Charlie Jaite, REALTOR® - COMPLETE GUIDE TO BUYING A HOME

COMPLETE GUIDE TO BUYING A HOME

Charlie Jaite, REALTOR®

Table Of Contents

Owning vs. Renti

Buyers' Needs and Desires

Real Estate Horror Stories To Learn From 17

Searching for the Right Home

Buying a House: Negotiation Dos and Don'ts 33

The Closing Process

Preface When I first ventured into the real estate industry 20 years ago, I did so with the hopes of helping sellers like you avoid the headaches often associated with the home-selling process. In my years of experience, not only have I helped alleviate the stress of selling for numerous clients, but I’ve also accumulated years of knowledge to help them get more money for their homes in the least amount of time. I decided to share all of my expertise in one place with potential clients. And that’s why you’re receiving this book. I want to help you have the best possible home-selling experience. And by that, I mean I want you to 1. Get the most money possible for your home, 2. Sell in the least amount of time, and 3. Avoid the headaches most commonly associated with the home-selling process. Think of this book as my gift to you. It contains insider advice on the home-selling process to help you achieve your ultimate real estate goals, including: • Secret strategies to sell your home for more money • Marketing techniques employed by top agents • Advice on how to appeal to today’s buyers • And much, much more If, after reading through it, you want to hire me to help you sell your home, I’d be more than happy to meet with you to discuss a specific plan to sell your home. Happy reading!

About Me She is a dynamic and accomplished real estate agent with an undeniable passion for helping others find their dream homes. With an extensive knowledge of the local market and a keen eye for detail, he has built a reputation as a trusted and reliable professional. He understands that purchasing or selling a home is one of the most significant decisions in someone's life. With his compassionate and empathetic nature, he takes the time to listen attentively to his clients, understanding their unique circumstances and goals. This allows him to tailor his approach and provide personalized solutions that exceed expectations. Whether assisting first-time homebuyers, growing families, or investors, he remains committed to delivering outstanding results. His negotiation skills, attention to detail, and strategic thinking empower him to secure the best deals for his clients, ensuring their satisfaction and long-term success. Beyond his professional achievements, he is a dedicated member of his community. He actively participates in charitable initiatives and believes in giving back to the neighborhoods he serves. His involvement reflects his genuine care for the well-being of others and his desire to make a positive impact in people's lives. With a remarkable blend of professionalism, expertise, and genuine care, he is the ideal partner for anyone seeking to navigate the real estate market. His unwavering commitment to excellence and his clients' satisfaction sets him apart and makes him a trusted ally throughout the entire real estate journey.

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CHAPTER 1 Owning vs. Renti

Owning your own home might be one of the defining qualities of the “American Dream:” the set of ideals that includes opportunity for prosperity and success and an upward social mobility for the family and children, achieved through hard work. Home ownership is surely ingrained as one of the strongest representations of that vision — 66% of Americans own their own home, and more hope they will or wish they did. Something about home ownership plucks a strong chord with Americans. Financial security, permanency, status, and pride are values many of us seek. Lifestyle plays a big role in the decision to own versus rent. Home buying is most often driven by household formation, such as marriage and growing a family. Less than 40% of people under 35 years old own homes, 60% of people over 35 years old own homes, and more than 80% of people 65 years old or over own homes. Interestingly, for the millennial generation, the primary reason for buying a home? Owning a dog. The U.S. homeownership rate has fluctuated between 62% and 70% since the 1950s. Most young people begin their independent lives renting an apartment, maximizing lifestyle flexibility and minimizing the hefty upfront costs associated with purchasing a home. As they build careers, save money, and start families, many choose to buy a home, recognizing that home ownership, as opposed to rental living, is more appropriate to their growing family needs. At the other end of the age spectrum are homeowners nearing 1

retirement who may desire to sell their homes, downsize, avoid the maintenance and other obligations, and go back to renting.

WHICH IS BEST?

Is it better to rent or buy a home? Most adults ask themselves this at some point as they form their goals and plan for the years ahead. Before you answer the question, here are some things to ask yourself. Owning and renting each have their advantages, but what’s best for you depends on your circumstances. What will be the duration of your stay in the home? Each market is different, but whether the time you plan to spend in the house warrants its purchase is possible to predict. In general terms, it takes four to seven years to break even on a home (i.e., where there has been enough appreciation to pay back the cost of the transaction and cost of ownership). If you’re thinking about buying a home and selling it in two years, buying is very unlikely to be cheaper than renting. Do you think of or need your house as an investment in your retirement plan? Americans are used to their homes being a store for wealth to liquidate in retirement when downsizing their lifestyle. In 2015, Gallup reported that for the second straight year, more Americans named real estate than stocks, gold, savings accounts/CDs, or bonds as the best long-term investment. Real estate leads, with 31% of Americans choosing it, followed by stocks/mutual funds at 25%. A cautionary note though — although home prices have recovered their pre-2006 market slump and continue to rise, the value of your home can fall, as well as rise. Are you financially ready? Owning a home is a financial commitment that requires planning how home ownership fits into where your life is headed. Ask yourself what your budget is and if either buying or renting would require you to stretch

