The Ultimate Guide to Buying a Home

Buying a home is one of the biggest purchases of your life, so it’s important to get it right, especially in today’s down economy. But with so many things to consider, sometimes buyers get overwhelmed and overlook important things. That’s why eLocal.com polled its panel of experts for the most important (and least-remembered) things to do during the buying process. The result is a wealth of information for anyone buying a new or pre-owned home, whether that’s you personally or a relative or friend.

Modern Health Talk founder Wayne Caswell was one of the experts consulted and was happy to share tips from his experience as a consumer advocate. Here’s the collective response from the expert panel [my additional tips at end]:

1. Equip yourself with a dream team of professionals.

• Home buying is not a DIY affair! Since this is the biggest investment you will most likely ever make, make sure to have a strong team behind you, including a Realtor, attorney, lender, insurance agent and inspector.
• Choose the right lender! Compare at least 2 reputable lenders and get approval BEFORE looking into a home.
• Make sure your Realtor is well-rounded. Great traits include knowledge about competition in the area, experience with short sales and foreclosures, and great negotiation skills!
• Get multiple quotes from contractors to fix problems you find during inspection; even get second opinions from home inspectors.

2. Go into the home-buying process prepared.

• Keep your money in one place. Lenders need to feel assured that they are making a safe investment in you. You will be asked to provide statements from all your accounts, and moving money between these accounts will make that paper trail harder to follow.
• Stay within your budget. Plan out what monthly payments you can afford, including mortgage and utilities.
• Think about how long you’re planning to stay, so you know if your new home will be a flip house, transitional home, or a keeper.
• Carefully evaluate the type of home you need for your lifestyle. You may love the idea of a home with a huge backyard, but is it practical for you?
• Make a wish list BEFORE searching. Then, narrow it down to a small number of deal breakers. A pickier criteria means less options and purchasing power.

3. What to consider when you visit each home.

• Look beyond the physical house: school districts, taxes, Home Owner Association fees, convenience of grocery stores, cleaners, crime, history of neighborhood, etc.
• Look at the big picture, rather than dwelling on minor cosmetic changes (paint color, light fixtures, etc.).
• Know the local codes and always get permits. If you are planning on major renovations, codes vary by area, so knowing what you are getting into could affect your opinion of the location. Request permits from the previous homeowner on projects they conducted. Your home will have better resale value if you can product official paperwork for all remodeling projects.

4. Make sure your budget matches up with ALL the costs.

• Consider maintenance and indirect expenses, such as lawn care, pool maintenance, energy inefficiencies (poor insulation/windows), and customizations that will be hard to replace or fix.
• Don’t overbuy – if you buy a mansion and cant afford to furnish it, it’s going to be a dreary sparse home! The dining room is the most expensive room for furniture investments, so plan accordingly!
• Be aware of the things you can’t see that still might need maintenance, like sewage flow or appliances that have reached their life expectancy. That will be extra money you need to spend.

5. What to consider before the final purchase.

• All we have to say is INSPECTION, INSPECTION, INSPECTION! If the general home inspector finds problems, hire a specialty inspector and/or contractor to look at the problems right away. Try negotiating the replacement/repair of these problems by the current homeowner before purchase.
• Electrical and HVAC systems are expensive to replace, so make sure the inspector checks them thoroughly.
• Aside from a general inspection, get a sewage line inspection! A sewage line on a homeowner’s property is their responsibility (not the city’s!), and isn’t included in a normal home inspection.
• Request details from the previous owner on the home’s history.
• Buy title insurance. [This is especially important in today’s market where it’s sometime difficult to prove who has clear title to the property.]
• Know what you are really offering: The offer is much more complicated than simply coming up with a price and saying “This is what I’ll pay.” Both you and seller will want to build in protections and contingencies to protect investment and limit risk. In the offer, include other details of purchase besides price such as:

1. how you intend to finance home,
2. who pays closing,
3. what inspections are to be performed,
4. timetables,
5. whether person property is included in purchase,
6. terms of cancellation,
7. which professional services will be used for which repairs, and
8. how to settle disputes should they occur.

A Realtor and attorney can help ensure all of these and more are included.

• Be sure to maximize your negotiation advantage in this current buyer’s market, where sellers are more willing to add value by lowering prices or improving quality & features.

 

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The following tips come from my own perspective as a consumer advocate and from meeting many home buyers who got seriously burned by unscrupulous home builders and were left with no legal recourse. co-founder of  a few years ago. In that capacity I They are not specific to home healthcare but I feel important to anyone relying on this guide to buy a home.

6. Do your Research

• Use the Internet to search for complaints about the home builder, especially complaints related to structural integrity, because even though there are many good and reputable builders, there also some unscrupulous ones to watch out for, and because it’s hard for real estate inspectors to notice problems hidden behind walls.
• Scan consumer sites representing home buyer issues, such as Homeowners Against Deficient Dwellings and Homeowners of Texas. They’ll have additional advice, including 10 Things Contractors Won’t Tell You.
• Don’t discount homes that are older than 15 years old since they were often built better back then. Over the last 10-15 years, the laws in some states have allowed builders to cut corners, do shoddy work, and hide behind laws that shield them from accountability, thanks to lobbyists for the home building industry and the tort reform movement.

