What mistakes are home buyers making today, and how can you avoid them?
It is an incredible time to buy a home. From low home prices and interest rates to sellers finally able to sell, this is the best time most will see for buying a home in their lifetimes. Unfortunately, many are missing out on the opportunity, or are turning their dream homes into a nightmare by making some very basic, but very expensive mistakes. So how can more aspiring home buyers dodge these pitfalls, and enjoy the home buying experience?
The Home Search
In theory, searching for a home should be a lot easier today given new technology, and the growing number of home listing platforms. In reality, this has also complicated the process. Giant home listing portals can be incredibly frustrating, with 30% or more of listings incorrect, or no longer available. A Craigslist experiences can be similar, with the added frustration of endless scams to sift through. Local websites, and real estate investors could offer many a more appealing, profitable and effective resources for streamlining home searches.
Vetting the Home Seller
Vetting the seller of a home is critical today. First, it is important for buyers to ensure that they are actually dealing with the real home owner, or at least an authorized agent. Next, it is smart, especially when dealing with real estate companies, to check out their reputation. There is so much on the line when buying a home, why not take a few minutes to look them up?
Ability to Sell
Unfortunately, many homeowners may not even be able to sell their homes, despite being highly motivated to do so. They may not even be aware of some of the issues that could prevent them from selling their homes, or at least selling them in the desired time frame to all buyers. Some of these issues can include:
- Foreclosure
- Delinquent property taxes
- Liens
- Condo and home owner associations
- Cloudy titles
- Pre-payment penalties
Preliminary title work can help uncover many of these potential issues.
The Math
Fuzzy math can derail buying a home at the very last moment, or at least take the fun out of it. It’s not uncommon for home buyers to get to the real estate closing only to find closing costs and cash required to close is significantly higher than thought.
Aspiring home buyers need to make sure they are aware of all closings costs down to moving and utility service deposits. The biggest threats are normally discrepancies in initial Good Faith Estimates versus final closing costs. All too often, mortgage lenders minimize the charges on initial Good Faith Estimates (GFEs) to lure home loan shoppers. This can lead to leaving out escrows for property taxes and insurance, title and homeowner insurance premiums, and even condo and home owner association fees and even significant special assessments. It is always wise to get a second opinion on these documents, and to get an estimated HUD-1 settlement statement from the title company as early as possible.
Read the Fine Print
From initial contract to homeowner association documents, it’s important for home buyers to read the fine print. This is where the issues lurk that can wreak major havoc on the buying process, and with enjoying a property once it is purchased.
Look out for deed restrictions, quirky association rules, loopholes which allow others to skirt performance, and any exceptions which could derail the real estate transaction, result in higher costs, or prevent buyers from using the property as they plan to.
Home Inspections & Due Diligence
Home inspections are really a must. There is no excuse for forgoing a home inspection, unless buyers are willing to gamble everything. They are not expensive, but can be invaluable in saving buyers from seven figure mistakes. Review them with a pinch of salt, and understand every nut and bolt might not be shiny, and may not need to be fixed immediately. But do be alert to issues which can threaten structural integrity, could prevent financing approvals, or cost many thousands to fix out of pocket before the home will be livable. Also, be aware of issues common in the local you are buying a home in.
Investigating the Neighborhood
Beyond the individual property, buyers should be investigating the neighborhood or condo buildings. Realtors can be slick in the routes they take to show a home, and they times they will show them. Drive different routes, watch the neighbors, and ask local shop keepers about potential building developments which could block views, or cause years of noisy construction, or even devalue a property.
Deposits
Earnest money deposits should never be made directly with home sellers. Preferably, deposits will be made with a truly independent title company. Real estate attorney escrow accounts are also possible.
Get Pre-Approved Early
Get pre-approved for a home loan early, and turn in conditions as soon as possible to avoid any surprises. Waiting will only increase risks of deal falling apart.
