1st Time Home Buyer

What are all the expeses you have to pay up front when buying a home? I know the realestate agents need thier cut, but am not sure how much they get. Do you have to pay any property tax upfront? or homeowners insurance?

Sorry, one more question: How long does the process usually take? I am looking to take advantage of the tax credit which has a cutoff of Dec. 1st 2009. When would I have to find a house by, and make an offer etc.

Thanks again.

The seller typically pays the real estate commission, not the buyer. In my state, the seller is also responsible for the pro-ration of property taxes. Those are the only two things the buyer is required BY LAW to pay for in my state.

The rest is negotiable.

The list of what the closing expenses are is a mile long, and differs depending on what kind of loan you get. For example, a VA loan tacks on so many charges, and takes percentages off the top, that it's a real shame we treat our veterans that way. My home was just purchased by a guy with a VA loan, and they charged him nearly $10k in closing costs (on a $125k home). We paid $4k of that -- part of our negotiation to sell the home.

A short list includes loan origination fees, possible "points", appraisal fee, the lawyer's fee, new survey, filing fees, title search, and a bunch of other stuff. Additionally, depending on the kind of loan you get, you may be required to buy mortgage insurance, and show proof that you have purchased home owner's insurance. Also, prior to even arriving at the closing table, you will have paid out of pocket for a home inspector, a termite inspector, and any other due-diligence expenses you want, in order to make sure you're getting the house you think you're getting.

They say you should budget 3%-4% of the home's total price toward closing costs.

How long it takes depends on how on-the-ball you are, how on-the-ball the seller is, and what timeframe you negotiate. My husband and I just sold our home in what might be the smoothest transaction ever. We listed our home, this couple looked at it the second day it was listed, put in an offer the same day, withdrew their lowball offer the very next day (before we could reject it), and made us an over-full-price offer the following day. We countered on closing costs and timeframe (they wanted thirty business days for due diligence, but we demanded 15 calendar days, which they accepted). They took those two weeks to get their financing firmed up (they only had a pre-approval letter), get their inspections done, etc. At the end of the two weeks (now three weeks since the home was listed), we set a closing date two weeks ahead, because we needed that much time to pack our stuff and arrange for a mover and move the stuff out. So, from first offer to official closing, five weeks -- and we were both highly motivated to move quickly.

The first time home-buyer credit ends December 1 (unless they extend it, which you never know!). That means at best, you need to find the house you want in mid-October (and probably earlier, because business slows down the closer you get to the holidays, and people don't want to return your calls). But in reality, you need to start looking NOW. Is there any particular reason why you want to cut it close?

I dont necessarilly want to cut it close, but I am moving to a new city at the end of the month, so it will take a bit of time to find the right neighborhood and house. We have seen a few online but they are a little overpriced for the area.

How low is too low for a lowball offer(either by % or $)? Most houses on the market in theigborhood we looked at online are around $10k less than this house, and they have similar lot sizes and sq. ft.

I already know I will not need PMI, have any loan fees, or pay any points, but I was not sure of all the other fees. If the house was build in 1995 how much inspection is necessary besides the general home inspection?

With the real estate market as depressed as it is, I would shop around and put out a lot of VERY lowball offers, and see where you find a seller who's really urgently looking to sell and might consider a low offer just to get to the table. That said, you'll find better deals in the late fall and winter months than right now or the summer, as it's harder to sell in the colder months.
As for how low you should go, I'd talk it over with your real estate agent, but it doesn't hurt to start as low as you can get away with, without being offensive. I find this is generally in the 60-70% range of asking price.
Best of luck,

I agree with LeaseRental -- put in shockingly low lowball offers. That's what we are doing. We have not fallen in love with any one house, so walking away is easy.

