New Homebuyer - tips/tricks/unnecessary costs? (1 Viewer)

[Warrior]

Hey guys,

I'm looking at purchasing my first home in the very near future. I just made my first offer, which was countered today. I plan on countering back soon. Being a FBG poster, I of course am paying in , which is nice as I'm seeing there are a ton of fees when you originate a loan. I'm looking for some advice from the more "experienced" FBG homeowners. My RE agent is a nice guy and all, but I know he's trying his best to get a deal done and doesn't necessarily have my best interests in mind at all time.

Any tips for me?

The first thing I started researching was title insurance. I'm reading many places that it's a bit of a scam...that research shows that 70%-90% of the amount goes to the agent, while only about 5% is actually paid out on settlements. Would I be a fool to buy it? Or to not buy it? The house I'm considering was built in 2007, if that helps. Lets say $200,000 for simplicity's sake.

Wish me luck, I'm hoping my second offer gets a bit more traction from the seller

 

[Bucks]

Local customs can vary but typically it's standard that the seller pays for the owners title insurance policy. The buyer would pay for the lenders policy if financing was involved. You are putting up $200k in cash. You definitely want title insurance.

 

[Dentist]

I'm impressed as hell that you're paying for your first home in cash.

That is really awesome...

If there's one thing I learned from buying a home it's that the real expense comes after purchasing with the maintenance, the utilities (much higher than an apartment), acquiring stuff to fill the home, etc.

Homes are one big fat money pit.

 

[Politician Spock]

Homes are one big fat money pit.

that fuels the US economy.

 

[Warrior]

I'm impressed as hell that you're paying for your first home in cash.

That is really awesome...

If there's one thing I learned from buying a home it's that the real expense comes after purchasing with the maintenance, the utilities (much higher than an apartment), acquiring stuff to fill the home, etc.

Homes are one big fat money pit.

Thanks Dentist! I've been pretty frugal all of my life and am unmarried with 0 kids, so like 90% of my income goes into savings. I've also been renting with 3 roommates in a less than desirable neighborhood for the last 4 years to save up. I've started to realize lately that I'll need to have a good bit extra left over for furniture, utilities, etc. I'm hoping I can finagle a washer/dryer/refrigerator in the negotiations so at least I'll have that taken care of. I'll definitely to start from square one with furniture though.

The house has 3 bedrooms including a large master, plus a medium sized BR and a very small one. I'm hoping I can find a good tenant to fill the second room so they can help me out with a bit of rent and the utilities.

And thanks for the title insurance info, Bucks. I'll definitely keep that in mind.

 

[Otis]

I'm impressed as hell that you're paying for your first home in cash.

That is really awesome...

If there's one thing I learned from buying a home it's that the real expense comes after purchasing with the maintenance, the utilities (much higher than an apartment), acquiring stuff to fill the home, etc.

Homes are one big fat money pit.

You don't say.

 

[mr roboto]

Buy the title insurance - don't get cute. Get an inspection too.

 

[jon_mx]

Buy the title insurance - don't get cute. Get an inspection too.

I would not recommend against it, but it is probably the worst insurance there is.

As far as other types of insurance as a comparison, the loss ratio for title insurance is among the very lowest. Because title insurance is against past risks, not future risks like other insurance, loss experience is primarily based on avoiding losses. Compared to about 80% payout for losses on homeowner and auto insurance, the title insurers pay only about 5% in losses. Some are experiencing even lower loss ratios. In 2003, this testimony says that First American Title paid out only 1.2% in losses, represented by $41.7 million in claims on $3.4 billion in premiums.

If the title search is done well, Title Insurance should not come into play.

 

[fruity pebbles]

with interest rates so low and the tax write off, im not sure id buy a house in cash even if i could.

 

[Dentist]

Homes are one big fat money pit.

that fuels the US economy.

really at the end of the day it's living that's just too expensive

 

[WookieBooger]

make sure to get the sewer lines inspected by a plumber. if there is a problem have the current owners fix it

 

[Otis]

with interest rates so low and the tax write off, im not sure id buy a house in cash even if i could.

This. Seems weird to me to buy the house in cash. I'd rather have the money in my pocket, unless I was so filthy rich I'd never need it.

 

[fruity pebbles]

if i were you i'd talk to a good financial advisor before doing anything.

