Rules of Engagement

how to buy a home in duluth~Superior

Robert Lillegard

Real estate is a battleground, and you can get burned. Making money in this business requires patience, skill, and knowledge. Here, three veterans of the Duluth~Superior market share their secrets for buying a home. (And here, they talk about selling one.)

1. Find an honest lender

Unless you've got a suitcase full of gold bullion, chances are you'll be buying your house on credit. Strict mortgage laws have limited scams and predatory lending, but don't let your guard down.

One of Binsfield's clients got financing through a cousin in Minneapolis. Everything went well until he got to the closing, where he found his bill speckled with what Binsfield called "unusual" fees. He paid up anyway.

A few years ago, Germond saw even bigger problems. A twentysomething contractor was trying to buy through an online lender with no nearby office. Despite repeated phone calls, the closing was delayed for over a month.

When he finally sat down at the table, he found the interest rate was different than he had bargained for. The whole process was a frustrating, expensive ordeal.

The lesson here? Find an honest lender, and find one with a local prescense.

2. Stay within your means

A big house won't make you happy if you're always at the office trying to pay for it. A big mortgage payment can make life very difficult.

"You don't want to be in a position to be house-poor," Binsfield said. "Stay well within your budget."

Real estate guru David Crook agrees. In an article for the Wall Street Journal, he discouraged readers from overcomitting to a house.

"It's risky and bad planning to have too much of your net worth in your principal residence," Crook wrote. "Economic studies have demonstrated over and over that houses (1) cost more than most people make when they sell and (2) rarely match the long-term returns of stocks or other investments."

3. Know what you want

Buying a house is a little like getting married—it's a big commitment, and you need to be sure about it. Before you sign that 30-year mortgage, think carefully about your needs.

"First time home buyers are a lot less decisive," Bartell said. "They say 'I NEED a two-car garage' and end up choosing something totally different, because the kitchen was gorgeous and the master bedroom was huge."

A few years ago, Germond bought a house in Superior for two empty nesters. They had always lived out in the country, but thought they wanted the city experience. Three months later, they thought otherwise.

It's hard to buy a house, so go slow. Think about house size, proximity to schools and work, neighborhood safety, and everything that matters to you. Unless you want to move again in six months, make sure the house meets your needs.

"People are in a real hurry to make a decision," Binsfield said. "You really need to take your time."

4. Get a real home inspection

You wouldn't let your dad cut your hair. So why would you let him inspect the house you're looking at?

Binsfield suggested a professional home inspection to one young couple, but they decided to ask the wife's father instead. He missed some mold in the attic. To fix the problem, the couple had to gut the whole roof—to the tune of a few thousand dollars.

"We all like to save money and use our friend, our dad, etc," Binsfield said. "You need to use someone who's qualified."

In Wisconsin, home inspectors must be certified. There's no such law in Minnesota, so Duluth buyers should look for someone with ASHE or NAHE certification.

Finally, watch out for scams. A legitimate inspection should take 2-3 hours, and it should cost about $275. If you're given a much different estimate, look for another inspector.

5. Strike a bargain

With mortgage rates near 30-year lows and home prices sinking, you'll do well with your purchase. If you drive a hard bargain, you'll do even better.

"The sellers are competing for the buyers," Bartell said. "There's a very good supply of homes."

A competitive offer isn't all about the final price. Consider asking the seller to pay your closing costs, or to thrown in extras like furniture, appliances, or a home warranty.

Expect a counteroffer; but remember, the advantage is yours.

"Now, supply and demand are out of whack," Bartell said. "A lot of the sellers are willing to help the buyers."