your finances. Crunch all the numbers. A frequent mistake of first-time home buyers is comparing a month’s rent to a month’s mortgage payment. Many people don’t have all the numbers. There are many additional fees necessary to include to make a fair comparison: principal interest, property taxes, property insurance, homeowners’ association (HOA) fees, and ongoing maintenance. Are you prepared for the down payment? This is the lump sum payment that funds your equity in the property (how much of the property you actually own). Down payments vary; 20% is preferred and gets the best rates. There are some loans that allow down payments as low as 3%. Sometimes relatives help with the down payment. If you have a choice, take a gift rather than a loan because lenders will add the loan debt to other monthly obligations and potential mortgage payments to determine your debt-to-income ratio, which generally can’t top 43% to qualify for a home loan. Can you afford the monthly mortgage and its components? Generally, a mortgage includes loan principal and interest (both amortized over the life of the loan) plus homeowner’s insurance and property taxes (prorated). These items can affect the monthly loan-only payment by several hundred dollars. Are you emotionally ready? Can you handle the stress? A big factor to consider when buying a home is stress. The Holmes and Rahe Stress Scale, a landmark stress study, ranks many events that go along with buying a home in the top 43 most stressful circumstances in life. Four events are specifically home-related: change in financial state (No. 16), large mortgage or loan (No. 20), change in living conditions (No. 28), and change in residence (No. 32). If someone has recently made other life changes, such as marriage (No. 7), switching careers (No. 18), or having a child (No. 14), it might be wise to postpone buying a home. Stress overload can lead to missed payments, which can result in

destroyed credit or even losing the home. It’s better to rent if your life is in flux and then buy when your stress levels are lower. Are you ready for commitment? Are you ready to make lots of decisions, from picking a real estate agent to picking paint colors? Are you confident enough to choose a neighborhood where you believe home values will continue to appreciate and that will serve your needs (i.e., proximity to schools, shopping, recreation, etc.)? Are you ready for devoting the time and attention to maintaining a home (i.e., leaf-raking, grass-cutting, appliance maintenance and repair, etc.)? Taking care of your biggest investment can be gratifying, but only if you’re ready.

ADVANTAGES OF BUYING YOUR HOME

Control over housing expense. By selecting a fixed-rate 15-, 20-, 25-, or 30-year mortgage, the homeowner has assurance that housing costs won’t increase over the period, and, in fact, will be eliminated at the end of the term (subject to refinancing). You build equity. Some of each monthly mortgage payment goes toward the loan’s interest. Other portions may go to homeowner’s insurance and county taxes. The remainder pays down the loan principal. Every dollar put toward your loan’s principal represents a dollar of equity — actual ownership of the property. Further, the property should appreciate in value each year, further adding to equity (what the house could be sold for versus what is owed on it). Discounting certain blip periods, such as the 2006 housing bubble burst, home prices in the U.S. appreciate nationally at an average annual rate between 3% and 5%. Remember, though, home value appreciation in different metro areas can appreciate at markedly different rates than the national average. Improvements increase your home’s value. A homeowner can also increase a home’s value through home improvements, thus

both making your home more comfortable and enjoyable while growing its loan-to-value (LTV) ratio. For instance, adding a bathroom or finishing a basement substantially increases the property’s functionality and appeal, while potentially boosting its value. Tax advantages of home ownership. There are significant tax benefits associated with buying a house, both at the time of purchase and for the duration of time you own the home: • Homestead exemption. Many states exempt owner- occupied homes (homesteads) from a portion of the property tax amount that would normally accrue. For instance, Louisiana exempts the first $75,000 of a home’s value from property tax assessments, so a $200,000 home in New Orleans is taxed as if it were worth $125,000. • Federal tax deductions. When you’re looking to purchase a home, it’s important to understand what can be deducted on your tax return and what can’t. Property taxes and interest paid on your mortgage can be deducted if you itemize your federal income taxes, which can reduce your income tax burden. Many home buyers, unfortunately, overlook the effect of mortgage interest on their federal income tax payments. Mortgage interest can be a powerful financial planning tool. Calculate the amount of mortgage interest deductions you are eligible for, and include that in your annual financial planning. Then, make a point of checking Internal Revenue Service (IRS) Form 1098, which you’ll receive from your lender at the end of the year. This form shows the amount of mortgage interest that you’ve paid. The Tax Cuts and Jobs Act (TCJA) applies from 2018 to 2025 and limits the

