Searching for a new home, help

dcbride86 · March 2015

labro said:

dcbride86 said:
I would talk to some people in your area who have bought homes. Every area is so different. FI and I put in 1 of 2 bids above the asking price, but we got it because ours was slightly higher after closing costs. In some areas, though, you NEVER offer above asking.
Speaking of closing costs, they are a pain in the ass and ridiculously expensive. I don't even know what they are. I asked my mom, and her exact response was "they're bullshit." And that they are.
Try not to get too excited until after the inspection. Ours turned out okay, but we did ask for about $5,000 after the inspection because of little things that the inspector found. Speaking of which - inspectors WILL find things wrong with the house. that is literally their job. Things will be wrong, but that's okay. Hopefully they'll all be small things.

Good luck!
All of this! Especially about the home inspection! I LOVED our home inspector. We got back a detailed description of all the problems he discovered, along with pictures, and a "rating" on the severity level of the issue. Most "issues" he marked as green or yellow, mostly meaning maybe something wasn't 100% up to code (like no GFCI outlets in the bathrooms) or wasn't major (like additional insulation) and could be fixed easily and cheaply on our own and shouldn't affect our decision making. He marked one red issue - the siding, because it was in poor shape and needed to be replaced. He also gave us options on what we could do to temporarily prolong the life. The home inspection is super useful for identifying major problems, but also for showing you the minor issues that you may want to consider fixing after you've moved in, or having the seller repair if it's a big deal to you.

We got this too and I love it! I still have it saved with our other condo documents. Also - ask the inspector LOTS of questions. He showed me how to change the air filter, how to turn off all the water if a pipe burst, and tons of other things. I took a fair amount of notes - he even said when we would need to replace a lot of appliances, which is great for budgeting

MadHops21 · March 2015

labro said:
@MadHops21 I can't say it's the same with all foreclosures. It was just our experience. As far as I know, foreclosed homes never have open houses, you'd need to get set up with a realtor to actually look at them. Foreclosed homes are cheaper because the bank is trying to get their money back on the loan they foreclosed on - which means they may just be selling the home for whatever the remainder of the loan amount happened to be. You're in a good position now where you aren't having to rush in to this, so don't get disappointed just because you aren't seeing the homes on the market that you want to see. It wouldn't hurt anything to get a pre-approval letter from a bank (so you can come up with a realistic home budget), engage with a realtor, and do some looking around. If you don't see anything you aren't 100% happy with, stop looking, take a break, and go back to it later. Your realtor should be most interested in selling you a house that you love and are absolutely happy with, not just with making their commission as quickly as possible. We started looking a year before we actually bought, stopped because we just weren't sure we were ready to buy, and then a year later started talking to our realtor again and found the perfect house for us within a month.

Does applying for a pre-approval letter get me a hit on my credit score? I know whenever I applied for student loans, I always got a hit. Really annoying.

abl13 · March 2015

I would avoid buying a house that costs 3x your annual income. I think this rule of thumb is really outdated. We heard that recommendation too and this would put us in a house well over half a million dollars, but if you look at what the actual monthly cost of the mortgage we would literally have NO money left each month after paying our mortgage, insurance and utilities.

There's tons of free mortgage calculators online. I would utilize those to see what your monthly payment would be based on different mortgage amounts to make sure you could swing that.

We are house hunting but my husband bought the house we currently own as a foreclosure. There were no issues with it despite it sitting empty for so long. The only thing really was the yard - 7 years later we are still trying to undo what 3 years of no weed pulling or fertilizing did to the yard.

thisismynickname2 · March 2015

On the topic of closing costs. Just a suggestion, but you can ask the seller during negotiation to include the closing costs. I was told, if I remember correctly, to budget 3 or 4% of the purchase price for closing costs.

Now, my dad was really against me financing the closing costs, but it was like, 5 grand. Five grand out of my pocket was significant against needs like furniture and little cosmetic upgrades. The interest on 5 grand in the grand scheme of a 30 year fixed rate mortgage was negligible, so I just did it.

