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Here’s a comedy short starring two Second City Improv veterans. It describes the worst real estate agent ever.

Watch and weep.

Fortunately I’ve never gotten a call from a client complaining that her real estate agent came onto her in the shower at a showing.

But buyers have called to complain that their agent didn’t return calls, brought his girlfriend to a showing, or explained things so badly the buyer was more confused after getting an answer than before.

In the end, I can only tell the buyer that they’re talking to the wrong person. If they’re unhappy with their real estate agent, that’s who they need to talk to.

Although it’s intimidating to buy a house for the first time, you’re in charge. You are the person every one needs to make happy. You’re the person bringing the money to the deal. And no one can make you work with a bad real estate agent but you.

[Thanks to Wilmington Design Co for finding this video.]

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Bad Credit No Credit Ok! on Flickr

Oh really?

You meet with a mortgage lender to get preapproved before shopping for houses. The lender says your score is too low. She can’t help you.

Now what?

Low Credit Solutions to Help You Get a Mortgage.

Not every one of these solutions will work for everyone. But one of them might work for you.

Put more money down.

Sometimes it’s the combination of a low down payment and a low credit score that’s hurting you. For example, if you’re planning to make a down payment of less than 20%, then you’ll need to get private mortgage insurance (PMI) for your loan.

Recently, PMI companies have tightened their standards. If your credit score is lower than 680, you may not be able to get it at all.  The solution? Make a 20% down payment so you don’t need PMI.

I can hear it now. Pam, are you crazy? Where am I doing to come up with such a large down payment?

Obviously you haven’t been reading Hands on Home Buyer for long because I’ve made many suggestions including getting a gift from family, working with a nonprofit organization who provides down payment assistance, and even volunteering for medical research.

And if a 20% down payment for a conventional loan is too much, look at FHA (Federal Housing Administration) loans. FHA will only make you put 10% down before giving you mortgage insurance if your score is less than 620. But if your score is higher than 620, you may be able to put as little as 3.5% down.

Get a mortgage from the government.

The United States Department of Agriculture (USDA) makes mortgages in rural areas of the country. They do have income limits but go higher than many nonprofit programs, up to 115% of the median income for the area.

Government guaranteed mortgages like USDA Rural Development and FHA don’t allow you to get a mortgage with trashed credit. You still need to have no open collections or judgments. And you need to show you can afford a mortgage after paying your existing debt.

But lenders are more lenient with credit when you have the promise of the government behind you if you don’t pay your mortgage.

Wait until you’ve fixed your credit.

Yes, I know I’m saying something totally outrageous here. No one ever likes to wait. But if you take the time to fix your credit, you’ll qualify for much better terms on your mortgage—lower interest rates, reduced closing costs, etc. —that can save you thousands of dollars.

If your score is low because you don’t have much credit, begin a cautious plan to fix that. Open a secured credit card at your bank. You put money in a savings account and they’ll give you credit up to the amount in the account. Charge one thing on the card each month, perhaps gas or groceries. And pay the bill in full as soon as it comes. Within a few months, your bank may allow you to have a regular, unsecured credit card. Don’t carry a balance and you’ll see your score increase over time.

Fight collections that you don’t believe are fair. This is common with medical collections when a doctor’s office doesn’t bill the insurance properly. Paying off a collection will not increase your score. But getting a collection removed will.

The Poor Credit Blues.

“I wish I hadn’t been so stupid in college.” “That *%&@ ex-husband of mine. He trashed my credit.” “Why did I have to hurt myself right before the insurance kicked in at my new job?”

Whatever the reason for your credit problems, you can’t change the past. You can only fix the future.

Even if you decide to buy a house before returning your credit to stellar status, it’s worth it to make a clean credit report your goal. You’ll save money each month on car and homeowner’s insurance, for one. And besides, who wants to pay for past mistakes forever?

[Photo from Flickr.]

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bunny in the grass on flickr by Robyn Lee

I call first home buyers the fuzzy bunnies of the real estate world. Everyone thinks you're adorable and wants to help you.

