Military house hunters have a number of distinct advantages over their civilian counterparts. Therefore, it is critical to approach home buying with a game plan in mind, armed with the facts. (Photo by Lt. Cmdr. Jim Remington)
Military home-buyer guidance
By Capt. Devlin McDermott, Fort Bliss Legal Assistance Office
Very few life experiences elicit the same mix of joy and fear as purchasing a home for the first time, and while years of wonderful memories lie ahead, so too does the prospect of looming debt.
However, military house hunters have a number of distinct advantages over their civilian counterparts. Therefore, it is critical to approach home buying with a game plan in mind, armed with the facts.
The first step is to find a good realtor. With online reviews readily available, this is a relatively simple process. Even better, though, are recommendations from fellow military families who have purchased a home or rented an apartment in the El Paso area. So, ask around.
With a realtor secured, the next step is identifying the type and characteristics of houses that are of interest to you: How many rooms and bathrooms do you need? What are the “must-haves,” as opposed to the “nice-to-haves?” Perhaps a finished basement is a necessity, but a porch isn’t absolutely essential. By establishing a list of preferences for a realtor, you can streamline and expedite the search process.
Another factor of consideration is the physical state of the property: is a prospective house move-in ready or is it a fixer-upper? Soldiers can find project houses at a substantial discount on foreclosure sales lists. However, while a fixer-upper can make for an exciting project and can significantly lower the asking price for the house, most military families will be hard pressed to devote the time and resources for such an endeavor. One possible tactic is to request that the seller make the requisite changes prior to signing, thereby making the property updated and move-in ready. Of course, the overall factor of cost will determine what slice of the real estate market is accessible to you.
Common wisdom holds that no one should spend more than 30 percent of gross income on housing. One potential method of discovering a hidden treasure is to look for a house that has been listed for six months or longer and recently dropped in price. While there might be a legitimate reason that buyers have been scared away, such as a railroad track running through the backyard, it is often the case that an eager seller simply overpriced their house and scared off any potential buyers out of the gate.
Some important points to contemplate for military homebuyers are: location, available schools, and proximity to hospitals, universities, and military installations. The importance of location cannot be overstated, as it has a direct effect on property values, and by proxy, the quality of public schools, which are funded primarily through property taxes. Meanwhile, the proximity to various installations is an indicator of the likelihood of finding quality renters when the inevitable PCS occurs. Doctors, nurses, college professors and Soldiers all make for reliable tenants, as they are usually mature, have relatively recession-proof jobs and a steady source of income.
After finding a dream house in the perfect location near post, the next hurdle is paying for it. Unless you can afford the house outright with cash, chances are you will need to apply for a mortgage. This is where the benefits of service kick in. The Department of Veterans Affairs (VA) home loan is only available to service members and veterans, and allows military families to purchase a house with little or no money down.
Conventional mortgages require a down payment, sometimes in excess of 20 percent of the value of the house. A Soldier can apply for a VA loan through most banks, and while there are additional requirements for this particular type of loan, the process is relatively streamlined. Soldiers should be careful to include an “assignments” clause in their mortgage contract, which would allow them some discretion in choosing a new lender should a current bank or lender fail.
While a loan does not have to be secured at the time of making an offer, it is important to include a contingency clause in the “purchase-and-sale agreement” that stipulates the contract be valid pending approval of the loan. This simple act can preclude the headaches of litigation should a loan not be approved. A purchase-and-sale agreement is a binding contract, signed by both the seller and buyer, and must include an offer, acceptance of that offer, a reasonable explanation of the property, and the decided price.
Should you find a house that you cannot yet afford, but would like to buy in the future, you can explore renting with an option to buy. Texas Property Code, Title 2, Chapter 5, Subchapter D, section 5.061 spells out the specifics of such an interaction. As with any complex, real property issue, Soldiers should proceed with caution and obtain legal advice before proceeding with such a contract.
When purchasing real property, it is important to look up the deed to determine if the seller actually has a good title, meaning there are no other people that could claim full or partial ownership. Deeds are public records and are usually held at the town or county courthouse, depending on the local jurisdiction. In the Fort Bliss area, deeds are recorded and maintained by the clerk for the El Paso County Courthouse.
Military families can also perform an online records search through the El Paso County website at www.epcounty.com. A deed will also tell a Soldier if other parties have water, mineral, or coal rights to the property. Additionally, it is important to look for a deed of easement, which would stay with the property regardless of owner. Easements, equitable servitudes, or covenants allow others to use the property or restrict the owner’s use of it, depending on the language.
For instance, a neighbor might have an easement which allows access to part of the driveway in order to reach their house. Military families can use title companies and title insurance to protect their interests. It is also vital for Soldiers to know the property lines of whatever house they intend to buy, as well as the local restrictions of land use. To do so, you can have a survey of the land conducted, to ensure you know exactly what they’re buying.
While Texas state law does not require an attorney as part of the purchase process, it is a good idea to use one, particularly for review before signing any sales contracts. Further, an attorney can be of assistance if issues arise during the escrow period, when a check is held from the buyer while titles are searched and deeds are written, as well as at closing, when the property is actually exchanged.
If, for instance, a seller is stalling at the closing date, legal action may be required. Also, once a contract is signed, the seller cannot legally enter into another binding contract without a contingency clause. If the seller attempts to default on the deal, you may need a lawyer to defend your contract claim.
In order to take positive control of the property, you will need to close on the house, a process which will carry additional costs. Therefore, you must be sure to save an extra $2,000, on average, for closing. The costs include third-party and lender fees. Also, Soldiers should keep in mind, while forming a budget, that there are annual property taxes that are due to the local government, based on the value of the house. Often, lenders include the estimated tax into a mortgage payment, to be held in escrow and paid directly to the local government. Military families should be sure to check with their lender, though, as tax delinquency can lead to a serious legal headache.
Finally, many military families see real estate purchases as long-term investments, which can be used as rental properties upon a PCS. In that case, using a property manager can prove to be worthwhile, as they can take care of all tenant-related issues while a family is stationed elsewhere. Of course, this comes at a cost, but with the balance of mitigated personal involvement with the property.
In conclusion, while the purchase of real estate can seem like a daunting venture, if done carefully, it can provide the solace of stability and the joy of turning a house into a home.
If you are a service member, military family member, or military retiree, and you have legal questions in this area, call (915) 568-7141 to make an appointment to meet with an attorney at the Fort Bliss Legal Assistance Office, located on the first floor of Bldg. 113 on Pershing Road.