Good Old Honest Abe (President Abraham Lincoln) once said “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” Preparation is certainly a prerequisite for success in just about every facet of life. The same can be said about how real estate professionals approach their clients or how they approach a transaction. The same goes for a buyer’s mindset and how they see all the pieces surrounding their purchase.
There are both psychological and physical elements for homebuyers, together with sellers, in our industry. Failing to prepare for success can slow buyers down, or worse yet, put them on a path which may jeopardize their acquisition of a home or loss of their good faith deposit. First-time homebuyers in particular might lack the understanding of the parties involved and how all the pieces fit together in the real estate transaction.
First-time buying mistakes… Everyone makes them! They usually won’t hurt you, but some produce detrimental effects. Therefore, it’s important to make sure you do your homework.
Here are five pitfalls to avoid if you’re a buyer, especially a first-timer!
- Not hiring a real estate agent
Here’s our shameless plug for the day! There’s a reason we put such heavy emphasis on seeking the services of a real estate professional. While you can certainly purchase a home without one, we’d hardly recommend it. The real estate transaction is full of twists and turns. You need only ask any agent and they’ll tell you no two deals are ever alike. Unfortunately, a lot more goes into the homebuying process than one might think.
Real estate agents can help plan and anticipate the bumps a first-time buyer might not see until it’s too late. While not hiring an agent would be your first mistake, entering into a business relationship with the first one you meet could be even bigger folly. We believe trust is paramount when deciding who would be the best match for your homebuying needs. We’d recommend getting to know a few agents before committing to one.
- Shopping for a home before pre-approval
When inventory is scarce, a buyer who’s seriously considering obtaining a home should know they’ll most likely face increased competition from other buyers. In a competitive market, you’ll want to speak to lenders prior to looking for a property. And notice we said lenders! Don’t consult with only one mortgage lender. As with any product worth having these days, shop for the best deal around and talk to multiple lenders. There are many programs available, especially for first-time buyers. Make sure you’re seeing the bigger picture before you decide on a single mortgage rate quote. Seeking the best possible rate and terms can save you thousands over the life of loan.
As a prospective buyer, you’ll want your offer taken seriously, right? Be ready to roll when you find the home that’s right for you. Speaking to lenders who are knowledgeable about the process can ease your concerns. When it’s all said and done, you’ll want to assure sellers they can trust you’ll be able to get the financing necessary to complete the home purchase.
- Not relying on facts and information at your fingertips
We can’t fault buyers having emotions about their home purchase. Heck, we even have emotions about our clients’ journey toward homeownership! Memories are part of life and home is where many will happen for you and/or your family. While we understand excitement is part of the equation, it’s also important to keep your emotions in check throughout this journey.
It’s good to remind yourself that you’re making one of the largest financial decisions of your life. We don’t say this to scare you, rather to acknowledge that making choices based upon fact and not emotion is essential for success and lack of regret. Not relying on objective information can only get you into all sorts of trouble, including overextending on a home you can’t afford. Make a list of what you need, discuss it over in great detail with your real estate agent and stick with it.
- Liquidating your personal savings
Having a budget and knowing what you can spend for a home is one of the first steps in the homebuying process. Yet, one of the most dangerous moves you can make might be spending a bulk of your savings on the closing costs and down payment for your purchase. On the contrary, potential buyers should be saving long before they enter the market. There are expenses to save up for such as closing costs, down payment, maintenance or repair costs, homeowners insurance, moving costs and property taxes, to name a few.
Don’t be vulnerable by depleting your emergency funds. If something unforeseen happens, it’s always good to have a few months saved up in order to cover your housing expenses. Anticipating the extra expenses, not always visible on the surface, is a big plus. Having that buffer in savings will serve you well. Consider your income, expenses and what you would like to set aside for savings and recreation. This framework will allow you to proceed with confidence, understanding how much home you can afford.
- Passing on those inspections
This is the one area on the agreement of sale we really caution buyers not to take lightly, even in a competitive seller’s market. Buyers can be blindsided by problems which could exist in a home. Especially if you’re not a structural engineer or an inspector or a contractor or a ________________ (you fill in the blank), a home inspection can provide the buyer with information to more adequately make a determination on a house’s condition prior to its sale being final.
Inspections protect the buyer, greatly eliminating the chances of material defects in the home, where the structure might be compromised or one of its core systems in disrepair. Don’t undervalue home inspections and refrain from automatically waiving them. Passing on inspections can be a costly error. Saving time or money on the front end can really cost you, if you discover a huge problem lurking right around the corner. Contingencies are homebuyer’s friend – make sure to use them!
We’re always here when you need us – 570-585-6880 – speak to one of our real estate professionals now! If you’d like more information about the purchasing process, check out our homebuyer FAQs or our downloadable homebuyer’s guide.