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Home Buying For Dummies®, 4th Edition

Table of Contents

Introduction

About This Book: The Eric Tyson/Ray Brown Difference

Conventions Used in This Book

How This Book Is Organized

Part I: Home Economics

Part II: Financing 101

Part III: Property, Players, and Prices

Part IV: Making the Deal

Part V: The Part of Tens

Part VI: Appendixes

Icons Used in This Book

Where to Go from Here

Part I: Home Economics

Chapter 1: Deciding Whether to Buy

Weighing the Advantages of Owning versus Renting

Ownership advantages

Renting advantages

The Pitfalls of the Rent-versus-Buy Decision

Renting because it seems cheaper

Fretting too much over job security

Buying when you expect to move soon

Succumbing to pushy salespeople

Ignoring logistics

Overbuying

Underbuying

Buying because it’s a grown-up thing to do

Buying because you’re afraid that escalating prices will lock you out

Misunderstanding what you can afford

Chapter 2: Getting Your Financial House in Order

Surveying Your Spending

Gathering the data

Analyzing your spending numbers

Reckoning Your Savings Requirements

Setting some goals

Retirement savings accounts and a dilemma

Other reasons to save

Protecting Yourself, Your Dependents, and Your Assets

Insuring yourself

Insuring your assets

Invest in Yourself

Chapter 3: What Can You Afford to Buy?

Lenders Can’t Tell You What You Can Afford

The Cost of Buying and Owning a Home

Mortgage payments

Property taxes

Insurance

Maintenance and other costs

The tax benefits of homeownership

Closing Costs

Accumulating the Down Payment

The 20 percent solution

Ways to buy with less money down

Where to invest the down payment

Chapter 4: Why Home Prices Rise and Fall

What Drives Real Estate Markets and Prices?

Jobs, glorious jobs

Available housing

Inventory of homes for sale and actual sales

The rental market

How to Get a Good Buy in Any Market

Seek hidden opportunities to add value

Buy when others are scared to buy

Find a motivated seller

Buy during slow periods

Become a great negotiator

Buy in a good neighborhood

Part II: Financing 101

Chapter 5: Understanding and Improving Your Credit Score

The Record You Can’t Ignore: Your Credit Report

What your credit history comprises

What goes into your credit report

Why you should check your credit report

The Most Popular Kid on the Block: FICO Scores

How scores work — the short version

How a FICO score assesses your credit history — the long version

What FICO scores ignore

Why your score is what it is

Getting Hold of Your Report and Score

Chapter 6: Selecting a Mortgage

Fixed or Adjustable? That Is the Interest(ing) Question

Distinguishing fixed-rate mortgages from adjustables

Looking at hybrid loans

Starting out risky: Interest-only mortgages

Making the fixed/adjustable decision

Deciding on your loan’s life: 15 years or 30?

Finding a Fixed-Rate Mortgage

The all-important interest rate

The finer points of points

Other lender fees

Arriving at the Absolute Best Adjustable

Where an ARM’s interest rate comes from

How often does the interest rate adjust?

Limits on interest-rate adjustments

Locating the Best, Lowest-Cost Lenders

Shopping on your own

Working with a mortgage broker

Chapter 7: Mortgage Quandaries, Conundrums, and Paperwork

Overcoming Common Mortgage Problems

Insufficient income

Debt and credit problems

Dealing with Appraisal Problems

You’ve overpaid

The appraiser doesn’t know your area

The appraiser/lender is sandbagging you

Those Darn Mortgage Forms

The laundry list of required documents

Permissions to inspect your finances

The Uniform Residential Loan Application

Other typical documents

Part III: Property, Players, and Prices

Chapter 8: Where and What to Buy

Location, Location, Value

Characteristics of good neighborhoods

Selecting your best neighborhood

Fundamental Principles for Selecting Your Home

The principle of progression: Why to buy one of the cheaper homes on the block

The principle of regression: Why not to buy the most expensive house on the block

