Real Estate 101

7/7/2009 Meg "finding myself making every possible mistake" M. says:

I'm in the middle of it. It sucks something vicious.

7/7/2009 Melissa "Gram" M. says:

Has anyone gone through the process of buying their first home yet? Was it difficult? What was it like?
I have been looking for two years -- I have been actively looking (going to open houses, looking for hours a day, meeting with realtors since probably January).  I hope to find a place by the end of the summer.  It's just scary.  It's a lotta money.

If you haven't gone through the process of buying a home yet (or even an investment property) why not? What is holding you back?
I'm scared!

7/7/2009 Richard D. says:

I have gotten close but, have not yet closed on a property. On two attempts, it was the seller not following through on important repairs as promised. Deal breaker, right there. I'd be looking to do some minor work, mostly cosmetic.

7/7/2009 Justin "loves Boston" O. says:

So from my basic understanding (I'm personally looking forward to our event to learn more) right now the buyers market is so good and rates are also good that you can get away with paying the same for a mortgage that you'd pay for your rent? Anyone know if this is true?

7/7/2009 Dawn "Delicate Flower" E. says:

I bought my house two years ago.  I found it on the first day I looked (it was the last house) and I closed 3 weeks later.   I'm in the mortgage industry but I didn't go through my own company because I didn't want them to see my info.  (even though I refer all my friends here and I'm probably going to refi here because other companies can't seem to do better on the rate and my privacy becomes less important when $ is concerned).  I can say, with experience that the process was very smooth.  People often make the process more complicated than it has to be, I think.

I have had problems with my house since I bought.  I had a major plumbing issue that cost me thousands, and my Hazard wouldn't pay for it unless damage was already done but if I waited for it to completely burst it would have resulted in sewage all over my kitchen.   I also complete gutted and redid the kitchen.  It's harder than it looks.  I did most of the work myself or with the help of friends until I had medial issues and needed surgery.  Then I paid to have it completed.

Be prepared for unexpected things that cost alot.   When you get preapproved for a mortgage, you will get preapproved for what you can afford on paper, which doesn't count how much money you spend on food or shoes or HBO.  Don't be so conerned about rate... think about payment and buy what you can afford.   My house was $100k less than I was approved for and I can afford it on my own at that. I  had a roommate and will get another eventually but it's nice to know I don't NEED one to get buy.

This whole mortgage crisis happened because people when crazy and spent mort than they could afford and agree to non-standard mortgages to get it done.

Only YOU really know what your finances are like and you shouldn't let anyone else tell you you can afford more than you know you can.

:)

7/7/2009 Justin "loves Boston" O. says:

Richard, when the seller didn't do the repairs did you try re-negotiating on the price?

7/7/2009 Dawn "Delicate Flower" E. says:

Justin, rent is probably cheaper for the first year.    But for the first few years of a mortgage, it's primarily interest, and you'll get a great deal back on your taxes.

7/7/2009 Meg "finding myself making every possible mistake" M. says:

We put an offer in on a condo we really wanted. We were in a offer/counter offer war with the IDIOT sellers. We put in a final offer of 156 k. She came back and said she wouldnt go less than 158K. Lost the sale over 2k. IDIOT. We walked.

7/7/2009 james "the message in my alphabits says 'ooooooo'" w. says:

my mortgage + taxes is about equal to the rent in the area.  plus i get money back on my taxes.  throw in condo fees and i'm a bit higher, but i get back money on my taxes which makes up for most of that.  

oh, and (presumably) when i move, i'll get a check which will be more than a security deposit.

7/7/2009 Lynda "She said MEEP" M. says:

I have done the home buying thing twice. I bought my first home back in 1996, a multi family on the North Shore. Found two other properties I had liked previously, but I had to find one that passed the home inspection! (Some real dumps out there, and I do not mean just cosmetics, I mean major structural issues). Lived there in until 2004, missed living near the city, so I sold the multi and bought my current condo. Both transactions were relatively easy, except the mortgage co I used for my first house REALLY sucked. They dropped the ball on everything. I went to a bank for my current mortgage, so much easier.

