First Time Home Buying 101: Checklist

After meeting with one or more mortgage brokers, since they offer different "products", and/or your bank loan officer and determined which has the best loan for you. You have been "pre-approved" for a loan amount and have searched homes within your price range.

For this scenario, let's assume that your real estate agent has now shown you several properties and you have found a couple of homes that would fit your needs and it is time to make a decision. Perhaps, their are some minor compromises or a few concessions that each offer, but still they all would make you happy. The following is a "checklist" of items your agent may or may not have discussed with you. It is simply additional questions or "food for thought" when making your decision. Some might be relevant, some not. I don't expect that you would use this list in your initial search; however, in making your final decision these things might be worth consideration.

Disclosures: Specific rules vary from state to state, but sellers must make disclosures when selling with their home with a real estate agent. That means that if they "know" something is wrong with the property they have to tell you about it. Sometimes the seller doesn't know, sometimes they fail to disclose everything to the real estate agent. These questions may vary from state to state, but things like a lead disclosure is a federal requirement. Some people will sell "as is". This pretty much means they are not going to fix anything before they leave, but they still have to "disclose". ("As is" does not mean not negotiable!). As I say this, remember this may not be as stringent with a For Sale by Owner or a bank foreclosure. The bank will make it clear that they really know nothing about the specific property and may not offer any type of warranty. If the property is listed with a real estate agent, the owners have been advised of disclosures, no one wants to end up with lawsuits. (Another valid reason for a home inspection, a little research on your own, and/or some additional questions that may be relevant).

CHECKLIST: Some of these items may be on the disclosure statement. Some may not be relevant to your home choice. If any of them fit your situation, ask your real estate agent or do some research on your own. You will recognize if any of these items fit your situation.

1. What are the taxes and how are they determined?

• Tax assessments vary from state to state, but initially determined by your purchase price. The reason I think this is very important and relevant is that states receive a great deal of revenue from property taxes. With all the foreclosures and home values decreasing at such a rapid rate, the states are losing a lot of money and need to find it somewhere. For example,This is where you hear stories about people that bought lake front property 50 years ago and suddenly receive a tax adjustment that is 1000% higher. Of course, when they bought the property, it wasn't premium, now they are retired and they have to sell because of taxes. Ask your real estate agent how your taxes are assessed and what is the general rate of increase --- it will be a rare situation to see a decrease. You agent doesn't have a crystal ball, so don't expect them to tell you what to do. Unfortunately, the governor of the state in which you are moving probably couldn't give you an exact answer.
• If you have moving to the country and have acreage, you may be taxed as agricultural property. You want to know what the requirements are to keep this status. If you have several acres and are raising hay, this may keep your status as agricultural. Perhaps you can lease some of the acres to a neighboring farmer that wants to plant corn, etc., and this may keep your agricultural status. An agricultural status will generally allow for much lower taxes.

2. What is the average utility bill for this property?

• Do you have gas and electric?
• If this is agricultural property, is there a rural electric co-op? This can really be less.
• Are you considering a house with oil heat? This can be really expensive. If the home is heated with oil, you will generally have a minimum order prior to the oil company coming to put oil in your tank. Very often they will require that you "fill the tank". This can be pretty expensive at one time! The same is true if you live in an area where you need to fill the propane tank. Usually, you would only find oil heat in older homes, you will find propane (clean) in new homes that don't have access to natural gas lines. The worst thing about oil heat is that it is dirty! Your walls and ceilings close to heat registers will get dirty with a grimy, oily, residue where all the dust attaches. It means a lot of extra cleaning and a consideration if you have anyone with asthma or other breathing issues.

3. How far away is the fire department?

• The best is a fire department that is staffed full-time and close to your new home. If not, a volunteer fire department close to your home. If the fire department is close to your home it usually reduces the rate of your homeowners insurance.

4. What type of shingles are on the roof?

• In certain parts of the country, the type of shingles on your roof can make a difference in the cost of your homeowners insurance. For example, cedar shakes used to be very popular; however, especially in areas with high fire dangers, they are no longer permitted. They simply ignite too fast. In areas that are prone to hurricanes, tile roofs with a hurricane rating are a good choice.

