Buyers would seem to be on top of the world these days.
The number of homes on the market for sale, both new and existing homes, has grown exponentially. Developers are offering special deals and incentives, trying to get their new homes sold while maintaining the integrity of their subdivision’s price points.
Sellers are sprucing up their properties, lowering prices, and offering incentives such as bonuses for buyer’s agents, increased commissions for all agents, and everything from free cars, vacations and furniture to the successful buyer.
While agents are quick to say that the market is much more “balanced” than it was, it seems to me that buyers are in the driver’s seat for the first time in more than a decade.
It’s a new reality, but there are still traps that can trip up the most diligent of buyers. Any one of these home buying mistakes can mess up what would have been a successful deal.
Home Buying Mistake #1 — Guessing How Much You Can Afford to Spend.
Home buyers have learned that mortgage lenders hardly ever say “no” when it comes to borrowing money. Poor credit, lack of a job, or even lack of cash is no longer an obstacle in the process of buying a home. Instead, lenders are quick to say yes, and only later discuss how much you’ll have to pay for getting the loan.
That “yes” can be costly. If your credit score is 620, you might pay an interest rate of 7.38 percent, while someone with an 820 credit score is paying 6.09 percent, according to MyFico.com.
Knowing what you can spend before you shop for a home is a lynchpin of buying successfully. You won’t shop above your price range, nor will you make an offer that forces you to take out an exotic mortgage, such as an interest-only loan or pay-option adjustable rate mortgage (ARM).
Home Buying Mistake #2 — Making an Offer on the First Home You See
It’s a different world out there. There are loads of homes for sale and sellers are eager to have you walk through the door. This is the time to see as many properties as you can in your price range, and take your time figuring out which one will be right for you.
Once you decide which property is right, don’t show all your cards. Never tell the seller how much you like the property. Instead, play it cautiously, and let the seller know you’re looking at other properties, too. Remember, if you lose a home, there is always another one you’ll find that you will just as well.
Home Buying Mistake #3 — Agreeing Orally to a Deal
Any real estate attorney will tell you that oral contracts don’t count when it comes to buying and selling real property. Be sure your contract includes all the exclusions, furniture, or other items you feel should be a part of the deal. If you don’t get all of the terms in writing, and the deal goes bad, your contract may not hold up in court.
Home Buying Mistake #4 — Taking a Home’s Condition at Face Value
Just because a home looks beautiful and well taken care of, doesn’t mean it is. Sellers have become hip to the concept of “staging” a home. Staging is when all or most of the seller’s furnishings are removed, and a decorator comes in to makeover the property using rented furnishings.
True, cleaning house, touching up the paint, and putting in new, matching furniture will make a home shine, but that doesn’t mean there aren’t hidden problems lurking beneath that fresh coat of paint.
Be sure to hire a professional home inspector to go through the property, looking for potential problems. The last thing you want is for a chronic roof leak to mess up that pretty paint job after you’ve bought the house.
Home Buying Mistake #5 — Letting Greed and Pride Overrule Common Sense
Recently, a buyer and seller got stuck $10,000 apart on the sales price. The property, a condo on Chicago’s famous Lake Shore Drive, would ultimately sell for more than $750,000. While the buyer didn’t want to kick in another $5,000 (which the seller would have matched), it’s foolish to lose a $750,000 deal for $10,000.
Saying “It’s the principal of the thing” isn’t enough to put the kibosh on what would otherwise be a great deal.
But buyers (and sellers, let’s be honest here) will often let greed and pride get in the way of getting a deal done. Sellers already feel put upon that the market has changed and they missed their big opportunity to name a pie in the sky price and get it. Buyers feel as though homes have appreciated so much in price over the last few years that they’re not going to pony up every last cent just as the market is turning.
When it comes right down to buying a home, emotions often overrule logic. And that’s a bad thing. If you want to get a great deal, your job as a buyer is to keep emotions like greed and pride at bay, so they don’t sink the transaction.
September 1, 2006