7/7/2009 Mark "Hilarious Diversion Tactics" M. says:

Been in my house 1 year and love it. The worst part of the entire process was actually finding a house that was worth buying.

Our first step was to set a budget: take your income and subtract monthly bills and spending money. Subtract a decent size  amount you will put into savings for a rainy day fund.  What is left over should be equal to 140% of your mortgage payment you can afford (monthly payment + 40% for cost of home ownership like repairs, taxes, etc) AFTER you put down a 20% down payment. I can't stress that enough-- if you don't have the 20% down payment, reconsider if this is the right time for you to buy, or look at less expensive houses. I realize people will disagree with that, and it might even spark an argument, but there's a good reason this was standard practice for decades. Understand your mortgage. Get one mortgage at a fixed rate. Don't get an 80-20, or anything like that. And for the love of all that's holy, no ARMs.

Real estate agents suck and in my experience add NOTHING to the process. We ended up using one begrudgingly. From personal experience I would highly suggest staying away from dual agency (if you hire an agent, don't buy a house from a client they represent in the sale.)  Yes, this is legal, but there certainly is a conflict of interest regardless how much they assure you they are unbiased.

Hire a good lawyer to help with all the contracts, fees, etc.

Be realistic.  It is a buyer's market but you cannot get a $500k home for $199k.  Don't get involved in a bidding war.  If you "beat" the other person trying to make an offer, you probably have overpaid. Don't get emotionally attached to a home and overpay. Be prepared to start low, negotiate, and walk away when the price hits a point higher than you think it is worth. On the contrary, if a house is listed at a price in your budget, and it is everything you want, don't mess around with trying to get it for a steal. Give them the asking price and be done with it. We ended up getting our house because another party that wanted it kept making insultingly low offers. We offered asking price and got it on the same day as the offer. Rumor has it the other party then came back and offered more than list price to try to get it back, and the sellers said no because they were tired of their shannanigans.

It took us over 2 years to go through all this but we eventually found a great house in a great neighborhood we could afford. A lot of it is luck-- right place at the right time. But be patient... that's the best advice I can give.

7/7/2009 Dawn "Delicate Flower" E. says:

Mortgage Lenders often get better rates than banks.  I have no idea why since banks eventually buy the mortgage in most cases and you'll be sending your payment to the bank, but, having been int he industry for year, I've found that to be true.   There is a difference, though, between a Mortgage Lender and a Mortgage Broker.  These days with current program structures, you're unlikely to find the best rates at a broker.  

If you pick a major lender, you shouldn't have hiccups in service.  In fact, they should be more efficient than a bank.  (Because it's all they do.)  However, small shops can go either way.  At my company, which is a leading lender, we take a survey at the end of the process and ask questions about service, and satisfaction, and convenience, etc.  About 90% or so of the ones that come back are completely positive, and very few are complete negative (with a few in between that and some and some).  I'd recommend asking a friend where they got their mortgage and how they felt about the service and follow your gut.   If it seems too good to be true, it probably is.

7/7/2009 Dawn "Delicate Flower" E. says:

I disagree with Mark.  You can still find a signigicant advantage with homeownership and a LTV (loan to value) or greater than 80%.  Also, mortgage insurance is tax deductable and is not as scary and folks think.  There aren't a lot of 80/20s available in todays environment so that's moot.  I financed my house at 100% (Nov 07) and already have a decent amount of equity.  You won't be able to get 100%, these days, but you can get in the high 90s with FHA.  Again, it's all about what you can afford.

There's also good reasons to get an ARM.  Like,for instance, you KNOW you are moving in less than 10 years and you'd like to benefit from a low rate in the meantime, maybe a 10/1 ARM is a good idea.

I do agree with Mark about the bidding.  I paid asking price more my house immediately.   It later appraised for $10k more.

