Home Work

Dos and Don'ts of Buying a House

Apr 9, 2003 at 2:06 pm

Now that spring has sprung, the beginning of the traditional home-buying season has begun and interest in purchasing a new home blooms. Open house and new listing signs begin sprouting up everywhere, so what better time could there be than now to examine the steps involved in purchasing a home, particularly if you're new to the process?

For the uninitiated, it might seem like a daunting process — and it can be if you're not prepared. Even for those who have been there and done that, it's a good time to review and update as you prepare your game plan. The steps involved are logical and, although they can't be scripted word for word, they can be planned and directed from beginning to end.

Start by getting pre-qualified for a mortgage. Find out up front what you can afford before you choose a new home. Keep in mind that real estate activity is brisk and there's a good chance you might not be the only one interested in that dream home you and your Realtor® just toured.

Assume for a moment that you write an offer at the same time someone else does, with price, terms and conditions being identical except for one — financing. Your offer lacks specific information about how you plan to finance the purchase, while the other offer is complete with a pre-approval letter specifying the terms and conditions of the loan, including amount, rate, duration and by what date the seller will be notified in writing that a loan has been obtained.

Now ask yourself: If you were a seller, which offer would you prefer and possibly accept? Enough said.

Once you've put your financial house in order, you can put your house hunt in order. Start by selecting a neighborhood (or three) that meets your prospective needs including transportation, schools, shopping, cultural amenities, distance to work or whatever is important to you. Write them down, prioritize them and communicate to your Realtor what's important and where you want to look.

Speaking of look, you'll want to look at several listings to get a good idea of what you can get for your money as you compare and contrast the positives and negatives. You might discover, after seeing a finished basement or two, for example, that it's important to have one even if you'd never really considered it before.

When you've found a home you really like, go back and back again. Go when it's daylight, go at night and go during rush hour. Observe the traffic patterns, pedestrian activity and street lighting. Walk the streets and talk to neighbors, learning as much as you can before you decide to invest.

Find out how long the house has been on the market and if the price has been reduced. There's a good chance that, if the home has been on the market for a while, it was initially overpriced or perhaps there's something wrong with it.

When you go through for the first time, find out how old the roof, furnace, water heater and air conditioning are. Have there been any major upgrades in the last 10 years; if so, what where they?

Next week more of the A-B-Cs — the dos and don'ts of buying a home.

Let's face it: Everyone has his or her own personal likes and dislikes, especially when it comes to a home. If you're looking to improve your current home or put your personal touch on a house you're buying, there are a few things you should keep in mind.

An improvement is anything that enhances the value of your home, prolongs its life or adapts it to new uses. The money you spend making such permanent improvements (known as capital improvements) can be added to your original cost basis. If some day you sell at a profit, they'll reduce the capital gains tax you might owe.

Although recent tax law eliminates almost all federal capital gains tax when one's residence is sold, it's still wise to retain all invoices and cancelled checks. There's no telling what changes Congress might make in the law in the years to come.

Among the many "basis-boosting" items the IRS considers an improvement are:

· Additions

· Awnings

· Built-in appliances

· Ceiling fans

· Central air conditioning

· Deck

· Driveway

· Fence

· Finishing a basement

· Fireplace

· Water Heater

· Garage-door opener

· Insulation

· Landscaping

· New furnace

· New roof

· New siding

· Patio

· Trees

Home Work is a weekly column geared toward residential real estate.