Buying Your First Home by Rick Lobley - HTML preview

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Rick Lobley

Sr. Loan Consultant
Money Tree Financing Group, LLC.

Taxes are just another factor to add into the total cost of your home. Newer neighborhoods often times have lower taxes. However, when the government starts building schools, streets, sidewalks and parks and starts moving police and fire protection into the area, taxes will undoubtedly rise. Also check to see if there are City taxes as well as County taxes.

Unfortunately, some of the best houses are located in some of the worst neighborhoods. When you buy a home, you are also buying into a community. You can't wall yourself away from the surrounding environment. The neighborhood location you choose is one of the biggest aspects of buying a house.

Choosing Between A New And Existing Home

With their belongings neatly stashed in cardboard boxes, the Smiths entered the market for a new home. The scenarios played out before them. Unsure whether to choose a new home or existing home, they sought out the help of a Realtor and a home builder.

Each tossed their own pitch onto the table - the advantages of a newly constructed home vs. a house that already exists. Who's right?


They both are. The Smiths don't exist, but the dilemma is real.

New homes generally come with steeper price tags, but offer more amenities. Homes are becoming increasingly wired for technology, including multiple phone lines and more advanced electrical wiring. A home can be built to suit the wants of the buyer. Better lumber, more energy-efficient appliances, custom wiring, and improved insulation can be advantages for new homebuyers.
New homes generally require less maintenance as well.

Some question marks associated with a new home purchase can be cleared with an existing home.

For a homebuyer putting costs over conveniences, purchasing an older home is an option. Existing homes often relieve the buyer of purchasing appliances, such as refrigerators and microwaves, which often are left behind by the previous owner.

Landscaping and established yards are another plus for an existing home. In an established neighborhood, homebuyers can meet their would-be neighbors. The character of an existing neighborhood often differs from that of a new development area.

Inquiring into schools, police presence and other aspects of living in a neighborhood also are possible in an established neighborhood. You might go into a subdivision and be the 10th house out of 100 and you’re not sure what's going to happen.

Existing homes often come with lower price tags because the buyer is paying past prices for labor and building materials. More negotiation in price also accompanies an older home.

Homebuyers should take personal preferences into account and examine the perks associated with both options. Low interest rates and appreciating home values should have little effect on whether a homebuyer chooses a new or existing home.

The Questions That Could Make All The Difference

1. What is the neighborhood (and your soon-to-be neighbors) like? Are there certain features in the area that would affect the value of this property in the future?


2. What are the property taxes on the home? Are there city taxes as well?


3. What are the utility costs... especially electricity if the home is electrically heated? You can usually contact the utility companies and get the history of the bills for at least the last year.


4. How far do I have to travel for schools, public transit and shopping?


5. What major repair expenses do I have to look forward to within the next two years? (water heater, paint, gutters, appliances, roof, etc.)


6. What is the traffic flow in front of or near the property... any main roads, bus routes or railway tracks?


7. Is there a fairly recent survey that shows all the buildings and additions on the property?


8. Are there any utility easements or encroachments over the property?


9. Was a home inspection done when the present owners first bought this home that you could check to see what minor and major problems there were? Were they fixed?


10. Has the homeowner signed a disclosure document?


11. Is there a better time in the month to close to minimize settlement costs?


12. What are the other comparable homes in the area selling for? You don’t want to overpay or get carried away by snazzy finishing touches in a home, which may be priced higher than other neighborhood homes.


13. How flexible are Sellers/Builders usually on their asking price?


14. At what price do we start with when we go to put in an offer?


15. What does the yard look like when it isn’t covered with snow? Are there any problems with drainage or runoff after a heavy rain or in the spring?


16. Does the basement show any signs of moisture... can it be fixed simply by cleaning/repairing the eves trough or is it a more serious problem?


17. What items can I have the Seller include in the sale? Are there any exclusions?


18. What is “Title Insurance”, and who pays for it?
19. Can the Seller require me to use a particular Title Insurance Provider
? (These last two reports have been attached at the end of this document)

Negotiating Tips

Negotiating the price for your new home doesn't have to be a stressful experience. Anyone can be a successful negotiator if a few simple things are kept in mind.

First , a Pre-Approved Buyer has basically the same power as a “Cash Buyer.”
Second, an informed buyer is a confident one.
Negotiations may be like snowflakes, no two are the same, but one thing that's helpful in every negotiation is information. Below is a list of questions that will allow you to become well informed heading into negotiations.

1. How long has the property been on the market?


Usually, the longer the property has been on the market, the more likely the seller will be to negotiate.

2. Has the price been reduced during the listing period?
If there have been any reductions, especially large ones, in relation to the overall price, then the seller will again be more apt to negotiate. You can also ask what the Sellers originally paid when they bought the home.

3. Have there been any other offers on the property?


Its good to know what offers are being considered and what offers have been turned down and why.

4. Why is the seller selling?
It is always good to know a person's motivation when negotiating. This will help you in choosing what offer to make. Sometimes, talking to neighbors will uncover motivations that were unknown to your Realtor.

5. What all are you buying?
Is the seller leaving anything else behind? Furniture or equipment, washer, dryer, etc. This should all be taken into consideration when making an offer.

6. What is the price range of properties that have been sold in the area? This will give you a good idea of what the market is like in the area.


7. How long do properties stay on the market in the area? This average will let you know how heavy the competition is you may be facing.

8. What is the list to sale price ratio in this area?
This tells you what homes were originally listed for vs. what they actually sold for. Knowing this will help you determine how little the seller may be willing to bend.

9. What is the average price per square foot of recent sales in the area?
Now you will know how the house stacks up against others in the area, without worrying about size. It puts all houses on the same level.

10. What other factors may affect the property value of the house or neighborhood? Crime, flood planes, natural disasters, termites, in other words find out the history of the house and area.

The only final information you should get now is a comparative market analysis (CMA). You can request your Realtor to write one up for any of the houses you wish to make an offer on. A CMA is what a seller uses to set the asking price. It may show you that the price they are asking is a bargain or extremely inflated.

Now that you are armed with knowledge, negotiations will be much easier. Now you know what a good price for the house actually is.

When you get into the actual negotiations, don't be in a hurry. Remember to be relaxed and patient. You have all the information you need in front of you, don't hesitate to take time to look over it again. As the buyer, the ball is in your court. You can always raise your offer if you need to, but you can't easily lower it.

Remain aloof and don't act as if you've fallen in love with the house, make them convince you that the house is the one for you. Don't let them rush you into a buy. If they say there is another buyer seriously interested, don't become over anxious, they may be bluffing.
Another ploy often used in negotiations is the 'good cop/bad cop' strategy. This takes place when one person acts as the hard liner who won't budge only to be convinced to come down a bit by the 'good cop.' The price they move down to, no matter how much the 'bad cop' complains, still may not be a reasonable one.

Don't get into a bidding war. If you are told that you are in competition with another buyer, let them make the first move, and avoid continuous bidding. This will just drive the price out of your range. Drop out of the bidding and see what the sellers' reaction is.

The key to all negotiations is to know your limits. If you've set a cap on spending, stick to it, don't let someone talk you into something you can't afford or aren't willing to pay.


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I hope that these reports and tools will be helpful to you in gathering the information needed to make the most informed decision about your first home purchase.


There is a lot to consider, and a lot at stake. However, armed with the proper help and information, this process can be enjoyable.


Enjoy your home search, and enjoy your new home!


Please feel free to contact me with any questions, or to get Pre-Approved in advance for your home purchase.


Also, when you are ready to start interviewing Realtors, please let me know. I have several very experienced Realtors I work with that deliver great service.


I look forward to serving you!