Next week will mark 3 months since Emily and I closed on our first home. It's been almost nine months since the house hunt began in earnest and in that time, I've learned a lot about the home buying process. In no particular order, here are my top 10 lessons learned:
#1 - Get pre-qualified early. The first call I made when we decided to buy a home was to a mortgage broker who checked my credit, got some basic information about my finances and issued a letter of pre-qualification. In a depressed housing market (like the one we were shopping in), being pre-qualified isn't always crucial during the house hunt. But in a competitive housing market, sometimes pre-qualification is required just to get your foot in the door with a seller. Pre-qualification should be one of the first steps in your home buying process, as desirable homes often sell very quickly (sometimes less than 72 hours). You want to walk into prospective homes prepared to make an offer. Once it comes time to write paper, pre-qualification is a must if you want your offer taken seriously.
#2 - Budget Conservatively. When Emily and I first started talking about purchasing a home, we looked at the inventory in Rochester based on our combined income. But since we knew Emily would have to find a new job in Rochester, we made the decision to get pre-qualified and purchase a home based solely on my income. In retrospect, this was a great move. We ended up getting a lot of house for our money and now that Emily has a job, we'll be in a solid financial position that will allow us to cover our housing costs and still bank some savings.
#3 - Don't Ignore Fees and Taxes. When perusing the MLS listings, the property tax amount is hidden down at the bottom and is often the best-guess of the seller and their agent. This is unfortunate, because in Monroe county, taxes can often double the amount of your monthly mortgage payment. Never consider a property until you've evaluated how the taxes will affect your monthly payment. In anticipation of rising assessments or screw-ups on the part of the listing agent, round the property tax amount up to the next thousand dollar mark when budgeting. In addition, don't forget to factor in attorney fees, mortgage application fees, the cost of an inspection and other miscellaneous closing costs in your budget.
#4 - Shop Realtors. This was my biggest rookie mistake. I got a recommendation from my mortgage broker and stuck with the guy WAY after I knew he wasn't the right realtor for me. If I had to do it all over again, I would screen multiple agents. The most important question I would ask is "What do you bring to the table that makes you more valuable to me than one of your competitors?" All agents have certain obligations to their clients. Don't settle for a realtor who doesn't go above and beyond those obligations.
#5 - Use the Internet. My biggest beef with realtors is that with the proliferation of online real estate tools, there's not much extra a realtor can offer in the way of finding a home. Using online MLS directories (homesteadnet.com in the Rochester area), a buyer can get a feel for the specifics of property and often see photos. Google Maps is useful in helping to locate prospective properties and the Street View feature is great for getting a curbside look at a property and the surrounding neighborhood. Zillow.com has aerial photos and also shows property lines and assessed values. There are many helpful sites out there to help you with your house hunt. Use several of them to get as complete a picture as possible about a property before setting up a showing.
#6 - Narrow Your Focus. Some buyers begin a house hunt knowing exactly what they want and how much they can pay. Emily and I began knowing what we wanted to spend, but we had only a vague idea of what we wanted. After LOTS of looking, we developed a better feel for what we needed in a home. If you're not entirely sure what you're looking for, keep searching until you can confidently describe the must-haves and the desirables for your home. Once you've reached that point, screening out non-contenders becomes much easier.
#7 - Consider Resale. When you're looking for a home that you plan to occupy for years to come, it's tough to think about the day when you'll be selling it to someone else. But that should definitely play a part in your decision. Is the home in an appealing neighborhood? Will it's character and personal touches appeal to other buyers? Are you overlooking a feature that's going to be a major turnoff when you have to sell? All good questions before deciding on the right house.
#8 - Read Everything. OR have it explained by a trusted individual. The old adage about not signing anything until you've read it is excellent advice. However, real estate can be complicated, and reading a document and not understanding is about as helpful as not reading it. So if you don't understand something, ask your realtor or attorney. There are no stupid questions when so much money is on the line. I would also highly recommend that once you decide on a realtor, have them walk through their standard offer paperwork. When a buyer finally finds the right house, it's tough to focus on the details. But there are numerous terms and conditions in the offer that require some serious thought. Knowing what those terms are before it's time to write paper can make the whole process less stressful.
#9 - Be Present for the Home Inspection. Once you've had an offer accepted, a home inspection by a qualified inspector is a necessity. And being there when the inspection is done is important. You'll receive a report from the inspector, but being there to ask questions is a valuable opportunity to learn about your home and any problems it may have.
#10 - Don't be Afraid to Walk Away. Don't be afraid to fire a bad realtor. Don't be afraid to bow out of a bidding war. Don't be a afraid to walk away from a home that's falling apart on inspection. It is difficult to separate emotion from the business of purchasing a house. But the effort and potential pain of staying detached is definitely worth avoiding the financial consequences that result from emotionally charged decisions.
#5 - Use the Internet. My biggest beef with realtors is that with the proliferation of online real estate tools, there's not much extra a realtor can offer in the way of finding a home. Using online MLS directories (homesteadnet.com in the Rochester area), a buyer can get a feel for the specifics of property and often see photos. Google Maps is useful in helping to locate prospective properties and the Street View feature is great for getting a curbside look at a property and the surrounding neighborhood. Zillow.com has aerial photos and also shows property lines and assessed values. There are many helpful sites out there to help you with your house hunt. Use several of them to get as complete a picture as possible about a property before setting up a showing.
#6 - Narrow Your Focus. Some buyers begin a house hunt knowing exactly what they want and how much they can pay. Emily and I began knowing what we wanted to spend, but we had only a vague idea of what we wanted. After LOTS of looking, we developed a better feel for what we needed in a home. If you're not entirely sure what you're looking for, keep searching until you can confidently describe the must-haves and the desirables for your home. Once you've reached that point, screening out non-contenders becomes much easier.
#7 - Consider Resale. When you're looking for a home that you plan to occupy for years to come, it's tough to think about the day when you'll be selling it to someone else. But that should definitely play a part in your decision. Is the home in an appealing neighborhood? Will it's character and personal touches appeal to other buyers? Are you overlooking a feature that's going to be a major turnoff when you have to sell? All good questions before deciding on the right house.
#8 - Read Everything. OR have it explained by a trusted individual. The old adage about not signing anything until you've read it is excellent advice. However, real estate can be complicated, and reading a document and not understanding is about as helpful as not reading it. So if you don't understand something, ask your realtor or attorney. There are no stupid questions when so much money is on the line. I would also highly recommend that once you decide on a realtor, have them walk through their standard offer paperwork. When a buyer finally finds the right house, it's tough to focus on the details. But there are numerous terms and conditions in the offer that require some serious thought. Knowing what those terms are before it's time to write paper can make the whole process less stressful.
#9 - Be Present for the Home Inspection. Once you've had an offer accepted, a home inspection by a qualified inspector is a necessity. And being there when the inspection is done is important. You'll receive a report from the inspector, but being there to ask questions is a valuable opportunity to learn about your home and any problems it may have.
#10 - Don't be Afraid to Walk Away. Don't be afraid to fire a bad realtor. Don't be afraid to bow out of a bidding war. Don't be a afraid to walk away from a home that's falling apart on inspection. It is difficult to separate emotion from the business of purchasing a house. But the effort and potential pain of staying detached is definitely worth avoiding the financial consequences that result from emotionally charged decisions.
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