I want to buy a house-- what do I do?

In My Humble Opinion
21

I bought a house recently. We spent several months without an agent, simply looking at places online at sites like ZipRealty(1) and RealQuest. We used bogus names and throw-away email for those sites, since we didn’t want to be hassled by agents. We looked at houses in our price range(2), and would take a weekend afternoon to drive by these places and look over other places to check out online. This gave us a good feel for what kind of neighborhood/house-size we could get for our money.

Once we knew about what we wanted, we contacted an exclusive buyer’s agent through the National Association of Exclusive Buyer Agents. A buyer’s agent still gets paid by the seller, but legally represents you. So there’s still potential for conflict of interest–the agent wants you to buy a house, but not any house in particular, unlike a seller’s agent. We interviewed two agents before picking one.(3)

Once we had our buyer’s agent we started looking at houses together.(4) It was a little slow at first, but once he got a good idea of what we’re looking for, the houses we saw we’re all ones we could like. Once we found the house we really wanted, he managed all the little details of buying it. There’s tons of paperwork, but he could explain what everything meant.

From when we first started looking for houses on our own to when we got the keys to the new place, took about six months. You should expect a similar time scale. Start looking now, but don’t be in a hurry to buy. The price bottom will be long and it’ll be a buyer’s market for longer than that. Instead, look and keep your eyes open for a place that meets all your requirements. Finding the place you’ll be happy with for a long time is more important than getting the best deal. And don’t fall in love with any place until you see the inspection reports.

(1) I have no association with any of the companies/websites I linked to, other than actually using them.

(2) We limited our mortgage to what one of us could cover alone, to avoid the two-income trap. But we put both our incomes on the mortgage application, which made getting the loan much easier!

(3) The agent works for you–interview them like you would an employee. They should have references from previous buyers (call/email several–both from last year and from several years ago) and should be upfront in explaining exactly how they’ll find potential houses for you and how they get paid. The agent we picked was extremely helpful in explaining in detail, step-by-step, how the house-buying process works. Anything we didn’t understand immediately, we kept asking about until we got it straight. Another important benefit of an exclusive buyer’s agent: because they don’t care which house you buy, they should honestly answer what the drawbacks of any particular house is. This is something you’ll never get from a seller’s agent!

(4) It’s important to know that you must make first contact with a potential house through your agent. Otherwise, the seller’s agent can keep your agent out of the loop. Think of it as a “finders-keepers” rule among the agents. Since this works differently in different states, ask your agent about it.

22

Don’t buy that house. If you are struggling to save 5%, you don’t have enough. You should try to put down 20% and have 6 months living expenses left over at least. How secure are your jobs? We could pay cash for a home right now and we are still renting (although I do own my apartment in Europe).

23

From DrDeth’s link, there is another page with Austin’s floodplain mapswhich you can look at. From the site:

Please be sure to check the maps they have. It’s OK if the house has been elevated above the floodplain. It’s not so OK if it hasn’t been.

Good luck!

24

Oh, several things to consider when buying a house that aren’t necessarily obvious. Do all of these things before you’re committed.

  1. Do the commute from and to the new house. This means, in the morning, getting to the house at the time you normally leave to work and commuting from that point. And do the reverse, to see what the commute home will be like.

  2. Drive to the place and sit and watch the neighborhood for an hour. Do it in the afternoon, to see what the local teenagers do. Do it on Friday and Saturday night to see what the neighbors do then.

  3. Go and introduce yourself to all your potential neighbors. Tell them you’re considering buying the place and wanted to introduce yourself and see what the neighborhood is like. Talk to everyone adjacent to your potential property and one over. Don’t forget backside neighbors. If you’re lucky, you’ll get to talk to the nosy old lady who knows all the local dirty laundry and is happy to chat about it.

25
  1. Go watch it during a heavy downpour and see how well water drains off of the house and yard.
26

Call the police and ask about the neighborhood. Ask a nosy neighbor about the neighborhood. You might be able to go on line and see the police reports for the neighborhood.

27

FYI. you can get a FHA backed loan that requires you put down 3.5% only. Your mortgage broker can hook you up with a FHA loan just as easy as a conventional loan. There aren’t many qualifications for you to be eligable, but there are qualifications for the property to be eligable - it needs to be basically perfect! No peeling paint, nothing needing replacement, etc. This program is designed to help the needy get a house, and they’re assuming that you won’t be able to put any additional money into repairs. That’s just how the program works. If you find a house that does have some repair issues, or is a “fixer-upper”, then you cannot do a FHA loan. Conventional loans are requiring 5% down (they’re not actually requiring 5% down, but you can’t get Mortgage Insurance (PMI) with anything less then 5%, so they effectively have a 5% minimum).

Currently in the process myself… hopefully will be closing on 2/20!

and now’s the time! housing costs are at their recent lows, as well as interest rates. I’m getting a much bigger house then I could have afforded just 6 months ago!

