5 First-Time home buyer mistakes to avoid

Thanks to one of my top agents, George McDowell (Mr. Magothy) for bringing this excellent article to my attention. Thought I would share it with you.



Experienced homeowners share their secrets so you won't make a rookie move
By Sarah Max, Cyberhomes Senior Writer
July 10, 2009
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If you're a first-time home buyer in this market, how could you go wrong? Nationally, sales prices of existing single-family homes are down nearly 24 percent since their July 2006 peak. Interest rates, recently 4.9 percent for a 30-year fixed-rate mortgage, are hovering near historic lows.
And if that isn't incentive enough, Uncle Sam is offering first-time buyers an $8,000 tax credit to further sweeten the deal.
But as any homeowner will tell you, the decision to buy a home is only half the battle. The real challenge is in the details of what, where and how much. Here are five first-time home buyer mistakes you don't want to make.

First Time Buyer Guide 2009
This is an exciting year for first time buyers, with a once in a lifetime opportunity to get the home of your dream.Gallery: Advice for First Timers+ Understanding the First Time Buyer Credit
1. Don't think that "long term" is a couple of years.
Buying a home, especially now, requires long-term planning, not just with finances, but with your career and your personal life. "The old rule was to plan on owning the house for three to four years," says Ben Hoefer, an agent with John L. Scott in Seattle. "I'm recommending that people think in terms of five to seven years."
If you don't know where you'll be a year from now, let alone seven years from now, you might want to rethink your plans to buy. A house isn't a bargain if you can't recoup your investment. The more time you can spend in the home -- comfortably -- the better the deal.
For many first-time home buyers, that means finding a house that suits their needs and their budget now but also offers room to grow -- or the option to rent. Location is another sticking point. "A lot of people will go for the better house farther out and realize, after it's too late, it's not the location they want," says Hoefer. Would the commute be manageable if you change jobs? What about school quality? These factors influence not only your sanity but also home values.
2. Don't settle for something with more wrongs than rights.
Before you get lured into an open house, spend some time figuring out how much home you can afford and browse online listings to familiarize yourself with the market. "Most first-time buyers are going to be hard pressed to get everything they want, even now," says David Krieger, general manager of Coldwell Banker Preferred in Philadelphia. But if you prioritize your needs and wants and give yourself time to look around, you have a better shot.
For More: Cyberhomes First Time Buyer Guide
That tactic worked well for Litsy Witkowski, who bought her first home last summer. "I didn't necessarily want to find a place very quickly," says Witkowski, 27, who spent more than six months looking around New Haven, Conn. During that time she saw dozens of houses and condominiums and "quickly learned what neighborhoods and styles I liked and didn't like," she says. Her home, a three-bedroom colonial with two and a half bathrooms, a finished attic and basement, and a four-season porch, was listed for $299,000; Witkowski managed to negotiate the price down to $285,000. "Taking my time was definitely the right call," says Witkowski, who shares her home with three housemates. "I think there is something to be said for walking into a place and knowing that you either love it or you don't."
3. Don't make finding an agent an afterthought.With so much information at your fingertips, it might seem old fashioned to enlist the help of a real estate agent. But, a good buyer's agent brings a lot more to the table than listings; he can walk you through everything from the loan preapproval to the home inspection and, most importantly, is obligated to put your interests first.
In hindsight, this is one thing first-time home buyer Kelcey Nichols, 34, would have done differently when she started house hunting in Santa Fe, N.M., a couple of years ago. Although she's very happy with her three-bedroom adobe-style home, she wasn't always on the same page as her agent. "We had different negotiation styles," she says. If she were buying again she would interview several agents before starting the search. "I think working with someone who really knows what you want could save you a lot of time and money," she says.
Yet, most buyers don't spend enough time looking for an agent who will represent their interests in the transaction, says Krieger. Instead, they find the home and call the listing agent, not realizing that that agent represents the seller. It's better to find your own advocate from day one. What's it going to cost you? Technically, nothing. Sellers' and buyers' agents split commissions paid by the seller. Although you could go it alone and ask the seller's agent to cut her commission and pass that savings on to you, as a first-time buyer it's likely you would do better working with a pro and looking for savings elsewhere.
4. Don't assume that every home is in foreclosure.
No doubt there are deals to be had. But just because national headlines show double-digit drops in home prices and a record level of foreclosures doesn't mean that's the case for every home in every market. Nationally, fewer than 1 percent of all housing units on the market are in foreclosure, according to first-quarter data from RealtyTrac. While you don't want to rule out foreclosed property, you don't want to limit your search to the bargain bin.
Krieger notes that the average Philadelphia seller is receiving about 97 percent of asking price. This figure will vary from month to month and even from neighborhood to neighborhood, so do your homework before putting in an offer. Now that home prices have fallen so much, many of the best deals are starting to fetch multiple offers.
5. Don't forget about all the other costs of owning a home.
After searching Salt Lake City for six months, Julia Lyon, 35, knew she'd found a winner when she walked through the front door of a circa-1901 Victorian in the Liberty Park neighborhood. The house needed a little work. But at $260,500 the price seemed fair, especially by 2006 standards.
Still, the home has gobbled up more time and money than she'd ever anticipated. "As my brother recently told me, I didn't buy a house -- I bought a project," says Lyon, who's spent about $15,000 on everything from gutting the first-floor bathroom to fencing in the backyard. "I don't want to keep ignoring problems that should have been dealt with 10 years ago," says Lyon, who got married in 2008. "But I worry that we're putting more money into some of the fixes than we may get back."
Most first-time home buyers find themselves in a similar situation: They focus so much on the sticker price that they fail to account for the other costs that come with owning a home. Some of these costs aren't optional -- closing costs, maintenance and utilities. Others -- new furniture and gardening tools, to name a few -- can add thousands of dollars to the price tag if you're not careful.
At the same time Lyon is conscious of "over improving" her home, she has no regrets about buying it. "I love my house as much today as I did the first time I saw it," she says. Unfortunately, many buyers from the boom can't say the same. "Some of the saddest homeowner stories I've heard are from people who bought too quickly -- without really understanding what was out there."
Quick links:
Cyberhomes First Time Buyer Guide
Affordable Markets for First Timers
First Timer Timeline
Thanks,George C. McDowell, IIIColdwell Bankerwww.MrMagothy.com