aggregate deduction for state and local real estate property taxes; state and local personal property taxes; state, and local, and foreign income, war profits, and excess profits taxes; and general sales taxes (if elected) for any tax year, up to $10,000 ($5,000 for marrieds filing separately). This limit does not apply if those taxes are paid or accrued in carrying on a trade or business, or in an activity engaged in for the production of income. In other words, if you are just living in your home, you can only claim up to $10,000 in tax deductions on your property, but if you are earning income directly from your home in some way, the limit might be waived. Current mortgage rates are relatively low. Interest rates vary through the years. Several years ago, interest rates were higher, and it was more expensive to obtain a mortgage. Since these costs have been reduced, it’s now easier and less expensive to own a house. Ownership rights and creative freedom. Your decorating and home-improvement choices are just that — yours, provided they don’t break building codes or violate homeowners’ association rules. You can paint walls any which way, add fixtures, update or finish your basement, or build a patio or deck. Changing your environment to suit whims is a freeing aspect of homeownership. A sense of belonging to the community. Homeowners tend to stay in homes for longer than renters and are more likely to grow roots. They might join a neighborhood association, volunteer at a nearby community center, join a school group, or align with a business improvement district. Renters might not do any of those things, particularly if they know their lease is up in a year and they might move. There’s an intangible pleasant feeling attached to owning your own house — a sense of freedom and

independence. The home you live in belongs to you, and you can do what you want with it. You aren’t daunted about increases in rent or losing the lease. You’re free to make improvements and changes. Also, owning your home gives your children the guarantee of attending the schools in the area on a more permanent basis; you never need to worry about a notice from the landlord to vacate your rented house or apartment for a variety of reasons over which you have no control.

ADVANTAGES OF RENTING

It seems a shorter list, but one man’s pro is another man’s con, and there certainly are advantages to renting to factor into your buy- or-rent decision. No responsibility for maintenance. Admittedly, this is a big one. As a renter, you’re not responsible for home maintenance or repair costs. If a toilet backs up, a pipe bursts, or an appliance stops working, you don’t have to call an expensive repair person — you just call your landlord or superintendent. Renters in condos, townhouses, or apartments don’t have lawn and grounds care obligations. Relocating is easier. When renting, relocating for work is easier. Though a sudden move may require you to break your lease, you can partially offset the cost by subletting your apartment or talking with your landlord. On the other hand, selling a home takes time and effort. If you have a short timeline to sell your home, you may be forced to accept a lower price and lose some of your investment. No real estate market exposure. Home values fluctuate and can decline over time. If you’re a renter, that’s not your problem. If you’re an owner trying to sell — it is.

DISADVANTAGES OF OWNING

Maintenance. The renter’s largest advantage might just be the homeowner’s major disadvantage. While insurance might be available to protect against expense from major catastrophe, usual maintenance items are on the homeowners’ dime. Maintenance and repair can be as simple as repainting the baseboards and can also be as extensive and expensive as replacing a HVAC system or sewer pipe. The expense will vary from year-to-year; however, you can expect to pay about 1% of the value of your home annually toward these expenses. If you live in a $200,000 home for 10 years, that’s $20,000 over the period, and perhaps more if you must replace a costly, long- lived mechanical item, such as a furnace. Keep in mind the usual homeowner’s chores of lawn care, snow removal, gutter cleaning, and other regular home maintenance needs. Upfront and closing costs. Buying a home entails numerous upfront costs. Some are paid out-of-pocket after the seller accepts your purchase offer, while others are paid at closing. These include earnest money, down payment (typically ranging from 3.5% for FHA [Federal Housing Administration] loans to more than 20% of the purchase price), home appraisal, home inspection, property taxes, and first year’s homeowner’s insurance. Loss of relocation flexibility. It’s much easier to break a lease and move out of town than to arrange for the sale of a residence. Selling the home from out of town involves special logistics and financial matters, such dealing with the mortgage while the home is on the market. Financial loss potential. Homeownership builds equity over time; however, equity doesn’t equate to profit. If home values in your area go down or remain stagnant during your time as a homeowner, the appraised value of your home could decrease, putting you at risk of a financial loss when you sell.

DISADVANTAGES OF RENTING

No equity building. The monthly rent you pay goes to the landlord. It represents the fee you pay for using the property. You gain no ownership in the property, no matter how long you live there. No tax benefits. While homeowners can deduct property taxes and mortgage interest on their tax returns, renters aren’t eligible for housing-related federal tax credits or deductions. Home improvements go to the landlord. Any structural and decorative home improvements that renters make belong to the building owner and will have to stay behind when you move to a different place. Additionally, approval for desired major redecoration will be necessary. After all is said and done, the decision to buy or rent depends on the prospective home buyer’s circumstances. There’s no denying, though, that a home of your own is a good financial and a great emotional investment. An investment in a home can also mean an investment in your future. There is much to consider when you want to buy a home. Switching from renting to homeownership is highly challenging, but an exciting and amazing decision to make.

