How to buy house in 2010 - home buying guide : Bad Credit Advisor

How to buy house in 2010 - home buying guide

In this home buying guide I want to focus on emotions of the buyers. Let us forget for a few minutes about your down payment and credit history, even though, we will of course talk about those. I suspect, it is going to be one very long post. So bear with me. Emotions, you see are quite dangerous thing when it comes to buying a house, especially your first one. How to buy a house in 2010 without getting yourself into trouble? Put your emotions aside and keep them there. Things like I must have this house or honey, I fell in love with it from the moment we stepped in have promptly led many to the most severe cases of buyer's remorse. And selling home you no longer want in current market circumstances will cost much grief and money. So keeping a cool head is very important.

How to buy house in 2010 - common sense do-not-do things
For starters, we want to notice in our home buying guide a few rather simple things that somehow people insist on doing.

1. Do not move back with your parents, in-laws or other relatives after you sell your existing home and want to take some time to find exactly what you want. In 2010, you will find plenty of more than affordable places to rent and many rentals are available on monthly basis without long term commitment. Living with your relatives or those of your spouse rarely contributes to a healthy relations after you move out. Unless you absolutely have to.

2. Don't expect making large and quick profit even when buying short sale or foreclosed house. I see foreclosures bought for $350,000 in formerly $700,000 neighborhoods and put on the market in $500,000 range. Only to be sold for lower $400,000. Still not bad but beware of all associated costs involved.

3. Don't be afraid to miss the bottom, I don't think there is any in sight. Do not read too much into S&P/Case-Shiller home price report which is being touted as sure thing by many from recovery-coming-soon gurus. I mentioned professor Shiller chart when he and his chart were very unpopular among realtors, builders and speedy recovery well wishers. The very same crowd now claims that the report promises a bottom in home prices in 2010, but not before additional declines. Well, take it for what it's worth, which ain't much in my opinion.

4. Don't be afraid to miss the lowest rates ever, they are here to stay for a while. Obviously, mortgage rates will fluctuate a bit but even an increase by a half percentage point will be the deal breaker for many. We wrote about interest rates not going anywhere in a foreseeable future in Getting mortgage in 2010 - how to get the best mortgage, and the Federal Reserve did state it just few days ago.

5. Don't buy a house just because you are afraid to miss government incentives, since there is talk about discontinuing the home buyers tax credit for new and existent homeowners. If you rush in, it is likely to end up costing you more than all the incentives out there.

How to buy house in 2010 - do not involve friends in home buying process
Yes, times are tough and you just want to throw a bone to a realtor friend whose business is 75% down from a year before, or your wife best girlfriend has just started at the local bank and needs something to show to her new bosses. When buying a house in 2010 or 2011 or any other year, having friends or relatives as your realtors or mortgage brokers is often but not always a rather bad idea, and also a dilemma or two. You are not sure how good they are but if you ask them will they be offended? Then again, do you want them to make money of you? But so what, someone else will? If you feel they are qualified you can get them, but weren't Steve and Mary quite unhappy with them?

If you have them do the work and deal goes bad because bank doesn't give you a loan or the realtor sells you a house that will have some issues later one as all homes, even the most perfect ones do, then things may get ugly between you and friends or relatives. The other question is commissions, with many realtors giving kickbacks that are quite legal in many states, how much should you ask for or how much they should offer, or should either of you mention it to begin with? And what if another realtor offers a much better kickback?

And how much your mortgage broker should offer you to pay for closing costs? The bottom line is, I have seen many cases where friend or relative based purchase works fine and as many when it doesn't. Finally, when husband and wife each has his and her set of realtor and mortgage broker friends, it further gives ground for needless and potentially harmful issues to arise, like my Jennifer would get us much better deal, than your Pete, you dummy.

The most important point is to find a professional who knows the area, knows how to negotiate, makes proper market analysis, etc. Too many realtors are simply accidental amatures, bored housewives, part timers and glorified salesmen who managed to get a license and have access to multiple listing network. Same goes about mortgage brokers and home inspectors. Home inspectors do not have to licensed in many states. And people often think they know everything, but if you have an uncle who is excellent plumber or electrician, he can simply miss more than few small but important things that experienced home inspector won't.

How to buy house in 2010 - choosing a realtor
That is the most important aspect and not every home buying guide puts enough emphasis here. Real estate agent is at the bottom or the top of the food chain. He or she is the one who recommends you a good loan officer, home inspector and lawyer. But most importantly, the knowledgeable and honest real estate agent who intimately knows the area you are interested in, will help you find exactly what you want, hopefully.

Of course, our home buying guide has few things to watch out for,
1. Don't relay too much on referrals of family and friends but judge for themselves. People change and someone who was good for your sister 5 years ago, may not be as good for you.

2. Don't get the top producer in the area. Those are mostly interested in getting listings to sell, and you will be stuck with one of his or her juniors who will try to push every house they show you.

3. Don't buy into "we are not Florida, Arizona or California ... our housing market is strong" type of the sale pitch, your state may be next if not already.

4. Curb appeal is one of the most ridiculous inventions in selling real estate. Just ask your realtor to explain you what precisely curb appeal is. If he/she tells you this is how much a given house appeals to would be buyers and that is why you must write a contract right now or tomorrow at the latest, just let it go because believe me, will be many others, even more curb appealing.

5. Don't believe the hype that there is nothing on the market in your price range any more and likely nothing is coming, since the prices will go up, so you have to grab this house. You don't and others will be coming indeed.

6. Be sceptical of a midnight call when your realtor wants you to jump the gun and sign the contract. Only for you guys since you are so nice ... or I did it for your brother in law so believe me ...

7. If someone calls your realtor with an offer or even an attempt to talk about the very house he is just trying to convince you to buy, chances are he is trying to break your hesitation by creating some nonexistent party that supposedly is after this very house.

How to buy house in 2010 - getting mortgage
You must understand that times have changed, so if your loan officer asks something in 11th hour, don't ask why, shut up and get it. He or she wants the deal done three weeks ago, get the commissions and move as aggressively on to the next deal, so believe me, they are not asking you to furnish additional papers just because they want to aggravate you.

You must also be prepared to few delays or even setbacks that can happen as late a the day or two before the closing. Even with everything perfectly fine, on the very closing you may encounter problems, so don't freak out. Get you lawyer to get all the extensions needed if something comes up before the closing. Normally everything gets resolved one way or the other.

After all, I am not going to touch mortgage details, down payment and credit history. We will get to those later, for now just remember 3 things,
First, there is no housing market bottom in sight so do not rush.
Second, nothing as uncommon as common sense so if you possess any don't be shocked that people look funny at you when you occasionally display it.
Third, if something looks too good to be true, it is very likely is.

Thu Jan 28, 2010 01:01PM by Tony | More in Personal Finance | Comments (0)

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