Not all sellers will do this though, but it can save you money upfront if you ask.

dcbride86 · March 2015

MadHops21 said:

labro said:
@MadHops21 I can't say it's the same with all foreclosures. It was just our experience. As far as I know, foreclosed homes never have open houses, you'd need to get set up with a realtor to actually look at them. Foreclosed homes are cheaper because the bank is trying to get their money back on the loan they foreclosed on - which means they may just be selling the home for whatever the remainder of the loan amount happened to be. You're in a good position now where you aren't having to rush in to this, so don't get disappointed just because you aren't seeing the homes on the market that you want to see. It wouldn't hurt anything to get a pre-approval letter from a bank (so you can come up with a realistic home budget), engage with a realtor, and do some looking around. If you don't see anything you aren't 100% happy with, stop looking, take a break, and go back to it later. Your realtor should be most interested in selling you a house that you love and are absolutely happy with, not just with making their commission as quickly as possible. We started looking a year before we actually bought, stopped because we just weren't sure we were ready to buy, and then a year later started talking to our realtor again and found the perfect house for us within a month.
Does applying for a pre-approval letter get me a hit on my credit score? I know whenever I applied for student loans, I always got a hit. Really annoying.

I think so, but I can't totally remember. When I was applying for that, the Bar Association also had to do a full credit check, which may have hit on it. I think I got a hit on 1 of them, but I just can't remember which

dcbride86 · March 2015

thisismynickname said:
On the topic of closing costs. Just a suggestion, but you can ask the seller during negotiation to include the closing costs. I was told, if I remember correctly, to budget 3 or 4% of the purchase price for closing costs.

Now, my dad was really against me financing the closing costs, but it was like, 5 grand. Five grand out of my pocket was significant against needs like furniture and little cosmetic upgrades. The interest on 5 grand in the grand scheme of a 30 year fixed rate mortgage was negligible, so I just did it.
Not all sellers will do this though, but it can save you money upfront if you ask.

You can also ask them to pay a certain dollar amount toward closing costs. Where I live, asking the seller to pay all of our closing costs is a sure-fire way to get them to reject your offer because they're so damn high. I think our sellers paid maybe $5,000 toward closing.

Also - budget more than recommended for closing costs. Ours were higher than we expected

lovemesomemonster · March 2015

MadHops21 said:

OliveOilsMom said:

MadHops21 said:

OliveOilsMomthe2nd said:
My county offered a first time homebuyer grant. If you stayed in the house 5 years, you did not need to pay it back. If you sold before 5 years, then you paid it back at your closing. With this program came a necessary financial course. Basically it was Dave Ramsey's course. It went through all sorts of things about general financial planning and home buying. I found it to be very helpful. Maybe they offer something like this in your area?
The one rule of thumb I learned from it was that you should buy a house that is 3 times your yearly salary. So you make $50k per year, you should try for a $150,000 house. This should generally work, but you still need to look at your current debts, property taxes, and insurance to make sure it would be a comfortable price point for you.
For a realtor, I would ask around for recommendations first. If you hear of someone who had a great experience with their realtor, then maybe add them to your list of realtors to interview. I found my realtor from a co-worker. It is his aunt and almost everyone in my department used her services and loves her. She is a real advocate for her clients and doesn't just want to get a commission with any under handed shadiness.
When H and I put my first home up for sale last year, we knew it was going to be a tough sale. So we didn't go serious house hunting until we have a contract on our house. But we did go to open houses of places in our targeted area and price range. It really helped us learn what we could get for our money and what would happen if we stretched our budget by $10k to see the upgrade in properties.
It also helped us realize really quick how great a deal our current house is! We have a 4 bed, 2 1/2 bath house with a formal living room/dining room, family room, and partially finished basement. The house is still original from the early 70s, so its dated, but we also know that we can put all of our finishing touches on it as we go. It will also help us build equity in the house since we will be putting in the updates instead of buying a updated house. We never thought we would be able to find what we found in our price range!
I'm doing ~50k a year, so $150k sounds reasonable. We don't have much debt besides car payments and insurance, then eventually phone, but no student loans (my dad is paying that off as a gift for me, so lucky). It's hard to find a home in this area at that price without being a "rehab" home or in a bad area.

If I do, say ~50k, and Fi is about the same, is it smart to just stick with $150k homes and not look higher? He wants to stay relatively cheap, and him and his family have a lot of handymen to do work if something needs to be done, like flooring, but the homes I'm finding at that range are bank owned and foreclosures and in really bad shape. The apps don't show the foreclosures pictures, just an aerial view from Google maps.

Are foreclosures good to look at? It looked like they're being auctioned off, and I don't know anything about auction homes.

