The Smart First-Time Home Buyer's Guide (2015)
Choosing the right neighborhood
Choosing a home is much more than just choosing the building layout and the structure. It is going to be a major part of your lifestyle and a major investment. So choosing the right neighborhood is a must. Location is critical to determining the aspects of your daily life, in and around your new home.
The geographical area in which you buy your home will have a major impact your lifestyle. The climate, the economy, the laws of the state will all have to be looked at closely and carefully to buy a home in a particular neighborhood and state that is right for you. For instance, buying a home in California will mean lots of sunshine and a neighborhood in Nevada might mean future drought and a drop in real estate prices. Buying a home in Florida as compared to Colorado will again constitute different lifestyle choices.
Urban vs. Peri Urban vs. Rural
Do you want to live in an urban neighborhood? Of course, there will be a lot of positives associated with living in the city, like less travel time and good leisure and schooling opportunities. As opposed to that, the negatives of an urban neighborhood will surely be the high crime rates, high levels of pollution and more noise.
Rural neighborhoods will give you freedom of space, as opposed to the congestion of urban living. Rural areas will also have relatively more peace and quiet. However, such areas might lack a lot of facilities you take for granted in urban living.
Peri-urban neighborhoods in the suburbs give you the best of both worlds. You can experience the peace and quiet of rural areas and have access to most of the facilities that modern living requires, with the city usually just a train ride away.
Safety plays a key role when determining which area to live in. If your neighborhood isn’t safe, then is it really worth living in? You might pay less in order to live in an area where the crime rate is high, but more often than not, you will end up paying much more for crime against you.
Safety and security rank higher for people with families than single people, so the choice of neighborhood might vary according to marital and family status. Another major downside to high crime neighborhoods is the low resale value of the housing. So choose wisely when moving into a neighborhood that is unsafe.
Education has always been the cornerstone of society and with increased competition, it has become critical to a child's success. Choosing neighborhoods with good schools is imperative for parents who have high aspirations for their kids. Paying that extra few dollars might be worth it in the end if that means better schooling opportunities.
Remember that nothing is greater or more important than your child’s future.
Recreation and Nature
Parks and recreation are vital to your leisure activities. Living in a neighborhood with close proximity to these can be a major plus point. You could then engage in outdoor activities and spend quality time with your family. Places near scenic beauty tend to cost more, but also hold immense value. A home on the side of a lake or near the beach all have their perks.
The view from the house itself should be appealing. A neighborhood that does not have scenic beauty will tend to sell at lower prices. A view does not necessarily have to be natural beauty- it can very well be a panoramic view of the city. Imagine living in a neighborhood from where you can see the city lights in their full glory. A neighborhood that has great views of the mountains or lakes will be equally pleasing. Aesthetics are a key factor to consider when selecting a neighborhood. A property with a nice view always have an advantage when it comes to reselling.
Entertainment/ Leisure activities
Entertainment and leisure activities are crucial determinants of modern day life. Without them, life would surely be incomplete. A neighborhood that has access to a multitude of restaurants will be a major positive. Neighborhoods that are close to malls, cinemas and other entertainment venues tend to provide a better quality of living. However, these localities cost more money so many people choose to drive to these places rather than live close by and just walk to them. But for those who can afford it, living close to high end shops and boutiques is highly desirable.
Does the neighborhood conform to the standards of your house? Most people want to live in areas that have houses that are roughly as old as their own home. They also want to live around people who generally share similar beliefs. Most often than not, people want to live around other people who have similar interests and thoughts. For example, a liberal family might find it hard to live in a predominantly conservative neighborhood.
Apart from people in the neighborhood, similar properties in terms of age value and size are also desirable. No one wants to live in a mansion next to small houses or in an apartment building in situated close to a slum.
You should definitely consider a neighborhood that is economically stable. These neighborhoods have seen the booms come and go and survived the bust. These neighborhoods have proven their value over the years and stood the test of time. These sort of localities tend to be good investments for the future. These neighborhoods have withstood the artificial price hikes and they have shown consistently that they are worth the money invested in them. Therefore, it is a wise move to buy a house in such places.
These days a lot of travelling is required for one reason or another. Activities like schooling, entertainment and most importantly work mean that you get to travel a lot during the day. Hence, a good neighborhood must have easy access to public transport.
Often, one public transport source is not enough. Desirable places to live mostly have multiple links to public transports like bus stops, railway tracks, subways, sky-trains, mass rapid transits and highways.
When selecting a neighborhood, you might want to look for links to major public transport facilities, but remember, there are downside living way too close to public transportation as well, because of the noise level.
