Avoid Money Pit Homes on Your Next House Hunt
Homebuyers should pay close attention and avoid money pit houses as the rules of navigating local real estate continue to change. These rapidly changing rules are happening in every area of the home buying process. Some of these rules have to do with the condition of the homes themselves. Bank owned properties and short sale homes tend not to be in the best shape and could have hidden conditions. New requirements for homeowners insurance policies have made changes on roof and sinkhole coverage limitations. Changes to Federal government regulations for banks and lending requirements make navigating an FHA loan quite tricky.
According to REALTOR® Ginny Zukowski, the “money pit” can not only be a home that has hidden repair costs, but homeowners insurance policies may require the repairs to be made before they will write a policy. Also, banks are not accepting all appraisals and often require a second and sometimes third appraisal before they will provide a loan. This can lead to a lower price than the original appraised amount and less than the contract price.
To help potential homebuyers, Zukowski reveals the following tips:
Tip 1: Be prepared for the new changes and have open communication with the real estate agent and lender. Try to meet with them together and find out all of the upfront cash that will be needed to purchase the home. Buyers will need to pay for all inspections, appraisal, good faith money, and provide a down payment. With new private mortgage insurance, this could be several thousand dollars.
Tip 2: Once the buying process starts, be prepared for the closing to take some time. If it is a short sale, this could be four-to-five months. The loan process is also taking longer, around 45 days on the average, and additional delays often occur.
Tip 3: Be on the lookout for properties that will soon need a new roof or A/C. Home insurance policies can require new ones before they issue a policy and the mortgage lender requires homeowners insurance. This can cost the buyers more upfront dollars.
Tip 4: Before putting in an offer, ask the REALTOR® to explain all the possible things that could require more time and money at or before closing. As an example, the bank may require additional appraisals. A bank-approved appraiser may be required.
Tip 5: Be sure the REALTOR® goes over all of the fine print before an offer is submitted. Be aware of all the possible things that could go wrong and how it could impact the buying process up front.
With a real estate professional to help both buyers and sellers navigate the process, you can be know what to expect in the home buying process...and what to avoid.
Reprinted with permission from RISMedia. ©2013. All rights reserved.