House buying questions

[spunkarella]

I don't have answers to everything but here are a few thoughts:

I would not go by Zillow, especially since the view has changed dramatically. I would ask them for the price, get an appraisal, and go from there. Or if they're not willing to do an appraisal yet, maybe see if you can pay a realtor a flat fee to give an opinion on what this house is worth.

I would be comfortable with 3-4 months in e-fund if it meant putting 20% down and avoiding PMI if I could build it back up quickly.

You said the price is close to your preapproval amount...are you sure you can afford this house? IME people are still approved for much more than they can afford but there are exceptions of course.

[Susie]

Oct 20, 2014 11:03:18 GMT -5 namasteak said:

A private client of mine has asked if we are interested in buying their home and I was hoping that I could get some questions answered. 

-According zillow the price they bought it at is out of our budget but (in a casual "would you want to buy our house" conversation) they offered to take 6% of the selling price since we would not use realtors. This would bring the price down to $2k under what we were pre-approved for. 
This is cutting it awfully close.  Buying at the top of your approval range makes me cringe.

-It used to have a lake view from the living room, master and backyard but the "view" is now the back of an office building. Of course this is not ideal but we otherwise love the house and neighborhood. I think this would bring the price down even more and make it fit more comfortably within our budget. How much do you think it would lower the price? 10%? 
Not sure about this.  

-It is in our current neighborhood (which we like), walking distance to DH's work (unheard of in our city), and big enough for our family to grow into. There are no renovations needed (according to the owners) but there are a few things we would like to update.
I wouldn't take an assertion from a seller that "no renovations are needed" to be worth the paper it's written on.  Make sure if you proceed, you get an inspection and figure out exactly what you are getting into just like any other real estate purchase.

-Our current neighborhood is nice but there are a lot of improvements going on that should increase property value over the next few years. 

-I think we would be able to put down between 15%-18% as a DP (depending on how much property values have lowered) and still have a 6 month efund. We could put down more but lower our efund. Which would you do if your DH had a stable job?
Keep the 6 month e-fund.  Job stability is only part of the equation.  Home ownership can mean big repair bills and expenses, often unexpectedly.  # of months' savings is a useful way to think about the "if I lost my job" contingency, but often with houses the roof goes or something and replacing it has no relation to months' income or expenses.  It's just $$$$.

-After making the house payment how much money should we set aside each month specifically for house related expenses? (not including lowering fun categories because you need to put $ into the house)
Impossible to generalize, really.  Depends so much on the age of the house, type of construction, condition, your satisfaction with finishes, luck, and a million other things.  The one thing you CAN generalize, I think, is that you can expect it to be higher than whatever number you would figure on.

[krystee]

I would hire an appraiser and an inspector before making any decisions. And banks typically approve you for way more than they should. What percent of your monthly take-home would the payments be?

[Deleted]

Oct 20, 2014 11:20:21 GMT -5 krystee said:

I would hire an appraiser and an inspector before making any decisions. And banks typically approve you for way more than they should. What percent of your monthly take-home would the payments be?

I would hire an appraiser to come and give you a price.  You may have to pay twice (independent appraiser and an appraisal through your lender) but $300-$400 spent could save you thousands on the house and a huge headache when you are trying to agree on a price.

[Deleted]

I would not buy a house without a comparative market analysis. Otherwise, the pricing would just be a shot in the dark for you guys and that is too much money to be guessing how much the house is worth. Do you have any realtor friends that can run a quick one for you?

[imojoebunny]

I would really look at what you can afford vs. what your approved for. We were preapproved when we bought our new house in April for 3x what we were comfortable spending. It kind of scared me.

The others have done a good job of giving you ideas of how to arrive at a fair price. You really need the comps to figure out the pricing.

[Deleted]

Oct 20, 2014 11:56:11 GMT -5 namasteak said:

Oct 20, 2014 11:44:21 GMT -5 @missy1 said:

I would not buy a house without a comparative market analysis. Otherwise, the pricing would just be a shot in the dark for you guys and that is too much money to be guessing how much the house is worth. Do you have any realtor friends that can run a quick one for you?

I have a realtor friend in another city...maybe she will be able to help us? 

in Dallas? She probably won't be able to access the listing service/database in Houston.

[lys]

Make SURE you can afford the increased house payment, increased taxes, higher insurance, higher utilities as well as more furniture, upkeep, maintenance.
Approval amounts are much too high - go with what fits your budget - 25-28% of your TAKEHOME pay or 30-35% in a HCOL area for
Mortgage+PMI+taxes+insurance+utilities+HOA.
You will need recent comps AND an appraisal to come to a realistic current value of the house.

[lys]

AND be sure to have a good home inspection!!

[aurora]

I would definitely want some information on the home's price beyond Zillow (which is very wrong in our neighborhood) before putting in an offer. However, paying an extra $400 for an independent appraisal would be well worth saving 6% in realtor fees. (I would also want to hire a real estate attorney to look over the paperwork if not using a realtor.)

How low I'd be willing to go on the e-fund depends on a bunch of factors. For example, if 6 months expenses is $100k and I were dropping to $70k, I might be happy to do that because it's still a large chunk of $ compared to what might come up as immediate expenses (new roof at $15k). If I were looking at $20k vs. $14k, I wouldn't be willing to drop that low. It would also depend on how many easily-cut frills like expensive travel I have in my budget. If I can get my dream home but not go to Paris for a year while I re-build my e-fund, that's OK. If it means I have to eat ramen and cancel my internet, not OK.

[Poppy]

The price they paid probably isn't all that relevant to what the house is worth right now. I would let that number go and concentrate on recent comps. Zillow allows you to look at recent home sales in the neighborhood and hopefully that will give you some idea. I also like the idea of hiring an appraiser.