10 Costly Mistakes - one of the best I have found!
This truly is one of the best compilations of mistakes buyers' make...reading and doing these things will make your real estate transaction "smoother and easier" with less stress...what could be better?
Real estate agents see buyers make a lot of costly mistakes. Read
about the 10 biggest home buying mistakes you can not afford to
make & how to avoid them.
Are you making a huge home buying mistake? You may be surprised at how often buyers make costly mistakes - even after being warned by their agent. In this article industry experts discuss the most common mistakes, how to avoid them and how to recover when a mishap happens.
Home Buying Mistake #10 - Buying Big Ticket Items before the closing
You found the home of your dreams and you're under contract. Time to start buying furniture for your new house, right?Wrong.
Jill R. Silvas, SCRP and Branch Executive/V.P. of Relocation Services noted mistake number 10 this way, "They [buyers] frequently go out and buy ‘big ticket’ items while they are under a “conditional offer” or still looking for a home (like a car, expensive furniture, etc.) which can impact their credit and consequently their ability to get a loan.
How to Avoid Making this Mistake: Reign in your urge to spend and save the big purchases for after the close. Even piling up a lot of small purchases on a credit card needs to be avoided.
How to Recover if You Made this Mistake: If you've made a big purchase that you can return, do so. And make sure that it no longer shows up on your credit. If anything is already in the works but not yet completed, put it on hold and explain to the other party that you're under contract to buy a home and you can finish the transaction after close. If you can pay off anything that was bought using credit do so as soon as possible.
Home Buying Mistake #9 - Underestimating the Market
Michael Signet, Executive Director of Sales said, "In my opinion the biggest mistake is underestimating the market. By this I mean that every buyer seems to think that they are the only ones interested in the property. They mistakenly assume that their best strategy is to go slow and make the seller sweat. We tell our buyers all the time…don’t play games. Look at as many properties as you want but when you find “the one” go in fast and strong and make sure you get it."
Monique Bryher, Broker-associate/Realtor at Pinnacle Estate Properties, added:
"Even though this is a "buyer's market," some buyers get overly confident and kill their own transaction. This is by either low-balling the seller or making excessive and/or puffed-up estimates for repairs or repair credits."
How to Avoid Making this Mistake: Keep in mind that real estate is local and every market is different. Just because the market overall is sluggish doesn't mean that it isn't competitive in your area. There are always other buyers out there and all it takes is one other offer to keep you from getting the home you've been looking for.
How to Recover if You Made this Mistake: If the home is still on the market or you're still in negotiations think very hard about how much you want the house and what a fair offer really is. Come to the table with something that is based on facts, like comps, not assumptions about how the market affects your ability to negotiate.
Home Buying Mistake #8 - Not Having All Your Paperwork in Order
Are you organized enough to buy a home? As you may well imagine buying a home involves a lot of paperwork. Being prepared with your paperwork is vital for every step in the home buying process.
When asked about the biggest mistakes that buyers make, Jill R. Silvas, SCRP and Branch Executive/V.P. of Relocation Services had this insight: "They [buyers] fail to respond in a timely and/or complete manner to the various providers ( loan officer, agent, etc.) for information and documents that are needed during the process."
How to Avoid Making this Mistake: Make getting your documents in order your top priority before viewing homes or contacting a lender. Ask your real estate agent/mortgage broker what all documentation you will need for loan approval and start requesting copies of documents you may not have in your possession, such as this year's T4 – letter of employment, Follow up with your agent to discuss what all will be needed after you're under contract. Make yourself available.
How to Recover if You Made this Mistake: If you've already started the process of looking for a home and haven't yet gotten all your paperwork in order, stop looking for homes and start looking for your documents. Talk to your agent ASAP about which documents you need now and focus on getting those together. It is also a good idea to keep your documents organized in a file or folder for easy access.
Home Buying Mistake #7 - Buying at the Top of Their Price Range
There's a term that all buyers need to take to heart when they are looking at and considering homes. That term is 'house poor'. My experience has told me that one of the biggest mistakes buyers make is, "buying a home at the top of their approval level instead of at the comfort level. In my experience there is usually a gap between the two levels. In many cases the full approval level will make the buyer house poor, unable to afford much other that their mortgage payment and necessary recurring expenses. No money for recreation or a birthday diner makes for unhappy home owners."
How to Avoid Making this Mistake: It pays to be conservative when you're shopping for a home. Use your pre-approval amount as a measure for what would max your finances out. Explain to your agent that you aren't comfortable being maxed out and to not show you houses that are at the pre-approval amount. Once you have seen something that is more expensive, its harder to be satisfied with what will make your pocket book much more comfortable.
How to Recover if You Made this Mistake: If you already own a home that is making you 'house poor' see what you can do to refinance. With rates as low as they are today refinancing could make a huge difference. If you're in negotiations on a home already try to get a lower price on the home by making other concessions such as agreeing to not ask the seller for repairs.
Home Buying Mistake #6 - Not Reading & Understanding Contracts Thoroughly
Real estate contracts can be complex and it's a huge financial obligation that you're entering into when you sign a contract. An agent can explain different parts of the contract to you but that doesn't mean you should read every line and ask questions. You should know what each portion pertains to, how it will affect negotiations. and how it's going to affect your purchasing and ownership of the home.
How to Avoid Making this Mistake: The answer here is easy, read every page of the contract. If you don't understand a portion then ask your agent to explain it to you. That's part of their duty as your agent. I strongly suggest that as most of our contracts are preprinted, have a look at the contract BEFORE you are all excited about a home, you are only thinking of moving in!! It’s the wrong time to be looking at the details.