 

[Polish Hammer]

A friend's brother is now involved in a big property dispute where the title I surance is coming into play. Just get it. Without it he would be beyond screwed is my understanding.

 

[NutterButter]

I'm impressed as hell that you're paying for your first home in cash.

That is really awesome...

If there's one thing I learned from buying a home it's that the real expense comes after purchasing with the maintenance, the utilities (much higher than an apartment), acquiring stuff to fill the home, etc.

Homes are one big fat money pit.

Thanks Dentist! I've been pretty frugal all of my life and am unmarried with 0 kids, so like 90% of my income goes into savings. I've also been renting with 3 roommates in a less than desirable neighborhood for the last 4 years to save up. I've started to realize lately that I'll need to have a good bit extra left over for furniture, utilities, etc. I'm hoping I can finagle a washer/dryer/refrigerator in the negotiations so at least I'll have that taken care of. I'll definitely to start from square one with furniture though.

The house has 3 bedrooms including a large master, plus a medium sized BR and a very small one. I'm hoping I can find a good tenant to fill the second room so they can help me out with a bit of rent and the utilities.

And thanks for the title insurance info, Bucks. I'll definitely keep that in mind.

So you lived in an undesirable neighborhood for 4 years instead of buying sooner with less down and just getting a loan with a historically low rate? Are you that debt adverse?

 

[fruity pebbles]

I'm impressed as hell that you're paying for your first home in cash.

That is really awesome...

If there's one thing I learned from buying a home it's that the real expense comes after purchasing with the maintenance, the utilities (much higher than an apartment), acquiring stuff to fill the home, etc.

Homes are one big fat money pit.

Thanks Dentist! I've been pretty frugal all of my life and am unmarried with 0 kids, so like 90% of my income goes into savings. I've also been renting with 3 roommates in a less than desirable neighborhood for the last 4 years to save up. I've started to realize lately that I'll need to have a good bit extra left over for furniture, utilities, etc. I'm hoping I can finagle a washer/dryer/refrigerator in the negotiations so at least I'll have that taken care of. I'll definitely to start from square one with furniture though.

The house has 3 bedrooms including a large master, plus a medium sized BR and a very small one. I'm hoping I can find a good tenant to fill the second room so they can help me out with a bit of rent and the utilities.

And thanks for the title insurance info, Bucks. I'll definitely keep that in mind.

So you lived in an undesirable neighborhood for 4 years instead of buying sooner with less down and just getting a loan with a historically low rate? Are you that debt adverse?

Sounds like it. Even though the house is paid for, he'd still like a boarder for the extra bedroom. I'd rather get a 2nd job than have to share a house with someone im not banging.

 

[Politician Spock]

Homes are one big fat money pit.

that fuels the US economy.

really at the end of the day it's living that's just too expensive

July 2015: Dentist ->

 

[Sarnoff]

with interest rates so low and the tax write off, im not sure id buy a house in cash even if i could.

Kinda was my thinking. I jumped at the chance to take as large a loan as I could at 3.75% interest rate. No desire to pay it off early. That's almost inflation rate, making the money nearly "free" in the future.

As far as new homebuyer tricks, I just make peace with the fact that there was going to be B.S. that was gonna have to be paid somewhere. Even worked it into my budget, an extra 10K set aside for "whatever stupidity comes along". Sometimes you watch these shows on HGTV where the home buyers fret over an extra 2K or 5K or whatever. Really? If flushing 5K down the toilet is gonna break you, you shouldn't be buying a house in the first place.

 

[eoMMan]

Save money for different repairs that could be needed in the first few months. Also, money for paint, new carpet, your first orgy, etc.

 

[Slapdash]

Using cash is not a bad move unless you are planning to rent it out in the near future.

 

[Warrior]

I'm impressed as hell that you're paying for your first home in cash.

That is really awesome...

If there's one thing I learned from buying a home it's that the real expense comes after purchasing with the maintenance, the utilities (much higher than an apartment), acquiring stuff to fill the home, etc.

Homes are one big fat money pit.

Thanks Dentist! I've been pretty frugal all of my life and am unmarried with 0 kids, so like 90% of my income goes into savings. I've also been renting with 3 roommates in a less than desirable neighborhood for the last 4 years to save up. I've started to realize lately that I'll need to have a good bit extra left over for furniture, utilities, etc. I'm hoping I can finagle a washer/dryer/refrigerator in the negotiations so at least I'll have that taken care of. I'll definitely to start from square one with furniture though.