I got my original account back now!
I live in a higher cost of living area, so I had problems staying at the 3 times your income price range for the same reason you stated. So I did go over the 3 times thing both times we have purchased. But we didn't need to go over by that much to find something suitable in a good area. It's really only a guideline to follow and if you feel comfortable going to something higher than 3 times your income, than go for it.
Auction homes can be tricky. You are almost always buying "as-is", I think you need to bring a certain amount of money with you to the auction, sometimes you cannot even see inside the house before the sale, and if its a sheriff's auction - I think there is a time period after you agree to purchase it that the original home owner could pay off what they owe and get their house back. I feel auctions can be very tricky and I personally would never buy a house at auction.
If you have no hurry and really like a foreclosed house or a short sale, then I would take a chance on dealing with the bank to make the purchase. But again, it is your personal preference. We looked at a few bank owned or short sale houses, but they just weren't the house for us in the end.
Also, there is a difference between being a rehab house and being dated. This is why a good home inspector is key. They can tell you whether your ugly and dated bathroom (mine our yellow and powdered blue!) is functional and usable or needs immediate replacement. As I said above our house is dated, but all functional. We did purchase a new stove immediately because the original 70s stove was scary to me! We also replaced the yellow and blue toilets, but we knew a plumber to do it on the cheap and the original toilets held so much water, we saved money on our water bill replacing them. But we also probably could have lived with that stove and the toilets for a while, if needed. I hope that makes sense.
That does make sense. I was wondering who that other account was, I was so confused!

Auction homes sound like too much of a risk for me. This would be our first home and we want to live there for years until our children get older, once we have them. So I want it to be a good enough home to live in, and still fix things ourselves to really make it our own.

Foreclosed homes and short sales take longer than regular for-sale homes? I'm finding that those are cheaper and still have what we want, but I didn't know the cons to those. I know bank owned are "as is", but it's hard to see what a foreclosed home looks like from just an aerial view. And there are a lot in the Chicago suburbs.

Both of our houses have been "distressed" sales, the short sale took 5 months to close and the foreclosure took 2. They don't generally have an open house for a foreclosure but if you are not buying it at auction (must have cash in hand) you can go look at it with a realtor. You'll get an inspection just like you would for a regular sale but you generally can't ask for repairs (that is the "as is" part of it). Just make sure that in your offer you add that it is "contingent on an inspection" that way you can walk if something big comes up. We were able to talk the bank down (they are all different) and there was nothing huge wrong with the house with the exception of lack of upkeep from it being empty for two years. Don't be afraid to look at them, you can find some good deals especially if you are patient.

lyndausvi · March 2015

abl13 said:
I would avoid buying a house that costs 3x your annual income. I think this rule of thumb is really outdated. We heard that recommendation too and this would put us in a house well over half a million dollars, but if you look at what the actual monthly cost of the mortgage we would literally have NO money left each month after paying our mortgage, insurance and utilities.
There's tons of free mortgage calculators online. I would utilize those to see what your monthly payment would be based on different mortgage amounts to make sure you could swing that.
We are house hunting but my husband bought the house we currently own as a foreclosure. There were no issues with it despite it sitting empty for so long. The only thing really was the yard - 7 years later we are still trying to undo what 3 years of no weed pulling or fertilizing did to the yard.

Everyone's situation is different. I happen to live in a high cost of housing area. The average listing for houses is over a million dollars. There are very few houses under 3x of our salary. Of those 2 have HOA fees of over $500 for nothing.

We have no student loans. No credit card debt. The only loan is a car that will be paid off in a few years. The rest of the cost of living isn't too bad here. Property taxes are petty low actually. Utilities are not bad either. We have no kids, will not be having kids. So for use it's worth going over 3x.

If any of the above was different then we wouldn't be comfortable. Heck, if we lived in an area with a decent priced house under 3x would not go over.

Sadly we in fact do live in a high housing cost area. It's so bad every development has to put in deed restricted affordable housing units. One of the restrictions is you can not make more than 3% profit and you have to resell the house to another affordable housing person. You can not sell them on the open market. You ca not lease or sub-lease the unit. Income limits can be in the 6 figures. Seems silly someone making over $100K can't find housing to buy, but that is indeed the case here.

