I won’t get into the ins and outs of FHA financing here, but I want to talk a little bit about how it could directly impact the sellers.

In a typical residential home transaction (here in Tennessee, anyway), the buyers will get a home inspection.  After receiving the report, they may ask the sellers to fix certain items shown to be in need of repair.  If you, the seller, agree to fix the items in question, you may think that you’re done negotiating (more on the steps of a transaction in a future post).  And if the buyer is getting conventional financing, you probably are.

However, with an FHA loan, the repair issue remains somewhat open ended.  That’s because the appraiser the bank sends out, in addition to trying to determine the value of the home (all he/she would be doing with conventional financing), has a list of other things to sign off on regarding the home’s general condition.  For example, does the roof appear to have a couple years of life left on it?  Is there chipping or peeling paint in a house of an era where lead based paint might ever have been used?  Are there any other potential health and safety issues?

As a seller you can’t be expected to know all these guidelines ahead of time.  But what you do need to be aware of is that even after the inspection, more repairs may be required – all before closing.  But who will pay for these repairs?  Depending on what the needed repairs are, this could mean serious dollars out of someone’s wallet, but what if this wasn’t addressed in your sales contract?

This is one area where an experienced real estate agent can help.  An experienced agent will know how and when to address these issues given your situation.  That way, FHA loans are nothing you should be afraid of.

One is in a home where an elderly woman lived there for decades, remodeled in the 50′s and never touched it again.  Canary yellow metal cabinets, dark green linoleum floors and a highly unattractive graphic wallpaper (but not so bad that it’s ironically good).  No dishwasher, and outlets are both ungrounded and few and far between.  You wonder how she dealt with it for so long.

The other kitchen was done two years ago, and though everything is (presumably) up to current building codes, it’s full of boring tile and countertops and cabinets that you can’t stand.  If you bought this house, you would change it all as you got the time and money.

The new kitchen in the second house is reflected in the asking price, and likewise the price on the first house is much lower because the kitchen is a dinousaur.

Both kitchens are terrible and you couldn’t live with either of them long term, right?  There really may be more work to do in terms of plumbing and electrical work on the older kitchen, and you should look into that before you buy the home.  But beyond that, it costs just as much to rip out an old kitchen as it does a newer one.  And sometimes in the older ones you have some original details that you can keep, which might have been taken out in newer remodels.  Bottom line is that you have to look at the entire picture and see what makes the best economic sense.  Just make sure you’re not paying extra for someone else’s questionable updates.

Whether you plan on driving your car, riding your bike, walking or taking the bus or trolley, one thing you should know before you put an offer on a home is what your commutes to and from work are going to be like.  You might look at a house on a Sunday at 2pm and it took you no time at all to get to and from the home in question, but what will it be like Monday morning at 8:00 or Friday afternoon at 4:30?

Unless you know the area really well, it will be well worth it to take the time to go from your office to the house whenever you would be doing it on a daily basis.  The commute may be a total drag, but at least you’ll know in advance and will be able to make the call about whether it’s something you’re willing to do five days a week.

Google maps can really come in handy here.  In addition to driving directions, they now have biking directions and greenway maps.

What if you calculated your monthly mortgage payment, being careful to take everything into account (principle, interest, even your escrowed taxes and insurance), and someone told you after closing that you had to add $500 to that number every month in the winter?

In an old house especially, utilities are something that you should absolutely do your due diligence on.  If the home you’re considering has a dinosaur furnace and little or no insulation, go into it at least with your eyes open.  Buyers can use a sky-high average utility bill to their advantage when negotiating a purchase price.  Likewise, if you’ve invested in utility-saving upgrades, your house will be that much more attractive when you go to sell it.

In Knoxville, you’re in luck if you want to get an idea about the utility costs of a house you’re considering.  Instead of having to call multiple utility companies, Knoxville Utilities Board (KUB) takes care of electric, gas, water and wastewater.  Here’s how to get the scoop:  call 865.524.2911.  Press “2″ for residential services, then “4″ for “all other calls.”  You will then be greeted by a friendly (seriously, they really are 99% of the time very friendly) KUB associate.  Tell him/her that you would like to get the average utilities for a certain property, then give them the address.  While they won’t give out the amounts of every bill, they will give you the highs and lows for the past year, breaking it down by electric, gas, water and wastewater.  From this you’ll be able to tell things like whether the property uses gas or electric heat; the gas will be their highest cost in the winter if they have a gas furnace.

Another thing to know is that the wastewater cost is calculated based on your water usage, and for the average user your wastewater rate is a little over double your water rate.  There is a way to eliminate paying a wastewater charge when you’re using the water for irrigation, but that will have to wait for another post…

Now lenders are required to give accurate costs in the GFE, or they eat the difference.

But lenders have found a way around this – instead of giving the buyer a GFE, they’re giving so-called “worksheets” that are not regulated. If you just want a general idea of closing costs before you make application this can be useful, but if you’re after a guaranteed number, mention the words “good-faith estimate”.

Read a full article on this topic here.