The 10 Dumbest Mistakes Smart People Make When Buying a Home
Mistake #1: Not knowing how much they can afford before they make an offer.
The easiest way to avoid this mistake is to get, at lease, pre-approved for a mortgage by a lender so you know in advance exactly how much you can afford.
Mistake #2: Not realizing in advance who the real estate agent represents.
Most people think that their agent is working for them. Unless you have a written exclusive agreement with the agent as your buyer representative, the agent works for the seller.
Mistake #3: Not realizing that the wrong mortgage can cost thousands of dollars in needless interest and taxes.
Check with your accountant before you make your final decision on which mortgage you are going to choose. Your CPA will be able to tell you what the long term effects will be on your income and taxes.
Mistake #4: Not discovering hidden defects before you buy a home.
One of the most expensive mistakes is also one of the easiest to avoid. Always have a professional pre-purchase home inspection. If possible, make the contract contingent upon the inspection for an added safety net.
Mistake #5: Not knowing your credit can affect your ability to buy or refinance a home.
Before you buy or refinance, many of the clouds on your credit can be cleared up or even eliminated. Your mortgage professional can help you review and prepare your credit file in advance.
Mistake #6: Choosing the wrong agent or choosing them for the wrong reason.
Buyers choose agents for a variety of reasons, referrals, advertising, friends, etc. You still need to do your due diligence and make sure the agent you plan to use is a licensed agent in the area you are looking. Also make sure that the agent is experienced and professional.
Mistake #7: Not knowing your realtor’s fee structure and who pays those fees.
A good agent SHOULD make this clear before showing you any property. You should ask the realtor what their fee is and who pays it. Also ask if there are any additional fees. This information is part of the buyer broker agreement and should be explained prior to looking at any property. By knowing this up front, it protects you and the real estate agent from any misunderstandings.
Mistake #8: Not knowing all of your legal rights and obligations.
Real estate law is complex. The contract that you will sign when buying a home is legally binding. Small items that are neglected in the contract can wind up costing you thousands of dollars. You need to consult a knowledgeable professional who understands the in’s and out’s of a real estate transaction.
Mistake #9: Not purchasing owner’s title insurance.
The lender requires that you purchase title insurance to cover their portion. It is highly recommended that you purchase owner’s coverage as well. Since your home is most likely your largest investment (not to mention where you live) you need the extra coverage in case there is ever a title issue.
Mistake #10: Not using local lenders.
With the recent changes to the mortgage banking industry, it has become much more difficult to get a loan approved. It is preferable to use a local lender with an in-house local underwriter that understands the local market.
Buying a home can and should be a very exciting and enjoyable experience. Working with an experienced, professional, licensed realtor can make all the difference.
If you have any questions or comments about these items or any other real estate related matter, please feel free to contact us.