Steve Kent's July 2007 Newsletter

Protect Your Interests When Buying a Home By Peter G. Miller       Even though real estate has changed substantially in recent years with the use of new technologies, the fact remains that buying a home still requires a series of traditional protections and defenses. Why? Because buying a home is inherently complex and professional assistance is both appropriate and reasonable. In practical terms, this means that if you're a buyer there are steps you should take to protect your interests. As a place to start, here are several basic issues to consider: Get a home inspection. Don't let the stiff competition in seller's markets persuade you to forego a home inspection on a home you want to buy.       By misusing a home inspection as a negotiating tool, the house you succeed in buying may cost you a fortune in the long run as you rush to correct problems a qualified home inspector would have easily been able to point out.       It is not the inspector's job to tell you whether or not you should buy the house. That is your decision alone. The inspector's job is to provide you with thorough and accurate information to help you make the decision.       What about new homes? You certainly want a home inspection as part of the final walk-through -- make sure you allow several hours for this process. But, even better, use a three-step process for new homes: Inspect once the foundation is in place, inspect when the walls are up but not closed, and inspect before closing. Get an appraisal. An appraisal satisfactory to the lender is required when a home is financed by a traditional mortgage source. Consumers pay for this appraisal, but lenders get to choose the appraiser.       Independent appraisers assure lenders that a home is not over-priced and thus that they are not making an inflated and risky loan. If you're buying with seller financing (where there is no outside lender) or all-cash, you still need to make your offer dependent on an appraisal satisfactory to you. Speak with your real estate agent for details. Get a termite inspection. Wood-boring insects cannot demolish a home with cartoon-like speed, but they can cause damage. Before or at closing, lenders will want evidence showing that the property is free and clear of active termite infestations.       It's sometimes asked why a termite inspection is needed for new homes. It may seem like an odd requirement at first, but the concern is that lumber may be infested before it's cobbled together to create the home. Get a title examination. A home purchase is a huge investment, so it makes sense to make sure that the seller actually owns the property and has a right to sell it. A title inspection looks at the property's history as it is shown on public records to establish a trail of ownership. Get title insurance. About that title examination -- it's based on a check of public records, but those records may be wrong or incomplete. It could be that a former owner was insane, an alcoholic, drug-addicted, a bigamist, or not legally competent -- factors which may all make it difficult to offer good and marketable title when it's time for you to sell, thus reducing your ability to make a sale -- or a profit.       Title insurance is a one-time charge that protects against title claims. For details, ask your broker and the party that conducts closing. Ask about "re-issue" rates (you may be entitled to a discount under certain conditions), endorsements, limitations, and exceptions. If you're in Iowa, be aware that title insurance is generally not used there -- ask how you are protected in the event of title problems. Get a survey. A survey shows the quantity of property being sold and it's location. A survey will show whether "your" plot improperly includes someone else's land -- think of a garage or fence that extends six inches over a property line and the ability of a neighbor to charge for the use of that land or to order the removal of your improvements. A survey can also show "encroachments," the improper use of your land by someone else. Get a limited "warranty." There are warranties for new homes, and service contracts for existing properties. What individual policies include varies by state and by program, so you need to ask your agent for details -- what is covered, what is not covered, how long coverage lasts, what costs you face if you have a claim, whether you can continue an existing home policy after the initial term, etc.       Do these various inspections and checks cost money. You bet. Are they worth it? Sure.