28

[ol]
[li]Get your own agent - don’t use the one selling the house[/li][li]Get the house inspected professionally[/li][li]Shop around (a mortgage broker is a good way to do it)[/li][li]don’t get “your heart set” on a house - if it’s been on the market since Oct there is a reason it’s still for sale[/li][/ol]

29

I’m really appreciative of your input as I’m likely buying soon myself, but you’re making some awfully bold predictions here. Will you share what you’re basing all of this on, particularly given some of the (potential) help coming out of the stimulus package?

30

but note that if you’re purchasing a foreclosure (there are tons!) then you’re probably already getting the property at a highly reduced price. The bank will typically charge for a foreclosure what’s left on the original mortgage, not what the unit is worth. So… if you can buy a unit for $250K that’s actually currently worth $350K, then you have a lot of headroom before you’re “under water” - even with a 30% drop over the next 3 years. And how much rent would you have flushed during those 3 years??

31

On the downside, a foreclosed house is one where the owner is not going to have done any maintenance for a while, and where you hope the bank kept up the property. An owner selling is probably going to make sure it passes inspection, the bank not so much. It will also likely have been abandoned for a while.

32

Realtor here, in the state of Wisconsin, so anything I say may not apply to all states.

You’ve gotten some good answers here about financing, so I’d just like to explain a little about buyer’s agents.

Years ago, if you approached an agent with a listing, the agent represented the seller only. While you were a customer to the agent, the agent did not represent you.

Many (most?) states have moved to a much more equitable arrangement where the agent can represent either buyer or seller (or both, but let’s skip over that for now). This is possible even though the commission is typically paid by the seller.

Here’s how it can work. If a prospective buyer approaches me, he may sign a Buyer Agency agreement with me (actually it’s with my firm) and I represent him in any transaction that falls under the agreement (it may be limited as to time, geography, etc. as desired). If he ends up buying a property that is listed already, the seller pays my commission because of a blanket arrangement with all agents and firms thru the local Board of Realtors.

If the prospective buyer declines to sign a Buyer Agency in advance, that’s OK. Up until the time of negotiations, I will be a neutral party, sort of in an “undefined” category. The minute negotiations begin – often defined as “writing an offer” – I tell the buyer he must make a choice. Either I will, from then on, represent him or the seller.

If he chooses the former, I give him a Buyer Agency agreement to sign (the same one as before), and he becomes my client. If not, I give him an Agency Disclosure form to sign that says I will be working for the seller.

The Buyer Agency agreement says that I will accept the commission that is offered thru the listing agent, or, if the property is not listed, the buyer will pay it. However, when I write an offer, I typically write as part of the offer language that “Seller will provide compensation to Broker.”

One of the big advantages to a buyer to sign a Buyer Agency agreement is that I can approach ANY property owner, even ones that are not on the market, on behalf of the buyer. I know that I will receive a commission from some source no matter what, so I don’t have to hold back; I can actively solicit sellers. This a win-win proposition as I can bring the widest possible choices to the buyer and have the best chance of earning my commission.

So if you have a listing agreement with an agent (you are the seller), you are his client and he represents you and your interests. Likewise, if you have a buyer agency agreement with an agent, you are his client. Otherwise, you are his customer, and he does not represent you.

That said, there are ethics that prevent an agent from dirty dealings even towards customers, and our contracts spell those out, such as these (paraphrased from standard contracts). The following are some of the duties owed to both customers and clients:[ul][li]The duty to provide brokerage services faily and honestly[]The duty to exercise reasonable skill and care in providing brokerage services to you[]The duty to provide you with accurate information about market conditions…[]The duty to disclose to you in writing certain material adverse facts about a property…[]The duty to present contract proposals in an objective and unbiased manner and disclose the advantages and disadvantages of the proposals.[/ul][/li]One thing you should keep in mind. If you sign a buyer agency agreement with an agent, you should funnel all real estate matters thru him (he’s working for you, remember?) If you walk into some other office to make an inquiry, you are asking other agents to work for free, without the possiblity of earning a commission, which is why one of the first things they should ask a prospect is, “are you working with an agent already?” But sometimes we forget.

One more parting comment. It is possible to have a buyer agency agreement with an agent and it is his listing that you want to buy. Since both the seller and the buyer are clients, it is impossible to represent both at once. Different brokerages have different ways of handling this, but ours has a clause in the contracts that says that in this case, the agent must take a neutral stance and cannot represent either. Other brokerages may assign a different agent to each client to preserve the relationship. Sounds tricky, but it works.

33

You want to hear homebuyer horror stories? Start a thread, I’ll bet there are some.

When I bought my first house, I fell in love with one particular house. It was a VA house so I needed to qualify for a VA mortgage, which I did (I don’t know how; I’m not a vet, I don’t remember what they needed.)

At that time VA houses had to have a certain inspection. The process went kind of like this. Inspector goes to house. Sees crack in sidewalk, stops there, flunks house.

