One point I would suggest is that you get a plot plan of the property you are buying some time before closing. These plots can be sometimes be found via the internet under real property assessment portions of a state governments website depending on the state or you can certainly go to the county clerk and they should have it available for you in their offices. I got screwed because the house I bought had a fence which seemed to encompass the total back yard and it looked like what I’d expected the layout to be (i.e. a rectangular plot). I requested a plot plan from both my realtor and the sellers realtor two weeks before closing. Either should have gotten it to me but in the rush of selling one house and getting ready to move to another and given that it seemed pretty obvious I didn’t push the issue and didn’t think it was a big deal. Turned out the land not only extended a significant way beyond the actual fence (the original owners didn’t want to put up a fence in some adjoining woods and the plot was more pie slice than retangular) but some neighbors backing up to to the property and also assuming the fence defined the property boundary had built a swing set and shed in what was technically going to become my yard. By law the sellers realtor did provide the plot plan, at closing, halfway through the paperwork, with the problem laid out and a kind of “aw shucks, guess we didn’t see that problem” look on his pasty-assed, sleezeball face (but I’m not bitter :-). Sadly a simple look at the property combined with the county plot plan would have identified the problem and I could have had the seller be the bad guy prior to closing. As it turned out, it started off some bad relations with those particular neighbors and their local buddies for which no amount of rationale discussion or offers to help move the swing set and shed seemed to make a difference (e.g. his own words “this is the only flat part of *my property* where I can put a swingset!” pretty much summed up my neighbor’s attitude). Good luck.

Miguel’s advice to have an experienced tradesperson inspect is excellent. But be aware they can’t usually punch thru drywall and so forth to inspect, there’s a lot of verbiage in their reports stating all the things they don’t see.

Click on my name, it will take you to a graphic on nytimes.com.

I would be kind of negative too, you’re buying at a time the market is still priced really high. It’s begun to correct, but it will take some time to get back where it belongs, houses here in Omaha are only down a couple percent from what I can tell.

They call it a “buyers market”, but compared to what? Last month? Last year? 5 or 10 years ago?

I am thankful every day that I got in, in 2000 and my house is only 10% over-valued ($100k for a 3 bedroom on a nice cul-de-sac in the suburbs, by historical prices I think it should be about $85-90K). Lots of people are gonna find out about “bubbles” the hard way. (It wasn’t that I was really smart, just cheap and lucky to get in when I did.)

The value of real estate (or anything really) is based on a couple factors:
1. The cost of materials
2. The supply and demand

Now during the “bubble” false demand was created via “creative” financing for unqualified (financially) people, this demand is going away, painfully.

The opportunity for profits kicked in and builders built, lots. This increased the supply of houses and the cost of materials/labor (again supply and demand).

So, where we find ourselves, IMO, is with an over-supply, vastly reduced demand, and a cost of materials and labor that will be falling (a bit on the materials side, hopefully not much more on the labor side as that would be more painful) over the next few years.

Also, worrisome, is that demand may begin a longer term fall within a few years when the baby-boomers begin to pass away in larger numbers.

Two things will probably help you:
1. You live in the midwest and we didn’t get as crazy as many areas
2. There was not a similar “wage bubble” so probably the worst case (as long as you got a normal 30 year fixed rate loan with no pre-payment penalty) is that you overpaid for your house and will have significant negative equity for a long time, which doesn’t matter too much as long as you don’t plan to move for 30 years.

Well intentioned though it may be, the government trying to sound positive about it makes it harder for people to gauge the risks. If I had bought one of those “McMansions” (most of my co-workers bought $200-300K houses when I was buying) I would be seriously considering selling now, banking any “equity” I could and moving into an apartment for the next 5 years.

Speaking of building codes, make sure they point out specifically what building code an issue with the house violates (aside from viper pit in the basement, or obvious stuff like that).

Also, you should ask for a your HUD disclosure form a few days before closing. This will have a break down of where all the money is going… I would also ready all the docs, and consider taking them to an attorney for reading.

