Most Common Mistakes Made By Home Buyers? (I call these the BIG 12)
Through the years of working as a contractor and professional home inspector, I have had the privilege of working with some great people in every aspect of the real estate industry. Unfortunately, I have also witnessed first hand some of the mistakes made by eager, new and first time home buyers. Most of which were no fault of their own, but an end state of the processes involved in real estate transactions, laws and regulations.
1. Buying the Wrong House.
The very first thing home buyers should do is making a list of priorities desired in a home. If you do not prioritize your needs and requirements and list out your desires and nice-to-haves, you can easily get swept up in the excitement of buying a home that was a bit less or more than actually needed. Buying too much or too little in a home can place both emotional and financial burdens on you and your family for years to come.
2. You picked the Wrong Community.
Some places are just flat-out expensive, and you'll probably have to search for a location that's affordable. That doesn't mean you should choose the cheapest locale.
If you don't like the location you'll be unhappy. What's more, you'll probably have a hard time selling your property if the community isn't good. Ask around and read the local papers to know how the community is faring economically, what the major issues are how many resources it offers.
Don't neglect the schools. Gather such data as test scores, statistics on the percentage of kids who graduate and go to college, the student/teacher ratio and so on. Take time to visit local schools and also to talk to parents and students to get the inside scoop.
3. Right Home, Right Community, but wrong part of the Sub-Division.
Even if you find the right home in the right community, is it located in the best part of the sub-division? Where am I going with this you may ask? The following comments come from living in multiple cities during my adult life and from building and inspecting homes in these cities. What I mean, by my comments about the right part of the sub-division is this, in my opinion, there are better parts of any sub-division to build and buy a home in. It's all about location to include where the home is located with its own sub-division. Here are a few areas I recommend avoiding:
•· Homes that are on long straight streets with a sub-division
•· Homes that have adjoining drainage ditches or easements which connect to the property
•· Homes that back up to drainage easements or retention ponds
•· Homes that busy main city streets behind or next to them
•· Homes that are in a curve of a main entry street into the sub-division
•· Homes that lie next to a utility easement such as over-head power lines
•· Homes that have utility access panels, electrical transformers or boxes in their front lawns
•· Homes that are more than 150 feet from a street fire hydrant
4. Falling in love with a home.
If you think a house is ideal, don't let the seller or any of the seller's agents know. If the seller finds out you're in love with the house, the seller could hold out for a higher price.
A wise home buyer knows there are lots of houses -- and there's one out there that's the right house at the right price. If you can't afford it, move on and keep looking. Falling in love always leads to the number 1 mistake "Buying the wrong house." What if something is really wrong with the home and you know deep down that you should not proceed, but you really love the home. Love will blind you to your actual feelings about the property and will cause you to accept things that you normally would have run away from. Falling in love with a particular home, home builder or model of home can cause you to fail in one or all of the other eleven areas listed in this article.
5. Over-buying the first time.
Being "house poor" is a very uncomfortable existence. A large and beautiful home with little or no furniture tends to be empty and cold. A life where almost every dime of your earnings goes to the support of your house wears thin very quickly and is a frequent cause of family stress. Pushing yourself right up to--or beyond--your limits leaves you highly exposed when the inevitable changes to the national or your personal economy occur. Leave yourself some breathing room! Buy a home that's way out of your price range and you could well derail your ability to fund other important items such as retirement savings, your kids' education -- not to mention an entertainment budget.
6. You picked the wrong mortgage.
These days, many homebuyers are rushing to secure a mortgage as fast as possible without fully exploring their options. That's because sellers often only consider bids from individuals who have been pre-approved for a loan. A word of advice? Pick your financing package with care.
Gone are the days when you had to save up for a 20% deposit to own your dream home. Now you can take out 97% (or even 100%, if you are a Veteran) of the value of the property which means you don't have to spend years saving for a deposit before getting into the property market.
7. Don't sugar coat reality and a bad credit rating.
It's best to be honest here (as always!) and accurately report your credit rating, card debts and personal debts. If you try to fudge the truth, this sort of stunt can stay with you forever.
8. Buying a house that is tough to resell.
Many home buyers stay focused on finding a home where their families will be happy and safe. You should also remember this is also a big financial investment. Take a moment to look ahead to the day you'll sell the house. Knowing the neighborhood and paying attention to marketable details of the house will go a long way toward preventing a buying mistake. I always tell my home inspection clients that they should always look at a house as if they plan to sell it in three years. A great example is a two story home that has the master bedroom on the 2nd floor.
It's easy when you're house hunting to forget what it's going to be like to sell your home down the road. But as you tour homes, put yourself in the perspective of the sellers. You may be drawn to a home that has quirky features or no closets or just one, tiny bathroom (You can use armoires. Share showers.) But others may not be as enthusiastic. When you buy, think about the day it comes time to sell.
9. Not using an agent at all or using the Listing Agent as your 'Agent'.
Finding out too late that you have no representation can be a nasty surprise when you assume that the Agent with whom you are working represents you when they actually represent--and owe complete allegiance to--the seller. How does this happen? By not taking the time to investigate and familiarize yourself with the laws regarding real estate transactions. Or, by rushing out to look at homes, whether in person or on the Internet, and contacting the Agent who has the house advertised (who will be the listing Agent and will absolutely represent the seller).
Another pitfall occurs when you try to represent yourself in the purchase of a home, thinking that you will save money. This may be the case, but it is just as--or more--likely that you will run into a savvy seller who is looking to keep the commission savings in their pocket rather than give it to you. The sellers or listing agent represents the seller, although they can represent the buyer too, it is not a wise decision.
A buyer's agent will help you negotiate a contract, process the paperwork, help you find the right home and help you schedule the needed inspections and appointments necessary when you do find your dream home.
10. Putting up "Non-Refundable" earnest money.
If your Agent recommends it, find another agent because they don't have your best interest at stake. Be sure to work with a good real estate agent to write a refundable contract that will allow you to withdraw your offer and get back your earnest money if the financing, home inspection or appraisal do not pan out.
11. You forgot about or under estimated the closing costs.
Think it's bad to pay tax when you eat out? Wait until you're paying closing costs, which can run 2 to 5 percent of the home's purchase price, according to Tyson.
A mortgage lender should provide you with a specific estimate of what costs will be. But keep in mind they include such things as origination (points) on a loan, escrow fees, title and homeowners insurance, legal costs, property taxes, fees to record your need deed and notary fees.
12. Not hiring a professional Home Inspector.
Bottom line: You should NEVER buy a home without having it inspected. After all, you don't want to learn that you've bought a house that's filled with termites or has a frazzled electrical system. If you're building a new home, an inspection can ensure that all the work has been finished properly and to current building standards.
Home inspections typically run anywhere from $250 to $500 and usually include a thorough check of a home's mechanical, heating and air condition systems, plumbing and electrical works, structural to include roof, walls, foundation and attic, drainage and attached/detached garages.
Robert is not a real estate agent, broker or attorney, nor is he a financial consultant or does he claim to be an expert in any of these fields. The above views are his own and have been obtained from experiences in contracting and professional home inspections. Always consult with your financial planner and/or Real Estate Agent before making any decisions.
Robert Welch is your Professional Real Estate Inspector licensed in Texas (TREC # 9292) and owner of ATEX Inspects LLC, a Home Inspection Company in Houston Texas. ATEX Inspects LLC performs commercial and residential inspections. You can find out more by clicking on this link to his site: http://www.atexinspects.com or contacting Robert by email at: Robert@atexinspects.com