7 Home Buying Mistakes to Avoid
Published May 29, 2014 | Updated July 23, 2014
By Jeannette Morrison
Buying a home in the Austin Metro Area just makes good sense! Recently, USA Today reported a 5.2% increase in apartment rent in Austin during 2013, and another 3.7% jump is anticipated for 2014. Home value appreciations are up and expected to increase by over 25% from now to 2018. As 2014 progresses and home values rise, it’s best for buyers to act quickly and secure a home that will appreciate with the market.
For many, purchasing a home is a very exciting experience. Unfortunately, it can also be frustrating, especially in our hot Austin Real Estate market where inventory is low (~2.5 months) and sellers have the advantage. Here are some mistakes to avoid whether you are buying this month or next year.
Mistake #1: Not Getting Pre-Approved First
The very first step towards buying a home should be getting pre-approved for the loan. This is an absolute must if you want to avoid major disappointments later. Getting pre-approved is often easier than people think.
- Decide on a lender, then meet with them and discuss your purchase needs. You will fill out a loan application, and your lender will check your credit, verify your income and employment, and determine what kind of loan you can qualify for.
- You will then know (1.) how much you will be able to borrow, (2.) how much you will need for the down payment, and (3.) how much your monthly payments are likely to be. Looking for your next home then becomes easier since you will know that you can get financing, and you know the price range to focus on.
- The lender will also give you a pre-approval letter. You should also ask for a pre-qualification letter, which is more important than a pre-approval letter. The pre-qualification letter is stronger than a pre-approval letter and will confirm to sellers that you can obtain financing. It will be an important negotiation tool to give you leverage over those buyers that only have a pre-approval letter. In fact, many sellers will not even respond to an offer without a pre-qualification letter.
Mistake #2: Rushing to Buy Without Doing the Research First
Many buyers are so excited and anxious to get started with their home search that they forget to do some research and planning first.
A trusted Realtor can be a great resource and should be able to get you the information you need quickly. Your search will become much easier once you hone in on a specific area or specific neighborhoods. Your Realtor can set you up with a search especially tailored to your wants and needs so you will be alerted in real time once it becomes available. A well connected and networked Realtor can even know about properties before they go active in the MLS, which is important in Austin’s competitive market. A buyer can gain a competitive advantage over other buyers.
It is a good idea to make two lists – one of the must-have amenities and one of the would-like-to-have-but-not-that-necessary. For example, three bedrooms may be on the first list, but granite counters or a hot tub may better be suited for the second list.
- Which area do you want to live in? Are the homes in that area in your price range?
- How long of a commute can you tolerate?
- How many bedrooms and bathrooms do you need?
- How are the neighborhood’s schools, property taxes, homeowner association, and other important factors?
Mistake # 3: Analysis Paralysis
Some buyers get overwhelmed and start over-analyzing the most mundane aspects of every home once they start shopping. Over-analysis soon leads to paralysis – they cannot decide which one to buy. As a result, they miss out on many nice homes in the meantime. Remember, there is no such thing as a perfect home. Look at the overall picture.
- Does the home fit your needs?
- Do you feel comfortable in it?
- Do you like the neighborhood?
- Can you see yourself living there for a long time?
- Does the home have everything on your must-have list?
If the home suits your needs and you feel comfortable in it, don’t be afraid to make an offer. If you hesitate too much, someone could snag the home that should have been yours.
Mistake #4: Making Lowball Offers
Everyone loves a great deal, including yours truly. But when it comes to getting a good deal on a home, there are good strategies and there are bad ones. One of the bad ones is making very low offers.
The reality of current market conditions is that many homes in the Austin Metro Area go at or over asking if multiple offers are involved, and it is a highly desirable area. Your Realtor can help you determine how much to offer and even negotiate with the seller on your behalf.
Be realistic and avoid antagonizing the seller. The seller that likes you will be far more open to working with you than the one who dislikes you.
Mistake #5: Not Getting a Professional Inspection
This should go without saying – a home is the most valuable thing most of us will ever buy in our lives, so inspecting it for possible problems should be a top priority. Yet time and again, I have witnessed buyers who are content to have a relative “who knows all about that home stuff” take a quick look before giving it the seal of approval.
There is no substitute for a thorough, professional inspection. It is not that expensive, and it will reveal any defects that may not be apparent such as gas leaks, foundation problems, roof issues, and more. Spending a little bit of money on the inspection is well worth the peace of mind in knowing your new home is in a good, safe condition.
Mistake #6: Not Paying Attention to Contingencies
Real estate transactions are complex matters, and there are many things that can go wrong. The purchase contract is your main tool for protecting yourself and should, at the very least, contain two important contingencies (conditions) – the inspection contingency and the mortgage contingency.
The inspection contingency allows you to have the property professionally inspected and request that the seller make any necessary repairs. If the seller is unwilling to make the repairs, or if the problems discovered are serious, you should have the right to pull out of the contract with no penalty.
The mortgage contingency is there to protect you in case something goes wrong with your loan approval process. If you’ve been pre-approved and pre-qualified, the risk of something going wrong with the loan should be minimal. But there is still the appraisal that your lender will require, and the appraiser will determine if the home is worth the price you are paying for it. If the appraisal comes in lower than the purchase price, you should have the right to re-negotiate the contract. If the seller is unwilling to lower the price, and you do not want to come up with the difference out of pocket -you should have the right to cancel the contract and incur no penalty.
Mistake #7: Doing it Alone
When buying a home, many pieces need to fall into place in order to have a smooth transaction. Wouldn’t it be nice to have someone at your side to help you along the way-- to help you with the loan process, help you find the right house, negotiate on your behalf, and assist with all the paperwork? Well, such person does exist – a Buyer’s Agent.
The job of a Buyer’s Agent is to work for you in the real estate transaction, not the seller. Your Agent can help find you a home out of the most reliable local database for home sales there is (the local Multiple Listing Service or MLS), prepare your offer, provide you with a list of comparable and similar homes recently sold, negotiate with the seller on your behalf, and insure that you are protected along the way from any pitfalls of the complex process. And the best part is that the Buyer’s Agent is free for the buyer! They typically get a portion of the Seller Agent’s commission so you don’t incur any additional expense.
How do you select a good Buyer’s Agent? There are a few conditions he or she must fulfill. Choose someone who
- knows the area where you want to live
- knows how to negotiate to get you the best price
- is knowledgeable and can guide you through the complexities of contracts and paperwork
- will care about your transaction as his or her own
Take the time to learn more about the Agent you are considering. Buying a home is a big step, so make sure that the Realtor you choose is the right one for you.
Information courtesy of Jeannette Morrison - Residential, Relocation, and Investment REALTOR®, BE, CNE, Keller Williams, neither of whom are affiliated with Amplify Credit Union.
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