Home Buyers Checklist
What are you looking for in a HOME?
What is the size of your family? What type of location will be best for you and promise the best improvement in real estate value. What recreation and other activities are you and your family keen on? Are there good schools and hospitals and other utilities for quick and easy access. Are important infrastructure and transport facilities available.
How much can you afford?
How much is the budget for your new home have you saved up adequately to finance a home purchase. Have you checked out the government state and federal facilities that allow subsidies for home purchase. Preparation of a cash budget is important to figure out how much you can afford to pay monthly and annually for a home purchase. Should the investment be for a apartment or a house in the suburbs. Have you assessed the trade off in owning a house in the city and one in the suburbs in terms of commuting cost and time? Have you carefully assessed the cost of home ownership, property taxes and the tax implications.
Own or Rent
Is is conducive climate to purchase a home or rent a property do you expect a bubble to burst or is this the best time to buy a house. Postponing a purchase at times when prices are high can be one of the best decisions that you can make.
Finance your purchase
Mortgages can be very expensive so first consider the tax implications. The subsidies provided by state and federal authorities for home owners. Consider obtaining multiple competitive quotes from different banks and housing finance companies. Don’t forget to read the fine print. Check the conditions that allow for re-financing and secondary mortgages, prepayment penalties etc
Buying a second home or an investment?
If your planning to purchase a holiday home or a second home as an investment it is important to consider the rental value, property taxes and ease of rental, legal fees etc
Build or buy decision
At times of asset bubble and booming property market it may be much cheaper to build a house rather than buy an existing house you need to look at land price and contractors value of the property that you plan to build. The time factor will also have to be considered how much time will the building contractor take to complete the house – liquidated damages clause in the contract may allow you to ensure that the builder constructs the house in time. You will also need to have a good working knowledge about building regulations in your area before you purchase any land. Your contractor will help you to get up to speed on various local authority rules and regulations.
Use an agent or buy directly
Benefits if using an agent include the legal formalities will be undertaken by the broker and consultancy service on drafting the legal documents. Will provide detailed advice on the property and how to develop it – will advise on how you can obtain an independent opinion on the property. The broker is not an independent party as he will earn a commission on the sale usually from the seller.
Performing an online search
Online search for property has become popular and has led in most cases to cutting out the middle man as more people deal directly with the seller. However in performing online searches there are some risks that will be borne by the buyer as the data on the website needs to be accurate and upto date the disclaimers and terms and conditions of the website needs to be carefully assessed to ensure that interests of the buyer have been adequately protected.
Determining the price
This is where the services of the broker come in handy as they know the going market rate for a property and will be likely to get the highest price to ensure a higher brokerage fee. The other method includes reviewing prices of recently sold similar properties in the same location from local registration authority such as the land registrar.
Buying foreclosure houses
Mortgage companies, banks and local property tax charging authority can be a good place to find foreclosure properties. Foreclosure properties can be a good way to get a very cheap and good deal – but caveat include difficulty in assessing the real condition of the property – the buyer may have to spend a considerable amount to make the property habitable and raising cash for the purchase as usually foreclosure properties have to be bought for cash only within a week typically.
Buying and selling houses can be a quick way to make a lot of money – most entrepreneurs purchase houses that can be easily developed by making some slight or significant improvement and quickly sold in the secondary market. Profit in flipping depends on how quickly the property can be resold – holding a property unoccupied for long period of time can cost a lot in terms of opportunity cost and householder costs resulting in a loss.
When not to buy a house
Buyers Caveats (Buyer Beware)
- When the ownership is not clear and the deed is defective
- Local authority and zoning ordinances are changing in the locality
- High crime rate and unemployment rate in the area
- Poor infrastructure and utilities
- High property taxes – depends on your own budget
- Asset bubble and volatile property market
- High mortgage rates and interest rates
- Very low rental rates makes renting more profitable than buying
- State and Federal taxes and lack of subsidies that make home ownership unattractive
- When you cannot trust the broker
- Independent opinion on the property condition is negative or adverse
- Building a property is considerably cheaper than buying