Piano World Home Page Forums Restricted and Archives The Coffee Room I'm thinking of buying a house : Advice please

You know I was only teasing, right? :-)
I think it's pretty cool that we all live in OK. Maybe if I buy the house I'll throw a party and invite everyone!

Hi Melody-

I'm with Larry - buy that house if at all possible. If not that one, another one - and soon.

Nervous? You bet! Everyone is on their first house, and that nervousness never really goes away no matter how many houses you buy after that. The trick is to get enough information that you can make the best decision you can, then just close your eyes and go for it. That's what we've done over the years, and we've never regretted it.

I recommend you work with a Realtor on this - your first - house. If Real Estate transactions in OK are done the same as they are here, you can obtain the services of a Realtor as a buyer without having to pay anything directly. The process can be quite daunting, and a good Realtor can walk you through the process with a minimum of fuss. If your credit is good, even the lack of a down payment is not an issue - more on this in a minute.

What will the Realtor do? First thing would be to establish the approximate value of the house; first to be sure you are not overpaying for it and second to be sure you can get a loan on it. If it appears that the house is overpriced, an offer below thew asking price is not only customary, but expected. If your Realtor won't do this, find another one.

Another thing the Realtor will do is handle the paperwork - and there is a LOT of paperwork. All that paperwork has to be filled out just-so, and it is in your best interest that someone who knows all of the rules does the paperwork for you.

Part of that paperwork will be a list of "contingencies" in your offer - things that have to be done and approved by you prior to the close of the sale. If they are not to your liking, you can back out of the sale and get your deposit back (less any costs incurred - have your Realtor explain this to you).

One contingency will be the inspection, and you don't want to buy a house without one. I don't, even though I could do it myself. I hire a pro and it is always money well spent.

The house is settling, which is not surprising - all old houses settle to one degree or another. What you need to know is why, what sort of problems the settling has caused (tearing plaster, stuck windows/doors), how likely the problem is to continue and how immediate is the need for repair.

So you hire a house inspector, and this inspection runs about $150 around here. The inspection will also include the roof, electrical, plumbing, heating/cooling, appliances, windows, drainage and everything else about the house. Once you have this info, you can make an informed decision about the house's condition and whether or not you want to own it. If there is a major problem though, don't give up. It would not be unusual to deduct the cost of repair from the offer price, or require that the seller repair it prior to the close of escrow. Again, Realtor should guide you through this process.

Another contingency will be that you qualify for and obtain a loan. If you can't get a loan, you get your deposit back.

You mention a HUD loan, which is usually an excellent way to go if you can get one. I'd also look in to the FHA first-time buyer program if it's still available. 3% down and seller pays all of the fees. I sold a house that way two years ago - worked out great.

If the down payment is an issue, there are loans out there (your credit has to be excellent) with $0 down and the seller pays the fees. The seller may also cover part of the loan. Even an interest-only loan should not be dismissed out of hand. Figure in the tax deduction and you are still paying less than rent, plus you get to keep the appreciation. I sold a house that way 6 months ago - the buyers paid no down, their payment is the same as the rent they were paying and they'll refinance it in ten years when the note comes due. Even if they have to sell at that time, they still made a good investment because the payment will not go up for 10 years (rent will - guaran-darn-teed), and the house is bound to appreciate.

The down payment - you mention $1800. For a 3% FHA loan, that figure is actually $1950 (at an offer price of $65K)plus you will need something for costs - ask your Realtor what is traditional in your area. How do you get it?

Any way you can. Borrow it, sell something, sell lots of things. Work overtime, skip Christmas, take sack lunches. Max a credit card. Whatever it takes. $2K is a lot of money, but not an impossible amount if you're creative. It's been my experience that buying a house is worth doing any or all of these things.

The higher payment. Have your tax person or someone savvy about taxes explain to you how the homeowner's tax deduction works for your situation. Using the figures you give, it looks like you will actually be paying less in house payments than you currently pay in rent AND - your rent is bound to go up. Your payment will stay the same for 30 years. Rent out a room for a while to help make the payment.

