Guide to Buying a Home

If you are thinking of buying a new home, you must pay close attention to many details to ensure that you find one that will suit your needs and preferences. Before you start shopping, you should sit down with the members of your household to discuss your preferences and the many options available to you. Here are some things you should consider: 

Financing 

Before you buy or build a home, find out about your financing options. Ask banks and other financial institutions: 

·         if you are eligible for a loan  

·         how much you need for a deposit  

·         if funds are always available and  

·         how much you can borrow. 

The amount you can borrow will normally depend on: 

·         your income  

·         the interest rate  

·         the term of the loan  

·         your other commitments, such as credit cards 

·         and personal loans.  

You may be eligible for a loan if you: 

·         have enough to pay a deposit on a property and sufficient funds for additional costs and 

·         are in regular employment and receive sufficient income to service the loan and 

·         meet the requirements of the lender. 

Features 

An easy way to organize your thoughts is to write each separate feature that you want on a 3X5 card, and arrange the cards in order of their importance to you. For instance, if you like to cook, you may want a home with a large, well-equipped kitchen. Or you may settle for a small kitchen, so that you can have extra space for a library, office, or computer room.  Some home buyers seek large, open interior spaces, while others prefer traditional rooms that afford more privacy. Some choose homes with large yards. Others opt for condominiums where they can avoid yard maintenance entirely. 

While looking for a home, consider whether your needs are likely to change over time. If you plan to add rooms, find out if there is enough space on your site for such expansion and whether such additions are permitted by your local jurisdiction. 

Management 

Options include single-family homes, condominiums or cooperatives. With a single-family home in a development, you'll be responsible for your own yard and home, but may be restricted to certain design elements or other regulations if there is a home owners association.  

A condominium is a home in a multi-unit complex, such as an apartment building or a townhouse cluster. You own the home, and you and your neighbors jointly own the common elements, such as the land around the complex, the parking areas, building exteriors, hallways, utility pipes and recreational facilities. A condominium owners association is responsible for maintaining the jointly owned elements. The day-to-day business of the complex is generally handled by a managing agency. 

The owner of each condominium unit has a vote in the affairs of the community. Each owner pays a fee to cover the operating expenses of the property and usually contributes to a reserve fund for replacements (such as a new roof) or improvements (such as decorative landscaping to improve the value of the property). Changes and improvements to the complex may be made only as you and your co-owners desire. You are responsible for maintaining the interior of your condominium unit. Typically, you will not have to perform outdoor chores. 

Cooperatives offer lifestyles similar to condominiums, but rather than owning your unit, you own shares of the stock of the complex. Stock owners are jointly liable for the cooperative's debts. 

[Return to Consumer Resources]  

How to Choose a Home Builder

If you're in the market for a new home, you should shop for your builder as carefully as you shop for your home. Whether you are buying a condo, a townhouse, a house in a subdivision, or a custom built house, you want to know that you are buying a good quality home from a reputable builder. Here are a couple of tips to help you choose a builder. 

Make A List of Possible Builders 

Once you have thought about the type of house you want, you will need to find a builder. 

·         Contact your local home builders' association to obtain a list of builders who construct homes in your area. Look in the real estate section of you local newspaper for builders and projects. Looking through the ads and reading the articles can help you to learn which builders are active in your area, the types of homes they are building, and the prices you can expect to pay. Make a list of builders who build the type of home you're looking for in your price range. 

·         Local real estate agents may also be able to help you in your search. Ask friends and relatives for recommendations. Ask about builders they have dealt with directly, or ask them for names of acquaintances who have recently had a good experience with a builder. 

Do Your Homework 

Once you have a list of builders, how can you find out about their reputations and the quality of their work? The best way to learn about builders is to visit homes they have built and talk with the owners.  

·         Ask builders on your list for the addresses of their recently built homes and subdivisions. Builders may even be able to provide names of some home owners who would be willing to talk with you. 

·         Drive by on a Saturday morning when home owners may be outside doing chores or errands. Introduce yourself and say you are considering buying a home from the builder who built their home. Talk to several owners, and try to get a random sample of opinions. The more people you talk with, the more accurate an impression of a builder you are likely to get. At the very least, drive by and see if the homes are visually appealing. 

·         When you talk to builders and home owners, take along a notebook to record the information you find and your personal impressions about specific builders and homes. Doing so will help you to make comparisons later. Some questions you can ask people include: Are you happy with your home? If you had any problems, were they fixed promptly and properly? Would you buy another home from this builder? 

·         Usually, people tell you if they are pleased with their homes. And if they are not, they'll probably want to tell you why. 

Shop For Quality and Value 

Look at new homes whenever you can. Home shows and open houses sponsored by builders are good opportunities to look at homes. Model homes and houses displayed in home shows are often furnished to give you ideas for using the space. You may also ask a builder to see unfurnished homes. 

When examining a home, look at the quality of the construction features. Inspect the quality of the cabinetry, carpeting, trimwork, and paint. Ask the builder or the builder's representative a lot of questions. Get as many specifics as possible. If you receive the answers verbally rather than in writing, take notes. Never hesitate to ask a question. What seems like an insignificant question might yield an important answer. 

