by Geon, Bryan
Co-operative apartments are not common in Portland, but the area is home to an increasing number of cohousing projects. In these projects, which are sometimes called “intentional communities,” each household owns its own unit but shares communal space such as a “common house.” Cohousing residents often prepare and eat meals together and share gardening and other general maintenance responsibilities. Currently, there are five existing or developing cohousing projects in Portland. For more information about cohousing or for a list of locations, contact the Cohousing Association of the United States (www.cohousing.org) or the Northwest Intentional Communities Association (www.nica.ic.org).
Potential Pitfalls
When scouting for a home, be aware of the wide range of potential pitfalls. Not only will you have expenses for ongoing maintenance or necessary repairs (some of which a home inspection should uncover), but there may be issues specific to the property you’re interested in. Many older homes feature disused underground storage tanks, which can be expensive to decommission. Some properties lie within conservation zones where regulations limit the owner’s ability to build a deck or addition, for example. Other homes may have historic designations that affect remodeling options. Many homes in Southwest Portland and the outer Eastside neighborhoods are on unimproved streets, and the property owner is responsible for making (and paying for) repairs from the property line to the centerline of the public right-of-way. While a good real estate broker can help identify some of these issues, they should be on your personal radar screen before you get your heart set on a particular home.
Property taxes are another expense to consider. Oregon’s unique property tax system makes it impossible to estimate property taxes based on market value alone; Washington’s system is a bit more straightforward, but you should always check with your county assessor to find out the current property taxes on a specific property. (See Money Matters for information about property taxes.) Certain neighborhoods are tax abatement areas in which homebuyers, builders, or rehabbers pay reduced property taxes for a period of 10 years. Your real estate broker should be able to tell you which neighborhoods currently qualify. And speaking of taxes and other expenses…
Getting Your Financial House in Order
Assuming you aren’t fortunate enough to be able to buy a house outright, you’ll need to arrange a mortgage loan. It’s a good idea to get pre-approved before looking for houses in earnest. Some sellers will not seriously consider an offer from a buyer who is not pre-approved, and the pre-approval process gives you a good idea of how much you can reasonably afford to spend on a house.
When you’re ready to get pre-approved, go prepared with relevant financial documents and check your credit report in advance to make sure it is accurate. You can get one free copy of your credit report each year from each of the three major credit bureaus; visit www.annualcreditreport.com or call 877-322-8228. You are also entitled to a free credit report if you have been denied credit based on the contents of your credit report within the 30 days before your request. The national credit bureaus are:
Equifax, 800-685-1111, www.equifax.com
Experian, 888-397-3742, www.experian.com
TransUnion, 800-888-4213, www.transunion.com
You might also want to check your FICO® score, the number that most lenders use to determine how creditworthy you are, and thus what interest rate you can get on your loan. The FICO score is available from Fair Isaac, the score’s creators and overlords, at www.myfico.com. You may also be offered the chance to buy your score when you obtain a credit report. If the idea of having to pay to look at your own information—information that someone else is already profiting from—sticks in your craw, consider signing up for a credit monitoring service with a free 30-day trial period; you can usually get your credit score when you sign up. (Just remember to cancel before the free trial ends.)
It may be most convenient to get your pre-approval through a local bank, but shop around before you sign for your loan. While many banks offer competitive interest rates, mortgage brokers can often match or beat their best offers. Make sure you ask about closing costs, loan origination fees, and points when comparing interest rates. Of course, virtually no lender’s loans are unique. Even in today’s post-bubble environment of more stringent mortgage requirements, most lenders offer a variety of fixed-rate and adjustable-rate mortgage products and participate in government-insured VA and FHA loan programs, both of which allow for low down payments and have flexible qualifying guidelines.
If you need assistance with mortgage costs, several unique local resources are available. The Portland Housing Center (3233 NE Sandy Boulevard, 503-282-7744, www.portlandhousingcenter.org) provides homebuyer education and offers financial assistance to eligible buyers (generally, first-time buyers with below-median incomes). Proud Ground (5288 N Interstate Ave, 503-493-0293, www.proudground.org), formerly the Portland Community Land Trust, helps first-time homebuyers whose incomes are below the local median and who can’t quite afford a house buy homes below the market rate.
Online Resources—Mortgages
The following sites might be useful in researching interest rates and loan programs:
Bankrate, www.bankrate.com, allows you to compare mortgage and home equity loan interest rates, and offers several online mortgage and housing calculators.
Freddie Mac, www.freddiemac.com, offers information on current mortgage averages.
Interest.com, www.interest.com, includes advice for first-time home buyers, suggestions for finding the lowest interest rate, and current interest rate comparisons.
