Author Topic: First-time home buyer  (Read 4609 times)

MgoSam

  • Magnum Stache
  • ******
  • Posts: 3643
  • Location: Minnesota
First-time home buyer
« on: December 20, 2013, 10:01:42 AM »
Hello,

I have been living with my parents for the past few years, this has been largely a beneficial situation for us as instead of paying rent (offer to pay my parents but they declined) I have been putting money in Vanguard with weekly automated investments.

Now that I have a considerable of money and stability I want to move out. It doesn't help that there is more friction at home and I feel that it most definitely is time to leave.

I'm looking at Zillow for prices on a neighborhood close to my office and found a few potential places. I don't have much skills in terms of fixing things up, but do have friends that have offered to help and others that have said that they learned how to by doing. The key they told me isn't to buy too much of a fixer, otherwise you can get overwhelmed.

What advice do you have for this future first-time home buyer? I would be open to paying a significant down-payment or maybe even buying the house with cash should be it be worthwhile. I would need to analyze the pro's and con's to see if it is worth while and a good investment to do so.

Thanks for your help.

golfer44

  • Stubble
  • **
  • Posts: 195
Re: First-time home buyer
« Reply #1 on: December 20, 2013, 11:43:16 AM »
Find a good realtor. Interview them, seriously. This is HUGE.

Second, do your research. Zillow, city-data.com, etc. Spend a bunch of time in the neighborhood you're looking at with your Zillow app handy (you have this, right?) checking out listings and Zestimates (take these with a grain of salt, but it's good to get a general idea what a neighborhood is worth).

You should know your target neighborhood like the back of your hand, and feel comfortable enough when something pops up to know if it's a good deal or not. It's not easy, don't set any unrealistic time expectations for yourself.


Re: 'fixer uppers'. This is mostly solved for you, since most FHA and conventional lenders won't lend on an unsafe or distressed house (mold, etc). The sweet spot for you here is most likely an ugly house that needs 'lipstick and makeup'. Be willing to put in a few hours and a couple grand for new paint and carpet. The more people that pass on it because they don't like the wallpaper, the better deal you can get.

Thegoblinchief

  • Guest
Re: First-time home buyer
« Reply #2 on: December 20, 2013, 12:20:00 PM »
Learn how to spot obvious issues like mold, but especially foundation/basement issues. Look at the age of the mechanicals (HVAC and water heater). Anything more than 10 years old can present issues. This way you don't get all the way to an accepted offer and home inspection only to find that the house has major issues.

Cosmetic issues can be time-consuming if you do it yourself, but they're typically not money sinks if you have friends to help teach you.

Depending on the cosmetic condition, with rates this low I would do a standard 20% down that way you can afford to put some cash into renovations (if needed), while still preserving most of your invested assets.

MgoSam

  • Magnum Stache
  • ******
  • Posts: 3643
  • Location: Minnesota
Re: First-time home buyer
« Reply #3 on: December 20, 2013, 12:27:05 PM »
How do you recommend finding a good Realtor? Just about everyone I know that has bought a home is quick to recommend theirs, but I can't tell if that is because they are excellent or because they receive a commission. That does skew incentives.

Out of curosity, is there any advantage to paying more than 20% up front other than of course it means that you are taking less of a loan? So long as it doesn't affect getting a house, I likely would pay at least 20% down and pay more than the monthly mortgage payment. I don't want to be paying for the house over 30 years but am wondering if I should take a 30 year and pay more, or get a better rate by getting a fixed 15 year?

Of course I will game both out once I have a better idea as to how much the house will cost and what kinds of renovations will be required (plus will need to furnish it too).

How much should I factor in for commision, appraisals, closing costs, ect?

CanuckExpat

  • Magnum Stache
  • ******
  • Posts: 2998
  • Age: 37
  • Location: North Carolina
    • Freedom35
Re: First-time home buyer
« Reply #4 on: December 20, 2013, 12:37:51 PM »
Find a good realtor. Interview them, seriously. This is HUGE.

I'm curious what makes a good realtor, and what makes them earn their 3%, especially when you are buying.
Does anyone have experience going without a realtor and getting the buying side of the commission discounted from the selling price, or finding realtors who compete on the commission?

Mustacheless in Seattle

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: First-time home buyer
« Reply #5 on: December 20, 2013, 01:31:56 PM »
+1 on interviewing RE agents.  It's amazing how many people just pick somebody off the Web or go with a friend's recommendation.  The selling agent pays the commission on purchases, so there's no reason NOT to use a RE agent when you buy a home, IMO.

I would make sure the agent is an expert in the exact area you are looking to buy.  They may have closed on hundreds of houses in a town 45 minutes away, but that doesn't really help you if you're not looking in that area. 

