Buying Tips

Starter Home
The term “starter home” exists for a reason. At the height of the housing market craziness, and right before the bubble burst, many first-time home buyers jumped over the starter home and into a bonafide dream home. Now, we are all painfully aware of how that all turned out. You have to accept that your first house is probably not going to be the one you’ll live in for the rest of your life. That’s okay! And the thought of what lies ahead should be exciting! When you think about the fact that your future holds salary increases and smart savings plans, the opportunity to move up becomes more real. When you’re ready to jump up to a larger, dreamier home, this first home can provide you with the funds for that purchase.

House to Condo
Yes, you are going to need to narrow down your search at some point, but as you begin to play with the choices, keep an open mind. You may be thinking about a house, but there might be a great condo with a cool balcony, a stunning view, and great amenities that could be just as dreamy. For your budget, a condo or even townhouse might get you closer to your dreams than a single family home.

Older vs New Construction
According to a recent Trulia trends report, twice as many people prefer new homes over existing homes.“New” means new construction, or homes purchased in pre-construction while “existing” means a house someone else has lived in. In many parts of the country, especially the East, Northeast and South, many of these “existing” homes are homes built anywhere from the 1920s – 1970s. For the same price, 2 in 5 of Americans (41%) strongly prefer to buy a newly-built home over an existing home. However, most new construction homes could cost you up to 20% more than a comparable older house. Buying an older home could add up to big savings and allow you to get a bigger piece of the “dream” than a brand new one.

The Fixer
I am a huge proponent of buying a home that you can add value to, rather than paying the bigger price tag to someone else who had the work done for you. Offsetting a big price tag with some sweat equity is a very smart move. In addition, you can get much more home for your dollar, and have the option to fix up and improve it as time goes on and as you have the available cash to fund the renovations. Plus, all that original older architectural detail that comes with many fixer-uppers is a dream in the making.

Balancing Dreams and Location
You now are pretty clear about how much you can afford and the price range you need to consider. Now comes the major tug-of-war between where you want to live and what you can actually afford. Sure, we all want to live in the swankiest part of town. But your budget may not support that choice. Be prepared for this “price vs. location” battle. I warn you, it could get ugly. You can live in a slightly less desirable neighborhood, but you can’t live in a house you can’t afford!

Transitional Neighborhood
Buying in a transitional neighborhood for your first house allows you to get into the market relatively cheaply and build some equity. It may not be your dream ‘hood, or the seaside beach community you want to retire to, but clearly, it’s not going to be your ultimate dream home. If you can identify an area on the upswing, you have secured yourself lots of potential wealth building. The neighborhood may be a little rough around the edges now, but if you have gauged its transition potential correctly, in three or five years you may be sitting in the middle of a hot new trendy area, where home prices have risen substantially!

Knowing The Must-Haves vs. Should-Haves
What makes something about a house a “must-have” and another element a “should-have?” Well, the must-have is essential in your new home. For example: “We now have a newborn baby, so we must have a two-bedroom house.” However, a should-have is not essential and it may get nixed out of the mix if price becomes an issue. For example: “We should have a three-bedroom house. That way we can save one room for guests or for a home office.” That third bedroom is not a must-have and you could or may have to live without it to get into a house you can afford. Square footage is also a must-have. For a first-time home buyer, 1,600 square feet could be a realistic minimum must-have, whereas 2,300 square feet is a should-have. A nice, clean, functional kitchen is a must-have, but a gourmet kitchen with double ovens and Viking stainless steel appliances is sadly just a should-have.

Knowing your dream house must-haves vs. should-haves really helps you prioritize, because on the ultimate hunt for your dream home — compromises are going to have to be made.

Happy hunting!

1. What type of home best suits your needs?
You have several options when purchasing a residential property: a traditional single-family home, a townhouse, a condo, or a multi-family building with two to four units. Each option has its pros and cons, depending on your homeownership goals, so you need to decide which type of property will help you reach those goals. You can also save on the purchase price in any category by choosing a fixer-upper, although the amount of time, sweat equity and money involved to turn a fixer-upper into your dream home might be much more than you bargained for. (To examine your options, check out Does Condo Life Suit You? and Is A Housing Co-op Right For You?)

2. What specific features will your ideal home have?
While it's good to retain some flexibility in this list, you're making perhaps the biggest purchase of your life, and you deserve to have that purchase fit both your needs and wants as closely as possible. Your list should include basic desires, like neighborhood and size, all the way down to smaller details like bathroom layout and a kitchen that comes with trust-worthy appliances.

