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Protecting Yourself When Buying a Home

ThinkstockPhotos-476560173Whether you are buying your first home or you’re buying your 10th, you need to make sure you and your agent take the right actions to protect you on one of the largest purchases you will make in your life.

The 3 areas in which you will want to have the proper level of protection have to do with the property, the transaction and the financial aspect.

The Property

There are many potential troubles that can come with a property from incorrect zoning, to unpermitted work, to visible or hidden property defects, environmental issues, etc.  It is almost impossible to be absolutely certain that you won’t run into any issues in the future, but you can take the correct steps to make sure you have eliminated as many issues as possible.

The 3 categories of actions that need to be done to ensure you are aware of as much as possible regarding the property are 1) personal research and observation, 2) professional inspections and 3) disclosures (not necessarily in that order).

As a buyer you need to look at the property closely and ask about anything you see that doesn’t seem right.  In some cases you can get information from the seller, in other cases you will need to ask a home or other professional inspector.  But since you will ultimately have to live with the property condition you will need to participate in this as much as possible.

Sellers are required by law to disclose any material facts that affect the value or desirability of the property so you should get some information from them.  This can be helpful but should not be relied upon as being adequate in and of itself since sellers can only disclose what they are aware of and though many are honest and thorough in doing this, there is no guarantee that all are.  You will also likely get a lot of disclosure information from the escrow company involved with the deal.  You are responsible to review any disclosures you receive, clarify anything you don’t understand and ask questions about anything you want answered.

Professional inspections are always recommended so that you can get as much information as possible about the property condition.  An inspector can’t find every possible issue that might be going on with a property because they can’t cut into walls or floors or do anything invasive unless the seller agrees to allow them to do so.  Even so, they will be able to find most problems that currently exist or that are likely to happen in the near future and this in itself is very helpful.  You should be prepared for the possibility that you may need to have additional inspections – a home inspector will be able to look for and find many types of issues but sometimes an opinion of a specialist is needed to really know what the issue is and what it might cost.

Armed with this information you can decide if you want to continue the purchase or cancel it, or even renegotiate with the seller.  You can make your decision based on more information about what you are buying and what additional expenses you are likely facing in addition to the cost of your purchase.

Financial

This category mainly has to do with making sure you aren’t overpaying for the property and that it is affordable for you to own.

Paying too much for a property can give you trouble in the future when you want to sell, but if you are buying in a seller’s market you may have to pay above ‘market value’ just to be able to get something.  If it is priced way too high it will sit on the market and not sell and that can be the first indication to you that you may want to move on to something else.  This is something that you and your real estate agent will need to go over on a property by property basis.

At the same time you are looking at whether the price is reasonable you need to look at whether it is really going to be affordable for you.  If you are paying cash you may have enough to pay for the property and closing costs but then you have to also look at whatever repairs or upgrades are needed – did you factor that in?  What about the ongoing costs after the purchase?  You will have taxes and insurance each year and then there will be property maintenance and upkeep – painting periodically, roof repairs and eventual replacements, heating/air conditioning servicing and replacement, etc.   One of the ways buyers can get into trouble is getting the most expensive home they can ‘afford’ only to find out later that the ongoing expenses and cost for maintenance and upkeep create constant stress.

Have as nice a home as you want but make sure that the financial aspect of owning it doesn’t create a situation where you can’t enjoy it.

The Transaction

Though I have this listed as it’s own category it actually includes the 2 categories above.  All the steps in purchasing a home, condo or townhouse and how they are done will affect you not only in regards to that particular deal but also in the future if you do successfully buy that property.

The sequence of steps and their timing, knowing and observing all deadlines, ensuring that your due diligence is fully done, having the financing done in the manner that is best for you and watching out for your future – all of this is part of the transaction and both you and the people who are working with and for you have to pay close attention to the details to make sure nothing important is overlooked.

You will have questions along the way and you should ask them, and you should be able to get answers that make sense.  Your real estate agent and loan originator (if you’re getting financing) should be in regular communication with you concerning what you will need to do and by when, what they are doing, if the transaction is progressing like it should, whether there are any issues that are coming up that can affect your plans, etc.

The most successful purchase transactions I have been involved with have been ones where everyone involved worked as a team to ensure that the deal was good for both the buyer and seller and that they were doing their work for the buyer and/or seller.  This also means that the buyer and seller have to realize that they are part of the team working to have a successful conclusion.

Make sure that you have the best team possible so that you have the best success possible.


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