10 Most Common Buyer Mistakes
1. Not knowing how much house you can afford. Many novice homebuyers spend a lot of time researching homes-comparing kitchen layouts and backyard square footage-but very little time researching their financing options. One of the first things buyers should do is talk to a qualified lender and get preapproved for a mortgage. Without first figuring out how much house you can afford, you risk falling in love with one you can’t have.
2. Assuming foreclosures are great deals. Just because the previous owner owed $450,000 on a house before the bank took it over doesn’t mean it’s worth that much now. Values have slipped significantly, so you may not be getting the bargain you think with a foreclosure. Also, most homes owned by lenders or banks have been sitting vacant for months and may have been vandalized. That could require extensive renovation or repair. Weigh the costs of fixing up the property against the savings you’ll likely reap by buying a lower-priced foreclosed home.
3. Letting your true feelings show. No matter how much you’ve fallen in love with a house, don’t let the seller’s agent in on it. Otherwise he will gain the upper hand in negotiations.
4. Failing to find a good buyers agent. Landing a mortgage is tough these days. So buyers should rely heavily on knowledgeable agents to help them get their finances in order. After all, buyer’s agents have a fiduciary responsibility to the buyer exclusively-and should be looking out for his best interests. Consider using an agent recommended by a relative or a friend or someone who specializes in the area with a proven track record. Interview the candidates about their experience; ask if they’ve worked with first-time buyers before and what kind of service you’ll get from them.
5. Underestimating the costs of owning a home. Whether it’s a rusty pipe or a leaky roof, things go wrong and need to be fixed. Many homeowners don’t anticipate the additional costs for repair and maintenance, or for an increase in utility costs. Consider the age of your new home and how well it’s been treated by the previous owners. In your budget, be prepared to set aside a small percentage (1% at most) of the home’s purchase price annually for repairs and upkeep.
6. Failing to budget for property taxes. Property taxes-and the likelihood that they’ll climb over the course of your time in the house–should be factored into any home buying budget. To get an idea of how much you’ll be paying, call the local assessor’s office.
7. Assuming your first offer will get accepted. As home prices get even more affordable, competition is bound to heat up. “You can’t assume you’ll walk in there, make the offer and get it,” Try not to get discouraged if you lose out on the first–or second house you make an offer on.
8. Skipping the inspection. As a major part of your offer it must include a contingency for a home inspection, hire a professional inspector. The seller isn’t likely to tell you there’s mold in the basement or the walls are poorly insulated. Buyers should find and hire their own inspector. Ask for referrals from friends, family or co workers who you know have had a good experience with their inspectors.
9. Doing too much too fast. Some buyers want to make the house their own right away. They overextend themselves on credit to do so, and assume the improvement will pay for itself by increasing the home’s value. But that’s not always the case–especially in today’s market. Instead, buyers need to exhibit patience and make changes over time.
10. Failing to include a contingency clause in the contract. A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through or the appraisal price comes in lower than the purchase price. Should one of these events occur, the buyer gets back the earnest money they used to secure the property. Without the clause, they can lose that money and still be obligated to buy the house.