Sidewalk gets fixed.

Inspector goes to house, sees crack in front porch. Stops there, flunks house.

Crack in front porch gets fixed.

And so on.

I had picked the house because it was on a southern corner, had a big lot, had two balconies, had a fireplace, had a great view of the mountains, had one big bedroom upstairs. It had lots of deficiencies (only one bathroom, downstairs–bedroom, upstairs, oops) but it just looked like my perfect house. Also it was right down the street from where I lived, so I knew I liked the neighborhood. Hey, I could park in the same spot!

Owing to the prolonged length of the inspection, I didn’t get it.

I then spent a couple of months looking at three dozen other houses, none of which measured up. Either they didn’t have a balcony at all, or they were a one-story dump, or they cost way more than I thought I could pay.

Meanwhile I had to decide whether to sign another year’s lease on the place I lived.

Somebody bought the house on the corner (MY house!) and painted it. The wrong colors!:mad:

My landlady installed new carpet, which was much plusher than the old carpet, and none of my doors would close, and it was also the wrong color.

I decided to buy the next house I looked at that I could afford, so I did. It never measured up to the first house. (But at least I could paint it however I wanted and rip all the carpet (shag) out.)

Furthermore, I had dawdled around so long that I had to move during a snowstorm. If I’d come to my senses months earlier I could have moved on a nice, hot day.

Also, between the time I put down the contract and got the loan, I lost my job. I decided to ignore that little detail and hope the mtg. co. didn’t find out, and they didn’t. I was a single woman, and had to go through a lot to get the mortgage in the first place. I was really sweating that one out.

34

Thanks for the great replies. I’m learning a lot in this thread!

I know I shouldn’t get too attached to this particular house, and honestly, I know there’s very little chance we’ll actually end up in this house, once all’s said and done. I really wish I had never seen the damn thing because then we’d just be chugging along, saving and saving, oblivious to the awesome nature of this house and feeling no pressure except to get out of our apartment by August. (What’s probably going to happen, even so, is that we’ll extend our lease by 6 months so we can save longer, because we really do need to have extra money for new furniture and appliances.)

So based on the advice here, it looks like we should get pre-approved first thing after we’ve got what we want for a down payment. Then we would go find a buyer’s agent. S/he would show us properties until we found one we liked, we would make an offer and put down some earnest money, and then get an inspection of the house. From there we either say “yay! ok, fix this shit and it’s a deal” or “blah, this house is broken, let’s find a new one.” If we decide to buy it, we would then go to the bank and say “I’m pre-approved, give me money”, and then comes lots of paperwork with the bank and the buying.

Does this sound about right? Am I missing any steps?

As for the dream house, although I know it’s unrealistic to think this will be the one we’ll end up buying, I’m still going to keep an eye on it in the months to come. If it’s still available when we’re really ready to buy, it’ll be the first one on our list of places to check out. It won’t be the only one on the list, and we won’t let its superficial awesomeness blind us to evil; I’ve already told my girlfriend that if both the A/C and the roof will need fixing soon, we can’t buy it.

35

Sounds like you have it about right.

Once you have a buyer’s agent, show them the house you have your eye on and say “this is what we like”. It’ll help them to better find houses you will like.

Someone mentioned it earlier, but it needs to be said again: you will be making a commitment with your girlfriend if you buy a house together. Think 30-year mortgage. If you break up and can’t live together, at the very least one of you will have to buy out the other. Or, more likely, you’ll have to sell the house. As you’ve noticed, this is not a good time to sell a house. So make sure you’re both understand the commitment you’re both making to each other. You don’t need to be married, but that’s why most couples buying a house together will be.

36

My husband and I just finished this process last summer.

What we did:
We took a homebuying class which also was all about credit repair. Through the class we found a real estate agent and a mortgage broker. They worked together and got us a great loan and then found a great house. The broker got us a much better deal than we would have going through our bank.

My advice: find a realtor you trust. Talk with them about options for mortgages and who to speak to about mortgage advice. You’ll be spending a LOT of time talking with your realtor, so SHOP AROUND. Find one that works at your speed.

The first realtor we talked to was like, we’ll get you in a house by next month!!!

The second one (and the one we ended up with) had a pre-typed sheet of all of the steps, how long each would take approximately, and told us from the beginning exactly what would happen during the course of our time together.

37

Well, I suggested "Your county or city likely has a Housing dept with scads of info for 1st time homebuyers and also quite likely a special “1st time homebuyers program”.

And FilmGeek mentioned Credit- run both your histories now and start fixing any things. If you have not checked in a while there will be some issues.

38

Yep, and we know that; the only reason we’re not getting married is that we’re gay and we can’t in this state. We’ve been together 4+ years and are still doing great; we want to have kids and get old and wither and die together and all that. If we could make it legal, we would, but it’s not an option, so we just have to trust each other to be sane and fair if we split or live in shitty apartments forever.