The principle of conformity: Why unusual is usually costly

Defining Home Sweet Home

Detached residences

Attached residences

Finding a Great Deal

Finding a fixer-upper

Taking over a foreclosure

Pooling Your Resources: Ad Hoc Partnerships

Types of residential partnerships

Structuring a successful partnership

Chapter 9: Assembling an All-Star Real Estate Team

The Team Concept

Lining up the players

Avoiding gratuitous advice

Reeling in a Real Estate Agent

Types of agent relationships

How agents get paid

Characteristics of good agents

Selecting your agent

Getting the most from your agent

Bagging a Broker

Landing a Lender

Procuring Property Inspectors

Electing an Escrow Officer

Finding (Or Forgoing) Financial and Tax Advisors

Looking for Lawyers

Selecting your lawyer

Getting the most out of a lawyer

Chapter 10: What’s It Worth?

The Three Elusive Components of Worth

Value is a moving target

Cost is yesterday

Price is what it’s worth today

Fair Market Value

When fair market value isn’t fair — need-based pricing

Median home prices versus fair market value

Determining Fair Market Value: Comparable Market Analysis

The basics of a helpful CMA

The flaws of CMAs

Getting a Second Opinion: Appraisals versus CMAs

Why Buyers and Sellers Often Start Far Apart

Inept agents

Unrealistic sellers

Chapter 11: Tapping the Internet’s Best Resources

Finding Useful Information

Get your feet wet at Realtor.com

Read quality real estate news

Discover more at these sites

Doing Some Preliminary Shopping

Surveying homes for sale

Watching out for sites promoting foreclosures

Sifting school information

Perusing “best places” to live

Familiarizing yourself with financing options

The Drawbacks of Searching for Houses in Cyberspace

Conflicts of interest

Bankruptcies

Misleading home-valuation tools

Untrustworthy mortgage calculators

Part IV: Making the Deal

Chapter 12: Negotiating Your Best Deal

Understanding and Coping with Your Emotions

Examining the violent forces at work

Controlling yourself

The Art of Negotiating

Being realistic

Examining your negotiating style

Negotiating with finesse

The Negotiating Process

Making an offer to purchase

Leaving an escape hatch: Contingencies

Getting a counteroffer

The Finer Points of Negotiating

Negotiating when the playing field isn’t level

Spotting fake sellers

Low-balling

Negotiating credits in escrow

Chapter 13: Inspecting and Protecting Your Home

Conducting Thorough Inspections

All properties should be inspected

The two types of defects: Patent and latent

Patent defect red flags

Types of property inspections

Inspecting inspectors

Insuring Your Home

Homeowners insurance

Title insurance

Chapter 14: It Ain’t Over till the Weight-Challenged Escrow Officer Sings

An Escrow Is a Good Thing

Know thy escrow officer

Cover all the bases

'Tis the season: December escrows

Follow through

How You Take Title Is Vital

Joint tenancy

Community property

Tenants-in-common or partnerships

Getting help drafting an agreement

Getting Possessive

Moving day

Final verification of condition

Coping with Buyer’s Remorse

Part V: The Part of Tens

Chapter 15: Ten Financial "To Do’s" After You Buy

Stay on Top of Your Spending and Saving

Consider Electronic Mortgage Payments

Rebuild Your Emergency Reserve

Ignore Solicitations for Mortgage Insurance

Ignore Solicitations for Faster Payoff

Consider Protesting Your Tax Assessment

Refinance if Interest Rates Fall

Keep Receipts for All Improvements

Ignore Solicitations to Homestead

Take Time to Smell the Roses

Chapter 16: Ten Things to Know When Investing in Real Estate

Real Estate Is a Solid Long-Term Investment

Real Estate Investing Isn’t for Everyone

REITs Are Good if You Loathe Being a Landlord

Don’t Invest in Limited Partnerships

Avoid Timeshare Condos and Vacation Homes

Residential Properties Are Your Best Investment Option

Consider Fixer-Upper Income Property

Consider Converting Small Apartment Buildings to Condos

Consider the Property’s Cash Flow

Your Rental Losses Are Limited for Tax Purposes

Chapter 17: Ten Things to Consider When Selling Your House

Why Are You Selling?