Point is 3x is a guide line but doesn't work for everyone's situation. We would rather buy something with 3.5x then buy into a deed restricted unit. I think the long term benefits of being able to sell on the open market will be worth the risk. Again, not having kids or debt helps make that decision.

abl13 · March 2015

lyndausvi said:

abl13 said:
I would avoid buying a house that costs 3x your annual income. I think this rule of thumb is really outdated. We heard that recommendation too and this would put us in a house well over half a million dollars, but if you look at what the actual monthly cost of the mortgage we would literally have NO money left each month after paying our mortgage, insurance and utilities.
There's tons of free mortgage calculators online. I would utilize those to see what your monthly payment would be based on different mortgage amounts to make sure you could swing that.
We are house hunting but my husband bought the house we currently own as a foreclosure. There were no issues with it despite it sitting empty for so long. The only thing really was the yard - 7 years later we are still trying to undo what 3 years of no weed pulling or fertilizing did to the yard.
Everyone's situation is different. I happen to live in a high cost of housing area. The average listing for houses is over a million dollars. There are very few houses under 3x of our salary. Of those 2 have HOA fees of over $500 for nothing.

We have no student loans. No credit card debt. The only loan is a car that will be paid off in a few years. The rest of the cost of living isn't too bad here. Property taxes are petty low actually. Utilities are not bad either. We have no kids, will not be having kids. So for use it's worth going over 3x.

If any of the above was different then we wouldn't be comfortable. Heck, if we lived in an area with a decent priced house under 3x would not go over.

Sadly we in fact do live in a high housing cost area. It's so bad every development has to put in deed restricted affordable housing units. One of the restrictions is you can not make more than 3% profit and you have to resell the house to another affordable housing person. You can not sell them on the open market. You ca not lease or sub-lease the unit. Income limits can be in the 6 figures. Seems silly someone making over $100K can't find housing to buy, but that is indeed the case here.

Point is 3x is a guide line but doesn't work for everyone's situation. We would rather buy something with 3.5x then buy into a deed restricted unit. I think the long term benefits of being able to sell on the open market will be worth the risk. Again, not having kids or debt helps make that decision.

True! We do not live in a high cost of living area so your point makes total sense! I guess the point I was failing to make is make sure you can afford the monthly payment regardless of the cost.

julieanne912 · March 2015

For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.

littlemushroom · March 2015

julieanne912 said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.

You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.

huskypuppy14 · March 2015

MadHops21 said:

labro said:
@MadHops21 I can't say it's the same with all foreclosures. It was just our experience. As far as I know, foreclosed homes never have open houses, you'd need to get set up with a realtor to actually look at them. Foreclosed homes are cheaper because the bank is trying to get their money back on the loan they foreclosed on - which means they may just be selling the home for whatever the remainder of the loan amount happened to be. You're in a good position now where you aren't having to rush in to this, so don't get disappointed just because you aren't seeing the homes on the market that you want to see. It wouldn't hurt anything to get a pre-approval letter from a bank (so you can come up with a realistic home budget), engage with a realtor, and do some looking around. If you don't see anything you aren't 100% happy with, stop looking, take a break, and go back to it later. Your realtor should be most interested in selling you a house that you love and are absolutely happy with, not just with making their commission as quickly as possible. We started looking a year before we actually bought, stopped because we just weren't sure we were ready to buy, and then a year later started talking to our realtor again and found the perfect house for us within a month.
Does applying for a pre-approval letter get me a hit on my credit score? I know whenever I applied for student loans, I always got a hit. Really annoying.

Yes, it will ding your credit, but it's not too much.

labro · March 2015

huskypuppy14 said:

MadHops21 said:

labro said:
@MadHops21 I can't say it's the same with all foreclosures. It was just our experience. As far as I know, foreclosed homes never have open houses, you'd need to get set up with a realtor to actually look at them. Foreclosed homes are cheaper because the bank is trying to get their money back on the loan they foreclosed on - which means they may just be selling the home for whatever the remainder of the loan amount happened to be. You're in a good position now where you aren't having to rush in to this, so don't get disappointed just because you aren't seeing the homes on the market that you want to see. It wouldn't hurt anything to get a pre-approval letter from a bank (so you can come up with a realistic home budget), engage with a realtor, and do some looking around. If you don't see anything you aren't 100% happy with, stop looking, take a break, and go back to it later. Your realtor should be most interested in selling you a house that you love and are absolutely happy with, not just with making their commission as quickly as possible. We started looking a year before we actually bought, stopped because we just weren't sure we were ready to buy, and then a year later started talking to our realtor again and found the perfect house for us within a month.
Does applying for a pre-approval letter get me a hit on my credit score? I know whenever I applied for student loans, I always got a hit. Really annoying.
Yes, it will ding your credit, but it's not too much.

