Buying a home is a big deal. There are many home buying pitfalls a buyer can make. This article will discuss some of the bigger pitfalls that can make your home purchase less than perfect. These deadly pitfalls can cost you tons of money, cause lots of aggravation or both!
Unfortunately many times a home buyer will rush forward in the excitement and emotion of buying a home, only to get extremely frustrated with the home buying process or find out they made a mistake later on. Find out at the end of the article how to avoid these 10 Deadly Home Buying Pitfalls
TOP 10 DEADLY HOME BUYING PITFALLS
1- NOT UNDERSTANDING AGENCY
Real Estate Agency is a misunderstood topic by many and can create many problems if not fully understood. Basically, agency is how a real estate agent works for you and will interact with you in a real estate transaction. It is a “legal relationship” you have with your agent. One mistake many buyers make, is buying a home at an open house directly from the listing agent.
The listing agent or sellers agent, owes the seller fiduciary responsibility….. their job is to secure the highest and best offer possible on the property… their duty is to the seller, not you the home buyer. They are to legally give every advantage to their seller even at your expense.
A Buyer’s Agent on the other hand owes the home buyer fiduciary responsibility. Every home buyers has the right to use a buyer’s agent.
2- Not Getting Pre-Qualified Before Looking at Homes
Looking at homes is fun! Talking about money or lack thereof is not! Getting a proper pre-approval letter will head off tons of aggravation and heartache from the beginning.
A proper pre-approval will ensure you are looking at the right homes, let you look with confidence and can even be used as a negotiating tool.
You will also be having dialogue about programs and interest rates with your mortgage officer prior to finding a home. There will be no surprises by the time you submit your mortgage application on a specific home.
3- NOT SEEKING THE PROPER PROFESSIONAL HELP
Don’t think you can learn everything you need to know about buying a home on the internet. Real estate is dynamic and markets change quickly. An article written a year ago can be outdated.
One thing I can say for certain is as a home buyer you don’t know what you don’t know.
There are buyers agents that can help you buy, plus you have mortgage bankers, home inspectors, real estate attorneys, appraisers, home improvement contractors and more…. Each can play a vital role in your home purchase. Saving $500 by not having a real estate attorney review your purchase contracts or skimping a $100 to get a cheaper home inspection is penny wise and pound foolish.
Everyone of these professionals are immersed in the business of real estate 8+ hours a day. Every day, every closing and every client bring them more real estate experience to help serve their next client.
4- THINKING SHORT TERM AND IGNORING INTERMEDIATE AND LONG TERM HOUSING NEEDS
Thinking of your immediate housing goals without thinking about your long term goals can lead to disaster.
Try to buy a home that will suit your needs for the next seven to 10 years at a minimum. Five years can be a long time, jobs change as well as marital status or family size can change. There is a cost to selling your house and if the market is not appreciating quickly you might not get all of your money out in a short period of time if you end up having to sell.
Of course no one can think of every possible scenario, but work thru the obvious ones. Is your job stable? Will your family status remain the same or will the home you buy allow for changes? Is my income stable? etc….
5- NOT HAVING A HOME INSPECTION OR HIRING THE WRONG HOME INSPECTOR
Unless you know what you are doing, don’t do it. Don’t skip the home inspection to save money or because the listing agent told you, you would get the house if you would.
A house is filled with expensive systems and fixing one or several can be expensive. Not only is it important to have an inspection but hire a good home inspector. This is not the time to save money. Referrals and your buyer’s agent can be a good resource to find a great home inspector.
6- NOT FULLY UNDERSTANDING THE COSTS INVOLVED
There are closing costs, pre-paids, escrows, home inspection fees, moving costs and more when you are purchasing a home. Make sure you fully understand the costs involved when purchasing a home. Many times home buyers overlook the cost’s that are above and beyond their down payment.
A mortgage officer will cover all your down payment and closing cost’s that will be needed and a buyer’s agent will discuss other costs with you as well.