[Return to Consumer Resources]  

Homeownership Tax Advantages  

Buying a home is one of the smartest purchases you can ever make. One reason is that homeownership has many positive tax implications. The three most important sources of tax savings for home owners are the: 

·         deductions for mortgage interest 

·         deductions for real estate taxes 

·         capital gain exclusion for the sale of a principal residence  

The deductions for mortgage interest and real estate taxes reduce the annual cost of homeownership by reducing the home owner's tax liability each year.  For example, a home owner with $10,000 in annual mortgage interest payments and real estate taxes and who falls in the 25 percent tax bracket could realize up to $2,500 in tax savings each year.  Home owners who itemize their taxes can deduct from taxable income interest allocable to a first or second home for up to $1 million of mortgage debt and $100,000 of home equity loans.  And most state and local taxes paid on homes are also deductible. 

When the home is sold, the capital gain exclusion can again provide home owners a tax benefit.  Under present law, sellers of a principal residence can exclude from taxation profits from the sale of a home, up to $500,000 for married taxpayers and $250,000 for single taxpayers.  With capital gain tax rates expected to increase from 15 to 20 percent in coming years, these tax savings can be substantial. 

Research by economists has estimated the tax savings for home owners for certain income and mortgage amounts. For a married couple with an income of $80,000 per year and an initial mortgage amount of $250,000, the tax savings from the mortgage interest and real estate tax deductions are estimated to save the couple more than $11,000 in the first five years of homeownership.  Assuming the couple owns the home for twelve years, these savings grow to more than $25,000 over the time period. Combined with the capital gains exclusion, the total tax savings for the entire period of ownership exceeds $52,000. 

For a couple with an income of $60,000 and an initial mortgage of $180,000, the five years tax savings total more than $6,000 and the total savings over a twelve year period are estimated to be more than $33,000. 

[Return to Consumer Resources]  

Remodeling Vs. Moving

If you want to change your home, your other option besides remodeling is to find a new one. But more and more American families are deciding to stay put and improve their existing home. Here are some of the reasons: 

·         Remodeling allows you to customize your home to meet your needs and desires. The only similar, but much more costly alternative, is to have a brand new custom home designed and built. 

·         Remodeling means that you don't have to give up a familiar neighborhood and schools. 

·         Remodeling is a more efficient use of your financial resources. According to the American Homeowner Foundation, selling your home and moving typically costs about 8-10% of the value of your current home. And much of this goes into moving expenses, closing costs, and broker commissions - items that have no direct impact on your home's quality. 

·         Remodeling can be stressful, but few experiences are more stressful than moving. 

While there are many reasons that people choose to remodel, the bottom line is that remodeling makes your home a more enjoyable place to live. The intangible value of this pleasure needs to be considered, along with any resale value you hope to gain.

But there is no doubt that, as far as improving the sale of your home, all remodeling projects are not created equal. The general rule of thumb is that any remodeling project that brings your home up to the level of your neighbors' is a worthy investment. But it doesn't pay to be the most expensive house on the block - real estate experts recommend that a remodeling investment should not raise the value of your house to more than 10-15% above the median sales price in your neighborhood.

Remember that potential buyers will compare your home to ones newly built. Therefore, you'll want to look at the design trends and amenities being built into new homes. Great rooms (open kitchen/family room arrangements), master bed and bath suites, and higher ceilings are a few of the features sought by today's home buyers.

Each year, Remodeling magazine conducts its "Cost vs. Value" report to assess which remodeling projects create the greatest return on investment. Not surprisingly, kitchens and baths regularly come out on top. These are two of the most used rooms in the home, and they receive the most scrutiny from potential buyers. 

[Return to Consumer Resources]  

Pre-Settlement Walk-Through Checklist

You're getting ready to close on your first new home purchase and all that stands in the way of your homeownership is the pre-settlement walk-through. While your excitement is understandable, the home is yours once your close on your loan, so be sure your expectations and the sales contract specifications have been met. Pay special attention during your walk-through to be sure that the builder has made any changes or repairs indicated in the home inspection and to ascertain that all the required work on your new home has been completed. Here's a checklist to help you through this process. 

Grading 

·         Does the ground around the foundation slope away from the house? 

·         Make sure the water does not pond in swales. To check, water the areas with a hose, if possible. 

·         Are there signs of erosion? 

·         Is the shrubbery placed at least 2-3 feet from the foundation? 

·         If the house has a basement, are the basement window wells clean and graveled? 

Roof and Gutters 

·         Are the shingles flat and tight? 

·         Is the flashing securely in place? 

·         Do the gutters, downspouts and splash blocks direct water away from the house? 

Exterior Appearance 

·         Are the windows and doors sealed and protected by weatherstripping? 

·         Are the trim and fittings tight? Are there any cracks? 

·         Does the paint cover the surface and trim smoothly? 

·         Has landscaping been installed according to the terms of your contract? 

Doors and Windows 

·         Are all doors and windows sealed? 

·         Do they open and close easily? 

