Buying A House: C or D?

So I have another naive question -- as I mentioned one option is perhaps for us to buy our place from our landlord. Can I get an inspection now? Or is that something you can somehow only do after you've made an offer on the house? I feel like if there are major structural problems, it more or less takes that out as an option, and we can focus on other houses.

I guess once again I'm mystified by the process. Let's say there are two places we like and I'm picking between. Are you supposed to just pick one with no knowledge of any major repairs that might be needed, make an offer, then if the inspection fails you start over from scratch? Why doesn't the seller have to do the inspection before they go on the market so you know what you're offering hundreds of thousands of dollars to buy?

ppl who literally can't imagine what a room would look like after a two hour painting job so they pass over a house

More like "ppl who correctly assess that they would mean to get around to painting the room for decades but would never actually do it"

Why doesn't the seller have to do the inspection before they go on the market so you know what you're offering hundreds of thousands of dollars to buy?

right

that would be amazing

eephus i'm w/ you this whole process is very overwhelming and we haven't even made any offers yet

very good homebuying guide there, too. ppl who literally can't imagine what a room would look like after a two hour painting job so they pass over a house

― μpright mammal (mh), Tuesday, 24 May 2016 15:48 (13 minutes ago) Permalink

P sure this is how we got a good deal on our place -- it was messy and cluttered and badly in need of painting and the carpet was gross, but there was really nothing wrong with it otherwise and it even had a nice kitchen. It had been on the market like 200 days with comparable places selling in a month or two. People really have a hard time seeing past that stuff. Actually tbh there is more stuff we still need to do like fix up the closets and maybe sand or replace some doors and fix some doorknobs, but it's all basically cosmetic and minor. The layout is great, the place is big, the light is decent, it has some nice design features, and, as I said, it's a co-op so there's really no major shit that we have to worry about except as shareholders in the co-op.

If you have physical access to the whole home, I don't think there's anything blocking you from having an inspector check it out.

While inspectors are licensed there's a wide variation in how thorough they are and what they identify as issues, and what counts as an issue when it comes to funding, etc. If I was selling a house, there's nothing to stop me from paying the cheapest inspector to take a quick look, say, "yup, fine for human habitation" and wandering off. HSA loans require more adherence to accessibility and building codes.

So yeah, it's kind of a trap, and the reason why you hear of jerks making wild claims post inspection -- maybe they wanted to back out for another reason and they just want to get out of the deal and maybe get their deposit money back.

As a buyer, if there really are two places at a time you'd put an offer on, then yeah, you're screwed because you might be going down the path with one while the other goes off the market.

my parents are notorious house renovators, to the point there is always at least one project in progress. when we moved in my teens, they bought the new house, had all the walls and floors stripped and painted/carpeted before we moved in. they later gutted the whole kitchen and replaced all the cabinets and appliances (with good reason, though -- the prior owner was a smoker and even refinishing the cabinets, which they did, didn't kill the smoke odor)

one of my peers recently did the same thing as far as renovations, so the impulse isn't dead

man alive otm, though. if you don't have to move immediately upon closing, by all means, get a project timeline set up and get a mortgage for the home cost + renovations

regarding the offer process, I still have occasional weird dreams where I somehow have two mortgages because something got screwed up and I ended up buying two houses

some sellers have inspections done and available to potential buyers. I think we did that for the lolkansass house? obv buyers are gonna have their own inspection to confirm "independently" the results but buyers can still get some idea from those. whether sellers do that depends on how hard they're trying to sell.

Yeah you want to hire an inspector who is looking out for your interests, not the interests of the homeowner. We've had one done on both houses we've bought and one was incredibly, meticulously picky about every little possible thing wrong - like a crack in piece of 50 year old siding, ridiculous things that don't matter at all. The other was thorough but didn't hassle small cosmetic stuff and concentrated on major structural things.

And as a seller you don't WANT a thorough inspection because it gives the buyer a lot of dumb things to quibble about or will uncover something dramatic you don't want to know about; ignorance (without being dishonest) is bliss.

yeah that part of selling is like negotiating with an editor on a piece you've submitted : ok, we'll respond to points 3, 5, and 11 in the inspection, per the request of the buyer, but not the others ; and then you see if the buyer accepts it. on the illllllannoy house we got like a 50 page inspection, with pictures of everything, and yeah it was just more to worry about, since most of it was little dumb stuff.

ugh the dumb stuff kills me

I had a couple railings secured (the front porch entry was wobbly, the basement stairs had no rail) and the fuse box had the wrong breakers on a couple things, like they'd wired the washer/dryer to a lower voltage one and the lights to a higher one, probably just a screw-up

people who are like "the smoke detectors should be more than six inches from the wall" and "the refrigerator has a dent in the door" kill me

So I have another naive question -- as I mentioned one option is perhaps for us to buy our place from our landlord. Can I get an inspection now?

