Buying a house relatively soon, lay your advice on me!
I'm in the market for a house, been looking pretty seriously for the past week or so. I've got two pre-approvals for mortgages, and I think I'll probably look for at least two more for fee comparison purposes. I have yet to actually see a house unfortunately, since every house we try to view gets sold that very same day :/ Hopefully the streak is broken, since we have an appointment with another house today!
Anyway, who here has advice for (any part of the process of) buying a house? Things to look for when viewing a house, things to consider that the common person might not, tips for making offers, tips for not giving up because of the market, etc.
I'll lead with some tidbits that I've gained from asking around friends and family that have already bought places recently.
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Apparently, sending a personal letter to the owners with the offer letter has gotten multiple people a house even when their offer wasn't the highest. For example, my sisters friend knew the owners had a cat, and has cats herself. So in the letter she wrote, she mentioned how happy her cats would be laying on the windows and running around in all the new space and such.... and she got it! The owners realtor was kinda pissed.
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Try to find out the reason the owners are moving out. My sister and her husbands realtor asked around, and they were able to close on their house because the owner needed a quick turnaround to get out as fast as possible. They got the house for 60K under asking price because they were able to sweeten the deal to suit the owner.
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Location is (generally) more important than furnishings. You can add or remove things from a house, but you can't move it once you buy it.
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Once you make an offer on a house and the owner accepts, make sure the contract includes the following two parts that are (apparently) very important:
- House must appraise for at least the same value you've agreed to buy it at
- Inspection must show no more than
$buyer_defined_valuedollars of necessary repairs, otherwise the deal should be re-negotiated or considered void.
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Always leave enough money in your savings account to pay for any extras (because there are always extras) after the house is yours. New furniture, carpets, smaller repairs, paint, etc. You don't want to drain your account for the house only to find out you can't do anything afterwards.
I'm very excited (and exhausted already), but I want to make sure I'm as thorough as possible since I'll be spending the next several years of my life in it!
Forgot to mention(Thanks @Thra11), this is the US East Coast.
First advice that comes to mind is : don't buy a house right now. If you can wait, I'd wait. The market is absolutely bonkers competitive right now in most parts of the US. It was moderately competitive when we bought our house 3 years ago, the rapid shifting economy of the pandemic has launched it into the stratosphere. If you can find a good deal by all means go for it, but this apparent trend of bidding 50k+ over the asking pricing as a starting point is insane.
Don't buy more house than you can afford. When my wife and I bought ours, we specifically looked at a price range that we knew we could afford even if one of us was unable to work for a long period of time.
Think about the things that you must have in a house, and write them down. Things like a certain number of bathrooms, a certain size kitchen, garage, finished basement, etc. Then write down the things that you do NOT want to deal with. Things that in theory can be fixed, but you don't want to invest the time and effort to deal with or resolve. Mold/moisture problems commonly top that list. Other things might include outdated furnace/AC (or a complete lack of AC), new windows, new flooring/carpet. It's one thing to say "I wish that carpet was a different color" than to have carpet that NEEDS to be replaced because it is so old/smelly.
So make those lists. Then carve them into stone. Be 100% prepared mentally to walk away from any house that hits one of the deal-breakers on those lists. It can be really hard, and it's really important to be honest with yourself and think about it ahead of time. You will absolutely try to rationalize yourself in the moment and say "well, I can make an exception on this one thing because I really want this house". Which is why it's important to do it ahead of time, when you can think through the problem, and anticipate just how much time, money, and effort are involved in some house projects. Also keep in mind that home improvement contractors are absolutely slammed right now, as everyone upgrades their quarantine nests. If it's even possible to get some renovations done you might end up paying a high price for it.
When we bought our first house together, we were pre-approved for a large loan. My husband was having none of that, and insisted we only look at houses that were on the market for a much lower price. It was incredibly frustrating because in the price range we were looking, in the location he wanted to be in for work, only a few houses a month came on the market. I was incredibly bitter at the time knowing we could afford so much more. Six months later we found an outdated but well maintained home in a nice little neighborhood where younger families were starting to move in as the elderly began selling their homes. Four years later my husband, who was sick of his job and burned out, decided to quit and do nothing for a year. Then the financial crisis happened. At the time I was leasing land to farm, and we were able to stay afloat on my meager profits because of my husbands foresight to live below our means. We were both able to do what we wanted (him nothing, me continuing to farm) without the financial pressure of having to maintain the cost of living that living at your means puts upon people.
