Anyone really familiar with buying a house?

[buckettgirl]

I am requesting some serious responses here...

My hubby and I found a house. We weren't trying to find a house, but we did anyway.
We are currently trying to get pre-approval for a home loan. My husband is 29, and has NO CREDIT, no credit score/FICO score, nothing. So we have to do an alternative line of credit, and I am waiting for the credit letters to come in and give them to our broker.
The loan we are trying to get preapproved for is an FHA look alike loan. It is a 100% loan (which is good because have no down payment money, and yes I do know about down payment assistance) that will accept an alternative line of credit for someone with no credit history. The rate is around 6%, and doesn't require an appraisal.
There is no prepayment penalty.
Hopefully next week we will know how much we are pre-approved for and then make an offer on this house.
This house 95 years old. Has original woodwork and hardwood floor throughout (it needs work, like the wallpaper is coming up etc) It is 2200 sq ft above ground with 1000 sq ft unfinished basement. Part of the foundation has been replaced, the outside is orginal wood siding, in excellent condition (we found one small area of wood rot due to no flashing being put down when the roof was done), all the windows and doors in good condition. It has a small garage and a carport and is on a huge corner lot. We know that the furnace will need to be replaced (the brand hasn't been made in 40 years!), some rewiring needs to be done, and the main sewer line needs to be changed to PVC.
For all the repairs this house needs, my husband (who is a carpenter) and two of his friends (one licensed in plumbing/heating/air, the other is a master electrician) are capable of fixing it.
Do we still need to have a home inspection even though we already know about all these problems and are willing to buy the house as is?

This house is listed for $79000. Its in a little bitty town where other houses of comparable size go for around $50-$60000. We will not offer the asking price. We are not going to request any repairs or replacements from the seller; the only contingency we have is that they pay the closing costs and pre-paids.

So, I guess, basically I want to know if we have all our bases covered and if we have to have a home inspection by a licensed professional even though we already did it ourselves? Is there anything else that I should be aware of? And what is a good way to negotiate?

[trotsky]

1. GET THE BEST INSPECTION YOU CAN AFFORD

Seriously. You want absolutely no surprises.

On edit: Also, get a realtor to do your negotiation for you. They only take a commission from the sale of a house, not the purchase.

On further edit: It sounds like an absolutely beautiful house and I hope this works out for you!

[chelsea0011]

5. I agree.

Just be sure you are getting someone who is well versed in inspections. There are a lot of quacks who really don't know much. Myself, I would be concerned about the work done to the foundation. We put a bid on a house and the inspector was unsure of the foundation so he suggested an engineer look at it. Lo and behold he found a serious fault with foundation and we withdrew the offer. And it wasn't even part of the foundation the inspector had concerns about. It set us back $1000 for the expertice but repairing a foundation was not something we wanted to take on. Besides, some lenders require inspections for insurance puposes. You may have to get one anyway.

[buckettgirl]

19. If we do get this house

I'll post pictures. For anyone who loves old houses, this house is amazing. My husband is convinced this is about the best condition we will find an old house in (pre-restoration).
It is more of a farm house than a victorian. It is 2 stories, 4bdrm, 2 bath. From what we can tell, it is structurally sound, and the roof is still decent (has survived many hailstorms though).
There is so much potential. This is everything we have ever wanted in a house. I am hoping this works out so that we can stop paying rent and start investing in an asset. :)

[wryter2000]

44. It sounds divine

I hope you get it.

[barb162]

36. GET AN INSPECTION!!!!!! My brother made this fatal error and

paid bigtime in regard to electrical code violations, plumbing problems, basement leaks, etc.

[XNASA]

2. You should have an inspection done.

I'm not sure what rules the FHA has on inspections, but even if they don't require one, you should get one.

And here's why.....

Say that you want to pay $65K, but the seller won't go any lower than say.....$70K.

If you had a licensed inspection, and it listed everything wrong with the house, you could use it as bargaining leverage. So you could say...."But the furnace needs replacing and that will cost $2K, it says so right here on the inspection. You need to come down another $2K if you want to be fair." Etc, etc.

I've done it...and had it done to me.

BTW, I'm on house #4.

[buckettgirl]

4. well,

see, we already talked to the sellers - behind the realtors back.
(she is the sellers agent, so I know she ain't workin for us!)

they are aware of all the problems with the house, but they aren't willing to put any money into it. Basically they are stuck with this house because they signed as a co-borrower for their son and daughter-in-law, who then got a divorce and stuck them with the house. They won't rent the house out (that's why we talked to them, see if they would a lease with the option to buy, because we weren't sure if we could get pre-approved). The realtors contract with them is up next friday (2/11), and if it doesn't sell they plan to just let it sit. It hasn't been lived in for 2 years.