I’m kinda famous for an ongoing rant. It keeps me up at night. I stop traffic to deliver it. And my friends and co-workers know it by heart:

Why in the world do so few first home buyers take advantage of all the great programs waiting for them?

What’s waiting for first home buyers:

Local governments and nonprofit organizations throughout North America have resources for you. If you’ll only claim them.

My short list of offerings and their benefits include:

  • home buyer education – makes you smart and saves you money
  • down payment loans and grants – shows you’re smart and saves you money
  • one-on-one counseling – once again, makes you smart and saves you money
  • free credit reports – prevents you from being surprised when you apply for your mortgage
  • new and renovated houses to buy – keeps you from buying a money pit
  • tool lending libraries – keeps you from having to buy tools you’ll only use once
  • home maintenance classes – keeps money in your pocket instead of a handyperson’s
  • renovation loans and grants – turns that fixer upper into a well-maintained home
  • landlord training classes – teaches you how to survive and thrive as a landlord
  • and much, much more.

Yes, some programs are limited to people with modest incomes. But not all. Many home buyer education classes are open to everyone and can give you a discount on your mortgage costs. Oooooooh.

I’ve already posted many ways to find the programs in your area. Now you just need to do it. Why are you waiting?

But don’t listen to me. Here’s a video from a happy home buyer talking about the help she got to buy her home. Will you be next?

[Photo by Robyn Lee on Flickr.]

Oh, and the other source of help for first home buyers? Hands on Home Buyer, of course. Subscribe to get new posts by email.


 

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Buyers are Liars

Another Dream House by Mary W.E. on Flickr

Is this your dream house?

It’s a fact. Many buyers end up choosing a home that’s nothing like what they said they wanted.

Why?

But first, a story.

One of my first counseling clients was a young man who had made some mistakes. His credit was not good. We worked together for a couple of years while he paid off collections and reestablished a clean credit history.

When the bank said he was ready for a mortgage, we started talking about what kind of house he wanted. It had to be:

  • in the city so he could walk or bike to work,
  • easy to care for (no large yard),
  • and close to restaurants and the cultural activities he enjoyed.

One day I got an email. My young friend had just made an offer on the perfect house. It was:

  • 30 miles outside the city—bikeable only if you didn’t mind lots of hills and snow six months out of the year,
  • on an acre of land with extensive gardens,
  • and located in a tiny town where the idea of a good time was a few hands of euchre played at the local bar.

Was this guy an undiagnosed schizophrenic? Had he been replaced with an exact double by aliens? Was the house located next to a nudie bar with no curtains? Or was something else going on?

The balancing act.

I’ve never met anyone who got every feature they wanted in a house.

If it’s in great shape, you can’t afford it. If the rooms are laid out perfectly, the house is on a noisy street. If it has a great yard for your dog, it’s too far away from work.

So you compromise. You figure out what’s most important and make trade-offs to get it.

Buyers are liars because their ideal house doesn’t exist.

You know it when you see it.

The other reason buyers are liars is because you can’t tell what you want (or don’t want) until you see it.

Yes, old houses are charming. And you may dream of soaring ceilings with unpainted woodwork in every room. But after looking at six houses with natural oak trim on a cloudy day, you realize that your annual case of Seasonal Affective Disorder (SAD) would make you miserable in a house with such dark moldings.

Or maybe you’ve enjoyed lovely images of houses with open floor plans on the decorating shows you like to watch. But once you walk through a few with your kids in tow, you realize that sound travels throughout the house and it’s impossible to hold a conversation without everyone else hearing it.

The home buying learning curve.

The purpose of looking at houses is not only to find one that matches what you want. It’s to figure out what you want.

Mid-Century Ranch House by Joe Wolf on Flickr

Or is this your dream house?

The more you look, the more you’ll learn. And, if you’re working with a great real estate agent, the more she’ll learn too.

A good agent can make the learning curve less steep by listening to your objections to some houses and your likes in others to guide you to the place you’ll ultimately buy. That’s why your agent may suggest a house not on your list. Something in what you’ve said or done has led her to believe it might be the one.

