1. Missing out on the perfect place.
Hundreds of new homes hit the market every day, and buyers who are not using all of the house hunting tools available, and working with a knowledgeable agent, could let their dream home slip by unnoticed —or worse, someone else might snatch it up before they even know that it’s for sale. One of the toughest lessons for buyers, especially first-time buyers is that in this market, passive house hunting simply will not cut it. If you are not prepared to buy within the next 3 months, including being pre-approved for a loan, and marketing your current home for sale, then you are not a serious buyer. If you’re not ready to make house hunting a top priority, finding the right home is going to be a painful process. First step is to consult with an experienced buyer’s agent and establish a realistic timeframe for finding your new home; use communication tools available to both buyer and agent to identify brand new listings; and agree to a strategy that will position you as a strong buyer when you do enter the market.
2. Choosing the wrong lender.
Few things are more frustrating (for buyers and agents) than finding the perfect property only to find out that your loan isn’t coming through. I always tell clients to use a local preferred lender because they’ll get great rates, the VIP treatment, and if there’s a problem they’ll find out early in the process. Preferred lenders earn their preferred status only after they’ve consistently delivered smooth loan closings and excellent customer service. Don’t be fooled by “come on” online loan rates and promises.
3. Fixating on price per square foot.
Buyers who search by price per square foot may be prime for disappointment. Size rarely equates directly to purchase price, except in new construction or commercial properties. Measurements are not guaranteed to be accurate, and mis-measurements in public records can place appropriately priced homes outside of a buyer’s search parameters. The market value of any residential property is ultimately determined by a certified residential appraiser, by comparing the subject house to recent comparable sales, and the appraiser uses measurements to find the best comps. Use the published interior sq. footage as a guide to selecting the homes that are the right size for you, look beyond square footage and use number of rooms, number of baths, room sizes and amenities as a better way to qualify your search criteria.
When prices are on the rise, or the market in strengthening, buyers get antsy and sellers get greedy. Some buyers have been outbid on numerous properties and may get tired of looking. As a result, a frustrated buyer may place ridiculously high offers on properties that just aren’t worth it—just to finally get or “win” a home. Remember, the fair market value that is the basis for all home loans is determined by an independent appraiser, what a buyer is “willing to pay” doesn’t figure into the lender’s decision to make the loan. If you offer to pay more than the house is worth in the market, your lender may refuse to make the loan you planned on, leaving all parties disappointed and frustrated. If this happens to you, go back to basics and review your original motivation for buying. Discuss your search criteria with your agent and have a back-up plan that includes looking at neighborhoods or areas that may actually have the right home at the right price. Don’t give up what’s most important to you, but be flexible when it comes to criteria that is less important.
5. Foregoing inspections.
In a perfect world, sellers would disclose every single issue to the prospective buyers because “it’s the law.” Since that’s not the case, inspections are an integral part of the home-buying process. Buyers should do inspections as part of their due diligence. Inspections identify red flags and can address the general state of a property. Plus, they can provide leverage when it comes time to negotiate the terms of your contract. In most cases, once you go to settlement you have accepted the property in “as-in” condition. Make sure you discuss all the inspections that can be done on the property prior to settlement and any recourse you have as a buyer in negotiating remediation or repairs—“no surprises, no regrets.”
6. Buying a “project.”
The unwritten rule of renovating states that it will take more time and money than expected. So it’s important for buyers to know their threshold for renovations before buying a fixer-upper. Do your homework—discuss referrals to general contractors and specialty tradesmen with your agent. Get quotes for work to be done after settlement, before settlement. It’s always better for clients to know what they’re getting into before they find themselves in over their head. One word of caution: Sinking $50,000 into improvements after settlement may not make the property worth $50K more when you go to sell it. Improvements rarely increase the market value of a house dollar for dollar. The biggest mistake in buying a “fixer upper” is that you over-improve the property for the neighborhood and will not be able to recoup your investment in the future.