The realtor doesn't know that we know all this information.

And the loan isn't an FHA loan, so I still need to find out from our broker if it requires an inspection or not. I know FHA would require many things to be fixed before we could buy the house....

[chelsea0011]

10. I'm sorry to disagree with you, but I view these people as motivated

You say they were stuck with the house. Nobody wants to be stuck with a house. They would much rather have the money than let a house rot away and lose it's value. And those problems listed usually aren't the negotiable types. There really has to structural including roof , septic, or serious electrical problems to negotiate.

[wryter2000]

46. I'm with everyone else

I think the inspection will cost you $1K. It's worth the money, imho.

[NewJeffCT]

3. Yes, you will need a home inspection

As qualified as hubby and his 2 friends are, a bank won't accept somebody that is not a licensed home inspector. I'm sure they are welcome to go through the inspection process with the inspector.

If you want to negotiate, find out how long the home has been on the market. If it has been on the market for a while, they may be open to negotiation. ( However, the seller may not care and is just looking to get his or her price.)

If you think the seller is motivated to sell the home, then offer them what you think the home is worth. The only problem is that if you offer too low, you could insult them and not hear back at all.

You might want to put the repair requests into the contract and "negotiate" them out in exchange for a cheaper price, even if you intend to do the repairs yourself.

[LiberalinNC]

6. I'd recommend a home inspector and

you probably need to talk w/ an attorney to be safe on all the contracts, etc.

Go on line for the county the house is in, and pull up the tax records on the surrounding homes. This will give you an idea on how much the other homes are valued or what they were paid for, this is great for negotiating a good price.

Good luck!

[spinbaby]

7. Be careful of those beautiful old houses

We bought one in '91 and we're still working on it. We thought we'd be done a decade ago.

[Lisa]

29. good point -- especially ones from the Victorian era!

Victorian buildings are very "in" now thanks to all those decorating shows. There are some nice homes from back then, but at the time there was also a lot of crummy architecture being slapped together (rapid population growth and high housing demand in many cities). So some builders skimped on the quality, not intending the houses to still be in use 100 years later! They might look pretty on the outside but be falling to pieces. And even the well-preserved ones might not fit present-day needs. Heating systems back then were different so rooms were smaller and not organized the way they are now.

[mopinko]

8. just me personally

i would not buy a house if i had no savings. especially an old house that needs repairs. owning a house is so expensive. long term it is great. short term, an old house can be a real money pit. mine is 100. it has been a lot of work and money over the years. everything was so much more work, time, money than i ever dreamed.
are your husbands friends the kind of hard working guys who are out working every weekend? you will be asking a lot from them. they may be good friends, and love y'all, but if they are not go-getters, ....

edited to add- no appraisal?????

[buckettgirl]

9. oh yes

These are people that take pride in their work and love to build/fix/and demolish - depends on their current project.

We know this could end up being a lifelong project. But that's fine by us. It is a dream to be able to restore and old home.

Yes, the broker said no appraisal... and this is a legitimate, reputable company we are going through.

Oh, I keep forgetting - the seller bought a one year home warranty to cover the heating/air, plumbing, and electrical systems... so I think that may help some.

[AlCzervik]

11. You must have the home inspected

you should also have a termite inspection done as well. Do not even think of buying it if the sellers aren't agreeable to inspections.

[buckettgirl]

12. its been treated for termites

does that still have to be checked out?

[AlCzervik]

13. yes, i would still do it. An once of prevention you know.

[LiberalinNC]

14. All the more reasons to have it checked out!

They could have not treated for termites correctly. Or not replaced the damaged wood. I've been told that once you have termites, it's hard to get rid of them, and that they are every 1/8 of a mile.

[davsand]

15. It needs work and is listed for 19K more than similar houses?

BAD IDEA!!!! If you are sure it is comparable in age and square footage to houses selling for less, then no way I'd offer that much on a house that needs work. Further, I'd be amazed if any lender would write a loan on a house priced over market value in lesser condition--especially a 100% loan...

If you just adore the house and will be happy with no other, then see what you qualify for as far as loan amounts and then have it appraised for value.

Best of luck!