CHAPTER 2 Buyers' Needs and Desires

After you’ve decided to buy a home, what sort of home it will be is your next decision point. It’s a better approach to have a concrete vision in mind of what type, features, and amenities you want in your home, rather than a “shotgun look” at every listing that’s out there in your price range. Imagine your dream house. It fulfills both your needs and desires. It fits the need for a good roof over your head, a sturdy structure, modern fixtures and appliances, living space (i.e., bedrooms, living room), and functional rooms (i.e., kitchen, bathroom[s]). Your needs fulfilled, you turn to your desires. Perhaps you envision a home on the beach or in the woods, a gourmet kitchen, a wood-paneled den, a crystal chandelier over a banquet table in the manor-sized dining room or an Olympic-sized swimming pool with a hot tub and sauna. Your priority in any home purchase should be ensuring all of your needs are met. Sometimes, you won’t find everything you desire in a home and if you do, you may not be able to afford it. It’s important to prioritize the things you want in a home by how important they are in your search.

Decide your needs vs your desires.

• Would you like a swimming pool? Enough that a home without one will not be looked at? • In what areas or neighborhoods might the home be located? Where do you want to live? Where might you have to live for work commute or home price reasons? 11

• What features would make it special? • What can you afford and what is out of your budget?

Budget usually constrains us most in selecting a home. While some things are necessary for any home (as mentioned, a good roof and working appliances), others will just stay on the list of desires for now (like the sauna).

MAKE A LIST; CHECK IT T ; CHECK IT TWICE

You may have an impression of what you want in your new home. Putting that to paper and having a complete checklist can prove useful. Before starting your hunt for a new home, it’s advisable to make a list of all your basic needs and desires, then prioritize the desires, figuring that all needs must be met in any house under consideration. This will make the search easier and help weed out the ones that don’t meet the basics. Realize, however, that it’s nearly impossible to find a home that meets all requirements. Compromises will be necessary. It’s a good idea to work from outside-the-house factors to inside- the-house. For example, location is perhaps the primary concern and both “needs” factors and “desires” factors might be involved. A “need” would be “must be within 25 miles of work.” A desire might be, “would like Westwood” (a favored neighborhood), while a need might be “on the west side of the city” (because work, family, friends, and recreation activities are all located there). Location needs may include proximity to schools, frequently used recreation facilities, or mode of transportation (bus or suburban rail access). Whether an item is a need or a desire depends on circumstance.

Closeness to family might be a need for a couple with young children or elderly parents to care for — or a desire if those factors aren’t involved. It’s items like these that make a checklist most helpful. After location needs and desires are compiled, housing factors can be considered. Needs include having all essential house structures and systems in good working order. Accepting a house with need for a new roof because the owner is willing to knock $7,000 off the listing price — but it will cost $10,000 to replace the roof in two years — is not a sensible deal. Needs might include a minimum number of bedrooms and bathrooms, no steps, fenced yard, perhaps a first-floor laundry facility, and any feature the prospective buyers have decided they cannot accept a home without. Desires are features that make the home more attractive or enjoyable — an upgraded kitchen, walk- in closets, a master bedroom suite. Of course, one buyer’s need is another buyer’s desire. The point is to know your own needs and desires so you can easily assess potential properties and make the process smoother. Regardless, buying a house is not a simple process. Much of the planning should be done well before contacting a real estate agent or looking at homes. Work the costs as well as your budget. Choose a general location. Contact lenders well ahead of home shopping, so that your offers aren’t tied up in getting financial approval. Having the image of your dream home is reality married with imagination. In fact, you may find that some aspects of the house you intend to buy are different. It’s not the same as what your dreams told you. Different people have different requirements. It depends on your thought processes, as well as personality.

We understand important things and potential compromises

differently. Needs are basic requirements that just can’t be ignored or compromised. Desires, on the other hand, can be left behind if the situation demands it. You need to make a clear distinction between what your needs are and which items you would classify as desires. No matter how many desires you have unfulfilled now, they can be worked on later. A pool can be added and paint colors can always be changed.

A NOTE ABOUT PETS

Consider your pets in your home shopping. Home buyers who are pet owners have specific requirements — they must provide for their pets. A third of millennial-aged Americans (ages 18 to 36) who purchased their first home (33%) say the desire to have a better space or yard for a dog influenced their decision to purchase the home, according to a survey conducted online by Harris Poll, on behalf of SunTrust Mortgage. Dogs ranked among the top three motivators for first-time home purchasers and were cited by more millennials than marriage/upcoming marriage, 25%, or the birth/expected birth of a child, 19%. It’s essential that the neighborhood in which you’re going to buy a house has no restrictions on pets — or livestock, if that’s something you desire. Do you raise American Staffordshire Terriers, also known as pit bulls? There are neighborhoods that ban this breed. What about goats? Vietnamese pigs? Have you always wanted fresh eggs from your own chickens? Include your animals in location planning. Some pet owners choose wood or other hard flooring, not wanting to risk pet damage or odors. An appropriate-sized fenced backyard is on the “needs” list for many pet-owning house buyers. Consider the arrangement of

rooms and the structure of the house to ensure it’s suitable for your pets, too. Traffic in the area could be another checklist item. Pet services, such as veterinary, grooming, and exercising, should be conveniently nearby.

LOCATION, LOCATION, LOCATION!

