If plates fly around your prospective home's kitchen, a bloodstain reappears nightly on the staircase, or houseguests flee the back bedroom screaming, you want to know about it, right? But don't expect to see a "haunted" box on any state's disclosure form. Nevertheless, sellers are, in many states, obligated to disclose things that affect a house's marketability, which the oddities described above certainly could. Smart sellers would describe exactly what they've observed, without drawing conclusions.

And lying isn't the only problem. Even honest sellers may be allowed to keep quiet about something they only suspect. Some state's forms may offer handy escape hatches, like a box saying "don't know," or "no representation." In Oregon, for example, sellers need only disclose problems of which they have "actual knowledge."

That can lead to situations like one described by Oregon real estate agent Debbie Stevens: "A buyer I represented moved into a house where, within one month, the water line from the street failed. Of course, we immediately wondered whether the seller had failed to disclose something. It turned out the seller's neighbors had had repairs done on their water line, and the repairperson had actually told our seller, 'Your water line is old, too; I can fix it while I'm in here.' But the repairperson couldn't predict when the seller's water line would fail, and the seller didn't want to pay for repairs. Unfortunately, we had to conclude that the seller wasn't necessarily wrong to say nothing, since he didn't know how close the water line was to failing."

Also, in most states, sellers aren't required to poke around for problems-just to tell you what they already know. A house's owners can remain blissfully unaware of many serious problems-a cracked foundation, termites deep in the walls, or a roof on the verge of leaking-and won't be held responsible.

Reviewing the Seller's Inspection Reports (If Any)

Some sellers voluntarily provide copies of inspection reports they've commissioned themselves, either pest reports (common in California) or general inspections. In theory, this is no mere subjective opinion-the report was drafted by a trained professional, right? The answer is a not-so-resounding "maybe." The quality of home inspectors varies widely, and are you going to gamble on the seller having chosen the most nitpicky one in town?

That's not to say the seller is trying to pull a fast one. But inspectors who are regularly hired by sellers describe feeling pressured not to be "deal-breakers," but to downplay problems they find. They tend to use fuzzy words in their reports like "worn" or "serviceable."

SEE AN EXPERT.

Go to the source: Call the inspector directly. There's no law saying you have to rely solely on the inspector's written words. According to California inspector Paul A. Rude, "If you're seriously thinking about making an offer, call and ask the seller's inspector for details and for information about his or her background. Better yet, ask the inspector to come back and do a walk-through with you. Many will do this for a reduced fee." There's no law saying you have to rely solely on the inspector's written words. According to California inspector Paul A. Rude, "If you're seriously thinking about making an offer, call and ask the seller's inspector for details and for information about his or her background. Better yet, ask the inspector to come back and do a walk-through with you. Many will do this for a reduced fee."

So, if you've got a report in front of you, how do you evaluate its worth? Start by reading it carefully, following the advice on understanding inspection reports provided in Chapter 11. Also check whether the inspector is a member of ASHI (the American Society of Home Inspectors). And you can ask your real estate agent about the reputation of the inspection company-and of the seller's agent, who probably selected the company.

Learn to decipher the pest report. Because Abby was looking for a fixer-upper, she knew it would have problems. But when the seller gave her the pest report, she says, "I almost called off the deal-the fix-up was going to cost almost half of what I'd be paying for the house. Then I took a closer look. The report said things like, 'cellulose fiber near foundation-$200 to repair.' It turned out that just meant there was a big piece of wood leaning on the foundation-all I had to do was brave the spiders and drag it away. I found a lot of items that weren't as major as they'd seemed." Because Abby was looking for a fixer-upper, she knew it would have problems. But when the seller gave her the pest report, she says, "I almost called off the deal-the fix-up was going to cost almost half of what I'd be paying for the house. Then I took a closer look. The report said things like, 'cellulose fiber near foundation-$200 to repair.' It turned out that just meant there was a big piece of wood leaning on the foundation-all I had to do was brave the spiders and drag it away. I found a lot of items that weren't as major as they'd seemed."

Inspect This!

The largest Hollywood home, according to the Guinness Book of World Records Guinness Book of World Records, is "The Manor," in Bel Air, California. Built by (now deceased) TV producer Aaron Spelling, it covers about six acres, has 123 rooms, and includes a gym, bowling alley, tennis court, screening room, pool, and skating rink.