Can You Afford to Buy the Next Home?

What’s It Worth?

Have You Done Your Homework to Find a Good Real Estate Agent?

Do You Have the Skills to Sell the House Yourself?

Have You Properly Prepared the House for Sale?

Do You Understand the House’s Hot Buttons?

What Are the Financial Ramifications of Selling?

Do You Know the Rules for Capital Gains Taxes on the Sale of a House?

Part VI: Appendixes

Appendix A: Sample Real Estate Purchase Contract

Appendix B: Example of a Good Inspection Report

Appendix C: Glossary

Praise for Previous Editions of Home Buying For Dummies

“It is absolutely practical. They cover the basics in straightforward language and go into enough detail to make them the only books you’ll need.”

— Eric Antonow, President and CEO, Katabat Corporation

“As a first-time home buyer, I found this book to be a quick read and immensely helpful in knowing what to ask my agent, what to look for on walk-throughs, what to expect in terms of offers and counteroffers, as well as the entire timeline and process from open house to moving in. This book really is invaluable to anyone purchasing a home, even if you’re not a first-time home buyer.”

— Travis A. Wise, San Jose, CA

“Because I bought this book, I was able to carry on intelligent conversations with my agent and lender when I recently purchased a home. Even better, I felt prepared for those conversations and much more in control of the situation than I would have had I not read this book. Thanks to the authors for doing such a great job!”

— Jeff C. Benson, Lake Zurich, IL

“I never bought real estate in my life. I never shopped for a mortgage in my life. But after reading this book I am extremely well prepared when I call them and when they walk through the door to meet with me.”

— Ben Milano, Lindenhurst, NY

“If you are considering buying a home, don’t fail to read this excellent new book. The book is full of profitable ‘insider tips’ which most real estate writers either don’t know or are afraid to reveal. The advice is so good I wish I had written it . . . on my scale of 1 to 10, this outstanding book rates a 12.”

— Robert J. Bruss, Tribune Media Services

“ . . . Home Buying For Dummies immediately earned a prominent spot on my reference bookshelf . . . takes a holistic approach to home buying.”

— Broderick Perkins, San Jose Mercury News

“ . . . invaluable information, especially for the first-time home buyer . . .”

— Carol Nuckols, Fort Worth Star-Telegram

Here’s what critics have said about Eric Tyson and his previous national bestselling personal finance guides:

“Personal Finance For Dummies is the perfect book for people who feel guilty about inadequately managing their money but are intimidated by all of the publications out there. It’s a painless way to learn how to take control. My college-aged daughters even enjoyed reading it!”

— Karen Tofte, producer, National Public Radio’s Sound Money

“Among my favorite financial guides are . . . Eric Tyson’s Personal Finance For Dummies.”

— Jonathan Clements, The Wall Street Journal

“Smart advice for dummies . . . skip the tomes . . . and buy Personal Finance For Dummies, which rewards your candor with advice and comfort.”

— Temma Ehrenfeld, Newsweek

“Eric Tyson is doing something important — namely, helping people at all income levels to take control of their financial futures. This book is a natural outgrowth of Tyson’s vision that he has nurtured for years. Like Henry Ford, he wants to make something that was previously accessible only to the wealthy accessible to middle-income Americans.”

— James C. Collins, coauthor of the national bestseller Built to Last; Lecturer in Business, Stanford Graduate School of Business

“Eric Tyson . . . seems the perfect writer for a . . . For Dummies book. He doesn’t tell you what to do or consider doing without explaining the why’s and how’s — and the booby traps to avoid — in plain English. . . . It will lead you through the thickets of your own finances as painlessly as I can imagine.”

— Clarence Peterson, Chicago Tribune

“Personal Finance For Dummies is, by far, the best book I have read on financial planning. It is a simplified volume of information that provides tremendous insight and guidance into the world of investing and other money issues.”

