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Posted by dapperdobbs on April 22, 2009, 5:01 pm
What kind of research is recommended before making a decision to
purchase a home? (E.g. appraisers include the latest 12 months of
sales, days-on-market, and average percent of asking price that is
actually paid.)
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Posted by Douglas Johnson on April 22, 2009, 6:24 pm
>What kind of research is recommended before making a decision to
>purchase a home? (E.g. appraisers include the latest 12 months of
>sales, days-on-market, and average percent of asking price that is
>actually paid.)
For investment or personal occupancy? -- Doug
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Posted by dapperdobbs on April 22, 2009, 9:07 pm
> >What kind of research ...
> For investment or personal occupancy? -- Doug
For personal occupancy - is there a difference in quality of research
if it's for investment?
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Posted by Douglas Johnson on April 23, 2009, 10:35 am
>> >What kind of research ...
>
>> For investment or personal occupancy? -- Doug
>
>For personal occupancy - is there a difference in quality of research
>if it's for investment?
No difference in quality, big difference in kind. For a rental, you are going
to want to know things like local rents and vacancy rates. You will want to
value the house on discounted cash flow as well as comps and replacement costs.
You will also want to do much of the things in the list below as well.
For a personal residence, you will want to make sure you can get an insurance
policy on the property and the cost. You will want to get an inspection by an
inspector you find and pay yourself. If you have a friend knowledgeable about
construction, ask if they'll look it over as well.
You want copies of the last year's utility bills. Get a list of comps in the
neighborhood, both for sale and recently sold. Go through them if possible and
adjust the prices up or down on features and condition. Research the local
schools if that matters to you.
Get prequalified for a mortgage. Don't forget to shop around for it. Find out
what your income taxes will be with and without the purchase. Make a list of
likely expenses (furniture, fridge, lawn mower, repairs, upgrades, replacing old
appliances, carpets, painting...). Do a detailed budget for at least the first
year.
If this is your first house purchase, get a lawyer to review the contract.
They're pretty standard, but you should have him/her explain what you are
signing. Get a draft closing statement and have him explain it to you.
Drive your commute at the hours you will be doing it.
I'm sure there is more, but that is what is occurring to me now.
-- Doug
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Posted by dapperdobbs on April 23, 2009, 2:26 pm
> >> >What kind of research ...
>
> >> For investment or personal occupancy? -- Doug
>
> >For personal occupancy - is there a difference in quality of research
> >if it's for investment?
>
[snip]
> No difference in quality, big difference in kind. For a rental, you are going
> to want to know things like local rents and vacancy rates. You will want to
> value the house on discounted cash flow as well as comps and replacement costs.
> You will also want to do much of the things in the list below as well.
>
> I'm sure there is more, but that is what is occurring to me now.
>
> -- Doug
Trying to address many helpful replies without quoting all ... I see a
lot of analysis on investments (or buying a car), and these tend to be
quantitative. Home purchasing seems to be left to a lot of "emotional
impact", without a great deal of analysis, yet is a huge item in most
people's lives. The differences in real estate analysis for
"investment purposes" you point out is very interesting. Depreciation
also plays a role, as I understand it, and the "fixing up" budget v.
estimated resale price (or improved rental value) would be important
to those who do it as professional DIY-ers.
But for the different "personal occupancy" it's still the objective
statistical analysis I'm interested in learning much more about (as
opposed to 0.5% landscaping and 0.5% staging). There must be reams of
statistics - I've seen some of them, but I had to torture an agent to
loosen their tongue (hahaha!). Agents and commissions notwithstanding,
it seems to me that the first questions should be something like "What
quality of construction / design are you looking for? Are you familiar
with the construction companies? The area demographic trends? The
average price per sf in this and proximate areas v. national averages?
Do you understand why? Have you seen charts of prices? Affordability
indices?" ("Are you feeling lucky today?")
Where does one get the right questions, and where does one get the
answers?! My bet is that most people buy a house without analysis -
like buying Intel at $70 just because the price per share is going
up!!! (Bad joke, eh?) The appraisal is close to the final step, as I
understand it.
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