House Hunters Guide to Florida

Many people are affected by this terrible economy but if you are one of the lucky ones and you are still able to shop for housing in this market then you have some pretty good pickings. This house hunting guide was designed with my experience in shopping for houses in the deed restricted communities in Florida. Prices that were once over-the-top high can be purchased for extremely cheap prices now. I'll go over some of the common terms you'll hear when shopping and few nuggets of house hunting caveats I've picked up over the past few years.

I want a new house, tell me about newly constructed homes!

If you are looking to buy new construction (pre-built but no one has ever lived there) you pretty much have your pick of the litter. There are tons of gated communities with leftover inventory from pre-recession time. These homes are really big, are very nice, and are decently reasonable in price. You can get houses that are 4 bed, 3 bath, 2300 square for around $180,000 (this depends on inventory available. One thing that you have to also consider when buying a home that is newly constructed is that they are often in communities which require HOA fees (home owners association) and they can be rather expensive. For example, I look at one area where the HOA fees were $200 a month (some HOA fees are yearly and much lower). Also, HOA fees are typically not fixed. Benefits of living in an HOA area is that the community will often take care of your lawn and make sure the neighborhood is kept to look perfect and the area is safe. This is terrific for older folks who don't want to maintain a lawn and like the area to be friendly and maintained. Also, when dealing with pre-constructed homes, you will be able to look at models of the homes at pretty much anytime without having to go around a potential home owners schedule like you do for normal homes. One downside of buying these homes is that you have relatively little negotiating power with home construction company, they typically stick to their guns on the price. And if there are no houses available in their inventory, expect to pay double for pre-construction or newly built units. Another good thing about these homes is that they often boast warranties on the home construction, appliances, and various other things.

What the heck is a short sale?

Basically a short sale means that the owners of the house can no longer pay the mortgage and the bank has agreed to accept less for the house than is owed. On a short sale you prepare an offer for the bank, rather than the owners of house even though the owners have not yet foreclosed. One thing to be cautious about with short sales is they are sold "as is" with right to inspect. Owners of the home no longer have stake in the house and are typically on their way out. It also has been common practice for short sales to drag on with the banks making the negotiating process into several months rather than a few weeks like a normal house purchase. The good thing about short sales is that typically the house has not been sitting for a long time like you see with foreclosures. They are usually maintained much better since people were living in them recently. You can get short sales in the lower end of the sales range. For example, I recently looked at a house that was 3 bed, 3 bath, 2400 square feet built in 2005. It was pretty much brand new and perfect for only $127,000 starting price. Short sales also give you a little more room for negotiating since you can throw a number at the bank and hope that it sticks. When negotiating with regular sellers you often feel like you might offend someone if you offer too low, but this case is different.

Ok, so what about foreclosure?

In the most simplest terms, a foreclosure means that the owner of the house has stopped paying the mortgage and the house is now bank owned and the owners have been evicted. The reasons the owners have stopped paying could be a result of many reasons including job loss, unexpected medical conditions, excessive debt, or a uncooperative divorce. Typically, when you go look at foreclosure homes all the utilities will be off (so go look at these house during daylight hours). You might also notice overgrowths of plants, insects in the home, missing light fixtures, and various other problems. A foreclosure is the type of purchase that can either be a nightmare or a diamond in the rough. The former owners of the house were no longer obligated to the house so there can be damage from them left behind. Foreclosure's are typically DIY projects but the best part about a foreclosure is that they can be purchased for dirt cheap. You will often find these houses have been sitting for a long time which might have caused secondary issues such mold and insect infestations. Be careful and check everything so you know how much your going to spend on repairs after buying the house. They are not typically move-in ready and don't expect warranties on anything.

Get on with the tips already!

1) I would say the number one tip for buying any property is to get a home inspection. I made the mistake of not getting a home inspection once and will never make that mistake again. For a few hundred dollars, you can find problems that would have cost you thousands in the long run. Don't be cheap.

2) You can get better financing if you have a down payment. Sure it sounds great to go with "no money down" financing plans, but you'll be looking to pay like 7% interest rates (as opposed to 4 - 5% with a down payment). This is going to increase your monthly payment over the long haul.

3) When in doubt on an agreement, get a lawyer. Lawyers are trained to see small contract details that you might have no clue to look for.

4) Keep in mind when purchasing a house that you have to pay more than just the mortgage. You are also going to be paying for home insurance, PMI, taxes, moving expenses, and various other things. You will also have to pay for the home inspection, earnest money, real estate appraisal, etc. If you are scraping by from month to month, you might want to wait to buy a house because the upfront cost can be a lot.

5) Buy what fits you. If you are a DIY kind of person, a foreclosure might be a great project. If you are an elderly person, you don't want the hassle so buy something newer and move in ready.

6) Buy what you need. Sure the giant house with the pool and waterfall looks freaking awesome, but you might not need all that extra space. Keep in mind that bigger houses also have large energy footprints. You're going to be paying to heat and cool that larger space. The more space you have, the more maintenance it requires.

7) Come up with a list of things that you "need" in a house, and things you "want" in a house. This will help you and your realtor narrow the shopping list for houses down. There's no point in wasting your time looking at houses that don't fit your profile or price range. Don't expect everything to be perfect but still have standards.

8) Don't buy the first house you look at. Even if you have a narrow list of houses, look at more than that house even if you think it is your dream house. There might be something even better right down the street.

9) Check out the neighborhood around the house during day and night hours. Don't move buy trains, airports, chemical or power plants. Don't live near power lines (as there are studies that have shown it can lead to cancer). Make sure you aren't in a flood zone. Check out the history of the area for natural disasters and weather conditions. Knowledge is your best friend and gets you prepared.

10) I'm a believer of "going with my gut". If I get too many bad vibes from a place, I usually say no. There's always more houses to buy, if you don't like the vibes of the place on first approach why would you want to live there?