The house has 3 bedrooms including a large master, plus a medium sized BR and a very small one. I'm hoping I can find a good tenant to fill the second room so they can help me out with a bit of rent and the utilities.

And thanks for the title insurance info, Bucks. I'll definitely keep that in mind.

So you lived in an undesirable neighborhood for 4 years instead of buying sooner with less down and just getting a loan with a historically low rate? Are you that debt adverse?

Yes. Long answer is that I wanted to buy in another city about 4 years ago by taking out a small loan. I ended up moving and wanted to get to know the new city before deciding on a place to buy. In addition to saving $, I also wanted roommates for a while since they could show me around the area and I would meet new people through them. The undesirable neighborhood part was probably more about me not wanting to spend much $ if it was going toward someone else's mortgage instead of mine.

I know I'm a fool for not taking advantage of these low rates, but I live comfortably so I've been eating the investment opportunity cost in exchange for the security of knowing I'd be able to pay in cash. I'm now learning about a lot of fees involved with taking out a mortgage of any size, so it's nice not to have to worry about those.

 

[Warrior]

Save money for different repairs that could be needed in the first few months. Also, money for paint, new carpet, your first orgy, etc.

I think I'll go orgy first, then new carpet.

 

[Otis]

I will say I am most definitely looking forward to the day when I pay off my mortgage. That has to be an unbelievably good feeling to not have one.

 

[Henry Ford]

Go around to all the appliances (fixed ones even, like water heater and HVAC) and take pictures of the serial numbers. Look up how to tell how old each one is. It'll give you a vague idea of how long it will be before you have to replace them.

 

[Baloney Sandwich]

Don't get the extended warranty

 

[Johnnymac]

Seriously, do not pay cash with mortgage rates this low. You would be better off taking a mortgage loan and investing that money.

 

[NutterButter]

I will say I am most definitely looking forward to the day when I pay off my mortgage. That has to be an unbelievably good feeling to not have one.

Financially speaking, I'll be looking forward to the day that my kids graduate from college. Going the private school route, they cost me more than my mortgage does and at least a house is some sort of guaranteed investment.

 

[NutterButter]

Seriously, do not pay cash with mortgage rates this low. You would be better off taking a mortgage loan and investing that money.

This seems pretty obvious to me in terms of maximizing your long term dollars, but if you're as debt adverse as the OP, then investing would be too risky.

 

[Baloney Sandwich]

I will say I am most definitely looking forward to the day when I pay off my mortgage. That has to be an unbelievably good feeling to not have one.

Financially speaking, I'll be looking forward to the day that my kids graduate from college. Going the private school route, they cost me more than my mortgage does and at least a house is some sort of guaranteed investment.

hopefully they don't decide on a major like history or european studies

 

[NutterButter]

I will say I am most definitely looking forward to the day when I pay off my mortgage. That has to be an unbelievably good feeling to not have one.

Financially speaking, I'll be looking forward to the day that my kids graduate from college. Going the private school route, they cost me more than my mortgage does and at least a house is some sort of guaranteed investment.

hopefully they don't decide on a major like history or european studies

yeah, not sure how i'm going to handle that. hopefully i won't have to cross that bridge.

 

[Warrior]

Seriously, do not pay cash with mortgage rates this low. You would be better off taking a mortgage loan and investing that money.

This seems pretty obvious to me in terms of maximizing your long term dollars, but if you're as debt adverse as the OP, then investing would be too risky.

Yeah, I realize the folly in not investing the money instead, but this has been my goal for a long time and I'd pull my hair out if I lost a big chunk of it in the market. I do have some retirement $ that I have invested in some pretty risky stocks, so I'm still happy when the market goes up and my house nest egg just sits there doing nothing.

 

[Slapdash]

Seriously, do not pay cash with mortgage rates this low. You would be better off taking a mortgage loan and investing that money.

Saves a few grand right off the bat in origination costs.

 

[Warrior]

Go around to all the appliances (fixed ones even, like water heater and HVAC) and take pictures of the serial numbers. Look up how to tell how old each one is. It'll give you a vague idea of how long it will be before you have to replace them.