Also, the stock market is currently doing quite well. It may make sense to take a larger mortgage and put some of the money you didn't spend on the house to work in other ways, like the market or other types of investments. I did that, and it has paid off very nicely (literally). But of course, be aware of the risks.
Curious about this, did you just rent an empty lot somewhere and do this? Was it a hobby, or was it something you planned to make money from the beginning? How large was the plot and what did you grow?
My wife has half-joked about doing this kind of thing from time to time (usually after binging some Netflix/YouTube documentaries on sustainable agriculture and/or the wonders of mycelium).
Small counter-view:
Mortgage rates are bonkers low as well. I traded homes and have a <3% interest rate fixed. At those rates it makes sense to get as much as you possibly can and pay the minimum.
Inflation alone will ease that burden in a few years.
And on a morbid note...maybe there will be a bailout ala 2008 when the market collapses when so many people are underwater from an overinflated market.
I had a bit of a special case though, I was able to unload a home with many expensive problems for way more than it was worth and move to a nicer home in a less competitive area.
Yea I thought a lot about that before buying my house and think I came to a similar decision. If there is a rapid correction to housing prices and no bailout, you're probably not going to be in a financial position to benefit from it even on the sidelines. Also, as long as more voters are homeowners the chances of a bailout in such a scenario is high so getting into the market is probably a good idea.
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Some were not and I can only think that they were and old program that was never updated. I found one city program and one state program that had income limits in the $30k range. No one is going to be able to afford a house, let alone actually get a bank to finance them on $30k a year. The city was one of the higher end sort as well, but that was a relatively recent development over the past couple of decades.
On top of a plumbing inspection...Wood-destroying insect testing is mandatory.
Don't buy a home that's having its framework being eaten.
Also get an electric outlet tester to check for wiring problems. It can get real expensive and messy to fix those.
Moisture sensors are also cheap and easy to use. Test tons of spots to check for hidden moisture problems.
Solid call outs. Something I didn't think about because I hired a good inspector that did all of that and was just par for the course when I bought my home.
Oh I did too, but I did the moisture/electrical test myself during a tour, before offers/inspection to save myself some money.
The housing grants totally slipped my mind, thank you for that one. I'll be looking into that tonight after I come back from our first open house.
Honestly, finding a house and then having to deal with something like your situation scares the everloving shit out of me. Looks like I'll be hiring a plumber and an inspector before signing a contract. Especially considering most "recently built houses" are out of my price range.
You are welcome!
Good. It should scare the shit out of you and make you want to avoid it as much as possible. I got lucky in that I was awake and I have all the tools to handle it immediately. I don't know your background or hobbies, but it's probably fair to say that most people don't have everything at the ready and knowledge to control it. A normal person in a normal house in my situation would probably be replacing a good amount of drywall, wood flooring, and carpeting.
A good inspector is a must, I can send you the company I used if you'd like, and will do the things that @vord mentioned, but also hire the plumber. The inspector will "check the plumbing" in that they'll make sure there's water coming out of the faucets, it's hot/cold as appropriate, and that it's draining, but they will not actually go through the pipes. Make sure the plumber you hire for the camera work gets on the roof to check the vent lines as well.
As for recently built houses, they can be, but aren't always, more energy efficient than older houses. Tends to depend on your area, around here older houses are made of brick, newer ones seem to be almost exclusively siding because it's cheaper. Personal preferences tend to show here, but I prefer older houses for the character. Newer houses and developments have a nasty habit of being cookie cutter, my older house is the only one of its style in the entire area, same with my neighbors and most of the houses in our neighborhood. The fact that older houses tend to be better priced is a plus in my opinion and typically need little more than new attic insulation blown in and/or double pane windows installed, neither of which are all that expensive and the attic insulation is something easily negotiated for in the contract.
As for the contract, remember the seller is not your friend. Nitpick and nickel-and-dime over every little thing. It's like buying a very expensive used car; every scratch, paint swirl, missed oil change, or worn tire is money to be negotiated for.
A three-figure inspection fee saved my husband and I from making a six-figure mistake on a house we had put an offer in on. Getting a good inspection of a house is ABSOLUTELY worth it!
