Buying a home is a big deal. There are many aspects and phases of purchasing a home that have legal and financial ramifications while going through the home buying process as well as long after you have closed on your home. Good decisions need to be made. Avoid these common home buying mistakes that can turn the American Dream into a nightmare.
When you commit to a home purchase, it is not as simple as finding a new apartment when renting.
There may be financial ramifications for selling a home. If you decide to trade in a short period, there could be tax ramifications, closing costs, and real estate commissions.
Make sure you make the right decision. Avoid these typical home-buying mistakes that might leave you as a remorseful buyer.
14 Common Home-Buying Mistakes
Failing to Get Pre-Approved
Getting a mortgage pre-approval letter is the first step of the home-buying process. And one that should not be skipped. When it comes to financing a home, don’t assume anything. Get pre-approved early so you know exactly what a house will cost you and head off any problems at the beginning of the process.
Getting pre-approved before you look at houses will save you time and money and lessen the stress of home buying.
Not Knowing What You Don’t Know
Buying a home can be a complex process financially, legally and procedurally. But many buyer’s get caught up in the excitement and the pace of buying a home with out seeking out the proper help they need.
It is important to realize you don’t know what you don’t know when it comes to buying a home. It is equally important to seek out the proper help. There are plenty of people who do know like real estate agents, real estate attorneys, home inspectors, etc… than can help guide you thru certain aspects of the home buying process.
Missing a vital step or not understanding part of the process can easily cost you money.
Not Understanding the Money Involved in Buying a Home
Usually, most people go into buying a home knowing they have to put down a down payment. Often, a buyer may overlook the other costs of buying a home.
On top of you down payment you will have closing costs, pre-funded escrow accounts, home inspection fees, moving expenses and more…. Again, a reason to get pre-approved early so you understand all of the costs associated with getting a loan in the way of closing costs, escrows and prepaids.
Your real estate agent can help you plan additional costs outside of getting a mortgage.
Not Understanding How Your Agent Works for You
Real estate agency is the law behind the capacity in which an agent works for you. Laws vary from state to state but it is critical to understand the relationship you have with your agent. It can make or break you.
Not all agents work for you. And this is what trips up many home buyers, who work with an agent they think is acting in their best interest, but is acting in the sellers best interest by a legal agreement.
Not Using A Buyer’s Agent
Here in Massachusetts, a Buyer’s Agent is the only agency relationship where the agent works for the buyer and owes them a fiduciary responsibility (in most states). A buyer’s agent’s job is to counsel a buyer through each step of the process to the buyer’s benefit.
Buying a House With A Dual Agent
Dual Agency is a very complicated form of agency where an agent represents both buyer and seller in the same transaction. Unfortunately, you give up many of the rights you would have had in a single-family situation. Unfortunately in the haste to get a property under agreement the buyer and seller don’t take the time to understand what they are giving up fully.
Personally, I and many of my counterparts feel that dual agency should be banned as it does not benefit either party and it is a very confusing form of agency.
Buying A House Directly From The Listing Agent
Either by niavity, or because a buyer thinks they will get an inside deal, buyers will go directly to the listing agent to buy a house. Yet, the listing agent is supposed to give the seller every advantage they legally can along the way, often at your expense.
How an agent works for you may never come into play, but when there is a conflict between buyers and sellers, how an agent works for you can make a difference in the outcome.
Falling in Love with The Eye Candy and Not Paying Attention To What is Important
Have you ever heard the phrase “pig with lipstick”? Often, it is easy for us to get all googly-eyed over granite, stainless appliances, new laminate floors, etc…. But at the end of the day, you need a house with good bones and no significant repairs like a roof looming around the corner.
You can live with an outdated bath or hardwood floor that needs to be finished but you can’t live with a broken furnace or a leaky roof. Analyze the soundness of the structure and systems before getting caught up in the bling.
Buying a Home Strictly on Emotion
I have had buyers fall in love with the wrong home and buy for all the wrong reasons. Some will even admit they are. But try and remove the emotion and ensure your house satisfies your needs on all the essential levels.
Don’t fall in love with a home because you love the backyard with a pool if the house is wrong for your family. Or some other reason. Compromises must be made when buying a home, but make sure they are practical compromises.
Spending on a Home
Just because the bank can approve you for more money doesn’t mean you can afford it. Only you can determine that for yourself. Create a budget and run your numbers and make sure your mortgage payments work for your individual circumstances.
It is human nature to want more than what your budget allows. But after your purchase, you will want extra money to live life and improve the house the way you like it and not scrape by every month to pay the mortgage.
Not Having A Home Inspection
The home you may be buying may look to be in terrific shape. And in a hot real estate market it may be tempting to remove your home inspection contingency to strengthen your offer.
The whole purpose of a home inspection is for a trained and licensed professional to review your purchase with a fine tooth comb and identify potential latent issues that could result in significant repairs in the near term.
As good as a home may look, you don’t want to get saddled with tens of thousands of dollars’ worth of repairs shortly after moving in. There are certain repairs that just cannot be put off and require immediate attention.
Not Paying Attention To Your Home Inspection Results
It one thing to have a home inspection because you think you should. But often a home buyer uses the home inspection to check out the house and see where the furniture will go. Instead you should show up and be engaged with the home inspector.
Ask questions, many home inspectors can be a valuable resource on long term maintenance as well as important issues that need immediate attention. When the home inspection is complete thoroughly review the inspection report and if you don’t understand something…. ask!
Your home inspection is the last line of defense in buying a home that is structurally sound with all major systems working properly while providing a healthy environment to live in.
Not Doing Your Due Diligence
Ok, you found the perfect home. But don’t forget to do your due diligence while in the home inspection period. Has the house had significant work where permits should have been pulled? Is your 3 family really zoned as a three family? How is the neighborhood? Is there anything surrounding your home that would impact your enjoyment of your new home?
I once had a neighbor buy a house next to me. Little did they realize their property abutted the railroad tracks they were shocked and not to happy. But a quick drive around the neighboring streets would have revealed that down the embankment behind the trees was an active railway!!
Taking the time to do some due diligence would have prevented the problem.
Buying a House That Requires Too Much Work
Often a home buyer will think if they buy a fixxer upper they will save money. There is a couple problems with this thinking.
First, a home buyer will fail to think ahead and figure on where the money is going to come from to do the repairs and renovations, often leaving much of the work undone. Secondly they fail to assess their skills in completing the job in a craftsmen like manner leaving any of the work undone sub par.
While you can save money buying a fixer, it is certainly not for every homeowner.
