First-Time Home Buyers

Your first home is probably the largest investment you've ever made. Unlike a stock or municipal bond, a home is an investment you will have to live in. There are a few things every first-time home buyer should know before touring a single listing.

Get Your Own Agent

The helpful real estate agent whose name is on the sign is working for the seller, not you. In fact, it's illegal and considered unethical for the listing agent to act in your best interest. That means that he is bound by law to tell the seller anything you tell him "in confidence" about your finances, how much you would be willing to pay, or what you really think about the house. By contrast, he is not allowed to tell you anything other than what the law demands or his client allows. You need your own agent who will, hopefully, negotiate on your behalf, point out flaws or potential problems and smooth the path to the closing table.

Get A Pre-Approval Letter

Before you look at a single home, see your lender for a pre-approval letter. She will help you analyze your finances and determine how much house you can afford. Then get a pre-approval letter for the low end of the range she recommends. This letter is worth its weight in gold, because it announces to sellers and agents alike that you are serious and can afford to buy.

Beware of Shiny Pennies

"Shiny pennies" is what your agent calls perfectly groomed, perfectly maintained, perfectly decorated homes that sell at or above market value. They practically sell themselves, and many agents try to include them in the first few homes you look at. One old trick is to make a shiny penny the last home you view after a handful of dismal listings. Be especially wary if the penny is one of your agent's own listings. Shiny pennies are often great homes. They are rarely especially good deals, however, and the seller can afford to be very choosy and usually has no motivation to negotiate.

Look for an Ugly Home with Great Bones

Picture your grandfather's house with its avocado and tangerine color scheme and aluminum screen door. You might not call it pretty, but when he sells, there's a good chance someone will get an incredible deal. If that surprises you, think of the brand-new roof he had installed last summer, the new furnace and hot water heater he put in two years ago, and his habit of sealing his driveway every spring and fall. You get the picture. If you can find a well-maintained home with a good roof and good mechanics, then a little carpet, paint and a new countertop may be the only home improvement expense you have for years.

Save Some Cash for the Closing

Ask your realtor for a realistic estimate of how much money you will need to have at closing. There are tricks that can reduce the amount you pay at closing to little or nothing, but they don't always work out the way they are supposed to. Also, sometimes a last-minute expense comes to light. Occasionally, sellers underestimate how much they will have to have at closing. It it's a small amount, you may want to pay it yourself in order to get the home. It's good to have a little cash available just in case.

There are a few things every first-time home buyer should know before touring any listings

by Lee Jameson, Finance writer