If you have followed this personal finance blog very long, you know that real estate investing is near and dear to me. I am a licensed Texas realtor, and have rental properties of my own as well as managing property for others. But how does that benefit you as a residential home buyer? It means that I can provide you sound advice and tips on buying a home. So what are the key things to look for? And what are some ways to minimize the risk of buying a lemon?
First thing first – Location, Location, Location
The old saying is true, location is the most important factor when buying a home. If you are new in town, I recommend driving the neighborhood and talking to some of the potential neighbors scoping out that next home. Also, make sure and find out about the school zone the property is located in, and what specific school your children will be routed to.
Get a Home Inspection
After finding a great place, you need to know if the home has any problems. Sometimes when folks go through a home, they love it, and gloss over the potential problems. A home inspection will level the playing field between you and the seller, and give you some points to negotiate on. You may think that you don’t want to incur the $100-$200 cost of the inspection, but hey – ask the seller to pay for it! Even if you can’t come to terms with the seller, the seller can use the report to help them fix any issues with the home, and give comfort to the next potential buyer.
Find Out what the Tax Value is, and the Tax Amount
Often these can be found online via a city website, otherwise just look up the phone number for the county clerk’s office and inquire about the home. Be sure to ask if your county uses “100% market value assessments” or some other valuation method. You can then use this information to bargain down the price of the home.
Shop Around for Home Owner’s Insurance, and Use a High Deductible
While most of you know that shopping around for insurance is a good idea, you may not agree with obtaining a high deductible. But let me explain. Don’t buy insurance with the intent to use it – insurance is designed for catastrophes, not everyday use. Look at it this way: Would you rather pay $150/month for a $500 deductible, or $100/month for a $2000? This example is fictitious, however the concept is that you will pay for the $1,500 deductible gap in less than 3 years of premium payments. So again I say, think of insurance as a guard against disaster, not as an everyday crutch.
Negotiate the Purchase of the Home
Duh! Right? Well, often people don’t do a good job of this. Let me put it to you this way, I have been on the seller’s side, and I can almost guarantee that the seller built some negotiation into the price, e.g. they have increased the price in order to be able to come down and make a deal that they are happy with. For sale by owner homes are the best for this, as you can speak directly with the home owner and gauge their reactions. When talking to the owner, try to identify things with the home that would merit a lower price. Butter them up, so to speak, but don’t make a verbal offer. Always submit written offers. If they are expecting a lower offer, when they get it they will be less likely to get angry and throw it away.
If the home is listed with a realtor, you will just have to submit an offer. I recommend starting very low, and just see if you can get a response. Don’t get emotionally attached, or you will spend way too much for the home.
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