Buying your first home is an exciting time in life. But too often, I see first-time homebuyers make simple mistakes that leave them stuck with a “problem house,” or they don't know how to negotiate with sellers, and it ends up costing them thousands. Here are 10 common mistakes and how to avoid them:
Mistake #1: Not Understanding What You Need and What
You want to prioritize your basic needs before you even start looking, so you don’t buy the wrong home. Also, know that you may have to compromise. This is your first home, not the dream home you’ll live in for the rest of your life. The home you can afford may need a little work (fresh paint, new carpeting). Over time, you may be able to hire a contractor or do some more substantial upgrades yourself. With that in mind, consider these items:
1. General price range
2. Approximate size (square footage)
3. General location, area, or subdivision
4. Number of bedrooms
5. Number of bathrooms
6. Style and layout of the home
7. School requirements or districts
Mistake #2: Not Knowing What You Can Afford Before Looking at Homes
You’ll waste your time looking at properties that may be out of your price range. Examine your budget, get a copy of your credit report and credit score, then sit down with a qualified lender to determine how much of a home loan you can afford. Don’t assume the first lender you ask is giving you the most competitive rate. Talk to more than one lender (ask your REALTOR® for recommendations) to shop around for a mortgage.
Mistake #3: Not Getting Pre-approved Before You Go, House Hunting
A lender can give you a pre-qualification letter after a simple 10-minute phone interview. However, a pre-approval letter is a firm commitment to lend money based on verification of income, funds on deposit, and your credit history. All that remains is the property appraisal. Once it’s complete, you can secure your home loan. Why is this so important? Pre-approval is a powerful tool when it comes to negotiating the price you want, so it’s worth the few days or weeks it may take. It shows sellers that you are serious, and they may accept your offer, even if it’s lower than another, because they know your financing is secure. On the flip side, without pre-approval, you might put an offer on a home only to have the seller go with another buyer.
Mistake #4: Neglecting to Consider the Overall Costs of Owning a Home
Owning a home involves more than just the monthly mortgage payment. You also need to plan for homeowners’ insurance, property taxes, utility costs, and repairs and maintenance. If you’re buying a condo, you’ll also have monthly maintenance fees.
Mistake #5: Paying Too Much for a Beautifully Staged Home
That’s exactly what the seller wants you to do. Work with your REALTOR® to understand what you should offer. Also, imagine the space empty and think about how your furniture and belongings will fit. You may want new furniture, but buying it just to fill the space can blow your budget. Or you may still need new pieces if your current furniture doesn’t fit.
Mistake #6: Not Thinking of the Future
How long do you think you’ll own the home you’re interested in? If you plan to move in five years, that’s fine. But if you can’t see yourself living there for even a couple of years, don’t buy the home because you may not make a profit if it hasn’t had enough time to appreciate. Also, consider what the neighborhood will look like in five years and what plans for future development might affect the resale value if you don’t plan to stay long-term.
Mistake #7: Not Having a Home Inspection
Having a professional home inspection before closing is one of the most important steps in the process. Carefully review the inspection report to ensure the home is in good condition. You don’t want to buy a home that has serious issues, such as mold, water damage, or pests.
Mistake #8: Not Doing a Walk-through Before Closing
Visit the property after all the furnishings have been moved out, to make sure there are no surprises. If you’re buying a new home, you’ll typically do a walk-through with the builder’s representative. Any incomplete items will be added to a “punch list,” which will be reviewed at closing. Be sure to get written confirmation of when the builder will complete these items.
Mistake #9: Not Understanding the Contract
Make sure everything is in writing, and work with a professional REALTOR® to understand your responsibilities under the contract. They will guide you through the closing process to help protect your investment.
Mistake #10: Choosing the Wrong Agent
You want to hire an experienced REALTOR®—not just a family member or friend. Ask your friends, neighbors, relatives, and business associates for recommendations. Then select at least three individuals to interview and hire someone who understands your goals and will help you find the perfect home at the right price. Related to this, the biggest mistake that can cost you thousands is not using a Buyer’s Representative, an agent who represents you exclusively in the home-buying process.
Why Should I Use a Buyer’s Representative?
The seller’s agent does not represent your financial interests. They work for the seller and are trying to get the seller the most money you will pay. Create a “buyer’s representation” with a REALTOR® so you have someone on your side working to negotiate the best price for YOU. This is why you never want to walk into an Open House without having a REALTOR®. By the way, this won’t cost you a nickel because it’s paid out of the seller’s commission.
An experienced Home Buyer Representative can save you time and money when buying a home by:
♦ Helping you find the perfect home at the right price, so you don’t have to worry that you bought the wrong home or paid too much.
♦ Providing you with direction and contacts to get pre-approved for a home loan so you’re never lost trying to find the most affordable financing for your situation.
♦ Negotiating the best deal with the sellers… so you avoid costly traps and pitfalls. You don't make money when you sell a home; you make money when you buy it!
♦ Coordinating all inspections, appraisals, escrow, and title services with the very best companies, so you feel confident and can focus on other tasks with your move.
How to Find the Perfect Home and Save Thousands When Buying
We offer a Preferred Buyer Program for those considering buying in the next 6 months. Our program includes an Advanced Home-Locator Service™ where our software will sift through the market each night to find hidden bargains and new listings before anyone else – and send you daily email notifications at no charge. To enroll in our no obligation program or if you have questions about our Lowest Loan-Locator Service™ to help you find the best loan program for your needs – call us using this number:
Victoria Popescu & Peg Augustus, REALTOR® Home Buyer Representative
