Nolo's Essential Guide to Buying Your First Home (39 page)
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Authors: Ilona Bray,Alayna Schroeder,Marcia Stewart
Tags: #Law, #Business & Economics, #House buying, #Property, #Real Estate
BOOK: Nolo's Essential Guide to Buying Your First Home
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Staging isn’t all trickery—if it’s well done, you might pick up some ideas for how you’d do up the place yourself. Just don’t pay more than the house is worth simply because it looked gorgeous after the staging job.
Recent Remodels: What to Watch Out ForIf you can afford a house that someone else has fixed up, great—you can save a lot of effort and ongoing maintenance. But not all sellers have good motives, judgment, or taste. In particular, watch out for houses where the seller has:
•
Never lived there, but fixed it up to make a profit.
This is called “flipping.” Unfortunately, since the seller had no personal stake in the house, you can’t count on good materials or workmanship. If you get as far as making an offer, you’ll of course hire an inspector. But before things get that serious, save yourself a heap of trouble by making sure the necessary permits were issued and getting an independent appraisal before relying on appraisal reports the seller shows you. Fraud cases involving flipping are surprisingly common, where the appraiser is in cahoots with a seller and overvalues the house based on superficial or low-quality improvements.Donkey:
Whoa. Look at that. Who’d wanna live in a place like that?Shrek:
That would be my home.Donkey:
Oh and it is LOVELY. You know, you’re really quite a decorator. It’s amazing what you’ve done with such a modest budget. I like that boulder. That is a NICE boulder.From the movie
Shrek
, 2001.
•
Made fix-ups to suit unique tastes.
Overcustomizing can be detrimental to a house’s value, like if the seller was a sports fan who did the whole house in team colors. If you and the seller are kindred spirits, great—but good luck finding the next buyer.
•
Overimproved the house.
A property can actually be made so fabulous that it’s no longer comparable to surrounding homes. Unfortunately, surrounding homes set the standard for home values in that area. You might enjoy the house while you live there, but be prepared for slow rises in value and difficulty reselling.
Feng Shui TipsThe Chinese practice of feng shui is based on a simple truth: Your exterior and interior surroundings can influence your life. Even if you don’t believe it, a house with good feng shui may appeal to later buyers. According to feng shui consultant and author Kartar Diamond (
www.fengshuisolutions.net
), “Every house has what I call an energetic blueprint. This can either enhance or undermine your health, well-being, and career.” Though some feng shui issues can be fixed, Diamond recommends homebuyers avoid the following problems:Exteriors• lots of cracks in the outdoor pavement• a triangular-shaped lot or one that narrows in the back• a corner house on a busy street• a house at the bottom of a cul-de-sac or below street level• trees that appear to be leaning away from the property (like they’re trying to escape!)• a house within view of a cemetery, church, hospital, fire station, ugly eyesore, or place that makes a lot of noise, like an auto repair shop or bar.Interiors• chronically dark rooms or tight, congestive spaces• uneven floors• big exposed beams in the bedrooms• front door aligned directly with back door or window• toilet or kitchen in center of house• stairs right behind entrance door.
The physical layout of a house can make a huge difference in whether you’re comfortable living there. When visiting a house, imagine going through your daily activities. For example, “I’m opening the refrigerator—it bumps the oven door, and I’ll have to chop vegetables on this tiny countertop across from the sink.”
Not buy the house with the weirdly placed bathroom.
Kurt, an avid gardener, was close to bidding on a two-bedroom Victorian. He says, “It was on a corner, with a lot of garden space around it. I was already visualizing planting roses. The problem was, the one and only bathroom was stuck right between one bedroom and the kitchen. It just had a door on each side. Imagine being a guest and having to worry about locking both doors! I’m hugely relieved I held off.”
What Do They Know? Reviewing Seller Disclosure ReportsKurt, an avid gardener, was close to bidding on a two-bedroom Victorian. He says, “It was on a corner, with a lot of garden space around it. I was already visualizing planting roses. The problem was, the one and only bathroom was stuck right between one bedroom and the kitchen. It just had a door on each side. Imagine being a guest and having to worry about locking both doors! I’m hugely relieved I held off.”
One of the most important pieces of paper in this process is the disclosure report, which most—but not all—states require sellers to give prospective buyers. (Exceptions are sometimes made for certain properties, such as those in probate.)
