Buying and owning your very first home is probably one of the most exciting things you will do in your lifetime! You may not remember the entire experience, but there will be details, whether good or bad, that will forever stand out in your memory.
So here are the 5 things I wish I knew…
1. You can interview agents!
When I bought my first house the agent I used came recommended. It was clear after looking at a few houses that he just wasn’t working for me, but rather just along for the ride in order to collect a paycheck. At that point in time I didn’t realize I could find another agent to work with, so I stuck it out. After looking at over 100 houses I settled on one and was never truly happy with the end decision or the price I paid. Looking back, not once did he ever take the time to really explain the process, the papers I was signing, or to even say, “Hey, I think I found a house you might really like.”
So, how do you know if your agent is working for you? A good agent will take the time to sit down and explain the process, answering any questions you may have (and if they don’t know an answer they will find out). They will be available to you when you may need them whether that is for a last minute showing or just a quick question. They will actively search and recommend homes they think you may like. They will advise you on the homes you go see letting you know if it is priced appropriately or if there are any issues that may stand out. They will work closely with your mortgage lender to ensure you are informed about the costs associated with each home. In the end, they will do their best to keep this process as fun and low stress for you as possible!
2. Don’t settle, another house will always come along!
My biggest regret is that I settled on my first home because I was sick of looking! While it was close to family, it didn’t have what I truly needed or wanted. I even settled on the price. The house was priced high for what it was and the market we were in (about $30,000 high). I offered less than the asking price, but the seller countered back at the asking price…so I settled. I wish I would’ve walked away because there were a lot of homes that would have taken better advantage of the market with much lower asking prices.
The lesson here is that if it is not right or doesn’t feel right, don’t settle—you will know when it’s “the one!” Don’t feel bad that you are asking your realtor to show you more homes, even when the current one looks right on paper. Our job as realtors is to make sure you are finding a home that makes you happy!
3. Think ahead!
While your first home most likely will not be your forever home, will it fit your current lifestyle, needs and budget? When I bought my first home I had a three-year-old son and another on the way. The house I bought only had two bedrooms! Not only is that a lot of toys to cram into one small bedroom, but it’s just asking for your living room to become your children’s toy room. The other issue was that I knew I wanted my kids in a different school district than the one I bought a house in…what was I thinking??
Don’t allow yourself to be blinded by nicer aspects of a home and spend more than what you are comfortable with. While I could afford my first home I wish I would have laid out my finances better; I was house poor! For some of our younger first-time home buyers, a really good resource for this is your parents! Ask to see their monthly expenses including mortgage, utilities, groceries, gas, etc. This is a great way to get the full picture of what home ownership can cost to help determine a reasonable monthly budget for yourself.
4. Think about resale!
This is very important because, like I stated before, this most likely will not be your forever home. If it’s a problem for you when you are buying, it will most likely be a problem for another buyer. You can always change the house, but there are things you can’t change! There are a lot of inexpensive ways you can spruce up a house to build a little sweat equity. A can of paint can go a long way, but who are the neighbors? Is the house in a nice neighborhood or is it next to a factory or county jail? What are the schools like? This is also something your realtor will be able to advise you on to help make the best possible decision.
5. Once you find “the one” you will have a few out of pocket expenses right off the bat, including earnest money, inspection, and appraisal.
Earnest money is “good faith” money that you pay out of pocket to the seller after you have a signed purchase agreement. This money essentially is telling the seller that you are a serious buyer for this home. In the end, the amount that you put forth is up to you to decide, but a good rule of thumb is about 1-2% of the purchase price. Your realtor can write the purchase agreement in a way so that if the sale falls through, the earnest money will be returned to you. This money will be held for safekeeping by the seller’s broker and then applied to your down payment at closing.
Your next out of pocket expense will be a home inspection. While this is optional, I always recommend having one done. You may choose your inspector, but more than likely your realtor will have some recommendations and can even schedule the inspection for you. The cost of an inspection is dependent upon the size (square footage) of the home, but an average size home (1500-2000 square feet) can cost around $350-450. There is also a test that can be done for Radon gas. Radon is a radioactive gas that seeps from the ground and can become trapped in areas of homes with poor ventilation. Radon is very common in Minnesota and long-term exposure can lead to lung cancer. Testing for Radon will be in addition to the inspection cost and will generally be another $150.
Your last out of pocket expense will be the appraisal. If you are financing the purchase of your home, your bank will require an appraisal be performed. The appraisal is the bank’s way of ensuring that they are not loaning more money than what the home is worth. An appraisal, on average, will cost around $400.
And there you have it! Had I known these 5 things I know I would have not only had a much better experience, but I would have made a much different decision when purchasing my first home.
If you find that you have any more questions, please feel free to ask!!