Nice. Great idea. The place I'm currently considering was built in 2007, so everything is relatively new, but I'll definitely do this when I look at other houses.

 

[Henry Ford]

Go around to all the appliances (fixed ones even, like water heater and HVAC) and take pictures of the serial numbers. Look up how to tell how old each one is. It'll give you a vague idea of how long it will be before you have to replace them.

Nice. Great idea. The place I'm currently considering was built in 2007, so everything is relatively new, but I'll definitely do this when I look at other houses.

If it was built in 2007, the water heater might give you 5-6 more years. You find a 15 year old water heater, they're selling you a house without a water heater.

 

[Henry Ford]

Keep in mind that just because the house was built in 2007 doesn't mean they put a brand new water heater in it.

 

[Psychopav]

How would you determine the age of a water heater?

Can you tell when it's time to replace a water heater other than when there's a big hole in it and there's water all over the place?

 

[Henry Ford]

How would you determine the age of a water heater?

Can you tell when it's time to replace a water heater other than when there's a big hole in it and there's water all over the place?

the serial number has a code. You have to Google your brand and figure out how to decode it, I think, but the first four digits are usually the month and year of manufacture or year and week.0395 is probably March, 1995.

9915 is probably the 15th week of 1999.

 

[mquinnjr]

Seriously, do not pay cash with mortgage rates this low. You would be better off taking a mortgage loan and investing that money.

Markets go up and down, but what I've seen most as a inflation adjusted overall yearly market return is ~8%. If you go conservative and choose a simple, low cost index fund/ETF, you're gaining an automatic ~4% return vs. paying down the mortgage. It has to be money you don't need now, like retirement money, to absorb the ups and downs that result in that ~8%. But, ignoring the power of that just to hit your mortgage harder with payments is a HUGE opportunity cost long-term.

 

[Warrior]

Any more first time homebuyer tips, guys? Other than the water heater trick and, uh... investing in the stock market?

 

[mr roboto]

Location. You can renovate a house, but you can't move it. Stay away from busy streets, retail areas, don't buy a house that has airport or road noise behind it.

Water drainage - depending on where you live, this is either irreverent or VERY important. Make sure the lot slopes away from the house and you aren't the lowest lot in the area.

Foundation condition - if the basement is unfinished or it has a crawl space, check the walls. If on a slab, check to see if the flooring is level.

Mold - attic. Check the attic.

DO NOT buy based on the cosmetics. If it's move in ready, consider it a bonus. But you want a sound, dry, mechanically updated house.

Check for permits if a recent kitchen reno or basement reno was done especially if there is plumbing in the finished basement.

Condition of neighboring properties. You can't control neighbors. Make sure the immediate properties are kept up.

Schools - even if you don't have kids, good schools help for resale.

 

[Warrior]

Location. You can renovate a house, but you can't move it. Stay away from busy streets, retail areas, don't buy a house that has airport or road noise behind it.

Water drainage - depending on where you live, this is either irreverent or VERY important. Make sure the lot slopes away from the house and you aren't the lowest lot in the area.

Foundation condition - if the basement is unfinished or it has a crawl space, check the walls. If on a slab, check to see if the flooring is level.

Mold - attic. Check the attic.

DO NOT buy based on the cosmetics. If it's move in ready, consider it a bonus. But you want a sound, dry, mechanically updated house.

Check for permits if a recent kitchen reno or basement reno was done especially if there is plumbing in the finished basement.

Condition of neighboring properties. You can't control neighbors. Make sure the immediate properties are kept up.

Schools - even if you don't have kids, good schools help for resale.

Awesome, thanks.

Regarding your first point, I almost made this mistake. I really liked a house located close to a major interstate but didn't realize until I was leaving that it was situated directly behind it. There was a thick row of trees behind the house, but I looked closely and could see the cars down below. Once fall/winter comes and the leaves start to fall, I'm sure the noise would get worse. Not to mention the thick cloud of exhaust that must constantly be hovering over that property.

 

[RUSF18]

For anything you believe you need to remodel, decide where you're willing to go low cost and where you're willing to spend a little more, and then stick to your budget on everything. It's pretty easy to just say "it's only a little extra" a bunch of times and by the end, you've spent a lot more than you wanted.