You must make sure to limit your search to a neighborhood that offers the closest possible match to the kind of lifestyle that you like and want to live. Trulia recently conducted a survey with Harris Interactive, and the real estate site found 84% of Americans said the neighborhood would be equally important to — or more important than — the house itself, if they were searching for a new home. Location is so important that people are willing to give up “must- have” features to buy into their desired neighborhood — 72% would forget about a pool, 55% would lose a finished basement, and 33% would accept less square footage. What matters is living in a safe place with good schools. According to Trulia, 69% would drive through the neighborhood during different times of day to determine if the neighborhood was the right fit. You can’t go shopping for a home without choosing a location where you’d like to live. Probably the most significant decision when buying a home is where it is. Location influences your everyday life. Your property does not exist in a bubble; it’s part of a bigger community. It’s important to find a neighborhood or area that suits your needs. Do you want the peace of a secluded woods, or the energy of a bustling city center?

Do research before starting your search. Drive through the area and see if all the stores, activities, and features you want are there. Eat at local restaurants and walk through a nearby park. As price is mainly based on location and condition of the property, when someone starts looking for their house, it’s important to consider the location and how far it is from schools, shopping areas, and other facilities. Home means comfort, and comfort can’t come if the location isn’t suitable.

CHAPTER 3 Real Estate Horror Stories To Learn From

You’ve seen frightening stories like this on TV. Perhaps you’ve heard about them from neighbors or co-workers, but you still haven’t witnessed anything like them yourself. Be warned. The first time is one time too many. Now that you’re in the market for your first home, or maybe a second or third, congratulations! Buying a new home is one of the biggest achievements for many people. Unfortunately, home buyers — especially first-time buyers — can be the victims of real estate horror stories. Absolute horror, from the buyer’s perspective. Here are a few examples. Alex was excited about making her first home purchase in 2016. Being in the Washington, D.C., area, she was limited with pricing options, with many of the lower-cost homes around $250,000. She went to several banks and got preapproved for different amounts at various lower interest rates. She found her dream condo, and, after some deliberating, she decided to go with the lowest rate of 4% offered by her lender. She completed her paperwork and submitted it with her 10% deposit. The rate wasn’t her only deciding factor. Personnel had been friendly and great at communication, making her feel very comfortable about the process. Until now. Suddenly, it seemed as though all of the bank corporation dropped off the map. A closing process that should 17

have taken 30 days or less turned into several months of waiting and a larger deposit of an additional $20,000. They ran her in circles, until the seller told her, through the real estate agent, that the deal was over if she didn’t find another solution. Luckily, the seller’s real estate agent referred her to another lender and was able to help her to obtain another loan (although at higher interest) much more quickly. It turned out the first lender was a scammer. In another case, Ron and Jenna were planning on upgrading to a new home. After a long search, they found it — or so they thought. A bright and colorful kitchen, open living and dining areas, three bathrooms, high ceilings, a fireplace, and even a covered porch made the home seem perfect. They were especially thrilled that the price was only $235,000. That was a steal. They signed the contract and were in the house a little more than a month later. Less than six months later, the horror story began to unfold. Jenna was cleaning one of the bathrooms when she noticed tiny little ants with wings. Following Ron’s advice, she called the exterminator. When he arrived, he delivered the first blow — these winged ants were termites. The exterminator went under the house to assess the damage. He found that not only was the floor under the bathroom completely infested, but also the other two bathrooms, and the infestation was spreading to more of the house. The grand total to repair this problem came to over $12,000! That’s an unbelievable amount of money to unexpectedly invest in a house you’ve only lived in for less than six months.

The key lesson here is to really know the house that you’re buying.

You should always hire an exterminator on your own to investigate the house, particularly for termites. If you’re going to make such a huge investment in a new home, the small price of precaution is worth it. The stories continue endlessly. I recently met a lady at a café with an incredible first-time buyer story. I happened to overhear her conversation, so I decided to step in and ask about it. Sue and her fiancé were searching for their first home with the intention of buying one before their wedding. They had been told about a great real estate agent in the city where they wanted to call home, and so they looked him up to ask his help in finding the right home. The problem was that the only praise they heard about him was from clients who had hired him to sell homes, not from home buyers. The agent met up with Sue and her fiancé to go over different homes he had on his list, and then it was time to take a trip around town to see them. There was one home that he talked profusely about, and so they went in person to take a look. Sue and her fiancé knew what good quality was, and so they were able to see right away that there were problems. The basement doorway was weak. The upstairs bathroom floor bounced, and the light switches in the hallway seemed to pop and flicker. Although very nicely painted, this house didn’t fool them. When confronted with these concerns, the agent replied that they could always fix those problems later. Although their gut told them not to move forward with making a purchase, they agreed to a $10,000 price reduction and took the house.

