Homebuyers: Avoiding Five Expensive Mistakes

In a buyer’s market or a seller’s market, first time homebuyers as well as seasoned homebuyers should always be smart when shopping for a new home.  In a buyer’s market where there is so much inventory to choose from, potential buyers can easily lose their focus.  In a seller’s market, there isn’t enough inventory and homes go under contract so quickly, sometimes there’s just not enough time to really think clearly and make wise decisions. Regardless, smart buyers need to be cautious about making an expensive mistake when buying real estate.  Below are my five top tips that every homebuyer can make use of.

1. Be sure to get pre-approved for a home mortgage and most importantly, have it in writing.  Most buyers need some help in the form of a mortgage for purchasing the home.  The smartest homebuyers get this out of the way first before even starting to look at homes.  Finding out what you can afford and feeling comfortable with your estimated monthly payment could be two different things.  Some people are not willing to fork out on a monthly basis what the bank says they can afford. It’s best to know that dollar number and accept it before entering into a contract and going into shock later. In addition, finding out earlier than later that there is a credit issue that needs to be cleared up will make all the difference in the world once you finally find your dream home.  Potential sellers will not wait for you to clean up your credit.  Be sure your final document from the bank says it is a pre-approval letter and not just merely a pre-qualification.  A pre-qualification is nothing more than a “maybe”.

2. Work with an experienced real estate agent.  Many new agents have entered the market in the last year and have little to no experience or mentoring help from the Broker.  Check references and ask friends and family for a referral.  Call the local real estate office in your town and ask for a recommendation.  Visit their websites.  Are they well organized and professional?  Set up some time with at least three agents and speak to them about your needs.  Once you do that, you will have a good idea of who you trust and who you want to work with.  Keep a supply of their business cards on hand with you just in case you visit any open houses or model homes.  It doesn’t cost you any more or any less to have your own real estate agent, no matter what you are buying, whether it is a newly constructed home or a resale.

3. Possibly bypass the home that has a serious defect.  No home is perfect but some homes have blemishes that no matter what you do, you can’t disguise it.  Someday you may want to sell the home.  Ask yourself if you are prepared to deal with this blemish on the selling end too.  What if the current market changes, could this blemish take your home completely out of the buyer’s market?

4. Get a comparative market analysis before making an offer.  Don’t assume every house is priced right for the market.  Some people “test the waters” first.  Insist on a comparative market analysis before deciding on your offer.  Licensed real estate agents have all the tools to do this quickly and efficiently for you.  Ask to see a report of all “similar” homes closed within the last 6 months, all homes currently under contract, and then all homes on the market in your immediate area.  If you are still having trouble deciding on a figure and you have the time, ask to view a few of the similar homes for comparison.

5. Contingency clauses -- it depends on the market.  In a fast and furious seller’s market most people try not to tack on any contingency clauses such as “contingent upon my home selling”.  With multiple offers coming in, a seller will totally bypass your offer, even if it is a full price offer.  On the other hand, in a buyer’s market a contingency clause regarding obtaining an appraisal of less than or equal to the purchase price and the buyer’s approval of a professional inspection report make good sense and should be considered.

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