Costly Mistakes Home Buyers Make
Home buyers are an increasingly rare breed these days. Many who were eager to buy a house raced to take advantage of federal home buyer tax credits. When those government perks expired in April, home sales essentially went into deep freeze, plummeting to levels not seen in more than a decade, according to the latest numbers from the National Association of Realtors.
Still, the Realtors project that nearly 4 million existing homes will sell in 2010. First-time buyers, without the burden of a home to sell, could benefit from the distressed market and the record low mortgage rates.
Here are common missteps that home buyers make:
Going it Alone
With so many web sites offering a mass of data on listings, who needs a real estate agent? Most people, actually. Finding a house and figuring out comps (the price of comparable homes on the market) is the easy part. Managing the nuances of contracts, addendum’s, offers, counter-offers, inspections, financing, estoppel letters, and all the other pivotal steps to buying a home is where many buyers tend to make costly mistakes.
When you hire an agent make sure you are working with an Exclusive Buyer’s Agent; they are obligated to put your interests first, even if their commission is paid by the seller and based on the sale price.
Buyer’s Agents are skilled real estate professionals who choose to work for buyers. A top Buyer’s Agent is your full-time advocate, researcher, advisor, negotiator and local community expert. The job of a Buyer Agent is to acquaint you with the community, answer your questions, help you decide on your home selection criteria, and locate the home that best suits your needs at a fair market value.
Unlike most real estate professionals, Buyer’s Agents have no loyalty or fiduciary responsibility to any home seller; they do not accept listings. Buyer’s agents exclusively represent the homebuyer and their best interests. Hiring an Exclusive Buyer’s Agent eliminates any conflicts between the seller’s and buyer’s representation.
But don’t let the agent find you; do your research. Ask friends and neighbors about good experiences they have had. Relocating to a new area? Do use the Internet to search for your initial list of agents to speak with. Make sure you ensure that the agent you select is an EXCLUSIVE buyers agent and does not also take listings. They have a conflict of interest when representing both Sellers and Buyers.
Know How Much You Can Afford
Many buyers mistakenly take a do-it-yourself approach to financing. They use online calculators to estimate how much house they can afford, dive into the house hunt, and then get a dose of cold water when lenders refuse to qualify them for that amount.
Ask you real estate agent for some recommendations for mortgage brokers and get pre-qualified. A good mortgage broker will explain the process to you, give you a list of documentation you will need to prepare for mortgage qualification, and will assist you through the loan process. Remember, too, that the costs of buying and owning a home go well beyond the sticker price. While online calculators do take into account property tax and insurance, it’s up to you to account for maintenance costs, moving fees and association dues.
Falling in Love with the Home
No one will fault you for falling hard for a home; but understanding the neighborhood, age of home, commute times, schools, neighbors, covenants and restrictions, and local amenities is all part of the homeowner experience. In hindsight, many buyers say they wish they’d taken their due diligence a few steps further to really get to know all the perks, quirks and hassles of living in a particular place. You can
always fix up the house, but there’s no easy remedy for annoying neighbors, oppressive homeowner association rules, and aggravating commutes.
If you are purchasing an older home you must factor in renovation and repair costs as well. Of course, new homes aren’t without their drawbacks. Recently, many newly built homes experienced serious problems with Chinese-made drywall and radon, for example. Proceed with care whatever the home’s age.
Spend as much time as you can in your future neighborhood, ideally on different days and times.
Making Arbitrary Offers
With housing inventory running high and sales at record lows, in most markets, there’s no shortage of houses for sale and sellers desperate to get out from under them all the more reason to hold out for the right house and the right price. But when you find that perfect house, don’t assume you can lob a low ball offer or make unreasonable demands. Even in hard-hit markets, nice houses in desirable neighborhoods are fetching multiple bids.
If the house has been on the market for months and has not reduced their listing price recently, you probably don’t need to worry about other buyers lining up behind you. Make an offer based on recent sales for comparable homes, foreclosure activity, and market trends, and don’t be afraid to start the bidding low. If you are serious about purchasing the home however, making an unreasonably low offer may have the unintended result of putting a bad taste in the Seller’s mouth and not getting a counteroffer. I have had more than a few deals go south because of the impression the Seller gets of the Buyer bottom-feeding and not being reasonable and well-intended buyers.
If the house is fresh on the market, has taken a recent price reduction, or recently foreclosed, and other buyers are circling the block, put your best foot forward with the guidance of your real estate professional, but don’t get suckered into a bidding war.