A good place to live must have easy access to decent healthcare facilities. Your neighborhood must have a basic health unit with easy access to public hospitals. If you select a neighborhood that is far away from decent healthcare, you are not only risking your life, but the lives of your loved ones as well.
It could cost you extra bucks, but that will be a price worth paying when faced with a medical emergency in which very second might be critically important to save a life. The least that you can look for in a neighborhood is whether it falls under the coverage of an air ambulance service. A service such as this would help mitigate major disasters from taking place.
The time you spend on your commute to work directly affects your disposable income, your work quality and the time you have left for family. Living close to the place you work can do wonders for your work and personal life balance.
Whilst looking at houses, look for a neighborhood close to where you’re working so that you can enjoy a higher quality of life.
Proximity to friends and family
The ideal house only becomes a home when you have your friends and family to share it with. So be sure to look for a neighborhood that is close to where most of your friends and family reside. This way, you will have the added benefit of an active and engaging social life in your new home.
The following is a list of locations in which you should avoid buying a house. These locations not only reduce the resale value of your house, they also tend to decrease your quality of life. These locations tend to take a lot out of you so try and avoid the following places and the perils of living close to them.
Places with Commercial or industrial land close by will tend to be highly polluted. Pollution is detrimental to your health and reduces the peace of mind you get from your house. You cannot control the people who litter in front of your abode. You will also have to deal with loud noises during the day that constitute commercial and industrial activity. Both these areas will interfere with the peace and quiet that you seek. Air pollution next to factories is harmful to health. It is thus advisable to stay away from neighborhoods which have the above listed factors in abundance.
Neighborhoods near highway, railroad and airport platforms are going to cause you a lot of inconvenience. The amount of noise pollution that you will have to deal with is staggering. Air pollution will also be a major factor as they will all utilize vehicles functioning on fossil fuels. It would be a wise move stay away from these neighborhoods.
Crime ridden areas are to be avoided at all costs. No amount of saving resulting from buying a home in crime ridden areas is worth it. Such a place might end up hurting you. Try and avoid areas that have historically high crime rates. A home is where you and your children feel safe. Do not destroy that peace of mind by living in a crime infested area.
Economically deprived localities tend to have those people who take zero care of their houses. Such neighborhoods boast of junk cars on every street corner and high gang violence. These areas should be avoided at all costs.
Natural hazard prone areas can prove disastrous. Some people often take the risk, thinking that the chance of a natural disaster hitting is small. When a natural disaster does hit, the effects are usually catastrophic, so it is not worth taking a chance. Moreover, try your best to avoid hurricane and earthquake prone zones. Do not live close to large forest areas where forest fires could easily start. It is also safe to avoid living in snowy mountains where avalanches might be common.
Tips for neighborhood inspection
The following list highlights some inspection tips that you might want to take into account before selecting an area to live. These will help you get a better understanding of the area and prevent you from incurring fraud.
Always research and ask around in the neighborhood to get an idea of what kind of people will be living next door. The type of community you move into will determine a lot of your household activities.
Visit the neighborhood during the day and night
This is an important step in order to get a true feeling of the neighborhood. Some neighborhoods feel very safe and welcoming during the day, but have a disconcerting silence during the night. Be sure to sleep on your decision before moving in. Do not judge a neighborhood on how it looks during weather extremes. The best judge is in everyday weather conditions. Moreover, lighting and security at night should be given special consideration.
Look at the statistics
Try and collect as much neighborhood statistics as possible. They will be your guide into the past of the neighborhood on which basis you can determine whether the place will be safe for you and your family in the future.
Look at the price registry databases to get a true estimate of the house. The asking price is negotiable and selling records of similar nearby houses will give you the best idea of what to pay.
This might sound very simple, but listen to your gut feeling. If a neighborhood doesn’t feel right, it is better not to buy a house there. In the end your peace of mind matters much more than anything else.
The efficiency of the local authorities should be checked beforehand. Look at the schedules of garbage collection and other utilities.
Condition of other houses
Looking at the condition of other houses is a quick and easy tip to understanding the true value of the neighborhood. The condition of the other houses reflects on the class of people that lives there as a whole.
After selecting the perfect neighborhood, you need to search a home that best suits you. The house of your dreams is what you define it to be. Hence, be mindful of picking a house that can best fulfil your current as well as potential needs.
New or Old
Do you require a house that is new or one that is used? A used house may cost you less money but it will have its own problems. A new house can have newer design features that accommodate more features in an efficient manner, but could however end up costing more.
Historic or Modern
Do you require a house that is modern, tech savvy or are you one of the traditionalists who prefer the old school look with a touch of history. Be sure to state your requirements clearly to the agent when looking for a house.
