You found the home of your dreams. You absolutely love it. There's no doubt about it; you want it. But what do you need to know to make sure that your dream home doesn't turn into a nightmare? What questions should you be asking?
Fortunately, most states in the U.S. require sellers to fill out disclosure forms that list issues such as previous water problems, the condition and age of the roof, hazardous conditions and household mechanical conditions. But there are caveats as to how complete these disclosures have to be. The list of mandatory disclosures varies from state to state, and there are cases in which a seller can get out of filing a disclosure form. Common exceptions include properties in probate. It's also important to note that property owners who fill out disclosure forms are only required to answer the questions to the best of their knowledge, so if they don't know about things such as termites or electrical wiring, their responses may not be correct.
Still, if your state (of purchase) requires a disclosure form, it can be useful to you, depending on when the disclosure report is provided. If it's provided before you go to contract, you can use the information as a bargaining tool to negotiate the price. If it's provided after the contract is signed and you find some disturbing information, you can probably cancel the contract without any hassles. If you find any of the statements are intentionally false, then the seller will usually have to pay a fine. However, some states, such as New York, allow a seller to pay a fine instead of filling out the disclosure form. As stated above, not all states require the same information, but in most cases, if you ask additional questions, the seller must answer truthfully. In a few cases, the seller is allowed to refuse to answer; if they lie, they can be fined.
Questions that do need to be asked -- especially if they are not answered in the disclosure documents -- include the structure's history, such as flooding issues or fires, the real estate taxes (which may change), utilities and included appliances. Doing a walk-through with a certified inspector is necessary. An inspector will be much more of an expert than the seller is expected to be on foundations, water quality (especially if there is a well), septic systems, plumbing, electrical wiring, radon tests and insulation. The findings of a home inspection may also be reason to cancel or renegotiate the price. In all cases, local building codes must be met, as must a few federal mandates, such as disclosure about lead-based paint.
Your local real estate agents can be a huge help in looking for a new home, especially if you are new to the area. They are usually very familiar with the neighborhood and with previous home sales. If an agent knows the house has been on the market for a while, then the agent probably has an idea of what type of bids are coming in and whether it could be fruitful to make an offer lower than asking price. Other information your realtor can offer includes stats on local schools (even if you don't have children yet or don't plan to, the local school district is important to know for resale value). If you are looking at a homeowners association, the realtor might have inside information about the governing and amenities of the community. Again, the agent's familiarity with the locale can give you clues about flood zones, shopping, traffic, recreation and other services you might find useful.
It's recommended that potential buyers get a premortgage approval, although it does not guarantee that a bank will grant a mortgage for a particular house. That decision is based on a bank inspection; the mortgage approval is based on the buyer's income and credit worthiness. New buyers also need to know what closing costs will be, including realtor and lawyer fees, title searches, mortgage points, some tax bills and any HOA transfer fees. Home insurance is required at closing if there is a mortgage.
Happy house hunting!