You’ve crossed out all the important things on your list: you’ve convinced yourself that you want to buy a house, you have the funds, and you’re ready to apply for that mortgage. What’s next? That fun part of touring houses for sale all over town and picking out the house that you think is right for you.
But before you commit yourself to buy that elegant old home that looks straight out of a Hollywood movie scene, ask yourself some important key questions. It’s almost sure that upon close inspection, every house will have an issue – from a minor repair to a major structural flaw. Obviously, you should know these things before you buy a property.
If you skip this part, you’d not only frustrate yourself with your purchase but it can also give you some financial problems later. Here are some questions to ask:
- Why are you selling?
People move or relocate for a variety of reasons. Some transfer jobs, some families outgrow their homes, some experience major life events such as marriage, the birth of a child, the death of a loved one, etc., or retirement. Asking the seller his reason for selling the house can prove helpful in the negotiation process.
However, don’t expect that every seller would give a hundred percent honest answer. The real estate agent or the seller is under no obligation to tell you why – but they might give you a hint at the circumstances. Once you get a good idea for the reason for moving, you can ask for a lower price if it means they can sell or get out of the house faster. Of course, if the seller has no pressure to sell immediately, you won’t have that kind of advantage.
- Is there anything that’s NOT included in the sale of the house?
When you view a house, don’t immediately assume that everything you see inside or outside comes with the asking price. Things like appliances and fixtures really look good on the house but make sure if they are part of what you are buying.
There may be a nice garden shed in the backyard but it could be something that the owners would take with them when they move out. Perhaps it’s the ceiling fixtures they want to bring to their new residence or other seemingly “built-in” items that don’t come with the house. Check out the similar things such as bookshelves, mantles, etc. that the old owners can dismantle and take when they leave.
To be on the safe side, ask your agent to clarify what the initial home offer incudes and what it does not. Make sure you know what you are buying and note these things into the contract. This way, you avoid surprises and misunderstandings later. You also avoid disappointing yourself over your purchase.
- How long have the owners lived there?
If a property had many different owners in a short span of time, that can be a warning. But long occupancies can also hint of a different set of issues. Quick turnovers could be because of some serious issues that linger (like bad neighbors) and longer occupancy may mean that the owners have learned to live with the problems.
For example, they could have coped with some structural defects rather than do something about them. Of course, that won’t always be the case but it’s good to keep them at the back of your head when looking into different properties.
- Who is performing the home inspection process?
One process you should never skip is getting a full home inspection. You’d want to see that there are no major issues with the property before you buy it. Your real estate agent might be able to arrange for it but not all agents provide that kind of service to their clients.
To maintain the integrity and independence of the inspectors, buyers should look for their own home inspectors. Many agents will have a list of inspectors among their contacts and that’s okay. We suggest that you select your own. You want someone who will be completely unbiased when doing the home inspection and who has your best interest in mind.
- How much did the seller pay?
The seller’s profit should be none of your business but it does help to know if home values have gone up or down since the current owner bought the home. If the house happens to be a foreclosure flipper, lenders might not allow a new mortgage for 90 days. Don’t preoccupy yourself with the previous sales but use whatever information you get to guide you for your specific purpose.
- Are you aware of foreclosures in the area?
Even if the property you’re looking at is not a foreclosure, foreclosures in the neighborhood can dramatically affect property values. You need to ask whether foreclosures in the area influenced previous sales. In many cases, a high rate of foreclosure can bring the prices down. But you have to be willing to wait until the neighborhood turns around and the new owners start living in their new homes.
- What are the monthly utility costs?
A home of your own comes with natural expenses and utilities are the most integral. Therefore, you should know how much of your monthly budget should go into them. Try to find out the average monthly cost. Don’t use the lowest monthly bill and find out what months the utility bills are at their highest.
Also ask what kind of energy sources your house appliances use whether it’s gas, electricity, propane, or a combination. This can help you find which areas you can save on energy costs by switching to energy-efficient appliances. You can also do some simple energy-saving activities that are not too complicated – such as sealing air leaks.
Before you go ahead with a mortgage, you have to draw up a household budget that incorporates your mortgage payments. One important item in your budget is the council tax. You should, therefore, know which band your property belongs to because it would have a bearing on your budget once you begin to live in your new home.
If you think the property is ideal but the council tax is the highest that you’ve ever paid, you may need to sacrifice on some other things. On the other hand, if the council tax is less than before, you can store the savings for future needs.
- Are there any neighborhood nuisances or problem neighbors?
Neighborhoods can often be less than ideal when you compare them with your standards. Some of them may have problems such as speeding on community streets, bad traffic, noise (from cars, neighbors, pets and/or nearby businesses), crime, annoying odors (cigarette smoke, car exhaust).
Others might be dirty, with poor maintenance, with bright lights and have unruly neighbors who cause disturbances or don’t respect other residents. While you may not easily spot some of these things or get this info from the seller, it’s a good idea to find them out before going ahead with the acquisition. Aside from directly asking the seller about nuisances in the neighborhood, you can check the local police department for the crime statistics for the area.
- Are there any problems with the house?
Disclosure statements are very important for buyers. They serve to acknowledge a home’s condition in order to protect sellers from future legal action in case the new owners find some problems with the house. Although disclosures differ by state and even county, sellers must reveal important things that the buyer must know. This would include existing liens, lead-based paint, natural hazards, termite problems, history of property-line conflicts and defects with major systems and/or appliances. (You can find out more about this by reading the eight disclosures you must make when real estate flipping.).
Sometimes, a seller might know of a problem about a house but the law does not require him to disclose it. Therefore, it is helpful to ask point-blank: Are there any problems with the house that you know of? You might be able to encounter some of the problems ahead of time and be able to negotiate repair costs. Of course, you should never forego a comprehensive professional inspection before buying the house. There could be other issues that the seller doesn’t want to share or is not aware of.
- What kind of concessions will you ask for in the offer?
Once you find the ‘one’, it’s time to make an offer. If you are working with a real estate agent, this is an area where she can help out. Many buyers prepare an offer letter that focuses on the deal they can get on the purchase price. Don’t forget that you want to get a few concessions so plan for that and be clear about them.
For instance, you may ask the seller to chip in a certain sum as his share on the closing costs. If the seller agrees, then you can save some money from your closing costs. Make sure that you ask for these concessions before you draw up the contract so you don’t lose your opportunity later.
- Did they document the work done to the house?
If the previous owners had some work done on the appliances, mechanical systems, etc. some of them could still be under a warranty. So, make sure you get a copy of the paperwork. At the very least, make a list of who made the repairs and when so you’ll know who to call when a follow-up work is necessary. Get the details of the important things. For example, know the brand and specific color number of the paint they used to paint the walls so it will be easier to find the paint when you would need to repaint or touch up the walls.
Baruch Silvermann is a personal finance expert, investor for more than 15 years, digital marketer and founder of The Smart Investor. But above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.