By Jack Howard
Realtor Rick Harris worked in a casino when he bought his first house. The house turned out to be the real gamble.
His wife found an ad for a home in the newspaper that said it could be bought with nothing down.
“So I came home from work one day,” he said. “We were living in Reno, Nevada. And my wife said, ‘We’re moving.’ And I said, ‘Oh.’ That’s surprising. And she ‘We bought a house today.’”
He soon discovered what they bought.
Harris called the house this “funny little kind of thirties cottage house that was stuck out in the middle of this funny lot just north of Reno.”
He said it looked so “stuck out” because the seller’s house didn’t belong on the vacant lot.
“So essentially we bought our house but had a 30-year lease on our land,” said Harris.
Harris has now made almost one-thousand transactions. He’s the owner-broker of a real estate firm in Oregon and the regional vice president of the National Association of Realtors for the western region.
He says he would have done things differently.
“Well if I had known then what I know now. Even though it was a surprise to me. And even though if I’d had a realtor involved there, I would have done things very, very differently,” said Harris.
It starts with the offer, says realtor Rebecca Spitzer. She says depositing one percent of your bid improves your offer’s chance of being accepted. That’s called an earnest money deposit.
In addition, prospective homebuyers will be asked whether you want a bunch of inspections. Hint: You do.
“It’s this extensive, 20-something pages to fill-out. Your realtor will be asking you several questions in terms of … do want a home inspector, do you want an appraiser, do you want a lead inspection,” she said.
Woah is this all really necessary?
Spitzer says Yes. She says a home inspector looks at the house to see if anything’s wrong.
“An appraiser can do a CMA, which is a Comparative Market Analysis, basically telling you what the value of that house is according to the current market,” said Spitzer.
After the home inspection, there’s a buyer inspection. A loan officer figures out if you’re eligible for a no-money-down loan through the VA. Or the Federal Housing Administration may give you a reduced down payment.
Spitzer says it’s good to have a twenty percent or greater down payment. Without a twenty percent down payment, banks require mortgage insurance because the loan is riskier without that down payment. That will mean a higher monthly payment.
Realtor Rick Harris says homebuyers then have to remember the other aspects of a loan – the principal, interest, insurance and property taxes.
“Principal and interest are the cost of the loan plus a small amount of the principal balance that gets paid every month. The taxes and insurance are things people aren’t used to paying. And so that’s going to be a thing that lead to a higher cost up front,” he said.
Harris says some costs of home-buying are offset by government refunds.
“One of the great values of owning a home is that your property taxes and mortgage interest that you pay are deductible on your federal return and, in many states, on your state return as well,” said Harris.
And you’re making those payments for 15 or 30 years. Harris says that sense of permanence is well worth all of the costs of home-buying.