Some tips for real estate buyers.
Rule #1--unless absolutely necessary, never purchase real estate in a new location until you have lived in the area for at least six months, preferably a year or two. To see an ad in a publication, travel there on a weekend and purchase immediately is like marrying someone the day you first meet. One in a hundred works, the other 99... Living in the general area gives you lots of advantages.
First, you get to know the general economy. Are businesses growing or closing? Is there new construction going on? Are there opportunities for employment? Never buy a place without at least one full-time income in the household.
Second, find out what real estate is really worth. Check out lots of different properties and learn about local ordinances, finances, developments, etc., before you decide on your dream property.
When you find property that does interest you, never buy the first time you see it. Tell the agent you need to think about it. Then, on your own, drive down the road to nearby neighbors. In any rural area there will be a couple of lifetime residents who can give you information on the property for the last 30 years. Don't be afraid to check several neighbors. At least one will have been in the house enough to know if there are major problems. This also gives you an opportunity to decide whether you want these people to be your neighbors.
Third, read the local newspapers and spend free time driving the area. If a large hog operation sits down the road, your agent is not required to tell you. He/she may be careful to only show the property when the wind is in the "right" direction. Newspapers are important ways to learn of new developments such as a new highway or industry coming in next year. Also, don't ignore schools just because you plan to home school or have no children. Property taxes are the main source of revenue for rural schools. If the district just voted to build a new school, your taxes may double next year. Can you afford that increase?
Fourth, establish "contacts" by letting people know what kind of property you want. If people seem convinced that you plan to stay in the area, they'll keep their eyes open for you and might even give your name to someone thinking of selling:
Fifth--and I cannot emphasize this enough--make certain the locals are people you are comfortable with. If you cannot accept the local people, their customs and their expectations, then leave the area. A few of you may want isolation with little local contact. If that's the case, make sure the locals are "okay" with it. Some neighborhoods would be paranoid and/or suspect of you; others would be insulted.
If the area is religious, make sure there's a church of your liking nearby. If you're "co-habiting" make certain that's accepted in the area. Rural areas thrive on tradition and are slow to change. Do not assume that they will accept you nor that you have the right to force change. You can live in a rural area for 20 years and still be seen as an outsider. Consider it a privilege to be accepted as a local resident. You don't move to an area because the geography is pretty--you move there to be part of the community. Twenty years from now, these people may be the only "family" you have. If your spouse dies or your home burns down, these are the people positioned to help you. Will they? Will you be willing to help them in return? Consider all this before putting your life savings in a piece of property.
Legal Matters: Anyone buying rural property needs to understand what a land contract is. I am not an attorney but I did sell real estate for a while. Here in Nebraska we're seeing fewer land contracts all the time but they may be common in other areas.
Land contracts are the traditional means of selling a farm. The seller agrees to transfer ownership after the final payment. If you miss a couple of car payments, the car is repossessed and your land is too if you use a land contract.
If you sell a home you can get a tax break--one time--with the IRS from capital gains. But this doesn't apply to farms. So elderly people sell on land contract, pay taxes only on that year's income (payments made) and have something to live on in their retirement years. Advantages to buyers are low down payment, fewer closing costs, and no income qualifications to meet.
As I said, the disadvantage is that the buyer doesn't own it until the final payment. But when buyers skip out, they're also a pain to the seller. Sometimes it takes one to two years for the seller to get clear title and be able to sell it again. The time involved is because the seller must go to court.
The land contract is being rapidly replaced by a deed of trust. In this situation the deed is literally held by a third party which accepts payments on the seller's behalf. If a buyer skips out, the seller can regain the property in 90-120 days. But the buyer owns the property from the date of closing. Usually they have to miss two or three payments before a sale is forced and then the buyer can still get other financing to buy back the property. Basically, it works just about like a mortgage but the seller is the financier. Many banks and insurance companies now use a deed of trust.
Push for a deed of trust instead of a land contract. If you must use a land contract, use a local lawyer and hire your own lawyer separate from the seller.
Most real estate practices are based on local custom, such as who pays which fees, how taxes are prorated, etc. Know those customs before you make any offers. Here in Nebraska, we try to avoid attorneys at all cost; they treat real estate sales just like divorces--they complicate, aggravate and drag it out as long as possible. A good, long-time real estate agent knows five times more about it and proves it when you go apply for the loan.
In some states you must use attorneys. In that case, try to get one who specializes in the field.
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|Title Annotation:||Looking for Land: Where Do You Start?|
|Publication:||Countryside & Small Stock Journal|
|Date:||Sep 1, 1996|
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