Buying a Home - Inspections

I tend to think most people walk through a house for sale like I do. Check out the place for about 15 minutes, analyze paint colors, look for obvious cracks, check out the landscaping, look for stains in the carpets, and leave. That's a great way to know if you like the place and whether or not you want to make an offer. And, it's a great start. However, this does not qualify as an "inspection." Here are a couple inspection tips from my trip through buying a home.


The first tip applies before you sign your offer sheet. It is customary to build in time for home inspections. You should ALWAYS include this contingency. Not only is it a way to ensure you are buying a house without major problems; it is also a way to get out of your contract if something else is worrying you about the purchase. We built in 10 days in our offer. However, keep in mind that 10 days are calendar days, not business days. So if you have an offer accepted on Saturday you really only have 6 business days to get all your inspections done. Regardless of how tight your timeline is to get the inspections done make sure the clause is in your contract.

The next tip...get quality inspectors. I cannot recommend this enough. As I mentioned in my previous post one of the things that our realtor really helped us out with is in picking an inspector. She recommended a company that was awesome! The home inspector checked every corner of the house including the slab, the crawl space, the water pressure, polarity in the outlets, etc. And, the best part is that when it was all done he sent a full report with color photos of every defect he found. That's what you want in an inspection. You want a detailed report that not only lets you form a decision whether or not to move forward with the purchase but also gives you an idea of the repairs you need to perform in the future. I recommend getting a termite inspection and if you're area is prone to mold get a mold inspection. The $1000 you'll spend on those three inspections is well worth it when you consider the thousands you could end up spending fixing a foundation, rewiring, replumbing, or fixing one of hundreds of other problems that you could find days, months, or years after closing.

Buying a Home - The Realtor

The first posting on my experience buying my first home deals with using a realtor to assist with the purchase. We decided to use a realtor because, well, we knew nothing about buying a home, the processes, the paperwork, the intricate details. We started out by finding a realtor in the local area, giving her some details about what we were looking for, and having her send us a list of homes that met most of our criteria. We'd go out on random Sundays, tour a bunch of homes, sometimes over 10 at a time, but we weren't in a hurry and didn't want to spend that much time looking around and so that whole process sort of died out.

In the meantime I found a wonderful website, ZipRealty. They don't cover all areas of the nation but lucky for me one of the areas they do cover is Orlando. The beauty of ZipRealty is that they give you all of the details you can find on national sites like realtor.com or local sites such as an individual realty company site, but they also provide additional details that some sites don't want you to know. For example, they list not only the current asking price of the house but also any price changes over time, both increases and decreases. They allow you to search across a wide range of criteria including bringing back only those houses that have had at least one price reduction. They show you how long a house has been on the market. And, my favorite feature of all is that they will sometimes find a house that was listed, deactivated, and relisted (it's not ethical but realtors will do this sometimes to reset the # of days on the market for a house) and they'll show the true number of days that the house has been on the market across all listings.

Once I found and started utilizing ZipRealty's website, the core value of having a realtor disappeared. Now, instead of her finding us homes to look at, I was finding the homes and telling her that we wanted to see them. In fact, the house we ended up buying we found without our realtor, we viewed without our realtor, and our realtor didn't even know about it until we called her because we wanted her to make an offer.

Our realtor assisted with the paperwork for the offer letter and talked with the selling realtor to relay our prices as we negotiated with the owner. However, once the offer was accepted there wasn't much remaining for our realtor to do. Before I sound like our realtor didn't do anything I will give her some credit. She recommended both a home inspector, who turned out to be fabulous, and she recommended an insurance broker, who was able to get us a decent premium on our homeowners policy. Besides that, we talked with her a couple times between the offer acceptance and closing, but she didn't do many other things besides show up at closing and take her commission.

Do I think we needed a realtor for our first time home buying experience? Yes. Would I recommend a realtor to others who are going through this for the first time? Yes. However, will I ever use a full-commission realtor in the future for any of my home purchases? No. I will either get a real estate attorney involved to handle the necessary paperwork or I will find a discount realtor that handles only the paperwork for a reduced commission. For those of you in the market for a home, check out Redfin. They are not in all markets yet but they are a discount online realtor that will handle the paperwork of buying a home and give you a kickback of 1% on the typical 3% buyer's realtor commission.

With new websites, such as ZipRealty, and discount realtors, such as Redfin, traditional realtors are going to have to find new and useful ways to serve the needs of home buyers or they are going to find themselves with less and less business and many will need to find a new career.

We Bought A House!