5. Does the area and/or the property have a history of flooding?

• A flood is a horrible thing to have to clean-up, even if your property is left standing. It's dirty, stinky, moldy.....just plain awful. If your home is in a "floodplain", insurance will be hard, expensive or not available. Fortunately, FEMA usually becomes the "insurer". However, there are maps to show the "floodplains". Your insurance agent will have these maps, also the FEMA website, and other Internet sites. But remember, these "floodplains" are a line drawn on a map. If you live across the road from the "floodplain", it doesn't mean that you will never have to worry about flooding. The property may have never had a flood, but technically speaking everyone can live in a flood area. It may be rare, but their are never any guarantees. There may simply be a year of torrential rains, or the terrain has changed over the years, allowing a greater potential for flooding.
• 100 year & 500 year floods. These terms are deceptive, although not meant to be. When you hear the news reporters say, "100 year flood". It doesn't mean that there won't be another like this for a hundred years. It is based on historical data over a hundred years. It means that the chances of a flood like this happening in any given year is 1%. The chances of a 500 year flood (based on historical date over 500 years) to happen is .2%. However, there could be a 100-year flood and then a 500-year flood in the same year or even within months or never again. You just don't know....mother nature gets those decisions.
• This may not be a major concern if you live on "high ground". But, it would be something to check out if you have a river anywhere close to your property. Some libraries also have a "mapping" section with aerial photos that go back in time, or the local University's geology department could probably give you a pretty accurate history of the property, especially if it is geologically interesting.
• If you are buying in an area prone to earthquake's, landslides, or floods, it is not uncommon to request to have a geologic report done. Check with your real estate agent.
• You may also want to know about your "micro climate". There may be an average climate for the area, but perhaps your spot is "warmer" or gets "high winds", just due to the topography of the area. Probably not anything serious enough for you to change your mind about the property, but interesting to note just the same.

6. Has the homeowner had a Home Inspection completed?

• Often times the homeowner will have done a home inspection prior to putting the house on the market. They are really serious about wanting to sell the property and want potential buyer's to know they are getting a solid structure. I have been to "open houses" where there were copies available to take home.
• Perhaps the homeowner had an appraisal of the property completed. It is the value of the property based on the sales of surrounding homes. Check with your realtor. (Your loan will be based on "appraised value" of the home).

7. What is the neighborhood like?

• You have ruled the choices down, but I suggest that you try to go back to the home with your agent and take a closer look if you feel this is the "one". You may have missed something important on a quick walk through.
• If you have the opportunity, I think you should spend as much time in the neighborhood as possible...at different times.
• Drive around the neighborhood, what does it look like? Go to Google Earth and check out what surrounds you. For example; 1) You found a gorgeous home in the country. a) there is a dairy farm or a cattle feedlot and the wind blows the smells directly through your kitchen window! Plus, the flies can be horrific! b) Do the neighbors run a dog kennel and the dogs are barking constantly? c) Is there a train that you didn't notice and when it runs you feel like it is coming through your living room? (that you might get used to). d) Are you in an airport flight path? d) Is there a huge reservoir and your house is downstream from a dam? (I'd have to think about that one!) e) Is there a landfill over the hill behind the trees? f) When you drive around the neighborhood, are other homes nicely maintained?
• Try to visit when the neighbors get home from work. Do the dynamics of the area change? Is there a lot of traffic? If you have the opportunity, talk to a neighbor and mention that you have been considering the house. They may say "welcome to the neighborhood, it's a great place" or tell you what you don't really want to hear.....the stuff that may give you some reasons to reconsider. Better to know before you buy!!!