Laura

[buckettgirl]

16. yeah

we were thinking of offering 60k, they pay closing costs and prepaids. But I am afraid to start out too low. But I think that for the repairs that we have found, it would be fair.
I forgot to mention in my OP that the seller bought a one year warranty on the house to cover heating/air, electrical, and plumbing... still waiting for more detailed info about that from the realtor.

I need to double check, but I believe the county appraisal on the house is $75k, but I need to check, I don't have that in writing.

[mopinko]

17. i would want that appraisal

and be very, very, very suspicious of a lender that would give a 100% (or 80% for that matter) loan on a house without one.
county appraisals are generally not all that closely related to the actual value of the house.

[NewJeffCT]

28. agreed on county appraisals

get a licensed appraiser not tied to the bank making the mortgage to you...

[AlCzervik]

18. How long has the house been on the market?

that can help you figure out your price, and you should get an appraisal. Also, what are the comp sales in that area?

[buckettgirl]

20. this house

has been on and off the market for a few years, and has been vacant for that long as well.
There aren't many houses for sale around here. One that is comparable is size and style (but needs tons more work) is for sale at 49500. Another smaller house, that is 50 years old, and needs no work is going for 60k. And then a large, old farm house that needs alot of work (and the sellers are desperate) is for sale for 39k.
These are the only houses comparable in age, size, and style. There isn't much to compare to in this town.

[AlCzervik]

21. the big thing is that you don't want to drive the real estate prices in

your neighborhood. The house is either priced too high or something is wrong with it. the other thing, if you buy for say $65,000 and do all the work and make improvements then your house will be over improved compared to the rest of neighbors. Now if you plan on living there for a very long time then it might be ok but if it's something to live in for a few years then i think you really want to think a lot about the purchase. I'm not trying to rain on you parade, buying can be a very emotionial thing and it's easy to get attached to a house that you see on the market.

[buckettgirl]

23. 100% agree

We tried to buy a house a year ago, but it just wasn't the right time at all. I am glad now that we are not stuck with that dumb house (which is still for sale). Yet I was so emotional over it because I was so desperate not to pay rent anymore.
Now, we stumbled on this house and fell in love with it. We know that we are settling in the area permanently no matter what, but we were waiting until I finished school. Even though we don't have money in the bank for a down payment, I know that we are financially capable of making the house payments without becoming house poor. I told my husband that if we get this house, it is a long term committment, that this would be our "forever" house. This will be were our children (when we have them) grow up and were our grand-children will have family holidays.
This is a long range, long term situation for us. That is part of the reason why we have no issues paying for repairs - its just part of our investment.
However, I will not allow either myself or my husband to accept a counteroffer on this house that is more than we can afford right now. I may love this house, but I don't love it more than I love school or not being constantly broke.

[AlCzervik]

24. Good, you're obviousley looked at all the angles

I hope it all works for you, let us know.

[wildeyed]

26. Do you know the prices of comparable houses

that actually sold in your area? You can ask whatever you want for your house, but asking isn't getting.

[mopinko]

27. do you think

that there is a chance the owner will default on the mortgage? go look up the taxes payments, and see if they are behind. while you are there, you could see who owns the mortgage, if there are liens. maybe you could sit back save up some money, and pick it up for way, way less money from the bank.
the worst that could happen is that you could find out if they really are desperate.

[jswordy]

22. I've bought two houses direct from owners

1.) I like to leave the agent out of it when possible. An agent working for the seller is not working for you. A buyer's agent, who gets half the seller commission, is working for you but also working for that commission. If the house is not listed by an agent, try to do it privately and seek an extra 5% off for the commission the owner does not have to pay. If it is agent listed, be sure you know as you neogiate that the agent is not working for you at all.

2.) A good home inspection is around $300 or so. Worth every dime, cuz you will have a qualified thrid party telling the owner what is wrong. Be SURE, ABSOLUTELY SURE that your husband goes with the inspector and points out all the stuff he found as a carpenter. Get a copy! Use this in your negotiations.

3.) Expect surprises, you will get them with an older house. I have done two so far. Be sure you can financially stand any surprises, and that you also ask to look at utility bills and get some idea of annual maintenance costs. This avoids future cash crunches. I will also add that some of the stuff you list will be the wrong things wrong, from a value standpoint. A new furnace or new sewer line or new roof adds little value to the house on resale. You won't get your money back on them. So be sure you take those matters into account in your negotiations.

