Finding the Right Home

Experts would say buy a home if you meet the following criteria:

  • Need a lucrative tax break. The mortgage interest deduction can make home ownership very appealing.
  • Are not counting on price appreciation in the short term.
  • Can afford the monthly payments.
  • Plan to stay in the house long enough for the appreciation to cover your transaction costs. The costs of buying and selling a home inchtde real estate commissions, lenderfees and closing costs that can amount to more than 10 percent of the sales price.
  • Prefer to be an owner rather than a renter.
  • Can handle the maintenance expenses and headaches.
  • Are not greatly concerned by dips in home values.

Home buyers can protect themselves by including an inspection contingency in their purchase offer, which will allow them to cancel closing on the deal if an inspector finds problems with the property. As soon as the seller accepts a written offer, the document becomes a legally binding contract. It supersedes any previous oral agreements, so be sure it contains clear references to any promises made by either party during negotiations.

The purchase contract could be written to include a contingency for any repairs found to be needed or related items the seller must take care of before closing. If these are not attended to, the buyer could hold the right to delay or possibly cancel the closing. Otherwise, buyers face losing their deposit. There also may be costly legal implications stemming from backing out of a contract.

The buyer usually has the right to choose the inspector and also is responsible for paying for the inspections. In addition to an overall inspection for structural soundness, buyers can request a satisfactory pest control inspection report, roof inspection report or contingency for no potential environmental hazards such as asbestos or radon gas.

Contingency clauses should satisfy the concerns of both the buyer and seller. quot;The sellers will be nervous about contingent offers,quot; Lank states. quot;they will be taking their house off the market on your behalf, without any guarantee that the sale will go through. So it's customary to set a time limit on contingencies.

Buyers also can protect themselves by inserting additional necessary contingencies. Indicate which items like curtains and appliances are to remain with the house. Then stipulate you have the right to personally inspect the home 24 hours before closing to make sure all is in order.

Disclosure laws vary by state, but in some state law requires the seller to complete a rea1 estate transfer disclosure statement. Here is a summary of the things a buyer can expect to see in a disclosure form:

  • In the kitchen a range, oven, microwave, dishwasher, garbage disposal, trash compactor. Safety features such as burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens, intercom.
  • The presence of a TV antenna or satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump.
  • All amenities such as a pool or spa, patio or deck, built-in barbeque and fireplaces.
  • Practical concerns like central heating, solar panels, condition of electrical wiring, and gas supply.
  • The type of water heater, water supply, sewer system or septic lank also should be disclosed.

Home sellers also are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.

The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.

Also look for settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides.

People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions, if the homeowners association has any authority over the subject property and ownership of common areas with others. In addition, buyers should note that the simple idea of disclosing defects has broadened significantly in recent years to include locally mandated disclosure forms, burgeoning home inspection and warranty industries and a more alert group of brokers and agents who have their own detailed disclosure obligations. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.

Learn everything you can about the homeowners association before you purchase a condo. The financial, political and legal condition of the association is very important to your investment and quality of life.

When run properly, homeowners associations maintain the common grounds and keep civility in the condo complex. If you follow the rules, the association should not intrude on your privacy or cost you too much in association dues.

Poorly managed associations can drag down property values and make living there difficult for residents. Start by studying the association's covenants, codes and restrictions of the association, or CCamp;RS, and find out if you can live by them. For ex ample, if the rules prohibit loud music after a certain hour and you like to play your CDs late at night, this may not be the place for you. Don't move in thinking you can get away with violating the rules or change them later because you may find yourself in turmoil with determined neighbors who are firmly in control of the association board.

Find out all you can about the association's finances. Beyond reviewing the budget, talk to the association treasurer and find out if dues are expected to increase and if any special assessments are planned Ask if special inspections have revealed problems with roofs or plumbing that may cause a dues hike or special assessment later on.

Call and meet with the association president. If you are the type of person who despises intrusions into your private life and the president seems more interested in gossip about the residents than maintaining the property, this may not be the right condo complex for you.

Speak with residents to get their views on the association's finances, its property manager, how it operates and any politics. Associations are volunteer organizations with elected boards, like a mini-government, so politics can enter the picture and spoil a good thing.

Lastly, take some time to understand how homeowners associations are organized and how they conduct business. Like all real estate investments, the more you know the better off you are.