 

[Sarnoff]

For anything you believe you need to remodel, decide where you're willing to go low cost and where you're willing to spend a little more, and then stick to your budget on everything. It's pretty easy to just say "it's only a little extra" a bunch of times and by the end, you've spent a lot more than you wanted.

"Just another $5,000" [/otis]

 

[Henry Ford]

Location. You can renovate a house, but you can't move it. Stay away from busy streets, retail areas, don't buy a house that has airport or road noise behind it.

Water drainage - depending on where you live, this is either irreverent or VERY important. Make sure the lot slopes away from the house and you aren't the lowest lot in the area.

Foundation condition - if the basement is unfinished or it has a crawl space, check the walls. If on a slab, check to see if the flooring is level.

Mold - attic. Check the attic.

These four, definitely, and the bolded especially. No one thinks about it, but you'll definitely be thinking about it while you spend several weekends installing your own french drains when you realize your property floods.

 

[NutterButter]

Keep in mind that just because the house was built in 2007 doesn't mean they put a brand new water heater in it.

Furnace is the big ticket item. A water heater is like 300 bucks.

 

[NutterButter]

Roof is another big purchase so find out how old that is. If it has septic, make sure to get that checked b/c that's very costly to replace.

 

[Johnny Rock]

Totally agree on having a good inspection done and bringing friends and/or family by too. They'll see things you won't. Tell them to be honest with you.

I'd also buy an Owner's Title Insurance policy. Who cares if their loss ratio is low? This is a no-brainer for a risk averse person such as yourself. Don't forget a homeowner's policy with Replacement Cost coverage from a reputable insurer.

Turn on every faucet you see to check water pressure, including the shower. How about the height of the shower head?

Look for signs of a wet basement, even moreso if no sump pump.

Does your vehicle/boat/whatever fit in the garage?

How much yard work maintenance do you want?

What kind of heat and AC? Ask them for copies of the utility bills.

What are the property taxes? Any assessments? HOA dues?

Did the realtor show you comparables (comps) for Sold Properties? Not similar houses still on the market. This will help you with pricing.

Don't worry about filling every room with furniture right away. I believe it's more fun to get what you need and pick up unique pieces when the opportunity is right. Auctions are fun.

 

[Sarnoff]

Any more first time homebuyer tips, guys? Other than the water heater trick and, uh... investing in the stock market?

Just checked my mailbox and remembered: for about a year after you close, you'll get all sorts of spam in the mail. "Get an official deed recording for only $400" or "Don't forget to get a copy of your city property registration! Our service is only $150." These are all scams. Legal scams, but scams.

Everything you need to file and/or register will be done at closing. Everything will be taken care of. These spammers are offering to to get publicly available records from the city office and photocopy them for you for what comes out to about $100 per page. They just figure enough people don't know they can ignore this junk mail and get scared they'll lose the title or deed somehow and will fork over the cash.

 

[UOFI_316]

make sure to get the sewer lines inspected by a plumber. if there is a problem have the current owners fix it

This. probably $150 to have them scope it, will tell you if there are any roots getting in, broken/displaced clay pipe, etc. I just paid to have a giant hole dug in my front yard to fix sewer problems. $150 versus 13k to fix everything.

Turn on several faucets at the same time. Turn on the shower and then flush a toilet see if the pressure drops.

If the floor framing is exposed in the basement look for signs under the kitchen that there was a water leak/flood at some point.

In the basement look at the base of whatever is sitting on the floor, chairs, chest freezers, look for small rust rings around the feet to tell if there are water intrusion problems.

If the house has carpet, pull up a floor register and see if you can slightly pull up the carpet to tell if hardwood floor is beneath it or if it is just plywood.

Some crappy inspectors will not move things out of their way, like move ceiling tiles in a basement. Just pop up a couple and see what you can.

Condition of driveway.

Knock on some neighbors doors, see if they like the neighborhood, if they know about any issues with the house. I have a neighbor who is the original owner of his house, he can run down an almost complete history of my house, which I would not have gotten from the previous owner as we are like the 9th people to own the house.

 

[Yankee23Fan]

Real estate is so location specific it's hard to give advice. I will add this though, since title insurance came up - if I have a client that refuses to get title insurance I fire them. It's not worth the headache to me for one real estate deal.