Why a first-time home buyer should never go at it alone

It's tempting for a first-time buyer to start shopping for a home without the help of a real estate professional, especially with the abundance of online information. 

But why would a first-time home buyer go at it alone, when the seller usually pays the commission to the buyer's agent from sale proceeds? While commissions are always negotiable, a buyer doesn't pay anything extra.

Another compelling reason why first-time home buyers need the help of a professional is the complexity of a real estate transaction. It's complicated. Real estate agents do this for a living, while buyers have other jobs. 

Agents are experienced and trained to negotiate a sales contract, can help avoid missteps, know the local neighborhoods, and see red flags early in the process. They have the connections to home inspectors, septic or sewer experts, pest inspectors, as well as a list of local plumbers, electricians, and handymen for future repairs. Plus, if something does go wrong, first-time buyers will need the skills of an experienced professional to get things back on track.

The vast majority of people who have bought several homes and are familiar with the process still rely on a real estate agent, because they know that if something unexpected happens, they won't have to fix it themselves.

Millennial buyers: Why bigger may not be better

While millennial's are coming into the home-buying market later than their predecessors, for the last three years, they still have been the largest group of all recent home buyers, according to the National Association of Realtors.  

Millennial's tend to buy at a lower price point, which translates into smaller homes. While they're less likely to buy a mansion, they are buying bigger places than they were renting. 

A housing study by the NAR shows the number of millennial's living in urban or central city areas decreased from 21 to 17 percent just in the last year. The trend is moving from buying condos towards purchasing a single-family home in a suburban area. Interestingly, the younger the buyer, the older the home they purchased.

That's another indication that millennial's are seeking affordability as they form their families. They'll be looking to the suburbs, but can't afford too big of a home.

A better way to buy your next home

What if you could have an X-ray machine that would show you all the potential problems with a home before you buy? While this technology doesn't exist – yet – a veteran home inspector suggests there is a better way to shop for your next home.

He calls it focusing on the "bones" of the home versus the "bling."

Dylan Chalk created this better way after providing more than 5,000 professional home inspections. He points out that the 100 million people a month visiting real estate websites are attracted by the bling – the shiny granite kitchen countertops, the marble floors, and those dramatic winding staircases.

He argues that home shopping today is based "on the emotion of the bling and not understanding the bones of the home." Understanding a home fully – the good, the bad, the ugly –  helps buyers put it all in perspective. With perspective, buyers won't panic and cancel a deal over a solvable problem after receiving an inspection report. 

He's written a new book and blogs regularly (dylanchalk.com) to teach buyers how to "see" a home in a more transparent way. His posts share photos and expert insight into understanding all of a home's systems, how the style and age of the home will impact future maintenance needs, and the danger signs of water, insect and animal infestation. 

Dylan's goal is simple: "This new way to buy your next home will make everyone smarter about how to really look at a home."

Don't make this first-time home buyer mistake

It's the biggest financial decision first-time home buyers make, and they want to get it right. Buying a home can be nerve-wracking and complex. While information about how to get a loan is easy to find online, not all of this information is accurate.

That's one of the reasons home buyers overlook an important point: Online information – such as mortgage calculators - focuses on how much home buyers can qualify for, versus what they can afford. Failure to budget and thoroughly understand all the expenses that homeownership brings can be the biggest mistake a first-time buyer can make. 

Buying the best home one can afford brings some surprises: A larger home comes with bigger utility bills and costs more to maintain. Best bet for first-time buyers: Take online home loan information with a grain of salt and talk to a local lender who understands your need to afford a home, not just qualify for a loan.

3 secret tips to buying a home

Every buyer would like to have an edge when it comes to shopping for a home. How can you get a jump on other buyers? Here are three tips that most buyers never consider:

The early bird: It would be nice to know when a home is going to go on the market, before it actually went on the market, right? A real estate agent can give you insight into when homes go on the market. The key is to be ready and available to see the house immediately if your agent contacts you, because the best-priced homes won't stay on the market long.

Bid smart: Your offer needs to take two things into account: How much you can actually afford, as well as what you believe the home is worth. Your agent can help you understand the bidding strategies that work, whether it's a buyer's market or a seller's market, and if your home is in a sweet spot – where the majority of the sales are occurring – or on the edge, where homes tend to sit on the market longer.

Become a social stalker: Social media (Facebook in particular) is a great place to find out if someone is selling well before they've listed their home. Large garage sales to clear the clutter, friends of friends asking for agent recommendations, and announcements of new jobs – in a different city – are all clues.

New 3-day home loan rules for buyers

Everyone getting a home loan now gets three days to review mortgage closing documents before they have to sign on the dotted line. This new rule, dubbed "Know Before You Owe," is part of what the mortgage industry calls TRID – or the new TILA RESPA Integrated Disclosures.

It means that if you are buying or refinancing a home, you'll receive your new, easier-to-use closing document – called the Closing Disclosure – three business days before closing. It's designed to give you more time to understand mortgage terms and costs so that you "know before you owe."

According to the U.S. Consumer Financial Protection Bureau, by requiring your lender to provide Closing Disclosure before you sign, surprises should be eliminated from the closing table. Also, if you want to talk to your lawyer or someone else for advice, you will have time to ask all the questions you might have about the terms of your mortgage.

The CFPB publishes a comprehensive website about all the new "Know Before You Owe" rules at http://www.consumerfinance.gov/know-before-you-owe/.

Winter wondering: Why now could be a great time to buy or sell

Conventional wisdom says you shouldn't buy or sell a home during the winter. But real estate pros will tell you that the winter can often be a great time to buy or sell. Why? Consider the following:

  • Historically, interest rates tend to drop the most at the end of the year.
  • The number of homes listed for sale drops in the winter, which means less competition for sellers.
  • While there are fewer buyers looking, those buyers who are shopping are more serious about closing.

Remember that large employers often transfer employees in January to start the New Year, and that means even more motivated buyers are looking in the winter months.

Why do you need title insurance?

The vast majority of home buyers secure a mortgage to purchase a home. What you get when you buy a home is a title to that property, a legal document that gives you the right to possess that property.   

To protect their investment – the mortgage – lenders require title insurance. Like any insurance, it's designed to protect an investment from loss. Loss can be caused by a "defect" with the title, which means there could be an issue with who really owns the property you purchased.

Homeowners themselves are protected by an Owner's Title Policy, which insures your equity in the property. Title insurance makes sure that you don't lose money because of a defect.

While title defects are rare and might not show up for months or years, they can result in the loss of the property or an expensive lawsuit. Title experts say defects can include forged deeds or wills, undisclosed missing heirs, errors in public records or tax reports, mistakes in recording legal documents, and more. 

Title insurance is designed to give both lenders and home buyers long-term piece of mind. Like any insurance policy, you hope you never have to use it. But if you ever do, you'll be glad you were insured.