1. Waiving a home inspection.
The sellers are required to disclose any defects in the house – but it’s never wise to stop there. We recommend that 100% of homebuyers pay for a professional home inspection. The few hundred dollars it costs will be the best money you’ve ever spent, giving you a peace of mind that you know exactly what is wrong with the home, including big-ticket items that are expensive to fix like heat and AC systems, plumbing, the roof, electrical, and even the condition of the foundation. Waiving your opportunity to get a home inspection is one of the worst possible things you could do while buying a home, and remember that we might be able to negotiate with the seller for a lower price, credit, or even fixes to be made before the close of escrow based on the inspector’s findings.
- Making big financial changes during the process.
Assuming you’re not a cash buyer so you’re applying for a mortgage to buy your home, a common mistake is to make significant changes to your finances during the loan approval process. When you fill out the paperwork and submit all of your documentation, you’re basically taking a snapshot of your good financial picture with the help of your loan officer, which is then presented to the underwriters at the bank. But when home buyers start opening and closing credit cards, making big charges, changing employment, co signing for loans, pulling credit to apply for other loans, buying or selling assets, depositing unaccounted checks or withdrawing large sums of money, it raises red flags with the underwriter, putting the home loan – and therefore the whole home purchase – in jeopardy. Always communicate with your mortgage professional before doing anything out of the ordinary during the home loan process.
- Not communicating (and being honest) with your Realtor.
It’s definitely less than wise to buy a home without utilizing a Realtor consider that the buyer’s agent is compensated by the seller. But another critical mistake buyers sometimes make is not communication openly and honestly with their realtor. It’s challenging enough to find a house you love, make offers and get in escrow, and close the deal, but if you don’t treat your real estate agent like a trusted advisor and confidant, you’re probably throwing a monkey wrench into the process, making things harder on you – not easier. Home buying takes teamwork, so have good communication and direct, frank conversations with your real estate agent whenever possible or if you have questions, concerns, or any vital information to share.
- Not getting preapproved for the loan before shopping for homes.
If you want to waste your precious time, effort, and probably hard-earned money, go shopping for homes in earnest without sitting down with a loan officer to get preapproved first. I guarantee that even if you have innocent intentions just to browse through a few homes for sale, you’ll end up seeing something you love and want to put an offer down, but will be in no position to do so without that preapproval letter. More over, it’s imperative you know how much home you can afford, what your monthly payment might be, how much down payment you’ll have to put down, etc. The good news is that getting started with a lender will be simple and won’t take long, keep you organized, and make the rest of the home buying and lending process as smooth and efficient as possible.
- Misjudging cosmetic repairs.
Too often, home buyers (young couples and first time home buyers in particular) walk into a listing and fall in love with it because it looks just right, with modern tile and a modern sink in the bathroom, brand new light fixtures, clean carpet and fresh paint. They make a full price offer and desperately want the home. Just as often, the same buyers walk into a listing with dingy paint, overgrown landscaping, outdated fixtures and old flooring and fail to make an offer because of “all the work” that needs to be done. In reality, that second listing might have been $25,000 less than the first, but the sellers only needed to put $5,000 in quick cosmetic repairs into the home to make it shine. The point is to look at the “bones” of a home and the things that you can’t change, or can’t change inexpensively like the neighborhood, square footage, enough bathrooms, layout, electrical and plumbing systems, etc. instead of grossly overpaying for cosmetic upgrades.
- Not thinking about your home as an investment.
The old real estate axiom is that you make money when you buy a home, not when you sell a home. Even when you’re first looking at homes and putting offers down, you should judge them not just by emotional criteria but also by cold, calculated dollars and sense. Think resale value from day one – identifying the pros and cons of what make a sound and lucrative investment with your Realtor’s help.
- Buying the smallest house on the block.
You may have heard that “location, location, and location,” should be the three most important factors when buying a home, but my experience has shown there’s a fourth: square footage. Here’s my reasoning why; houses go up in value because similar houses, call comparables, sell for higher values. But when it comes to pricing your home to get it sold in the future or even having it appraised for a refinance, your smaller home will be stunted by its limited square footage. The greatest percentage of buyers are families so having a home with only two bedrooms, only one bathroom, or diminutive square footage compared to everything in the neighborhood will only guarantee your value stagnates.
- Forgetting that you’re buying the neighborhood, not just the house.
What’s the most important factor in your home’s appreciation? If we crunched all the numbers, the answer would probably be “The school down the street.” When you buy a home you’re also buying into a neighborhood and a community, and those are at least as important as the physical structure of the home itself. So take a good look and do some research on your neighbors, your street, nearby schools, parks, shopping and restaurants in the area, neighborhood associations, traffic patterns, commute times, proximity to any railroad tracks, busy intersections, and any other factors that could be a pro or con for future home buyers.
- Becoming overly emotional.
Buying a home is a business decisions first and foremost, and should be treated as such. Some buyers become so overwhelmed with the process that they suffer from “paralysis by analysis,” missing out on great opportunities because they’re so stressed about making the right decisions. Or others are too aggressive, “shotgunning” offers in an attempt to lowball or “steal” a great deal. Your goal should always be to buy a great house in a great location within your comfortable price range at a great value, and you’ll only be able to do that by keeping your head and treating it as a business decision.
- Budgeting like a renter, not a homeowner.
If it’s your first time buying a home, it’s a good idea to sit down and map out your budget as a new homeowner. In fact, there are myriad extra costs and expenses when you own a home like your mortgage, property insurance, higher utility, sewer, water, and trash costs, maintenance, insurance, etc. But when planning your future finances, you’ll get a lot of good news, too, since you’ll get significant tax breaks from mortgage interest deductions (consult your CPA or tax professional before you even start the buying process to get an idea about tax breaks.) Remember that the most important financial perk about home ownership – you’ll watch your home appreciate in value over time instead of wasting money on rent.