Finally, no matter how reputable the seller's inspector, if the report was written more than a few months ago, it's too old. New problems can crop up in a day. And the seller might have already tried to repair some of the problems-for better or for worse. A professional inspection is important, but it's best to rely on the one you'll commission yourself, later.

Poking Around: Doing Your Own Initial Inspection

From the first moment you look at a house, you should be taking stock of its physical condition. If there's a chance you might make an offer, you'll want a clear idea of how much the house is worth, based partly on its state of repair.

CD-ROM.

Bring along the "First-Look Home Inspection Checklist," found in the Homebuyer's Toolkit on the CD-ROM. A sample is shown below. It details both the easiest and most important issues to look for. A sample is shown below. It details both the easiest and most important issues to look for.

First-Look Home Inspection Checklist Here's what to look for in your initial house visit, and why it's important to take a special look at these items. Jot down your findings on the little form that follows.* Examine the roof. Examine the roof. If the roofline is sagging, be prepared for foundation problems. Ask how old the roof is. A roof ten years old or older will probably need replacing soon, a $10,000-plus job. Loose, curling, or missing tiles or shingles also indicate a new roof is needed, as do shafts of light in the attic. Complex roofs with lots of gables, intersecting surfaces, and multiple roofing materials are difficult to maintain and expensive to replace. If the roofline is sagging, be prepared for foundation problems. Ask how old the roof is. A roof ten years old or older will probably need replacing soon, a $10,000-plus job. Loose, curling, or missing tiles or shingles also indicate a new roof is needed, as do shafts of light in the attic. Complex roofs with lots of gables, intersecting surfaces, and multiple roofing materials are difficult to maintain and expensive to replace.* Listen for squeaks when you walk. Listen for squeaks when you walk. Squeaks are caused by loose nails, often loosened by sagging or movement in the structure, which may mean settling problems. Squeaks are caused by loose nails, often loosened by sagging or movement in the structure, which may mean settling problems.* Take cues from your feet. Take cues from your feet. They'll tell you whether the flooring feels unstable, or the house has started to settle unevenly. As you walk up stairs, make sure the heights feel uniform. And step close to the toilet and tub. If the floor feels soft, leakage may be occurring, possibly caused by the owner's failure to change the seals on the toilet or caulk the wall tiles. They'll tell you whether the flooring feels unstable, or the house has started to settle unevenly. As you walk up stairs, make sure the heights feel uniform. And step close to the toilet and tub. If the floor feels soft, leakage may be occurring, possibly caused by the owner's failure to change the seals on the toilet or caulk the wall tiles.* Use your nose. Use your nose. At worst, fusty odors or your sudden sniffling may mean a mold problem. Other odors, such as cat urine or cigarette smoke, are also a bother to get rid of and reduce the value of the house. (Or maybe you'll just smell a lot of air freshener, which should make you wonder what's being covered up.) At worst, fusty odors or your sudden sniffling may mean a mold problem. Other odors, such as cat urine or cigarette smoke, are also a bother to get rid of and reduce the value of the house. (Or maybe you'll just smell a lot of air freshener, which should make you wonder what's being covered up.)* Turn on the faucets. Turn on the faucets. What does the water look like? If you see rust particles or discoloration, the pipes may be rusted, and need replacement. What do you hear? Knocking sounds may mean old, leak-prone pipes. Try turning the faucet to its maximum. If the underlying problem turns out to be low water pressure, this is tough to solve-but should be fixed if you plan on enjoying your showers. Also make sure the hot water arrives within a reasonable length of time. What does the water look like? If you see rust particles or discoloration, the pipes may be rusted, and need replacement. What do you hear? Knocking sounds may mean old, leak-prone pipes. Try turning the faucet to its maximum. If the underlying problem turns out to be low water pressure, this is tough to solve-but should be fixed if you plan on enjoying your showers. Also make sure the hot water arrives within a reasonable length of time.