If you've read the last few real estate entries in my blog about the horrible market for buying and selling homes not only in Orlando but nationwide then this is probably the last blog post title that you expected to see from me. But, it's true. On July 13, 2007 (Friday the 13th) my fiancee and I closed on a house in Orlando. It's a very basic 3 bed, 2 bath one story house built in 1947. So why after all of my thoughts about how bad the market is in Orlando did I go out and buy a place in the same market? Glad you asked.

1. Location, Location, Location - That's the first thing they teach you in real estate school, right? This house is located on a street with very light traffic and it is half a block from "downtown" College Park, which keeps expanding with new shops and restaurants every month. Also, while other streets around it have already had most of the older, run down homes torn down and new construction put in its place, this street is still waiting for that to happen. I think that spells opportunity in the future.


2. Local Comp Sales - I studied the local comps in the area and we purchased our house for about $50/sq. ft. less than the current comps. I think it is important that I note that I looked at current comps, within the last 3 months, and not ones from early 2006. Sure, the market may continue to drop in Orlando, but I feel confident that for the price I picked this house up at I never have to worry about being upside down in it.


3. Solid Home - My fiancee and I had looked at a number of homes over the last 6-8 months and many of them were priced low because of the numerous problems they contained. However, this home, for being built in 1947, is in surprisingly good shape. I contribute most of that to the previous owner, who took very good care of the place and didn't let it fall into disrepair even after he moved across the country to California and rented it out for a short time. Sure, it has its issues that we will have to address, but it truly is move-in ready.

I think my next blog post or two will be in regards to what I learned in the course of buying a home. Having gone through it for the first time I think there are things I want to put in writing for both anyone reading this blog as well as myself so I can look back and remember what I did and didn't do the next time around.

Oh, and if you're wondering, do I think the Orlando housing market is still in horrible shape and posed to linger in this downturn for at least another year and probably longer? Yep. But, in the mean time, I'm going to watch the down turn from my new front porch

I'm Investing In Omaha. Yes, Omaha.

I've lived in Chicago, Southern California, and Orlando in the last 5 years so of course the market I know best is Omaha. No, actually, I, like many people, don't know anything about Omaha. I've driven through there a few times but that's about it. So why am I writing about Omaha on a blog about personal finance?

The reason I am writing about Omaha is FNBO Direct. FNBO Direct is offering a 6.00% APY savings account. I had previously written about Emigrant Direct and their 5.15% account (currently it is at 5.05% APY) but FNBO Direct has made me a convert. I do not change accounts often. It's a pain to fill out the applications, wait for the approvals, transfer funds from one savings account to my checking account and out to the other savings account, not to mention the small hit against my credit record. But, the reates just keep getting better and better. I started with ING Direct when they offered 4+%, switched to Emigrant Direct when they offered more than 5%, and now I am with FNBO Direct at 6% APY. With inflation still at a moderate level and with the dollar tanking worldwide it's a good idea to make what you can with the money you have.

So far I am pleased with FNBO Direct. They made the application process simple, their website is laid out well for the most part (I'm not a big fan of the Transfers section), and they have comprehensive security measures in place. According to their website the 6% APY is valid at least until September 28, 2007 so even if it drops a bit after that point I will have still gotten a full four months of the rate.

Give it a try. If you are going to save you might as well save wisely.

Orlando Housing Update: Status Quo

So what has happened since my last couple posts? To put it simply, nothing. Lower sales numbers, lower house prices, lower expectation for a recovery. The only thing rising are the number of houses for sale. It has been amazing to watch the number of houses on the market explode over the last couple months. I run numbers each week of houses for sale in select Orlando zip codes and the trend is up, way up.

One new trend that I am noticing in the area are large price drops on select homes. In just the last three weeks I have noticed at least three homes in various parts of the city, all originally listed for between $350,000 and $450,000 drop in price anywhere from $60,000 to $75,000 in one fell swoop. Sure, there are still homeowners dropping prices a couple grand at a time but for others the desperation is setting in.

As for the fiancee and myself, we're still sitting on the sideline. I can't see purchasing a house for 2005 prices (yes, no longer 2006 prices) when all around are thousands of homes for sale dropping in price everyday. It doesn't mean we're not looking and making offers when we find deals where we think we can buy a place for 2003 prices; we're just taking our time. I suggest everyone else in the Orlando market do the same.

Orlando Housing Tipping Point #1

I saw this day coming for a while now. I could see it happening; I just didn't know when they would make the move. Today was the day.

To what am I referring? I am talking about the home for sale at 2802 Kemper Ave, Orlando, FL 32814. Why is this house any different from the other homes for sale in the Orlando area? Sure, it's one of the nicer homes in the downtown Orlando area. It's a 3BR/2BA 1,740 sq.ft. single family home, built in 2005. It's located in Baldwin Park, which is one of the newer Orlando communities and also one of the most unique. Baldwin Park was formed after the closure of an old naval base. It's one of the rare places in Orlando where you can buy new condos, townhomes, and single family homes and not be 15 miles or more from downtown and not have a 30+ minute commute to work.

