Tuesday, July 18, 2006

Six Tips for Planning for life with a home and mortgage.

Recently there was an article on InvestorGeeks about whether or not you should buy or rent. I am a proponent (for the most part for many people) that renting is the way to go. If you a renter and you have decided to embark on that quest to buy a home or condo, there are a few things that I would advise you to do and consider during the process that might save you tons of time and sanity (and that I wish I knew before I started!).

Before the Purchase:

1. Consider the type of Real Estate broker you are getting. If it is someone you know and trust, that is great. However, be aware that there are two types of brokers - a buyer's broker and a seller's broker. Even if you walk into a real estate office and get an agent on your own, they might not be acting completely on just your behalf. It is possible to have two 'sellers' agents that is - each one advocates for the seller, even though one works with you to close the deal. Consider this before you commit to an agent.

2. Take some time on your offer:
- Consider the advice of your home inspector carefully. Your home inspector will likely give you several things to consider (especially for an older property). Even if you like the price, consider asking for a few things in your negotiation. Negotiation is an art and if you don't ask for items (and be very specific in your offer), you will likely 'leave money on the table'.
- If you buy a condo, make sure that the condo agreement is up to date and you are certain of any portions of the new property which you may be responsible for. Be direct, and up front, and consider talking to the president of the condo association to get those items straight and to get a feel for the community you are moving in to.

3. Be prepared to walk away. Even if you feel like this is "the one", sometimes something about the deal just doesn't seem right. Until you make the offer, you have the power to walk away. Make sure that you think about the process a while and what it will be like, emotionally, logistically, and even financially to live in this new home. Consider expenses, driving more or less, visiting family, new furniture or fix-ups that might be needed.

After the Closing:

4. Resist the temptation to 'redo' everything right away because you 'cant stand it'. There are often reasons for the way things are in a home. If you live in a home for a while, you sometimes discover that the shortcomings are charming and don't need to be fixed. Or sometimes a room that might have seemed great at first with a new coat of a dark color paint is actually already dark enough. Funny observations about your new home will make you appreciate and enjoy it and ensure that changes you make are ones that you will be happy with in the long run.

5. Start an emergency fund or contribute more to the one you have now. If you don't have an emergency soon, you are lucky. Repairs on a home or condo (or assessments if you have a condo association) are a big expense that people forget about. Even stashing a small amount away in a savings account for these incidentals (although new water heaters/roofs/air conditioners that cost upwards of a couple thousand bucks don't seem incidental) can really help defray these unexpected costs.

6. We've all heard that the three factors that contribute to the value of a property are location, location, and location. Don't think that property tax is any different. Be prepared for the tax bill that is coming. Check out the tax rates in the area you are considering. And it realize that it will go up, oh yes, it will go up. Although that mortgage is nice and fixed (you DID get a fixed mortgage right), expect a small increase in your tax bill for your property each year, in addition to other town services that might now be an expense. Plan for these up front to avoid unexpected surprises or consider getting them included in your mortgage if you want to avoid the process of paying separate bills. Most advisors consider that you should be putting about 1% of your sale price away for home repairs each year.

No comments: