The Top Ten Home Buyer Mistakes and Real Estate Pitfalls – Buying a home is fun, profitable, and relatively easy, if you do it correctly. However, if you make one of these following ten mistakes, you could unnecessarily complicate the process.
1. Skipping pre-approval
Many buyers are so anxious to start looking at homes that they skip the pre-approval process. Unfortunately, this means that when you find your dream home, you will be several steps away from making a viable offer. It is much more satisfying to get the paperwork out of the way early, and then be able to put an offer on a home as soon as you find one that you like. It will also give you a better sense of your price range and enable you to act quickly in a multiple-offer situation.
2. Neglecting credit scores
Credit scores are one of the main variables used to compute your mortgage rate. Inexperienced buyers can end up paying thousands of extra dollars because they didn’t take the time to clear up a dispute on an old parking ticket, or pay down their Macy’s card. Take the time to understand your credit score and clear up any blemishes.
3. Over-buying
You have a $50,000 down payment and a $200,000 loan, so you purchase a home at $250,000. This is what is known as over-buying, because you have not set aside any money for taxes, insurance, association dues, transaction fees, or even furniture. Make sure you take into account all of the ancillary costs of home ownership before you end up in a huge home with only a mattress and a lawn chair inside.
4. Skimping on inspections
Inspections are the best place to expose potential problems with the property, so it’s essential to take the process seriously. Unfortunately, some buyers use this as an opportunity to save money by hiring a substandard inspector to execute the inspection. Make sure you put the inspection in the hands of a competent and experienced professional.
5. Buying a car during the transaction
When calculating your monthly mortgage payment, your lender will take into account your debt-to-income ratio. If you have recently taken out a loan on a car or even used a credit card to buy a new plasma TV, your mortgage rate will be adversely affected, potentially costing you thousands over the duration of your loan. Wait until after escrow has closed to go on your shopping spree.
6. Lowballing
When you place an offer on a home, it is going to have an emotional impact on the seller. If you place an insulting offer at the outset, you run the risk of enraging the seller and destroying your chances of buying the home. It is perfectly acceptable to place an offer below the listing price, but if you are way off, be prepared for some blowback.
7. Being too open and honest
Keep in mind that a housing transaction is a negotiation. Every piece of information you give to the seller or the seller’s agent can be used against you in that negotiation. If you reveal that “this is the only home for us,” your bargaining position is weakened, and you may end up paying more for the home. Be honest with your family, your agent, and anyone who has your best interest at heart. When talking to the seller or the seller’s agent, be friendly, but not effusive.
8. Adhering to unrealistic criteria
Many buyers develop criteria for their home that turn out to be unrealistic. For instance, a buyer may want a home with a three-car garage in a neighborhood that only has two-car garages. If you fixate on adhering to unrealistic criteria, you will blind yourself to the better options that may be available, such as the beautiful home with a three-car garage in the neighborhood across the street.
9. Ignoring resale value
Certain home deficiencies can make a home difficult or even impossible to resell. You may love your home now, but if you can’t sell it when you land that big cross-country promotion, your dream home will quickly become a nightmare. When purchasing your home, take into account how long it has been on the market and how easily other comparable homes in the area are being sold.
10. Including too many people in the process
It can be tempting to include your friends, extended family, and trusted advisors into the home-buying process; but the more people you include, the harder it is to come to a decision that makes everyone happy. Try to reduce your home-buying team to as few people as possible.
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