7 Home Buying Mistakes To Make, Because You Don’t Know What You Don’t Know!!
It sometimes amazes me how many home buyers are blindly running around with little or no guidance. The problem for many home buyers is they don’t know what they don’t know! So they don’t often know when they are making a mistake.
While a home owner can realize they made a mistake shortly after buying or during the home buying process, many big mistakes don’t show up until it comes time to sell there house. Now that is surely a disappointment!
There is a lot at stake when buying a home. First you want to make the right choice in a home, neighborhood and community. You also have a lot at stake financially. You have large deposits to be lost by missing deadlines. Or, you could buy a home that needs more work than you ever imagined. Maybe you made the wrong choice in the neighborhood or community.
I have been doing real estate full time for 13 years. It took me 5 years before I really felt comfortable with what I was doing. I spend 50+ hours a week immersed in the business of real estate and have been involved in hundreds and hundreds of real estate transactions representing home buyers. I have a process I go through with each buyer from searching for homes, writing offers, negotiating offers, doing due diligence etc… Because I have been doing it so long I am on auto pilot with the home buying process.
A home buyer could never duplicate that experience on one or two transactions they have had in a lifetime.
That’s why a good buyer’s agent can be worth their weight in gold. Think of a buyer’s agent as a buying consultant, not a salesperson. So if you don’t know what you don’t know, guess who does know?
7 Home Buying Mistakes
1- Going Directly To The Listing Agent To Save Money
Thinking you are saving money by going directly to the listing agent? Guess what… your just giving the listing agent a great pay day, while being unrepresented by an agent working on your behalf.
I charge the same commission irregardless of whether I sell my own listing or not. My contract is with the seller as a listing agent and has nothing to do with you. As a matter of fact how you handle yourself when demanding part of the commission back could be considered torturous interference of a contract.
On top of it, usually an unrepresented buyer is a ton of work. I have to spend additional time at the property, do a lot of hand holding so you navigate the process properly, etc… I am not going to double my work and give up the buy side commission.
You are unrepresented and you are taking on a lot of liability yourself. Understanding your “legal” relationship with an agent is very important to maximizing the home buying process. It is not uncommon for a home buyer not to have a real idea about the difference between a buyers agent and a listing agent is and what they are truly giving up.
When you go directly to a listing agent they work for the seller and owe them fiduciary responsibility. The listing agent cannot counsel or guide you in any way that disadvantages their seller.
Often it is an illusion to think you are saving money going to the listing agent. Even if you save a few thousand in commission, most likely a good buyers agent will save you even more money, time, and aggravation.
2- Not Understanding Current Market Conditions
Most home buyers perception of current real estate conditions are 6 months to a year behind current conditions.
A seller’s market puts the seller in the drivers seat whereas a buyers market gives the buyer the upper hand. A balanced market gives each party equal negotiating power.
Currently we are in a strong sellers market. Ask any buyer that has been in this market for any amount of time and you can hear their frustration. In 2009 and 2010 we were in a horrible recession giving the buyers what ever they wanted. Sellers were desperate to get their home sold and were doing tons of major repairs to get their homes under agreement.
In a turning market 6 months to a year can be huge. Understanding current market conditions will dictate the whole home buying process… how you look for properties, structure an offer, negotiate terms, approach home inspection repairs, etc…. Understanding the current real estate market conditions is one of the first steps in making the home buying process a successful one.
3-Thinking Only Short Term
As a buyer’s agent I encourage buyers to think for the intermediate and long term. Do not make a purchase based on your immediate needs alone.
Unlike renting where it is relatively easy to change your living situation there is a cost to selling your home. You have real estate commissions and selling costs that can run up to 6-7% of the purchase price. For many first time buyers and even move up buyers, they are putting relatively low money down on a home and it is not so easy to sell if you discover that you have not taken all your considerations into buying a home. It could take 5 years or more to breakeven in a slower market.
If at all possible buy a house that may suit you for 5-10 years. Life changes fast, a one bedroom condo for a newly married couple can certainly be outgrown in a couple of short years.
Think about space and community needs, now and the intermediate future…. is your family going to grow soon, if you are in a career where you change jobs often are you centrally located, are you close to your circle of friends and family, etc…
4- Not Understanding Where Your Reality Lies
Over the years I have run into many home buyers who are totally frustrated with their home search. They have an idea and they stick to it even though its not working. I call looking for a home that doesn’t exist, chasing unicorns.
What do I mean? Many time a home buyer will be looking in a price range in a community that is non existent or mostly not existent. When meeting with a home buyer the first time, we look at past history of what has sold to give them an idea of what is the likeliness of finding what they are looking for.
If past history shows the home you want, meaning size, style, bed count, bath count, acreage in your price range, hasn’t shown up for sale in the past year or there may have been only one or two, then you are probably be in for a disappointment.
For example, I recently ran into a buyer that was insistent on new construction. There budget was 525k and under. The problem was they were looking in Lexington, Bedford, Sudbury, Andover and more. All of the high end communities where there is no new construction anywhere near there budget.