3. How much mortgage do you qualify for?
Before you start shopping, it's important to get an idea of how much alender will actually be willing to give you to purchase your first home. You may think you can afford a $300,000 home, but lenders may think you're only good for $200,000 depending on factors like how much other debt you have, your monthly income and how long you've been at your current job. (For an introduction to the terminology and structure of a mortgage, read our tutorial Mortgage Basics.)

4. How much home can you actually afford?
On the other hand, sometimes a bank will give you a loan for more house than you really want to pay for. Just like with the purchase of a new car, you'll want to look at the house's total cost, not just the monthly payment. Of course, looking at the monthly payment is also important, along with how much down payment you can afford, how high the property taxes are in your chosen neighborhood, how much insurance will cost, how much you anticipate spending to maintain or improve the house, and how much your closing costs will be. (For help deciding what mortgage type is best for you, read Shopping For A Mortgage and Make A Risk-Based Mortgage Decision.)

5. Who will help you find a home and guide you through the purchase?
A real estate agent will help you locate homes that meet your needs and are in your price range, then meet with you to view those homes. Once you've chosen a home to buy, these professionals can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork. A good real estate agent's expertise can protect you from any pitfalls you might encounter during the process. (Keep reading about this in Finding A Listing Agent and The Benefits Of Using A Real Estate Attorney.)

The Buying Process
Now that you've decided to take the plunge, let's explore what you can expect from the home buying process itself. This is a chaotic time with offers and counter-offers flying furiously, but if you are prepared for the hassle (and the paperwork), you can get through the process with your sanity more-or-less intact. Here is the basic progression you can expect:
1. Find a home.
Make sure to take advantage of all the available options for finding homes on the market, including using your real estate agent, searching for listings online and driving around the neighborhoods that interest you in search of for-sale signs. Also put some feelers out there with your friends, family and business contacts. You never know where a good reference or lead on a home might come from.

2. Consider your financing options and secure financing.
First-time homebuyers have a wide variety of options to help them get into a home, including federally-backed loans and loans for homebuyers who don't have the standard 20% minimum down payment. Your state may also have its own programs for first-time homebuyers. Your mortgage interest rate will also have a major impact on the total price you pay for your home, so shop around. It will really pay off. (To learn more, read Understanding The Mortgage Payment Structure.)

3. Make an offer.
Your real estate agent will help you decide how much money you want to offer for the house along with any conditions you want to ask for, like having the buyer pay for your closing costs. Your agent will then present the offer to the seller's agent; the seller will either accept your offer or issue a counter-offer. You can then accept, or continue to go back and forth until you either reach a deal or decide to call it quits. If you reach an agreement, you'll make a good-faith deposit and the process then transitions into escrow. Escrow is a short period of time (often about 30 days) where the seller takes the house off the market with the contractual expectation that you will buy the house - provided you don't find any serious problems with it when you inspect it. (For more on the escrow process, read 10 Hurdles To Closing On A New Home.)

4. Obtain a home inspection.
Even if the home you plan to purchase appears to be flawless, there's no substitute for having a trained professional inspect the property for the quality, safety and overall condition of your potential new home. If the home inspection reveals serious defects that the seller did not disclose, you'll generally be able to rescind your offer and get your deposit back. Negotiating to have the seller make the repairs or discount the selling price are other options if you find yourself in this situation. (For tips on coming out ahead in any negotiation, read Getting What You Want.)

5. Close or move on.
If you're able to work out a deal with the seller, or better yet, if the inspection didn't reveal any significant problems, you should be ready toclose. Closing basically involves signing a ton of paperwork in a very short time period, while praying that nothing falls through at the last minute.
Things you'll be dealing with and paying for in the final stages of your purchase may include having the home appraised (mortgage companies require this to protect their interest in the house), doing a title search to make sure that no one other than the seller has a claim to the property, obtaining private mortgage insurance or a piggyback loan if your down payment is less than 20%, and completing mortgage paperwork. (For more on the pitfalls of private mortgage insurance, check out Six Reasons To Avoid Private Mortgage Insurance and Outsmart Private Mortgage Insurance.)

Congratulations New Homeowner ... Now What?
You've signed the papers, paid the movers and the new place is starting to feel like home. Game over right? Not quite. Let's now examine some final tips to make life as a new homeowner more fun and secure.

1. Keep saving.
With homeownership comes major unexpected expenses, like replacing the roof or getting a new water heater. Start an emergency fund for your home so that you won't be caught off-guard when these costs inevitably arise. (To make saving for your emergency fund a breeze, read Build Yourself An Emergency Fund.)

2. Perform regular maintenance.
With the large amount of money you're putting into your home, you'll want to make sure to take excellent care of it. Regular maintenance can decrease your repair costs by allowing problems to be fixed when they are small and manageable.