7/7/2009 Mark "Hilarious Diversion Tactics" M. says:

Dawn,
Let's say someone buys a home at $250,000 and finances 100% at a low rate of 5%.  This would mean only $7,500 has gone toward principal after 2 years.  Since 2007, median home prices in MA have fallen drastically (close to 10% in Marlborough, specifically.) This means the house is now worth $225,000, and the buyer still owes $242,500.  They are now upside-down by almost $20,000. What happens if they have to sell? Oh, and don't forget the 4% realtor fee on top of that. They'd be in debt over $30,000.

In the same scenario, let's say the buyer puts 20% down on the home. The mortgage is only for $200,000. After two years they now have $56,000 in equity compared to the above's $7,500.  Even with falling home prices they are ahead of the game by over $20,000. If they have to sell, they can do so while still hanging on to some of their initial investment.

So I stand by my statement: if you can't put a decent down payment down you should not buy.

7/7/2009 sam s. says:

I have to agree with Mark. In last 2 years market has fallen so hard even in prime neighbor hoods like back bay or beacon hill apartments are sitting for months and there are drastic price reductions even in trophy properties. I just can't imagine if you bought it in Nov. 07 and your property value has gone up?

This whole economic downturn was started with aggressive lending such as sub prime mortgages, no money down and it should have been a wake up call for you. Home ownership is a responsibility. If you can't afford decent down payment, not sure about job, finances, may be possible move, then probably you should not buy it.  Although it is a good time to buy but at the same time no one can tell if this is absolute bottom so you should plan to live in the house for at least 5 years to break even.

7/8/2009 Justin "loves Boston" O. says:

This is all great stuff! Thanks for the info.! In order to steer this conversation back towards general tips and away from the nitty gritty financial details, I want to ask you, what topics would you like to be most covered at this event. We have an excellent speaking agenda already planned, but may have room for a few more topics and I figured why not ask you.

We'll have a Mortgage Broker speaking first, a Closing Attorney next, and a Real Estate Agent who will wrap it up...we'll also have excellent Sangria!

Here is the event page if you haven't looked at it already: http://www.yelp.com/ev...

7/8/2009 Dawn "Delicate Flower" E. says:

Mark,

Home prices are stable in Marlborough and mine, as I said, has gone up in value.   That said, I don't the point in buying a house if you might be moving in a year or two...  That said, there is no way I could rent a house this size for what I pay in mortgage and I get a NICE chunk back in taxes, especially during the first years because it's all interest.

Additionally, the realtor's fee isn't in addtion to the selling price.  It's part of it, and the seller pays it.  You don't pay an additonal fee if you have a buyer's agent (buyer's agents split the seller's agent's fee), or, if you did, you're an idiot because it typically doesn't work that way.   And if the price your paying for the house is what you feel it's worth, then whatever fee is worked into is moot.  Hell, if you want to back out the agents fees I got a better deal than I thought.

Of COURSE, it's better to put 20% down if you can't, but less of a down payment doesn't have to restrict you from homeownership.  Which brings me back to MY original statement, which is, each person individually knows what he or she can afford.  Don't let other dictate to you what you can afford, instead, consider your own finances, all of your expenses, and all of the variables before you commit.

7/8/2009 Dawn "Delicate Flower" E. says:

Justin, you're going with a broker as your speaker and not a lender?   Hrm.   Can you say who from what companies?

7/8/2009 james "the message in my alphabits says 'ooooooo'" w. says:

mortgage broker - having your shit together.  what documents (financial and otherwise) you might need; what types of programs are available to first time buyers; and, while i agree they should not be generally recommended, what the differences are between arms, negative am. loans, interest only loans and the like and plain vanilla 30-year fixed.  people need to learn the lingo.

closing attorney - what they do, what they do not do, and who they represent (here's a hint, it ain't you); problems that inevitably will crop up prior to close; what buyers need to have ready for closing (i.e., funds in the bank available on 24 hours' notice); title insurance (difference between bank and borrower policies, why get it/not get it, &c.).

real estate agent - inspections; negotiating a good p&s; what to look for/avoid in properties; how to negotiate with sellers; what they do, what they do not do, and who they represent (here's a hint, it likely ain't you).

