Wednesday, March 19, 2014

The 25 Biggest Mistakes Home Buyers Make.

1. Over borrowing:
Homebuyers sometimes get caught up in the frenzy when searching for homes and start putting offers down for much more than they can afford.  Your dream home will be a nightmare if you can’t really afford it!

2. Underestimating home improvement costs.
The rule of fixing up or remodeling a home is this – expect it to take twice as long and go double the budget as planned.  The little things – towel hangers, window treatments, and doorknobs can add up to big bucks and once you get started you won’t want to stop!

3. Estimating initial moving and settling costs.
It usually costs more than anticipated to pack up your former home, get everything moved, and settle into your new home.  Those quick trips to Target and Bed, Bath & Beyond can add up faster than anticipated!

4. Buying the ‘outlier’ house.
It may seem like a good deal at the time but you’d be wise to avoid the biggest home on the block, the house with the funky floor plan, houses with garage or patio additions, or any strange characteristics that may come back to bite you when you try to resell. 

5. Don’t buy out of frustration.
Putting offers down on homes and not having them accepted can get super frustrating, especially in market with tight inventory.  Stay cool, calm, and collected when buying a home – anticipate that it could take months of searching and during that time you stick to it like any other financial plan, not an emotional purchase. 

6. Don’t be over cautious.
Buying a home can be such an intense and overwhelming process that buyers sometimes suffer from ‘paralysis by analysis,’ scrutinizing every single decision and losing so much sleep over it that they shut down from fear – often losing out on great deals and opportunities.

7. Not listening to the market.
If you want a mansion for $200,000, by all means go looking, but if there just aren’t any mansions anywhere near that price then the market is telling you something.  Listen to it.  Just like sellers need to adjust their strategies and do price reductions based on market conditions, so too should buyers make sure their expectations are realistic. 

8. Don’t buy just on price.
Getting the lowest possible price doesn’t mean you got a good deal if you’re not happy in the property.  Price is one factor but remember that finding the house you love and want to stay in for as long as possible is what really determines the overall value of a real estate transaction.

9. Don’t buy too small.
If they say “location, location, and location,” are the biggest factors when buying a home, I’ll add a fourth, “square footage.”  It’s easy to remodel and fix up a home but it’s difficult and incredibly expensive to add square footage – and your house will always be worth what similar square footage floor plans are going for.

10. Not talking to your CPA.
Even if it’s not tax time, communicate with your CPA or tax preparer before and after the real estate transaction.  When you close on the house, what you can write-off, and other strategies may save you a lot of money –or cost you – so it’s important to get your tax professional in the loop.

11. Listening to the wrong advice.
The moment you start the buying process (or selling) it will seem like everyone is an expert and has advice for you.  Be careful who you listen to – unless someone is a successfully and wealthy investor or real estate professional, you might want to take their advice about the market, interest rates, and the economy with a grain of salt – or block it out all together.

12. Not using your agent to the fullest.
As a buyer’s agent we work for YOU and only you, so please utilize our services to the fullest.  Ask questions, discuss strategy, and share any thoughts, circumstances, or factors that are influencing your home buying decisions.  We are on the same team so we love it when a client sees it as such so we can work to get them their dream house!

13. Not getting fully prequalified first.
Buyers are wasting their time and precious money if they don’t go through the complete process of getting preapproved with a lender before they start looking at homes and putting down offers.  Don’t worry – it’s painless with a good lender and you’ll feel empowered by knowing exactly what you can afford and how much your future payment will be.

14. Not looking at your credit score 6 months ahead of time.
It’s a good idea to get a copy of your credit report 6 months or more before you’re ready to even start the home buying process.  Up to 40% of credit reports have some sort of errors, and surprises, duplicates, or even identity theft are very fixable – but can take time.

15. Overpaying for charm.
I know you love the tiny, overpriced home because the bathroom and kitchen are remodeled, but please realize that’s the exact reason it’s overpriced!  Cosmetic remodeling and basic redesign like paint, flooring, landscaping, fixtures, and tile are weekend projects that shouldn’t make you toss your buying strategy out the window.  Too often, buyers pay too much for small homes that have been remodeled – a big ‘no-no.’

16. Not looking at the neighborhood.
Remember that you’re not just buying the home but you’re buying into the neighborhood, and while you can remodel and change your home, you have no control over your neighbors.  Walk the neighborhood, talk to a few neighbors, ask questions, look at reports, and go by at night or on weekends a few times.

17. ‘Shotgunning’ unrealistic or non-serious offers.
Just like some buyers suffer from ‘paralysis by analysis,’ others become too aggressive, shooting off offers like they were flying paper airplanes.  As a general rule of thumb, don’t submit an offer for a property unless you will be happy – and willing – to go through with the transaction if it’s expected.

18. Not thinking long-term resale.
Yes, you have to pay more for a great property, but that value will grow under your care, allowing you to cash in even bigger when you sell it down the road.  The better the property, the better you take care of it, and the longer you hold it, the more cash it will put in your pocket.

19. Thinking the Good Faith Estimate is set in stone.
Remember that it’s just an estimate, and what time of the month you close and other factors can swing your actual closing costs widely higher or lower.  Expect variations and keep a cushion so you won’t be out of money after the closing.

20. Not negotiating.
Everything is negotiable!  Of course you don’t want to waste everyone’s time by asking for the bizarre or ridiculous, but don’t be afraid to bounce back with reasonable counteroffers that “sharpen the pencil” on terms and conditions.  The longer you keep a seller (or buyer) negotiating, the more invested everyone becomes in the deal so it can get done!

21. Waiving a home inspection.
If there is a #1 mistake buyers make, this would be it.  Not getting a home inspection is like buying a million dollar racehorse without checking to see if it has bad knees.  You’re not saving a few hundred dollars – you’re taking on huge amounts of liability, future costs, and disappointment in the future.  Get a home inspection, and carefully review your pest inspection, disclosures, and possibly a roof certification with your agent. 

22. Falling in love with one house.
It’s easy to become emotional about the “one” house that was just “meant to be,” only to become distraught when you don’t get it but remember – a lot of other people are out there buying with the same sentiment in mind.  Think of the home buying process as a long term financial transaction and you won’t feel married to just one house. 

23. Making contingent offers.
Though less prevalent these days, an offer that’s contingent on you getting your home before closing might have more pitfalls than benefits.  Be sure to go over the pros and cons of contingent offers – and other options - with us before you get too excited and sign on the dotted line. 

24. Not understanding short sales.
Over the past few years, buying a short sale resulted in great deals for a lot of buyers, but it’s so important to understand the nature of the transaction before you jump – from timing to costs to what it will be like to deal with the bank.

25. Expecting to find everything on your wish list.
When we first meet and start talking about the ideal home you have, broken down into a wish list, I’ll encourage you to prioritize what’s most important in a home from 1-10.  It’s almost impossible to find absolutely everything you wanted in a home, but if we find the most important factors – price, neighborhood, size, floor plan, etc. then the minor, end-of-the-list details will be forgotten by the housewarming party!

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