In addition, many real estate-focused sites such as Zillow (see “Househunting Resources” below) provide information on mortgages and lenders.
House Hunting
Working With a Real Estate Agent
When an agent who has listed a home shows it to you, he or she is representing the seller, not you. If you want an agent who will act on your behalf, you will need to hire a buyer’s agent. There is no substitute for the advice of a knowledgeable local real estate agent, and there usually is no downside to working with one when you’re buying a home. (The buyer’s broker’s commission almost always comes out of the selling broker’s commission; the exception is if you buy a property that is for sale by owner and the owner refuses to pay a commission to your agent.)
Probably the best way to find an agent is through a referral from a friend or co-worker. Failing that, you might consider agents who seem to have a lot of listings in your neighborhood of choice. Most agencies claim to serve the entire Portland area, but individual agents often specialize (or purport to specialize) in certain neighborhoods or in certain kinds of homes, and are not shy about advertising their specialties in community newspapers and on bus benches. While neighborhood knowledge is important, it’s also important that your agent be someone you trust, who knows the market, and who listens to you. A good agent will interview you in detail about your needs and interests—not just your preferred price range, but every detail of your lifestyle. Are you planning to have any (or more) children? Do you need space in a basement to set up a media room, a model railroad, or an evil genius lair? Do you want to plant a garden, or would you prefer a small yard that requires little maintenance? Are you planning to commute by bike? The more information you can provide, the easier it will be for your agent to find a home that’s a good match.
Househunting Resources
In addition to the standard places for classified advertising listed in the “Renting” section above—newspapers, Craigslist, and the like—a wide range of online resources target prospective homebuyers. Most agents will send lists of properties to you by email as soon as they come on the market. In addition, or even before you decide to use an agent, you might find the following websites to be useful househunting resources:
Zillow, www.zillow.com, purports to be able to give a market value for any house (based on recent sales in the neighborhood and the characteristics of the specific property)
that is generally within 20% of the real market value. While the market values should be taken with a large grain of salt—a 20% margin of error on a $300,000 house represents $60,000, after all—the data on comparable sales in the target neighborhood are invaluable.
Trulia, www.trulia.com, like Zillow, provides estimated market values for specific properties. It is useful to compare prices on both sites, as estimated values for the same property can differ significantly.
RMLS, www.rmls.com, is the multiple listing service for the Portland area. The site includes a searchable database of most homes for sale; you can search by price, ZIP code, number of bedrooms, etc., but many search options—such as the list of “green” and energy efficient features—are only available to RMLS members (generally real estate brokers). Many real estate brokerages provide similar search functionality on their own websites.
If you prefer to buy a home without an agent—or at least to buy from an unrepresented seller—check out sites that specialize in for sale by owner listings, including HomesbyOwner.com (www.homesbyowner.com/portland_or/), FSBO.com (www.fsbo.com), and Owners.com (www.owners.com).
Purchase Agreements and Closing
A purchase agreement is a legally binding contract between the buyer and seller that states the price and all terms of the sale. Although most Oregon brokers start with a standard form, the purchase agreement is the most negotiable and variable document produced in the homebuying process. The purchase agreement is also the place where you, the buyer, can attach contingencies that protect you from being legally bound by the purchase agreement if, for example, the house you are buying does not pass its mechanical and structural inspection, the seller is unable to give you possession by a certain date, or you cannot obtain mortgage financing. Neither Oregon nor Washington regulates purchase agreements, but both states require sellers to provide certain property disclosures and a lead-paint disclosure.
Typically, once both parties have signed the purchase agreement, you will hire an independent home inspector or engineer to examine the foundation and overall structure, the HVAC and plumbing systems, and the roof. Also request that the inspector check for mold, particularly if the roof has been replaced recently or if there are signs of water damage in the basement. Your lender will appraise the house, but only to determine if it’s worth enough to secure the loan.
If all goes well, eventually you’ll close. Closings traditionally take place in the conference room of a title company, where you’ll be asked to sign the tallest pile of papers you’ve ever seen. How do you avoid problems? First, schedule your closing at least six weeks from the date your purchase agreement was signed, then keep in contact with your lender to see if additional information is required. The week you close, your lender should send you a copy of the completed Settlement Statement, or HUD-1 form. (If the lender doesn’t send it, ask for one. You have the legal right to see this form one business day before closing.) Compare the Settlement Statement to the good faith estimate of closing costs your loan officer gave you when you applied for the loan. The actual closing costs should not differ dramatically from the estimated costs. If they do, you may be getting scammed, although some costs, such as insurance premiums and the loan origination fee, can only be nailed down after your loan is approved because they are based on the amount of your loan and the final value of the property. It’s a good idea to read the closing documents in advance; there won’t be time at closing, and if any clauses cause you pause you’ll have time to ask your lender about them or check with an attorney. Finally, make sure you bring the necessary papers—identification, proof of homeowner insurance, etc.—and a cashier’s check to pay the balance of your down payment and unpaid closing costs.