My wife used to be a closing paralegal, and it was shocking to see how many people ended up walking out of the table because the loan was really an ARM when the broker promised them it was a fixed rate loan.

Also, you’re putting 20% down to avoid PMI right? around here it adds 100-200 a month to your mortgage.

One more thing, and this is pretty important. A lot of people will show up on closing day with a u-haul, or be prepared to move –having their previous housing arrangement nulled. There is nothing worse than showing up to closing in a u-haul, and having the closing not finish right there that day for some reason. Believe me, it happens. Also your closing has a pretty high chance of being delayed a week or so. The closing date is always iffy.

TiP are you referring to this: http://tinyurl.com/ysuyjd (I couldn’t find the original listing).

When you are done, do you plan to do a retrospective on the whole process from start to finish?

I asked this once before but I don’t think you answered: How do you feel now about your decision not to buy that house you mentioned a few months back — the one that was about $50,000 over your limit? Pretty darn good, I’ll bet.

Are you a member of any societies or porfessional organizations? Someitme banks they are affiliated with will offer lower rate on mortages and insurance for their members. Don’t forget multi-line discounts – that can save hundreds a year.

Check around a lot for rates. Our credit union was not the lowest rate out there.

Not sure about Southern California. I see houses still in the high 500K+ and that’s consider decent. If you want a good home you’re looking at 700K+

I cant speak for the entire SoCal, but just from my city, I dont see that many for sale signs. My neighborhood currently has no for sale signs as far as I can see.

In fact there is a huge lot a few miles from my neighborhood and the houses arent even built yet and I heard people say everything is already bought, they are just waiting for the houses to be built and move in.

If you don’t get the documents in advance (I wish someone had suggested that to me!), don’t be bashful about reading through everything. I didn’t read everything as thoroughly as I wish I would have, but I did catch a couple wrong numbers in one place. They were meaningless numbers, but they did have to go fix and reprint that document.

If you qualify for it, I highly recommend USAA insurance.

Clearly, some people are going to have to downgrade, but that’s going to make the “cheaper” houses really competitive. People have to have a place to live, after all.

1) currently about 2.9% of all houses are empty. 11% (yes, 11%) of all condos are empty. We’ve overbuilt in the last few years and it’s going to take several years for demand to catch up.
2) As I implied in my previous post: a lot of these people in trouble are currently on the low end of the market already, so it’ll be difficult for them to “move down”.
3) Those that are in a larger, more expensive property may not be able to qualify to buy another house (even a smaller one) under the tighter lending standards, especially if they’ve run into payment troubles that have erroded their FICO scores.

The problem is that some of those people with ARM resets right now are not going to be able to qualify to refi under the tighter lending standards (and if the higher monthly payment has caused them to be late on other bills, their FICO has been reduced making it even worse). They’ll have 3 options: 1) sell 2) suck it up and try to make the higher monthly payment 3) give the keys back to the bank. The problem with option 1 is that the market is very slow right now (you’ve seen that in your area). Many will try to make option 2 work, but you know that a good percentage of those will eventually fall into option 3.

I wish I could attach a graph from Credit Suisse that shows the different types of ARM resets and the months that each will reset in. ARM resets are just getting started – they don’t peak until November this year. The other shoe to drop is the Option ARM resets – these are not subprime loans, these are considered Alt-A. They don’t start resetting in significant numbers until about a year from now and they don’t peak until sometime in 2009. The thing to remember about Option ARMs is that they go into negative amortization if the borrower pays the lowest option payment/month. I’ve seen some surveys that show that up to 80% of people with option ARMs are paying that minimum, negative amortizing payment in any given month. That’s scary – it might have been OK to do that when prices were going up 10 to 20%/year, but now prices are flat at best and actually falling in many areas. That’s why we can in fact have a pretty good idea of what the future will bring, just as we could about a year ago with subprime.
Another good blog to read about all of this is:
http://calculatedrisk.blogspot.com/
They pretty-much predicted the current subprime troubles a year ago and now they’re talking about the coming option ARM debacle.