6 Common Homebuyer Mistakes
And How to Avoid Them
Buying a home can be stressful. Very stressful. So with all the chaos of buying your new home, we’ve noticed a lot of people who make some errors in the process. So let’s take a step back, take a breather, and make sure we get this process correct and stress free! Here are our 6 Common Homebuyer Mistakes and How to Avoid Them:
1. Don’t Get Educated on the Home Buying Process
A home purchase is the most important investment of your life. You go to school and learn valuable information about all sorts of important things, yet when you go to purchase a home most buyers fail to educate themselves on
1. the dangers of homeownership
2. what to avoid
3. how to protect yourself properly when you write an offer
4. how to not overbuy a property
2. Looking At Houses Prior To Getting PreApproved
a. A pre-approval letter is more reliable than a pre-qualification letter. Getting a pre-qualification letter is easy. You just call a mortgage broker or lender, provide some basic financial information, then wait a few minutes for the letter to come through your fax machine. Getting a “pre-qual” from a Web site is just as easy. Enter some information, click “submit” and voilà. A pre-approval letter, on the other hand, involves verification of the information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment and other aspects of your financial circumstances. Granted, a pre-approval is more time-consuming (and possibly more stressful) than a pre-qualification The additional due diligence is exactly why the pre-approval carries more weight.
b. You’ll know how much money you can qualify to borrow. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there’s no quick-and-dirty way to translate that monthly payment into a specific maximum mortgage amount because other factors — down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on — are part of the calculation. And, you might not be qualified to borrow as much as you think you should be able to borrow, depending on your income, your debts and your credit history.
c. You’ll have more leverage in negotiations with the seller. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable point in a close multiple offer situation. And, you might feel more confident about making an offer with a pre-approval letter in hand and the knowledge that you’ll be able to obtain a mortgage.
3. Try To Purchase A Home Without Representation
– IT DOESN’T COST THE BUYER A PENNY!
4. Mistake Asking Price Versus True Value of a Property
1. This brings us to our next mistake. In my real estate career I’ve bought more homes than I can remember. Last year I purchased over 30 homes alone for example. What I have come to realize in this experience is that the asking price does not always match the true value of a home. I’ve bought a home for $50K over asking before, and gotten a deal that was great and I made a lot of money on. I’ve also gotten a house for $40K under the asking price, and lost a whole lot of money on.
2. The important lesson here is that you work with a market expert that can accurately value a property’s current market price. That way you can protect yourself. No one has a crystal ball and can 100% guarantee what the market will look like tomorrow, but through data and research market experts can take educated guesses on what is going to happen and most importantly get you in a home at a price that you aren’t over your head on if you had to turn around and sell the property the next day
5. Losing Site Of The Big Picture
1. The home buying process is an emotional one. Home buyers can get caught up in winning the negotiation and winning the battle, and lose sight of winning the war.
a. We had a past client that was in a situation that she wanted to walk away from the house because the homeowner was not budging any longer. We literally had them down as low as they would go. Our client was fixated on the zestimate of the home and how she wanted it at a price not above the zestimate.
b. The only issue was that the price of the home that we had, and the value of the home was different. We had gotten the client down to $205K, and the home was actually worth in this case $220K. At that point, it became clear that our client was wanting to win the battle and get the price that she had in her head, even though the numbers said that a $205K price would give her 15K of equity when she purchased the home. Which is a obviously a really good thing!
c. (See maximizing your real estate investment article and market review video for more information on market conditions and what you should be doing in today’s market)
6. Don’t factor in properly the importance of location
1. LOCATION LOCATION LOCATION
2. Is the property in your budget because it’s a deal, or is it because there is something wrong with the location – like a bad yard, or on a busy street