5 Common Home-Buying Mistakes
Low interest rates on mortgages make lots of people think it's time to buy a house... the belief those rates will eventually go up again makes it easy to think it's time to buy, right now! Just keep in mind that buying a house is not something you do every day. Or something you do lightly.
There are plenty of ways you can trip up buying a house... but you can stop worrying. We've got a handy list of what not to do right here.
1. Expecting to bring down the price after you make an offer
With a real estate market that's heating up, homes are starting to sell for more than the asking price. Some buyers try and win over the other bidders by putting in bids over that asking price... but then want to negotiate down the price by trying for credits during the escrow.
This "bid high, negotiate down" might work sometimes during a weak seller's market. But right now the market is competitive for buyers... in other words, don't count on being able to pull this off. Any seller will likely have an offer in their back pocket from a different buyer who really wants to buy the house, and who's hoping your deal will fall through. The seller might simply go with the backup offer if you start asking for credits.
It's better to make your best offer in the beginning, without assuming you'll negotiate it down later.
2. Waiting too long to ask for credits
There was a house on the market in Houston that had been listed with the full disclosure there were termites. After making an offer and going into contract, the buyer had some further inspections done. At the last minute, the buyer went to the seller demanding a large and unreasonable amount be knocked off the selling price. This buyer assumed the seller wouldn't want to re-list the property and would agree so he could close the deal.
The seller was fine reducing the price, but not by the entire amount the buyer asked for. The buyer walked away, and the house ended up selling for a higher price than had been negotiated with that first buyer.
It's fine to ask for credits if the home inspection reveals costly repair work that wasn't clear when you made an offer. Still, even during a buyer's market you can't assume the seller will cave to an unreasonable demand at the last minute.
3. Trying to do it all yourself
Your agent's job isn't just to find listings. Today, the buyer's agent is more focused on presenting your offer in a way that gets accepted, and ensuring it sticks through escrow.
A good buyer's agent will know your local market far better than you will. They'll know the backstories behind the buildings, and why one home sold a bit cheaper than the rest (if the reason doesn't apply to the property in question, you can't use it to argue for a deal). Plus, a good agent will have a network in the market -- they know other good agents, and work with them regularly.
4. Not getting pre-approved
Sellers may refuse to consider your bids unless your lender gave you a pre-approval letter. Based on the pre-approval, your bank's loan officer gives you an idea of how much the bank will be willing to lend you. From the seller's perspective, pre-approval reduces the odds the buyer will be unable to live up to their bid, or might torpedo the deal by being unable to all the financing he anticipated.
5. Not considering resale value
You're not obligated to live there forever, you know. Life is full of changes. Buying a home is an investment, so look for one that will be easy to sell for a good price. Maybe choose one that has a big yard and several bathrooms, and no loud factories nearby.
Just don't bank on any fantasy you'll come out wildly ahead. If you've seen house flipping TV shows, you've seen how unpredictable selling houses can be.