Residential Real Estate Buying Guide

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Residential Real Estate Buying Guide

As most of us already know, the real estate market has changed significantly over the past few years. It used to be that investors could feel reasonably confident that the upside would generally be positive, even in the relatively short run. Those days are no more. No longer is a real estate investment something to be entered into lightly. However, for those who take the time to perform basic due diligence, there is still the potential for gain. Prices for homes are lower now than anytime in recent years and interest rates are at, or near, all time lows. eBay enables prospective buyers to search for residential real estate properties nationwide. The following guide provides the reader with the tools and information needed to successfully purchase residential real estate.

The information contained in this buying guide is intended for general information purposes only. This guide is not intended to be a complete list of all things relevant to the purchase of real estate and should not be deemed a substitute for professional advice. You should conduct your own due diligence into all aspects of a real estate purchase and depending on your situation, you should get assistance from experts, including a licensed real estate broker, a property inspector, title/escrow company, attorney, and/or financial advisor.

What Can the Buyer Afford?

If at all possible, buyers should avoid the very natural tendency to start house hunting before the initial research phase is completed. A buyer who falls in love with residential real estate they can’t actually afford only has heartbreak to look forward to. Every buyer should start by performing a thorough evaluation of their income and expenses. A buyer will save themselves a lot of effort if they take the time to figure out how much mortgage they can afford on residential property.

Pre-qualify With a Residential Lender

A buyer should talk to a residential lender to get pre-qualified before starting the process. This way they’ll know exactly how much money they will be be able to borrow to buy residential real estate.

Determine the Monthly Mortgage Payment

Generally, a residential lender wants an applicant’s monthly mortgage payment to be 28% (or less) of their monthly gross income. The gross income is defined as the monthly income before taxes and other paycheck deductions.

Consider Total Debt Ratio

Another useful number is total debt ratio. The total of all debt payments should be less than 36% of gross income.

Consider Interest rates in Monthly Mortgage Payments

The lower the interest rate of a loan, the lower the overall monthly mortgage payment. A low interest rate loan may mean a buyer can afford a higher-priced home.

Estimate Monthly Costs

Even though they don’t directly affect purchase price, monthly maintenance costs, insurance premiums, and taxes will have an impact on a homeowner’s bank balance, and these costs may be considered by the residential lender.

Lifestyle Considerations When Selecting Real Estate

If there was ever a time to start planing ahead, it would be when purchasing a house. There is a high probability of a significant financial setback for anyone who purchases residential real estate today, only to find themselves in the situation (buyer’s remorse) of having to sell it again just a few years later.

There are a number of factors to consider prior to making such a long-term commitment. This is the perfect time for a prospective buyer to make some projections about what the future may hold with respect to the size of their family, preferred location, career expectations, climate preferences, as well as other unforeseen circumstances like losing an income to downsizing.

A buyer will probably have different needs if they’re retiring to sunny Florida than if they’re snapping up foreclosures in Texas. Buyers need to consider how they will be using the property before they buy.

Home Size

Considerations here are largely based upon family size and makeup. Clearly a couple earning over $200,000 annually with four children will have little interest in a two bedroom duplex. On the other hand, buying a property that significantly exceeds the needs of the owner can end up being a financial drain.

These are the most common types of residences:

Type of Residence

Description

Single-family homes

Single-family homes are free-standing structures that don’t share walls with any other homes.

Duplexes

Duplexes are residential complexes consisting of two separate residential units where there’s only one legal title covering both units.

Condominiums

Condominiums, also known as condos, are typically apartment-style properties within a building or complex. Individuals own the units, and common parts of the property, such as the grounds and building structure, which are owned jointly by the unit owners.

Housing co-operatives

Co-op residents own shares in a legal entity that owns a group of homes, usually one or more apartment buildings. Each shareholder typically has a lease agreement with the co-op, and the co-ops rules provide tenure for its residents.

