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News and commentary about the real estate market and related topics.
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Avoid common home buyer mistakes…
Buying a home, whether it’s your first or your next, is an exciting process … filled with the anticipation of life in your own space and perhaps the realization of other long held dreams. For most of us, it is probably the largest single financial transaction we have ever made… But it does not have to be difficult, stressful or even risky. However, you do need to do your homework and follow some simple rules and steps before committing to buy.
Skipping even one step or bending one rule makes the process of buying real estate riskier than it needs to be. Almost all the nightmare stories you hear include the fact that at least one of these steps were skipped or taken incorrectly.
Buyer mistakes generally fall into three areas:
- Paying too much
- Losing a dream home to another buyer
- Buying the wrong home
Have a systematic plan before you shop so you can avoid these costly mistakes. Here are some tips for making the most of your home purchase.
Get help… Let’s face it buying a home is not something you do everyday and even if you have bought a home before, it is a complex and ever changing process for which previous home buying experience is generally inadequate to assure a smooth and successful outcome. It should be no surprise that whenever you are doing something you don’t do everyday, it’s always a good idea to get help. But, what kind of help?
You will want the help of a full-time Realtor ® to represent your interests in the process; often referred to as a Buyer’s Broker. This will be real estate agent that will sign an agreement to work in your best interest. A good and ethical agent will do this, even at the cost of their own commission. It is important to understand that the Listing Agent (the agent who has a property for sale) is the agent of the Seller as has a contractual obligation to work for the Seller’s best interests.
Beginning the process with the guidance of your own representative is the surest way of being sure that you don’t miss any of the important steps in the process.
Get Pre-Approved… Most new home buyers don’t understand the difference between being pre-qualified vs. pre-approved. A pre-qualification is just a mathematical formula that mortgage companies use that serve as guide to how much home you can afford. It is in no way a commitment that you can actually get that amount of money. Where a pre-approval is just that, a commitment from the mortgage company that they will loan you the money. Being pre-approved will not only allow you to focus on the homes you can actually afford and are approved for, but can often give you more negotiating power as well. It’s similar to purchasing a car and bringing cash with you. If nothing else, it let’s the seller know they have a capable buyer … one not to be ignored or taken lightly.
Begin with the end in mind… Even before you look at your first house… take the time to define what it is you’re looking for. Make a list of everything you want … Then for each item on the list decide if it’s a “need” or a “want”. A need is any item that would cause you to immediately disqualify a home if it didn’t have it; whereas, a “want” is a desirable item that you would love to have but you don’t have to have.
Think about resale now… I know it’s difficult to think about right now, but you will sell your home someday. Given this is your first home, statistics show you’ll sell it in about 4-5 years which isn’t long. Make sure you don’t fall in love with what you think to be the perfect house, only to turn around a few years from now and be upside down on the value. Consider the potential resale value of your home in 5 years and make sure you’ll either break even, or better yet profit from the sale. This will enable you to purchase an even nicer home next time. Again, a good real estate agent can help you determine the potential resale value.
Become familiar with the neighborhoods… Once you’ve narrowed your focus to two or three neighborhoods, go there and walk around. Are homes tidy and well maintained? Are streets quiet? How does it feel? Pick a warm day if you can and chat with people working or playing outside. Visit at various times of the day and during weekends to get a better feel for the neighborhood, traffic, and other items of importance to you.
Get the facts on the home selected… Ask your agent to prepare a price analysis for the home and neighborhood selected including any information in the public record.
Don’t Skip the home inspection… Regardless of whether the house you intend to purchase is new or used, have it inspected by an independent and licensed inspector. Again, your real estate agent can recommend several from which you can choose. While it’s yet another expense, it’s worth its weight in gold to be able to assure yourself that your dream home is not a lemon. While no home is perfect, you want to be aware of any significant items (especially health & safety issues) that you want addressed before moving in. While the seller is not required to address items disclosed, the cost of addressing these issues may be negotiated with the seller.
Obviously, you have a lot of questions about these important topics and many others as well… Don’t be afraid to ask them … Rely on your agent to help you through the process and guide you home.
