Editor’s Notebook: It’s A Jungle Out There, Know Your Rights – The Mortgage Note

Photo: Kimberley Haas, editor of The Mortgage Note

The housing market is tough for any buyer to negotiate. Unexpected things pop up at every turn and closing a deal can seem like a second job.

I recently dipped my toes in the water and put in an offer on a home. The experience taught me numerous lessons and reminded me of the importance of due diligence. With this in mind, I would like to pass along these tips to anyone who is considering a home purchase in today’s market.

Things Are Not As They Appear Online

Listings for homes can be misleading. And it’s not just the perfect pictures or virtual staging to blame.

A home can be “beautifully renovated” but that doesn’t mean the HVAC system and water heater are within their life span. Renovations could have simply included cosmetic items such as kitchen cabinets and flooring.

In a day and age where people are searching for homes to tour online, properties that look good in photos tend to get attention. But good-looking properties may have serious, and costly, issues that you will need to address once you become the homeowner.

Never Waive An Inspection

One way to avoid costly repairs once you become a homeowner is to get an inspection of the property. Although people often waive an inspection to get their offer accepted, this is a very risky move.

An inspector goes through the home and assesses the fundamentals, including heating and cooling, plumbing, the electric panel, water heater, fireplace, kitchen appliances, bathrooms, laundry hookups, windows, and doors, as well as whether there are indications of settlement.

Inspectors can also point out major, marginal, and minor defects. They may recommend replacement or repairs. This is important because once you have an inspection of a home, you can ask the seller to replace systems and fix issues that are problematic or will become problematic in the near future.

The seller is not obligated to replace systems or fix issues, but at that point in the contract, if they do not agree to do so, and you can see yourself getting in over your head with costly repairs, you can walk away from the purchase.

Keep in mind that an inspector won’t catch everything that is going on with a home and no matter what, there will be things that you need to repair during the course of homeownership. It’s important that you save enough money so that you have the budget to maintain your home once you move in.

Be Your Own Advocate, Research Everything

I cannot stress how important it is to be your own advocate throughout the process. Your realtor can help you create language in your offer and after the inspection to help protect you, but you are the only one who will suffer long-term if you make a housing decision that isn’t right for you.

This means going through the home with a fine-tooth comb prior to putting in an offer. After the inspection, you will need to read every sentence of the report and make a list of everything that was made note of so you can present it to your realtor for negotiation.

If you are looking at a condo or townhouse, get in touch with the homeowners association or city planners to find out what kind of firewalls are in place in between units and/or what the codes are for multi-unit structures built at the same time as the one you would be moving into.

Use Crime Maps And Global Warming Predictions To Inform Your Decisions

Ideally, you should check local crime maps and global warming predictions for the neighborhood you are considering prior to putting in an offer on a property. You may be surprised to find out that a neighborhood has high crime rates or may be flooded many times over the course of the life of your mortgage loan.

In addition, you should go to the property on a Friday night to check out what the neighborhood is like after a long work week and people feel like letting loose. Talk to a neighbor while you are there and find out if they have any trouble with car break-ins or other crimes. Ask them about storms and whether the area floods. If they are honest, it could save you a lot of trouble down the road.

Put Your Own Safety First

In addition to learning all you can about crime in a neighborhood, think about what would happen if you had to call the police or emergency services. How far away is the local hospital? How long would it take for an ambulance to get to you if you were hurt on your property?

When it comes to the home itself, what were the building codes at the time the property you are interested in was built? What kind of materials were used to build the structure? What kind of pipes and paint were used?

Water and air quality can be an issue in some parts of the country. An inspector may be able to determine if there is radon in the air or chemicals in the water. These issues can often be remedied with the right home systems, and you will want to make sure they are in place and working before you move in. At the very least, you will want to know what you are dealing with and how much it would be to fix these issues.

Understand What Repairs Are Scheduled

If you are moving into a home with a homeowners association, it’s important to find out what is being scheduled as far as future upgrades are concerned. Often, these costs fall on the homeowner through increased HOA fees.

Remember, these are repairs that aren’t negotiable. If a homeowner’s association plans to replace the roof or balcony on your unit, those preplanned renovations will be your responsibility.

Make Sure You Know Exactly How Much It Will Cost To Move

If you are renting a place now, it’s important that you understand how much it will cost to break your lease. You will need to set that money aside so you can get out of your rental agreement.

Your landlord or people working in the leasing office at your apartment complex can help you navigate what it would look like if you were to close on a home on a certain date.

At the same time, don’t provide your landlord a move-out date until after the home inspection process and you know your loan is secured. If you do, you may end up stuck in a precarious position.

Research Loan Options And Rates

Borrowing money for a home is expensive. Homebuyers can save thousands of dollars by getting quotes from multiple lenders and asking for the best rate possible. They can also potentially save money by using a mortgage broker who can help buyers shop for the best rates.

Talk To Your Loan Officer About Everything

After you have found a lender, talk to your loan officer candidly about what you are hoping for and what you can reasonably afford. Ask them to calculate how much your monthly payments will be given a variety of scenarios and make sure they tell you exactly what you will have to bring to the table on closing day.

Some lenders have programs that can help with rate buydowns and closing costs. Ask if any apply to you and what the criteria are for these programs. You may find out that there are ways for you to save money through your lender.

Research Down Payment Assistance Programs

Down payment assistance programs are growing in popularity and many potential homebuyers qualify for help. Sometimes loan officers know about the programs. Often, states have resources posted online and you can find out more by contacting the appropriate provider.

These programs may require homebuyer preparedness training but can be well worth it if you can access thousands of dollars in financial help for the down payment on a home.

Don’t Get Emotionally Attached To A Property

It’s hard to put in an offer on a home and not imagine spending time there with family and friends, maybe having a cookout in the backyard. But it’s essential to stay emotionally unattached if you want to negotiate the best deal for yourself.

That means staying emotionally unattached all the way through closing. As I said at the beginning of this article, there are twists and turns at every step of the homebuying process.

In order to make sure you can do what’s right for you, it’s important not to fall in love with a home.

You Have Rights

Remember, you have the right to back away from any deal, even if you have almost completed the homebuying process. Understand when you can, and should, negotiate or terminate a contract.

Your realtor can help you negotiate or back out of a deal. There are also resources online to help clarify at what points you can do so.

Often you can get a return on your deposit if you terminate the contract at an appropriate time, for example, after an inspection that finds defects with a property that cannot be negotiated.

It can be difficult to tell your realtor and lender that you are not going forward with a contract for a home. You may even feel guilty about it, as if you wasted their time.

But the truth is, buying a home is a business transaction. The terms of the agreement have to work for you, and at the end of the day, you are the only person who will be paying for, and living in, that home.