How to Recover if You Made this Mistake: Not reading and understanding a contract thoroughly is a mistake that can get buyers into the most trouble. Unfortunately, most contracts are binding and it's your responsibility to make sure that everything is accurate and to your liking before you sign. Try to discuss any issues with the other party to see if they are willing to rework the contract.
Home Buying Mistake #5 -Buying Based on Emotions Only
Buying a house can stir up a lot of emotions, which is to be expected. It's likely the biggest purchase you'll ever make and it will be the place you call home. But getting too emotional can cost you a lot in the long run. Craig Delsack, a real estate attorney at the Law Offices of Craig Delsack, LLC, has seen a lot of home buying mistakes and this is one of them. He says:
"First [mistake] is looking at the transaction as a personal transaction rather than a business transaction. They [buyers] get too emotional (e.g., fall in love with a home) and don't let their common sense and business sense control their decisions. This can be problematic because they could glaze over important facts that might deter a "business mind" from going through with a purchase."
How to Avoid Making this Mistake: Employ a qualified real estate agent. They are market specialists whose business savvy can balance the emotional investment you've made in buying a home. An agent will point out all the pros and cons in a house looking at it from a business/investment perspective. A Realtor® who you have employed can be a good sounding board, as long as there is no pressure on the Agent to sell you any particular home.
How to Recover if You Made this Mistake: If you've already fallen in love with a home, let your agent take the lead throughout the negotiations. They are professionals that are trained to approach a purchase as a business transaction.
Home Buying Mistake #4 - Focusing on Wants Instead of Needs When Considering Homes
This next mistake is closely related to the one above. The wants are the more emotional choices rather than the practical ones that serve a purpose. As Haymarket, VA Re/Max Olympic real estate broker Chris Howell points out this problem often plagues inexperienced first-time buyers.
"First-time home buyers will obviously make the biggest number of mistakes as they don't exactly
know what they need, they shop only for what they want. The experienced home buyer will know what is really important to them."
How to Avoid Making this Mistake: Make a home search must-have list and refer to it any time you find a house that you 'love'. The must-have list should be needs, not wants or wishes. This list will help keep you grounded and focused on the bottom-line. Look for a home that meets the most of your must-haves.
How to Recover if You Made this Mistake: If you're in the negotiation process on a home and realize that it doesn't meet a number of your needs then use the provisions of the contract that will help you either get out of the deal (losing the little bit of money you may have invested is better than buying a house that isn't right for you) or fix some of the issues before you close on the home.
Home Buying Mistake #3 - Not Getting a Thorough Inspection
The inspection is a critical point in the home buying process. It's when you will get a real look at what a home is made of, literally. It's also gives the buyer the power to walk away from a contract if the home isn't exactly what they expected and to re-negotiate. Yet, many buyers are so excited to have found a home and signed a contract that they don't do their due diligence and get a thorough inspection.
How to Avoid Making this Mistake:, "Hire a licensed home inspector - this is critical, no matter if you're a first time buyer or a seasoned investor. Too often people get emotionally involved in the purchase and can't make objective decisions. This is just one of the reasons an inspector is important."
How to Recover if You Made this Mistake: Unfortunately, there isn't much you can do once the inspection period has passed. There is a good chance that the home is in good shape, however you probably won't know for sure until after you've moved into the home. Your best bet is to get a good home warranty which will cover some of the issues that may arise.
Home Buying Mistake #2 - Not Getting Pre-approved for a Loan
When we polled our real estate resources, the majority said not getting pre-approved for a loan was by far the biggest mistake a buyer could make. It should be the first thing you do if you're serious about buying a home.
How to Avoid Making this Mistake: Don't skip the pre-approval process before you start looking at homes. Lets put it this way when I’m asked about big buyer mistakes:
"Failing to get fullyapproved, not pre-qualified, by a qualified and experienced mortgage broker before looking at houses. The difference is the approval comes only after the lender has verified the buyers income, assets, has run a full credit report and the verified documentation has been reviewed by an underwriter or thru desk top underwriting. This will prevent the buyer from looking at homes they can’t afford and put them in a strong negotiating position for making an offer."
How to Recover if You Made this Mistake: Ask Your Buyer Agent to get you in touch with a qualified and experience mortgage broker and get all your paperwork together. Once you've found a Broker you like get them to give you a pre-approval.
Home Buying Mistake #1 - Not Using a Qualified Agent
Having a buyer's agent working on your side will help you to avoid all the other mistakes listed in this article.
Victoria Shtainer, Esq., Senior Vice President Associate Broker at Prudential Douglas Elliman Real Estate, explains this well:
"By using a broker/ agent you are getting an ally and negotiator for free. You are using all the knowledge and skills without paying for it. By using an agent you remove yourself from the situation especially in a negotiation. An experienced agent knows how to get to the closing table by helping the buyer and diffusing conflict. The buyers’ agent can help you in showing you correct homes that fit your search criteria instead of you walking around and spending every Sunday at an open house. If they are an experienced agent they will show you where the value is and explain that not all sales in the area are the same. They can also advise you how to present the offer correctly. The biggest mistake buyers and sellers make is NOT using an agent. It hurts their final sales price."
How to Avoid Making this Mistake: Simply put, find a real estate agent before you look at homes. Ask friends and family members for references and talk to a few agents before deciding who you would like to work with.
How to Recover if You Made this Mistake: It's never too late to find an agent. Even if you're under contract there's still plenty of guidance that an agent can give that will make getting to the closing table a lot easier.