Be sure to look for bedrooms not only according to your current needs, but future needs as well. If you plan to expand your family, look for one extra bedroom at least. The size and type of the house will also determine the number of bedrooms you can have. A town house, condo or apartment all have a differing number of bedroom options.
Bathroom needs can vary according to your requirements. Having only one bathroom for multiple users will end up with a long wait in the morning. A family should thus preferably look for a house with more than one bathroom.
The kitchen designs these days are available in an amazing variety. You can have anything from traditional American kitchens to having kitchens inspired by Japanese and European designs.
Wooden flooring or marble floors with synthetic tiling are all available at your request. Be sure to choose the house that has the type you desire.
Architects have come up with very creative designs for household interiors. Special thought is now given to everything from lighting to the colors and space requirements. All of these are governed by how the interior is set, so be sure to look carefully at the interior to judge which house gives you the best possible options.
If you have a pet, check whether your house is pet friendly. Check whether it has the small pet doors, if it has a garden for them to play in and if it has any objects or fixtures that could pose a threat to your pets.
Inspecting all these elements will lead you to selecting the ideal abode. The house of your dreams will not just appear out of the blue. You will have to be mindful of all these minor details and select the house according to your needs.
Home inspection is basically making sure that the property is safe and inhabitable. This also gives an estimate of what the property is worth and what condition it is in.
There are a few major kinds of inspections carried out, such as:
Structural inspection: the walls, foundation, paint, drainage and roof are all checked. Major and notable holes and cracks are searched for. This inspection will determine the general structural integrity of the house.
Mechanical inspection: this includes checking for working toilets, heating, cooling, plumbing and electronics.
Miscellaneous inspection: this inspection is carried out to look beyond the structural and mechanical issues. This inspection includes rodent or pest problems in addition to the proper working of doors etc.
Required repairs: Required repairs may be anything from defective paint to standing water. Make sure you get these issues resolved before moving in.
Getting the right inspector
You should always look for the best inspector who carries out the best inspection. He or she should:
Belong to a professional inspecting company
Have carried out more than a 1000 inspections
give you detailed written reports
adhere to standard practices
Have proper training
Have a good reputation in the market
Home inspection mistakes
Common home inspection mistakes include;
Not inspecting a new house- whether new or old, inspections are mandatory.
Choosing a cheap inspector: this will not save you money. Rather, it will you in the future.
Not being present when the inspection takes place and missing out on important information.
Not listening to the recommendations of the inspector: this is a major mistake as not listing to experts might cause you big bucks, especially when it comes to resolving major repairs or other problems you should have resolved timely.
Expecting too much out of home inspectors: home inspectors are not supermen. They are bound to make mistakes. Always leave a margin for human error.
Buying a House checklist
Making an offer
Be smart when bidding for a house. You do not want to overpay or be made to look like a fool. Ask around for the prices of similar houses that have been sold recently in the neighborhood. Be sure to conduct a detailed comparative price analysis so you don’t end up overpaying.
Demand clearly what you want and don’t want in a house. The furniture and fixtures that you want to be part of the deal should be stated up front. The color of the drapes and walls should also be revealed clearly. Be sure to make your preferences known.
Stress on the closing date in negotiations according to your own advantage. If you are not in a dire hurry to move-in, try and delay the time so that you can get the maximum work done and concessions from the sellers as possible. The more you delay, the more you will put the sellers on a back foot, but don’t delay for too long as that might hurt the deal.
Buy a home with a home warranty. This is necessary as a home warranty gives you protection from damages and free repairs for up to a year after your purchase of the house. In the negotiation, try and have the seller buy a house warranty so that you could benefit from it later on.
When getting a house mortgage, try and ask for referrals from the people you know. These might include friends, family or your real estate agent. All of these referrals could help you get to people who will offer you loans at low interest. If you qualify for membership to local credit unions, they will also help you get lower interest rates.
Calculate down payment so that you can save yourself extra costs. If you pay at least 20% of the principle, this will save you from private mortgage insurance. Be sure to save costs from all the places where possible.
Quotes from Multiple lenders. Be sure to take quotes from multiple lenders to get the best interest rate out there. Consult multiple lenders to get an idea of the market rate. Consult mortgage brokers as well as bankers to get the best possible deal.
Decide on whether to pay upfront to lower interest rates or prolong your interest payments. If you have the capital available, it is best to pay off as much principle as possible in one go. The lower the remaining amount, the lower the interest you will end up paying for it.