This. If you already have good credit, it's not going to hurt it to the point that it would actually impact your ability to get a good rate (or cause red flags on your credit report in case you were shopping around at other banks).

MadHops21 · March 2015

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.

You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.

Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

julieanne912 · March 2015

littlemushroom said:

julieanne912 said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.

Yes but even if the prepaids don't exceed what you ask for, the seller gets that back. I've had it happen more than once on my deals (I usually only deal with sellers so it works out well for them!).

julieanne912 · March 2015

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.

Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.

Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

A lot of buyers ask for closing costs, yes. But if you're in a competitive bidding situation, you want to make your offer as attractive as possible. So, say you offer $250,000, but you ask the seller to pay $5,000 of closing costs etc. So your offer to the seller is only $245,000. So someone else could offer $248,000 with no closing costs paid by seller and their offer will actually net the seller more money. So again, this is more of a location and situation specific thing.

Agents do not cost a buyer any money. The seller pays the commissions for both their agent and your agent. What they pay your agent will vary on area, and really on what the seller feels like paying, although smart ones know if they don't offer a decent commission, agents won't show their house. I would say generally, in my experience, it's anywhere from 2.5-3% to the buyer's agent.

I've also seen some agents try to add in fees that the buyer pays to them in their buyer agent agreements.... calling them admin fees or something stupid. I personally think that's so wrong and would never think of doing that to a buyer of mine. So if you get an agent that tries that, walk away.

luckya23 · March 2015

I think most times realtors get 3% for buyer's agent and 3% for sellers agent. So they make more, the more they sell you.

Around here, you "offer" a certain price and also ask for closing costs, but that really just means you are financing the closing costs. So say I offered $150k as the price for my house, and I wanted $10k in closing cost assistance - so my offer says I offered $160k for the house, even though the seller knew they were only getting $150k. Seller's typically don't want to pay you to buy their house, so it's easier to think of it as asking to finance the closing costs, though it appears on paper like the sellers are giving you back that money.

There are also limits to how much of the purchase price they can offer you as closing costs. I think a convential mortgage is 3% and an FHA is 6% but those numbers may be off.

julieanne912 · March 2015

luckya23 said:
I think most times realtors get 3% for buyer's agent and 3% for sellers agent. So they make more, the more they sell you.
Around here, you "offer" a certain price and also ask for closing costs, but that really just means you are financing the closing costs. So say I offered $150k as the price for my house, and I wanted $10k in closing cost assistance - so my offer says I offered $160k for the house, even though the seller knew they were only getting $150k. Seller's typically don't want to pay you to buy their house, so it's easier to think of it as asking to finance the closing costs, though it appears on paper like the sellers are giving you back that money.
There are also limits to how much of the purchase price they can offer you as closing costs. I think a convential mortgage is 3% and an FHA is 6% but those numbers may be off.

These days, if you're paying 3% of your purchase price to closing costs, you're getting ripped off.

luckya23 · March 2015

julieanne912 said:

luckya23 said:
I think most times realtors get 3% for buyer's agent and 3% for sellers agent. So they make more, the more they sell you.
Around here, you "offer" a certain price and also ask for closing costs, but that really just means you are financing the closing costs. So say I offered $150k as the price for my house, and I wanted $10k in closing cost assistance - so my offer says I offered $160k for the house, even though the seller knew they were only getting $150k. Seller's typically don't want to pay you to buy their house, so it's easier to think of it as asking to finance the closing costs, though it appears on paper like the sellers are giving you back that money.
There are also limits to how much of the purchase price they can offer you as closing costs. I think a convential mortgage is 3% and an FHA is 6% but those numbers may be off.

These days, if you're paying 3% of your purchase price to closing costs, you're getting ripped off.

I live in NY. Mine were 6%+

julieanne912 · March 2015

luckya23 said:

julieanne912 said:

luckya23 said:
I think most times realtors get 3% for buyer's agent and 3% for sellers agent. So they make more, the more they sell you.
Around here, you "offer" a certain price and also ask for closing costs, but that really just means you are financing the closing costs. So say I offered $150k as the price for my house, and I wanted $10k in closing cost assistance - so my offer says I offered $160k for the house, even though the seller knew they were only getting $150k. Seller's typically don't want to pay you to buy their house, so it's easier to think of it as asking to finance the closing costs, though it appears on paper like the sellers are giving you back that money.
There are also limits to how much of the purchase price they can offer you as closing costs. I think a convential mortgage is 3% and an FHA is 6% but those numbers may be off.

