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Top 5 home-buying mistakes

Buying a homeYou can't build a good house out of stumbling blocks. With that fortune-cookie saying in mind, beware of the following common home-buying mistakes:

1. Misunderstanding the real estate agent's role
Real estate agents are very friendly. That's a major part of their job. In the course of shopping for a house, a home buyer spends a lot of time with an agent. However, the wise home buyer understands who's working for whom. Unless the agent is an exclusive buyer's agent, then agents are working for the sellers. Most states require them to tell the home buyer this in the beginning, but it's easy to forget.

If an agent's potential dual role is a concern, a home buyer should hire a buyer's agent who is contracted to work for the home buyer. This doesn't cost any more than a traditional agent. A wise home buyer will agree to work with the agent for 30 to 90 days and is wary of anyone who insists on upfront fees or a long-term contract.

For more on buyer's agents, read "The home buyer's secret weapon."

2. Falling in love
If you think a house is ideal, don't let the seller or any of the seller's agents know. If the seller finds out you're in love with the house, the seller could hold out for a higher price.

A wise home buyer knows there's lots of houses -- and there's one out there that's the right house at the right price. If you can't afford it, move on and keep looking.

 

 

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3. Not doing proper research and preparation
Understand your family's finances and needs. The wise home buyer will analyze assets, decipher debts and pull credit report before plunging into the house hunt. Understanding your finances prevents wasted time looking at unaffordable houses. Before making any offers, get pre-approved -- not just prequalified -- for a loan.

Learn how to fit a mortgage and housing costs into your budget by using our calculator, "How much house can you afford?"

  • Know the neighborhood. Remember you're not just buying a house; you're also buying a location. With the agent's help, a home buyer can find out about the quality of schools, the crime level and upcoming zoning issues.

  • Make a proper offer. Don't base your offer on the seller's asking price. Instead, he gets a comparative market analysis from his agent. This analysis will reveal recent asking and sales prices of similar homes in the neighborhood. With this, a wise home buyer can make an offer that is comparable.

  • Understand the responsibilities and costs of homeownership. The wise home buyer knows that owning a home is complicated and potentially expensive. Besides the mortgage, one needs to plan on paying for insurance, assessments if any, property taxes, repairs, appliances, landscaping and improvements.

4. Not getting two important contingency clauses in the contract
When making an offer, a wise home buyer asks for two important clauses -- a mortgage financing contingency and a professional inspection contingency. These could save a lot of money and grief.

The mortgage financing contingency clause saves you if the home doesn't appraise for the offered price. You can cancel the sale and renegotiate the price or get back your deposit.

The second clause hinges the deal on a professional inspector OKing the house. If the inspector discovers hidden flaws, structural damage or faulty systems, the wise home buyer may want to renegotiate or back out of the deal. An even wiser home buyer goes through the house with the inspector to learn any concerns the inspector has.

5. Buying a house that is tough to resell
Many home buyers stay focused on finding a home sweet home where their families will be happy and safe. You should also remember this is also a big financial investment. Take a moment to look ahead to the day you'll sell the house. Knowing the neighborhood and paying attention to marketable details of the house will go a long way toward preventing a buying mistake.

For more on buying a home, read My First Home: A guide for first time home buyers.

-- Posted: July 1, 2003

 

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