As we watch the real estate market and track the activity, we are finding that more people are taking advantage of the still low, but rising interest rates, and the still low but rising home prices. We have all heard the lines about purchasing your investments/assets properly – “buy low and sell high.” Following this trend, we are noticing that buyers are making faster decisions on their home purchase so they don’t lose out on the deals currently available in the market. To those of you making that leap from renting to buying their first home, there are a few common mistakes you should be aware of, and areas that may require some research beforehand.
Here are 10 all-too-common mistakes first-timers make:
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Not knowing how much house you can afford.
Many novice homebuyers spend a lot of time researching homes — comparing kitchen layouts and backyard square footage — but very little time researching their financing options. One of the first things buyers should do is talk to a qualified lender and get preapproved for a mortgage. By determining how much house you can afford, you lessen the risk of falling in love with one outside of your price range. Getting preapproved is a great way to start the process, so if you do find “the one” you are able to put an offer on it immediately before anyone else can discover your jewel.
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Assuming foreclosures are great deals.
Just because the previous owner owed $450,000 on a house before the bank took it over doesn’t mean it’s worth that much now. Values have slipped significantly, so you may not be getting the bargain you think with a foreclosure. Also, most homes owned by lenders or banks have been sitting vacant for months, and may have been vandalized; which may require extensive renovations or repairs. Weigh the costs of fixing up the property, against the savings you’ll likely reap by buying a lower-priced foreclosed home.
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Letting your true feelings show.
No matter how much you’ve fallen in love with a house, don’t let the seller’s agent in on it; otherwise, he will gain the upper hand in negotiations. Play it with the 3 C’s: cool, calm, and collected. Let them know you like the home, but if the seller isn’t willing to negotiate there are plenty more available.
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Failing to find a good buyer’s agent.
Landing a mortgage is tough these days, so buyers should rely heavily on knowledgeable agents to help them get their finances in order. After all, buyer’s agents have a fiduciary responsibility to the buyer exclusively — and should be looking out for their best interests. Consider using an agent recommended by a relative or friend, or do some looking at your local real estate office and review their credentials and designations. Interview the candidates about their experience; ask if they’ve worked with first-time buyers before and what kind of service you’ll get from them.
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Underestimating the costs of owning a home.
Whether it’s a rusty pipe or a leaky roof, things go wrong and need to be fixed. Many homebuyers don’t anticipate the additional costs for repair and maintenance, or for an increase in utility costs. Consider the age of your new home and how well it’s been maintained by the previous owners in your budget. Be prepared to set aside a small percentage (1% at most) of the home’s purchase price annually for repairs and upkeep.
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Failing to budget for property taxes.
Property taxes — and the likelihood that they’ll climb over the course of your time in the house — should be factored into any home buying budget. To get an idea of how much you’ll be paying, call the local assessor’s office, or your realtor will be able to look it up. This is also public information if you go online to the county’s property appraiser website and look up the address of the home of interest.
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Assuming your first offer will get accepted.
As home prices get even more affordable, competition is bound to heat up. You can’t assume you’ll walk in there, make the offer and get it. Try not to get discouraged if you lose out on the first — or second — house you make an offer on.
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Skipping the inspection.
Before closing, hire a professional inspector. The seller isn’t likely to tell you there’s mold in the basement or the walls are poorly insulated. Buyers tend to find and hire their own inspector — independent of the real-estate agent — to ensure there’s no conflict of interest. You can find inspection companies in the phone book, or by doing a simple Web search with your ZIP code.
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Doing too much too fast.
Some buyers want to make the house their own right away. They over extend themselves on credit to do so, and assume the improvement will pay for itself by increasing the home’s value. But that’s not always the case — especially in today’s market. Instead, buyers need to exhibit patience and make changes over time.
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Failing to include a contingency clause in the contract.
A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through, or the appraisal price comes in lower than the purchase price. Should one of these events occur, the buyer gets back the money he used to secure the property. Without the clause, he can lose that money and still be obligated to buy the house.
These are just a few suggestions to help you avoid making the same mistake others have made in the past. Using these guidelines, you will experience a less frustrating purchasing experience that may prevent you from “putting the cart before the horse,” so to speak. If you have already consulted a real estate professional, then you have already been advised of how to avoid these exasperating mistakes. Your realtor will be able to explain the step-by-step process of your home buying experience and offer assistance along the way. Mistakes are not uncommon when purchasing a house, but can be avoided with the proper guidance and knowledge.