 

7. Thoroughly Understand the Contracts

• Know that contracts “always” favor those who write them. They often include binding arbitration clauses such as, “Any dispute that arises between the builder/seller and the purchaser will be decided in binding arbitration.”
• Have ALL legal documents reviewed by your attorney before signing ANYTHING. Even if the seller refuses to negotiate contract terms, as many do, have your lawyer explain the rights you have retained or are about to relinquish.
• Be prepared for new documents to appear on closing day when the pressure mounts, and be ready to delay closing if need be so your attorney can review those documents too.
• Beware of seller provided home warranties. It’s a common practice for sellers to present buyers with a “gift” of a pre-paid warranty at closing time when they don’t have the opportunity to read and understand the terms. Many of these warranties aren’t worth the paper they’re written on and actually (1) remove all liability from the seller and (2) force disputes into arbitration. If you want a home warranty, buy one yourself with terms you’re comfortable with.

8. More on Inspection

• Hire a qualified inspector to represent your interests and point out structural problems or things that you can’t see, such as improper land grading or foundation engineering.
• It’s good to know something about the building codes and inspection process in your city or town since the rules can vary greatly. Some have strict codes and require more inspections during the building process. But don’t rely on city building inspectors, since many of them are overworked, “rubber-stamp” inspection reports, or are beholden to builders.
• Real estate inspectors, unlike city building code inspectors, represent buyers (you) once the home is built, rather than during the construction process. That puts them at a disadvantage since they can’t see behind walls or inside foundations, but they are trained to notice things that buyers often miss. That’s important because buyers are often attracted by cosmetic features that imply quality but might hide problems within, such as rounded corners, crown moldings, granite counters, and high-end hardware and appliances.

9. Look for Universal Design Features

• Ask about wind proofing, energy efficiency, and universal design features that serve people of all ages and abilities. Even if you don’t think you need these features, they can increase a home’s resale value and make it easier for grandma to visit when she’s using a walker, or for you if you get injured or get older yourself. Some of these features include zero-edge entries & showers, wider doorways  for wheelchair access, and lever-style door handles instead of doorknobs.

10. A Closing Nightmare

This personal story is not at all related to home healthcare, may it be interesting if you’ve read this far.

We expected a MUCH simpler process to refinance an existing home mortgage, where ■■■■■ (redacted) already knew our payment history and high credit rating, where our home was mostly paid for (just $100K owed on a home worth $300K or more), where ■■■■■ had all of our banking relationships (2 checking accounts, 1 savings account, 1 investment account, 1 safe deposit box, and our current home loan through ■■■■■ Home Finance), and where we had over $100K in assets at ■■■■■ and know the people at our local ■■■■■ branch. Contributing to the extremely low risk of this loan was the fact that my IBM pension income is more secure than an employer’s salary, since there’s no risk of being laid off. Still, the process took two months and was far more cumbersome than financing a new home from a builder-owned mortgage company with vested interests in getting the home sold.

I tried to do due diligence and compare the ■■■■■ mortgage proposal with others found online, but the choices were too confusing. There were too many tradeoffs in selecting different time periods, interest rates, points, loan origination costs, closing costs, tax implications, and the lack of standardization among lenders. I found it nearly impossible to do an apples-to-apples comparison and had little confidence in my ability to choose among competing lenders, even after considerable study. How could I possibly trust anyone that I had no prior relationship with? I ended up basing my decision solely on trust and my established relationship with ■■■■■.

The closing was done at our home with just my wife and I and a notary signing agent (I’ll call him Don). It was a rush job that took just 90 minutes (6pm – 7:30pm) to sign a very large pile of documents, many of which I had not seen before, even though I asked to see them a week or more earlier. After repeated requests, I finally got half of the documents the day of the closing with little time to do more than skim them, and I told Don that I was uncomfortable signing anything I hadn’t thoroughly read.  He told me not to worry and cited a new federal law giving me a 3-day right to cancel with no penalty, a “right of rescind.” That only made me more nervous since it didn’t leave much time to resolve open issues, and any changes could be deal breakers without someone from the ■■■■■ attending and authorized to negotiate.

Don said all mortgages are now on a standard Fannie Mae form, that closing is now just a formality, and that no changes would be allowed on any forms since mortgages with strike-outs can’t be sold. He made it sound like I was lucky to be approved since refinancing now requires a 700+ credit score, which eliminates 85% of the country. That sounded like a tactic to diffuse any objection that might come up.

Don rushed the process by saying it was the last day to close this month and that any change (or delay) would cause the loan to be rewritten, possibly at a higher rate (another pressure tactic?). He said he had eight closings to do today, including two more after ours (more pressure).

At the very end I REFUSED TO SIGN ONE FORM, which wanted me to indemnify and hold harmless the Title company for any dispute between them and ■■■■■, even though the information provided to them came from ■■■■■ and not me directly. Don called this as a “potential deal breaker” and telephoned the title company for advice but was unable to get a decision. We jointly decided to return the docs with the one form unsigned and resolve the issue later (still more pressure). The next day the Title company said the form didn’t need to be signed anyway (so why the pressure?).

After signing so many forms and signing them so quickly with no time to review them, I came away from the closing extremely nervous and distrustful.

Especially after the economic recession and distrust of big banks, I think ■■■■■ and the entire mortgage industry would do well to GREATLY simplifying the process and improve consumer confidence. If the industry does not do this on its own, then I think lawmakers should force them to, and I would strongly support such an initiative.

The 1999 repeal of the Glass-Steagall Act, the lack of strong regulatory oversight, and the obviously intentional complexity of the mortgage lending process puts consumers at an extreme disadvantage in completing the complex transaction of financing (or refinancing) the largest investment they’ll ever make. This is NOT the way the home mortgage process should be, and it’s not the way the home buying process should be.