The worst thing you can do is wait. Rent always goes up, never down. If the housing market in your town is as hot as you say, prices are going up too. Waiting will cost you money, so if there is any way for you to swing a house now, I'd suggest you do it.

Even if house prices drop (again, I don't know your market), you have still fixed your payment, gotten the US government to make part of that payment for you AND you can make all the holes in the wall you want to.

Good luck!

I agree with Steve's good advice on all but one point. I would not max a credit card. If there are any concerns at all about qualifying, keeping your credit obligations to the minimum possible is preferrable to show that you are responsible with your money.

MM

The house is not on a slab, but has either a crawl space or a basement. Any settling should have occurred years ago, if it appears to be later and is in spots rather than a consistent slope it indicates other problems, possibly termite damage to floor joists.

The small room at the back was added later, probably in the early 70's from the way it looks. Any loan company will require some inspections, which you will pay for. I would try to find out what inspections the loan company will require and who they will authorize to do them. If you have inspections done on your own you may have to have them done (and pay) twice.

If there are neighbors that have lived there for a while they probably know more about the house than anyone. Go out and see if you can talk to them.

Anything is fixable in a house, if the damage is not progressive and ongoing, and most are livable the way they are.

The house looks like a decent deal based on where I live.

Go for it!

Thank you Steve so much for your advice as well and Chick, I agree about not maxing a credit card. I am learning so much from everyone tonight!

THANK YOU!

Oh I am excited. I want to go and see this house inside tomorrow if I can. If I can, I'll take a few photos and post them online.

Seriously, if I threw a party, would those of you in OK come? To sit on the porch and sip lemonade and watch fireflies? Haha.

.....will keep going up, with occasional short-term adjustments like the one in '90-'91.

Have you seen the population projections for California over the next 20 years? They're quite remarkable, and believable given the diverse nature of both the population and the economy. There are a whole lot of people moving here, and these folks need housing.

The weather's not bad, either.

Add in the fact that the San Diego, Orange County, LA and San Francisco regions are mostly built out AND the 30-35% that regulatory costs add to the price of a new house and you have a RE market that isn't going to drop much - if at all.

What probably will drop is the availability of some of the more exotic sorts of financing I'm seeing these days - especially the 0% down interest-only deals and the 125% loan-to-value second TD's. Even a small adjustment in the market will likely result in a lot of these loans going back to the bank, complete with all of the high-level whining and crying we heard after the S&L fisaco.

How much will this affect prices? Dunno. But nobody ever made any $ betting on falling real estate prices in California - at least in the metro areas.

ACK, TERMITES? I HOPE NOT!

I don't know uyet whether the slope is in "spots" per se, but I was assured by the realtor that it was due to "settling" and should not be an ongoing, progressive problem. I am not going to just take his word for it though.

Good advice as far as qualifying.

When trying to gin up an amount like $2k though, credit cards are not always a bad way to go. If you have only one credit card and it maxes at $2K, then no, don't use it for the down. But if you have other cards too, or the credit limit is say $6K or $10K, I wouldn't reject a credit card as a way to raise the down if there is no other way.

In a pinch, put the $2K on someone else's credit card and pay them back with a second on the house in a year or so.

Whatever it takes. Buy a house.

Don't take the Realtor's word for anything as far as the condition of the house. They're not all liars, but they're all very "optimistic".

As far as termites, all lenders (at least in CA)require a full termite inspection and the seller is required to make any required repairs.

This could be the best of all possible outcomes for you. If termites are causing the settling, the seller will be obliged to make the repairs and it won't cost you a dime.

In my case, the credit card thing is a moot point. I don't have a single credit card. I own my car outright. I have no debtsm other than daily living and utility expenses.
I have excellent, non credit beareu (spelling?) established credit. I am on a fixed income but I am thankful for what I have. This house would be our home, even more importantly than being an investment. I day dream about decorating it, planting a garden-I already have plants waiting for a patch of earth. I dream of buying a piano to put in it and play to my hearts content without fear of disturbing nieghbors. I dream of seeing my son play out in the yard on a tire swing in the sun and sitting out on the porch. My parents had a porch when I was a child and we so enjoyed it. I like the idea of having a spare bedroom for visiting family and friends. I like that I would have the room to make others welcome. I want something that is ours, something secure, something that belongs to us, where we can relax and grow and feel comfortable and secure, where we feel and know we belong... I have moved so many times in my life. I have wanted to buy a big doll house just so I could own a home of my own I could fix up just how I liked.... to think we may one day soon own REAL house of our own excites me.

