Nolo’s Real Estate Tips for Home Buyers

Whether you're buying or selling a home, you have reason to be concerned that the deal will fall apart for reasons that weren't a problem a year or two ago; specifically, that the appraiser (usually sent by the buyer's lender) will assign the house a value that's significantly lower than the agreed-upon sale price. The lender will then refuse to loan more than the house is "worth," and the deal may end right there.

Part of the issue is the new-ish federal Home Valuation Code of Conduct (passed by Congress in 2008), which requires that appraisals be done by someone chosen by an independent third party.

According to recent reports by the National Association of Realtors (NAR), 37% of its surveyed members had "experienced at least one lost sale as a result of the new Home Valuation Code of Conduct, with seven out of 10 reporting an increased use of out-of-area appraisers. Seventy percent of NAR appraiser members said consumers were paying higher fees, while 85 percent report a perceived reduction in appraisal quality."

To get a more personal picture of what's happening, check out these news stories of heartbroken buyers and sellers, from Florida to Arizona to San Francisco.

As more and more people are pointing out, however, a faulty appraisal shouldn't -- and needn't -- derail your sale. Appraisers operate under a set of national rules known as the Uniform Standards of Professional Appraisal Practice. You can read them yourself -- they're not very long -- by going to The Appraisal Foundation's website. (But do so using Internet Explorer rather than another browser, or you'll just get a blank screen for the standards.)

Of particular note is the section of the standards called "COMPETENCY." Take a look, for example, at where it says  the appraiser must understand the nuances of the local market. If your appraiser doesn't, you have grounds to demand that another appraiser be sent to evaluate the house you're planning to buy or sell. With everyone in the transaction probably demanding the same thing, the third party is likely to listen.  

With house prices so low, people who might not have thought about buying a first -- or second -- home a couple of years ago are entering the fray. And they're no doubt curious about what kinds of deals new-home builders can offer them.

Unlike sellers who live in existing homes, house and condo builders can't just settle in for a while and wait for the market to pick up -- they've in many cases got empty inventory to move. Indeed,  they seem eager to make irresistible offers, complete with a flat-screen TV and a Hawaiian cruise in some cases.

But that makes now a good time to remind readers that if you show up "just for a look," without a real estate agent, and then decide to buy, many builders will argue that you can't bring an agent into the deal -- after all, the agent didn't help you find the place, the builder's own marketing lured you in. And having no agent by your side could be a distinct disadvantage if problems arise.

Don't let the low rates blind you to the fact that the builder is struggling in this market, too. Some go bankrupt, others just string the buyers along. (Fortunately, you can hire an attorney at any time -- but this probably isn't the way you were hoping the deal would go.)

For a good example of what I'm talking about, see the question posed to Tara-Nicholle Nelson of Inman News, and her very sensible answer. 

If you're planning to buy a home this year in order to take advantage of the $8,000 tax credit for first-time buyers, don't wait too long: Your home purchase has to close by December 1 of this year.  (No, that's not New Year's Eve, it's the beginning of December.)

And if you've been researching this process at all, you know that actually closing a sale can take several weeks after you've made an offer and then you and the seller have signed a purchase agreement. Forty-five to 60 days is common.

So, realistically speaking, you'd want to be in contract to buy by October 1 of this year. it's hard to imagine as you head for the beach, but that's less than three months away.

Meanwhile, for one homeowner's clever idea of taking advantage of the tax credit by having his 22-year-old daughter be named as the buyer, see this Wall Street Journal article.

Thanks to the Wall Street Journal's cheapskate for eloquently expressing a point I've tried to make many a time -- in fact, every time I talk about real estate to a reporter -- but usually get blank stares in response to: The reason you buy a home is not to become a real estate mogul, it's to settle down in a place that's all yours, and that you hopefully enjoy. 

But enough from me, already: Here's the article.

According to the 2009 survey of California homebuyers (by the California Association of Realtors), a full 32% of people buying homes in traditional (non-foreclosure) sales "either did not know or were not sure they knew the terms of their loan."

Yikes! Isn't this how we got into a lot of mortgage trouble in the first place? If there's any cause for hope, I suppose it's that most of these (88%) were fixed-rate mortgages, which are inherently more predictable than the other varieties that were so prevalent a few years ago. No big surprises or balloon payments in store. Nationwide, the trend is toward more use of fixed-rate mortgages.

Still, I would recommend scanning the fine print on your mortgage at least once -- especially if there's a chance you want to sell or refinance within the next few years, in which case you need to watch out for any prepayment penalties.

That's what Habitat for Humanity found in Charlotte, North Carolina, at least. The charity has long been known for building houses with the help of volunteers, then selling them to needy homeowners-to-be at a reasonable cost.

But Habitat's mission, as explained on their website, is a little broader than just homebuilding: The organization seeks to "eliminate poverty housing and homelessness from the world and to make decent shelter a matter of conscience and action."

The best way to do that in some areas is, apparently, to buy and repair vacant, foreclosed homes. The details are described in the article, "Habitat finds buying is cheaper," published in the Charlotte Observer on July 5, 2009. The organization takes pains to reassure the interviewer that they aren't kicking anyone out of their home!   

Having a hard time keeping up with your mortgage? If so, you're like many other Americans, for the mortgage is a first priority -- and primary source of worry.

But don't let that lead you to forget that homeowners' association dues are almost equally important. If left unpaid, the association may have the right to foreclose on you -- check your purchase agreement for details.

Worse yet, it may not be your fellow homeowners who make the decision. Homeowners' associations commonly turn the difficult job of dues collecting over to management companies.

For more information, see the article, "Neighbors are forcing neighbors into foreclosure," by Paul J. Weber, Associated Press.