10 Things to Know If You’re Buying a Home Now If you're buying a home right now, you have plenty of reasons to feel good: Interest rates are low, and housing prices around Boston, while not the mind boggling bargains you might hope for, are overall considerably lower than they were at their peak in 2005.
1. Get your financing in order This bit of advice tops the list. Given tighter lending practices — and that it's a competitive buyers' market — would-be buyers need to have their ducks in a row so that they're ready when they see the right home. The seller wants to know that if they do accept your offer, that barring catastrophic title issues or inspection issues, the deal is going to go through. I recommend having a full pre-approval within the past 30 days in your possession. A 3-month-old pre-approval is no longer a desirable negotiating tool.
2. Understand your time horizon As a shorter-term buyer, you might consider whether the place is a good investment, and if it's the kind of property that's going to be attractive for the next buyer. Any reservations/concerns that you have now are most likely to resurface when you are ready to sell. A house near train tracks, for instance, is probably not what most people are looking for. Even if you plan to live in your new home “forever,” situations change and sometimes moving is beyond our control.
3. Understand the overall market conditions Investigate what comparable properties have sold for over the past three to six months. Your buyer's agent should know what fair-market value is, not just the list price. While most properties are priced fairly and competitively, there is an occasional rogue listing that is overpriced. Underpricing is also a tool commonly used in the real estate market to create “hysteria” around a certain property and generate multiple bids. The expertise of your buyer agent is essential during a multiple bid situation, where you could very well be out-bidding yourself.
4. Search and buy within your means This is always true, but if the housing crisis has taught us anything, it's that buying with the expectation that prices will continuously go up — and that if you can eke out the payments each month, you'll be in a good spot in the long run — isn't such a good idea. If you start looking above what you can actually afford, it’s a difficult psychological transformation to feel good about what you actually end up buying. I always recommend working with a lender for a pre-approval as the very first step, so that you start looking at the right properties right away.
5. If you're waiting for prices to go lower, think again Real estate is a bit like the stock market, in that it's unpredictable. What's more, many market watchers are expecting interest rates to inch up since the Federal Reserve ended its program of buying mortgage-backed securities — which kept interest rates low. That said rates are still near record lows. If you are waiting for the $400,000 condo to come available for $250,000, it just isn’t going to happen in the current housing market.
6. Looks can be deceiving Buyers should keep in mind that many sellers will try to present their homes in the best possible light. If the house has been staged, what you need to remember is that all that stuff is going out when [the sellers] leave. Decorating, while making one’s home inviting and attractive does not add dollar value to the property. There are many “tricks” used to camouflage a home’s undesirable traits. Small and sparse furniture to create an illusion of spaciousness, beautiful window treatments to hide an unattractive view or windows that are in desperate need of repair or soothing music playing to detract from road noise or noise from a neighboring unit.
7. Questions… questions… and more questions… Sellers and their agents should be prepared to answer questions including the age of the roof, heating system, hot water tank and windows. They should also know if the basement has taken water in the time the seller has been there, and if there's a sump pump. It’s also important to find out prior to offer, all costs associated with owning that particular home, including association fees (condos), insurance policies, utilities and pending repairs/special assessments. It’s your buyer agent’s fiduciary responsibility to ask the right questions on your behalf.
8. Brand new construction Consider that a home that's been lived in has been tested. The seller will be able to tell you if the basement takes on water in a rainstorm, for instance. However, one of the advantages to purchasing new construction is the mandatory 12 month builder’s warrantee.
9. If you're buying a condo, know the rules Condo lending rules have become more stringent, making it difficult for some would-be buyers to get financing. Lenders generally want buildings to be at least 50 percent owner-occupied. Most lenders also don't one want one person to own more than
10 percent of the units, since that owner could sway how money is spent and, hypothetically, decide against making repairs. Buyers may also have trouble getting financing for condos in buildings with a certain amount of commercial space. Condo living is perfect for some – you share the expenses of the general maintenance of the building and often condos are more affordable than single or multi-family homes. One thing to keep in mind is that condos have an association fee due monthly and there are rules and regulations (condo documents) that unit owners must be willing to follow. These rules can include pet restrictions, noise restrictions, ability to rent and many more. You must always review your condo docs prior to signing a purchase and sale agreement. As a matter of fact, an offer to purchase should be contingent your ability to review condo docs. 10. Think about a home's intrinsic value Buying a home has always been a consumption decision and an investment decision. In recent years the investment aspect has become even more important to most buyers. Questions such as 'Is this where I want to raise a family' and 'Is this close to the things that are important to me' will factor more into the decision than “How much of a profit will I make when I sell?” The truth is that you may not make a profit at all, but may enjoy many years of happiness in your new home – that is priceless.
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