Buying my first house **update** offer accepted, I got a house.

[lordtodd75]

Well, I went and looked at a house yesterday and today I will be making an offer on it. I am not working with a real estate agent but the people selling the house are just about family. Any advice? I am shitting bricks here. I was up all night with nervous energy and anxiety. It is going to be great if this goes through. Bonus, there is a full finished basement that I can have all to myself. Hopefully soon I will be showing all of you gameroom pictures  Are there any common mistakes/pitfalls I should look for when making my offer? HELP 

[ChadTower]

If you're buying from someone you would like to retain as family you'd better get a solid upfront agreement in place on the little things.  Nothing wrecks a relationship faster than a financial deal.

[shardian]

Get an inspection. If the frame is wood near grade, get a termite inspection. Etc, etc, etc. Just because they are "almost family", does not mean you should go into a MAJOR investment blind. Quite honestly, I would advise you to NOT buy their house, because any and everything you find wrong in the house after  purchase will cause more and more resentment to the people. Trust me, there are PLENTY of issues in a house you don't see with those rose colored glasses on.

[ChadTower]

Definitely do all of the due diligence you would if the seller was a stranger.  The seller could have issues they don't even know about themselves.  A friend of mine tried to buy her great aunt's house so that it would remain in the family.  Their home inspection turned up so much moisture/termite damage they actually condemned the house.  The old woman had no idea and had been living there 65 years.

People do buy houses from family and friends all the time.  You have to go into it with full disclosure, though.  No usual selling/buying games and you can't expect more than a "it's yours now - have fun" the way you would from a stranger. 

[BobbyG66]

Like Sharidan said, INSPECTION.
A good inspector will find the flaws and problems. He can tell if something was covered up or repaired poorly.
Also if it has septic, you need a title 5 report. (at least where I live).

You also need to check the roof, appliances, plumbing and heating/cooling systems.
Those can be big bucks to replace, and may factor into the price you pay/negotiate.

Get everything in writing too.

Good luck.

[ChadTower]

Also if it has septic, you need a title 5 report. (at least where I live).

Are there any states left that don't legally require title 5 inspection in order to sell the house?

[Cakemeister]

Like Shardian and Bobby said, INSPECTION.

And don't get an adjustable-rate mortgage. It might be cheaper now but in a year you may have a problem when your payment goes up. If your credit is good then you'll have no problem getting a decent fixed rate mortgage.

With the ongoing subprime loan crisis it is a buyer's market in a lot of places. Have you gotten comparables on other similar houses to get an idea of the current value of the house? Don't act too fast.

[ChadTower]

Get a lead paint inspection if you have or plan on having kids.  Check the zoning for the abutting lots - don't find out 5 years later that your neighbor is on business zoned land and is tearing down his house to put up a McDonald's.

[lordtodd75]

All good advice, thank you. Like I said I am just making the offer today, should I get an inspection before I make the offer? I checked the house out and I asked a lot of questions. All problems I noticed were cosmetic. The roof, siding, windows are all brand new. The only thing I didn't like was that the oil heater looked a bit old. The appliances all seemed good, hell they are even going to leave a lot of the furniture if I want. One thing I did realize was that I don't know why they are so motivated to sell. I know they are moving in with there children, but I am not sure why they want to be out of this house so quickly(end of feb), I suppose that is something I should check out. I will definitely get a full inspection and termite inspection, I am just not sure in what phase of the deal this should happen.

Chad when you say "the little things" what exactly do you mean? I have never bought a house so I really don't know.

@cake
No arm for me, FHA. I did check out comparable houses in the area, they seem to be 10 to 20 grand higher.

edit
@chad
It is a row home so tearing down the neighbors house would definitely present a problem 

[ChadTower]

Chad when you say "the little things" what exactly do you mean? I have never bought a house so I really don't know.

Same as with a car.  If you bought a car from a friend, and the fuel injector crapped out after 500 miles, many people would be pissed at the friend.  A house has lots of issues like that.  What if you discover a year from now that the upstairs wiring is nongrounded run to three prong outlets?  Will you consider that your problem or will you be pissed at the seller for not at least telling you?  That sort of thing.  It's a lot less cut and dry with someone you still know.

"Dude, what's up with the turkeys in the yard?"
"oh, yeah, don't go out there until noon or they'll bite you in the junk"
"WTF, why didn't you tell me that?"
"Uh, why, just wear a cup"

[shardian]

All good advice, thank you. Like I said I am just making the offer today, should I get an inspection before I make the offer? I checked the house out and I asked a lot of questions. All problems I noticed were cosmetic. The roof, siding, windows are all brand new. The only thing I didn't like was that the oil heater looked a bit old. The appliances all seemed good, hell they are even going to leave a lot of the furniture if I want. One thing I did realize was that I don't know why they are so motivated to sell. I know they are moving in with there children, but I am not sure why they want to be out of this house so quickly(end of feb), I suppose that is something I should check out. I will definitely get a full inspection and termite inspection, I am just not sure in what phase of the deal this should happen.