·         Is the glass properly in place? Is any loose or cracked? 

Finishes 

·         Is the painting satisfactory in all rooms, closets and stairways? 

·         Did the painters miss any spots? 

·         Are the trim and molding in place? 

Floors 

·         Is the carpet tight? Do the seams match? 

·         Are there any ridges or seam gaps in vinyl tile or linoleum? 

·         Are wooden floors properly finished? 

Appliances, Fixtures, Surfaces, Etc. 

·         Do all of the appliances operate properly? 

·         Are all of the appliances the model and color you ordered? 

·         Check all faucets and plumbing fixtures, including toilets and showers, to make sure they operate properly. 

·         Check all electrical fixtures and outlets. Bring a hair dryer to test the outlets. 

·         Do the heating, cooling and water heating units operate properly? Test them to make sure. 

·         If the home has a fireplace, do the draft and damper work? 

·         Are there any nicks, scratches, cracks or burns on any surfaces, including cabinets and countertops? 

·         Test the doorbell. Also test the intercom system, garage door opener and any other optional items. 

Basement and Attic  

·         Are there indications of dampness or leaks? 

·         Is there significant cracking in the floors or foundation walls? 

·         Are there any obvious defects in exposed components, such as floor joists, I-beams, support columns, insulation, heating ducts, plumbing, electrical, etc.? 

Certificate of Occupancy 

·         Has your local municipality signed off on your house? 

Some problems may not be readily apparent during the walk-through. Even a professional inspector might miss a few. Most warranties cover any such problems that are the result of faulty workmanship. However, warranties usually exclude problems that result from owner neglect or improper maintenance. 

[Return to Consumer Resources]  

Checklist for Hiring a Builder or Remodeler  

Do your homework before having work done on your home. 

Use this checklist to help you select a builder or remodeler to work on or build your home. 

·         Does the builder or remodeler have a permanent business location and a good reputation with local banks and suppliers? 

·         How long have they been in the building business? It usually takes three to five years to establish a financially sound business. Will they be around after the construction is complete to service any warranties? 

·         Have you called your local Better Business Bureau? They can alert you to any complaints. 

·         Does the builder/remodeler have sufficient workers compensation and general liability insurance? If not, you may be liable for any construction-related accidents on your premises. 

·         Will the builder/remodeler provide you with names of previous customers? Ask them if they would hire the builder/remodeler again. 

·         Have you seen the builder/remodelers work, both completed and in progress? Check for quality of workmanship and materials. 

·         Are you able to communicate with the builder/remodeler? Remember you will be in close contact with them throughout the construction process and afterward as you live in your new home. 

·         Will the builder/remodeler provide you with a complete and clearly written contract? The contract will benefit both of you. Review it carefully. 

·         Be cautious of unusually low-priced bids. If the builder/remodeler is unable to pay for the materials and labor as the project proceeds, this may indicate a potential problem. 

Call your local home builders' association for the names of member builders and remodelers.  

Final Guidelines Before Hiring a Home Remodeler  

You're almost there, but there are a few final steps before taking the plunge. 

Ask yourself if you feel comfortable with the home remodeler and confident that this company will do the work according to your plans, budget, and specifications. 

If you are satisfied with the answers to your questions, ask for a written estimate of the work to be done based on a set of plans and specifications. Be prepared to pay for this package. If the estimated cost of the project is more than you can afford, see if you can trim something from the project or postpone part of it so you can still work with a professional home remodeler. 

Ask the home remodeler to explain the plans and specifications and company procedures to you. For instance, once construction begins, how does the company handle changes to the initial design, choice of materials, or schedule. If you compare your estimate with another, be sure each one is based upon the same set of plans, specifications, and scope of work. If your home remodeler suggests any deviations, ask the home remodeler to present them as options separate from the main proposal. 

Find out whether the home remodeler uses a detailed, written contract that protects both of you and that complies with local, state, and federal laws. The contract must spell out the work that will and will not be performed and provide a fair payment schedule.  

Select the home remodeler with a track record of a variety of excellent projects and plenty of experience with your type of project. Beware of an exceptionally low price. 

If you have completed all the steps on how to evaluate a home remodeler, congratulations! You can now choose with confidence the best professional home remodeler for your home. 

[Return to Consumer Resources]  

Questions for Interviewing Remodelers

How do you weed out shady contractors and find the best professional remodelers? Be sure to ask these questions when interviewing candidates for your remodeling job: 

·         Do you have General Liability Insurance? 

·         Do you carry worker's compensation insurance? 

·         Will you provide me with a written lien waiver? 

·         Are you a member of a Remodelers Association? 

·         Will you obtain all the required building permits? 

·         Do you guarantee your work? 

·         Who will be in charge of the job? 

·         Have you or your company been a party to any construction-related litigation within the past five years? 

·         Will you provide me with written references or contact information of previous customers? 

·         What percentage of your business is repeat or referral business? 

·         How many projects like mine have you completed in the last year? 

·         How will you protect my home? What about protecting my children and pets? 

·         How is cleanup handled? 

[Return to Consumer Resources]