Real Estate Advice

[FRPLG]

I will probably echo a lot of what has been said but may have some other things to add.

First off I am 28 and live in my third primary home. I also several real estate investments properties and I am constantly traversing the real estate market in search for more. Basically I have been where you are enough to have some good insight into the more subjective aspects or your questions.

First, is there any sort of generalized formula for determining whether a house is a "good buy" based the home's assessed value?

These projected values almost always means little to nothing. There are two different types of projected values of a house.

Assessed value=the value assigned by the local government for tax purposes. It is almost always signicantly lower than the real market price since reassessments are done on a yearly or bi-yearly basis using an inexact comparable type system on old figures. Never pay attention to this assessed value beyond what it will do in terms of taxes for the property. It has no bearing on what the house is really worth.

Appraised value=this is a much closer figure to actual value as it done by an independent evaluator. Banks use it to make sure they property they are going to finance is actually worth what the buyers have offered. If a appraisal comes in lower than the offer price then usually the offer price is contractually reduced to the appraisal price. These appraisers are more accurate because they use a stronger model for comps and have much more recent data. The value though is very often skewed though because the data they use can be as old as 6 months and if the appraisal is set up by the selling agent then the buyers need to be wary. Basically I don't trust the appraisal for one reason alone. Most appraisers see the purchase contract before they appraise and almost always the appraisal comes in pretty darn close to the offer price. It is amazing how that works! Finding an appraiser who wont just finagle a way to justify a price is hard. Most know if they start under cutting offers then agents won't use them anymore.

Second, to what extent are buyer's agents useful? I know that buyer's agents owe fiduciary duties to their principals, but do such duties actually compel the agent to do what is in the principal's best interests given that their commission is based on the home's purchase price?

I find buying agents to have a few good uses.
First, they know the market inherently if they are any good.
Second, they know properties much better. You'll waste a little less time with worthless properties if you have an agent who can weed them out
Third, they take care of paper work and most offer a safety net in that they are on the hook for some stuff if the deal goes wrong. If you are your own agent then you better know what you are doing otherwise there are lots of little things that you need to have done as buyers to make this deal go smoothly.

I alwasy use a buying agent. They cost nothing and do work for you. I don't know why anyone wouldn't.

Third, how many home inspectors do people typically retain? Is there any way to determine if a home inspector is qualified, other than asking friends? For example, do they have certifications that might indicate that certain inspectors are more qualified than others?

Home Inspector - The National Association of Certified Home Inspectors
Home Inspector at American Society of Home Inspectors: American Society Of Home Inspectors, ASHI, ASHI Home Inspection, ASHI Inspector

Both orgs have a find a home inspector deal on their sites. Get a certified one for sure. You need more than a contractor. You need someone trained to know what to look for. The inspection, depending on property size, should take an hour or more. It should look like they are being uber picky. If it is a property older than 2 or 3 years you should end up with a list. Most of the list will be cosmetic but there still should be a list. If there isn't one then either the property is magically perfect or the inspector didn't do a thorugh job. You can guess which I'd assume.

Fourth, what is a good percentage of your gross income to spend on mortgage payments (including escrow)? I know this percentage will vary based on the individual and his outstanding debt, but is there a range for the "conservative" buyer and the less risk-averse buyer?

Figure out what you can afford in payment and that will point you toward what to do. Payment is the biggest key. I like to have my payment as big as I can afford. That means I have put less equity down meaning I will make a higher percentage on my equity when I sell. I still try and always put down at least 20% to avoid the aforementioned PMI. I avoid anything but fixed mortages. ARMs just make no sense to me.

Finally, what kind of "hidden costs" can I expect to incur? Obviously there is the down payment, loan origination fee, and inspection fees, but what other fees can I expect to pay?

Any title company should be able to give you the exact charges they are going to charge you. If they cannot then don't use them. The only thing variable on the HUD sheet should be, taxes, escrow, inspection fees and so forth. Do a Google on what things should be on the HUD in your state. If there any 'other' fees that don't make sense then go somewhere else. Title companies will put administrative fees on there that shouldn't be there.