These days, if you're paying 3% of your purchase price to closing costs, you're getting ripped off.
I live in NY. Mine were 6%+

Eesh, did that include a large transfer fee or something? We just bought a house and they were around 1% and I rarely see much more than maybe 1.5%.

MadHops21 · March 2015

julieanne912 said:

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.
Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.

Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

A lot of buyers ask for closing costs, yes. But if you're in a competitive bidding situation, you want to make your offer as attractive as possible. So, say you offer $250,000, but you ask the seller to pay $5,000 of closing costs etc. So your offer to the seller is only $245,000. So someone else could offer $248,000 with no closing costs paid by seller and their offer will actually net the seller more money. So again, this is more of a location and situation specific thing.

Agents do not cost a buyer any money. The seller pays the commissions for both their agent and your agent. What they pay your agent will vary on area, and really on what the seller feels like paying, although smart ones know if they don't offer a decent commission, agents won't show their house. I would say generally, in my experience, it's anywhere from 2.5-3% to the buyer's agent.

I've also seen some agents try to add in fees that the buyer pays to them in their buyer agent agreements.... calling them admin fees or something stupid. I personally think that's so wrong and would never think of doing that to a buyer of mine. So if you get an agent that tries that, walk away.

So after the offer, the only other money transaction would be the closing cost? I don't owe the realtor company anything, only the seller does?

AprilH81 · March 2015

MadHops21 said:

AprilH81 said:

MadHops21 said:
OH ANOTHER QUESTION! (So so so sorry about asking a million questions but you guys are awesome)

Should I be worried if a house goes down in price? Some homes I've saved in Realtor or Trulia app will sometimes alert me if a price drops on a home I saved. Is there a good reason for a price dropping? Besides not selling maybe, but most homes I save will stay on the market for a few days or a couple weeks, so maybe they're trying to sell it quicker by dropping the price?
1) Yes it is recommended that you change the locks (or at least rekey them) when you move in. No one know who all has a key or where they ended up.

A price drop is either a sign the house was over priced to begin with or the sellers are trying to sell it faster. It doesn't mean anything is "wrong" with the house. Sellers are required to disclose certain known issues with the home and then if they find out information following an inspection I believe they have to disclose that information to future buyers if the other buyers back out.
I have seen descriptions that include things like a bad foundation, water damage in basement, etc. So at least time is saved to skip over the really bad ones, or take into consideration. Normally, when things like that are disclosed, does the seller lower the price than the actual worth of the home? Or they don't and just tell you in the description, so you can negotiate a lower price because of it?

MadHops21 said:

julieanne912 said:

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.
Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.
Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

A lot of buyers ask for closing costs, yes. But if you're in a competitive bidding situation, you want to make your offer as attractive as possible. So, say you offer $250,000, but you ask the seller to pay $5,000 of closing costs etc. So your offer to the seller is only $245,000. So someone else could offer $248,000 with no closing costs paid by seller and their offer will actually net the seller more money. So again, this is more of a location and situation specific thing.

Agents do not cost a buyer any money. The seller pays the commissions for both their agent and your agent. What they pay your agent will vary on area, and really on what the seller feels like paying, although smart ones know if they don't offer a decent commission, agents won't show their house. I would say generally, in my experience, it's anywhere from 2.5-3% to the buyer's agent.

I've also seen some agents try to add in fees that the buyer pays to them in their buyer agent agreements.... calling them admin fees or something stupid. I personally think that's so wrong and would never think of doing that to a buyer of mine. So if you get an agent that tries that, walk away.

So after the offer, the only other money transaction would be the closing cost? I don't owe the realtor company anything, only the seller does?

Correct. You pay for the home inspection, down payment, applicable closing costs and the seller pays the realtor the commission.

julieanne912 · March 2015

MadHops21 said:

julieanne912 said:

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.
Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.
Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

A lot of buyers ask for closing costs, yes. But if you're in a competitive bidding situation, you want to make your offer as attractive as possible. So, say you offer $250,000, but you ask the seller to pay $5,000 of closing costs etc. So your offer to the seller is only $245,000. So someone else could offer $248,000 with no closing costs paid by seller and their offer will actually net the seller more money. So again, this is more of a location and situation specific thing.

