Nolo’s Real Estate Tips for Home Buyers

Nothing fits so well into your budget as something that's entirely free. And the plus side of living in a consumer society on overdrive is that people are increasingly willing to just give stuff away rather than figure out what else to do with it.

Sometimes being alert to what's on the street is enough. Even in my own, less-than-upscale neighborhood, I've picked up post-garage-sale finds ranging from clothing to file drawers to my very own Oakland A's baseball cap (I'm not a native, but I'm told it's a must-have around here.)

And the online world has added a new layer of possibilities. If you're not yet addicted, check out the free section of Craigslist. (It's there under "For Sale.") In the SF Bay Area, at least, you'll find everything from desks to dirt to dressers.

Another favorite is Freecycle, a grassroots nonprofit where members both advertise giveaways and post requests for what they need.

And for more tips and inspiration, see this September 5th USA TODAY article by Jayne O'Donnell, "If you can't afford it, then get it for free". 

A recent article on Inman News reports that a survey published by Zillow, an online real estate valuation company, shows that a majority of homeowners are unrealistic about the true value of their homes. According to the survey, even though about 73% of homes lost value in the last year, 62% of homeowning respondents said they believed the price of their home had held steady or gone up. These homeowners are unrealistically optimistic about the future, too, with 75% expecting an increase or level value for the next six months, even while 42% expect values in their market to drop.

Why the disparity between reality and perception? One reason is probably a stubborn disbelief that it's possible for the real estate market to fall, especially given the frenzied pace with which values were increasing just a few short years ago. Conventional wisdom says that home values rise over time -- which is historically true -- but "wisdom" just a few years ago told us time or investment wasn't needed, and home values always rise. (If you disagree, try counting the number of television shows and books on flipping properties.)

Probably an even greater misperception -- given the number of people who think the value of their home will rise even while the local market falls -- is that homeowners think their properties are better and different than the rest. They can't imagine anyone wouldn't love what they've done with the kitchen, or ooh and ahh over the new deck.

But the sad reality, as any homebuyer knows, is that houses are commodities. Buyers aren't looking for someone else's dream home, they're looking for something that meets their needs at a reasonable price, and they're not willing to pay the premium many sellers expect for their own customization or improvements. (Often, whether such "improvements" even improve is questionable -- pet showers, anyone?) After all, if they don't like the seller's choice of custom cabinetry or bathroom tile, they can easily find another property without these features -- and not be expected to pay for them.

Alayna Schroeder

Read the news lately? Before you get too excited about the $7,500 tax credit for first-time home buyers included in the recent housing bailout legislation, take note of one very important thing: You have to pay it back. In fact, you don't even get to wait until your house is sold to pay it back -- the feds will claim it in installment payments in subsequent years of your tax payments.

That's no typical tax credit -- it's more like an interest-free loan. For details, see Sandra Block's excellent description in USA TODAY.

Ilona Bray

The recent flooding in the Midwest is a reminder of a single act of nature can have homeowners running to their insurance policy for help -- only to find, in many cases, that they're not covered. Recent news reports say that a tiny minority of homeowners in Indiana and Wisconsin had flood insurance. As is typical, some say they didn't think they were in a flood plain, and that their lending bank didn't require flood insurance to be included in their policy.

We said this in our book, Nolo's Essential Guide to Buying Your First Home, but we'll say it again: The flood zone maps are not always up to date, they're drawn to such a large scale that they're not necessarily accurate for individual properties, and they have traditionally identified flood areas based on the worst flood likely to occur in 100 years, or 1% of the time.

Meanwhile, flooding is the United States' most common natural disaster, affecting many people who live nowhere near water. Melting snow, overflowing creeks or ponds, a weak levee, or water running down a steep hill can all cause flooding. And experts say climate change is making it worse by bringing more severe storms.

Does that mean everyone needs flood insurance? Probably not (though it is relatively affordable if your house is not in a designated, recognized flood plain). But before finalizing your insurance policy (assuming you're just buying a home) or renewing it (if you already own), check with your neighbors, the local flood control board, and your city building department about recent trends.

A good credit record and score has always been important, but with the tightening up of the mortgage industry, people with a low score may have a harder time than ever buying a house -- a shame, if you want to take advantage of recent dips in home prices.