Big mistake! The problems they had noticed went much deeper. The weak basement doorway translated into unfortified walls leading downstairs. The bouncy bathroom floor had been wet under the linoleum and about three inches up two of the walls. The flickering light switches were warning them of the outdated wiring which had to be replaced. In the end, their $10,000 savings only helped to give them a bit of consolation when they paid $27,000 for all of the remodeling! The five-bedroom house sat on pastoral acreage in the American countryside. At less than $180,000, it seemed a steal. But it wasn’t a bargain. Ben and Amber soon realized the dream home they had purchased for their growing family was infested with hundreds of garter snakes. Throngs of reptiles crawled beneath the outer walls. At night, the young couple said they would lie awake and listen to slithering inside the walls. It was like living in a horror movie. The home was most likely built on a winter snake den, or hibernaculum, where the reptiles gather in large numbers to hibernate. In the spring and summer, the snakes fan out across southeast Idaho, but as the days get shorter and cooler, they return to the den. At the height of the infestation, the home buyer said he killed 42 snakes in one day before he decided he couldn’t do it anymore. He waged war against the snakes and “they won.” Buyers had little recourse when they decided to flee the home. They had signed a document, noting the snake infestation. They said they had been assured by their agent that the snakes were

just a story “invented” by the previous owners to leave their mortgage behind. The buyers filed for bankruptcy and the house was repossessed. They left the home the day after their daughter was born, just three months after moving in. The house briefly went back on the market. Now owned by the bank, it was listed at $114,900 a year later. The property has since been taken off the market, while the bank decides what to do with it. The moral of the story is to have a good inspection. These buyers were attracted by a price. They didn’t have a proper inspection of the home before purchasing. It seems the real issue was the agent who cared more about selling the home than his clients.

HOME-BUYER PLAGUES

Although a home inspector passed on Justin’s and Kate’s home, he missed some problems. For instance, the previous homeowner supposedly installed and tested the sump pump in the basement, and it failed shortly after moving in, flooding the basement. Then, the sunroom was filled with termites, costing the couple $2,000 in repairs. After the termites were eradicated, they discovered the sunroom was entirely covered in mold, and there was no caulking around the windows to keep the moisture out. A better home inspector would have been able to see the signs of termites and mold. The sump pump should have also been checked by the inspector, but it could have failed after the inspection. Sump pumps can burn out, lose power, become clogged or misaligned, or malfunction in a variety of other ways. It’s valuable

to have a warning device installed that will signal water buildup. These alarms can alert homeowners or neighbors of flooding, so that it can be resolved before water damage occurs. Be careful. Be smart. These horror stories are real and happen every day. Do your homework before signing paperwork or jumping into a new home. Too many people spend more time shopping for a car than they do on a home — a much larger and more permanent investment. You have time to educate yourself, and I hope that this has helped you move forward in the right direction.

CHAPTER 4 Searching for the Rig or the Right Home ht Home

Buying a home is an exciting event, but the process of finding the right one can be daunting. It’s a major investment. It’s an emotional time of making lifestyle decisions. It isn’t like buying a pair of shoes from the department store that are a bit snug, because you can’t just return the house if you’re not satisfied. Once you buy, you’re in for the long haul. To avoid costly mistakes that could haunt you for years, you need to make sure you do your homework properly when house hunting.

VIEWING A HOME

For most people, the prospect of going to view homes they like is a thrilling experience. It’s tempting to think that this is the first step to buying a home, but it’s not. Assuming you have your down payment, mortgage preapproval, and other financial issues handled, the first thing you need to do before viewing any home is to determine what you’re looking for. • What is your criteria? • Do you need a certain number of bedrooms and bathrooms? • Do you want a yard? Is a separate garden area necessary to your lifestyle? • Do you want property only in particular neighborhoods? • How much are you willing or able to spend?

Answering these questions will save you significant time and effort in running around to view homes that don’t suit you. Once you’ve decided upon your criteria, call your real estate agent. Let them know what you’re looking for and what your price range is. They will get to work on your behalf, shortlisting the properties that meet your criteria so you can start your viewing from there. Then comes the fun part: Finding that perfect home you’ve been dreaming of!

SCHEDULE ADEQUATE TIME

When going to view homes, make sure you’ve got plenty of time to really view the home from a critical perspective. Schedule enough time to do a proper inspection. Look into all closets and crawl spaces. It’s possible you will be living there for years to come, so five minutes strolling around is not going to be adequate to form an opinion. Two hours to view your potential house is an appropriate calendar entry. Research suggests that when buyers spend a longer time viewing a home, they are more likely to pay below the asking price.

BE THOROUGH

Related to scheduling adequate time to view the home, be thorough when checking it out. Open drawers, cabinets, and cupboards. Look behind furniture, and even under it to find stains or signs of wear not readily evident. Lift up rugs, if necessary. While this may seem rude, it’s not. You’re about to make a substantial investment and you need to know exactly what you’re getting.

An artfully positioned chair could be hiding something, so feel

free to look where you need to.

Of course, if you’ve dismissed the home from the start, do only a minimal walkthrough or don’t bother with the inspection at all. But if the property has potential and is something you like, open every door and look in closets.

WHAT COMES WITH THE P MES WITH THE PROPERTY

Confirm what comes with home — e.g., whether the stands or fixtures are for the exclusive use of that home or if the owners will remove them. Are appliances, such as refrigerator and washer/ dryer, included in the sale? Make sure to get confirmation in writing if you decide that you would like to buy the property.