If this is your first home don’t forget some of the basics you may need immediately, like a snow blower or a lawnmower. Or maybe your house was not fully applianced and you need a refrigerator, washer and/or dryer.
7- NOT UNDERSTANDING CURRENT MARKET CONDITIONS
Real estate markets rise and fall continually. The current state of a real estate market dictates many thing when you are buying a home. For example, if you are in a buyer’s market you will negotiate differently than when you are in a seller’s market. In a seller’s market a seller may be motivated but not desperate while in a buyer’s market they may be desperate!
Most home buyer’s understanding of the current market conditions can be 6 to 12 months behind what is really happening. Most market indicators are historical indicators making them a lagging indicator. If a market was flat and down last fall and winter, it doesn’t mean that market can’t turn on a dime and be red hot in the spring.
Only a real estate agent has access to the most up to date real estate market data and the skills to interpret them.
8- RELYING ON ORAL AGREEMENTS OR STATEMENTS
If you are buying a home based upon what an agent or a seller is telling you, make sure to get it in writing. Oral agreements or representations are legal but not enforceable. “But the seller agent said”… is probably not going to cut it in court.
Any representations that have been made to you and is not in any marketing materials or written contracts need to be put in writing.
For example a big one around me is owners will have in-law or accessory apartments and if you ask them if they are legal they will the owner will say yes. Most often they are not. Have them put it in writing that they warrant the unit is legal and a permit can be obtained.
9- NOT UNDERSTANDING FAIR MARKET VALUE
There is a process for determining fair market value of a home. It compares homes with similar specifications in a similar location to the subject property.
What you can afford or what your dad thinks has nothing to do with what most other buyers in the marketplace will spend on that home. Only a Comparative Market Analysis or an Appraisal can indicate what a home is worth.
A home can be overpriced, priced right at market or even be under priced. As a matter of fact many homes will be priced right at market or slightly under to generate multiple offers. It is a strategy home sellers and real estate agents use. Another home buyer will come in and scoop it from underneath you if you are trying to play hardball and get the home for less than market.
Being able to have an idea of what a home is worth will give you an understanding of it’s value as it sits today and will help you structure an offer that will get you the home you want.
10- Not Understanding How to Negotiate
It is easier for a buyer to negotiate in a buyer’s market. A buyer’s market will allow a buyer to get away with a lot. Flop to a seller’s market and you will be putting in offer after offer. Only to be rejected if you don’t change your negotiating strategy. I can’t tell you how many times a home buyer wants negotiate his way and is floored when the seller doesn’t even engage in negotiations with them and the sellers sells to another buyer that might not have been offensive or were just plain easier to deal with.
There are so many variables in structuring a negotiating strategy and no one way will work every time. Real Estate Agents spend part of every day negotiating prices, home inspections and other detail involved in a real estate transaction. We can be an extremely valuable resource.
HOW TO AVOID THESE 10 HOME BUYING PITFALLS
Quite frankly the solution is easy! All you have to do to avoid these 10 home buying pitfalls is to use a buyer’s agent. And, I am not talking about the first agent you run into that says they can help you or your Aunt Mary because shes in the business and is a family member. I am talking about finding an agent you trust, can provide you with data, educate you about the process and bring the necessary skills to the table.
Emotions and urgency can easily take over a home buyer. A buyer’s agent is in the business of home buying and can work through details quickly and remain objective. They have a unique set of skills that will be extremely helpful while you buy a home. Remember a buyers agents works for you. You are still in control and call the shots. They are just there to guide you, provide resources and use their skills and ability to help you make the most of your home purchase.
Everyone of these points a good buyer’s agent will navigate you through with ease. We do this everyday. A buyer’s agent will take time to understand your motivation to buy. They will discuss the other professionals you might need as well as make recommendations. A buyers agent will help you identify homes, run an analysis of values and help structure a negotiating strategy as well.