* Open windows and doors. Open windows and doors. If you can't do so easily, that too may be a repair issue. If you can't do so easily, that too may be a repair issue.* Look for signs of water damage. Look for signs of water damage. Look for stains or puddles on the ceiling, around the window frames, by the water heater, under the sink, and all over the floor of the basement, if there is one. Not only are these repairs costly, but because of scares over toxic mold, they can make a house expensive to insure. Look for stains or puddles on the ceiling, around the window frames, by the water heater, under the sink, and all over the floor of the basement, if there is one. Not only are these repairs costly, but because of scares over toxic mold, they can make a house expensive to insure.* Find the electrical panel. Find the electrical panel. Is it an old style one, small, and with fuses rather than circuit breakers? That's a several thousand dollar upgrade. If you suspect old wiring, look at the plugs near the bathroom and kitchen sinks. If they've been modernized at all, you'll see special plugs with little rectangular "TEST" and "RESET" buttons (these help protect you from water-related electrocution). Is it an old style one, small, and with fuses rather than circuit breakers? That's a several thousand dollar upgrade. If you suspect old wiring, look at the plugs near the bathroom and kitchen sinks. If they've been modernized at all, you'll see special plugs with little rectangular "TEST" and "RESET" buttons (these help protect you from water-related electrocution).* Take note of peeling paint. Take note of peeling paint. A paint job is an easy, cosmetic repair-but nevertheless can mean your paying someone several thousand dollars. And peeling paint can be especially problematic if it's old and lead-based or contains asbestos texturing material. A paint job is an easy, cosmetic repair-but nevertheless can mean your paying someone several thousand dollars. And peeling paint can be especially problematic if it's old and lead-based or contains asbestos texturing material.* Turn light switches on and off, or try turning on many lights and appliances at once. Turn light switches on and off, or try turning on many lights and appliances at once. If the lights flicker, or the electricity goes, there may be a bad connection or a circuit overload. These aren't expensive fixes, but are safety priorities. If the lights flicker, or the electricity goes, there may be a bad connection or a circuit overload. These aren't expensive fixes, but are safety priorities.* Examine the appliances. Examine the appliances. Ask whether the refrigerator, stove, dishwasher, washer and dryer, and other appliances come with the house. Then look to see whether they add value or will require a trip to the dump. Test to make sure they're functional; open the refrigerator door, and light the stove's burners. Ask whether the refrigerator, stove, dishwasher, washer and dryer, and other appliances come with the house. Then look to see whether they add value or will require a trip to the dump. Test to make sure they're functional; open the refrigerator door, and light the stove's burners.* Ask whether the house has a furnace or air conditioner. Ask whether the house has a furnace or air conditioner. You'd be surprised at how many houses still operate on small units that work in only a few rooms. Ask that the furnace or A/C be turned on. You'd be surprised at how many houses still operate on small units that work in only a few rooms. Ask that the furnace or A/C be turned on.* Look for unprofessional repairs or upgrades. Look for unprofessional repairs or upgrades. If the house has been in the hands of unqualified do-it-yourselfers, some work may have to be redone. If the house has been in the hands of unqualified do-it-yourselfers, some work may have to be redone.