— Althea Thompson, producer, “PBS Nightly Business Report”

More Best-Selling For Dummies Titles by Eric Tyson

Investing For Dummies®

The Wall Street Journal bestseller that walks you through how to build wealth in stocks, bonds, mutual funds, real estate, small business and other investment vehicles.

Personal Finance For Dummies®

Discover the best ways to establish and achieve your financial goals, reduce your spending and taxes, and make wise personal finance decisions. Wall Street Journal bestseller with more than 1 million copies sold in all editions and winner of the Benjamin Franklin best business book award.

Mutual Funds For Dummies®

This best-selling guide is now updated to include current fund and portfolio recommendations. Using the practical tips and techniques, you’ll design a mutual fund investment plan suited for your income, lifestyle, and risk preferences.

Taxes For Dummies®

The best-selling reference for completing your tax return and making tax-wise financial decisions year-round.

House Selling For Dummies®

Want to stand out to homebuyers in today’s crowded market? America’s #1 bestselling real estate authors, Eric Tyson and Ray Brown, have revised their classic guide to save you time and money as you prepare to sell your property. They’ll show you when to put your house on the market, the pros and cons of FSBO, and the best ways to utilize the Internet, from online listings to digital photos.

Mortgages For Dummies®

Eric Tyson and Ray Brown give you proven solutions for obtaining a mortgage, whether you want to buy your first home, refinance, or tap into your equity. You get the latest on adjustable-rate mortgages, finding the best lender, avoiding fiscal pitfalls and foreclosure, and much more.

Real Estate Investing For Dummies®

Real estate is a proven wealth-building investment, but many people don’t know how to go about making and managing rental property investments. Real estate and property management expert Robert Griswold and Eric Tyson cover the gamut of property investment options, strategies, and techniques.

Small Business For Dummies®

Take control of your future and make the leap from employee to entrepreneur with this enterprising guide. From drafting a business plan to managing costs, you’ll profit from Eric Tyson and Jim Schell’s expert advice and real-world examples that cover every aspect of building your own business.

Home Buying For Dummies®, 4th Edition

by Eric Tyson, MBA, and Ray Brown

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About the Authors

Eric Tyson is a syndicated personal financial writer, lecturer, and counselor. He is dedicated to teaching people to manage their personal finances better. Eric is a former management consultant to Fortune 500 financial service firms. Over the past two decades, he has successfully invested in securities as well as in real estate, started and managed several growing businesses, and earned a bachelor’s degree in economics at Yale and an MBA at the Stanford Graduate School of Business.

An accomplished freelance personal finance writer, Eric is the author of five other national bestsellers in the For Dummies series: Personal Finance For Dummies, Investing For Dummies, Mutual Funds For Dummies, Real Estate Investing For Dummies (which he coauthored), and Taxes For Dummies (which he also coauthored). Eric was an award-winning journalist for The San Francisco Chronicle/Examiner. His work has been featured and praised in hundreds of national and local publications, including Newsweek, Kiplinger’s, The Wall Street Journal, Money, Los Angeles Times, Chicago Tribune, and on NBC’s Today Show, PBS’s Nightly Business Report, CNN, The Oprah Winfrey Show, ABC, CNBC, Bloomberg Business Radio, CBS National Radio, and National Public Radio.

Eric has counseled thousands of clients on a variety of personal finance, investment, and real estate quandaries and questions. In addition to maintaining a financial counseling practice, he is a much sought after speaker.

You can visit him on the Web at www.erictyson.com.

Ray Brown is a veteran of the real estate profession with more than three decades of hands-on experience. A former manager for Coldwell Banker Residential Brokerage Company, McGuire Real Estate, and Pacific Union GMAC Real Estate, as well as a founder of his own real estate firm, the Raymond Brown Company, Ray is currently a writer, consultant, and public speaker on residential real estate topics.

Ray knows that most people are pretty darn smart. When they have problems, it’s usually because they don’t know the right questions to ask to get the information they need to make good decisions themselves. He always wanted to write a book that focused on what you need to know to make sound home-buying decisions — a book that kept people from manipulating you by exploiting your ignorance. This, at last, is that book!