8. Do you have city water or a well?

• City water is tested. It is pretty simple, turn on the faucet and pay the bill. However in some areas water can be pretty expensive. There is really not much you can do about this except budget and conserve.
• Do you have a well? That can be a real money-saver if it is a good one. Things to ask: a) When was the well drilled? b) How deep? (If it has to be replaced, you are charged by the foot - it is expensive.) If you don't have water, you really don't have a great deal of time to save money. It just has to be done. d) Has the well ever gone dry? d) How many gallons per minute is pumped? e) Did the house have good water pressure when you turned on the faucets? f) Has the water been tested for contaminates? (It is not hard to have done, usually a local water department will do it or send it out for testing.) This might be something important to know and especially important if their is a cattle lot, a landfill or a gas station that are close to your property where contaminates could leach into your water supply.
• If you have a well, are there any plans to put sewer and water to your property in the future? If so, how soon and what are the potential assessments to your home?

9. Do you have a septic tank or city sewer?

• if you have city sewer, same as water - just pay the bill. If your home is in the country, it is likely that you will have a septic tank. Generally, the septic will be pumped prior to your moving to the property. You will also want a septic report completed. It will tell you if the septic tank is really old and it is an expense that needs to be dealt with or if it is in good condition and working properly. Having a septic tank eliminates one bill each month. However, just like a well, they can be costly if they need replacing. Their are some things about septic tanks you can do to keep them working well. If you have one, check this out further. For example, garbage disposals are not usually recommended, or using certain harsh chemicals with a septic tank, but that is not a reason not to buy a house, rather an incentive to do some composting and use biodegradables!
• If you have a septic system, it would be important to know if the City has plans to put sewer and water in your area. This could be a large tax assessment. (same as #8).

10. Any other future improvements, assessments planned by city, state, or federal governments.

• Are you in an area where there is a chance or "knowledge of" sewer and water (already discussed)?
• Usually with sewer and water, curbs and gutters are put in place, also. If you are really in the country, this may be highly unlikely, however, if you are on the "outskirts" of a growing city it is not impossible.
• Is it likely that the road in front of your property will be widened? Is there plans to build a freeway? Or a freeway entrance/exit ramp that could end up in your living room? A new airport runway that will be in your back yard?
• These are all things that can happen, but most of the time the planning and approval of any type of expansions like these are "in the works" for many, many years. Your real estate agent would most likely know of any future expansion plans. For example, if a freeway is going into a new area, that area would likely go from residential to highly desirable commercial property. The real reason I mention it, is because you want to know if the person selling the property is selling it because they know a new airport runway is going to be in your backyard. It is fine if you are given a "heads up" and you still want the property.

11. Schools.

• I spoke about this before and I'm sure your real estate agent discussed the schools in the area with you. Even if you home school or don't have children in school this may be important. If you are having a tough choice to make between two properties, the school district could be a deciding factor. Obviously, if you have kids in school you will want them in the best schools possible, that is a given. If you don't have kids in school, it doesn't seem relevant; however, in some situations it can be a great difference on the value of your home. For example; A family member , living in the country for a lifetime, decided to sell. The property was one mile from a highly desired school district, that lowered the value of the property $40,000. Now that doesn't necessarily mean you should not buy. The people purchasing that property were able to save a lot of mortgage dollars over the years. They could be far better off financially if they choose to send their children to the desired school and pay tuition. When selling the property, if you eventually do so, the highly desired school district may attract more potential buyers. However, by the time you sell, perhaps the dynamics of the area will have changed and the school is now desirable. It is your decision, it is just good to know the facts, there will always be unknowns.

12. Are there any hazardous materials buried on or disposed on the property?

• This should be on a disclosure statement if known. However, it may not be known. It is somewhat likely, if this is a farm-like property there has been things buried. Many farmers disposed of "garbage" by burning or burying it. It was totally acceptable and thought to be safe prior to the existence of the EPA. This is something you want to ask about. It could be potentially be a huge clean-up cost! For example, in certain areas of Idaho where silver mining was very active, people have discovered their yards to contain very high lead levels. Needless to say, they claim to have not known this prior to purchasing their homes. Ask!
• Another example and probably more likely in the world as we know it today, is "the meth lab". Many unsuspecting landlords have rented their properties and discovered the tenants were "cooking meth". Unfortunately, for the landlord, if their property was "raided" and the EPA or a private company has to clean it up so it is habitable again. The costs are in the hundreds of thousands of dollars. Unfortunately, it is a highly profitable product. You don't want to discover the sellers of the property or your neighbors were part of this activity. Anyone disposing a hazardous material on a property is responsible for it "from cradle to grave". The health hazards to you and your family could be enormous if you unsuspectingly purchased this property.

