The good news: after the thumping the housing market has taken, it’s likely a smart time to be buying real estate for a lot of first-time buyers. The bad news: even in a favorable environment, you might still make a major mistake in your purchase.
It’s not necessarily your fault, it’s just that home-buying is a tricky, multi-layered process that can be daunting to the unfamiliar. Knowledge is power, so go in armed with critical information. Some of the most common blunders to avoid:
Blind trust in your real estate agent. Your real estate agent may be the nicest person in the world. But the agent’s ultimate goal is to sell the house, and for the highest price possible, since that’s where they derive their commission. So don’t think that they’re going to highlight the house’s negatives: maybe the local school is terrible, or the neighborhood’s comparative sale prices have been slipping. To discover all that, you’ve got to do your own due diligence. One way to turn things in your favor: use an exclusive buyer’s agent (find one at NAEBA.org). Be sure that you use an agent whom you trust and who has good references. Even a buyer’s agent can turn against you since they too are paid by a commission that comes from a percentage of the sales price (i.e., higher sales price = higher commission for your agent).
Lack of a home inspection. Anyone who doesn’t have an accredited home inspector check out their potential purchase deserves whatever is coming to them. It’s your right as a buyer to check the place out for factors like structural flaws or mold, which could set you back countless thousands of dollars. Find a home inspector at ASHI.org, and don’t sign anything until they’ve delivered their verdict.
Not adding up the total costs. When you’re calculating how much home you can afford, the mortgage is just step one. There are monthly maintenance fees, if you’re in a co-operative apartment; local property taxes, which can be punishing; homeowner’s association fees; and day-to-day repair costs. Your utility costs will likely be more expensive and don’t forget that you may need to buy some furniture to fill up the extra rooms you never had living in your old apartment. Make sure you can swallow all those combined costs, not just the monthly mortgage.
Skipping mortgage pre-approval. The housing market is heating up again – albeit slowly – so you may find yourself in a market where homes are getting multiple offers. If that’s the case, having a pre-approved mortgage from a lender is what will get you serious consideration from the seller. If you don’t have one, your offer could just get thrown on the scrap heap.
Not getting it in writing. Sad to say, but an oral agreement in a home sale means virtually nothing. If you want to include certain clauses in the contract – say, if you want to sell your own house first, before trading up to the new one – it needs to be in black and white. Having an experienced housing lawyer in your corner will cost you a bit upfront, but it will help you navigate through this legally treacherous process.