The home buying learning curve, like all education, can be frustrating. So remember, the learning is in the looking. If you can’t find your ideal house, it may not exist. You might need to shift your ideas to find the house that will work.

And then they’ll say about you, “Buyers are liars.” But you won’t care. Because you’ll have found your house. Just like my non-schizophrenic, not replaced by aliens, client who bought the house he didn’t know he wanted.

[Victorian dream house and ranch house pictures from Flickr.)

Hands on Home Buyer tells you what housing professionals are saying about you and why. Don't miss a post. Subscribe to get a link to new posts by email.


 

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Pile of debt by Mikko Saari on Flickr.comNow, more than ever, you need a clean credit report to buy a house. But while you’re cleaning things up, make sure the Internal Revenue Service (IRS) doesn’t clean you out.

Negotiating with creditors.

Sure, the best way to deal with late debts is to pay them in full. Well, actually, the best way to deal with them is to not have late debts at all.

But you want to buy a house in a few years and need to take care of those old debts sitting on your credit report. So you call the collection agency and negotiate a settlement.

If they’ll accept half the amount you owe, you’ll send them a money order from the income tax refund you just received. Good deal, right?

Everyone wants his share.

If a creditor forgives part of your debt, he’s supposed to issue a 1099-C to you and to the government. What is a 1099-C? It’s a statement that shows how much of your loan was forgiven so you can pay taxes on what the IRS considers income.

If a company send a 1099-C form to the government, you are responsible for paying the taxes—even if you don’t receive a 1099-C yourself.

Unfortunately, there doesn’t seem to be any statute of limitations stating how long after a debt is forgiven that a company must report it. A recent article in USA Today Money found a borrower who received a 1099-C for a credit card debt that had been forgiven twenty years ago!

Exceptions to the rules.

There are never rules without exceptions. Here are a few that might help you. You don’t have to pay taxes on forgiven debt if:

  • it was forgiven as part of a bankruptcy. Save your paperwork (forever) in case you need to prove it.
  • you worked in a public service field that qualified you for student loan forgiveness.
  • you can prove you were insolvent (your debts are greater than your assets).

There are a few other exceptions. Ask your tax accountant or lawyer for current advice.

Remember also that a company doesn’t have to file a 1099-C if it forgives less than $600 of the principal of your loan. But that doesn’t mean you don’t owe the tax. It will just be harder for the IRS to know you owe it.

Keep a paper trail.

Yes, I know we’re living in a paperless world. We should be able to find anything we need online. But it doesn’t work that way in real life.

  • If you negotiate a settlement with a debt collector, get it in writing before you send any money.
  • Save important paperwork about debts (bankruptcy filings, divorce settlements, etc.) forever.
  • Consider buying stock in a paper company. It doesn’t seem to be going anywhere any time soon.

[Photo by Mikko Saari.] 

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Super Saver and Sunset on Flickr by Emilie EaganSome people with low incomes have tens of thousands of dollars in the bank while others with high incomes show three digit checking account balances.

Are savers and spenders really that different? Oh yeah!

What are the secrets of the super savers?

I get to see a lot of bank account statements in my work. And no, I don’t pore over the entries to make fun of what people spend their money on. I’m really interested in the bottom line of what they have available to buy a house.

But it’s hard not to notice the difference in debit card entries for savers vs spenders.

1. Savers eat at home.

Spenders don’t notice that they have meals out on their debit card at least once (often more) every day. But Savers cook dinner at home, take the leftovers for lunch, and eat cereal or yogurt for breakfast instead of carry out bagels and coffee.

2. Savers maintain and repair their cars.

Savers know that a good car will last a long time. They make sure to wash the road salt off in the winter and change the oil as needed.

And, when they do face a big repair bill of $1,000 or so, they don’t panic and rush out to buy a new car with a loan. After all, $1,000 is less than 3 car loan payments and could keep your car going strong for years to come.

3. Savers find free fun.

I rarely see out-of-town concert tickets on the bank statements of savers. I rarely see entertainment expenses at all.

