Things to Know Before You Buy Real Estate

Buyers should understand loan terms before getting a mortgage.
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Buying real estate is often one of the largest financial investments a couple will make during the course of their lifetimes. Real estate investment has the potential to appreciate or depreciate over time, depending on the location of the property, the terms of the purchase, the financial status of the buyers and the short- and long-term outlook for the local real estate market. Understanding the potential of a property as well as the full financial ramifications of real estate ownership is vital to making an informed purchase.

The Status of Your Finances

The more financially stable a couple is, the better loan terms and interest rate they are eligible for. Before even looking at real estate, make an in-depth evaluation of your combined financial picture. This includes examining your income, debt, availability of liquid assets and credit rating. A financial adviser or loan officer can help you review your credit histories and evaluate how much money you can reasonably invest in real estate. This will also give you an idea of how much cash you will need for a down payment and closing costs and what type of loan structure is most appropriate for your circumstances. You can get ball park information by yourself using free online tools through places such as

The Status of the Market

The best time to buy property is during a “buyer’s market” when market conditions favor the buyer rather than the seller. This typically occurs in locations where property values have recently declined or where foreclosures are prevalent, because property owners are more likely to make deals and offer the property for sale below market value. Study real estate publications in your area that have information on trends and provide comparative statistics on real estate sales and purchases.

The Value of Similar Properties

Look at the price of similar properties where you are considering a real estate purchase. Are prices significantly higher or lower than the property you are looking at? If so, that can be an indication that the real estate you are considering is either over-priced or under-priced. Online comparative analysis tools, such as those found on, can provide you with these details as well as with the history of different pieces of real estate. This will help you estimate whether the value of the real estate has steadily risen or declined over time. It will also provide you with information about property tax rates and other expenditures related to ownership of the property.

The Value of Property

A professional real estate appraiser can provide you with an in-depth look at the current market value of a piece of real estate, which will give you information about whether the property is a good deal or not. Likewise, a professional real estate inspector can conduct a full-scale analysis of all the major systems of a house, such as electrical and wiring, plumbing, lighting and structural integrity. If you are looking at undeveloped land, a land appraiser can provide you with details about soil content, access to water and utilities and development potential.

Existing Zoning Requirements

Zoning is the term used to describe the master land use plan as determined by the city or county where a piece of real estate is located. If you are looking at land or a house adjacent to undeveloped property, checking the zoning of property with your local zoning board will give you an idea of what kind of neighbors you are likely to have in the future. For example, if you want to buy a house in a quiet neighborhood, you would want to stay away from neighborhoods that are adjacent to undeveloped land zoned for commercial or industrial purposes.

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