TOP TEN MISTAKES HOME BUYERS MAKE
- Picking the wrong mortgage or not having a mortgage at all.
- Choosing a Real Estate agent who is not committed to forming a strong business relationship with you.
- Not considering long-term needs.
- Not examining insurance issues.
- Not buying a home protection plan.
- Not knowing total costs involved.
- You picked the wrong community.
- Failing to make a Comparative Market Analysis prepared before offering.
- Neglecting to get all agreements in writing.
- Not taking a final walk-through before closing.
Working with a lender to set your home buying budget should always be Step 1 when buying a house. A reputable and ethical mortgage broker will show you on paper different options for purchasing and help you in obtaining not just “pre-qualification”, but “pre-approval”. When working with your mortgage professional be sure to pay attention that you will not be taking on “too much debt”. And remember, a pre-approved loan helps you to make a stronger offer to a seller and may make the difference in a multiple-offer situation.
A common mistake buyers make is not having a real estate professional working for them before they begin the entire process. See “Choosing the Right Real Estate Agent” (link to our article). Real estate professionals should support the buyers’ process from beginning to end, including searching for and viewing properties, negotiating the contract, and making sure due diligence is performed on the transaction before and after closing. The *right* real estate professional will help you to avoid many of the common mistakes listed here
Because home buying is such an emotional process for many buyers, it’s easy to forget about looking to the future. When you think you’ve found the right property, consider not only how it will support your current lifestyle, but also any life changes that you might expect during the time you reside. For example, what if you marry, have children, or children grow up and move out? It’s also important to take a look at the home’s resale potential, another topic that the right real estate professional can help you with.
Talk to a homeowner’s insurance professional before closing and make sure to purchase enough insurance coverage to cover the home as it appreciates and the replacement value of its contents.
Think of a home protection plan as a “mini” insurance policy that will cover basic repairs you may encounter after closing. For instance, suppose the garage door opener was working fine when the home inspector checked it, but fails a month after closing. Many home protection plans (or home warranty plans as they are sometimes called) will cover the repair and/or replacement of the appliance for a nominal fee. Your real estate professional can direct you to different home warranty companies and explain how the plans work.
First-time home buyers especially are not always informed of the extraneous costs surrounding a home purchase. Most strong purchase offers include a “good faith deposit” or down payment of some sort from the buyer. At closing this deposit can be credited toward the total costs of the transaction. The purchase price of the home may include some closing costs, but most likely there will be an additional $5000-$10,000 in costs for things like the appraisal, home inspection, county & city transaction taxes, recording fees, documentation fees, etc. Your mortgage professional should discuss these fees up front with you and will provide you with an “estimate” of these costs.
Part of your due diligence in buying a home is making sure you research your concerns about your new neighborhood. Check out crime rates, schools, power lines, neighbors, environmental conditions, etc. Your new neighborhood should make you as happy as your new home does.
There is an old adage “Never buy the best house on the block” and a CMA will help you to avoid this mistake. A CMA will provide you with comparative information on what houses like your choice have sold for recently and help you to prepare a competitive offer.
In the rare case where there are problems or disagreements about the purchase process or contract, it's risky to depend on verbal agreements to work out those conflicts.. Verbal agreements cannot be enforced, so a written agreement is the only guarantee that all parties involved have the same memory and interpretation of what was agreed to. All discussions and agreements should be added to the contract through written addendums.
A final walk-through is a visual inspection performed by the buyer(s) and their agent anywhere from a few hours to a few days before closing. The purpose of the walk-through is to make certain that the property is in the condition you agreed to buy. Any repairs that were specified in the contract should have been made and nothing major has changed with the home since you last looked at it. The excitement and stress many buyers experience as closing day approaches can tempt buyers to pass on the final walk-through. The final walk-through gives the buyer an opportunity to discover problems before the closing and should be specified in the purchase contract.
Not included in our “Top Ten” as it’s not a mistake a “home buyer” makes. But by NOT making that home purchase, you may be losing the benefit of valuable tax deductions, building home equity and the appreciation in value.
When viewing homes, consider the following points:
- Exterior Condition: Look at the condition of the roof, siding, paint, window sills, gutters, decks & patios.
- Energy Efficiency: What type of heating and insulation does the home have? Is the entire house insulated?
- Air Quality: Does the house smell clean & fresh? Check for conditions and materials which will maintain a healthy indoor environment.
- Basement/Crawlspace: Is it moldy? Look for water stains, leaks & cracks.
- Structural Problems: Doors and windows that stick and uneven floors can indicate problems.
- Test the Water Pressure: Turn on taps, showers and flush toilets.
- Parking: Does the home have a private or shared driveway?
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