This is why you go thru a realtor - it is their business to know all of the nuances of contracts, inspections, timings, offers, etc. When you make an offer - which is a contract - you have to specify specifically that the whole agreement is based on satisfactory results of any and all inspections within xx days. So yes, inspections come after an agreement has been made. Inspections can be costly, so you don't do them unless you have a signed contract. If an inspection turns up something substantial, you either renegotiate the contract, or walk away from the deal.

For example, our inspection showed up some nitpicky things, but also showed that only half the roof had been replaced - the convenient visible side. It was done 6 years before, and probably due to some immediate need, but the seller specified the roof was replaced a few years ago - a not entirely true statement. At that point, either the seller fixed the roof, lowered the price, or they say no and I walk away. I wanted to take the money and do it myself. The realtor advised me it would be better to have them fix the roof, because who knows what other issues could possibly be uncovered in the process. Better for them to be liable than me after the fact.

[Jdurg]

First off, congratulations!  I bought my first house late last year and know ALL of the range of emotions you are going through.  The house is now starting to finally feel like my home, but there are a lot of things I still want to do with it.  (I bought in September and winter quickly moved in so I haven't had a chance to clean up the exterior like i wanted to.  Hopefully spring comes soon).

Anyway, once you make the offer on the house that is when the inspection will take place.  Make CERTAIN that your offer is dependent upon satisfactory completion of the inspection.  I.E. make it so that if the inspection turns up a lot of things that you don't want to deal with that you are able to withdraw your offer because of it.  When I bought my house, the inspection showed that the chimney was falling away from the house and that the water pump was corroded and needed replacement.  I had an "out" in my agreement if I wanted to, but the sellers were willing to pay for the repairs so I had no problems.

An inspection will also inform you of little things that you will want to pay attention to once you move in.  For me, it alerted me to some electrical "fix-ups" that I would need to do and some plumbing work.  I could have asked the sellers to fix that stuff, but I needed/wanted to learn how to do it myself so I didn't make them fix it and have learned a lot by fixing it myself.  (I've actually become VERY handy since moving into my house).

Another piece of advice is to have your attorney highlight for you anything on your HUD-1 that you'll need to be aware of when filing taxes next year.  My attorney did an INCREDIBLE job of highlighting EVERYTHING on that HUD-1 that I could claim on my taxes.  It was a huge help to me as there were items that I didn't realize I could claim, but was actually able to.  I got myself a VERY nice refund this year from federal and state and was able to buy myself a laptop and a few power tools that I wanted.   

When you have your inspection, it is also a good idea to have a radon test done.  This is especially true if you plan on spending a lot of time in your basement as that is where radon tends to collect.

[ChadTower]

Yeah, don't scrimp on the attorney.  My attorney found in the sales contract that the property tax figures were allocated wrong by the realtor, something about them wanting reimbursement of recently front-paid taxes for a whole year, and yet the taxes are only paid semi-annually.  That one catch saved us almost twice what our attorney fee was.

[Jdurg]

Here here!  My attorney was fantastic and I owe him the world for what he did to help me out.  I showed up for the closing and he knew I had never done anything like this before, and he walked me through everything in laymens terms.  He even showed me the lawbooks and everything.  Not once did I feel as though I was being talked down to.  He did a great job of explaining everything, and as a result I got myself a VERY nice tax return this year.

The kicker was when I got the key to my house and when I walked in there was a bottle of champagne and a card from the attorney's office with a little "congratulations" for me.  A really nice touch to a great experience. 

Still, the notations on a copy of the HUD-1 was the biggest help to me.  I recaclulated my taxes based upon what I thought I could claim, and his "notations" gave me an additional $1,000 on my tax refund!

[SavannahLion]

I wanted to take the money and do it myself. The realtor advised me it would be better to have them fix the roof, because who knows what other issues could possibly be uncovered in the process. Better for them to be liable than me after the fact.

On that same note.

Even though you'll want the previous owner to make repairs, there's not much stopping them from low balling the work. To put it another way, there's no incentive in spending the amount of money on materials that will last. They'll buy 15 year roofing instead of 30 year. Or they'll try to use fewer nails or even the wrong type of nails or even screws (Good house inspectors will always catch the screw/nail swap).

