Going Solo ~Buying a house is a complex transaction. It should be a team effort. You’ll need a real estate agent, lender, inspector, insurer, perhaps a lawyer and other team members to help you through each step of the way. Team build before you start the search.
Love at First Sight ~If you believe in fairy tales you probably shouldn’t be buying a home. You won’t live happily ever after if you emote your way through the home buying process. Your home should fit your real needs, not your yen for drama. Buy a home that fits your budget and your lifestyle. Be sure the home is in a community and neighborhood you desire. Visit neighborhoods several times before you buy to check out schools, noise and traffic patterns.
‘Loanless’ Shopping ~Being pre-qualified gives you a general idea of how much you can afford to borrow. It’s better to be pre-approved for a given loan. Sellers will take you more seriously. You’ll stay on budget.
Overbuying Home buyers buying more than they could truly afford, in part, led to the collapse of the housing market. Buy more than you can afford and your dream home will become the same nightmare. Analyze all your monthly costs including debts, food, transportation, entertainment, and savings. Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. Don’t forget to budget closing costs (often two to five percent of the home’s purchase price), plus moving, redecorating and maintenance. Look ahead and allow for increases in ongoing expenses such as utilities and taxes.
Misplaced Trust ~You are engaged in what’s likely your most valuable acquisition ever. It’s a business transaction. Ask family, friends, co-workers, professionals and others you trust for referrals, but don’t take their word for it. Vet your team members.
Accepting Oral Agreements ~Get it in writing. The rate lock, the home inspection, disclosures, the contract. Always. Should a dispute arise, you’ve got the details documented.
Skipping the Fine Print ~Understand what’s really in any document before picking up a pen. Get documents in advance, take time to read them and ask questions. Get copies of your mortgage and closing papers a few days ahead of closing.
Forgetting or Betting on Resale ~Avoid buying a home that costs 50 percent more than neighboring homes. Reconsider buying the most expensive home on the block. Neighbors’ lower home values will weaken yours. Buy intending to flip your investment only to have the market fail means when it’s time to sell your price may not cover your costs.
Making an Unconditional Offer, protect yourself with these contingencies:
- Mortgage financing. You may be preapproved but is the house? A formal appraisal confirms — or not — that there is sufficient value in the home to warrant the loan. If the house appraises lower than the sales price, the loan may be declined.
- Inspection. Never buy an existing or new home without a thorough home inspection. Walk through the home with the inspector to learn more about the house and any concerns he or she may have.
- Insurance. Confirm you can get adequate insurance coverage. In some areas, or following certain disasters, it can be difficult to get types of hazard insurance.
And thank you for making me Your Orange County Real Estate Connection
Michael Caruso, Broker ABR ABRM CRB CRS GREEN GRI
2007 President, Orange County Association of Realtors (949) 753-7900