But, warns Kenneth Harney, that's no reason to pay money to the various companies that promise to not only raise your credit score, but find you an affordable home in foreclosure and a low-cost mortgage to boot. For details of the consumer complaints and FTC lawsuits that these companies have engendered, see Harney's article in the San Francisco Chronicle.

As for raising your credit score, you'll have to do it the old fashioned way: by paying down your debt, paying bills on time, and more, as discussed in Nolo's article on Credit Scoring.

A recent poll of residents of the world's eight richest cities reveals that over 40% of Tokyo's residents don't want to sacrifice a convenient lifestyle to prevent global warming. While these results may seem startling, consider that the average house size in Tokyo is 64.5 square meters, or 694 square feet (not to mention that many residents probably take public transportation to work, and drive cars that put American gas guzzlers to shame). To really make a positive environmental impact, those of us who are quick to pat ourselves on the back for our eco-friendliness must think beyond bringing our own bags to the store and driving hybrid vehicles.

And there's no better time to think about these issues than when buying a home, which leaves a (literally) big footprint. While some features -- energy efficient appliances, CFL light bulbs -- can be added later, some "green" features are permanent. Consider these important factors:

• The size of the home. A few months back, I read an article about a woman in California's Central Valley who installed solar panels on the 3,000 square foot home she lived in, apparently alone. She was quite smug about her positive environmental impact. But she could have had done even better by choosing a smaller home that took fewer resources to build and could be heated and cooled more efficiently.

• The age of the home. Older homes sometimes don't have energy saving features, but can often be adapted to include them. Two years ago I had better insulation sprayed into my attic; it almost paid for itself with the rebate from my utility company, not to mention my lower heating and cooling bills. Again, fewer natural resources are spent when an old home is updated than when a new one is built.

• The size of the lot. A large grassy lot could mean a great place for dogs and kids to play, or it could mean heavy water use, toxic weed killers, and hours of upkeep time. If you don't buy more lot space than you need, you'll save yourself hassle, money, and environmental impact to boot.

Alayna Schroeder

For many new homebuyers, one of the most exciting things about buying a house is having the space to garden. For the first time, you may have a little dirt to call your own, and a million ideas about how to fill it. That's great, but my advice is to take it slow. I'm living proof that if your ambition out-paces your knowledge of gardening realities, you could end up with a lot of dead plants.

When I bought my first home years ago, one of my first purchases was the Sunset Western Garden Book. I happily spent weekends weeding the overgrown backyard, buying and planting hundreds of dollars worth of new plants, and learning about mulch and ground covers. I was determined to turn my small yard into an English garden, and I succeeded (at least for a while).

But as time went on, I found myself enjoying gardening less and less. Money I used to spend on manicures and dinners out now went to new garden tools and the latest non-toxic snail bait. Rather than hike with friends in beautiful parks, I was alone in the dirt, nurturing my tomato plants. Gardening seemed the thing every new homebuyer should do, so why I was resenting it? Thinking I should scale back, I bought every book on low-maintenance landscaping, only to learn there's really no such thing. (Gardening's only easy is if you pay someone to do it all for you.)

I gradually started letting go and found myself happier shopping for vegetables and fresh flowers at the farmers market rather than growing my own. I started buying more novels instead of gardening books, and reading instead of weeding.

Before long, my once beautiful garden began to return to its original state of disarray. I looked for as many ways as possible to keep my little yard full -- outdoor play structures for the kids, a hammock, bird feeders, little lawn ornaments (though I didn't go so far as pink flamingos). My gardening friends were appalled: How could you let those perfectly good plants die? Well, like the person who finally admits they really don't like to cook (or shop, or redecorate), I have finally reconciled myself to the fact that I am not a gardener. At least with the recent emphasis on conserving water, I have an excuse when people inevitably ask, "What happened to your garden?"

Marcia Stewart

Getting It Done. Paul A. Rude, retired General Contractor and member of the American Society of Home Inspectors, answers your questions on remodeling, dealing with contractors, and home maintenance.