But, that information isn't what makes this home special. What makes this home at 2802 Kemper special is that it is the first single family home in Baldwin Park to have a listing price below $400,000 since the housing market turned. Sure, for Orlando, that is still a lot of money for a 1,700 sq.ft. house but in Baldwin Park that is a milestone. This is a neighborhood where 1,700 sq.ft. townhomes will go for $400-500K, that is, until now.

It's been a long road for 2802 Kemper. Thanks to the internet I am able to dig up some data on this home. It was purchaed on July 14, 2005 for $358,300 by Dang Nguyet. Less than a year and a half later, Dang decided that it was time to sell the house, since he had never lived in it anyway. The original listing price? $479,000. Somehow the house was suddenly worth 30% more in only 16 months. Unfortunately, for Dang, buyers didn't share his belief that the house was worth that much.

Since November the house price has been lowered a total of five times, including,

• $479,000 to $449,000
• $449,000 to $429,000
• $429,000 to $419,000
• $419,000 to $400,009
• $400,009 to $389,900

Even if Dang sells the house for the current full listing price, which won't happen, after the 6% realtor fee is taken out plus any sort of closing costs and such, he would be lucky to break even on the deal. Of course, this house will be lucky to sell for $350-360K, which means that he will lose money on his "investment."

This isn't the last house that is going to cost someone money at Baldwin Park. This market has a way to go to correct itself. In the meantime, I'm going to go pay my monthly rent, sit at the apartment pool with a cool drink, and bide my time.

Housing Market 2007: Up or Down? I Know Which Way I'm Leaning

It's strange how quickly I got pulled into the whole game. Last month, I spotted a house in Thornton Park, one of Orlando's historic neighborhoods. It was listed at what I thought was a very reasonable price. My fiance and I called up our realtor, checked it out, and all-of-a-sudden we were making an offer on this place. We eventually ended up pulling out of the deal. While the house seemed like a decent deal it would have required us pouring money into it to repair the plumbing and some of the structural, assuming that the seller's took care of the wiring upgrades.

After that we found ourselves checking out more homes, identifying more possibilities. We made another offer last weekend and, perhaps fortunately for us, the seller took another offer that just happened to come in on the same day. Why do I think we may have been fortunate?

I think housing is in for another rough year. I just don't know who is going to buy the inventory that is out there at the prices that people are asking. There is $1 TRILLION in ARMs that will reset this year. 1 TRILLION DOLLARS! What are all of these people going to do? Sure, some will hang on to their homes and keep making their inflated payments. But, many of these people, who figured they would sell and get out with a nice profit, will find that there is no one to sell to; that the house they bought in 2004 is now worth less than when they bought it.

The National Association of Realtors (NAR) is trying to spin the news to make it sound like the housing bust is slowing down. Remember, these are the same people whose job it is to sell you a house. It's interesting to see how they do it. When the housing boom was happening, the NAR would release statements stating how home prices had risen vs. the previous YEAR. If you look in the news these days you'll see how their statements now talk about home sales are up vs. the last MONTH. They can't compare vs. last year any longer because then they would have to talk about how home sales are still 15+% lower than last year. Be careful who you listen to in the news.

Part of me thinks that I might be missing the bottom of the market and that I should buy now before the real buying season begins. But, a larger part of me comes back to the same question. Who is going to buy all of these houses?! I look around Orlando and see all of these concrete block homes in older neighborhoods listed for $279,000. Let's say you want to buy that place and have 10% to put down (which is a stretch these days but let's say it anyway). With a 30 year mortgage at 6.5% your monthly payment would be $1586/month, just for the principal and interest. Assume your property taxes run about $360/mo. (calculated on the Orange County appraiser's website) and insurance, which everyone knows is fun in Florida, runs you another $200/mo. You're looking at a monthly payment $2146. Over 12 months that will run you $25,752 in mortgage payments. That is after tax money. If you pay about 40% of your salary in taxes, you would need to make $42,920/year just to pay for your house. As of the 2000 census the median family income in Orlando was $40,648. That's all the money this family has, for food, clothing, vehicles, everything. So, the average person in Orlando can't buy the average house in their town. That, to me, seems like a big problem.

Where does that leave us? That leaves us with one group of people that bought a house and now can't pay for it and another group of people that would love to buy a house but have been priced out of the market. Either the group of people that can't afford to buy a home need to get huge raises in 2007 or housing prices have to fall. My money is not on the house.