What to Know Before Buying a House
Buying a house is one of the most important transactions you’ll ever make. So what do you need to know before buying to make it one of the best transactions too?
1. Know What You Can Afford. Most lenders will work the numbers and tell you the highest price you can afford for a house. But is this really the price you should go with?
Determine ahead of time what you are comfortable fitting into your monthly budget. Don’t let a lender do it for you. Your lender looks at existing debt when determining how much house you can "afford" - that's credit cards, student loans, mortgages, and the like.
What's not taken into account are your monthly bills, your spending money, or your savings. They don’t have that information, but you do. So keep those numbers in mind when deciding what you can afford according to your lender versus what you want to afford based on your whole financial picture.
2. Find Out How Long the House You Want Has Been on the Market. Ask your real estate agent to look at how long your potential house has been on the market compared to others that have sold in the neighborhood. This knowledge can be incredibly useful when determining what price to offer for a house.
If the house has been on the market longer than the average time for the neighborhood (which is likely to be the case in the current market), the seller will be more likely to agree to a lower offer. On the other hand, if the house has been for sale less than most, you’ll need to think twice before pushing for that "bargain" deal. You probably won’t get it.
3. Know What You’re Getting Into. Once you’ve found your dream house, be sure to get a home inspection. A good home inspection will let you know what to expect when you move in and in the future.
What kind of repairs should you expect to make down the road? Can the seller remedy anything right now? Will the house be more trouble than it’s worth? These are all great questions that a home inspection can help you answer.
Between your home inspector and your real estate agent try to establish what’s normal for a house like the one you’re looking at. For example, if you’re buying an older house, you shouldn’t be shocked if at some future date repairs or upgrades are required.
Use the home inspection to educate yourself about a new home, an older home, or a fixer-upper. This information may effect negotiations on the house and will definitely prepare you for the future in your new home.
4. Find Out About the Neighborhood. Of course, you’ll want to learn about the neighborhood homeowners association, the pool, the community center, and the schools. But before you buy, you should also learn about the neighborhood's recent real estate market.
Ask your real estate agent to compare the list prices in the neighborhood to the final sales prices. If most homes ended up selling for $10,000 less than their original list price, you need to know!
And don’t forget that neighbors do tend to talk. They have a sense of what’s going on when it comes to home sales, especially when they are looking to sell themselves. If Joe and Linda down the street had to drop their price after two months, then your seller won’t be too surprised when they have to too.
Ask your real estate professional about other concessions as well. What kind of closing costs did other buyers in the neighborhood pay? Did they get new carpet, new paint, new appliances? Again, if your seller has heard that Joe and Linda had to offer closing costs or new appliances to sell their home, then they just might be willing to offer you the same.
5. Always Ask. You’ve found your dream home. You’re very excited. You don’t want to do anything to jeopardize the deal. And you don’t have to. However, in all but a few circumstances (usually involving a highly competitive market or an unusually grumpy seller), it never hurts to ask. The worst a seller can do is say NO. If this is the case, you can simply agree to go back to the previous offer - no harm, no foul.
The bottom line - know what you want in a house and don’t be afraid to ask for it. If you need appliances, ask for them. If you don’t like the paint color, ask for a painting allowance so you’ll have money to change that once you move in.
Don’t let a seller or even a real estate agent make you afraid to ask - especially in the current buyer's market. This is your money and your house at stake. Make it work for you! Make them work for you! You just might save yourself some money and end up with an incredible deal!