13. What should I give a closer look to on my return visit to the property?

• What type of siding is on the house? Is it need to be painted or is it a good quality vinyl-type needing little maintenance?
• How old is the roof? Is it in good condition?
• What condition does the chimney appear to be?
• Does it have new energy efficient windows? Are they double pane glass?
• How old is the furnace? Is it energy efficient?
• Is there a secondary heat source such as a wood fireplace? (Nice if power goes out!) If their is a wood stove or fireplace, is it common to have bans on their use do to air quality conditions?
• Is there central air conditioning in the home? If not, is it possible to install without major changes if you choose to in the future?
• Are the appliances, washer & dryer included? Are they in good condition?
• What improvements did the current owners make, if any? Does the workmanship look as if "they-did-it themselves" or that it was done by a contractor. For example, do tile floors or countertops have straight grout lines? Do the moldings fit around floors and ceilings or do they appear to all need replacing? Do the doors open and close correctly?
• When you open cupboard or closets, do you notice "water stains" or "droppings"? (Your home inspection will reveal whether or not their are "critters, termites, or water leaks.)
• When you check out the bathtubs, showers or even basement areas, do you see signs of mold? If it is only surface, it may just need cleaning with bleach; however, if there has been a real water problem, the mold could be in walls or ceiling and can't be seen. (Home inspector will know)
• Can you tell if the floors are in good condition?
• Will you be able to get your furniture up or down stairways? This can be a real problem in older homes, but it can happen in the new ones too! You will be pretty annoyed if you buy your house and can't get your bed "up the stairs and around the corner!"
• If the property is fenced, are the fences in good condition? This can be a really costly item, especially if it's not just the backyard! They are also exposed to the elements, therefore, if they require paint, it can be time-consuming and costly project.

14. Does the property have a history of "weird"?

• Has anybody died or been murdered on the property?
• Has their ever been "drug raids"?
• Is the property known to be "haunted"?

Many states have laws that require disclosures of "weird"! But not all are the same. Some people would be really uncomfortable in a house that they heard "stories" about. I think it is good to know about. I would definately want to know if someone that lived in the house was in prison for murder or drugs, etc. First of all, if I bought the house I would immediately change all the locks! (Which should be done anyway....you really never know who might have had a key).

Example: Several years ago a friend of mine bought a old farm house for a ridiculously low price. After the purchase, people in the area began commenting to her about buying the "haunted" house. Of course, it was really cheap, NOBODY would live there! She moved in, found a lot of "satonic" literature and a pentagram painted on the basement floor. She called her priest and had the "house blessed". She said she could hear very definite footsteps on the stairs at night and a door that she closed was open every morning. Their were a few other "weird" things, but nothing she felt afraid of. I think she enjoyed her "ghost" and really loved the house. One time in visiting her adorable home, she thought it late and invited me to spend the night. I must say, I was only too willing to drive home!

15. The sexual prediator list.

• One thing that won't be on your home inspection report, disclosures or your knowledge of your real estate agent. is the if there are sexual preditors living in close proximity to your home. Unfortunately, we never really know about other people. We just have to listen to the nightly news to hear neighbors say "they seemed like such nice people, I never would have expected this" to murders, thiefs, child molesters, etc. Most places have some type of sexual preditor list you can access on the internet. If you have children, I think it would be wise to check out. You would hate to discover that your house is next door to a third-level offender. They have to live somewhere, but you may not want to put your family in that type of situation if you can discover it in advance. Granted, if somebody has never been caught, they won't be on the list. But if someone on that list is living close to me, I would want to know.