Insurance
Your lender will require you to buy homeowner insurance to protect its investment (your home). Be sure the policy you choose adequately covers the house, its contents, and all outbuildings. A basic homeowner policy usually also includes liability insurance to protect you if someone is injured on your property, and living expense coverage that will pay for you to live elsewhere while the home is repaired or rebuilt. You may also want to purchase earthquake coverage, which most homeowner policies do not include. If your prospective home is in a floodplain, you’ll need to purchase flood insurance from the National Flood Insurance Program (888-379-9531, www.floodsmart.gov).
You’ll also need title insurance, which protects the lender in case your legal title to the property is faulty. (It doesn’t protect you, though, so you may want to buy an owner’s title policy. In Portland, it is usually customary for the seller to pay the premium on a buyer’s title policy.) If you are putting down less than 20% as a down payment, you may also need mortgage insurance, which is required by many lenders as well as the FHA to cover them in case you default on the loan.
For advice on homeowner insurance from the Oregon Insurance Division, call 503-947-7984 or 888-877-4894 and ask for a free copy of the Division’s Consumer Guide to Homeowner and Tenant Insurance (also available online at www.oregon.gov//DCBS/insurance/gethelp/Documents/).
Working With Contractors
If you intend to remodel or significantly alter the home you buy, you might want to enlist the services of an architect or structural engineer, who can give you a general sense of what options might be available for a particular house before you commit to a purchase. Once you buy a house, you’ll face the problems of finding a reputable contractor, getting the work done in a timely and competent fashion, and paying for the remodel.
Accomplishing all these tasks can be a daunting proposition. It is not unheard-of for contractors to abscond with homeowners’ money, and since Oregon currently requires most residential contractors to have only $15,000 in bond coverage, you could end up holding the bag—the empty bag that your money used to be in before you paid it to your contractor.
To help avoid this unpleasant scenario, the Oregon Attorney General and the Oregon Construction Contractors Board (CCB) suggest you take the following steps when dealing with any contractor:
Check out the contractor in advance. It’s always best to get recommendations from friends and family members who have had a good experience. Even a good recommendation, however, is no substitute for research. All contractors must be licensed, bonded, and insured. Check the contractor’s license and history of complaints at the CCB’s consumer website, www.hirealicensedcontractor.com, or call 503-378-4621. (In Washington, contact the state Department of Labor and Industries, 800-647-0982, https://secure.lni.wa.gov/verify/.) The Oregon Attorney General warns, “A devious contractor may tell you that he or she is licensed or may give you a false or outdated CCB number, so make sure to check on your own.” Also check with the state Department of Justice or a nominally independent source such as the Better Business Bureau or Angie’s List (888-888-LIST, www.angieslist.com). (See “Consumer Protection” in Helpful Services for more suggestions.) If the contractor provides references, check them.
Get multiple written estimates. The Attorney General suggests getting at least three estimates. Make sure the bids are in writing. Don’t automatically choose the lowest bid; make sure you compare the materials specified and the scope of the work, and be suspicious of unrealistically low bids.
Get a written contract. Once you’ve selected a contractor, put your agreement in writing. Make sure the contract states what work is to be done, when it is to be done, and how much it will cost, and that sufficient details are included: “build addition, $80,000” won’t cut it. Try to limit how much you have to pay upfront; you may be able to negotiate payments over the course of a long project once the contractor has completed certain phases. Don’t sign the contract unless you understand it completely, and make sure all changes are in writing.
Even if you follow these steps scrupulously, you might still get scammed—there are no guarantees—but you’ll substantially reduce your vulnerability.
Building Your Own Home
If you dream of building your own home, you�
��ll face a scarcity of large buildable lots within the urban growth boundary. In Oregon, you cannot simply buy a five-acre farm field in the exurbs and plunk down a house. The Portland area has a relative abundance of infill lots, although many of these lots are quite small or narrow and/or located on steep slopes. Keep in mind that building a huge house on a small city lot may not endear you to your new neighbors. You could also investigate doing a teardown of an existing, presumably dilapidated, house. If you must build a giant house on acreage, your best options are the rural exception zones outside the urban growth boundary in Oregon, or outer Clark County in Washington; in either case, be prepared for a long commute if you work in Portland.