We're in the UK so legal stuff is probably not the same, but we are in a similar situation and did exactly this. We had already made an offer but the surveyor didn't really care whether it had been accepted and I don't think we told the landlord until after the survey.

Having bought a house may turn out to be C but the buying stage is really annoying tbh

inventory is so low for us that we might end up renting for a while

my coworker had some post-agreement, pre-possession stuff to deal with when the current owners had the utilities turned off when they moved out, not waiting for them to be transferred on the handoff day

the refrigerator defrosted and leaked water all over the kitchen floor, necessitating repairs

also, the sump pump had no backup power and it was rainy

;_;

That's one thing my agent DID get me to get the seller to agree to in my offer. Very key!

more of a friendly reminder when documented! it's their responsibility until you take possession, being negligent like that is no better than kicking holes in the walls on the way out

question, may be stupid - what happens when a house is priced over what the appraisal price is? there's a property that looks awesome but i do feel like it's overpriced by at least $20k, can i bank on the appraisal revealing the true cost of the house down the road and avoid paying the full cost? how does that work?

are you talking about the local government's appraisal price for tax purposes, or an independent appraisal? the government appraisal is typically lower and while they update it according to an index of appreciation/depreciation for the area, much of the time they only update it when a property sells

my understanding is that it's rare for an appraisal (of the kind you get when you buy a place) to come in below the offer price, in normal market conditions. The price someone is willing to pay is taken as a strong indicator of the value, though not conclusive. If you think it's overpriced then just offer less.

That said, I know a guy in my building who was selling his place and actually had to reduce his sale price slightly because of the appraisal, so it does happen. I'm not sure if being in a co-op had an effect on this. In any case, I wouldn't "bank" on it happening.

ok makes sense

for instance, the house down the street from me sold mid-last year and was appraised by the city at $X but sold for $X + $14K. I'd expect the next appraisal, in 2017, to be much closer to the sale price. There's a maximum they can bump the appraisal in one year, I think it's $10K (unless there are a ton of property improvements?) so it's go to $X + 10

Probably a good idea to read up on "appraised contingency":

http://www.investopedia.com/articles/personal-finance/102913/contingency-clauses-home-purchase-contracts.asp

One of three things can happen if the appraisal comes in lower: the seller can agree to lower the price, the buyer can bring additional money to make up the difference at closing (because the bank isn't going to loan you the additional money), or you can part ways.

Definitely not a good idea to bank on the appraisal coming in lower, because if for any reason it doesn't come in lower you're stuck with the offer that was agreed to. Offer what you think is fair, but have your agent give solid reasons (e.g. closest comps you can find) for why you're coming in so far under asking.

if it's an appraisal done by your lender, they might not even drive by, let alone look at the place. they'll look at the city's appraised value and run a report of similar nearby properties that have recently sold to see if the price is in line with what others have paid.

I forgot about the lender's appraisal -- I received a report before buying and it literally was short notes on the house's amenities, a listing of recent sales, and some comparison notes. The "appraised value" from the report was exactly what my accepted offer was.

thanks everyone! all this is super helpful

yeah, my lender's appraisal was literally our exact purchase price, and I understand that's typical. I think there are some checks to make sure it's not grossly out of line with what you'd expect someone to pay, because then there are concerns of fraud, fake transactions, etc.

also i know we talked about it the other day but i'm not sure how much to trust the zillow, trulia, redfin, etc estimates

house is priced at $221k but:

zillow estimate is $158k
trulia is $182k
realtor.com is $155k

(redfin estimate which seems most accurate apparently? isn't listed yet)

Also the bank wants to avoid lending out way more than the value of the house, bc the house is its collateral if the buyer defaults and they have to foreclose. In other words it doesn't want to lend out a million dollars, have a buyer who doesn't pay back his loan after two years, foreclose, and then only have a house worth 350,000 plus whatever the buyer paid to date -- that'd be a huge loss.