4.) If you do use a buyer's agent, make sure he or she does a comparative market analysis and that you get a copy. This will show the SELLING prices of comparable homes in your area in the same condition and will tell you what to offer for the one you want.

5.) Negotiations: First find out why the home is being sold. That will tell you what to expect. Next, gauge the owners. If they are old, they may have lived there a long time and have a lot of appreciation in it, so more room to negotiate price. (You can go to the county courthouse and look up the deed, too..it is public record and will show the selling price last time). Also if they are older, see if owner financing would be attractive to them. Sometimes the interest from that arrangement can lower the selling price. Try to find out if they have had other offers, and how long it has been on the market (the long the better for you). Make your offer to them in writing, stipulating as large of an "earnest money" cash deposit as you can upon acceptance.

6.) When the contract is drawn up, be sure it lists everything that is to stay with the house that is considered a fixture (not attached physically to the house by screws or other devices). Make sure it allows adequate time for you to close out your current place and move. If the owners must stay after the place closes, be sure a monthly, weekly or daily rent rate is set for the time they stay there.

7.) When you make mortgage payments, try to include extra cash to be applied to the principle whenever you can. That shortens the length of your loan and can save you thousands of interest bucks!

Good luck...hope this helps some!

[wildeyed]

25. My husband and I bought a charming fixer-upper.

It was more work than I could have imagined, but so nice when it was done. Also ended up being a great investment. The house was in a great neighborhood, and because we got a good price on the front end and then did most of the work ourselves, we were able to sell for almost twice what we originally paid. It's a nice little nest egg for us.

My advice, get a good Realtor, a buyer's agent. You need someone who knows your local market and can negotiate. It costs you nothing, the buyer pays. Sounds like you are in love with this house, which is dangerous. Do. Not. Overpay. Love is great, but this is a business decision, too.

I hope you get this house. Glad you are young and enthusiastic, you will need all your energy to get it fixed up!

[jswordy]

30. "It costs you nothing, the buyer pays."

Uh...I think you mean the seller pays.

Uh...and who pays the seller? Gee, it's YOU! Nothing in finance ever "costs you nothing."

[wildeyed]

31. Sorry, mistyped.

Yes, the seller pays. And it is fine if you can negotiate the agent's fee into your own pocket, but not everybody is able and aggressive enough to do that.

I have purchased two house, both with the same buyer's agent, and I felt like he earned his $$$'s both time. The first one almost fell apart at the closing table, and then didn't only due to my agents superior negotiating ability. The second house had many hidden problems that needed to be fixed before we could close. It took tons of negotiation to get that done, too. We purchased both homes, cosmetic fixers, at below market value, so they have been excellent investments, too.

There are plenty of crappy agents out there, but my experience, a good one is worth it.

[sleipnir]

32. No.

n/t

[maveric]

33. $79,000.00 for a house??? Man, I have to get out of San Diego!

That same house would go for $600,000.00 down here.

[Misunderestimator]

35. Yeah, but then you wouldn't be in San Diego...

I can't wait to get out of this huge house in Florida and move to a tiny little place in blue California myself.

[buckettgirl]

37. ummm

I live in rural kansas!
no one wants to live out here, but it ain't too bad, really.

I can always see the stars at night in town, its quiet, and we are centrally located for most major vacation destinations.

I just found out today that the county appraisal for this house is only $34000. This is a very cheap little town to live in.

[Misunderestimator]

34. Oh God!! DO the Home Inspection!!!

It's great that your husband and friends are handy, but they can't possibly know all that is wrong with the house without someone inspecting it. My inspections have paid off well, with some larger items being fixed prior to the closing, more than paying for the inspection cost.

DO THE INSPECTION... It cost me less than $400 every time, and each time resulted in repairs costing much more than that.

[Sabriel]

38. I hope it's not in a cold climate

We were looking at one of those things here in Wisconsin, until we found out that it AVERAGED $450/month in utilities. One month they paid close to $900. Yikes. That would've been a major portion of our take-home.

Call the power company and ask. It might surprise you.

Edit for unasked-for advice.

[buckettgirl]

39. climate's not bad

we live in a 700 sq ft house about 2 blocks from this one and our power bill this winter hasn't gone over $100/month (for electric and gas).
We do our best to conserve because we don't want anyone in the natural gas/oil business to profit from us :) (not too much anyway)

but really, watching our power usage and conserving energy is a big deal to us.