After showing them what they were looking for was impossible, based on past history, we chose other communities where it was possible to get what they wanted. After a year of frustration, we immediately moved forward on a house they loved.
Unfortunately it is easy for a home buyer to get caught up looking for that home that really doesn’t exist. Worse yet, in a neutral to sellers market every month that goes by you are lose buying power. Again, a good agent representing your best interest will immediately know if your wants are not in check with reality.
5- Failure To Do Due Diligence
Home buyers are willing to just take the word of a listing agent or seller about certain conditions of the home. When I work as a buyer’s agent with a home buyer, I tell them to trust no one and if something is important to them to do their own due diligence. Don’t just take someones word on it, you have to much at stake.
I am not even saying that sellers lie, I am just saying that sellers think they know something when they do not.
For example many sellers selling their home with an in-law apartment will say it is legal when in many cases when I go to the town to verify the claim it is not legal and we cannot even make it a legal in-law apartment. If you are relying on a piece of information that is important to your buying decision, verify the information yourself. it will eliminate many future headaches and disappointments.
In the case of an in-law apartment you are paying a premium for the in-law. So what happens if you paid an extra 30k for the in-law to have a buyer’s agent check the permits when it comes time to sell, to find out it is not permitted nor does it meet the criteria to be permitted. You just lost 30k.
Again, working with a buyer’s agent will prevent these problems. First a buyers agent will know when and what to look for and also assist in getting you the proper information.
6- Not Understanding Fair Market Value
In general a home is worth what it is worth regardless of your situation as a buyer. If a house is listed fairly at $350,000 it isn’t worth $300,000 just because you can’t get financed for more or you have to build a garage because you really want one.
Determining the fair market value of a home will structure how you negotiate for a property. I recently had a buyer tell me a house he wanted to purchase was only worth $300,000 on a $350,000 list price.
He wanted the house and he could afford it. I told him it was worth every penny based on my research and would probably go 10-20k over asking. My customer insisted it was only worth 300k and tendered an offer for such. He didn’t get the property and it went well over asking with over 12 offers on the property. The market spoke and said the fair market value of that home was over $350k.
I asked him afterwards why he thought the property was only worth 300k. He said that is what the tax assessment was. I then explained to him that tax assessment had nothing to do with the value of a home based on selling the home in an open market.
Many buyers have a distorted view of value. I hear….. Zillow said, my friend bought the same house 6 years ago for, the tax assessment, my dad said etc….
Fair market value is a tricky thing, of course you don’t want to overpay for a house. And, frankly if buy traditionally through an agent you probably are not going to steal a house either.
What you can expect is to pay market value for a home. Understanding fair market value and how to come up with that number is critical to your home buying success.
7- Not Knowing How To Negotiate
Finally the last of 7 home buying mistakes. There are many facets that successfully go into negotiating a real estate deal.
In today’s real estate market the tables have turned and the sellers are in control. The last few houses I have listed every home had multiple offers and all but two went over asking.
When negotiating it is important to understand the fair market value of a house as well as what is trending in market conditions, the homes appeal and desirability, understanding what the seller’s needs, combined with your want of the house. Blindly low balling an offer will lead to a lot of heartache and wasted time and effort.
A buyers agent can help you craft a negotiating plan that will increase your odds of having your offer accepted. As a real estate agent, many of my days are spent negotiating. It is part of my daily routine. I see what works and what doesn’t. I have also worked with enough sellers and understand the psychology behind their motivations and how they will react.
All to often an inexperienced home buyer automatically thinks low balling the offer and playing hard ball is the way to go. While there is a time and place for that strategy it is rarely successful in most circumstances. Smart negotiating take time and experience. And not experience gained by buying one house.
These are just 7 home buying mistakes. Of course their are many more to be made. The great part is you can have help…. lots of it, by working with a seasoned . A buyers agent is a counselor and an advocate. Think of a buyer’s agent as a home buying consultant, not a sales person.
They have processes in place and can guide you seamlessly through buying a house. They are experienced negotiators as well as knowing how to keep you from making a mistake.
I am going to finish up this post with one last story. I had a neighbor who built their own house and sold it as a For Sale By Owner. The new owner moved in and was shocked the first night when they realized the train tracks ran right behind their house. It was down the embankment and through a grove of trees. This is why I tell my buyers, review the surrounding neighborhood on google maps, walk the property and drive down all the streets surrounding the home. The new buyers were miserable but it certainly could have been avoided.
Other Home Buying Resources:
- Sharon Paxson share whether renting vs buying a home is a smarter choice in today’s real estate market
- Tons of useful information for home buyers as well as home sellers has been put together by Bill Gassett
- Danny Margagliano discusses what repairs should be done after a home inspection before closing on a home.
- Luke Skar shares how a gift of equity can be used to buy a parents or family member’s home.
This article, You Don’t Know What you Don’t Know! 7 Home Buying Mistakes, was written by Kevin Vitali of EXIT Group One Real Estate. I have been practicing real estate for 14 years and have the experience of hundreds and hundreds of closings under my belt. if you would like to maximize your next home purchase give me a call at 978-360-0422.