Closing is an annoying process, but at least it's the end. Sitting in a conference room with sandwiches, chips and a bowl full of Halloween candy wasn't exactly how I pictured the final moments of my quest for home ownership -- second time around for me, first for my fiancée, Cathy -- but the entire process of buying a home is stressful, confusing and frustrating, so snacking on a Reese's while signing document after document seemed like a miracle.
By the time Cathy was done signing -- her credit score superior to mine, she took on the bulk of the purchase responsibility -- it had been an hour of sitting at that conference table in the offices of a title company we'll likely never visit again with an mortgage broker who will likewise become a stranger and a real estate agent that won't only because he's been my friend for many years. Surreal, yes, but all part of buying a home.
As if the whole buying a home thing wasn't difficult enough, add to it the furious real estate market in Houston and new regulations designed to protect us -- and lenders -- from ourselves and you have, well, a mess.
Our story had a happy ending. We got the house we wanted for less than we expected to pay and there were only minimal complications. But, as any realtor will tell you, transactions of this magnitude can be overwhelming. There are certainly a million good tips for home buying, but here are a few that I found served me and others I know particularly well (or didn't if they were ignored).
Research the market your potential 'hoods. Before we even started looking at homes -- and we began much sooner than we anticipated -- we researched what houses were selling for and what neighborhoods seemed to be our best options for our price range. Using HAR, Trulia and Zillow, we were able to get information on demographics, price trends, school ratings and crime rates. Good neighborhoods can be tucked away and bad ones can be right out in the open. Additionally, there can be issues from one block to the next. Doing the research ahead of time helped to narrow our search and armed us with the information we needed to move quickly.
When it comes to your loan, ask a million questions. Knowledge is power as the saying goes and when it comes to money, it can be the difference between getting rich or going broke. It is understandable, unless you are in finance, to not fully understand the laws and costs that go into closing on a home. That is what your mortgage broker is for. Ask as many questions as necessary to gain a better understanding of what you are spending money on, how much and why. Ask the same hard questions of yourself and be brutally honest about what you make and what you spend. It will save a lot of hassle later.
Set aside more cash than you think you need. We learned that having more than just the down payment set aside is not only a good idea for safety, but it will provide an advantage if things go sideways. In our case, thanks to a low appraisal (more on that in a moment), we had to cough up another 5 percent of the value of the home. Good thing we had it available.
Look at a lot of houses, but, ultimately, go with your gut. I cannot stress enough how important feel is when looking at houses. The right house often just feels right. Sure, it also needs to check off all the boxes when it comes to your needs -- if you need three bedrooms, no matter how good a one-bedroom house feels, it won't fit your bill -- but I've heard realtors say that there is an almost instant response from a buyer walking into the RIGHT house for the first time. Trust your instincts.
Be aggressive but reasonable with your offer. As realtors have told me, in this housing market, homes frequently get four or five offers on a home within days of it listing. Ours had two within 24 hours. That means it can be necessary to bid aggressively. That doesn't always mean that you have to bid at or above the list price, but if you really love a house, you should act quickly and decisively so the seller can see your intent. Don't go crazy (more on that shortly), but don't try to lowball either. It's a sellers market. Just because it is listed at a certain price doesn't mean it will appraise at that price. Since the housing bubble, new laws were put in place to ostensibly protect buyers and lenders from themselves. That meant that you couldn't pay whatever you wanted for a house anymore. It had to appraise based on comparable sales in the neighborhood. In fact, I wrote a whole story just about that a couple weeks ago. Bottom line: the list price could very well be above the appraisal value. Work with your agent to determine value and bid accordingly...or set aside enough cash to make up the difference, but be careful that you don't overbid for no reason.
Location, location, location. I am baffled whenever I hear people talking about buying a home and they don't think about where the house is located. If a house in nice, reasonable and located 40 miles from work, that has to be taken into consideration. And just because a house looks amazing on the inside doesn't mean it isn't located in a war zone. Not only is location important to living, but also for resale. You may not live there forever and the last thing you want is a house that can't sell because of where you bought it.
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Be willing to walk away. This is a tough one, but getting emotionally attached to a home before you buy it is a pitfall of every home buyer. Bad inspection reports, awful sellers, problems with the neighborhood and survey issues are just a few of the things that can derail you on your path to buying a home. Just because you can picture your life in a house doesn't mean you are seeing the big picture. Get all the details and make an informed decision. Better to cry now than later.
Try not to be overly picky. When I was selling a house I owned in the Heights a number of years ago, I was amazed at the reports I would receive from agents after looking at the house with a potential buyer. Things like, "I don't like the paint color in the dining room" or "I want a porcelain kitchen sink instead of a chrome one" were strangely common. In this market, you have to make allowances for the fact you might not get exactly what you want. Don't let one oddly-colored wall in the spare bedroom make you turn up your nose in disgust. Just buy some Sherwin Williams and get busy.
Buy below your means. The myriad number of problems in the housing market in 2008 and 2009 were primarily because people bought beyond their means. They wanted a house and talked themselves into getting a bad loan. Next thing you know, they can't afford it. I've been in a similar situation and, believe me, you don't want that. The less money you agree to spend now, the easier it will be on you when and if expenses change. If you have more money later, great. If you have less, you won't be in danger of losing your home.
Do not underestimate the value of a good agent. I am lucky because my real estate agent is someone I've known for many years -- even before he was a realtor -- and I've worked with him before, so I know his track record is excellent and his demeanor is ideal. A good buyer's agent will be honest with you about what you should and shouldn't buy and defend you when there are problems. Good ones can save you money, pain and aggravation. Bad ones do the opposite. Choose wisely.