Also, I would try to find someone who is a good negotiator.  Make them give you examples of what makes them a good negotiator.

15-year mortgages will always have a slightly better rate than 30-years, but will obviously come with a higher payment.  It's really up to you which you want to do.   But definitely shop around for the best rates, especially if you have excellent credit.

Oops, looks like Maigahane beat me to it on some of that.  Guess I'm a slower typer than I realized.
« Last Edit: December 20, 2013, 01:34:56 PM by Mustacheless in Seattle »

catccc

  • Handlebar Stache
  • *****
  • Posts: 1683
  • Location: SE PA
Re: First-time home buyer
« Reply #6 on: December 20, 2013, 01:50:15 PM »
+1 on interviewing RE agents.  It's amazing how many people just pick somebody off the Web or go with a friend's recommendation.  The selling agent pays the commission on purchases, so there's no reason NOT to use a RE agent when you buy a home, IMO.

I'm not against using an agent to buy a home, but maybe there's a time for it, and that time isn't necessarily right from the start.  Because you can find home for sale online, make appointments to see them with the listing agent, who can better answer your questions about the property, history, land boundaries, etc.  Then you can go to hungryagents.com and find a rebating agent to kick back 1/2 of the commission to you.  Typically the commission on the sale of the home is paid by the home seller, and it is 6%, which gets split 50% to the listing agent and 50% to the buying agent.  Each get 3%.  There are lots of agents out there that like to swoop in once you've decided on a home to do negotiations, contract type stuff, and since they didn't need to spend 500 sundays looking at houses with you, are willing to give up 1/2 of their commission (we are down to 1.5% now) to you as a rebate.  So on a 200K home, that's $3K.  Not too shabby. 

disclosure- I'm not a homeowner yet, this is how we plan to do it when we find a place we want to buy.  Also, if we had an agent from the start they would hate us now.  Because we've been looking at houses for 5 years.  I estimated we would have had 6 agents quit on us if we'd committed to one.  Instead, I have my hungryagents rebating agent on the back burner for 2-3 years, and she doesn't care when we finally buy a house.

CanuckExpat

  • Magnum Stache
  • ******
  • Posts: 2998
  • Age: 37
  • Location: North Carolina
    • Freedom35
Re: First-time home buyer
« Reply #7 on: December 20, 2013, 01:59:21 PM »
Because you can find home for sale online, make appointments to see them with the listing agent, who can better answer your questions about the property, history, land boundaries, etc.  Then you can go to hungryagents.com and find a rebating agent to kick back 1/2 of the commission to you.

Thanks. I like this idea, and didn't know the site existed.

nawhite

  • Handlebar Stache
  • *****
  • Posts: 1068
  • Location: Golden, CO
    • The Reckless Choice
Re: First-time home buyer
« Reply #8 on: December 20, 2013, 02:23:12 PM »
Because you can find home for sale online, make appointments to see them with the listing agent, who can better answer your questions about the property, history, land boundaries, etc.  Then you can go to hungryagents.com and find a rebating agent to kick back 1/2 of the commission to you.

Thanks. I like this idea, and didn't know the site existed.

I have to say for a first time home-buyer, I don't like this advice. I bought my first home in July and we were definitely tempted by this route but we tried an real-estate agent anyway and it was worth it a long shot. They know what to look for for maintenance issues. They know the order things need to go in when buying. They know the etiquette for touring homes while the owners aren't home. They will walk through every contract with you. They will spell out EXACTLY how the process works. They will remind you of things to look for that you wouldn't think of yourself (do you really need a radon check in your area? "That crack looks troublesome, you should get a structural engineer in here to double check it." "There are no crawlspaces so you'll have a hard time doing some renovations." "In the future, converting this closet into a bathroom would increase your home's value in this area" etc.)

Since you've never done it before, it is well worth it to have someone there

AccidentalMiser

  • Pencil Stache
  • ****
  • Posts: 661
  • Age: 52
  • Location: SE Tenn
Re: First-time home buyer
« Reply #9 on: December 20, 2013, 03:10:38 PM »
I agree that a buyer's agent is probably a good idea for you, since this is your first time and buying a home is a big deal. 

No matter what you do, you should thoroughly educate yourself on the properties in your area, be clear about what you are looking for, know your financials, check your credit report and credit scores, go to a bunch of open houses, etc. BEFORE you call any real estate agent or make any commitments.  You need to be a smart, savvy home buyer and be prepared to say NO if necessary.  Coming here is a good start but you should go to the library and get a book or two on the subject.

Also, get a home inspection!  The best $400 I ever spent was on a home inspection for a house I didn't buy due to material defects the inspector found (there had been a fire in the attic, I didn't notice it but the inspector did.)  An inspection report give you bargaining leverage (I saved $3000 on my last house because the AC fan was a little noisy) and peace of mind if you do buy.

