Buying A Home: Things Your Realtor Fails To Mention
Things Your Realtor Fails To Mention
We all have a dream of owning our own home. Though home purchases with millennials are decreasing, this is likely due to economic issues more than mindset. Millennials in general have taken out less debt (by credit card and loans) and worked their budgets closer to their standards of living. For those who are viewing this article before you go on to purchase that new home there are a few things you should consider before hopping in.
Realtors Over Hype Getting Qualified
You may wonder what I mean by this and it is a bit complicated. Realtors know that lending standards have changed and that getting a home using a first time home buyers program is complicated. The reality is that if you have the income to support the note, you can find a bad loan bank with horrible rates to purchase a home through. I suggest not doing this as it will cost you so much and we are already losing a lot. The idea is to drive you to want the home. Even if you qualified for the loan, most realtors will discuss scary stories about lenders and insist on taking a deep look at your credit report. This tactic can give you a false sense that getting this home is some sort of achievement and push you to doing whatever it takes to get into your home. Truth be told, a 580 credit score or higher can qualify for a home at a decent loan rate. Qualifying for an FHA loan requires a 640 and the jump of 80 points is actually very easy to make in a short period of time. Don't let a realtor use your credit score as reason you should use them. You should explore as man realtors as possible before deciding which one to choose.
Find The Lies
Realtors are in the business of selling you a home to make money. If you make an offer lower than the asking price and it is accepted there are a couple questions you should ask:
- First of all, would they be willing to negotiate a home in a different location of that subdivision? Or is it just this home?
- What are the future plans for development around the home?
- How many of that model of homes has the lender sold recently? How many homes on this street?
Please ask these questions. I made this mistake when I purchased my home. I placed a lower bid in and it was accepted. My wife and I were very thrilled with this as it allowed us to get this particular home we couldn't of bought otherwise. Later in the process the realtor quickly noted that a highway was going to be built behind us but insisted that 500 yards of trees would separate us from the highway. She also insisted that a sound barrier was required as the agreement. Our mistake was not making her outline those details in writing. We loved our home and we used the shade from the trees out back often. One day we came home to disaster however, the construction company from the highway was taking everything out. Every tree we enjoyed vanished and they even cut down trees right near our back fence with some just partially cut down. We sought answer but we were told 'tough luck' at every turn. Apparently the company had sold the 500 yards of land to the toll road company. Soon we had all sorts of flooding issues and our lawn began to die as it burned in the heat. Now , we have a toll road with no grass, trees, or anything behind our home. There is also only about 200 yards between the road and our home. Making matters worse, they never built a sound barrier and the toll booth flashes into our home regularly. It finally made sense why the builder took 20 thousand less than they were wanting. Sadly, most of my neighbors paid full price. Always ask your realtor for any plans of development around the property before you purchase. Get any statements signed and in writing. Never leave any details to oral agreement or just trust what you are being told about the development plans around your home.
Realtors Don't Care About You
They Want To Make Money And Go Home
Okay, I know i'll get tons of messages about how wrong I am and maybe even a few comments. Realtors will tell you how hard they work and what they put into their work. Maybe this is true but it doesn't change the facts. Realtors will let you go into something you can't handle if it means larger commissions for them. As I pointed out above, they will also withhold details that could be important factors in your purchasing the home. The truth is, the realtor is in it just to make the sale and you are just another customer to them. You need to take steps to protect yourself from buying a home you either will not want in years to come or will not be able to afford in a few years. Here are a few things to take note of:
- If you walk into a beautiful two story home and it's ice cold inside, there may be an issue. Realtors will turn the AC very low so that the cold air inside can compensate for the fact that the builder installed an AC that is not adequate to sufficiently cool the up and downs stairs at reasonable temperatures. AKA- You will spend tons on your electric bill.
- If you notice over grown grass in the front or back yard, ask that it be mowed before you make a decision on purchasing. Builders will allow maintenance on the homes yard to slip while saying it is due to the home being built a while ago. What higher than average grass does cover is the fact that a lot of sod they laid was not properly maintained and died. The high grass gives the illusion that the yard is healthier than it is. You have a right to request this issue be fixed before you buy.
