The U.S. housing market has finally cooled somewhat, and houses are sitting on the market slightly longer than they did a year or two ago. As a homebuyer, it’s now possible to get a seller to agree to some of your demands, which is a huge departure from the days when sellers held all the cards.
Even so, buyers still have to protect themselves from the earliest planning stages through closing. The best thing that buyers can do to protect themselves before signing on the dotted line is to ask the following 10 questions to their agent, the seller and, most importantly, to themselves.
Can I Afford It — Like, Really Afford It?
To prove you’re a serious buyer and to begin the budgeting process, you have to get preapproved before online browsing turns into legit house hunting. When that happens, don’t make the mistake of shopping near the upper limit of what your lender clears you to borrow.
Buying and selling real estate is expensive, and according to Opendoor, you must consider the following costs when budgeting to buy:
- Closing costs, which can include everything from loan origination fees to title fees
- The cost of appraisals and inspections
- Moving costs
- Points paid for rate discounts
- The cost of furnishing the new place and making any repairs not covered by the seller
- Mortgage insurance
- HOA fees
Have I Saved Enough for a Down Payment?
Lenders have to see that you have at least some skin in the game, so you can’t borrow the entire cost of the house. Historically, 20% was the magic number for a down payment, but depending on the type of loan and your own unique situation, you might be able to put down as little as 3% — and when it comes to money paid out of your pocket, less is more, right?
While it doesn’t always make sense to put more money down, the amount you choose will directly impact the interest rate you pay, according to Rocket Mortgage. The more of your own money you put on the line, the less risk you pose to lenders. Also, you’ll have to pay for private mortgage insurance if you put less than 20% down — and don’t forget that a higher down payment will lower both your debt-to-income ratio and your monthly payments.
How Much Will Utilities Cost?
Powering your home, pumping water into it and removing waste is an expensive part of homeownership. Try to estimate utility costs as accurately as possible when mapping out your homebuying budget.
According to the San Francisco Gate, you should ask your realtor to find out which companies provide electricity, sewer services, water, gas and/or oil. Your agent can ask the sellers to estimate their monthly utility bills, but keep in mind that consumption varies from household to household — they might have an automatic sprinkler system, for example, that you don’t plan to use. Don’t forget to keep seasonal utility adjustments in mind when estimating your monthly utility costs.
How Long Has It Been on the Market?
DOM is an important real estate acronym that stands for days on market. Each sale is different, but generally, homes sell for less the longer they stay on the market, according to Springs Homes. The DOM clock runs from the moment the house is first listed for sale through the time when it’s categorized as “under contract” or “contingent.” Only when a transaction is listed as “pending” does the DOM clock stop.
DOM is a good gauge of how well a home is priced, and the longer a home sits on the market, the more questions you should be asking about why. It could just be the result of a sloppy listing with bad photos or incomplete information, but there might be something wrong with the house, or the seller might have a pattern of deals falling through.
In December 2022, the typical home spent 67 days on the market, according to Realtor.com. By comparison, houses spent 11 days less on the market in both December 2021 and 2020.
What Are Comparable Houses Selling for in the Area?
At some point early in the process, you’ll be sure to hear your agent mention comps — that’s real estate shorthand for comparable properties in the area. By knowing what buyers are paying for nearby houses that are of a similar age and build quality, and with similar features, rooms and square footage, you’ll be able to gauge what a property is worth before you put in an offer.
You can certainly DIY this kind of research thanks to sites like Zillow and Redfin, but comps are hyper-local — values can change for similar properties on a block-by-block basis in some neighborhoods. This is a time when an experienced real estate agent with intimate local knowledge is invaluable.
How Does It Stand Up to the Weather?
Stormy days present golden opportunities for buyers to see how potential homes hold up in the rain and wind. This is the perfect time to look for moisture seeping up through unfinished floors in the basement and to investigate the performance of gutters, downspouts and windows. Does water pool around the foundation? Does the lawn feel muddy or spongy?
Also, Crescent City Living recommends looking beyond the home itself to see if the street has any drainage issues, or if driveways, carports or lawns take on excessive water in a storm.
What’s It Like at Different Times and on Different Days?
Neighborhoods change at night and on the weekends — and often for the worse. A street that seems quaint at noon could receive a busy crush of traffic during rush hour. A nearby school could bring twice-daily congestion as parents scramble to park and navigate fleets of yellow buses and pedestrian traffic. A nearby bar might be loud, but only on one or two specific nights a week. A house that appears bright and inviting during the day could be barely visible from the road if it’s located too far from a street lamp.
The point is, it’s important to walk or drive past a house you’re considering at different times and on different days. Homelight recommends visiting in the morning when commuters get going, at 3ish in the afternoon when schools let out and in the evening — especially in the late evening on weekends.
What Does the House Come With?
The house you see when you visit as a prospective buyer is not the house you’ll get on your move-in date in most cases. Both your budget and the home’s sale price will change depending on whether the property comes with things like window treatments, light fixtures, appliances, or expensive extras like built-in sound systems or pool tables. This is true for the entire property, not just the house — be sure to find out if things like basketball hoops, above-ground pools and barbecue grills are part of the package or not.
Is the Home Located in a Flood Zone?
For most people, living near a body of water is an amenity — until that water finds its way into their basement. A single inch of water can cause $25,000 in damage, according to FEMA.
Being located in a flood zone shouldn’t necessarily preclude a home from making it onto your shortlist, but according to Rocket Mortgage, it presents a whole new set of considerations. Step one is to find out if the home is in low-risk, moderate-risk, or high-risk zone, which you can do by using FEMA’s Flood Map Service Center.
The higher the risk, the more you’ll pay for mandatory flood insurance, and the more likely it is that the home has already experienced water damage in the past. You’ll also probably have a harder time selling.
Were There Any Unpermitted Additions or Major Renovations?
Homeowners have work done on their houses without first securing the appropriate permits for all kinds of reasons. For example, people sometimes finish basements without the necessary permits to avoid paying higher taxes on the value-enhanced property, according to Maximum Exposure Real Estate. In most cases, however, it’s simply to save money on the job, which often leads to corners being cut by unprofessional or inexperienced contractors.
Unpermitted work can void homeowners insurance policies or cause your lender to call in the entire balance of your mortgage loan. It can lead to legal repercussions and civic penalties, or you might be forced to hire contractors to redo the work or bring it up to code. Most importantly, unpermitted work is often shoddy and can have dangerous, or at least expensive consequences.
Avoid this trap by securing the home’s blueprints from your city building department and going over them with your inspector before the inspection.
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Cynthia Measom contributed to the reporting for this article.