Agree on the addition (the tails on the fascia boards don't match the main house), but what tips you off that the addition is 1970's?

Seems ageless to me, but we stopped building wood-sided houses in the 20's in CA so there is plenty I don't know about later styles.

The small room is the third bedroom, but I'm told it's tiny. Useful as an office. I am curious as to why it was added with it's own entrance as well. Do you think when it was renovated in 1996 that the roof was redone? I know the electrical wiring was redone and central heat and air was added.

Is 1065 feet plus the porch footage tiny?

I would bet it was originally added as a utility room, but that sometime since, some rearrangment put the washer/dryer elsewhere and that became a "3rd bedroom" instead. Not uncommon here to see utility rooms added in the 30s or 40s, with their own third door for access to the outside clothesline. It may at some time have had a separate garage and drive on that side that door served.

A realtor would say "cozy" or "modest". For a family of three, you can be comfortable. European families of 3-4 typically live in just over half that space, as do Japanese. We Americans with all our wide-open space are the only ones likely to think "tiny".

Thank you Chickgrand, for all of your insightfulness!

I'm curious about something and I'm guessing you are all knowledgeable enough (far moreso than I, obviously) about such things to ask you. If I buy this house and eventually we decided we need more room, i.e. a den or another bedroom for a baby, (I am not pregnant. But I would like another child in the future.) Would it be possible to add on a room to this house and how expensive and complicated would it be? Would I need special permits or anything?

Sure, you can always add on at a later date. It can get pretty expensive but by then you will be more established. You will need a permit.

Hmmmm...I think there's something here that no one has mentioned yet....the ongoing cost of maintenance. You said you were concerned about it and I think you are right to be so. First let me say that if at all possible, I think you should buy a house - it is one of the best investments you can make. But you need to be wary of just how much maintenance houses take. We have a 5 year old house and even with a new house, things break and they are not cheap to fix. A visit from the plumber runs at least $100. A furnace cleaning is $100. A new water heater (they go every 10 years!) is around $150 + labor to install it. And even though housing prices may vary from place to place, I have found that the cost of housing maintenance really doesn't vary so much. For example, in the town where I was born, you can buy a twin house (1/2 of a duplex) for less than $20K. But to put a roof on that twin house will still cost $3K. To put a new furnace in, same thing. So whereas as a percent of total housing value for a $200K house, a new roof or furnace isn't much, it's a considerable hit for someone living in a $20K house. I've often wondered how anyone actually affords to fix up their houses there - it seems like within a short amount of time (heck, just remodeling a kitchen!), you'd easily spend more than the entire house is worth! (Not to mention that for most people there, their cars cost more than their houses - weird, huh?)

Anyhow, don't just look at whether you can scrape the down payment up and whether the house passes inspection now. I've bought 2 houses now, both of which passed inspection with flying colors and both of which ended up costing me big time in maintenance anyway - that's just what houses do. The "experts" recommend setting aside 1% of your house's purchase price for annual maintenance - can you scrape up another $650/year -maybe more, since your house is "vintage"? You don't want to get stuck with a broken furnace in the middle of winter and no money to fix it -- remember, there's no landlord to call anymore!


Good luck with your decision!

Steve

Just guessing base on material used/available in my area in that time period.

The foundation blocks on the addition are different from the house that has sculpted blocks. This type of block was available into the 60's here and I would hope that a contractor would have used matching blocks if they were available. The window appears to be the type and style that was used here around that time. From mid 60's and back the window would have been a double hung. The fascia is differet also but as you say is ageless, and only indicates later addition.

Like I said, its only a guess and I could be way off.

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