Location, Location, Location

Such has been the mantra of home buyers since the days of finding a cave nearest to supplies of food and water. But, unlike primitive times, packing up and moving to a different location is not a simple matter.

The lure of living in the country has drawn many urbanites into purchasing property quite distant from where they work. Only later do they discover the commute that initially seemed inconsequential actually consumes much of their day. Buyers should always make the actual commute during peak traffic hours to accurately gauge how long it’s going to take to get from home to the office each day. Buyers shouldn't rely on rosy projections given by realtors.

Beyond travel time, other location considerations come into play. Buyers should find out about the neighborhood. Is it in demand? Are there grocery stores, shopping, and good schools nearby? What is the crime rate like, and what types of housing are nearby? A buyer will always look for a house with features that appeal to them, but it’s good to buy with a property’s resale potential in mind. To find out which features are in demand, buyers should browse local residential real estate ads and see which features are mentioned frequently.There are also local concerns too, such as cost of living, air quality, utility rates and local tax rates that need to be factored in.

Employment Security

A career police officer or other local government employee can reasonably expect to remain at or near the same place of employment indefinitely, while a military officer is subject to relocation with little notice. Some careers are more "portable" than others: writers, auto mechanics, and IT technicians can relocate just about anywhere at any time and find work. It is those flexible location jobs that sometimes offer the greatest job security. Someone laid off from a manufacturing plant, for example, will likely have a difficult time replacing that level of income in today’s job market.

The point is: buyers should carefully consider the likelihood of continued employment at a given income level prior to taking on a 30-year mortgage. It makes sense to also investigate the local rental market in the event of an unforeseen relocation.

Climate Preferences

Believe it or not, there have been entire families who have relocated across the country only to discover that the climate didn’t exactly live up to expectations. They may have visited New Orleans in January and neglected to spend any time there during August. They just loved Seattle in July and were shocked at how annoying 56 straight days of rain and 40 degree temperatures can become.

Residential Real Estate Property Condition

Buyers should always check the condition of the home or real estate they are interested in. Is the roof leak-free? Are there termites? Is the electrical work up to code? Issues like these can add costs after the purchase, so buyers need to make sure they know about them ahead of time. They should consider using a professional inspector who is trained to see things a buyer may not. For example, it often occurs that a lender is satisfied with the condition of a roof and is willing to make the loan without modification. Without engaging a specialist, the buyer has no way of knowing the remaining lifetime of that roof. Now is also the time to discover the existence of radon on the property, not two years into the mortgage.

The buyer should also ask the seller or seller’s agent about the residential real estate property. They should consider making a list of their top 10 questions. Some states may require that the seller deliver to a buyer a specific form of disclosure statement. A title search is usually performed by a title company or an attorney, who examines public records to determine the property’s legal ownership, loans on the property, and property taxes due. The company or attorney will also find out if there are any liens, which are claims against the property by debtors, or any easements, which give rights to anyone other than the new owner to make limited use of the property, such as for right of way. If there are issues with the title, the buyer must discuss them with the seller.

Residential Real Estate for Investment

Different considerations are in order when purchasing a property for investment. Many of the concerns listed above become irrelevant as the buyer does not typically occupy the home for the long term. Most of the questions now become cash-flow related. What rent level is required to cover costs and produce a reasonable profit? What are the chances for appreciation or depreciation? Are vacancies common or rare?

Buyers should keep in mind that rental properties in lower income areas tend to turn over the tenants frequently, require more repair work, are more likely to be subjected to vandalism, and may be more difficult to sell at a later date.

Residential Real Estate Financing

While there are many different types of residential real estate mortgages, fixed rate mortgages and adjustable rate mortgages are the most common.

Fixed-rate mortgages set the interest rate prior to closing on a home and the rate does not change for the term of the loan. Many banks allow buyers to lock in a favorable interest rate several months prior to closing. If it appears that interest rates are poised to rise, the buyer should consider locking in a rate as soon as practical. Naturally, the bank charges a fee to exercise this option.