Agents do not cost a buyer any money. The seller pays the commissions for both their agent and your agent. What they pay your agent will vary on area, and really on what the seller feels like paying, although smart ones know if they don't offer a decent commission, agents won't show their house. I would say generally, in my experience, it's anywhere from 2.5-3% to the buyer's agent.

I've also seen some agents try to add in fees that the buyer pays to them in their buyer agent agreements.... calling them admin fees or something stupid. I personally think that's so wrong and would never think of doing that to a buyer of mine. So if you get an agent that tries that, walk away.

So after the offer, the only other money transaction would be the closing cost? I don't owe the realtor company anything, only the seller does?

Correct. Also, I didn't mention earlier, but you generally have to put up an earnest money deposit. That amount will depend on your area, I know here in CO it's roughly 1% of the purchase price, but in Chicago it was 3% on up. Out in CA where I'm from it's only $1000 or so. You pay this money to show good faith that you're serious about the offer, and it gets deposited after an accepted contract, and is held by either the listing office or the title company. Once the transaction goes through, that money gets applied towards your downpayment, so if you pay $2,000 in earnest money up front, and your downpayment is $10,000, you would only need to bring $8,000 to closing.

Also the deposit could be refundable depending on the circumstances. If your offers has an inspection contingency in it (which it should), and the inspection goes bad and you terminate, you are entitled to get that deposit back. Same for financing, if you have a financing contingency in your contract, and something happens and you cannot get the loan at all (not that you change your mind), you can get the deposit back, as long as you terminate before that contingency date is up.

I know here in CO, you can pretty much cancel for any reason you like during the inspection period, and just blame it on the property inspection (even if you don't have an official one!). I had one cancel because they decided they didn't like the street after all, and because of how our contract is written here, they could cancel and get their deposit back. My seller refused to sign the release to give the buyers money back for about 2 weeks (even though I told him he legally could not), but eventually he signed.

theartistformerlyknownas · March 2015

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.

Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

Ok seriously girl, like 6 people told you on page 1 that it doesn't cost the buyer a dime to hire a realtor. They work for you for free, and are paid by the seller if and when you buy a house.

Please go buy the book Lynda suggested.

MadHops21 · March 2015

lolo883 said:

MadHops21 said:

littlemushroom said:
For closing costs, you should find out from your lender exactly how much there is. Some people ask for the seller to pay, say, $7,000 in closing costs. But their real closing costs are only about $5500. That extra $1500, per most contracts, goes back to the seller if you don't use it. That could have been money you could have negotiated off of the purchase price to start with. Just another reason it's really important to get your loan mostly in order before you make an offer on a house.
You can include in your contract/offer something like $2000 for closing costs and prepaids, not just for closing costs. That means if the closing costs are just $1500, you keep the extra $500 to be used for things like inspection or appraisal costs, escrowed taxes and insurance, etc, rather than the seller getting the extra back.

The best thing to do is ask your loan officer what the closing costs will be. That way you know exactly what to budget for and to ask the seller for. Our loan officer gave us a sheet that listed the cost for all the different prepaids and closing costs so we could negotiate and budget better.
Do a lot of people do this? Is this a common thing? I would love to include that in my offer if I could.

Also, how much do realtors cost? I was told to look at realtor companies and talk to some people, but actually having one? Do they vary by thousands of dollars, or around the same price?

Ok seriously girl, like 6 people told you on page 1 that it doesn't cost the buyer a dime to hire a realtor. They work for you for free, and are paid by the seller if and when you buy a house.

Please go buy the book Lynda suggested.

Yes, yes they did. I guess I don't understand, what if someone wastes a realtor's time and doesn't buy? Don't they lose out on getting paid from another person that could have bought? Just seems odd to me, but I don't know the industry at all. I'm buying that book tomorrow, pay day finally. So don't worry.

theartistformerlyknownas · March 2015

Yes, lots of people waste realtors' time. But they always have more irons in the fire, and are acting as a listing agent for multiple other houses while they're being a buyer's agent for you and multiple other people. And they'll make $4,500 on your $150k purchase (more if they're also the listing agent in whatever you buy) so it's a worthwhile risk.

WinstonsGirl · March 2015

A few things to think of while you're looking at houses:

What direction is the house facing?? I wanted a south-ish facing house. Right now, my sidewalks are clear and everyone around the corner facing north is chipping away at a foot of ice to lear their sidewalks. The sun does the work for me.