Choosing between a smaller house in an affluent neighborhood, an older, bigger house in a more working-class community or a brand-new home is not easy. Buyers in this situation may want to start by examining their own priorities and asking the following questions:

  • Is the surrounding neighborhood or the home itself the most important consideration?
  • Is each of the neighborhoods safe?
  • Are the quality of the schools an issue?
  • Do any of the areas seem to attract more families with children or adult residents? And where do you fit in?

As for the return on the investment, home price appreciation is hard to predict. In the late 1980s, the more expensive move-up housing appreciated wildly. But during the recession of the last five years, smaller homes have held their value better than more expensive ones. The most important consideration should be your own personal priorities.

The old adage that a picture is worth a thousand words certainly holds true when home buyers are trying to decipher the cryptic code used r home listings. "Finding the home of your dreams should be fun. But first-time buyers who already are struggling to understand financing, purchase contracts and contingency clauses should not be daunted when looking at listings in their local publications. While the writer of a recent newspaper classified advertisement was generous enough to describe their home as "impeccably maintained, others in the same paper save space (and advertising charges) by relying on the word "Clean, Rmdl" or Updates. Note that such terms do not convey the same meaning, so be sure to ask exactly what is meant by the seller.

Here are some abbreviations and the meaning of each, taken from a recent newspaper classified section:

  • assum. fin. --- assumable financing
  • dk --- deck
  • gar --- garage garden is usually abbreviated gard.
  • expansion pot'l --- may be extra space on the lot, or possibly vertical potential exists for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase.
  • fabPentrm --- fabulous pentroom, a room on top, underneath the roof that sometimes has views
  • FDR --- formal dining room
  • frplc, fplc, FP --- fireplace
  • grmet kit --- gourmet kitchen
  • HDW, HWF, Hdwd --- hardwood floors
  • hi ceils --- high ceilings
  • In-law potential --- potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units so be sure the conversion is legal first.
  • large E-2 plan --- this is floor plans available in a specific building
  • lsd pkg. --- Leased parking area, may come with an additional cost
  • lo dues --- find out just how low these one of several homeowner's dues are, and in comparison to what?
  • nr bst schls --- near the best schools
  • pvt --- private
  • pwdr rm --- powder room, or hao,-bath
  • upr--- upperfloor
  • vw, vu, vws, vus --- view(s)
  • Wow! --- better check this one out.

As much as a buyer wants to believe that the home they found is perfect, a clear title report ensures there are no liens placed against the prior owners or any documents that will restrict the new owner's use of the property.

A preliminary title report provides buyers an opportunity to review matters affecting the property which will not be covered by their title insurance policy unless they are removed before the purchase is final

When reading a preliminary report, a buyer's priority is checking the extent of their ownership rights. The report will note in a statement of vesting the degree, quantity, nature and extent of the owner's interest in the real property. The association states the most common form of interest is fee simple or fee, which is the highest type of interest an owner can have in land.

Liens, restrictions and interests of others that are being excluded from coverage will be listed numerically as exceptions in the report.

Interests of third parties, such as easements granted by prior owners that limit use Of the property, need to be considered Some buyers attempt to clear these unwanted items prior to purchase.

In addition, a list of standard exceptions and exclusions not covered by the title insurance policy may be attached This section includes items the buyer may want to investigate further, such as any laws governing building and zoning.

Homeowners should consider several questions before making a choice between adding on to an existing home or moving up in the market to a bigger house.

  • How much money is available, either from cash reserves or through a home improvement loan, to remodel the current house?
  • How much additional space is required? Would the foundation support a second floor or does the lot have room to expand on the ground level?
  • What do local zoning and building ordinances permit?
  • How much equity already exists in the property?
  • Are there affordable properties for sale that would satisfy housing needs?

Ultimately, the decision should be based on individual needs, the extent of work involved and what will add the most value. According to the "Cost vs.Value Report, published annually by Remodeling Magazine, remodeling a home not only improves its livability but its curb appeal with potential buyers.

Among the hottest improvement projects in 1995 were updated kitchens and baths, home-office additions and more amenities in older homes in order to compete with new homes on the market.

The highest paybacks come from the latter projects, according to the magazine's 1995-96 survey of more than 300 real estate professionals. "The resale market is tough right now and you need to give your home every competitive advantage you can, one agent said. While home offices are a relatively new remodeling trend, adding one to a house recoups 58 percent of the costs, according to the survey.