7/8/2009 jeremy "prrofreading is for chumpfs" k. says:

well i just closed on my crib in the framingham, nice lot, great neighborhood. seeing that i was able to lock in under 5% and the tax benefits plus the 8k from obama, it was time to become house poor, yea!!! i think????

anyways, ive been busting my ass 12 hours every day off and a few hours after work every day and the place still looks like a bomb blast, but as soon as that paint goes up, im sure it will come together.

my 2 cents, get at least 3 estimates for everything, use referrals and always expect shit to happen.

ohhhhh and my last piece of advice, look at topographical maps people, floodplains are not the best place to have underground residence......just saying...

8/21/2009 Tina M. says:

I loved Dawn's post of 7/7.  A great line from that post is" Be prepared for unexpected things that cost alot."  I'm a Realtor on the North Shore and this is one piece of advice that is often not communicated to buyers.  Invariably, once you've put out all that money and are in the house, somehting goes wrong.  A water heater leaks & floods the basement, you have an ice dam and water's running down the walls, etc., etc.  I love having a house, but you have to be realistic about the costs.  That said, my first house cost my husband and I $416.00 a month, and we didn't know how we were going to make that payment.  Fast forward to now.  If we were still in that house & making that same payment today - think of how well off we'd be.  Of course, I didn't stay there - but that's a story for another day.

8/21/2009 mike "saw moose!" G. says:

have bought & sold in CA and france. but my first boston purchase(south end)  a few months ago was Hellish.   my real estate agent,  bank(pre-approved,25% down) and attorney were the most incompetent i have EVER come across.  as in tons of what-the-f*ck moments.  in contrast, my 9wk build out went without a hitch. what did i learn?

screaming gets you action!  got BA to cut fees for delay in closing and a rebate from realtor. then bought  expensive master bath tiles and a new WIDEscreen tv with the windfall   :-)

8/21/2009 Dan "I stole your retrangle!" G. says:

I know nothing about taxes, mortgage etc, but I too am a home owner of 2 years. I used http://ziprealty.com and I don't really recommend them but i do recommend the ease and use of their website, it was awesome and easy to use. Find a realtor that will help you, and listen to what you are looking for. Many obviously are in it for the money and others really do have fun with it.

I had absolutely no interest in looking at this house. I felt the pics made it just gross. So I looked at like 10 others, and the pics made those look great, but in person they were horrible. The online pic for this was horrible but in person I fell in love.

Whoever did the mortgage f-ed up a lot and 'misplaced' papers and forgot this and that. I don't know who it was but it was really aggravating. The closing was a nightmarish 5 hours. The previous owner was about to walk out because we couldn't get some stupid paper from the mortgage co and therefore it held us up by many hours, it was really f-ed up. The home owner was a complete prick too, he left us folding chairs from 1980, but one of my friends lucked out and got a previous owner who is amazing.

There have been major issues with the house, a deteriorating sewerage pipe that wasn't disclosed put us back a couple thousand. It involved tearing up my neighbors driveway and repairing it. Since I own a 2 family, deleading was obviously a priority, which means basically tearing out the walls and replacing them, repainting etc. Owning a house is a LOT of work, but its also worth it in every way possible.

8/21/2009 Melissa "Gram" M. says:

well as a first time homebuyer my fiance and i are reaaaaally trying to find a house.  though, this past week we've discussed putting that on hold and just being renters.

oh what to do.....

8/21/2009 Mark "Hilarious Diversion Tactics" M. says:

Helooooo Gram!

Don't buy until you can find exactly what you want. It's too much $$ and commitment just to settle for something. There will be some compromises, but they'll be obvious when you find the right place. Sounds trite, but nevertheless true.

Our compromise was the kitchen. Great house, awful out-dated 70s kitchen. We're in the middle of the renovation now. That's a whole other ordeal.

8/21/2009 Melissa "Gram" M. says:

Hellooooo Mark!

Yes, I will heed your wise advice and wait wait wait.  If we find something spectacular, then yes, we'll put a bid in.

Otherwise, I'll just sit quietly on my porch in my chair....