Also, my brother recently purchased a home. He had assumed that the shower heads, curtains and a chandelier would be part of the sale since they were all permanently attached. The sale went through, he moved in and the curtains were cheap ---smurfy--- Wal*Mart specials, the chandelier swapped out and the shower heads were missing. If you see a feature you like, specify you want that feature to stay in the house... even if it's actually part of the house.

[ChadTower]

Heh.  And if you sell a house, be sure the buyer knows your games aren't staying.  Some people will assume they are "appliances".

[lordtodd75]

I am speaking with an agent that works on behalf of the seller. Can I trust this agent when it comes to getting everything done(ie. inspection, etc.) God I hate not knowing who to trust and what to do. When do I hire an attorney?

[Jdurg]

This is where having a real estate agent is very nice because he/she will handle the attorney acquisitions, etc.  You should have your attorney PRIOR to making the offer.  The attorney will read through the legal offer and make sure everything is up to snuff. 

An Agent's job is to make sure that, within legal bounds, their client gets the best that they can get.  An attorney is just there to ensure that everything is legally acceptable.  Basically, if it's not required by law the seller's agent won't go out of their way to ensure that it is done.  So keep that in mind.

In all honesty, getting a real estate agent isn't a huge expense.  They get their payment from the seller, not the buyer.  As a buyer, you really don't end up paying the agent anything.  When I bought my house, there was no payment to the agent.  Their fees were part of the closing costs that that the seller paid for selling the house.  It was quite nice.   

[ChadTower]

I am speaking with an agent that works on behalf of the seller. Can I trust this agent when it comes to getting everything done(ie. inspection, etc.)

NO.

You can get a buyer's agent.  They get paid out of the realtor's commission - so nothing out of your pocket - and they will help arrange all of the stuff on your end.  If you've already found a house that is just easy money for the buyer's agent.

[shardian]

So you are saying the seller has a realtor? I thought you were doing a private sale. If they have a realtor, then you definitely should get your own representative. By all means, do NOT let the sellers rep also represent you.

You can get a realtor to be your rep and it won't cost you anything - their cut comes out of the realtor cut that the sellers rep would get.

[shardian]

Heh, we were all quick on that one.

[ChadTower]

I had an independent buyer's agent help my find my house.  One of the best decisions I've ever made - she worked purely out of the MLS database.  Every other realtor I talked to would show me their listsings rather than choosing from the whole market.  They were trying to sell me houses rather than helping me to buy one.  Subtle distinction but it was huge in practice given how stupidly quick the MA market was moving right then.

[lanman31337]

^^^^ My wife and I did the same thing when we were looking for a house.  She'd give us some MLS's to look at, we gave her some, came up with houses, and the rest is history.

[ChadTower]

The best part about that is that you don't have to pay them - they get paid from the seller's agent's commission.  Traditional realtors hate them, obviously, because their profit gets halved.  The realtor for our sellers actually groaned when she saw our agent walk in with me.

Our house was on the market for less than 4 days, though, so it couldn't have been all that bad for the poor realtor.   

[Jdurg]

Heh, we were all quick on that one.

Lol.  Yeah.  As a buyer, there's no reason to NOT get an agent on your behalf.

[SavannahLion]

I had an independent buyer's agent help my find my house.  One of the best decisions I've ever made - she worked purely out of the MLS database.  Every other realtor I talked to would show me their listsings rather than choosing from the whole market.  They were trying to sell me houses rather than helping me to buy one.  Subtle distinction but it was huge in practice given how stupidly quick the MA market was moving right then.

So that's what the big deal is all about.

Where I live, the housing market is slumping big time. A lot of realtors are putting up signs that essentially state they'll show you their house listings for free. I've been racking my brain for weeks trying to figure out why anyone would charge to view house listings much less keep it private.

[bishmasterb]

Purchase yourself (or have them purchase) a homeowner's warranty. This will remove some of the possible strain should small problems with the house pop up (and they will). It won't cover every conceivable problem of course, but it's a cheap security blanket, and if (when) something goes wrong, at least you can deal with the warranty company instead of having to deal with a friend/family about fixing your house.

I've purchased a home warranty for the buyers on all three of the houses I've sold in my lifetime, and have never once received a call from them after the sale.

Good luck.

[BORIStheBLADE]

Buying a house is rough. Are you looking to buy their house because they are giving you a good deal or something?
I don't know how much your spending on the house, but you might want to wait because probably in the next two months the government is going raise the conforming loan amount probably near $700k. Right now the conforming loan amount ends at $417k. So if your getting a loan for more than $417k you will have a jumbo loan and you will spend alot more on your loan.

Have you had your credit checked to see if you qualify for a home loan?

