Avoid Common Buying Mistakes & Learn To Choose Value Priced Homes
Mistake #1 – Not Planning your move
Many first time homebuyers who are renting get into problems with their lease. They make an offer on a home forgetting they still have several months left to go. The lesson learned is if you’re renting, read your lease agreement carefully. If in doubt about the terms, talk to an attorney. Don’t sign a year or six month lease and then start house hunting. Sellers are usually reluctant to Wait for more than 60 days to close the transaction.
Mistake #2 – Not getting a pre-approval letter
Contact a bank or mortgage broker before you start looking at homes. Go through the complete pre-approval process and get a letter from your mortgage lender stating you’re good to go for a certain dollar amount.
This pre-approval letter gives you three big advantages:
You’ll know exactly how much home you can afford, how much down payment you’ll need and what your closing costs will be.
You won’t waste your time looking at homes not in your price range.
When you do find the home of your dreams, you’ll be able to make a strong offer that sellers will find harder to counter. Obviously, they didn’t want to take their home off the market and wait a week or two to find out if the buyers qualified. Timing and a sure-thing approach will often win out over a higher offer.
Mistake #3 – Not having an exit strategy
Before you buy property think about how long you intend to live there. Remember the average home buyer stays in their home about six years. So it’s important to do some what-if thinking before you commit.
Mistake #4 Not checking out the neighborhood
Spend a lot of time in the neighborhood before you buy. Check out the different ways you can get to the house you’re interested in. How close are shopping, schools and other areas of interest? And finally, how quiet is the neighborhood at different times and weekdays as well as on the weekend?
Mistake #5 – Buying the wrong type of house
It’s important to put some thought into what your family lifestyle is and make a list of important things you want in a home. Don’t be swayed by a cute restored bungalow just like the one you grew up in, if a two storey fits your family better. Every once in awhile take a deep breath and do a reality check when you’re out house shopping. Try to project what your needs will be in 5 to 10 years from now. And don’t let awesome curb appeal sway you if the floor plan doesn’t fit your needs.
Mistake #6 – Buying a home on impulse
New homes are professionally decorated and carefully arranged to push your emotional buttons. Existing homes are sometimes spruced up or staged to do the same thing. Resist the temptation to buy before you look around and know what’s available in your area. If it’s a new construction, check out the builder's reputation. Talk to three or four people who bought from that builder and listen to what they have to say. This is also a great way to see what your neighbors would be like.
Mistake #7 – Buying a property that’s hard to sell
Typical hard-to-sell properties are:
Homes that back up to railroad tracks, freeways, industrial areas, frontage roads, etc.
Homes that have been over improved for the area. A typical example would be a 900 sq ft. bungalow that an owner adds on to the back or side. Sometimes it’s a well-planned addition that blends in, other times it’s a tacky add-on.
Neighborhoods that have become run down with a high percentage of rentals or foreclosed properties.
Homes that stray too far from the architectural mainstream of what people are buying. Typical examples are round homes, earth-covered and conversions from other buildings, such as barns, silos, sheds etc. They can be quaint and even be featured in a home magazine, but selling and getting back the money invested is not always easy.
Properties that have lot or landscaping problems. Examples are: a steep slope for a backyard or a gully. Little or no backyard. No privacy from neighbors. The way a house sits on a lot can also affect value.
And of course the most common, exterior and interior colors that don’t complement or fit the house. You may love bright blue, but if you paint your house that color, you’ve just reduced it’s value considerably.
When you look at a property and see a negative but feel other features may out weight the problems, especially price. Slow down and think it through. There are red flags waving.
Mistake #8 – Overextending your budget
It’s up to you to look at your lifestyle and realistically determine what you can handle. However, there’s another way to look at the amount of home you can buy. Some people claim you should buy the most home you possibly can now. As your income goes up and home values go up you win. You not only save a move but you end up with more equity and a home you’ll enjoyed more.