It really is a matter of the market. Our new city is surprisingly robust -- military town AND university town -- but there are still builders who thought they could build cruddy houses and still command high prices. Now that they are sitting on inventory, they might be willing to deal. I'm putting in an offer of $170k on a house they list at $240k. It's one of two spec houses built in a brand new subdivision -- and no one else lives there! They won't get people to buy lots and build homes until the spec houses sell. The spec houses won't sell because they are overpriced for their quality. The developer also has two other subdivisions in the area, with a total of about thirty houses, 12 of which are currently for sale (10 are new construction, inventory he's sitting on). His personal house is up for sale, too. I see this as a sign that he needs cash to keep the operation going, and that he might be willing to take a small loss, on the hope that having someone living in the neighborhood will push others to move in as well. And if he doesn't, there are over 430 houses for sale in the area, and I have a short list of four houses I will bid on, in order of preference.

I'll get a house at MY price -- the numbers are in my favor, even if I'm not in a market experiencing a terrific crash!

Meanwhile, educate yourself about neighborhoods, values in the area, etc. You mention one house that is priced $10k more than the others. You need to ask yourself why. If they are underwater in their mortgage, that's not your problem. If they have added value to the home that the others have not, that's a benefit to you. But if they are the most expensive house in the area, you need to step back and think twice. I have my eye on a lovely mid-century modern brick house in town, but it's $15k higher than the neighborhood commands. It's very nicely updated -- the hardwood floors have been uncovered, and the bathrooms updated (the kitchen appliances are also updated, although not the cabinetry, which is small). After my eyes were first dazzled, I kept coming back again and again, and what I'm seeing now is that it's the best house in a neighborhood that seems bordering on something. I want to live in a neighborhood of professionals (people who edge their lawns, and keep their tree branches trimmed), and while the house is "professional", the houses around it seem to be working class (car engines under tarps, weeds growing around fence lines, dogs running loose, etc). The question I can't answer is this -- is "my" house a sign that the neighborhood is moving up in class, or are all the other houses a sign that the neighborhood is moving down in class? There's no sense paying a $15k premium on a house that's going to be the stuck up tea-with-pinky-finger woman on a street that holds redneck block parties -- because I'll never get it back when I go to sell, later!

If you have time, watch some of those "sell your house" shows on A&E and HGTV. The advice they give to homeowners trying to sell is information you can use as a buyer. One program (Get it Sold) compares the homeowner's house to comps in the neighborhood, and the goal of the program is to fix up the house so that it is at least as nice as the comp house, and then lower the price so that between the two, the featured homeowner's house looks better. That's advice the buyer can use, in reverse -- when you shop, you need to compare houses in the neighborhood, and play one off the other when you set your price and/or negotiate.

I don't know that LR's 60-70% should be a rule of thumb (although it might be, if you're in a very depressed area). The house that is third on my list, I'm going to ask for a 15% reduction, and I'd take it at that price. For one thing, it's already under-priced for the neighborhood. For another, it needs very little in the way of fixing up (we like mid-century modern, but most people look at a house like that and start adding up how much it would take to update all the bathrooms and the kitchen). What does need to be done are things we can do. And finally, it has the most amazing landscaping imaginable -- the kind of gardeners we aspire to be lived there, and solved all out problems for us! At my price, I could afford to update the things I want, and imagine it would quickly approach the value of the neighborhood.

Also, here's some advice for house-shopping, especially when you want to hurry and take advantage of the tax credit.

1 -- Make house hunting your job. Even if you have a full-time job, you need to make house hunting your priority. Come home from work and jump on the computer to look at houses. Go out with your realtor several evenings a week, and every Saturday (Sunday, too, if you and your realtor are okay with that). I teach, so I'm now entering summer (when I don't work), but even before now, I was on the computer constantly. If one of you doesn't work (or is out of work while job hunting) that person should spend part of the day house hunting. And don't forget to just drive around. It's a great way to familiarize yourself with a new city (get a GPS system, if you don't have one, so you don't get lost!), and it's a great way to spot houses. The house above with the great landscaping? -- I found it while driving aimlessly around nice neighborhoods. It never shows up on a search at Realtor.com, even though it fits the criteria I used to narrow down the search -- although it will show up if you enter the MLS#, so it IS listed there. Which leads to #2....