I would expect the power bill for this house to double (at least) for the winter months, even though we wouldn't be using the second floor right away. But in the spring and early summer, it will be mild enough for minimal power usage.

on edit: its actually about 62 degrees right now :D

[cally]

40. Your post sent up many red flags for me

You and your husband love the house. Great. Now get the professionals to advise you. Get the inspection. Get an appraisal...I know it's not required. Get the numbers and then make your decisions.

Wait until you see the value of the house before you make your offer. I know the house is wonderful to you but will others want to buy it? I guess not since it has not sold.

Think about how long you plan to own this house. Who would buy it from you? Do you think the town will have workers who will be able to buy your house? Btw, it is a risky idea to buy the most expensive house in a neighborhood or town. You usually don't get what you want.

[buckettgirl]

41. i oopsed

I misunderstood my broker: The loan does require an appraisal, which is going to cost us about $300; however it isn't as strict of an appraisal as an FHA loan would require. I found out that the county appraisal is only $34000

This isn't the most expensive house in town. But I guarantee you that these owners (we have met them) will milk that house for all its worth and screw anyone trying to buy it. This is why I don't want to make a contract with them after the realtor's contract is up. I feel safer having her between us (and yes, she is the seller's agent, but she wants a commission too and we are the only takers on that house - not many young people want to move up here.)

I do know that in the future more people will try to move into this town. Hays (Ks) is 30 miles away, and if this house were there it would go for well over $100k as is. People are moving here and to other small "suburbs", if you will, to escape the horrid real estate prices in Hays, even though it means a 15-30 minute commute to work in Hays.
I do know that this is a house we will stay in for a very, very, very long time. This is not a starter house, this is our dream house. I have wanted a house like this since I was a child, and my husband grew up in an old farm house too.

[cally]

45. Once they terminate the contract with the realtor you

can then hire your own. If the owners plan to sell on their own then most will pay your realtors fees. Just be careful. I don't know the house or the market but I'll be brutally honest. I think you need to step back and get an honest value of the house. Don't let your love of the house interfere with the economics.

[cedahlia]

42. I was in your very situation this past summer

Reading your post I'm thinking...that's me! Right down to the hubby being a carpenter, friends and family being plumbers and electricians, and all that! But even with all that expertise in our inner circle, we still went with the professional inspection, and I really think you guys should, too! It really is money very well spent. And as far as I know, if you're going FHA, they're going to require an inspection anyway. That's why some sellers won't even consider contracts from FHA buyers...FHA is apparently very strict about having all the necessary inspections done.

It really is in your best interest to get the inspection done anyway...we bought a 100 year old farmhouse that was turned out to be in surprisingly good shape overall, but it also turned out that the entire septic system had to be replaced!! That was BIG money, and the sellers had to pay for it before the sale went through. So please, protect yourselves and get the necessary inspections done! I wish you the best of luck! :-)

***Edit*** Okay, I just realized I misunderstood, and you're not going FHA...sorry! Still, get the inspection done, if just for your own piece of mind! Our realtor told us some horror stories of people who didn't get inspections done, then wound up getting royally screwed on big surprise problems later...yikes.

[wryter2000]

43. If they offer a warranty, get it

Ours cost $600 or so, I think, and if something goes wrong with the house, you can get it fixed for a deductible.

Also, don't expect a no-down-payment loan not to cost you anything upfront. We ended up spending about $11K before we got our no-down-payment loan.

[redsoxliberal]

47. just so ya know

you have to pay/tip your real estate agent.

[buckettgirl]

48. haha i see you read my other post! actually...

I would tip this agent .... even though she's the sellers agent.
She has been nothing but professional (we have dealt with some unprofessional realtors before), she is enthusiastic - obviously loves her job, and I know these sellers are giving her a hard time with some things that need to be taken care of. Heck, she deserves her commission and thensome just for dealing with these owners...

[redsoxliberal]

49. lol... good for the agent!

[tjwash]

50. My two cents...

First get a licensed building inspector that YOU choose. It will probably run about 150 dollars, but it is money well spent. I know you think that you inspected the place thoroughly yourself, but these guy's will find things that you never even thought about. From the personal experience file, we looked at a house, with what we thought was a fine tooth comb, and our guy found several things that needed fixed, including a bracing joist that had come loose under the roof.

Second, the real estate market is down right now (at least it is here in California), so that leaves you as a buyer a lot negotiating room. If they are asking 75000, offer them market value of 50000. If there are several things the building inspector found, you can also work in a "fix it" credit. Offer them 55000 with a 5000 dollar credit to fix various items, and put in new carpet.