Oh, boy, here we go again. A house I inspected for prospective buyers a few days ago had one of the “red flags” that give ASHI inspectors the willies: a big tiled deck with a view of the San Francisco Bay. This would surely be an asset, yes? Well yes, if it’s properly designed and built. The problem is that a very large percentage -- 90% or more in my experience -- are not done properly, so they leak into whatever is below them. If your master bedroom is underneath, you're not going to be happy with an installation that's less than perfect.

Decks with a hard surface such as concrete, tile, or stone are often called “plaza decks” or “paved decks” by architects. The problem is that contractors and designers too often assume that such surfaces are waterproof. But concrete, mortar, tile grout, and similar materials absorb water. Once moisture gets past the surface, it will find its way into the structure if the waterproofing system is inadequate. When I see one of these, whether new or old, I tell my clients to ask for a warranty against leaks.

These decks are a nightmare for inspectors because it can be hard to explain how something can go wrong with a brand new, stunning, and very expensive architectural feature. In my recent inspection, the sellers, who had installed the deck and were “flipping” the house, got more than a little testy when I questioned their work. My client’s agent made a note not to call me for inspections again, either. But defects in a deck can be extremely expensive to fix, so my responsibility to the client is my overriding concern.

Most of the critical details in a paved deck are concealed by the time a home inspector gets there, so we can only judge by the few visible clues. Below are some of the key things we look for.

Missing or improper flashings between the deck and adjacent walls. Flashings are transition pieces, usually of metal, that protect intersections in a roof. Oh yeah, by the way: If the deck is over a space that needs protection from the weather, it is a roof. It’s easy to forget that when you’re counting all the big bucks you're going to make from your flip.

Adjacent walls with improper waterproofing. One very common mistake is to bring the adjacent wall surface – stucco, shingles, or other siding – right down onto the deck. This is a great recipe for trapping water. We see this most often with stucco because builders -- and even some architects! -- still think it's waterproof. We want to see a separation of about 2 inches between the horizontal and vertical surface, with flashings visible between them.

Conspicuously absent flashings. Builders often figure that they don’t need no stinking flashings because they are installing a “bulletproof” waterproofing membrane below the paved surface. They turn this membrane up the wall, cover the top edge with siding, and call it good. Problem is, most of these membranes deteriorate under ultraviolet light (that would be sunlight). Someone who took the time to read the manufacturer’s specs would know that, but who reads? Even with materials approved for exposed installation, it can be tricky getting them to fit around corners and obstacles without creating bad seams.

Poor flashing at thresholds leading onto the deck. In better installations, a “pan flashing” is installed below a threshold; it normally extends to the interior side of the threshold and several inches up behind the jambs. Off-the-shelf pan flashings are sold in lumber yards, but a good one has to be made to specification in a shop. This is not terribly expensive -- it might add $150 or so to the cost of a $5,000 door -- but it requires actual thinking, a commodity all too rare in remodeling, as the flashing must be installed before the door goes in.

Absent drainage. We always look for a way for water to escape, both from the deck surface and from below it. The surface should slope to drains or gutters; just letting water flow over the edge and down the wall is certain to cause leaks. Drainage is also needed between the waterproofing membrane and the finished surface. This can be a corrugated plastic sheet, fine gravel, or other permeable material. It has to slope to a drain or gutter, which means that the supporting structure itself needs a slope. Although building codes have long required a minimum of ¼ inch per foot of slope for roofs, this is often ignored because building it flat is easier.

Waterproofing not accounted for in design plan. Maybe the biggest red flag of all is a designer who fails to specify the waterproofing details in the plans for a paved deck. Last summer, I looked at a $500,000 remodel in San Francisco that included a large tiled deck over a new media room. Flashings were missing and the waterproofing membrane appeared to be a roofing material turned up under the siding. The designer, an experienced architect, was on the job with a crew to take photos -- the project had won a prestigious design award. When I asked him what kind of waterproofing was used in the deck, he gave me a blank look and muttered something about “roofing.” I got the call in January, about six months later -- the deck leaks and will have to be torn out and done over.

Getting It Done. Paul A. Rude, retired California General Contractor and Certified Member of the American Society of Home Inspectors, answers your questions on remodeling, dealing with contractors, and home maintenance.