No, it’s not that savers are boring. As a matter of fact, I see them swimming at the lake, attending festivals downtown, joining comedy improv troops, and dancing at concerts in the park. They find their fun for free.

4. Savers don’t accessorize.

It’s not the savers whose phone cover matches their shoes, belt, purse, and necklace. If a saver wears jewelry, it’s often homemade or a gift. And it’s always interesting.

5. Savers stay in good shape.

It helps that they’re eating at home. But savers also rely on bikes or their feet for short trips and exercise to keep themselves feeling good.

6. Savers have well-worn library cards.

Savers know that many libraries lend DVDs, CDs, and even downloadable books for an e-reader. They never buy something they can borrow for free.

7. Savers aren’t afraid to buy things used.

Thrift stores often have sections of new clothing with the tags still attached. But a saver knows that a pair of broken-in jeans or a desk that just needs a small repair works just as well as the items bought new for much more money.

8. Savers don’t pay interest.

If a saver has a credit card, he never carries a balance. He pays it off before any interest accrues.

And, if the car finally dies for good, he buys a decent used one for cash instead of getting a loan.

9. Savers don’t pay for satellite or cable tv.

Nowadays there’s no reasons to pay more than a hundred dollars a month for in-house entertainment. This year, even the Super Bowl streamed live on the internet.

Most networks post video of their shows online and you can find even more to watch at HuluCrackle, or by opening a Netflix account.

Want to watch some special event that’s only available on cable? Find a like-minded sucker friend with a subscription. Offer to bring the beer.

10. Savers don’t shop for recreation.

On a sunny Saturday afternoon, you can find a saver almost anywhere—except at the mall. ‘Nuff said.

11. Savers pay themselves first.

Savers do not wait to see how much money is left in their checking account at the end of the month before moving it into savings. Instead, they make savings as important as paying the electric bill or rent. It comes right off the top.

12. Savers are creative.

Savers try to figure out why something broke and fixed it themselves. They have basic sewing skills and know a little bit about carpentry. They don’t feel intimidated when they look under the hood of their car. And they know their way around Craigslist and Freecycle.

13. Savers are optimistic.

Savers never say to themselves, “I’ll never save enough to buy a house. I might as well just give up.”

Instead, they set a goal and start saving. They take advantage of programs that will help them increase their savings. And they know that even if they decide not to buy a house, it’s never a bad thing to have savings in the bank.

Find a super saver mentor.

It’s really hard to save if all your friends are super spenders. They’ll always suggest drinks after work at the local bar after instead of a potluck at someone’s apartment. And they never know what’s going on around town for free.

If you want to become a super saver, you need to hang around super savers. Use this list of clues to find them among your friends and co-workers. Then copy everything you see them do.

If you use every one of the strategies of super savers listed here, you’ll save THOUSANDS OF DOLLARS A YEAR. And you’ll have your house down payment saved in no time.

 

[Photo by Emilie Eagan.]

 

Sometimes you just need a new perspective and a little encouragement to meet your goals. Subscribe to Hands on Home Buyer to have a link to every post delivered to your email box.


 

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The Golden Rule on FlickrLast night I taught a Landlord Training class.

The nonprofit agency I work for requires anyone who gets a down payment assistance loan from us who buys a house with a rental unit to take the training. That’s only a handful of people each year so I also open it up to the public.

We talk about screening tenants, leases, evictions, lead paint, Section 8, taxes—all kinds of things a prospective landlord  needs to know.

You Already Know…

But I always tell people that they already know how to be a good landlord. After all, they’ve all been tenants and they know what it feels like to have an awful landlord. If they remember to do the things that made their tenancy pleasant and avoid the things that made it miserable, they’ll be on their way to becoming a great landlord.

Of course, no one ever believes me when I tell them this. So I was lucky to have another landlord in the room with many years of experience who was able to share the practical benefits of the Golden Rule.

Applying the Golden Rule

You remember the Golden Rule, don’t you? It’s the idea that you should treat other people the way you want to be treated. Or, not do things to them that you wouldn’t want done to yourself.