On his way to becoming a real estate guru, Ray worked as the real estate analyst for KGO-TV (ABC’s affiliate in San Francisco) and was a syndicated real estate columnist for The San Francisco Examiner. For 16 years he hosted a weekly radio program, Ray Brown on Real Estate, for KNBR. In addition to his work for ABC, Ray has appeared as a real estate expert on CNN, NBC, CBS, and in The Wall Street Journal and Time.

That’s all fine and good. Ray’s three proudest achievements, however, are Jeff and Jared, his two extraordinary sons, and over 43 years of nearly always wedded bliss to the always wonderful Annie B. He’s delighted that Jeff’s wife, Genevieve, and his grandson, Aidan Joseph Brown, have joined the family.

Dedications

This book is hereby and irrevocably dedicated to my family and friends, as well as to my counseling clients and customers, who ultimately have taught me everything I know about how to explain financial terms and strategies so that all of us may benefit. — Eric Tyson

This book is lovingly dedicated to my real estate pals who taught me how the game is played; to my clients and friends who honor me with their trust and loyalty; to my brother Steve and best buddy Ben Colwell, who made RBCo a reality; to Bruce Koon and Corrie Anders, who taught me the dubious joy of writing; to Warren Doane and Dennis Tarmina, who encouraged me to follow this dream; to both brother Daves and Bob Agnew for being there; and, saving the best for last, to Annie B., Jeff, Genevieve, Jared, and Aidan, who have cheerfully (most of the time, anyhow) put up with the “Ray way” all these years. — Ray Brown

Authors' Acknowledgments

Many, many people at Wiley helped to make this book possible and (we hope in your opinion) good. They include Acquisitions Editor Mike Baker, Project Editor Georgette Beatty, Copy Editor Todd Lothery, and the fine folks in Composition for making this book look great! Thanks also to everyone else at Wiley who contributed to getting this book done and done right.

Extraordinary acclamation, copious praise, and profound gratitude are due our brilliant technical reviewer, Kip Oxman, who toiled long hours to ensure that we didn’t write something that wasn’t quite right.

We also owe a huge debt of gratitude to Craig Watts for his invaluable assistance with the credit scoring chapter; Paul Bragstad for his incredible Internet insights; Dennis Hart for masterfully updating Chapter 6; Ellie Besancon for helping us obtain the California Association of Realtors’ real estate purchase agreement included in Appendix A and the counteroffer used in Chapter 12; Warren Camp, Camp Brothers Inspection Services, Inc., for providing the exemplary inspection report included in Appendix B; Robert Jackson, BayCal Financial, for supplying additional forms; and Brian Felix and Andy Foley, Old Republic Title Company, who generously allowed us to pick their Einstein-like brains about the complexities of title insurance and escrows.

Publisher’s Acknowledgments

We’re proud of this book; please send us your comments through our online registration form located at http://dummies.custhelp.com. For other comments, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002.

Some of the people who helped bring this book to market include the following:

Acquisitions, Editorial, and Media Development

Project Editor: Georgette Beatty

(Previous Edition: Alissa Schwipps and Kristin DeMint)

Acquisitions Editor: Mike Baker

Copy Editor: Todd Lothery

(Previous Edition: Jennifer Bingham)

Assistant Editor: Erin Calligan Mooney

Editorial Program Coordinator: Joe Niesen

Technical Editor: Kip Oxman

Editorial Manager: Michelle Hacker

Editorial Assistant: Jennette ElNaggar

Cover Photo: © Comstock Images

Cartoons: Rich Tennant (www.the5thwave.com)

Composition Services

Project Coordinator: Kristie Rees

Layout and Graphics: Samantha Allen, Reuben W. Davis, Christine Williams

Proofreader: Christopher M. Jones

Indexer: Potomac Indexing, LLC

Publishing and Editorial for Consumer Dummies

Diane Graves Steele, Vice President and Publisher, Consumer Dummies

Kristin Ferguson-Wagstaffe, Product Development Director, Consumer Dummies

Ensley Eikenburg, Associate Publisher, Travel

Kelly Regan, Editorial Director, Travel

Publishing for Technology Dummies

Andy Cummings, Vice President and Publisher, Dummies Technology/General User

Composition Services

Gerry Fahey, Vice President of Production Services

Debbie Stailey, Director of Composition Services

Introduction

Welcome to Home Buying For Dummies, 4th Edition!