The checklist won't lead you through an in-depth inspection. But there's a lot you can look for on an ordinary open house visit, like sagging rooflines and leaking pipes. Wait for an individual appointment to do things like turning on heat and stove burners. And again, if you're really interested in the place, you should hire a professional inspector, normally after making an offer.

CHECK IT OUT.

Eager to take on more-difficult inspection tasks? Get guidance from: Get guidance from:* The American Society of Home Inspectors website at www.ashi.org. Under Homebuyers/Sellers, click "Virtual Home Inspection" to get a fun visual tour of what your inspector will eventually examine.* The Complete Book of Home Inspection The Complete Book of Home Inspection, by Norman Becker (McGraw-Hill Professional). Written for the layperson, this book includes helpful checklists and photos.* Local community colleges, adult schools, and home improvement stores, many of which offer excellent and inexpensive classes in home repair.

Hey, Nice Dirt Pile! Choosing a Not-Yet-Built House

If you're buying a new home from a developer, a number of choices lie before you: which lot you want, which type of model house you like, and which upgrades you'd like inside. All of this can require imagination if you're buying before the house is built (though some developments are nearly fully built in advance).

Choosing Which Lot Your House Will Be Built On

They may all look like squares on the map now, but walk around, and examine the map for the following: * Likely water flow. Likely water flow. Improper grading leads to poor drainage. It's a common complaint in new developments and difficult to fix, so avoid lots located at the neighborhood low spot or the bottom of a hill. A lot on a creek may sound nice but end up flooded by next year's "100-year storm." Also look for concrete-lined drain channels in hillsides above your lot, which are often poorly maintained, leading to flooding or even a landslide. Improper grading leads to poor drainage. It's a common complaint in new developments and difficult to fix, so avoid lots located at the neighborhood low spot or the bottom of a hill. A lot on a creek may sound nice but end up flooded by next year's "100-year storm." Also look for concrete-lined drain channels in hillsides above your lot, which are often poorly maintained, leading to flooding or even a landslide.* Roadways. Roadways. If your house will be next to a major roadway, expect extra noise and traffic. If your house will be next to a major roadway, expect extra noise and traffic.* Services. Services. While it's convenient to have services close by, being immediately adjacent to a grocery store, fire station, or school can raise levels of traffic, litter, and noise. While it's convenient to have services close by, being immediately adjacent to a grocery store, fire station, or school can raise levels of traffic, litter, and noise.* Lot size and position of neighbor's houses. Lot size and position of neighbor's houses. How big is the lot in relation to the size of your house-to-be? In many new communities, homes are built so tightly together that owners can hear their neighbors' television or see in their windows. How big is the lot in relation to the size of your house-to-be? In many new communities, homes are built so tightly together that owners can hear their neighbors' television or see in their windows.* Location. Location. You'll pay more for a house that sits on a lakefront and less for one that backs up against the freeway. The more desirable the location, the less negotiable the price. You'll pay more for a house that sits on a lakefront and less for one that backs up against the freeway. The more desirable the location, the less negotiable the price.* View. View. If a view is an important asset on your lot, find out whether you have a right to prevent downhill neighbors from blocking it with new homes, additions, or trees. Many trees grow fast enough to block a scenic vista within five to ten years. If a view is an important asset on your lot, find out whether you have a right to prevent downhill neighbors from blocking it with new homes, additions, or trees. Many trees grow fast enough to block a scenic vista within five to ten years.* Remaining undeveloped land. Remaining undeveloped land. If there's a big, open field nearby, find out from the local zoning or planning department what it's zoned for and what kind of development is planned. Unless it's a park, you can be sure that something will be built there eventually. If there's a big, open field nearby, find out from the local zoning or planning department what it's zoned for and what kind of development is planned. Unless it's a park, you can be sure that something will be built there eventually.

Choosing Your House Design and Upgrades

For the house itself, you might be choosing which model type you want and whether you want upgrades. This is where that low, advertised price can change dramatically. The modest-sized model may look tiny compared to the model mansion next door, and the simple, standard kitchen may look shoddy next to the glossy custom cabinets. To help rein in your choices, consider: * What the model home includes. What the model home includes. Some contain the upgrades, so that buyers mistakenly think that's what the final house will look like. Adviser Mark Nash says, "Ask how much the house you're looking at would cost with everything you see in it." Others contain cheap and tacky basics, to steer you toward the upgrades. Either way, look closely at the quality of woodwork, flooring, appliances, and more; decide which you're willing to pay to upgrade; and get the developer's promises in writing. Some contain the upgrades, so that buyers mistakenly think that's what the final house will look like. Adviser Mark Nash says, "Ask how much the house you're looking at would cost with everything you see in it." Others contain cheap and tacky basics, to steer you toward the upgrades. Either way, look closely at the quality of woodwork, flooring, appliances, and more; decide which you're willing to pay to upgrade; and get the developer's promises in writing. Don't Fall for the Hype! Don't Fall for the Hype!

