What should a first-time homebuyer know before making an offer on a home? Well, I don’t know that this is advice for the first-time homebuyers or all homebuyers whenever you are getting ready to purchase a house. It is called due diligence, and so the first thing you need to do is research the price. Now how do you go about that? Well, it takes work and effort, and I suggest that you look at several houses. The more houses that you look at, whether you like them or not, you then have a sense of the value that you are getting or you are not getting, as far as the price is concerned. So look at more than one house before you make an offer so you get comfortable with it.
I would also, if you are interested in purchasing a particular house in a particular neighborhood, that you ask the Realtor that’s showing you the property if they wouldn’t do a comparative market analysis so that you know how much the other houses are selling for in the neighborhood or have sold for. That’s called a CMA, and the Realtor should be able to do that by pulling up comparable sales in the neighborhood. This is the work you need to do as far as the price is concerned.
You also need to check into whether or not the property is in a flood zone, particularly if you are going to have financing, and that the flood insurance may – well, it is an extra expense. If you are in an area that does require flood insurance, it’s going to be an extra cost to you on a monthly basis in your mortgage payment. If you are paying cash, then you do not need flood insurance ever, then you have to get comfortable with that.
You need to have an inspection of the property or have one done to see does the roof leak? That’s a huge expense, no matter how much the useful life is. You need to have the air conditioning checked out to see how long is it going to last. It may be operational, but it may be 15 years old. It may not be very energy-efficient. Now all these factors may be factored into the price of the property, but you need to understand whether you are looking at a substantial layout as far as funds are concerned.
One of the bigger concerns, particularly in Pasco, Hernando, Hillsborough, and Pinellas areas, is whether or not the property has ever suffered or suffers from a sinkhole, whether the sinkhole has been repaired or not repaired. With the Realtor that’s handling the transaction, you will see where they will give you a disclosure, and the disclosure should indicate whether or not there has ever been a sinkhole on the property and whether it’s been repaired. If there is a notation that there has been a sinkhole, you should ask for the soils report and also the engineer’s certificate to ensure that the property has been repaired pursuant to the engineer’s report.
You also need to just take note to see who you are purchasing the property from. If you are purchasing it from an LLC or a corporation or even bank-owned property, you are not going to have any assurances that if there was a nondisclosure of an asset, whether knowingly or unknowingly, you are going to have no recourse since it’s usually an entity and your money has been spent. So I can’t urge you enough to go through and do the due diligence to make sure that you don’t have a soils report.
You also need to ask to get insurance and see if you can get insurance. You won’t be able to get sinkhole coverage because it’s very expensive, and they do check the property prior to issuing the insurance.
All of this has to do with due diligence, which costs you money and you may not be able to recoup that – but also that your home inspector will also tell you about the appliances. You also need to check with the building department or have someone check to see if there are any open permits. Also look to see if any improvements have been done without any building permit being pulled. A prime example is this, if you are looking at property out on the water and it’s an elevated home, if the downstairs has been completed, that’s probably below where the flood plain, and therefore it’s not insurable and could require you in the future to have that removed. All these items that you need to work on, whether you’re a first-time homebuyer or just a homebuyer.
Then you may wish to hire an attorney to review your contract to see if you can build in these protections so that when you do the due diligence that you have a right to terminate the contract. Also write in as far as your financing is concerned, and also check with a lender to find out how much you are going to be able to borrow. One of the other things you’ll find is that the financing is also going to be controlled by the lender’s appraisal and they are going to base the loan on the bank’s appraisal, not necessarily on the purchase price.
So these are a few of the things that I would suggest any homebuyer, whether it’s first time or not, to look into, and then you may want to hire an attorney to help you, to guide you through this, particularly if you are not in town to be able to do all this due diligence. So if you need representation or a lawyer to help you, well, give me a call at 727-847-2288. Thank you.