3. Ignore the housing market.
It doesn't matter what your home is worth at any given moment except the moment when you sell it. Being able to choose when you sell your home, rather than being forced to sell it due to job relocation or financial distress, will be the biggest determinant of whether you will see a solid profit from your investment.

4. Don't rely on making a killing on your home to fund your retirement.
Even though you own a home, you should still continue to save the maximum in your retirement savings accounts each and every year. Although it may seem hard to believe for anyone who has observed the fortunes some people made during the housing bubble, you won't necessarily make a killing when you sell your house. If you want to look at your home as a source of wealth in retirement, consider that once you've paid off your mortgage, the money that you were spending on monthly payments can be used to fund some of your living and medical expenses in retirement. (To learn how to get the most for your house when it is time to sell, check out Fix It And Flip It: The Value Of Remodeling.)

Conclusion
This brief overview should help put you on the path towards filling in any gaps in your home-buying knowledge. Remember that the more you educate yourself about the process beforehand, the less stressful it will be, and the more likely you will be to get the house you want for a price you can afford - and with a smile on your face.

Buying Tips

Q: What are the important documents one should check before buying any property?
If you want to purchase a property, you must see the approved layout plan, approved building plan, ownership documents, carryout search, etc. Consult an advocate before you purchase a property so that he can advise you.

Q: What is the difference between built up area, super built up area, and carpet area?
Carpet Area: This is the area of the apartment/building, which does not include the area of the walls.
Built up Area: This is the area of the apartment/building which includes the area of the walls also.
Super Built up Area: This includes the built up area, along with the area under common spaces such as the lobby, lifts, stairs, etc. This term is only applicable to multi-dwelling units.

Q: Who is liable to pay Stamp Duty-the buyer or the seller?
The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary.

Q: In whose name are the Stamp Papers required to be purchased?
The stamp papers are required to be purchased in the name of any one of the executors to the Instrument.

Q: What is meant by the MARKET value of the property and is Stamp Duty payable on the MARKET value of the property or on consideration as stated in the agreement?
MARKET value means the price at which a property could be bought in the open MARKET on the date of execution of such instrument. The Stamp Duty is payable on the agreement value of the property or the market value whichever is higher.

Q: Which are the instruments that attract the payment of Stamp Duty?
The instruments that attract Stamp Duty on market value of the property are:
Agreement to Sell
Conveyance Deed
Exchange of property
Gift Deed
Partition Deed
Power of Attorney settlement and Deed
Transfer of lease

Q: Who is the appropriate authority for knowing the market value of the property?
The Sub-Registrar of the area, in whose jurisdiction the property is located, is the appropriate authority for knowing the market value of the property. In addition to this, FINANCIAL institutions do also assess market value of the property through their own empanelled valuation agencies.

Q: Is a POA revocable?
Yes, a POA can be either revocable or irrevocable, depending on what sort of a POA one has made.

Q: What exactly do we mean by a Free Hold property? What are the advantages and disadvantages, if any?
A freehold property (plot or a property) is one where there is a whole and sole owner(s), ownership is full and unconditional (within the provisions of the laws of the land) and there is no lessor/lessee involved.

Q: How to convert a POA property into a Free Hold?
POA cannot be converted into anything. Leasehold properties of DDA in Delhi can be converted to freehold, as per provisions.

Q: How to verify the authenticity of the various documents submitted by the seller of the property, particularly with regard to the possibility that the property has not been sold earlier to a third party?
Regarding authenticity of documents, again, you have to take the help of an advocate.

Q: I want to gift a property in a Co-op Hsg. Society. What are the legal formalities? What about stamp duty?
Gift of an immovable property is considered as a ‘transfer’ under the provisions of the TOP Act and you have to have the transaction REGISTERED through a Gift Deed and pay stamp duty as per provisions of the relevant State’s Stamp Act depending in which state the property is situated.

Q: Upon buying a property from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the genuinity of the builder?
When you are buying a property from a builder in a building under construction, you have to check the following:
Approved plan of the building along with the number of floors.
Ensure that the floor that you are buying is approved.
Check if the land on which the builder is building is his or he has authority under an agreement with a landlord. If so, check the title of the land ownership with the help of an advocate.
Check the building by-laws as applicable in that area and ensure that the builder is building without any violation of front setback, side setbacks, height, etc.
Check specifications given in the agreement to sell of the sale brochure. Is he providing the same actually on the ground or not?
Check the reputation of the builder.
Ensure that urban land ceiling NOC (if applicable) has been obtained or not.
Permissions from water and electricity authorities also have to be obtained.
Permissions from lift authorities and other Government agencies as applicable

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