A DAY IN THE LIFE OF A REALTOR...

It's the day of settlement -- FINALLY!! The buyers and sellers are still talking, the money has been wired in from the lender, the title has been searched, the agents still have most of their hair, and the walk-through was done the day before. During the walk-through by the buyers a small issue arose. The seller had not actually moved their furniture and worldy possessions out of the house. No problem -- actual settlement is not until the next day, and we all assume the seller is clear that the house has to be vacant of their possessions, and broom swept, according to the sales agreement.

Well, I just got the phone call from my agent that most everything was still IN the house and that settlement starts in 5 minutes. The seller, in fact, did not move out. The new buyer will own the house and everything in it after settlement has occurred unless there is an agreement (hopefully in writing) that the original owners have permission to complete the move out.

Well of course we will work something out, but a word of advice to my agents at the next meeting is to be very clear to your seller client that at least here in Maryland, the process is that by the time of settlement, the seller should have moved everything out of the house and the buyer takes full possession.

So, it's just another one of those life lessons -- don't assume ANYTHING!!!

Free credit report

STARTING THE PROCESS OF BUYING A HOUSE?

HOW'S YOUR CREDIT?

One of the first steps a potential buyer or renter should think about before making the move to home ownership or renting, is to have a clear understanding of their credit report.

To acquire a free credit report, all you need is a computer. Go to http://www.annualcreditreport.com/, fill in the blanks, and you will get your credit information.

Both lenders and landlords will make decisions about your viability as a purchaser or a potential tenant based on this information. It is also helpful to have this information prior to searching for properties with your realtor since it is one of the first questions an experienced realtor might ask. In the quest for home ownership, a buyer/tenant must be "ready, willing and able". The "able" is your past and present financial picture, ie. your credit report.

Have you considered purchasing a home this year? Were you hoping to take advantage of the federal tax credit of up to $8000 if you qualify as a first time homebuyer? Then please consider starting the process soon.

To qualify for the federal tax credit, you need to have settled on your home by December 1, 2009. This means that your inspections, appraisal, financing, and all negotiations have been competed AND you have completed settlement. In other words, the legal process of property transfer has taken place, all by December 1, 2009.

Why are we talking about this so soon? I mean, it's only June 23rd, right?

Let's look at the process a typical buyer goes through and see how much time you really have left.
The typical homebuyer spends about 6 weeks researching homes for sale prior to contacting a realtor. Most of this is done on the internet (according to the NAR, National Association of Realtors, 87% of buyers start their search on the web -- Zillow, Trulia, Realtor.com, etc.). They might visit open houses, model homes, ride through neighborhoods, etc. Hopefully they have contacted a lender during these 6 weeks to estimate how much home they can afford to buy.

Then hopefully, they contact a qualified realtor who will assist them in identifying a property they love, write an offer, negotiate a ratified contract, arrange inspections, financing, appraisals, final walk-through, and title preparation with the help of a title company or real estate attorney. This process can take up to 45-90 days, depending on which type of financing is involved, and the type of listing chosen (short sales and foreclosures can take even longer).

We do live in a society of procrastinators, so if owning a home is your goal, please start now. If everyone wakes up on September 1st and decides to finally 'get in the game', there will be a terrible crush of activity and lots of anxiety to make sure we get settled and tucked in before December 1st.

Lots of luck and good hunting. Coldwell Banker office in Severna Park, MD stands ready to offer our expertise.

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