For about the cost of a couple of movie tickets, you can quickly and easily discover how to save thousands — perhaps even tens of thousands — of dollars the next time you buy a home.

How can we make such a claim? Easy. Each of us has spent decades personally advising thousands of people like you about home purchases and other important financial decisions. We’ve seen how ignorance of basic concepts and practices translates into money-draining mistakes. We know that many of these mistakes are both needless and avoidable.

Remember.eps No one is born knowing how to buy a home. Everyone who’d like to buy a home must learn how to do it. Unfortunately, too many people get a crash course in the school of hard knocks — and learn by making costly mistakes at their own expense.

We know that you’re not a dummy. You’ve already demonstrated an interest in discovering more about home buying by selecting this book, which can help you make smart moves and avoid financial land mines.

In the event that you’re still wondering whether to buy this book, consider that buying a home may well be the largest purchase that you ever make. If you’re like most people, buying a home can send shock waves through your personal finances and may even cause a sleepless night or two. Buying a home is a major financial step and a life event for most people. It certainly was for us when we bought our first homes. You owe it to yourself to do things right.

About This Book: The Eric Tyson/Ray Brown Difference

We know that many home-buying books are competing for your attention. If the fact that our families are counting on you to purchase this book doesn’t sway you, here are several other compelling reasons why this is the best book for you:

It’s in plain English. Because we work with real people and answer real questions, our information is current, and we have a great deal of experience in explaining things. This experience can put you firmly in control of the home-buying process (rather than having it control you).

It’s objective. We’re not trying to sell you an expensive newsletter or some real estate product that you don’t need. Our goal is to make you as knowledgeable as possible before you purchase a home. We even explain why you may not want to buy a home. We’re not here to be real estate cheerleaders.

It’s holistic. When you purchase a home, that purchase affects your ability to save money and accomplish other important financial goals. We help you understand how best to fit your home acquisition into the rest of your personal-finance plan.

It’s a reference. You can read this book from cover to cover if you want. However, we know that you’re busy and that you likely don’t desire to become a real estate expert, so each portion of the book stands on its own. You can read it piecemeal to address your specific questions and immediate concerns.

Conventions Used in This Book

Every book has its own conventions, and this one is no different. To make the most of the information we provide, keep your eye out for these conventions:

Italics highlight new terms that we define.

Boldfaced text indicates the keywords in explanatory bulleted lists.

Monofont sets Web addresses apart.

In addition, you can safely skip text in gray-shaded sidebars without missing anything you need to know. Sidebars contain plenty of helpful information, but the information they contain isn’t crucial to your understanding of the topic at hand.

How This Book Is Organized

So you’re ready to buy a home. Or maybe you know that you’re not ready, but you see a home purchase somewhere on the not-too-distant horizon. This book starts with the premise that many important things should fall into place before you sign a contract to buy a home. And even after the deal is done, you’ll have questions. Fear not! Our book covers what you need to know.

Part I: Home Economics

Perplexed about whether or not to buy a home? Concerned that your financial house isn’t as neat and tidy as it should be? Don’t know what you can afford or how you’ll pay for it? This part is for you! Many prospective home buyers make the mistake of buying before they understand their financial options and the home-buying process. As a bonus in this part, we explain real estate market economics, and we tell you how to spot a buyer’s market (good values) and avoid the perils of a seller’s market (inflated prices).

Part II: Financing 101

One of the most challenging and important aspects of the home-buying process is choosing a mortgage. Although not quite as jargon-prone as an Internal Revenue Service auditor, most mortgage lenders do have a penchant for using terminology — such as negative amortization and points — that you probably don’t use in your daily life. In this important part, we explain the different types of mortgages and cut through all that jargon to help you select the type of mortgage that matches your needs. We discuss the importance of your credit score, how to understand it, and even how to improve it. In addition to explaining how to get the best deal that you can on a mortgage, we guide you through the morass of paperwork required to apply for and obtain your loan.

