7 Home Buying Mistakes to Avoid
Published May 29, 2014 | Updated April 26, 2017
By Jeannette Morrison
Keller Williams Realty
For many, purchasing a home is a very exciting experience. Unfortunately, it can also be frustrating, especially in our hot real estate market where sellers often 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
While it is possible to home shop without pre-approval, it can often be far preferable to do so. It’s an important step if you wish to avoid major disappointments later. Getting pre-approved is often easier than you might think.
Speak to an Amplify Credit Union mortgage specialist or visit their website at www.goamplify.com/getstarted.
- They will have you fill out a loan application. Your credit will be checked, and your income and employment will be verified. This will determine what kind of loan you can qualify for.
- You will then know how much you will be able to borrow, how much you will need for the down payment, and 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 will know the upper limit of your price range.
- Your Amplify Credit Union mortgage specialist 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 might even know about properties before they go active in the Multiple Listing Service (MLS), which is important in a competitive market. An educated buyer can gain a competitive advantage over other buyers.
It is a good idea to make two lists – one for your must-have amenities and one for your would-like-to-have-but-not-that-necessary features. 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. Other things you should try to determine beforehand:
- 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: Getting 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 – a situation where it becomes impossible to decide which one to buy. As a result, buyers miss out on many nice homes. Remember, there is no such thing as a perfect home. Look at the overall picture and strongly consider these questions:
- 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, but one of the worst home buying strategies is going lowball with your offer.
The reality of current market conditions is that many homes go at or over asking price 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 with a low-ball offer. The seller that likes you will be far more open to working with you than the one you have annoyed with a very low opening bid.
Mistake #5: Not Getting a Professional Inspection
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 conditions: The inspection contingency and the mortgage contingency.
Inspection contingency: This 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.
Mortgage contingency: This exists 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: Buying a Home Without Professional Assistance
When you buy 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, someone to help you with the loan process, 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, more commonly known as a realtor, is to work for you and not the seller in the real estate transaction. Your agent can help find you a home out of the most reliable local database for home sales there is (the local 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 earn their money by getting 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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