Some version of the Golden Rule exists in most major religions and philosophies. Yes, it’s ethical. And it also works. Transactions go more smoothly when people are following it. Yes, even in real estate.

Buying a home is stressful. Lots of money is involved. And people’s lives are being uprooted along the way.

What makes it worse is when people start assigning negative motivations to someone involved in the transaction:

    • I can’t trust my agent because she only wants to make money.
    • The sellers are trying to cheat me.
    • The home inspector should have known the dishwasher would break a week after I moved in.

We’re Doing the Best We Can

Sure, there are plenty of wicked people who do a lot of damage. And if you find yourself involved with one, run away as fast as you can.

But most people are just doing the best they can and are motivated by what’s important to them at the time. Real estate agents want to make a quick sale so they can start working on their next deal. Sellers want to get the price they need to move on in their lives. You want to buy a house you’ll love and that you can afford.

You don’t want people to think of you as a greedy, money-driven jerk who would push the sellers to starvation if it meant you’d get a good deal on a house, right? So apply the Golden Rule. Treat others the way you want to be treated. Don’t assume people have bad motivations before they prove it.

What will that mean for your real estate deal?

      • The entire atmosphere will be less stress-filled for everyone.
      • Simple disagreements will resolve quickly instead making closing an all-out war over a $30 plumbing repair.
      • Most people will rise to your opinion of them.

And you know what? It might even benefit you financially.

 

[Photo from Flickr.]

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Drive-by Shooting on Flickr

You might want to be a little more subtle than this.

Yes, the internet is wonderful. But you can’t do everything from your laptop while watching How I Met Your Mother reruns.

Here are things you can only learn by getting up and going for a drive-by (or walk-by in town).

What Can You Learn From a Drive-By?

It’s easy to be so wrapped up in the features of a house that you miss other things that are just as important to your future enjoyment.

Here’s what I’d want to learn by doing several visits at different times of the day.

1. How long is the commute to work?

Sure, on a Saturday afternoon while you were excitedly checking out the place the drive didn’t seem that far. But what’s it like when everyone else in the area is going to work? How long will it take you to find a break in the traffic so you can turn out of your driveway?

There’s only one way to find out. Do practiced commutes during morning and evening rush hours. Then imagine what it would be like day after day, year after year.

2. What’s waiting for you around the next breeze?

On a cold day, the air was crisp and fresh. You could just see yourself out barbecuing on the deck once summer arrived.

Oh, did someone forget to mention that a dairy farm borders the back of your property? Well, you’ll always have a nearby source of manure for your garden. And flies. And a 5 a.m. rooster wake up call.

3. Who else uses your road?

What other vehicles do you notice on the street in front of the house you want to buy? Is there a mob of training bicyclists every other day that makes your squirrel-chasing dog insane? Are you on the direct route to the county dump and hear (and smell) heavy garbage trucks all day long? Or maybe you’re lucky and your road just serves as the local drag strip for teenagers heading off to high school.

4. How will you handle emergencies?

Is it easy to get from your job to your child’s school and then to take her home? What about if your car breaks down—will you find yourself stranded somewhere on the route that feels unsafe? And while you’re waiting for your car to be fixed, is it convenient for you to carpool with someone or take a bus?

5. What critters will you meet on the road?

Awwww, don’t the deer look cute?

They don’t look nearly as cute when they’re standing in the road and you’re hurtling toward them at 60 miles per hour.

6. What’s going on late at night on the weekends?

If you’re ready to make an offer after seeing a house one time, you may never see the neighbors. Do you think it’s worth it to stop by on a Saturday night to see if they like settling in early with a movie? Or are they the local meth supplies for four counties?

7. What’s the weather like?

You might laugh but in mountainous areas, weather can change quickly and be entirely different over a short distance.

I’ve known several buyers to find houses in a distant town where houses are much less expensive. I wonder if they know yet that this town falls on the other side of a snow band that will bring them more days of yucky weather than we see here in the city?