2 -- Don't trust Realtor.com implicitly. I don't know why, but it does NOT show all the houses available. Example -- early in our search, we liked two houses sitting side by side on a particular street. When I searched on Realtor.com, it would only ever show one. For about three weeks, it showed the one on the right, then for a week, it showed the one on the left, then it was back to the one on the right. If I hadn't saved the listing (you can sign up and be able to save your favorite listings), I would have thought the other house had been sold. Don't let any online source be a substitute for legwork. Go out and find houses/neighborhoods you like.

3 -- Make a notebook. Or some other way to keep track of the houses. Collect all the relevant details that are important to you. For me and my DH, that's the price, MLS#, address, square footage, year built, days on the market, taxes, size of the master bedroom, and pictures. Keep it all in one location. Take it with you, so you can make notes about the house while you're in it. There's nothing worse than having to drag your realtor back to a house, because you can't remember if it was THIS one, or THAT one, that had the cracked tile. Be organized.

4 -- Pick a realtor who will work with you. For me, obviously, the realtor has to be willing to show us homes regularly. She had to be willing to spend all of a Saturday with us. She also has to work with you -- she needs to understand what you need, what you won't take under any circumstances, and be able to forward houses you may not have found on your own. Also, if you are at all interested in foreclosures or short-sales, you need one with experience in that, not one who "knows the rules about it" or who "has done one or two". This is an extremely complex area, and if you have a wimpy realtor, you will NEVER get the price you want on a foreclosure/short-sale. My own is a bit wimpy in that regard, so we are not looking at f/s-s properties.

5 -- Create computer bookmarks. At a minimum, you should have easy access to Realtor.com, and the county's/city's property records and tax information. The tax website lets you know what you might be paying in property taxes. The property website will tell you what the previous owner paid for it, when, and give you an idea if they are merely profiteering, or actually asking for what the home is reasonably worth. This can help you set your offers.

6 -- If you're a demanding client like me, be willing to do some legwork yourself. I could just as easily ask my realtor to pull up the tax and property information -- but it's online, and it cuts down on the time she's working for me (I'd rather have her for the showing of houses, and don't want her sick and tired of me after having to do paperwork searches!). My DH and I also will drive to a neighborhood where a house is advertised, and if the house is not occupied, we will peek in the windows. In this way, we have eliminated houses we would have normally asked her to show us, either because we could see serious problems through the windows, or because the neighborhoods were not what we wanted.

7 -- Get your preapproval letter early, so you know what you can afford. No sense looking at houses beyond your means. And keep up with your mortgage broker. Mine disappeared on me, so I'm going to have to go through the process again -- imagine if I had waited until we were approaching closing, and had to start over again! ARGH!

Thanks for all the tips Puck. I will be putting them into action in the next month or so. I have enjoyed reading your replies here and on many other topics. If you think of anything else, please share.

Saturday, we looked at our 50th house. We have put in offers on six. I'm preparing my seventh offer. Hunker down and get ready for a long haul! All those reports about a bad real estate market, where easy pickings are to be found don't mean anything, stacked up against weeping homeowners who are refusing to let go of "the place where I raised by bayyyybeeeeeees!" at a decent price.

As we have started looking I also have seen that. A few we were interested in have been pulled off the market because they were only getting low ball offers.

Maybe when they go back on the market they will be 'For Sale By Owner' instead to lower the selling costs. Is there anything to watch out for with FSBO homes?

FSBOs can be great, I hear. My agent has actually approached a few FSBOs for us (after they agreed to pay the buyer's side of the commission), and one in particular is such a good deal, we are considering it (it's not in the location we want, but otherwise, it's a great price, and can be easily improved by pulling up the carpets to expose the hardwoods, and pulling down the 1970s wallpaper).

Oh, and interest rates have just jumped 3/4s of a point over the last three or four business days! What happened to the bad economy? I need it to be bad until I get my house!!!

Hi Puck,

Here are great posts from which have enhanced my knowledge.

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Sam Thomas
Real Estate Buyers Agent (http://www.buyersagent.net) ? Do you need one and how do you find one?

Thanks for all your advice. We have an accepted offer and are closing on October 16th. It seems to be the perfect time to buy, great rates, lots of properties out there to choose from, and very motivated sellers.