Part III: Property, Players, and Prices

After you decide that you’re ready to buy and you know how much you can really afford (given your budget and other financial objectives), you’re ready to explore how the home-buying game is played. In this part, we introduce you to the various types of property you may consider buying and the people you may hire to help you buy a home. In addition to steering you toward winning strategies and players, we help you avoid loser properties and people. We give you a crash course on how to distinguish good buys from overpriced duds so that you don’t overpay (and may even get a very good deal) when you purchase your dream home. We also explain how to harness the power of the Internet and tell you which realty Web sites are worth your time.

Part IV: Making the Deal

In this part, we get down to brass tacks — how to negotiate a super deal and how to get your home inspected from roof to foundation so that you know whether it’s in perfect shape or riddled with expensive defects. Because you can’t close the purchase until you get homeowners insurance, we explain what to buy, where to buy, and how to buy it right. Finally, we describe some of the legal and tax ramifications of your purchase, along with ways to make sure that your deal closes smoothly and without unnecessary costs.

Part V: The Part of Tens

In this part, we tackle shorter topics that don’t seem to fit elsewhere in this book. Here, we list the ten financial musts after you buy, the ten things to know when investing in real estate, and the ten things to consider when selling your house.

Part VI: Appendixes

Besides showing you a good home-inspection report, this part also provides a sample home-buying contract so you’ll be familiar with these documents. Finally, we provide you a comprehensive glossary in case you can’t quite remember what a certain real estate word or phrase means.

Icons Used in This Book

Sprinkled throughout this book are cute little icons to help reinforce and draw attention to key points or to flag stuff that you can skip.

Tip.eps This bull’s-eye notes key strategies that can improve your real estate deal and, in some cases, save you lots of moola. Think of these as helpful little paternalistic hints we would whisper in your ear if we were close enough to do so!

Warning(bomb).eps Numerous land mines await novice as well as experienced home buyers. This explosive symbol marks those mines, and then we tell you how to sidestep them.

investigate.eps Occasionally, we suggest that you do more research or homework. Don’t worry: We tell you exactly what you need to do.

beware.eps Unfortunately, as is the case in all parts of the business world, some people and companies are more interested in short-term profits than in meeting your needs and concerns. We warn you how, when, and where you may be fleeced, and where appropriate, we show you how to de-fleece yourself!

Remember.eps “If I’ve told you once, I’ve told you a thousand times . . . .” Remember good old Mom and Dad? From time to time, we tell you something quite important and perhaps repeat ourselves. Just so you don’t forget the point, this icon serves as a little nag to bring back those childhood memories.

TechnicalStuff.eps Some of you are curious and have time to spare. Others are busy and just want to know the essentials. This geeky icon points out tidbits and information that you don’t really have to know, but understanding this stuff can make you more self-confident and proud!

Where to Go from Here

Odds are you’re not quite ready to bolt over to the nearest bank and take out a mortgage — and we don’t suggest that you blindly call the first Realtor in the Yellow Pages. It’s up to you where you go from here, but if you’re just beginning to think about buying your first home, we recommend that you read this book straight through, cover to cover, to maximize your home-buying savvy. But the A-to-Z approach isn’t necessary — if you feel pretty confident in your knowledge of certain areas, pick other ones that you’re most interested in by either skimming this book’s table of contents or by relying on the well-crafted index at the back of the book.

Part I

Home Economics

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In this part . . .

Is home buying for you? Is now the right time? How much can you afford to spend on a home? These questions aren’t meant to throw you into a panic. If you don’t know how to answer them (and perhaps even if you think that you do), this part is for you! Many people assume that they need to buy a home (or that they don’t) without taking a good look at their overall personal financial situation. Don’t make that mistake! Read this part to see how a home purchase should fit into your financial puzzle and to understand how and why home prices do what they do.