8. Is it easy to do errands?

Yep, you noticed there’s a grocery store just ten minutes away. But does it sell items you want to buy and can you afford it?

If you find yourself going back to your old neighborhood to do your shopping even after you move away, you might be sorry you ever left.

9. Do you see yourself enjoying the activities of others in the neighborhood?

What do you see people doing on a nice weekend afternoon? Is everyone locked up indoors? Do you see gardeners? People working on their cars? Is everyone meticulously grooming their lawn so that if you get a little lax you’re worried about waking up with a dandelion head in the bed beside you?

No, I’m not saying you should only live around people who do the same things as you. But if you buy a house in a close-knit neighborhood where everyone belongs to the same bowling league while you’re allergic to rented shoes, you might find yourself a little lonely.

10. Will it feel good to pull up to this home day after day and feel pleased and proud that you own it?

I’ve sat with buyers trying to talk themselves into buying a house they just knew was a great value. Unfortunately, they also felt overwhelming dread whenever they pulled into the driveway.

Sure, a three bedroom house with two baths and a well-manicured lawn listed at a bargain price might have great potential for reselling at a profit someday. But if all you want (and need) is a modest two bedroom condo with no yard work, no wonder you’re not happy when you pull up in front of a house.

Yes, it’s a frequent refrain at Hands on Home Buyer. Say it with me, folks: “Money isn’t everything.” And paying attention to the way you feel when you pull up in front of a house (after the initial excitement of the first visit) can keep you from making a big mistake or encourage you that you’ve found the right place.

Why you can’t rely on anyone else for this information.

Sometimes, prospective buyers will ask me if I think a particular neighborhood is safe. I always tell them to check it out for themselves.

Why? Well, I lived next to a Philadelphia crack house for a decade and never once felt unsafe in my neighborhood. Although, I will admit, I felt mildly apprehensive waking up to the sound of firecrackers at 3:00 a.m. (which is what automatic weapons firing at your house sound like).

So “bad” neighborhoods don’t faze me. But drop me off in the middle of a Wal-Mart and you’ll see the sweat start running while my heart palpitates at 100 beats per minute.

We’re all different. And we have to see for ourselves if a house we’re thinking of buying is the right house.

So take good notes when you attend a showing. But use your own time before and after that showing to learn everything you need to know about the house that you won’t find on a listing sheet.

[Photo from Flickr.]

Well-informed home buyers learn all they can. Don’t miss out. Subscribe to get links to new posts by email.


 

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Comparing yourself to others can lead to all kinds of money grief. If you look around you and decide that you must have a new car, a great house, and take fabulous vacations every year because everyone else is doing it, you will face a world of hurt.

But hanging around with people who are frugal and satisfied with what they have can open your mind to whole new ways of living.

This infographic from 2010 shows where the “average” American spends her paycheck each year.

How does it compare with your spending?

http://www.creditloan.com/infographics/how-the-average-consumer-spends-their-paycheck/

Follow credit link at the bottom of the post to see a larger image.

Obviously you are far better than average. But does looking at this make you think differently about where you spend?

I look at it with shock to see how much people spend on clothes each year (thanks to local thrift shops, my husband and I spend less than $200 a year on clothing). And seeing average transportation and gas costs makes me really excited to see how much we’ll save by the end of the year now that we no longer have a car.

But I know we spend a lot in other areas not spelled out in the infographic. One year, thanks to emergency puppy surgery, our pet expenses were our highest expense of the year after our mortgage and giving.

So look it over. Do some math. Are you average? Are many other people spending less on something than you are? Why do you think that is? And can you change it?

Comparing yourself to others is great when it opens your mind and makes you think. So look at the pretty graphic and get thinking.

[Infographic from creditloan.com.]

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Signing the contract by Frank McMains  on Flickr.Buying a house is overwhelming. At times, you’ll forget if your socks go on your hands or your feet. But you increase your stress even more if you confuse a disclosure with a contract.

What is a disclosure?

