Nolo’s Real Estate Tips for Home Buyers

Today, we're introducing a special feature: Guest blogger Paul A. Rude, a retired California General Contractor and Certified Member of the American Society of Home Inspectors. Paul will answer reader questions on remodeling, dealing with contractors, and home maintenance.

We need to add a bath in our family room so our teenagers and guests can have more privacy. Do we need to get a permit?

Absolutely. With very few exceptions, a permit is required for anything that involves structural work, opening wall surfaces, or changes to electrical, plumbing, or other utilities. Of course, you should also stick to the speed limit on the freeway, not jaywalk, and never claim questionable tax deductions.

If you work without a permit and the local authorities find out about it, they will issue a Stop Work order. You will then have to submit plans, obtain any zoning approval that may be required, and pay a penalty on permit fees. This can stall a project for months. Work already completed may have to be redone if it doesn't meet current standards; this can be expensive. There may be code or zoning standards that would be impossible to meet, in which case you may have to pay to restore the house to its original condition.

Even if you don't get caught, there are still some negatives. Most experienced contractors will not work without a permit, as it can jeopardize their license. Unless you're doing the work yourself (a topic for another day), you may have to hire an inexperienced or unlicensed contractor who is more likely to cut corners and make mistakes. These guys usually don't have insurance, so you could be liable if someone gets hurt or if a lumber delivery lands on your neighbor's Lexus. When you sell the house, you must disclose to the buyers any work done without permits. Failure to do so can expose you to a costly lawsuit.

Paul is the owner of Summer Street Inspections in Berkeley, California. His opinions are based on conditions in California and the San Francisco Bay Area. Conditions elsewhere may be substantially different. Contact Paul at paul@summerinspect.com. To find an ASHI inspector in the Bay Area, go to www.ggashi.org . Elsewhere, go to www.ashi.org

All this talk of foreclosures, interest rates, trouble in the mortgage industry--what does it mean if you're a first time buyer?

Here's the picture a few years ago: the market was hot. Buyers, without a single penny down, financed 100% of their purchases, with historically low interest rates. Some didn't have the income to support a fixed-rate payment, so they either used stated income loans (sometimes called liar loans, because income information was often fabricated) or creative adjustable rate mortgages (interest only, frequent adjustment periods, option ARMs, or some combination of these) to lower monthly payments, increasing the overall amount they could borrow.

The picture today: According to an article at CNNMoney.com, you can probably forget 100% financing. Plan to put at least 5% down--10% if you're in a falling market. If you need a jumbo loan (more than $417,000), you'll also find that it costs a little more. And if you have a low credit score, you'll probably have to pay an additional, upfront mortgage fee.

But the good news? Interest rates have stayed pretty low, and prices in most places have come down while inventory has come up. It's a buyer's market--a savvy, solvent buyer's market, that is.

Alayna Schroeder

I recently lived through a California storm large enough for the national headlines to call a "hurricane," with 80-mile-an-hour winds and torrential rain. That's not something we see around here often. And although I mostly watched events from the comfort of my own home, where the power mercifully stayed on and the roof held strong, the experience made me look at my house in a whole different way.

That beloved tree in the backyard suddenly became a potential hazard, its branches waving threateningly. (In fact, an insurance broker I know says they've gotten numerous downed-tree claims since the storm.) I noticed how close the telephone poles are to our house - one good topple and the power lines would be on our roof. And I discovered a new flaw in our front porch - it has no water drain, and required bailing to remove the small lake that collected there.

On the TV news, I watched people endure much worse. And I kept thinking, "Why would you buy a house on such a steep hill/by a creek/next to all those tall trees?" Easy for me to say -- I wasn't there on a sunny day, when those houses probably looked beautiful and had great views of the San Francisco Bay.

But now, more than ever, it's worth imagining what rough climate conditions can do to your prospective home. And relying on the home's history may not do it. Yes, I confess, I just got around to watching An Inconvenient Truth last weekend. And although I already knew much of what's in it, the movie really brings home how much might change in the next 50 years, and the degree to which extreme weather patterns are already affecting the United States (and the world). (One relevant factoid from the movie: The number of Category 4 and 5 hurricanes has almost doubled in the last 30 years.)

Frankly, I don't understand why the real estate industry isn't talking more about this. So what if some people still think it's a "political" issue - shouldn't the mere possibility of increased hurricanes and 20-foot sea level rises have anyone with an ounce of investor's savvy think twice about buying, say, waterfront property? But talking about this openly still seems to be perceived as either taboo or a downer for the already-down real estate market.

So, where should you go for information? Check out NextGenerationEarth, by the Earth Institute at Columbia University, which offers state-by-state summaries. The Natural Resources Defense Council (NRDC) website also has some good general information on global warming, with a special report on how global warming will affect Florida. I've been looking for a website that will tell you how high your house is above sea level, but no luck yet. (Anyone got a hot lead?) And keep your eyes on the news!

Ilona Bray

Yes, we harped on it in our book (Nolo's Essential Guide to Buying Your First Home), but it's nice to have confirmation from Consumer Reports nonetheless:

Buying homeowners' insurance is not a time to go cheap and get the minimum. In fact, buying too little insurance is listed in a story in Consumer Reports' February 2008 issue as one of 12 major blunders that could cost you $1 million.

Why? Because the amount you're given to replace your house, in a disaster, may not allow you to rebuild what you had, and you'll lose any home appreciation you gained over time. Yes, disasters (such as fires, earthquakes, and floods) are unlikely, but the message here seems to be, why gamble on such a huge part of your life -- and your net worth?

The other major blunders are mostly focused on retirement planning and keeping yourself healthy. But when it comes to homeownership, insurance is a biggie.

Ilona Bray

Dedicated dog showers are in (no more kitchen sink baths for Fido). The living room is out (replaced by the multi-use great room). We have this on no less authority than real estate author, broker, and columnist Mark Nash, whose annual list of What's In, What's Out with Home Buyers has just been published. Mark's lists are so interesting (and usually on target), I thought my readers would be interested in seeing it in full, so click on over to the article at Realty Times. For more Mark Nash columns and articles, on everything from shopping for a home when you're pregnant to purchasing flood insurance, see his website www.1001realestatetips.com. You're bound to learn something new and interesting! (Snoring rooms, anyone?)

Marcia Stewart

One of the best things about buying a house is having more space than in your typical apartment. Of course, having that extra space can be a problem for those of us who self-identify as disorganized (a much nicer term than pack rat). I'm not the only one. Getting organized is among the top five New Year's resolutions, according to the National Association of Professional Organizers. And every time I turn around, I see another article about getting organized, such as the January 1 piece in The New York Times, "A Clutter Too Deep for Mere Bins and Shelves," by Tara Parker-Pope.

While the piece focused more on compulsive hoarders (an estimated 1.5 million Americans suffer from this problem), I did learn of a new resource -- the National Study Group on Chronic Disorganization (www.nsgdc.org), which has (among other things) a questionnaire to help determine if you are chronically disorganized. Most people don't need a questionnaire to figure that one out, but if you like questionnaires, give it a try.

So, if getting your house organized is one of your main New Year's resolutions, where do you start? One of my favorite resources is Eliminate Chaos: The 10-Step Process to Organize Your Home and Life, by Laura Leist (Sasquatch Books, 2006). You can find lots of useful organizing products and systems at Target or The Container Store. If you can afford it, a professional organizer can work wonders in a disorganized home. (For referrals, check out www.napo.net.) The main thing is to get started - even if you start small, perhaps by organizing your shoes, or buying a spice rack.

-Marcia Stewart