- Check all the home's corners,window seals, and look for paint that looks out of place. Builders will try to do quick fixes to fix mistakes to the naked eye. However , after buying the home you may find that bay window has a nasty crack in the window seal. These are issues you can demand they fix before purchasing but become harder after. Most builders will allow you to mark areas you want fixed, be as demanding as possible and let nothing go.
Property Taxes Will Kill Your Dream Home
Okay this is a very important piece of advise that no one a long the entire process of realtor, to middle man, loan officer, or the bank will discuss with you. You will hear about this 42% of debt to income ratio and 31% of your salary and all these things that make you feel you can buy this home and truly afford it. I got in my home for the price I wanted and the note was heavy but I could afford it and I adjusted my fiances to reflect that. After paying on my home for almost three years I opened an invoice one day and I almost cried. I owed the city 6400 dollars in taxes from the year before and on top of that my mortgage went from 1435 to 1984 a month. I noticed this adjustment on my bill that added the over 500 dollars to my total suddenly. It was labeled "Overage/Shortage" yet from the bill I knew I wasn't an "overage". When I called my bank to inquire about the bill I was met with little details. The bank said I could set up a payment plan to pay 2800 a month until my back taxes were caught up. As for the extra 500 a month that was the new norm and the true monthly cost of my home now. I called the tax office to inquire on the issue and got even more bad news. The home I had purchased had been valued at 63 thousand dollars for taxes purposes when I bought it. The tax rate I had been paying was at 63 thousand dollars. I paid 195 thousand for the home but my note was only reflecting taxes on the 63 thousand. However, the false taxes were never taken into consideration when approving me for the home. Bottom line, I wouldn't of bought this home if I had known my true mortgage payment would be so high. Adding the extra 500+ a month really hurt me. Not only did I not make enough every two weeks to make that payment and live off my budget, but they would hit me with fines up to 130 dollars for being late. This was complicated since I was already thousand in debt to back property taxes I had no idea even existed. My realtor sold me on the property taxes to begin with by insisting they were the lower in the area and I could afford more home as a result because it took away less of my ratio. No one during the entire buying process ever informed me that my payment would jump 500 dollars a month. I found this out about two months ago. I am struggling to keep my home and I have been exploring home modification loans and bankruptcy just to save my home. Five hundred dollars doesn't seem like a lot but it really has hurt my ability to own this home at all. On top of all that , our 'low , low tax rate, will be increasing next year from 3.1% to 3.9%. Meaning my bill will increase another 210 dollars.
Avoid The Heartache
When purchasing a home ask your lender , realtor agent, builder, and the LOCAL TAX OFFICE these questions.
- Will my payment suddenly increase due to taxes in the area?
- Were my future taxes taken in consideration when calculating my DTI?
- Please consider the full appraisal price for the home TODAY and add in the future tax rate for DTI purposes
- Are significant tax increases likely in the next five years?
Even If You Put 20% Down To Avoid Mortgage Insurance This Is Important!!
Be Safe Not Sorry
How To Completely Avoid Tax And Other Issues
Buying a home should be magical and I am sorry if this article scares you. I just wanted to offer a completely honest outlook on purchasing a home. Stressing over making your mortgage is not healthy, I should know. There are many ways we can avoid these issues. Let's discuss and recap a bit.
- Buy an older home - Older homes come with fear of problems but your tax rate is set and you pretty much know whatever you are paying for that home today, you will be paying very close to that same price in 10 years.
- Force The Bank To Consider Future Taxes And Appraisal Value On New Homes - I think most loan officers, lenders and realtors think they are helping you by not pointing this issue out. You can afford the home you want! Well, you can't. You would of likely been fine in a home just a little smaller that you could afford in reality. You don't want to get a 300-500 dollars increase on your mortgage randomly after years of living there. It will really wreck your budget and may cost you your home.
- Hire You Own Home Inspector And Appraiser- I know extra expense is far from your mind but you should hire both before purchasing a home, even if it is new. The inspector the builder or seller supplies is working for the builder or seller. They are paid to have their interest in mind and may fail to mention a few 'minor things' that could become major. A private inspector could find an issue with a sewer or foundation that could save you tens of thousands of dollars down the road. A private appraiser could offer you the true value of your home and offer that report to the local tax office in case of dispute of value.
Take these steps when purchasing a new or used home. After all, realtors keep getting prettier and prettier but pretend to know less and less. There is a reason for that. They are in the business of selling a home not looking out for you.