[myntik1]

As a recent homeowner I would like to provide a few things I wished I had done:

I wish I would have visited the house after a good rain storm.  My basement leaked and because it was an estate sale and the daughter lived in Cali she claimed she had no knowledge of it.

Turn on a bunch of applainces and lights and see what happens.  I had 50 Amp fuses, but it was wired wrong in half of the house.

Don't just turn on the water, let it run for a minute and see if the drains are clogged


Talk to someone in the business a realtor, attorney or a pest guy,  someone.  Ask them who the most thorough inspector they know and go with that guy.  I went with a guy my realtor recommended and he missed a few things in addition to those above.  To his defense he can't check everything, but my guy glossed over a lot of small items that I'm paying the price for now.  And when he tells you it will be X amount to fix this and that.  call someone immediately and get a free estimate before you commit to it.  It may be only 3 bones for him to have a chimney repointed because he may have a great relationship (referrals) with someone.  The average guy who doesn't know anyone is looking at a lot more.

And this is the myntik factor, save some cash for an emergency.  I originally had a good amount budgeted for the basement.  But after replacing the hatch door, replacing the fridge, dryer and stove my basement budget is now 38 cents.  I just wish all of my appliances would have gone at the same time I probably could have gotten a deal. Good luck with the purchase though.  There's no better feeling than knowing you own something.

[lordtodd75]

Well I put in a bid today for 10000 less then the asking price and I am pretty sure I am going to get it. I didnt speak to a buyers agent yet, but the pressure is getting to me, so I think I am going to talk to one tomorrow. I didnt sign anything that said I couldnt use a buyers agent so it shouldnt be a problem. unfortunately there is such a huge time issue that I wasnt able to talk to an agent before I put in my offer. The paperwork seemed standard and I read it very carefully, so I dont think there will be any surprises with that. When all is said and done I wont be surprised if I get this house for 20000 less then the appraisal. These people really want to get out quick.

I found out why there is such a time issue, turns out there daughter is buying another house next door to the one she already owns and there is no way she can float both mortgages, so mom and dad are coming to the rescue. Plus mom just retired and she is tired of climbing to the 3rd floor to get to her bedroom. Seems a little bizarre that the daughter has to have 2 houses but whatever. I got the information on good authority from my bros fiance who is there niece. So I am not actually related, but close enough. I will let you all know how this all goes as it unfolds.

[Jdurg]

As a recent homeowner I would like to provide a few things I wished I had done:

I wish I would have visited the house after a good rain storm.  My basement leaked and because it was an estate sale and the daughter lived in Cali she claimed she had no knowledge of it.

Turn on a bunch of applainces and lights and see what happens.  I had 50 Amp fuses, but it was wired wrong in half of the house.

Don't just turn on the water, let it run for a minute and see if the drains are clogged

That "should" all be part of a standard inspection.  When my pre-closing inspection was done, the inspector got on the roof and look at all the shingles and chimneys and connections to the roof, he also went out back and turned on the water faucet and hose and let it run for half an hour to see how the drainage was, how the water pressure was, and various other items relating to the water.  He then spent a good deal of time in the basement checking for any leakage.  A year before I bought the house, a VERY expensive drainage system was installed in the basement due to a prior flooding problem.  After MANY very heavy rain storms, the basement is as dry as can be. 

He also went to every single electrical outlet and tested the polarity and the load that could be handled.  The entire inspection took about 7 hours.  I was very impressed with how thoroughly it was done, and because of it I've had zero 'surprises' with my home.

[myntik1]

I paid about 5 hundred overall.  The inspector got about 375 (2.5 hours) and the termite guy got a 125 (1 hour).  Once again I got beat by my realtor.  I let her direct me to the people I should use for everything - inspection, mortgage, home repairs the seller had to pay for and to get my floors done.  Overall I would have to say she went Jet Li on me.  My inspection sucked, my mortgage is fine because I have good credit so they couldn't screw me, some of the repairs were done half-arsed, my floors sparkle but they cost 1K more than she said they would.  I'm the idiot though.  I would never let my bank or my car dealership tell me where to bring a car in to have it inspected before purchasing it, but I let my realtor tell me what to do.

You want to find the most detail oriented guy you can for your inspection.  A 7 hr inspection though must have cost a mint though.

[unclet]

Yes, always get your house inspected and then go to a title company which will do all the paperwork for you as well as determine whether there are any leans on the property you are going to purchase.   If the title company determines no leans exist, and then there happens to be one, then the title company is at fault and not you.

I never use a realtor when buying a house but I also make sure to get an inspection and use my own title company.

