Buying a Home: The Missing Manual

✍ Scribed by Nancy Conner

• Publisher: O'Reilly Media
• Year: 2010
• Tongue: English
• Leaves: 352
• Edition: 1
• Category: Library

✦ Synopsis

Home ownership is a cornerstone of the American dream, but it's a complex process that, without the right guidance, can seem like a nightmare. This Missing Manual takes you through the process of buying a home, from start to finish. Along the way, you'll use the book's expert advice and fill-in forms to identify the house you want, figure out what kind of neighborhood you want to live in, determine what a target home is really worth, make an offer, and close the deal. Throughout the process, this book helps you:

• Realistically determine how much house you can afford
• Assemble a real estate team that's looking after your interests and not the seller's
• Understand the different ways to finance your house, and which is best for you
• Create an attractive offer with the best chance of acceptance
• Learn what lenders look for so you can get your mortgage approved
• Inspect your new home to uncover potential problems
• Prepare all the right paperwork for a smooth closing

Ten Tips for Buying a Home in a Buyer’s Market By Nancy Conner

1. Know what you can afford--and stick to your budget. This is true of any market, of course. But when there are lots of houses on the market, it can be easy to slip into the mindset that any home is yours for the taking: “Another bedroom might be nice, or a family room and a great room….”

Don’t treat your local housing market like an all-you-can-eat buffet. Before you shop for a home, know your needs and your budget, and focus on homes that fit those. To track your spending, try the free budget planner spreadsheet from Spreadsheets123.

2. Get preapproved. This is a good idea whenever you shop for a home, buyer’s market or not. Preapproval means that a lender has given you the green light to borrow a certain amount of money before you start shopping. It helps you know how much home you can afford, and it also streamlines the mortgage application process. And it signals to sellers that you can follow through on your offer—a big bonus at a time when mortgages are tough to get.

3. Work with a buyer’s agent. A buyer’s agent represents you and your interests exclusively in a real estate transaction. If you don’t have an explicit buyer’s agency agreement, your agent may actually be working for the seller. If you’re not sure that your agent is a buyer’s agent, ask. You need to be sure that your agent works for you, 100 percent.

4. Negotiate your agent’s commission. Real estate agents earn their money by commission, and that means they get paid only when they sell a home. In a buyer’s market, when sales are sluggish, your agent may be willing to return a portion of her commission to you as a rebate at closing. Why? Agents waste a lot of time working with window-shoppers who never make an offer. A rebate may induce you to follow through and buy a home.

5. Do your research. Before you make an offer, spend some time looking at similar properties that have sold in your area recently (the last six months), called comparables or comps. (Your real estate agent can get you the most recent data.) If selling prices are consistently lower than list prices, you’ve got a good chance of having a lower-than-list-price offer accepted.

6. Use online resources. Thanks to the Internet, it’s easier than ever before to get information about your local housing market—and you can do so in your pajamas and bunny slippers. Use sites like Trulia.com to find homes, check a particular home’s price history, and compare it to recent sales in the area. Zillow gives you a computer-generated estimate, called a “Zestimate,” of a home’s value.

7. Don’t assume all sellers are desperate. Some buyers lose out on homes they want to buy because they think that a buyer’s market means the buyer calls all the shots. They make an insultingly low-ball offer and are surprised when the seller turns them down. As a buyer, you’re in a good negotiating position, sure. But a seller isn’t obliged to sell his home at any price. There are other pressures on the seller, like having to pay off his current mortgage. When you make an offer, be reasonable.

8. Consider short sales and REOs. In a short sale, the current mortgage-holder agrees to a sale price that’s less than the seller owes on the home. An REO is a property that’s gone through foreclosure and is now owned by the lender.

You can find bargains among short sales and REOs, but you need to look at these properties in context. Are prices still falling, meaning the home will continue to lose value? Is the house in acceptable condition? Many short sales and REOs are sold “as is,” which means the seller won’t help pay for repairs. If you’re looking at short sales and REOs, be sure to work with a buyer’s agent who’s familiar with the ins and outs of the distressed housing market.

9. Negotiate for the best price. In a buyer’s market, some sellers try to get buyers’ attention by throwing a new flat-screen TV or a cruise into the deal as an enticement. Instead of going for a $1,000 gimmick, ask the seller for $1,000 off the price. You’ll save money in the long run by reducing the size of your mortgage and the interest you pay on it.

10. If you want something, ask for it. If you think the seller’s furniture looks better in the living room than yours would, ask the seller to include it in the sale. If you’re buying in a new development, ask the developer for free custom touches or appliance upgrades. The seller can always say no, but she might agree for the sake of the deal. In a buyer’s market, it never hurts to ask.

✦ Table of Contents

The Benefits and Drawbacks of Home Ownership......Page 21
The Pluses of Owning a Home......Page 22
The Minuses of Owning a Home......Page 28
How Much Home Can You Afford?......Page 35
How Much Can You Invest in a Home?......Page 36
Get Prequalified or Preapproved......Page 44
What Lenders Look For......Page 46
Improve Your Chances of Getting a Loan......Page 58
Choose Your Style
of Home and
Neighborhood......Page 61
Your Style of Home......Page 62
The Condition of Your Home......Page 75
Find Your Neighborhood......Page 82
Create a Wish List......Page 87
Assemble Your Real Estate Team......Page 89
Real Estate Agents......Page 90
Your Mortgage Provider......Page 106
Your Real Estate Attorney......Page 109
Your Home Inspector......Page 112
Other Real Estate Professionals......Page 114
Shop for Your Home......Page 117
Select Homes to Tour......Page 118
Bargain Hunting......Page 131
What to Look for on the Tour......Page 142
Evaluate the Neighborhood......Page 151
Compare Homes......Page 152
Finance Your Down Payment......Page 153
Calculate Your Down Payment......Page 154
Alternatives to Paying 20 Percent Down......Page 158
Compare Mortgages and Other Financing Options......Page 161
Mortgage Basics......Page 162
The Mortgage Process......Page 171
Types of Mortgages......Page 173
Choose the Term of Your Mortgage......Page 186
Government Financing Programs......Page 190
Creative Financing Options......Page 196
Choose and Apply for a Mortgage......Page 203
Find the Right Lender......Page 204
Get the Best Mortgage......Page 207
Gather Documents and Information......Page 216
Do the Paperwork......Page 217
Know Your Closing Costs......Page 235
Kinds of Closing Costs......Page 236
Add It All Up......Page 243
How Much Will You Pay?......Page 244
Reduce Your Closing Costs......Page 246
Make an Offer......Page 249
Figure Out What the Home Is Worth......Page 250
What Goes Into an Offer......Page 259
Negotiating: The Art of the Deal......Page 266
Prepare for the
Closing......Page 271
Check Off Contingencies......Page 272
All About Titles and Deeds......Page 277
Homeowner’s Insurance......Page 283
Get a Home Warranty......Page 289
Prepare to Move......Page 292
Take the Final Walkthrough......Page 296
Inspect the
Property......Page 301
Find a Good Home Inspector......Page 302
What Happens at an Inspection......Page 303
Understand Your Home
Inspection Report......Page 312
Specialized Inspections......Page 314
If Problems Turn Up......Page 320
Close the Deal......Page 323
Countdown to Closing: 24 Hours to Go......Page 324
What If the Closing Gets Delayed?......Page 327
What Happens at a Closing......Page 329
A Mountain of Paperwork: What It All Means......Page 332
Your HUD-1 Form......Page 335
What If Something Goes Wrong?......Page 340
After the Closing......Page 341
Index......Page 345