Most state-required disclosures are made using a standard form, upon which the seller will check off features of the property and rate or describe their condition. If the house hasn’t yet been built, the developer obviously won’t have much to disclose—but may still need to tell you about things like the type of soil; previous uses of the property; possible future uses of surrounding land; and the developer’s intentions regarding existing trees, streams, and natural areas.
What you read may affect your decision whether to make an offer. To find out more about a topic mentioned in the form, ask for it in writing. And if you receive the disclosure form
after
making an offer, you can cancel the sale if you don’t like what you read. Even after the sale has closed, if a problem pops up that you believe the seller knew about and didn’t disclose, you can sue the seller on that basis.
after
making an offer, you can cancel the sale if you don’t like what you read. Even after the sale has closed, if a problem pops up that you believe the seller knew about and didn’t disclose, you can sue the seller on that basis.
Exactly
when
you’re given the seller’s disclosures varies by state. In a few states, such as Alaska, Kentucky, and New Hampshire, sellers must give you disclosures before you’ve made an offer. But most states don’t require the seller to do this until
after
you’ve made an offer, often just before the two of you sign the purchase agreement.
What’s in a Typical Disclosure Reportwhen
you’re given the seller’s disclosures varies by state. In a few states, such as Alaska, Kentucky, and New Hampshire, sellers must give you disclosures before you’ve made an offer. But most states don’t require the seller to do this until
after
you’ve made an offer, often just before the two of you sign the purchase agreement.
The typical disclosure form is a few pages long and describes features like appliances; the roof, foundation, and other structural components; electrical, water, sewer, heating, and other mechanical systems; trees, natural hazards (earthquakes, flooding, hurricanes); environmental hazards (lead, asbestos, mold, radon); and zoning.
Some disclosure forms also cover legal issues, such as ownership problems, legal disputes concerning the property, past meth lab usage, or community association fees. Strange but true, the forms might also require information about suicides, murders, and other deaths on the property; nearby criminal activity; or other factors, such as excessive neighborhood noise.
CD-ROMSee the sample disclosure forms in the Homebuyer’s Toolkit on the CD-ROM.
They’re from Indiana and California, representing a range between short and long versions of the form. (California’s disclosure laws are among the most demanding in the country and require sellers to also fill out a Natural Hazard Disclosure Statement, also included.) A sample from the California dislosure form is shown below.
California Real Estate Transfer Disclosure Statement
Disclosure requirements vary among states, and some sellers try to wiggle out of the requirement altogether. Your agent should make sure the seller complies with the law—but the question will remain, how much did the law require the seller to tell you about in the first place? If the standard form doesn’t mention past flooding, the seller doesn’t have to, either (but shouldn’t lie if asked). You might want to read your state’s law, or at least the form, to look for holes.
As of this printing, the majority of states require sellers to either fill out a disclosure form or disclose material facts about the property.
But even in nondisclosure states, buyers can negotiate to make seller disclosures a part of their purchase—or may get them without asking. Law or no law, your state Realtor®’s association has probably created a standard disclosure form for sellers to use. In Massachusetts, adviser Nancy Atwood says, “Our MLS listings tell us whether the seller is providing a disclosure form. Most sellers know that if they don’t, the buyers will think they’ve got something to hide.” Beyond these possibilities, “It’s buyer beware,” says New York attorney Richard Leshnower.
To find your state’s law, talk to your real estate agent or state regulatory agency. You can find yours at
www.arello.com/RegAgency.cfm
. Or you can search online for “real estate disclosure,” “disclosure form,” or “disclosure statement” and the name of your state.
www.arello.com/RegAgency.cfm
. Or you can search online for “real estate disclosure,” “disclosure form,” or “disclosure statement” and the name of your state.
And the Prize Goes to Arizona… for the most interesting creatures listed on its seller’s disclosure statement. The form asks sellers whether they’ve seen any scorpions, rabid animals, bee swarms, rodents, owls, or reptiles on their property.
TIPBuying a house built pre-1978?
By federal law, the seller should, before you buy, give you a form disclosing whether there might be lead-based paint in the home and a pamphlet called “Protect Your Family From Lead in Your Home.” For more on lead hazards, see the National Lead Info Clearinghouse at
www.epa.gov/lead/pubs/nlic.htm
.
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