What's scary about right now is that I've heard that the market is so ridiculous that if you don't waive the inspection on the house, your offer won't even be considered. That scares the living daylights out of me, and I hope that's not the case for you.
On that matter, one piece of advice I'd give is that you shouldn't be afraid to walk away from something if it's the right call. My husband and I had been househunting for a while, which is already a tedious and stressful process (as you well know). We finally found "the one" and fell in love. We put in an offer, had it accepted, then scheduled the inspection. We were so glad to be "done"! Unfortunately (though this ended up being very fortunate) during the inspection the inspector found two water lines in the crawlspace from previous flooding, one of which was mere inches from the floor of the house.
At the time, we were devastated at the prospect of losing "the one" and also we felt so far along in the process that it almost felt right to just proceed anyway. There was also a weird social pressure to just keep moving forward, because we didn't want to seem like we were wasting the sellers' and realtors' time, much less our own. The decision to withdraw our offer and "start over" was very difficult and felt like we were taking a huge step backwards, but it ended up being the absolute right call. Don't let temporary pressures or stresses force you into a thirty-year bad decision.
What's a flipper/flipped house?
Someone that buys a house, typically off-market (meaning the seller hasn't put it up for sale for the average Jane/Joe to come look at), does some "updates" and fixes to bring it in line with relatively current trends, and sells it for a profit.
This typically involves band-aids for anything that needs fixing, low cost upgrades like LED lighting to replace fluorescents, new countertops, cheap engineered wood flooring (aka veneer or a woodprint sticker over fiberboard core) that just loves to warp and buckle the first time you spill something on it, and painting all the walls the same characterless gray to try to look modern. Then sell it at high markup. The upgrades tend to be of low/lowest quality but look good, the "fixes" are just delaying the actual repairs until it's the new homeowners problem, and the buyer is paying a premium for some shoddy work to be done.
Flippers polish turds; while the result may be shiny, it's still shit.
There's good flippers and crappy ones.
Good flippers take a basically unlivable house and fix it up, selling at a tidy profit and recovering an otherwise lost house.
Bad flippers buy up decent but affordable housing then do some cosmetic improvements for a few thousand and relist for 80k more.
And the bad outnumber the good by probably 100:1.
0 disagreemment.
Decide right now how important it is whether or not you have to join a HOA. For some people, it's below their radar, for others it's a deal breaker.
Depends on the HOA, and really the community government at large as well.
An HOA can be immesely useful, like pooling resources for snow removal services. Or it can be a beuracratic nightmare where a busybody nitpicks everything about your home to keep valueation high.
Reading through the local government websites served me well too... you can tell a lot about a community based on the council minutes.
Unfortunately, HOAs are only as "good" as their current board, and getting out of them is intensely tricky.
You said Eastern US, so I'll share some of the things I learned along the way in Pennsylvania.
The market is absolutely insane right now. Despite that, do your best to be patient. In a normal market looking for a house can actually be pretty fun; that being said, try not to let your emotions make your decisions for you. If you're not under a time crunch, such as an expiring renters agreement, try to remind yourself to take your time. Buying your first home is a big deal!
While you're looking:
Consider your heating costs. Homes on the east coast could have any type of heating - gas, electric, oil, hell, there are places in PA where people still burn coal. Some options, like oil, can get really expensive and require delivery.
Ask about easements. Easements are agreements in the deed which grant certain rights to other parties and can prevent you from building fences, placing structures such as sheds and outbuildings, or cause headaches when a local utility needs to come and service or place new infrastructure.
Be wary of local taxes. Where I live, property and school tax rates range wildly, even in a very small geographical area.
Be wary of Home Owner's Associations. While a precious few HOAs exist to only provide basic services, such as snow removal in the winter, many are an absolute nightmare. On the other hand, if you're thinking of buying in a neighborhood without an HOA, also consider the ramifications of that.
Once you've got an offer in place:
If the seller has already vacated the property, treat anything left behind as a nuisance. If it's something you want, such as appliances, or a piece of furniture, great. Otherwise it's perfectly reasonable to ask that the items be removed before closing or negotiating the cost to remove them yourself.