You’ll sign so many papers when you buy a home you’ll suspect loan officers and real estate agents have it out for trees. (Pssst, the sorrow from killing so many trees does drive many of us to extreme measures. I just got rid of my car to do environmental penance.)

Most of the papers you’ll sign are disclosures. Disclosures are documents that explain something to you. When you sign them, you’re acknowledging that you read and understand them. 

If you sign a disclosure without reading it or knowing what it says, you’re a big old liar. No, you won’t go to jail. But you may find some surprises later—your mortgage interest rate will change every year, you’ll pay $13,000 in closing costs instead of the $8,000 you were planning on, or the neighbor’s prize-winning pigs might adopt your flower beds as their new mud bath.

What should you do when faced with a disclosure?

  • Read it.
  • Ask questions until you understand it.
  • Sign it. Your signature does not lock you into anything.

What is a contract?

A contract is a legally binding document between two individuals. When you sign a contract, you are bound by its terms.

Very few of the papers you sign when you buy a house are contracts. But the ones you do sign will tie you to buying a particular house or commit you to borrowing thousands of dollars.

What should you do when faced with a contract?

  • Read it.
  • Read it again.
  • Ask a real estate attorney about any serious questions you have.
  • Only sign it if you are willing to abide by its terms.
  • If not, renegotiate or walk away.

Can you tell the difference between a contract and a disclosure?

Let’s try a little quiz to see if you were really reading what I wrote (gee, that sounds like a good idea to put on contracts and disclosures, doesn’t it?).

I’ll describe something you might be asked to sign when buying a house. You decide if it’s a disclosure that is just informing you about something or a contract that legally binds you. I’ll put the answers at the bottom.

Ready? A form that

  1. tells you if the real estate agent you’re talking to works for the seller or for you—disclosure or contract?
  2. says paint contained lead before 1978 and if the house you’re buying was built before 1978, it could have lead in it—disclosure or contract?
  3. commits you to working with a particular real estate agent for a certain period and paying her commission during that time if you buy a house (even without her help)—disclosure or contract?
  4. lets you know that the house you’re buying may be located near oil or gas drilling sites, large farms, a halfway house for convicted child molesters, or a karaoke bar that blares 80s music every Wednesday night ’til 3 a.m. (that last one is not a real form but I think it should be)—disclosure or contract?
  5. describes your closing costs and how much they will cost—disclosure or contract?
  6. tells you your mortgage interest rate and how much your loan will cost you over its entire term–disclosure or contract?
  7. sets the price and conditions for your purchase of a particular house and says that if you don’t try to fulfill the conditions in good faith you can lose your deposit—disclosure or contract?
  8. promises to lend you a set amount of money at a certain interest rate for a fixed term. It may set conditions for you to get the money—disclosure or contract?
  9. tells you about any problems the seller knows about her house—disclosure or contract?
  10. says you agree to pay a home inspector to inspect the house you’re buying for a set amount of money—disclosure or contract?

How do you think you did? If you’re not sure, or feeling more confused than ever, go back over the list. Did you notice that some forms are described using words like “tells,” “describes,” and “says” while others use terms like “commits” or “sets?” Does that help you figure out which ones are disclosures are which ones are contracts?

Answers: 1, 2, 4, 5, 6, and 9 describe disclosures; 3, 7, 8, and 10 describe contracts.

Why disclosures and contracts are important.

In short, disclosures keep housing professionals honest. They are our way of proving that we’ve done a good job of telling you what you need to know. But we can’t force you to read them. It’s in your best interest to read even the boring stuff because you don’t want to find out later that you missed something you really wanted to know.

Contracts keep you (and the other party in the contract) honest. They commit you to a certain path and have penalties if you don’t follow through on the terms.

Both disclosures and contracts can relieve or increase your home buying stress. Knowing that you’re on top of everything you’re told makes your blood pressure go down. Worrying that you don’t know what’s going on makes your blood pressure go up.

So opt for the healthy choice. Read your paperwork. Get help with anything you don’t understand. And sign fearlessly once you know what’s going on.

[Photo by Frank McMains.]

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