I wouldn't put too much faith in any of the website appraisals. They use algorithms that crunch a bunch of different factors, and you don't know whether everything that makes the house valuable has been included in the algorithm. e.g. I don't know if they account for fancy appliances in kitchens, or "views" or desirable aesthetic qualities (like maybe it's just a really pretty house compared to other similar sized houses in the neighborhood). I would look at how much the home last sold for and what typical price appreciation has been in the neighborhood. I'd also look at similar houses and what they've recently sold for, and then ask yourself whether there's anything subjective or objective that makes this house more desirable than those.

an acquaintance's stepfather is banned from real estate transactions in a few states because that was one of the way he was gaming the system -- houses he was "selling" either by contract sales or on contingency (super shady) were through one mortgage agent, who used the same lender appraiser every time. the properties would be appraised for considerably more than they were worth, leading to all kinds of unscrupulous things

the house i bought sold for 206 and was appraised by the bank as worth 217; it actually made the bank more inclined to give me a mortgage.

Best indicator of how a market's doing is by looking at what recent homes sold for by $/SF. Put the online appraisals aside.

Also check to see if your county assessor keeps records online. You can see for yourself what homes have sold for versus what the county has appraised them for.

many xps - we have put the equivalent of a down payment into stocks instead of buying a house, for a few reasons; prices are insane here, and my FIL (a CFO and also kind of amazing at the stock market) advised us that at our age we should be taking financial risks for bigger rewards. and the thing about owning a home at the end of it, instead having nothing when you rent... well, you always need somewhere to live, right? like, if i buy a house today for 200k and in 5 years it's worth 800k, i'm not gonna come out ahead if i sell unless i downgrade pretty significantly (way smaller, way shittier condition, terrible location). i guess if you're really old when you sell, and move to a retirement home, then you make some money out of it. also: buying a first home seems stressful enough - i can't imagine buying a home AND trying to sell one at the same time.

If you buy a house today for 200k and in 5 years it's worth 800k (which would be a ridiculous and virtually unheard of return btw), you could always take that profit and use it to pay all of your rent for the next 15 years instead of buying a new house. And even if you use the profit to buy the next house, it's still equity.

"advised us that at our age we should be taking financial risks for bigger rewards"

i dont get this... the fact that yr so highly leveraged with your house means you're taking plenty risk i would have thought?

and with the other example, if yr house goes up by 600k you could sell it and go back to renting, and then yr back in the same position yr currently in. but now you have 600k extra rather than just yr downpayment increasing by whatever the stock market's gone up by.

(xp what man alive said)

Buying a house is basically the rare time the average person can take advantage of leverage in an investment AND not be doing something financially insane.

I don't know about everywhere else, but the way the Atlanta housing market has gotten so lopsided re: rents made buying a house the only way I'd be able to afford to keep living here (without getting a roommate...and I'm too old for that shit).

skyrocketing rents was definitely a big reason for us buying, wanted to hedge against huge increases and avoid having to move when not ready.

That might be less of a thing for marrieds/co-habitators because of the dual incomes, but as a bachelor who isn't rich, it was my only option besides a slum or living out in the sticks.

xps obviously i was just pulling a number out of thin air! you don't have to take it literally. and if property prices are high, rents tend to be high too. it's also a lot harder to cash-out from owning a house at the right time than it is to liquidate stocks. if we have to move house on a schedule that isn't of our own choosing (job loss, family issues, etc), we could take a massive hit in having to sell a house in a certain time frame. it's also easier to sell and buy stocks than it is to sell and buy houses!

this is the $221k house i mentioned, https://www.redfin.com/OH/Lakewood/2185-Northland-Ave-44107/home/70837341/normls-3809784, it is super nice, still feel like it is more of a $200k house but in the current lakewood market i could see it selling at the list price, it looks like it's in great shape and has had some updates. one across the street that is virtually the same style but not as many updates sold for $196 a few months ago, so maybe the price is right idk.

for $221k though i think we'd want something bigger though. lots of the homes in lakewood have huge finished (or potentially finished) attics that this house doesn't have.

I was watching Blue Velvet yesterday and noticed nearly every house in the neighborhood the main characters live in look like the houses marcos has been linking :)

haha neat

if i buy a house today for 200k and in 5 years it's worth 800k, i'm not gonna come out ahead if i sell unless i downgrade pretty significantly

I was talking to my kind of manic / thinks-before-he-speaks neighbor the other day about housing prices going up noticeably here and he was talking about how much he could sell his house for compared to what they paid for it three years ago and why wouldn't he do that, wouldn't it be amazing, think of what we could do with the money and the whole time I was thinking "where are you going to live, dumbass?". Then this aspect dawned on him and he looked incredibly sad and dejected.