Biggest Buyer Mistakes
Buying a home can be a pretty exciting adventure…and a scary one. Here are some mistakes to avoid:
- Buying before you know if you will stay in the area. If you’re a renter, it can be frustrating to write that rent check every month and have no home equity to show for it at the end of the year. But if you aren’t certain that you’re going to stay put for a few years, it may be be not the right time to buy. If you decide to take the plunge you should consider rental potential if you’re not certain you will be here in a few years. An area or neighborhood with a strong rental market will allow you to cover the mortgage on your home if you move elsewhere.
- Going over budget. Know your budget cap, and stick to it. Do not go looking at properties that are just too expensive, you will only become disheartened. However, do consider “what you get for the money” — sometimes a little higher price (up to your cap) can yield you quite a bit more home.
- Forgetting about the costs of home ownership. Along with knowing your cap, be sure that cap also allows for other expenses associated with home ownership, like maintenance costs, utilities (which will likely cost more) and property taxes.
- Putting down a nominal down payment. Even with lenders tightening requirements to qualify for a mortgage, it’s still possible to buy a house with as little as 3% down. That’s not necessarily a bad thing, but it does mean that you’ll have very little equity in your home when you first move into it. So if something comes up, and you have to sell, you’ll end up owing more than you can get out of the sale once you factor in closing costs. It puts you in a precarious position. Even if that doesn’t happen, you’ll have to pay
private mortgage insurance (PMI) every month until your equity in the home exceeds the 20% mark—and that could take years.
- Neglecting to get everything in writing. You wouldn’t be the first home buyer to assume that the kitchen appliances come with the deal—only to discover an appliance-free kitchen on the final walk-through. Common points of contention: window treatments, hot tubs, light fixtures, shower and bath fixtures, ceiling fans and big appliances, such as washers and dryers. Replacing something you thought was staying could cost hundreds, so it’s not a small thing.
- Skipping the inspection. Even if the home looks like it’s in winning shape, it would be foolish to skip a thorough once-over by a professional. When our market becomes ultra-competitive for the best homes there are ways to still get the home inspection done yet offer the seller a very competitive contract.
- Being Too Picky. Go ahead and put everything you can think of on your new home wish list, but don’t be so inflexible that you end up continuing to rent for significantly longer than you really want to. Homebuyers often have to compromise on something in every price range. You may have to live on a busy street, accept outdated decor, make some repairs to the home, or forgo that extra bedroom.
- Lacking Vision. Even if you can’t afford to replace the hideous wallpaper in the bathroom now, it might be worth it to live with the ugliness for a while in exchange for getting into a house you can afford. If the home otherwise meets your needs in terms of the big things that are difficult to change, such as location and size, don’t let physical imperfections turn you away. Besides, doing home upgrades yourself, even when you have to hire a contractor, is often cheaper than paying the increased home value to a seller who has already done the work for you.
- Being Swept Away. Minor upgrades and cosmetic fixes are inexpensive tricks are a seller’s dream for playing on your emotions and eliciting a much higher price tag. Sellers may pay $2,000 for minimal upgrades or staging that you’ll end up paying $40,000 for. If you’re on a budget, look for homes whose full potential has yet to be realized. Also, buying a house where you can add value ensures a bump in equity to help you up the property ladder.
- Compromising on the Important Things. Don’t get a two-bedroom home when you know you’re planning to have kids and will want three bedrooms. By the same token, don’t buy a condo just because it’s cheaper when one of the main reasons you’re over apartment life is because you hate sharing walls with neighbors. If you have to make some compromises to be able to afford your home, don’t make a compromise that will be a major strain.