Home Ownership (misc.consumers.house)

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Default I am buying a small house not in the best shape but anyway. Never owned a house before. Need your advice.

I am buying a small house not in the best shape but anyway. Never
owned
a house before. Need your advice.

The real estate guy is nice but how honest and smart he is - I don't
know.

What do I have to do to handle this purchase as best as possible.

What I know is that

1) I pay a deposit, (couple of thousands) and then monthly
installments. So, I need a contact for that and a receipt, right?

2) What do I need to make sure that I really get the house? I sign a
purchase agreement for the house? Who prepares it? Who signs it?

3) I pay the real estate guy or the owner? Or depends?

4) I need title insurance? When is the best to get it? Same day, I
purchase the house?

5) What about a warranty deed?

6) Do I have to go to local agencies to inform them that I am the
owner? Do I have to sign papers with them?

7) How can I find out if unpaid taxes or lien or other stuff is on the
property? And do I need an insurance against that too?

Did I forget something?

Joe

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Default I am buying a small house not in the best shape but anyway. Never owned a house before. Need your advice.

In article .com,
wrote:
The real estate guy is nice but how honest and smart he is - I don't
know.


I'm going to provide some general answers here, since it sounds like you
are very unprepared for this process, just to give you a general idea.
At the end, I'm going to give some specific references. Those are the
most important, so make sure you at least skip to the end and read those.

How did you find the real estate guy? If you saw a house, in person or
online, and called the number for the agent listing the house, then
*BEWARE*. That real estate guy is working for, and legally obligated
to, the SELLER of the house, not to you, the buyer. His job is to get
as much money out of you as he can. Anything you tell him, such as what
you think of the house, how much you'd be willing to pay, goes straight
to the seller.

Similarly, if you just walked into a real estate agency, and asked to
see houses, it is quite possible that the agent you ended up working
with represents the sellers of all the houses he showed you.

You specifically want something called a "buyer's agent". A buyer's
agent represents the buyer, not the seller. If you tell a buyer's agent
you really love a place, and would pay over list price for it, they
don't tell the seller that. They are on your side.

Find out what kind of agent you are working with.


What do I have to do to handle this purchase as best as possible.

What I know is that

1) I pay a deposit, (couple of thousands) and then monthly
installments. So, I need a contact for that and a receipt, right?


It's a bit more complicated. Say the house is $200k. Most of us don't
have $200k available, so we have to get a loan. This is called a
mortgage. (Well, technically, I think a mortgage is a very specific
thing, but in general conversation, even among the real estate and the
finance people, "mortgage" means the loan you get to buy a house).

A mortgage loan is interesting, because it is secured by the house, and
limited to that. What this means is that if you stop paying your loan
payments, they can take the house away from you, and then they can sell
the house, and use the money from that to pay the loan--and if that
isn't enough money, they eat the difference. If you were to borrow
$200k, and then, later, when you still owe, say, $180k, were to stop
paying, and they were to sell the house for $250k, they'd take out their
$180k, and you'd end up with no house and $70k from the sale. However,
if the house was in bad shape, and only sold for $150k, they get that,
and that completely satisfies the loan. They end up losing $30k, and
you get nothing, but you also no longer owe them anything.

Because of that risk, mortgage lenders generally do not want to loan the
full amount of a house. They want you to pay part of the price up
front, so that if you stop paying, and fail to maintain the house so its
value goes down, they are still likely to get their money back.

Typically, they want you to pay 20%. So, for a $200k house, they would
want you to pay $40k, and they would loan you $160k. Now, suppose you
stop paying, when you still own $150k. Even if you have trashed the
house, and they can only get $150k for it, they get all their money.

You can fairly easily get mortgages that only require 10% down, but you
have to pay more for them (such as higher interest rates to make up for
the lender's higher risk). You can even get mortgagers that require no
down payment. I won't go into more, because the references I'll give
later will cover that.

I believe what you are thinking of is what is called "earnest money".
It is to show that you are serious about buying the house. When you
make an offer on a house, and your offer is accepted, there are still
many opportunities for the buyer to back out. For example, if the house
fails inspection. And if you WANT the house to fail, it will. Hell, if
the inspector says he saw an ant walk across the floor while he was
inspecting, you can say "I'm backing out--the house has a pest
problem!", and you are out. An unscrupulous buyer could make offers on
10 houses, get accepted on all 10, which takes them off the market, and
then generally jerk the sellers around trying to get the best deal.

Earnest money discourages that, as most buyers can't afford to tie up
that much money.

It also provides some compensation to sellers if the buyer backs out
late. The contract on the house I'm buying provides that if I back out,
other than for one of the contingencies covered in the contract
(inspection failure, failure to obtain a loan, unable to get insurance
at less than 0.5% of the house price per year, and some others), the
seller keeps the earnest money, and that is their only remedy. (They
can't take me to court and force me to buy the house).


2) What do I need to make sure that I really get the house? I sign a
purchase agreement for the house? Who prepares it? Who signs it?

3) I pay the real estate guy or the owner? Or depends?

4) I need title insurance? When is the best to get it? Same day, I
purchase the house?

5) What about a warranty deed?

6) Do I have to go to local agencies to inform them that I am the
owner? Do I have to sign papers with them?

7) How can I find out if unpaid taxes or lien or other stuff is on the
property? And do I need an insurance against that too?

Did I forget something?


Go to a bookstore, such as Barnes & Noble, and get these two books:

Mortgages for Dummies
Home Buying for Dummies

Another good one that B&N carries is

The Everything Homebuying Book

There are other books, too. Browse through several of them and get any
that seem good to you (compared to the cost of a house, buying several
books is insignificant). Stay away from the "make a fortune in the real
estate market" kind of books--concentrate on the books that are for
people buying homes to live in, not the investment books.

Also consider

100 Questions every First-Time Home Buyer Should Ask
The 106 Common Mistakes Homebuyers Make (and How to Avoid Them)

In fact, I'd say to get ALL the books I listed above.

--
--Tim Smith
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