Buying Your First Home – Part I
Home ownership is a great experience! Not only can owning a home add to your quality of life, but it could also be a wise financial decision. I’ve written previously about the financial advantages to owning a home as opposed to renting. In most situations, home ownership has several clear advantages to renting.
Some of these advantages include:
- Building Net Worth
- Tax Advantages
- Control of the Property
- Potential Cashflow from Rental Units
- Collateral to Borrow Against
While many people realize the benefits associated with buying a home, few are comfortable with the process. Common questions include: “How much should I pay?”, “Where should I live?”, “Do I need insurance?; What kind of insurance?”, “Do I need to hire a real estate agent?”, etc.
Over the past year, I’ve learned quite a bit about the home buying process. This has come from research done for NY Home Solutions as well as a great deal of first hand experience. This series of posts will serve as a guide to those who are interested in buying their first home. Even if you think home ownership quite a way down the road, it will be worth while to learn about the experience. As always, your comments, tips, suggestions, and questions are welcome and encouraged!
There are a few key steps to take upon making the decision that you want to buy a home. The first thing you certainly MUST DO is visit Zillow. Zillow is a free website that gathers information from the Multiple Listing Service (MLS) and Real Estate Broker sites and combines it all in one place. Zillow shows homes for sale, recently sold homes, and houses for rent. Zillow also uses a complex and top secret algorithm for estimating the value of every home in the country! (While this is pretty cool, I’ve often found these estimates to be inaccurate and a poor guide to property valuation). Nonetheless, if you are even slightly interested in buying a home, hop onto Zillow and start searching around. Check out you current house/apt, your neighbor’s house, your friend’s house, the huge mansion you drove by the other day….it’s fun. After you feed your temptation to look up the home values of all your friends, start looking for homes that are for sale in an area that interests you. Look at the neighborhoods, the prices, the pictures, and the property details. This will give you a general idea of what homes go for in any particular area. After a week or two browsing on zillow, you will be able to estimate the value of a given home based on its size and neighborhood!
When buying a home (and browsing zillow), pay attention to these basic factors:
- List Price & Pricing History
- Square Feet (Divide Price by Square Feet to determine Price/SQFT)
- Style (Ranch, Colonial, Cape Cod, Raised Ranch, etc)
- Bedrooms & Bathrooms (Half Bath = Toilet and sink/vanity; Full Bath = Toilet, Sink/Vanity, Shower/Bathtub)
- Year Built (Old homes could need quite a bit of updating to the structure, utilities, windows, roof, etc)
- Basement / Foundation
Soon you’ll get a feel for what is standard in your target neighborhood. This will help you determine what is within your acceptable range for all these factors. For example, you may decide that you need 3-4 bedrooms and at least 1.5 bathrooms. You can then create custom filters in zillow to search only houses that meet that criteria.
A good guide for determining whether a house is priced right is to compare “Price/SQFT” for similar homes in the same or nearby neighborhood. This can be done by looking at recent home sales. Take a fairly large sample of similar houses sold within the last 6 months and determine the average Price/SQFT.Then compare this Price/SQFT to the house or houses you are interested in. While this is a great guide to get started, further investigation is required to fully determine whether or not you are getting a good deal.
The great thing about searching for a house is that you can do quite a bit of research without spending a dime. You don’t have to make a serious commitment to start looking into a home purchase. Start looking on zillow and you will get a feel for what’s out there and what will fit your tastes.
Next post in this series: Hiring a real estate agent