Financially, there are a number of factors to consider.  How long do you plan to stay in the home?  How are houses appreciating in your market?  How stable is your employment?  How much will your mortgage be relative to your income?

Finally, don't get in a hurry if you can avoid it.  Shopping for anything is an emotional experience which can lead to errors in judgment.  Make your plan, then work your plan.  Don't be afraid to pay for good advice but don't over-rely on others.

Hope this helps!


Mustacheless in Seattle

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: First-time home buyer
« Reply #10 on: December 20, 2013, 03:29:16 PM »
+1 on interviewing RE agents.  It's amazing how many people just pick somebody off the Web or go with a friend's recommendation.  The selling agent pays the commission on purchases, so there's no reason NOT to use a RE agent when you buy a home, IMO.

I'm not against using an agent to buy a home, but maybe there's a time for it, and that time isn't necessarily right from the start.  Because you can find home for sale online, make appointments to see them with the listing agent, who can better answer your questions about the property, history, land boundaries, etc.  Then you can go to hungryagents.com and find a rebating agent to kick back 1/2 of the commission to you.  Typically the commission on the sale of the home is paid by the home seller, and it is 6%, which gets split 50% to the listing agent and 50% to the buying agent.  Each get 3%.  There are lots of agents out there that like to swoop in once you've decided on a home to do negotiations, contract type stuff, and since they didn't need to spend 500 sundays looking at houses with you, are willing to give up 1/2 of their commission (we are down to 1.5% now) to you as a rebate.  So on a 200K home, that's $3K.  Not too shabby. 

disclosure- I'm not a homeowner yet, this is how we plan to do it when we find a place we want to buy.  Also, if we had an agent from the start they would hate us now.  Because we've been looking at houses for 5 years.  I estimated we would have had 6 agents quit on us if we'd committed to one.  Instead, I have my hungryagents rebating agent on the back burner for 2-3 years, and she doesn't care when we finally buy a house.

Crap.  You're right, that was a pretty egregious typo on my part.  I didn't mean to say the seller's agent pays the commission, I meant to say the seller's agent charges the seller for the commission (which obviously leaves the buyer out of the equation).

I don't really disagree with anything you said.  I think it's great for people to educate themselves when it comes to matters like these.  But I also know that *most* people won't spend the time to educate themselves and do all the work you were talking about on their own.  That's why I encourage people to spend a good deal of time researching and interviewing RE agents and loan officers.  Although when I stop and think about what site I'm posting this on, where DIY is highly encouraged, I'm probably preaching to the choir.

In our situation we picked a RE agent fairly early on in the process but had already done a lot of research on our own.  And unlike friends of ours who just sat back and waited for their agent to call/email them with available properties, we were doing our own searches everyday for available properties and would let him know when we wanted to look at one.  Ironically, we ended up buying the 3rd house we looked at.  So come to think of it, our agent got off pretty easy! 
« Last Edit: December 20, 2013, 03:56:56 PM by Mustacheless in Seattle »

Mustacheless in Seattle

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: First-time home buyer
« Reply #11 on: December 20, 2013, 03:40:05 PM »
One last thing I would mention just because I haven't seen it posted yet, is to talk to people who actually live in the areas in which you're looking.  If you're looking at a specific house, talk to the neighbors.  Agents will be able to tell you about the schools, crime, etc., but the neighbors can you give more specific information.  For instance, are there any "problem" neighbors?  Are there people who have loud parties all hours of the night?  People who have kids might want to know if cars speed down the street going 50 MPH, etc.  Most of the homeowners we talked to were more than happy to answer our questions and, since they had no agenda, were very open and honest.
« Last Edit: December 20, 2013, 03:57:42 PM by Mustacheless in Seattle »

sulaco

  • 5 O'Clock Shadow
  • *
  • Posts: 73
Re: First-time home buyer
« Reply #12 on: December 20, 2013, 08:28:06 PM »
If you have access to Redfin agents, you may want to look at them as well. We close on our second second house on Monday, and our experience with Redfin was significantly better than with our first real estate agent. Redfin agents do not receive commission for the house, they are salaried (or at least not directly incentivized by home sales), so there isn't huge pressure to get a more expensive house, or one of there own listings. You also get 1% of the Redfin commission back at closing.

The contract process with Redfin is also nice: they provide a checklist and timeline of all the things you need to do (inspections, lenders, title companies, etc.) and these are marked off as they are completed with any supporting documents.

Over the course of the process we worked with two different agents to view homes, and one of them ended up being the agent we used to purchase a house.

Yelp has reasonable reviews for inspectors. We happened to get a guy who inspects for fun, and builds houses on the side.

The one thing you can't control is the sellers agent, and they can be, um, not always pleasant.