Watch out for these developer sales tactics, many designed to encourage an impulse buy on your first visit:* The luxury tour. The luxury tour. You may be whisked around lovely house models by an attractive professional, maybe even with tasty treats or drinks along the way. You may be whisked around lovely house models by an attractive professional, maybe even with tasty treats or drinks along the way.* The "now or never." The "now or never." You may be told that a building or development is almost sold out-or is sold out. Whaddya know, you receive a call a few days later saying that a deal has fallen through, and a unit or house is now available. You may be told that a building or development is almost sold out-or is sold out. Whaddya know, you receive a call a few days later saying that a deal has fallen through, and a unit or house is now available.* The moment of silence. The moment of silence. If you're buying with someone else and find yourselves alone in an office, resist the temptation to do what the seller wants: Talk about what you just saw, and whether it's a good idea to buy it right that minute. If you're buying with someone else and find yourselves alone in an office, resist the temptation to do what the seller wants: Talk about what you just saw, and whether it's a good idea to buy it right that minute.* The "today and today only." The "today and today only." "Today only, upgraded granite countertops," or "we'll pay your closing costs." We can't say it's not true, but it's a favorite sales tactic. "Today only, upgraded granite countertops," or "we'll pay your closing costs." We can't say it's not true, but it's a favorite sales tactic.* The freebies. The freebies. As if buying a house weren't enough, some developers are throwing in motorbikes, cruise trips, and flatscreen TVs. Try to remember that these are minor extras compared to what you'll be paying to buy the property. As if buying a house weren't enough, some developers are throwing in motorbikes, cruise trips, and flatscreen TVs. Try to remember that these are minor extras compared to what you'll be paying to buy the property.

TIP.

It's possible to negotiate for free upgrades, at least in slower markets. Because it doesn't cost the developer nearly as much to make the upgrades as you'd probably be charged, they use them as incentives. Because it doesn't cost the developer nearly as much to make the upgrades as you'd probably be charged, they use them as incentives.

* Your Dream List. Your Dream List. If you'd never thought about needing a wood-burning fireplace or an outdoor barbecue, why add them now? If you'd never thought about needing a wood-burning fireplace or an outdoor barbecue, why add them now?* The retail cost of possible upgrades. The retail cost of possible upgrades. No need to pay a developer more to add high-quality materials than you'd pay for them yourself. Double check the cost of big-ticket items like cabinetry or floor coverings at your local home improvement store. Then negotiate with the developer to bring the price down, or plan to hire a local contractor for upgrades. No need to pay a developer more to add high-quality materials than you'd pay for them yourself. Double check the cost of big-ticket items like cabinetry or floor coverings at your local home improvement store. Then negotiate with the developer to bring the price down, or plan to hire a local contractor for upgrades.* What upgrades will add resale value. What upgrades will add resale value. If you ever sell your home, the less flashy, more practical upgrades will attract the most buyers. For example, swimming pools don't always add value to a house, while extra office or storage space will. Other practical, valuable upgrades include more electrical outlets, a fenced-in backyard, and wiring for high-speed Internet. If you ever sell your home, the less flashy, more practical upgrades will attract the most buyers. For example, swimming pools don't always add value to a house, while extra office or storage space will. Other practical, valuable upgrades include more electrical outlets, a fenced-in backyard, and wiring for high-speed Internet.* The tax impact of your house size and upgrades. The tax impact of your house size and upgrades. You may have seen a property tax estimate in the seller's written materials. If the house hasn't yet been built and assessed, however, that figure means nothing more than the value of the land. Call your local tax board for information. You may have seen a property tax estimate in the seller's written materials. If the house hasn't yet been built and assessed, however, that figure means nothing more than the value of the land. Call your local tax board for information.

TIP.

If you back out, your upgrades won't be refunded-you pay for them up front. "I've seen people lose $50,000 in upgrades because of a job transfer," says Realtor Mark Nash. "The reason for this policy is that the property is less marketable with your personal choices stamped on it-it's more like a resale." Plan ahead! "I've seen people lose $50,000 in upgrades because of a job transfer," says Realtor Mark Nash. "The reason for this policy is that the property is less marketable with your personal choices stamped on it-it's more like a resale." Plan ahead!

Buying a New or Old Condo or Co-op? Research the Community

If you're buying in a community interest development, such as a condo, co-op, townhouse, or planned unit development ("PUD"), its physical state shouldn't be the only thing on your mind. You should also be asking, "How much power will the community association have over my life-and will it exercise that power?" Although the term "community association" may sound like a social club, the reality is that a few of your neighbors, whose personalities are up to chance, will serve in leadership roles. They'll make important decisions about your living environment. Some associations are responsible minigovernments, but many are like dysfunctional families. So, it's well worth your time to: * read all the paperwork describing its governance and current situation, and* ask questions of the sellers, the neighbors, and the governing body.