Get a home inspection. A good realtor will have all sorts of provisions in place to allow you to gracefully exit an offer in certain situations, and getting a potential new home inspected is a good idea, even if the home is only a few years old. A home inspector will be able to tell you the quality of your roof, your HVAC systems, find evidence of water damage, basement issues, shoddy windows, etc. Should any problems arise it could allow you to have those problems dealt with before you buy, or exit the sale without losing a deposit. If you can, attend the home inspection and use that time to look around yourself, especially if you're buying sight unseen, like many people are right now.
If relevant, consider a termite inspection. Some lenders may require it, depending on the location. It might sound inconsequential, but termites can destroy decks, framing, or anything else delicious and woody.
Find out if the property is in a flood zone. Some sellers aren't going to be terribly forthcoming about whether a place is prone to flooding. Typical home owner's insurance doesn't consider flooding due to a storm the same thing as flooding due to a burst pipe, and flood insurance is expensive.
Discover who your utility providers are, especially if you're reliant on good internet service for work.
Once you've got an offer in place your access to the property will still be very limited, if you have any at all. You do, however, have access to the neighborhood. If you're not familiar with it, go exploring. Find our where you're going to be buying your groceries, where the gas stations are, and if the opportunity presents itself, talk to your potential neighbors - they're going to be just as curious as you who their new neighbor is going to be, and you can potentially learn a lot about them and your new home. Trust me, having a good relationship with your neighbors is priceless.
I think you are going to want to find out how hot the market is in your area.
Go look at a few open houses, if available. Ask the realtor what the market is like. Write down what the asking was, what the market estimate was, and the sellers realtors contact details, then later write down what they sold for and ask the realtor if the house sold without conditions such as inspections, all cash. Pay special attention to neighbors (owners or renters), schools (good or bad), and noises (airplanes, trains, automobiles.)
Also, you can see how well maintained the house was. It's no replacement for a property inspection, but will give you a sense in terms of valuation.
Start paying very close attention to the roof (modernized, and what condition is it in), the walls (any huge cracks), the outlets and circuit panel (are they grounded with gfci's outside, and has the breaker panel been modernized and expanded), and pop open the crawl space hatch if it exists and take a peek (I once looked at a very nice house with a very muddy crawl space.) Also look at the fence line to see how new it looks, and does it seem to follow the lot line.
Don't wait for things to get to the point of hiring a home inspector to take a hard look at things. If there are pull-down stairs to get into the attic, then pull them down and go into the attic. Look at the underside of the roof for water damage. Turn a pencil around and push the eraser end hard at the base of the door jamb for exterior doors, especially sliding or French doors. If there's a crawl space, you don't need to go army crawling around everywhere, but use a high-power flashlight and just look from the entrance at the foundation walls and rim joists - they should all be bone dry, with no water staining.
Google termite tunnels and learn what they look like. The bottom course of vinyl siding should (1) be WELL above the ground, (2) should NOT have J-channel on the bottom, and (3) should NOT pull away from the house easily. Go around the house and give a few sharp tugs to the bottom edge of the bottom course of siding. If there is a deck, look at the beams that support the deck. Do they sit on concrete or are they in the dirt? If they're in the dirt, pull the grass away and actually look at the post size at dirt level and compare it to the post about a foot above the dirt. Is it intact? Halfway gone? Less?
You see a house online, great. You see how many rooms it's got, whatever, doesn't really matter. When you go in person, don't go to look at stuff like, "oh the bedrooms all have closets," or, "Wow the kitchen is a little small." You should have a feel for all that stuff from the pictures. Go to the house to look for stuff they wouldn't show in the pictures.
Water damage is the number one thing that has screwed me, and it happens over and over again. Bottoms of windows and doors, bottom course of siding, rim joists and foundation walls in general but especially wherever the ground is sloping TOWARD the house.
Also, last thing - if there's a below-grade basement and the basement looks new, take a couple face plates off of outlets and look at the wires screwed into the outlets. They should be copper-colored or brown. If they're green then that outlet was under water at some point.
For your mortgage be aware of any stipulations it includes. These can be positives or negatives. Our original mortgage for our current house offered an additional 1/8% off the rate if we allowed direct withdrawal of our monthly mortgage payment from our bank account. I usually refuse anything that does direct withdrawal, but missing a mortgage payment is not something I wanted to contend with, so I agreed, and it shaved a few thousand off the overall cost of the loan over its lifetime. However, it also had an additional stipulation that we had to move in with in 30 days of closing. That put the pressure on to get some repairs done before we moved in. It was an annoyance, but a minor one.