Mistake #9 – Not protecting yourself when you make an offer
Many home buyers in the excitement of finding their dream home and writing up an offer, forget to add contingencies that will protect them. A contingency is a clause that added to an offer and makes it subject to a certain event. Common contingencies are financing approval, house inspection, closing on a certain date, replacing a roof, etc. It’s true that some contingencies will weaken your offer such selling your house first or adding a list of repairs. But there are others that you need to add to protect yourself.
The most critical clauses you should consider adding are:
Always make your offer subject to a professional inspection. If you find problems then you have some leverage to fix them or walk away and get your deposit back.
Making your offer subject to final loan approval will protect you from something unforseen. For instance, should you get a laid off during the loan process you’ll lose the house but not your deposit.
If you’ve made an offer on a new home and your old home hasn’t closed yet, add a clause making it subject to the old house closing and funding.
You want the offer subject to the home appraising for at least the sales price. If the appraisal comes in low, you’ll have the option of negotiating the lower price or walking away.
Mistake #10 – Getting family, relatives and friends too involved
Not involving family or friends can sometimes be difficult. If mom and dad are putting up the down or co-signing on the mortgage, then they’ll be a big part of the deal. Otherwise, getting too many opinions can be worst than no opinions at all. Often, those whose opinions you seek will see your enthusiasm and support your decision even it’s a bad one. Or someone who doesn’t know what they’re talking about will point out problems and bad mouth a good home.
First, rely on your agent. He or she is a professional who knows the areas and pitfalls. Second, trust your own research. You’ve undoubtably looked at a dozen or so homes in your price range, so you should have a pretty good idea of values and neighborhoods by the time you’re ready to make a decision. Don’t make the mistake of trying to save a few hundred dollars by short cutting the inspection process. Having anyone other than a professional who will inspect the house and give you a written report can come back to haunt you. The bottom line is go with the advise of your buyer’s agent and home inspector, they’re the pros who can help you the most. If you want to involve family, relatives and friends have a barbecue at your new house after they help you move in.
Mistake #11 – Not being able to make a decision
When you’re searching for the right house you should take your time and look at as many homes as you need to get a good feel for the market. Once you’ve narrowed down your choices and decided on your dream home, then it’s the time to move swiftly. Many first time home buyers lose a house or two they like before they realize that they have to move quickly. Indecision can cost them the home of their dreams.
Fear of making a mistake is usually the culprit. The best way to work through this is talk it over with your broker, lender or someone who has bought a house before. Once you get it out in the open, it becomes easier to deal with. Buyers remorse is the industry term for this fear and it applies to not only buying a house but a new car, appliance, engagement ring or whatever. Most home buyers get it somewhere along the way. Knowing that’s it out there lurking and will probably strike when you least expect it, should make it easier to deal with it when it grabs you.
Mistake #12 – Not getting a buyers broker early on
A good buyers broker on your side if the best thing you can do to find the home you’re looking for and get the best deal. These agents know the market, the best neighborhoods and what type of loan will best fit your situation. You’ll save a lot of wheel spinning if you get an agent in the beginning. The best part is the fee is typically paid by the sellers who are glad to pay it to get their home sold to a qualified buyer. It’s true you can find a home on your own, but why spin your wheels and go through the hassle when you can have the services of a professional that will make sure you make the right moves. So, how do you find a good broker? Ask other people you know who have bought homes if they can recommend a good agent. An excellent source is mortgage lenders and title people. They know who are bringing in the deals and how good a job they’re doing for their clients.
Once you find a good Realtor, it’s in your best interests to work with him or her on an exclusive basis. You may be asked to sign a Buyers Agency Agreement. If you specify that it can be cancelled by either party you’ll have a way out if you find you can’t work that agent. Working with several agents at the same time is usually not as productive. None of them are likely to consider you a serious client whom they are willing to spend time on searching out the best homes. To find your dream home you’ll want an agent who will stay of top of the best buys as they pop on the market.
Mistake #13 – Not getting a professional home inspection
The importance of a professional home inspection cannot be overemphasized. You stand to save a lot of money and avoid problems with this small investment.