Buying a house is a big decision that can have many consequences. It is important to do your research and ask the right questions before making any decisions.
For example, you may want to know what a particular house sold for if it’s located in the neighborhood of the home you’re interested in purchasing. There are a few ways you can find out the sales prices of homes but if you have a buyer’s agent they will be an excellent source.
Let’s look at a few questions that are worth asking before moving forward and making an offer on the house. The answers could influence many decisions in the process of moving forward.
Can You Truly Afford What You’re Going to Offer?
There are bidding wars at the moment in many parts of the country. You could find yourself going out of your financial comfort zone. You must set a housing budget and stick to it. If you can’t afford a property you’re interested in; it’s best to walk away.
The first step is getting preapproved to know exactly what the bank thinks you can spend. However, keep in mind that what the bank says you can qualify for and what you’re comfortable spending could be two different things.
It is essential to think about costs such as your mortgage payment and other expenses surrounding home ownership. You’ll want to budget for your closing costs, the property taxes, the cost of moving, mortgage insurance (if less than 20 percent down), and HOA fees, if applicable.
Talk to a professional to find out what type of loan you can qualify for. When going with government insured loans such us FHA or VA the downpayment will be lower than for conventional loans or mortgage for self employed borrowers.
All of these costs can add up quickly. You probably don’t want to be house poor either, so think about other things such as home furnishings you might need.
How Long Has The Home Been on The Market?
Most of the time, one of the most important questions to ask is how long has the home been on the market. In today’s real estate market, most homes sell very quickly.
Real Estate markets across the country are heavily skewed in favor of sellers. You are more apt to be worrying about how many other bidders you will be up against vs. the number of days the home has been for sale.
It is still worth finding out the home’s history. Ask your buyer’s agent if the home has been on the market previously and for how long. It could give some insight into the mind of the seller.
Days on the market or DOM is an excellent gauge of whether a house is priced fairly or not. When a home has been sitting on the market, especially right now, there could be some underlying issues.
It’s worth doing some additional due diligence when that’s the case. Who knows, there could have been a murder or suicide on the property. Something you might want to know!
What Should I Offer on The House?
Once you have the history figured out it will be time to move towards making your bid.
One of the most vital questions to get the answer to when purchasing a home is what to offer. The current real estate market will dictate what you should offer for a home.
You should be asking your real estate agent to prepare a comparative market analysis (CMA). The CMA will provide comparable sales in the immediate area. The data will be used to formulate the fair market value of the property at this moment in time.
Keep in mind that sometimes (like now), property values are rapidly escalating upwards. Bidding wars have continued to push home values higher.
This is when you will need to lean on your buyer’s agent for guidance. How many offers do they expect will be submitted? How high will the bidders likely go over asking? Can you make your offer stronger by removing typical contingencies?
These are all questions you’ll need to get answers to in order to formulate a solid game plan. There are resources that can help you with the process of buying a home.
Was There Work Done That Required a Building Permit?
One of the bigger issues at the forefront of real estate sales right now is unpermitted work on a house. It is not uncommon for sellers to have made an addition or significant improvement that required a permit and they skipped out on it.
Unfortunately, when a seller has done this, it becomes your problem. When you go to sell the property there could be repercussions. You will want to ask a direct question such as “was any work done on the home that required a permit?”
Once you have the answer, you can determine how much of a risk it is going forward. You might be willing to take a risk if it was something insignificant like adding some electrical outlets.
On the other hand, if the seller added a bedroom with no permits, it might be foolish to overlook.
You would likely be better off asking the seller to get the addition permitted.
What is the Neighborhood Like?
While the home is super important, so are the surroundings.
Take a drive or walk around the neighborhood. Is it peaceful and safe? Are there plenty of amenities nearby (including schools, grocery stores, and medical facilities)? Is the property within your budget?
Is It in an Active Area/City?
Are there areas of the city that are more prone to crime or natural disasters? Houses located in high-risk areas may require extra maintenance (e.g. updated locks, insurance) that could add up over time?
Also, consider how often you’ll want to move – if you’re planning on staying for fewer than five years, a less risky area may be fine.
Is there something nearby that could make the property difficult to sell in the future? Many home buyers fail to realize the importance of checking out the area as much as they do the home.
There are times when doing so where it could lead to disappointment.
Is there a Homeowners Association?
Another problematic situation that arises quite frequently in real estate sales is not checking on the financial stability and restrictions if there is an HOA.
It will be a significant mistake to buy into a homeowner’s association that is poorly run. You could find yourself with unplanned special assessments that become very costly.
There also may be overbearing rules that you don’t want to live with. It is vital to ask many questions before committing when there is an HOA.
What Type of Residential Property It Is?
Before getting pre-approved for a mortgage, you need to be aware of different types of properties. When financing a condotel, townhouse or co-op, a lender will require a condo questionnaire and you might be required to come up with a larger down payment than for a single home family.
Keep in mind when buying a co-op, you will own shares of the corporation not actually property. When buying a condotel, you will have access to maid and concierge service. Condotels can be rented and used as a vacation homes. They can provide extra income and be placed in an organized rental program managed by the hotel.
Final Thoughts
One of the most vital aspects of buying a home is conducting proper due diligence. Make sure you spend the time doing ample research beforehand.
Buying a house is a significant financial commitment that should be researched.
By asking these five home buying questions, you will be able to make an informed decision about whether or not buying a house is right for you.
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