The law in California and nearly all other states requires a permit for just about any remodeling project, so most homeowners get permits, right? Wrong. Private home inspectors see non-permitted work every day. Here in the San Francisco Bay Area, the consensus among experienced ASHI inspectors is that at least 60 to 70 percent of all home remodeling is done without permits. When I ran this number by a local city inspector with more than 20 years of experience, she laughed and said it sounded too low.

Why is so much work done without official sanction? First, the application process can be daunting. Many communities have obscure and sometimes unbelievable restrictions, often intended to maintain the “authentic” character of their neighborhoods. If your bath requires changing a single window, you may have to pay for a design review, additional drawings, or even a public hearing. In general, the larger the city, the more complex the requirements, although some small, exclusive cities also have very stringent rules.

And a bureaucratic blessing doesn’t come cheap anymore. In the old days, permit fees were nominal, but California cities have seen their tax base dwindle since Proposition 13 passed in 1978, and they have jacked up all sorts of fees to compensate. A permit for a modest remodel can easily be $2,000 or more -- not to mention that city offices are almost never open, except when you have to take time off work to visit them.

Then there’s the tax thing. In California, under Prop. 13, property taxes are based on the price you paid for the house, plus limited annual increases and local assessments. If you bought your home 15 years ago for $150,000, your taxes might have been about $2,000 a year at first. With annual increases and new assessments, they might now be $3,000 or so -- still low by present standards. But an addition or major remodel will be assessed at today’s values, according to a formula in the state tax code. The cost of a large addition could easily exceed the original cost of the house, possibly doubling the taxes. If you stay in the house long enough, the tax bill may eventually exceed the construction costs.

So, do you get a permit or not? Follow your conscience. But if you’re going the outlaw route, talk to the neighbors first. Few cities have the resources to monitor neighborhoods for power-saw noise -- the main source of Stop Work orders is complaints from neighbors. If you have a long-running feud with the guy next door, he might get even by calling in your unlicensed bath remodel. If a neighbor’s big remodel project does have a permit, the city inspector will be coming around and might notice your off-the-books project. Even if you play by the rules, it’s always best to let folks know what changes you’re planning. It’s just human nature to be agreeable when someone consults you in advance, and to be annoyed when noise and contractors’ trucks show up unexpectedly.

Paul is the owner of Summer Street Inspections in Berkeley CA. His opinions are based on conditions in California and the San Francisco Bay Area. Conditions elsewhere may be substantially different. Contact Paul at paul@summerinspect.com. To find an ASHI inspector in the Bay Area, go to www.ggashi.org. Elsewhere, go to www.ashi.org.

Today, we're introducing a special feature: Guest blogger Paul A. Rude, a retired California General Contractor and Certified Member of the American Society of Home Inspectors. Paul will answer reader questions on remodeling, dealing with contractors, and home maintenance.

We need to add a bath in our family room so our teenagers and guests can have more privacy. Do we need to get a permit?

Absolutely. With very few exceptions, a permit is required for anything that involves structural work, opening wall surfaces, or changes to electrical, plumbing, or other utilities. Of course, you should also stick to the speed limit on the freeway, not jaywalk, and never claim questionable tax deductions.

If you work without a permit and the local authorities find out about it, they will issue a Stop Work order. You will then have to submit plans, obtain any zoning approval that may be required, and pay a penalty on permit fees. This can stall a project for months. Work already completed may have to be redone if it doesn't meet current standards; this can be expensive. There may be code or zoning standards that would be impossible to meet, in which case you may have to pay to restore the house to its original condition.

Even if you don’t get caught, there are still some negatives. Most experienced contractors will not work without a permit, as it can jeopardize their license. Unless you're doing the work yourself (a topic for another day), you may have to hire an inexperienced or unlicensed contractor who is more likely to cut corners and make mistakes. These guys usually don't have insurance, so you could be liable if someone gets hurt or if a lumber delivery lands on your neighbor’s Lexus. When you sell the house, you must disclose to the buyers any work done without permits. Failure to do so can expose you to a costly lawsuit.

Paul is the owner of Summer Street Inspections in Berkeley, California. His opinions are based on conditions in California and the San Francisco Bay Area. Conditions elsewhere may be substantially different. Contact Paul at paul@summerinspect.com. To find an ASHI inspector in the Bay Area, go to www.ggashi.org . Elsewhere, go to www.ashi.org