Qualified inspector: a qualified inspector is an investment. Paying a bit more for a qualified inspector will end up saving a lot on later repairs. Always look for the best inspectors that have at least 1000 inspections under their belt. Look for one that is accredited and has a good reputation in the market. Do remember that quality doesn’t come cheap.
Detailed report: a detailed report is a must for an inspection. Ask for one beforehand with all the details and photographic evidence. Be sure to know any and everything that is wrong in advance. Request a detailed inspection report beforehand.
Additional assessment: sometimes there are houses that are built a bit differently than the standard houses. For these houses it is better to ask for additional inspections. Consult your real estate broker and have the things that seem ambiguous checked out in depth.
Be present at the inspection: your presence at the inspection is vital. Though you are no expert and can’t figure out the technical aspects, you must be present. You can learn a lot about the house at that moment. Be sure to keep asking questions about the structure and layout of the house. During the inspection, you are sure to learn about the electrical circuits, the gas pipelines and the water system.
Take written estimates from the repairman: these estimates will help you with the house price. Your agent could then give these estimates to the house sellers and ask them to have them fixed or have then deducted from the house price. These estimates of repairs will save you quite a lot of bucks.
Price credit: there is an alternate to having the seller schedule the repairs. You can ask the seller to reduce the repairs price of the house and conduct the repairs yourself at a later time. This is feasible for those of you who are handy with housework and cannot afford to delay the purchase.
Have an appraiser appraise the house: to get a true judgment of the house’s value, you should conduct this practice. The appraiser will give you a market estimate, according to what is agreed in the contract. Make sure to make him aware of what is being sold and what isn’t. Your money lender will hire the appraiser, so that they can understand the worth of the asset they are lending money against.
Ask for a list of comparable houses: this will help you get a better understanding where your home stands in comparison to other similar houses that have been recently appraised. You will get to judge the improvements to your house as compared to them and identify areas your house is lacking.
Look around for title insurance: title insurance protects you against legal damages to your property. Try and look at the best rates available. You do not have to buy it from the first company that offers it. The coverage difference isn’t that much in title insurance, so look for the cheapest option. It will provide almost the same coverage as the more expensive options.
Consult an attorney: you should make sure you are not getting fooled. Hire an attorney and have him go through the contract. There are often details in the fine print that might come back to hurt you.
Set your interest rate: have your interest rates locked in a month or so before the purchase so that you are safe from nay fluctuations. It is better to consult a financial analyst if possible.
Obtain detailed closing costs: transfer taxes or other expenses might surprise you later on. Be sure to have the details of all the costs involved.
Be mindful of bogus fees: if you are being charged for mundane services or services that are free, have they removed from the bill. After all, you don’t want to over-pay.
Verify all appliances: be sure that all appliances, electrical and non-electrical are in working condition.
Verify all taps and toilets: you do not want faulty plumbing to ruin your perfect home.
Verify all electrical outlets: you should check whether the wiring is all correct and all the sockets are functional and safe.
Verify the air conditioning and heating system: fixing these later on can be a real big problem. Be sure to have them checked and rechecked.
Check for water damage: any seepage or moisture damage will cause greater harm in the future to your house. Check for that carefully.
Check for termite/vermin: these can be a major pain and cause a lot of damage to wooden houses. Be sure that your house is termite and vermin free. Always look in the basement and the attic for these creatures.
If anything is found damaged, be sure to negotiate closing credit before closing a deal. You don’t want to pay for damaged good, do you?
Things Your Broker Won’t Tell You
Negotiable fees: the brokers tend to hide the fact that the fees they charge can be negotiated and the house prices are negotiable as well.
Inspection details that could kill a deal are often hidden by the brokers. Do not trust the brokers and always carry an independent inspection of the facility.
They add contract clauses without legal counsel just to confuse you and try and save themselves from possible contingencies. Having an attorney go through the contract is a good option.
You may not need the broker to make a deal after all. They charge commissions and will make you feel that they got you the best possible deal, but you can directly communicate yourself with the selling party online.
Some houses are kept secret by the brokers for themselves or their special clients. These houses are not advertised to the general public so that the brokers can make underhand profits out of them.
The house price is hiked often enough by the brokers. Try and look at comparable prices of similar property sold nearby to get the best price estimate.
That you could do better with another agent is a secret no broker will tell you. After all, there are brokers with different competency levels so do look around.
That they don’t have complete knowledge is a fact no broker would want to admit. Sometimes the brokers just turn to old selling techniques and cliché sales pitches.
Some brokers won’t tell you how desperate they are. Overeager brokers should be avoided. You shouldn’t feel any pressure and make a decision in your own time and by considering all facts.