An adjustable rate mortgage (or ARM) has a lower initial interest rate than a fixed-rate mortgage, but the percentage will fluctuate throughout the term of the loan. The bank can raise the rate in accordance with a rise in the prime lending rate. There will always be an adjustment period which will determine the frequency of the rate change. ARMs generally have an interest rate cap, with yearly and/or lifetime maximums. It is also possible to exercise the adjustable rate option initially and later switch to a fixed mortgage, again for a fee.

Find Residential Real Estate on eBay

Once you know what type of residential real estate you want, go to the Real Estate portal, click Residential, and start searching for item listings on eBay.The resulting list will assist with narrowing down listings by type of property and location. Options include links for Residential Homes, Foreclosures, Location, Price, Size, and more.

Search eBay listing titles for specific words. For example, if you want to find an apartment, type "apartment" (without quotation marks) into the Search box. Click Search Title and Description to expand your results. Visit eBay’s Search Tips page for more tips on searching with keywords. If you can’t find exactly what you want, try shopping eBay Stores, tell the eBay Community what you want by creating a post on Want It Now, or save a search on My eBay and eBay will email you when a match becomes available.

Buy Residential Real Estate With Confidence

Before moving forward with any real estate purchase, you will want to consider specifics like price, insurance and the nature of bids in auction-style advertisements. You should carefully read all the item listings and if you have any question you should query the seller. A buyer should always research the seller before moving forward with the transaction.

Know What You’re Buying

Carefully read the details in item listings. If you want more information, ask the seller by clicking the Contact Member link in the seller’s profile. In some states, the seller may be required to deliver a specific disclosure statement. Familiarize yourself with the seller’s terms, including any guarantees and requirements regarding the acceptable forms of payment. Check to see what closing costs you are expected to pay. Important questions you need to ask yourself:

About Price

Am I bidding on the full price, or am I bidding on a down payment?

About Title

Is the title clear; that is, free of liens, easements, and other encumbrances? If the title is not clear, what are the easements on the property?

About Insurance

Can I get title insurance at my own expense?

About CCRs

Are there any covenants, codes, and restrictions on the property?

About the Deed

What type of deed will I be getting?

Nature of Bids in Auction-style Advertisement

Due to the wide variety of laws governing the sale of real estate, eBay Real Estate auction-style advertisements of real property do not involve legally binding offers to buy and sell real estate. A bid is not a contract between seller and buyer. Rather, bids represent a buyer’s serious expression of interest in buying the seller’s item. Learn more about eBay’s bid policy for real estate and eBay Real Estate Rules and Policies.

Know Your Seller

Research your seller so you feel positive and secure about every transaction. What is the seller’s feedback rating? How many transactions have they completed? What percentage of positive responses do they have? What do buyers say in their feedback? Did the seller receive praise?

Do Your Due Diligence

As with all major decisions, in buying real estate, you will want to make sure you get full information and the best advice possible. You may want to consider using an experienced real estate broker who can help you with your due diligence, negotiations, and closing. Depending on your personal circumstances and investment goals, you may also want to engage an attorney and/or a tax advisor.

Payment

PayPal enables you to pay without the seller ever seeing your bank account or credit card numbers. In fact, PayPal protects buyers 100% against unauthorized payments from their accounts.Visit the Security and Resolution Center to learn how to protect your account and use eBay’s quick and efficient resolution tools. Never pay using instant cash wire transfer services through Western Union or MoneyGram. These payment methods are unsafe when paying someone you do not know.

Conclusion

Naturally, circumstances can and do change. People are constantly altering living arrangements as relationships begin, mature and in some cases dissolve. It is simply good planning to take the future into account when making such a significant decision as what residential real estate to buy. Those who are truly committed to living alone will do fine with a modest home or condominium. Single people who expect to marry and have children should factor that possibility into their real estate purchasing decisions. Buying a home is a serious financial and personal commitment, but it can be a very rewarding experience. It is the American Dream after all.

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