Top Ten Potential Mistakes To Avoid When Buying a Home
To the great relief of many people, both inside and outside the real estate industry, it looks like the worst part of the falling real estate market may be behind us. It’s risky business attempting to predict market ups and downs (see below) but at least in some parts of the USA it does appear that buyers are beginning to emerge from their lengthy hibernation. If you are looking into the possible purchase of a home, here are the top ten potential problems that you should avoid before signing on the dotted line.
1. Not Obtaining a Loan Pre-approval Letter Getting pre-approval for a home loan is an important first step for potential buyers. Obtaining a loan pre-approval will give you a much better idea of the amount of money you can safely borrow. Having a pre-approval letter also indicates that you are serious about buying. Most sellers with quality houses won’t even consider an offer unless it is accompanied by verification of pre-approval. Furthermore, should any problems with your credit worthiness arise it is better to learn about them early, when you still have time to take action to resolve them. Encountering a credit glitch after you have already agreed to a home purchase can be devastating.
2. Not Hiring a Buyer’s Agent Unless other arrangements are made, with nearly all full service real estate companies, the buyer’s agent works for you at no cost to you. His or her commission is paid by the seller’s broker after the sale closes. Hence, it is in your best interest to hire your own representation - a buyer’s agent - instead of working with the seller’s agent. The seller’s agent is obligated by law to act in the seller’s best interest, not yours. By using the services of a buyer’s agent you can level the playing field since a buyer’s agent is required to serve in your best interest.
3. Selecting the Wrong Real Estate Agent Before choosing a buyer’s agent, you should talk to a number of different agents. Request the names of earlier clients so you can check references. Don’t limit yourself to agents with large brand name firms or so called “million-dollar” agents. Also, before hiring a friend or family member who is an agent, remember that if you are disappointed with the level of service provided, it’s considerably easier to dismiss an agent who is a “stranger”.
4. Not Realizing the Length of Time Involved in the Process Buyers, and sellers, often believe that the process of buying property is shorter than it actually is. There are a myriad of things that can introduce delays. Sellers can be slow in formally accepting your offer, you may have trouble selling your current property, the loan processing may be delayed, repairs may have to be completed, problems with obtaining a clear title to the property may arise, etc. Murphy’s Law always appears to surface when trying to finalize a deal quickly. Make sure to allow at least eight to twelve weeks to complete the sale.
5. Presuming the Appraisal and/or the Tax Assessment Are the Same as the Actual Value. Appraisals and tax assessments are intended to be objective approximations of value. Yet, different appraisers can arrive at significantly different results. Buyers should request that their agent conduct a comparative market analysis (CMA) to get a better idea of the property’s present market value before submitting an offer to purchase.
6. Trying to Time the Ups and Downs of the Real Estate Market Attempting to time a purchase with when the market has hit rock bottom is virtually impossible. I’d be an extremely wealthy man if I had that ability! Both buyers and sellers need to understand that a practical real estate investment is always a long-term proposition.
7. Ignoring Reality When Looking for Your Dream Home When buying a home, if you only follow your heart and not your head, you will most likely be in for some ugly surprises. That magnificent home may appear to be your dream home, but make sure you bear in mind everything involved. Take into account such unexciting issues as the effect a larger mortgage payment might have on your resources, commuting distances, the availability of local schools and shopping facilities, the effect of property taxes and homeowner association in addition to other quality-of-life aspects of home ownership. That extraordinary house may not be worth the headaches it causes for you and your family.
8. Failing to Remember That Timing Is Everything As you can probably imagine, paying two mortgage payments can be incredibly hard to manage. When thinking about selling your current home and buying another, understand that the sale of your current home is the more crucial of the two transactions. If you would be unable to make payments on two loans, if at all possible, try to secure the sale of your current home before committing to purchase a new one.
9. Not Reading the Contract. Keep in mind that a purchase contract is a legally binding commitment. Not understanding what you’re agreeing to can be a major mistake. Review the document thoroughly prior to signing and obtain clarification if there is something you are unsure about. Do not be afraid to have your attorney review it,if you wish. Make sure it contains everything you think it should, including who is paying for what. Verbal commitments should be included, in writing, in the contract. Make sure that your agent takes an active role in the writing and negotiation of the contract. Cutting corners on this step may add delays or result in financial and emotional pain.
10. Not Conducting a Criminal Search for the New Neighborhood. Agents in most areas of the country are not required to tell buyers that there is a sex offender or other illegal activity in the neighborhood. Check with the local police department or sheriff’s office to find out how to review local sex offender and related criminal databases. Additionally, the internet has made this research much easier in recent years. There are quite a few online resources for locating this information. Visit the website backgroundcheckpoint.com for information about a number of of these important resources.
Jim Navary has been a freelance writer and researcher for more than thirty years covering a broad range of subjects. In addition, he is a licensed real estate salesperson in the Commonwealth of Virginia specializing in Fort Lee VA real estate and Petersburg VA homes for sale.
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