Buying a home is a long, and often confusing process; there are many steps involved, and as such it’s easy to make home-buying mistakes at some point from beginning to end. When you have as much money riding on something as you do when you’re buying the house, you don’t want to make any errors that can end up being a serious financial burden—that’s why you should keep these five common home-buying mistakes that people make in mind, so that you don’t make them yourself.
Trying to Haggle the Price Down After You’ve Made an Offer
If you’re buying a home right now, you’re getting the short end of the stick, because it’s a strong seller’s market at present. This means that many homes are selling for above the sellers’ asking prices, and many buyers are getting into heated bidding wars to get the homes of their dreams. Some buyers are making the mistake of bidding especially high in order to win the war, only to try to negotiate the price back down once they enter into escrow.
While this strategy sometimes works when it’s a buyer’s market, and houses are harder to sell, it’s much less successful in a market like we have at present. If you try to back out of the price you’ve offered, it’s likely that the seller has also been offered another price from a buyer who’s hoping that you back out of your deal. If you try to nickel and dime the seller during escrow, the seller could very easily just back out of their deal with you and take their backup offer, and then you’re left with nothing.
The way to avoid this home-buying mistake is to simply not make an offer beyond your means. Make your best offer, and continue with the deal from there.
Waiting Until Your Time’s Run Out to Ask for Credits
After a seller accepts your offer on a house, and you go into contract with them, you’ll have an inspection performed on the house. If the inspector discovers issues with the house that may result in costly repairs that you weren’t aware of when you put in your offer, you’re able to ask for credits to deduct the cost of the work you’ll have to have done. This is a legitimate request for credits off your original offer, and aren’t likely to disrupt closing on your deal. However, some buyers try to work the system by waiting until the eleventh hour to ask for credits.
For example, suppose a seller puts their house on the market, fully disclosing significant water damage to the basement. After a buyer makes an offer, they go into contract, and the inspection is done, the buyer waits until the last minute to demand a deduction from the sale price because of the water damage. The seller has no real reason to lower the price, because the buyer agreed to the price knowing fully well that there was water damage. Oftentimes in a situation like this, the deal falls through and the house is sold to someone else.
To prevent having this home-buying mistake happen to you, don’t try to manipulate a deal after you’ve agreed upon it. Certainly, if there’s unexpected damages that turn up during an inspection, you should get credits for the repair work that’ll be necessary, but don’t take advantage of the situation.
Bending Over Backwards to Save a Buck
Real Estate is a big investment, and as such, many buyers try to do everything they can to save money while buying a home. The problem, however, is that many would-be buyers wind up sabotaging themselves while chasing after “great deals,” and they turn down a lot of great opportunities along the way.
An example of this is a renter who’s looking to become a first-time homeowner, looking for the best “deal” he can find. The renter spends two years looking for a great “deal,” and winds up turning down a number of properties that were in good areas, within his budget, and didn’t need much work. After all of his searching, his landlord tells him that she’s selling his place, and he needs to get out. Now he has to make a purchase, and he has to make one fast. The market has changed drastically in the two years since he started his search, and now he has to buy at the top of the market. Now he’s spending way more than he would have if he’d taken up one of the opportunities he skipped over two years ago, and would have built up some equity in his new home instead of spending the last two years throwing money away into his rental.
In order to avoid falling into this home-buying mistake, be mindful of the qualities you’re looking for in a home, and put less of a priority in finding a great “deal.” Remember that oftentimes you get what you pay for, so finding a “deal” will usually mean putting in a lot of time and money into fixing up a home with damage or one that’s extremely dated. If you find a place that’s in a good area, in a good school district (if having kids is in your future, or if you already have some), and isn’t going to require a ton of work, it’s a better idea to make a solid offer on that than hold off for a fantasy deal.
Thinking You Can Do it All on Your Own
Members of Generation X and Generation Y are notorious for thinking they know everything about everything, because anything they need to know is only a quick Google search away. However, even though you can learn a lot about real estate, and there are many resources and tools available online, don’t overlook the value of an experienced real estate agent.
A good real estate agent doesn’t just serve to find you homes to consider buying—their number one job is to communicate your offer to the seller/seller’s agent as best as possible to have them accept it. After that, the agent ensures that your deal doesn’t fall apart through the process, by attending to every bump in the road as they come. A real estate agent with a lot of experience in the local market is an invaluable tool to new buyers, because there is so much that goes into buying a home. Oftentimes, agents stick to a fairly small selling radius, which gives them the ability to become very well acquainted with the area, the types of homes that are there, and how the neighborhood has developed over in time.
It’s easy to find a lot of information about real estate listings and comparative property figures online, but knowing the neighborhood and the people in the community is much more difficult. For example, if you see a comparable property that sold for 7% less than the property you’re looking to purchase, you may ask the seller to match that reduction. Seeing the figures in black and white online, you’d think that’s a fair offer. However, real estate is an intricate operation, and there’s a lot of gray area; a good agent would be able to tell you that the reason that particular property was reduced was because the owners were pressured to sell because they were divorcing, and also that there was a termite issue. That’s the kind of information you simply can’t find online, and trying to get a seller to match such a reduction could easily be the end of your attempt at closing a deal with them.
In addition to knowing the community members, a good agent will also have connections with other agents in the local market, and good professionals love to work with one another. Having a good agent can work for you in terms of getting you in with the listing agent both to see the property and to make an offer. Also, if you don’t have an agent at all, some listing agents won’t even consider working with you.
Lastly, as a buyer, having an agent doesn’t cost you a thing—the seller pays the buyer’s real estate commission. Plus, during your transaction you are almost guaranteed to run into an issue that you’d have serious questions about that need to be answered by a professional, and having an agent representing you gives you someone you can trust to help you make the right decisions. This is the best way to avoid a series of home-buying mistakes!
You’re Stuck in the Mindset of a Buyer
If you’re only thinking as a buyer, you’re overlooking the future you who will one day be selling the property you’re about to buy. That’s why it’s important to look at the property you’re considering from the standpoint of a seller as well, and think about the things that will work for and against you when that time comes.
A good example of such a case is a buyer in Boston who bought a home without a garage. She figured that due to the home’s incredible central location, with easy access to a number of public transit lines, having a garage wasn’t really necessary. Plus, she rode her bike to get to and from work, and there was a leased garage not far away if she ever felt she needed a car. “No garage? No problem,” she thought.
Several years later, the market wasn’t quite as busy, and our owner got a job in New York and had to sell her home. There were comparable homes in the area that had garages. She had invested in that leased garage space she’d considered earlier, so she felt that with that, and her home’s central location, there was no reason to price her home lower than the others in her area. The problem with her theory was that many buyers drive to work, and didn’t want to have to get to and from an off-site garage facility every day. Ultimately, many buyers didn’t even consider her house when they were searching for properties, because the lack of a garage was a deal breaker.
Be sure to always think like both a buyer AND a seller when you’re making a real estate purchase, because it’s likely that the day will come that you’ll be selling.