A west-ish facing backyard is also important for me. We changed lots to our current lot cos our backyard would have faced east. We'd get great morning sun, but we are never on the deck in the morning. If we're outside/entertaining, it's afternoon/evening so having the sun in the yard later in the day was better for us.

Corner lot or not?? DH though they were great. I pointed out higher taxes and more shovelling. Also, they often have a larger side lot than back yard, which I didn't want.

What do you need versus what do you want?? You may really want something but might not need it (the extra bedroom for guests when you never really have them)

Look at things you can't change. Paint is easy. No drawers in the kitchen is a bit harder. Do you have room close to the stove to store pots?? My good friend built and didn't realize till after they moved in that she has 2 drawers in her kitchen. She wants more. Also, measure the garage. Our code states you need a 3 foot landing before stairs and many cars no longer fit in new garages cos the stairs are in the way. If you can't live with something you can't change, the house won't work for you. Ugly furniture and paint?? That's easy.

No house will be perfect, but look at what you can and can't live with. Just some things you don't often think about until you have lived in a couple of places or more

MadHops21 · March 2015

WinstonsGirl said:
A few things to think of while you're looking at houses:

What direction is the house facing?? I wanted a south-ish facing house. Right now, my sidewalks are clear and everyone around the corner facing north is chipping away at a foot of ice to lear their sidewalks. The sun does the work for me.

A west-ish facing backyard is also important for me. We changed lots to our current lot cos our backyard would have faced east. We'd get great morning sun, but we are never on the deck in the morning. If we're outside/entertaining, it's afternoon/evening so having the sun in the yard later in the day was better for us.

Corner lot or not?? DH though they were great. I pointed out higher taxes and more shovelling. Also, they often have a larger side lot than back yard, which I didn't want.

What do you need versus what do you want?? You may really want something but might not need it (the extra bedroom for guests when you never really have them)

Look at things you can't change. Paint is easy. No drawers in the kitchen is a bit harder. Do you have room close to the stove to store pots?? My good friend built and didn't realize till after they moved in that she has 2 drawers in her kitchen. She wants more. Also, measure the garage. Our code states you need a 3 foot landing before stairs and many cars no longer fit in new garages cos the stairs are in the way. If you can't live with something you can't change, the house won't work for you. Ugly furniture and paint?? That's easy.

No house will be perfect, but look at what you can and can't live with. Just some things you don't often think about until you have lived in a couple of places or more

I actually have thought of some of that. We drove by a place last night (it's near where my parents live, ick). It's also on my drive to work, so this morning I noticed the sun hitting the front of the house because it faces east pretty dead on. I noticed no snow in front and the path was clear, while the neighbors facing north still had snow and ice. And the light would filter into the master bedroom, which is nice because my bedroom never has light from facing north.

It's weird how little things like that can make things better when looking. I never truly thought of that, but I guess in the back of my mind, I always knew I wanted my bedroom to have sun coming in because I never had sun in my room, always have to use a light in the morning and evenings. And afternoons, really.

julieanne912 · March 2015

People wasting a realtor's time is exactly why I stick to working with investors and doing listings

I only do buyer deals for friends, and even those get to be rather annoying.

theartistformerlyknownas · March 2015

MadHops21 said:
I actually have thought of some of that. We drove by a place last night (it's near where my parents live, ick). It's also on my drive to work, so this morning I noticed the sun hitting the front of the house because it faces east pretty dead on. I noticed no snow in front and the path was clear, while the neighbors facing north still had snow and ice. And the light would filter into the master bedroom, which is nice because my bedroom never has light from facing north.

It's weird how little things like that can make things better when looking. I never truly thought of that, but I guess in the back of my mind, I always knew I wanted my bedroom to have sun coming in because I never had sun in my room, always have to use a light in the morning and evenings. And afternoons, really.

Well you can't have it all... your bedroom will only have sun in the morning and afternoon if it faces south. But depending on where in the house your bedroom is, that may mean that your kitchen is always shaded, or your front porch. 25% of your house will always be in shade, and 50% will only get one or the other but not both morning and evening sun. That seems to be an entirely nitpicky thing to concern yourself with when you're so early in figuring out how to even get started. I wouldn't take that into consideration unless I had narrowed it down to two otherwise comparable houses, or was building.

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