Read the Large and Fine Print

Community associations normally put their main rules into documents called the "bylaws" and "master deed" or "Declaration of Covenants, Conditions, and Restrictions" (CC&Rs). As soon as you're seriously interested, get a copy of these, as well as of this year's budget, and read them carefully (at the latest, you can make receiving these documents a contingency of your purchase offer, as described in Chapter 10). If you're buying a newly built home, the builder may include these as part of your disclosures.

You'll learn about things like the permission process if you want to add onto your house, what color you can paint it, limits on pets, types of allowable landscaping, how high the association dues are, when the association can decide to charge you special assessments for projects affecting the entire community (like the pool or common room), and more. This isn't abstract stuff-it will have a real, direct impact on your daily life.

You may find that the association owners don't want to cough up these documents until you've made a purchase offer. For condos, however, anyone can go to the county recorder's office and get a copy of the CC&Rs. (They're part of the deed that's recorded to publicly show who owns the property.) Unless you're buying into a completely new development, these documents are just the beginning. You'll also want to research what the association or board has been up to lately. Ask for minutes from recent meetings, and review these for signs of internal disputes, financial troubles, or planned new projects.

CAUTION.

Signs of association money troubles: Ask further questions and think twice about buying if you spot evidence that: Ask further questions and think twice about buying if you spot evidence that:* more than 15% of the units are in foreclosure or have been on the market for several weeks and remain unsold* more than 15% of owners are overdue on their homeowners' fees* the association's reserve account is almost empty, or* major litigation is pending.

Also check on the ratio of units that are, or are allowed to be, rented out. The more units that are owner-occupied, the better the community usually is at attending to details like the budget and maintenance. Also, in a down market, investors are often the first to go into foreclosure.Why so much research early on? First, if there are restrictions you can't stomach, you'll know the place isn't for you. Don't assume that the rules will change, or that an exception will be made for you! Second, you want to know how well funded the association is. If there isn't enough cash in reserve, your monthly dues may go up, or you may have to pay special assessments.

Ask Lots of Questions

As with any neighborhood, it's worth finding out how people like living there, and who your neighbors will be. But you should also ask more-targeted questions, from your first interaction with the seller or seller's agent, and continuing on with people you meet within the community. Ask about everything from governance policies to package delivery to the neighbors' characters.

CD-ROM.

Use the "Condo/Co-Op Question Worksheet" in the Homebuyer's Toolkit on the CD-ROM for suggested questions. A sample is shown below. A sample is shown below.

Condo/Co-Op Worksheet Here are some basic questions you'll want to ask the seller, seller's agent, and neighbors about a particular condo or co-op. Tailor this list according to the particular property (Hawaii homebuyers can delete the question about snow removal!), and add other questions of interest-for example, if you have specific questions about waste disposal or want more details about use of a pool.1. Do you enjoy living here? What are the best and worst things about it?

2. What percentage of the properties are rented out to tenants?

3. Are you happy with the community association? Are there any particular problems? What do you wish it would do differently?

4. What exactly is included in your monthly association or maintenance fee? (Some might include heating, parking, storage facilities, and use of the clubhouse, while others charge separately for these services, if they're available at all.) 5. Where is your parking? Indoor? Outdoor? Reserved? Private garage?

6. What amenities are included in your membership (for example, a clubhouse or laundry room)? Are there any waiting lists?

7. Are any special assessments planned? When was the last one? What was it for?

8. What taxes can you expect-for example, local school taxes?

9. For co-ops: How much is the mortgage on the property itself? (This may affect your monthly maintenance fees and whether they are deductible because they pay the underlying mortgage.) 10. In the event of snow, by what time can you expect it to be shoveled or plowed? Does this include parking areas?

11. Are there any annual surcharges, such as for fuel?

12. How high is the reserve fund (of emergency money)?

13. Who determines how much is spent on various things?

14. Are meetings of the board or association open or closed? How do members or shareholders have input into decision making (for example, by submitting questions in advance of meetings)?

15. If people will be living above you, is there a rule saying the floor must be carpeted? Are the walls well insulated?

16. Are any of the neighbors difficult or inconsiderate?