Buying a home is one of the largest investments most of us will probably ever make. However, for many homebuyers, the process of purchasing a home ends up being more expensive than it needs to be. These common and costly mistakes can trap the buyer into....
Having a plan and a system in place before you begin the home buying process can help you avoid many of these common traps, which will not only save you money but will put the odds in your favor to get the best house for your needs. These tips will help you identify the most common and costly traps when buying a home and what you can do to steer clear of them.
1. Making Offers Without Knowing The Value - The million dollar question when making an offer on a home is.... What price should you offer on the home? While there is no perfect answer to this question, you first need to know if the seller's price is too high, just right, or if it is priced below market. value. Without getting the facts by researching what other comparable homes in the neighborhood and area are selling for, you are guessing at what may or may not be a good offer. Without this knowledge, you could easily pay too much, or make an offer that is too low and miss out on the home of your dreams.
2. Not Getting Financing Preapproval - Before you talk to a lender, you should check your credit report to see what your credit score is. Knowing your credit score may give you some leverage to getting a lower rate if your score is high enough. Getting pre-approved for a mortgage is free and easy. In fact, most of the time it can be done online. Preapproval gives you peace of mind knowing that when you find the home of your dreams, the money will be there, it will also save you time since you will only be looking at homes you can afford rather than homes that are out of your price range, plus it will put you in a stronger negotiating position over a buyer that has not been pre-approved.
3. Buying The Wrong House - What exactly are you looking for in a home? This question sounds simple enough, but the answer can be rather complex. There has been more than one home buyer that has gotten caught up in the excitement and emotion of buying a house, only to realize the house they bought did not meet their need and desires. Perhaps it was too big or too small, or maybe the commute was longer than desired or there were too many repairs that need to be done. Take some time before you even begin looking at homes to clearly define exactly what you want and need in your home.
4. Not Considering Hidden Costs - For most homebuyers, the first step in the process of buying a home is saving the money for the down payment. Although the down payment is normally the largest expense, there are several hidden costs or costs you may not consider, associated with buying a home. Some of these fees may include appraisal fees, home, and pest inspection fees, closing costs, and moving expenses. Ask your lender for a breakdown of the fees associated with your loan. Learn the costs involved in advance so you can plan ahead for any unexpected expenses that they may come up while under contract or even after the sale.
5. Looking For The Perfect Home - This is a common trap, especially for first-time buyers, because there is no such thing as the perfect home. This is why it's so important to make a list of what you want in your home and location. Once you have your list, break it down into a must-have list. The goal is to find a home with everything you need, and as many of the items you want as possible. But you also have to be realistic so set your priorities in advance and understand that a certain amount of flexibility may be required.
6. Equating A Foreclosure or Short Sale With A Good Deal - When the housing market crashed, foreclosures and short sales flooded the market, and there were plenty of deals to be had. But just because the home is a foreclosure or short sale does not automatically make it a good deal. These terms have become synonymous with a good deal, but that is very often not the case. There are many factors other than price to take into consideration when considering purchasing a foreclosed property or a short sale.
7. Submitting A Lowball Offer - Every home buyer wants to get the best house at the best price possible, but there is a difference between submitting an offer at the low end of market value and submitting an offer that is well below what the home is worth. By submitting a lowball offer, home buyers run the risk of the sellers simply rejecting their offer outright, or worse, losing out on the house to another buyer. By Knowing the approximate value of the home, you can make a reasonable offer based on the true market value range.
8. Not Using A REALTOR® - While it is possible to buy a home without the services of a real estate agent, it may not be the easiest and most cost effective way to go about the process. First of all, agents have access to all the properties that are active on the market through the MLS (Multiple Listing Service), as well as what has gone under contract and what has sold. A real estate agent can schedule the showings, create a comparative market analysis to determine the value, write offers, and handle many of the activities in the involved with buying a house. Having a professional looking out for your best interests and knows the contracts, has experience negotiating, and can guide you through the entire process is the best way to avoid these and any other common buyer traps.