realistic buyer: one who knows what he wants and can afford it, recognizes it when he sees it, and will move decisively when he does.

If you plan to look at “everything” for “years,” realize that your agent cannot afford to accompany you on every step of your journey.

Your loan agent will assess your individual financial situation and wishes, explain loan agreements and costs, represent your interests to the lender and make sure that things are done on time.

He or she will sort through many loans to find the most suitable and least costly one for you. So be frank, and even if you don’t expect to be buying right away, it will be to your advantage to complete a loan application, pay for a credit report and be preapproved for a loan.

Step three: Money

Use the help of your agents (and perhaps, your tax advisor) to determine your costs. Add the numbers, then think about your financial comfort level.

1. Cash down payment.
2. Additional money for closing costs.
3. Loan costs, initial and on-going.
4. Property taxes (which vary from city to city).
5. Insurance (varies depending on many factors).
6. Income tax savings.
7. Inspection fees.
8. Compliance with local ordinances.
9. Moving truck, window coverings and such, utilities, repairs, upgrades.

Step four: Looking at houses

1. Neighborhoods. Talk to friends, call the beat copy, consider the proximity to freeways, shopping, schools, recreation, quiet.

2. Housing construction styles. Learn something about common amenities depending on house age: electrical panels (circuit breakers vs. fuses), roofs (old/new, flat/pitched, composition shingle/tar & gravel), plumbing (galvanized, copper), heating (floor and wall units/central heat), flooring, foundations (slab/perimeter, earthquake retrofitting).

3. Specific house details.

Termite reports. These generally cover wood destroying organisms such as dry rot, fungus and insects; only occasionally do they provide clues about the strength or stability of the foundation or of the overall structure.

Transfer disclosures forms. State law requires sellers to write down for you such things as neighborhood nuisances known to them, roof leaks, a fence built on a neighbor’s lot.

Your own inspections. These might include a general physical inspection (heating, plumbing, roof, foundation, electrical) and, in some instances, specific experts such as engineers, furnace and fireplace professionals. City files should also be checked.

Hazard Areas. Be aware of designated earthquake, slide, flood and fire hazard areas.

Existing and potential conditions. Teach yourself to see what exists in the houses you look at, as well as what could be. Dirt, paint, carpet, a new hot water heater can be changed fairly easily and inexpensively; moving walls or redoing a kitchen are more extensive.

The perfect house does not exist. Try to zero in on what matters most to you. You might, for instance, compromise by getting more living space in a house on a busy street. Or maybe you’d prefer a new kitchen but can get along without a garden.

Step five: The process of buying

1. The contract. Know what your agreement says, what you will receive, what you have promised to do, and when. Understand the contingencies (the “outs”) that say to the seller “I will buy your house if such-and-such happens to my satisfaction.

2. Timing. Know when you must be done with your inspections, have loan approval, pay your down payment and closing costs, what date you will own the house and get the keys.

3. Negotiating. Your agent will negotiate for you according to your instructions. Note that frequently the seller and the buyer compromise on the price, but sometimes, the asking price is the fair price. Sometimes it is not – but the owner will not sell for less.

If you are a person who must win with money, find a way to win but keep your objective in mind (owning your chosen house), look at the bottom line and believe this: good will often has value.

Anxieties. Buying a house is big. It takes time and thought and can feel overwhelming because money, hearth and home, as well as change are involved. Many of your neuroses will be at the fore. Wisdom dictates therefore, that in the rush and hubbub you find moments to reflect positively on where you are going and what you will be gaining.

Master of your castle. Get out that list you made, what buying this house would do for you and smile a big smile. It’s time to celebrate.

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