DON'T BE FOOLED BY S LED BY STAGING

Sellers use clever tricks to make a home more appealing. They can strategically light a room to draw attention from a problem or apply fresh coats of paint to cover water damage or mold issues. While you’re viewing the house, look beyond the immediate aesthetics of the interior décor. Focus your attention on what you’ll get when the furniture and interior décor are stripped away.

KEEP EMOTIONS AT BAY

When viewing a home initially, try not to get attached immediately. Keep emotions out of considerations and only consider the potential property as a building you need to inspect and assess for others. Rapid emotional attachment may cloud your decision-making, or allow you to overlook failings in the house you might see differently without an emotional lens. If you get attached from the get-go, you might make an emotional decision and overlook major problems. Certainly, an emotional attachment will affect your ability to calmly and dispassionately

negotiate.

VIEW MULTIPLE TIMES LE TIMES

If you have found a likely prospect that strongly interests you, view it multiple times. You’re more likely to identify potential problems if you view it several times at different times of the day. You’ll also glean knowledge of the neighborhood at various times. Is a street that’s not busy in the late morning a commuter route in early morning and mid-afternoon? This way, you’ll know what traffic is like in the area and the noise levels that occur at different times.

CONSIDER THE OVERALL CONTEXT

When viewing, don’t just consider a property on its own; view it in the context of its location. What’s the area like? Is the property adjacent to a train track or noisy intersection? Is there a pub or restaurant close by that gets noisy at night? How close are you to the things you might need, such as schools, public transit, a grocery store, or hospital? These are important questions to consider when viewing properties, as they can add or subtract from the overall enjoyment of your home.

LET YOUR AGENT DO THE J O THE JOB

Don’t go viewing on your own. There’s a security factor in traveling to unoccupied houses alone. Additionally, there are other ways this makes you vulnerable. A seller’s agent might think you’re unrepresented and attempt to take advantage of you. Let your Realtor® do the job. If you come across a property that interests you, but your agent hasn’t told you about it, it might not meet all your criteria. If you think you want to view it, give your agent the address and phone number. Your agent can then arrange a proper viewing for you, together, without the owner

being present.

THE CONDITION OF THE PROPERTY

In assessing a home for potential purchase, there are important items to be on the lookout for — the primary one being the condition of the property. Is the home structurally sound? Walk around the interior of the home, checking the walls and ceilings for cracks. Hairline cracks are to be expected in some places. Check the exterior for cracks. Cracks could be a sign that the property isn’t structurally sound. Points at which extensions join are places to look, as cracks often occur there. Also look for loose or broken tiles on the roof or broken guttering, evidence of damage to the drywall and weaknesses on the floors. It’s acceptable to ask how long it’s been like that, and whether it will be fixed. If you see major cracks or bowing walls, have a structural engineer assess the situation. Look (and smell) closely for evidence of mold. Mold and mold damage are major problems that will cost you a lot to clean and repair. Don’t just look for it — use your nose as well. Mold frequently gives off a musty smell, even when there are no visible signs. Inspect all crawl spaces, basements area, and walls. Plaster that’s flaking, watermarks on walls or ceilings, or even a fresh coat of paint in part of a room could be indications of mold. Don’t overlook the ceiling and around the skirting boards properly for evidence of leaks or water damage. Ensure heating, air-conditioning, and electric is in good working order. Other aspects to consider when looking at the general condition of the property are the heating and air conditioning systems. Have an expert assess that they’re the appropriate models and capacity, and that they’re working properly. Check the electrical panel. It shouldn’t be old or outdated, must be easily accessible, and in good working condition. Ensure wiring was

done properly. You don’t want to spend a fortune rewiring the home to bring it up to standard. Consider if there are enough power outlets and if they are in good condition. Inspect basements and attics. Check the attic for water leakage issues. Look for water damage or leaks that may have affected the insulation, walls, and ceiling of the attic. Make sure the insulation is adequate for where the property is located. In the basement, look for evidence of moisture problems. Is there water leaking onto the floor or water around the foundation? There should be no cracks in the basement walls, and any wood, such as those in exposed beams, should be in good condition with no rot. Look at pipes and turn on taps. Check that the plumbing is up- to-date. Run taps to ensure they work properly and the water pressure is strong enough. Exposed pipes in unheated areas should be insulated, as frozen pipes will eventually cause water damage. It’s particularly important from a health perspective to determine that the pipes aren’t made of lead. If they are, you’ll have to replace them. Also, check the age and condition of the hot water heater. Is the exterior of the home in good shape and well-maintained? Check for evidence of water around the foundation, which may indicate drainage issues. The ground should slope away from the foundation. If there’s a porch, it should have a foundation, not simply sit on soil. Check that driveways and walkways leading up to the house don’t have cracks and aren’t crumbling. Check that the siding of the home is in good repair. Look at the landscaping on the property. It shouldn’t be unkempt and unsightly, as that can indicate a lack of care. The sprinkler system, if there is one, should be in proper working condition. If there’s a deck, ensure there is no decay or damage from termites or beetles.