Also, think about whether having a slightly higher mortgage would allow you to invest the additional dollars you would have used on a downpayment in another investment vehicle that outpaces both inflation and your mortgage interest rate. For us, we decided to put down less than we could have because we had some stock investments that were doing very well. They have continued to do very well, and as mentioned, we refinanced and got the mortgage payment down anyway, so it was like a double win. Just be sure you understand the risks involved in your other investments if you do that.
I don't know if this translates into American, but additional to not cheaping out on the inspection, also don't go cheap on your solicitor (lawyer? the person who handles and checks all the legal stuff)
That's the person who will tell you if there's any legal issues with the history of the building, if your contract with the seller is watertight (or if the seller is trying to pull a fast one), if there are any outstanding agreements or covenants on the property - for example, I am liable to pay for repairs to my parish church's chancel - I chose to take a risk on that because it's an old law which is rarely enforced. But thanks to my solicitor it was an informed risk. Also my house had a lodger staying, and weirdly the house can change ownership while they retain a right to remain, so I could have moved in to a dude living in the back bedroom and faced a complicated and expensive process to remove him. My solicitor made them leaving a condition of the sale.
Oh, and tip from my dad - if you end up going to an auction (do houses sell by auction in the US?) pay a professional to go and bid for you because they will bid up to the amount you decided in the cold, rational light of day - where you risk getting over-excited and bidding more than you can afford.
This might all be completely useless information because buying houses in the US could be totally different but I thought I'd mention it just in case.
In the US, the version of this advice would be to buy the title insurance. Your bank will require title insurance for them, but that does not cover YOU.
Yes there is supposed to be someone doing a check on the legal history of the building, making sure there are no liens against the property or anything. Title insurance will pay if they made a mistake and you, for example, don't actually own the house (because there's a valid prior deed that wasn't actually signed over) or you don't own the parcel you thought you owned, or there's a mechanic lien on the property, etc.
Title insurance will also pay for your legal defense if no mistakes were made but someone tries to claim you don't actually own the property (Seller's heirs, etc.).
Something we did before buying was take multiple trips to the neighborhood and just walk around to get a feel for the place. It was especially useful that the election was coming up, so we could get a feel for how many lawn signs and flags were up compared to other places. Sort of gives you a temperature on the crazy. Look for little indications of how people behave. Do the people next door park their cars halfway across the sidewalk, or display other little antisocial cues? Are there people out walking their dogs, or do they maybe feel more comfortable taking them somewhere else? Go there and walk around at night. Do you feel safe?
Get a property consultant. They're people who generally lend their services to the rich who want to find good investments. They're experts at finding and purchasing houses and apartments, will know how to quickly evaluate properties, find the issues and give you a report. Their fees are generally worth it because they'll negociate the price down for you (and some of them will usually have their fees never exceed the price difference).
These guys got me my apartment in Brussels, for example.
Depending on where you live, this kind of stuff isn't possible right now. In really hot markets, the seller will provide an inspection report for you (done on their behalf) and you basically have to buy it blind. When I bought my house we had an inspection done but the seller was going to walk and relist if we found any issues or tried to negotiate based on what we found.
Be prepared for some disappointment. I bought here in the Midwest just about two months ago.
We bid on THIRTEEN houses before we finally got one. That includes bidding like 15-20K over asking and still not getting it. Timing is going to be tough. We were also selling a house. Our house sold quickly, then we ended up in a hotel because we couldn't buy another house fast enough. It was only 10 days, but with two kids and a dog it was pretty rough.
Your biggest competition is going to be cash buyers. Everyone selling will take a cash offer, even if it's lower than other non-cash offers. Be prepared to pay closing costs, it's a sellers market and no one will look at your offer unless you do that
First - Don't buy a house! (at least before you consider this) Adam Ruins Everything - Why Home Ownership is Actually a Terrible Investment
Second - If you do choose to go ahead with buying a home, do your damnedest to stay away from ANY HOA! They are only as good as their current board, they attract busy-bodies, and you could conceivably lose your home to them over small shit!