[Jdurg]

I paid about 5 hundred overall.  The inspector got about 375 (2.5 hours) and the termite guy got a 125 (1 hour).  Once again I got beat by my realtor.  I let her direct me to the people I should use for everything - inspection, mortgage, home repairs the seller had to pay for and to get my floors done.  Overall I would have to say she went Jet Li on me.  My inspection sucked, my mortgage is fine because I have good credit so they couldn't screw me, some of the repairs were done half-arsed, my floors sparkle but they cost 1K more than she said they would.  I'm the idiot though.  I would never let my bank or my car dealership tell me where to bring a car in to have it inspected before purchasing it, but I let my realtor tell me what to do.

You want to find the most detail oriented guy you can for your inspection.  A 7 hr inspection though must have cost a mint though.

The inspection cost me $725, but it was worth every penny.

[lordtodd75]

They just countered and they aren't conceding much in there asking price. I know they are just grasping at straws, trying to get a higher price. It is pretty risky though, especially given the fact that they need to get out of there asap, not to mention the current real estate market. Upon closer inspection of the local market, it seems my appraisal of there house may have been high. Seems that maybe I was right on with my offer, so I am not sure if I want to go much higher. Maybe I will concede 3 grand. I guess I will see how my fiance and I feel in the morning. It is always good to sleep on things.

[lordtodd75]

I went in 3000 over my original bid and 3 hours later I got the call. I am going tomorrow to sign the sale agreement. This feels great. Now onto phase 2, 14 days of running around like an idiot getting everything I need to done.

My current landlord says he is going to keep my security deposit because I didnt give him enough notice to break lease. But my lease says I need to give one month notice to break lease. So I am going to call my lawyer tomorrow and see what he tells me to do. I am sure he is still going to try to keep my deposit for repairs on the place, even though it will be in the same exact shape it was in the day I moved in. Why does it seem like all landlords expect to keep your security deposit no matter what.

I also noticed a possible discrepancy on my good faith estimate from my mortgage broker. There is a PMI premium of 1.5% of mortgaged amount as well as a PMI monthly fee of roughly 70.00 added into my mortgage. I was under the impression that it was either a monthly fee or a one time fee in your closing costs and not both. I called my lawyer and he said that size of a premium is not normal and told me to ask for a breakdown of what the fee is from my mortgage broker. All my mortgage broker could tell me was it was normal to have both the premium and the monthly payments on an FHA loan. When I asked for a breakdown and information he said he had none and not to worry, he wont try to cheat me since his assistant is my sister in law. So now I have to figure out if this premium is valid. I will call my lawyer again in the morning.

I will keep you all posted, wish me luck!

[shmokes]

When I asked for a breakdown and information he said he had none and not to worry, he wont try to cheat me since his assistant is my sister in law.

Anybody who will admittedly cheat you so long as he has no special relation with you . . . is cheating you, but not admitting it.

[shardian]

Congrats on the house - I hope everything works out well. As to your mortgage, you definitely need to verify your information. The amount you pay monthly IS the premium for mortgage insurance. The percentage that you pay is based on what downpayment you make. The smaller the down payment, the more you pay per month. If your PMI is calculated to be 1.5%, then you pretty much didn't have a down payment I would guess. Now what may be happening is that you are paying the first year of PMI up front, and then thru the year you are "escrowing" the next years PMI payment. This is how your homeowners insurance and property tax is paid too - thru escrow. You will be paying the first year up front of insurance also.

The best thing to do is just have a 20% down payment. That may not be possible, but if you don't have at least 10% then you really shouldn't be buying a house in the first place. My 2 cents of course.

Honestly, it is a little scary that you are going thru with a major purchase such as this without doing a fair amount of research. People just blindly throwing themselves into a large home loan w/o a down payment is what has gotten the housing market so ---fouled up beyond all recognition--- up in the first place. It is probably in your best interest to get a professional to double check your loan before you sign anything - just to be safe.

[lordtodd75]

Maybe you should reread my post and then try commenting again  I guess anyone who gets an FHA loan is an ---uvula--- since they are only putting 3 percent down? Not everyone can save up 20,000 to 40,000 dollars for a down payment.

I am not quite sure how you came to the conclusion that I am not researching, I thought I made it abundantly clear that I was in the process of researching the PMI fees and as I said in my prior post, I will be discussing all of this with my lawyer tomorrow. Just my .02, ofcourse.

[shardian]

My point is you are researching on the fly and after you've already committed to decisions. I'm not trying to be an ass, I just think you moved way too fast on this. Odds are everything will work out fine and I hope so.

I know it sounds corny, but I care about people on this board. When you ask for advice and such, I really, really want to see you have the best outcome possible.