PROPERTY HISTORY

It’s a good practice to know all that you can about the sales history of the property you have under consideration. Don’t simply settle for the information contained in the customer copy of listings. Ask your agent for more detailed information. Find answers to how long the property has been on the market and whether it was previously listed, withdrawn, and/or relisted for a lower price. These kinds of questions can help you decide how much to offer. You’ll also need detailed information on the property, most of which will be available from the public records. A bit of research online will disclose the name of the owner, original age of the home, mortgage history, parcel number, previous sales of the property, property deeds, and any judgments or liens filed against the seller. Information about how much the property taxes are, and whether they’re paid or in arrears, will also be available in the records. You’ll also be able to see if there were permits obtained to make improvements on the home. These permits could complicate the sale of the property if liens were attached by workmen or improvements were not done up to code. Don’t skip this search because it reveals important information about the property in which you’re interested and could save you money. You can get this information through your agent, since most agents subscribe to services that give them access to such data. If you’re not using an agent, you can obtain this information through a local title company or order online for a small fee.

MAKING THE CHOICE

Once you’ve done all your homework, you need to decide whether to buy the house. It’s important that you step back and evaluate all the information available to you from viewing the house, inspecting its condition, and obtaining public records.

Keep in mind:

• You will likely need to compromise on some of your priorities. No home is completely perfect, and a first home is often a “starter” on the way to a dream home. However well it fits your needs, desires, and lifestyle, there will be things you wish you could change. Examples might include wishing the home was facing the lovely park you saw nearby or in another, fancier neighborhood. At the end of the day, you’ll need to decide the factors that are most important to you. If you prefer the neighborhood over the house, you may decide to look for a different type of property within the same community. A condo, for instance, instead of a townhouse. • If finances are the issue, you might want to discuss with your bank whether they would be willing to increase your mortgage. But use caution, and only do this if you can afford it — there’s no point in getting into financial trouble just to get a specific property, when more affordable ones could do just as well. • Lower your expectations on the condition of the home. If your inspection revealed a few small problems, you could still buy the property and do the repairs yourself. Use the problems as a bargaining chip to get a reduced price from the seller after getting a quote from a professional for the cost of repairs. Don’t estimate based on your judgment, and don’t let the seller decide how much he thinks it will cost. Ask a professional yourself. Also, don’t let the seller get the quote. • Be prepared to walk away. This echoes to our earlier point

about not getting emotionally attached until you have bought and moved in. If, at the end of the day, you find out the compromise required is more than one you’re prepared to make, just walk away.

CHAPTER 5 Buying a House: Negotiation Dos and Don'ts

You visited dozens of open houses and met with builders and sellers. You looked for the ideal neighborhood and searched for the best available offers. Now, you’ve finally found a property you would like to call “home” and are willing and able to pay for. Or, maybe you were lucky, and it was love at first sight, and you’re eager to close the deal as soon as possible. Congratulations! Welcome to the most important and challenging part of the home-buying process: the price negotiations. Start with knowledge of your financial status estimation and available options of financing. If you’re a first-time home buyer, there will be federal programs and state loans to help you with the down payment and mortgage interest rates. You likely know how much money you wish to spend. Considering all the opportunities and possibilities will give you flexibility during the negotiation process.

HOW TO MAKE YOUR FIRST OFFER THE BEST OFFER

Making your first offer is an important step that needs a significant amount of preparation and analysis. Go in knowledgeable, with consideration of all the components of your price offer, when submitting the proposal to the seller. You are not so much responding to their listing price as using your own factors in arriving at your offer. The two aren’t necessarily related.

An important component is a Comparative Market Analysis (CMA), which your real estate agent can provide — another benefit of working with a buyer’s agent — and is a mathematical model to find out the value of your future home. It calculates the basic conditions, such as number of bedrooms, bathrooms, existence/size of the yard, or swimming pool. Then, it compares your potential home to similar houses on the market in your area. This model will give you an idea of the average local cost, which will be fundamental information to inform your offer. After the approximation, add or remove the components that respectively increase or decrease the value. For example, you could know that the current owners have recently changed all the plumbing in the house. Or, conversely, that their plumbing is 25 years old and will probably start breaking down soon. Get estimates for any necessary immediate repairs, or ask for estimates. Research the market trends. Has the local market gone up or down over the last few years? Do people buy or sell more? Are there houses being built that will soon be for sale? For example, teardowns and new construction would indicate rising local home prices. Those calculations and forecasts may take time and effort, but they will ideally leave you with options to consider and choose from. The real estate agent’s services will be very helpful. It won’t take a professional as much time to evaluate all the pros and cons and come to you with a proposal. Your real estate agent will assist in this process and usually help to decide. The agent may advise on offering price and factors involved. After you agree on a price, the agent will send the proposal to the seller or seller’s agent. The seller’s agent will either accept it,

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