Buying Your Next Home
The following is an excellent article by a great financial planner and friend, Tedd Oyler. It contains great ideas to think about when you are buying a house.
OK, this is going to be more of a “nuts and bolts” piece than I usually write. While I may love to go on and on (and on and on and on, I’m told) about the importance of the relationship we have with our money rather than discussing how much money we have, even I recognize that, from time to time, I need to talk about specific do’s and do not’s.
So, let’s dive into the 15th installment of our financial check-up. I will provide a checklist you can use when purchasing your next home. My assumptions are that you or you and your mate are employed, that you intend to stay employed (or have reliable retirement income) for the foreseeable future, that you have “normal” tastes and that you want to maximize the profits, both financial and psychic, you can derive from home ownership.
1. Enough house – You are not buying a home to live in for the next couple of months, but rather for a period of years, so if you expect your family to grow, buy enough house to accommodate that growth; 2. Spend enough – Buy a house for at least 2-3 times your combined annual income – in other words, buy as much home as you can afford, for the more valuable home will appreciate at a greater rate than a less valuable home; obtain pre-approval from a lender to see how much house you can obtain financing for; 3. Streamline the process – It makes sense to work with a realtor when buying – a realtor can save you a lot of time in the search phase, eliminating houses that do not meet your specific requirements, and I strongly urge you to give the realtor a detailed list of what you want as well as what you do not want to even look at – and hold to it;, unless, of course, there is nothing out there matching your description; 4. No one-night stands – After you move in, you may love your home – however, DO NOT fall in love with a place before you buy it – this almost always means that you will pay too much;
5. Ruthlessness – Please remember that money is made when you buy the home not when you sell it; buy the home as cheaply as you can – drive a hard bargain; the seller needs to sell her house more than you need to buy it; this is a financial deal, so know the market – tour at least 10 houses before you make any offers; when you find a place that would work for you, offer at least 10% less than the list and be prepared to walk away if your offer is countered: 6. Patience – Do not let the realtor or anybody else pressure you into making an offer before you are ready – hurried offers become expensive offers; if there is competition for the house, let the other guy “win”; 7. Don’t make the same mistake the last guy did – Always keep in mind that you will be selling this house to some other purchaser some day, so avoid houses that most purchasers would pay less for, or wouldn’t even look at – including those on corner lots, houses on busy roads, houses with swimming pools, split-level houses – you get the picture; if a place has been on the market for too long, ask yourself why; 8. Don’t kid yourself – If the house needs work, don’t buy it unless you can (and WILL) do the work yourself or can readily afford to have it done professionally as soon as practicable; 9. Property taxes – Familiarize yourself with the effect your purchase will have on the next year’s property taxes; 10. Tax planning – There are significant income tax implications in any real estate purchase or sale, so consult with your tax advisor about how the dollars of a particular deal will affect you – BEFORE you make the written offer. 11. One last warning – Always have the prospective home inspected before you go through with the purchase.
That’s quite a bit to chew on, isn’t it? But good chewing leads to improved digestion.