What Are The Worst Mistakes New Buyers Make?
What Are The Worst Mistakes New Buyers Make?
What are the worst mistakes when buying a house? The home buying process is stressful, from house-hunting to signing on the dotted line. It's a financial, legal, and emotional process that involves tens of thousands of dollars just in processing fees alone.
Not understanding additional or hidden costs.
When it comes to the house-hunting process, the asking price is not the only thing potential buyers have to take into account. That's why it's important for prospective homeowners to do the research when it comes to hidden costs and fees.
There are many things that first-time buyers fail to account for like closing costs and potential repairs. The perfect house will always come with some sort of imperfection that an open house cannot suss out.
Before you start a bidding war, it's important to factor in things like whether or not the land transfer tax bracket changes with a higher offer, if home insurance premiums are likely to change before the closing date, and so on.
Buying in a hot market.
This is not necessarily a mistake but in a hot market where the home purchase price is higher because of high demand, it might be a good idea to save money by being patient.
It's hard for home buyers to gauge what kind of market a home is in but that is something that a real estate agent should be able to help with.
Of course, a home's price is based on concrete things like whether it's in a good school district or its condition but its market value is affected by the way the market is trending. Many buyers mean a seller can expect a sharp difference in price, not just a fluctuation of a thousand dollars or two.
A buyer's market where the house price favours the home buyer is one where there aren't a lot of buyers and a seller's agent may be able to motivate sellers to settle for a lower price than anticipated.
A dream home can be tempting but you need to put yourself in the shoes of a real estate investor even if you're only buying one home. Is the inflated value worth the increased financial pressure? More money for a down payment and a higher monthly mortgage payment because of the interest rate can quickly turn your dream home into a money pit.
Skipping the home inspection.
A home inspector will be the first person to identify any problems with a home. Since home inspection fees can save you tens of thousands of dollars in repairs, skipping this step just isn't smart.
Many people think that inspectors are only needed when there has been water damage or other problems but they are still important.
Sometimes it's difficult to get sellers to co-operate with inspectors but many people are willing to reduce their price when the home inspector finds problems that they wouldn't have otherwise known about.
This is unfortunately one of the more common home buyer mistakes. A good inspector can find the difference between water stains that just need a quick paint job and stains that stem from long-lasting maintenance issues.
From basement walls to the electrical panel, a home inspection is critical to highlight foundation issues and safety concerns that can change whether the purchase contract slides into the picture or not.
Negotiating with sellers who don't want to negotiate.
Real estate is time-sensitive and being locked into endless negotiation is money lost.
One of the big reasons why a seller might not want to negotiate is the current state of capital gains taxes. This is a tax the seller pays when they make a profit off of the property and something they have to factor into their finances.
When on the house hunt, it's a good idea to be aware of all your options. While the costs needed to get to the finish line are high, they might not be worth the too-high mortgage payments if the current homeowner is not willing to compromise a little.
Buying a house without researching the location.
There's a reason why real estate agents emphasize location so much. A home in a neighbourhood with top-notch schools and low crime rates is usually worth the extra cash.
It's also important to research what kind of transportation options are available and an area's proximity to shops and entertainment venues. A family that plans on walking or biking to get around may want to avoid homes that require them to drive everywhere.
You should also take into account what could happen years down the line when you want to buy a new house. Paying down your mortgage is one of the mortgage basics but learning about home equity to fund your search for the perfect two-bedroom home can help you make moves faster.
Buying a historic property without knowing the ramifications.
A historic property is enticing but buyers should know what they are getting into. These properties may need renovations to bring them up to current standards and get rid of any safety hazards.
Many historic homes cannot be demolished so buyers will have to pay for all the work necessary. It's also difficult to find contractors who specialize in older houses which can drive up renovation costs, not to mention the need for special permits.
Though historical homes come with their often quirks, they do have some benefits. It's not impossible for first-time home buyers to deal with those idiosyncracies but it is definitely an added stress.
Not using a real estate agent.
Real estate is a complicated business and there's a reason why a real estate agent makes their living from helping people find and buy the right home.
First-time buyers underestimate how volatile the real estate market can be and the complexity of the home buying process. Simply being pre-approved for a mortgage and having enough for a down payment is not enough to ensure a good deal.
One agent that is experienced and attentive can make a marked difference on closing day. They have access to a network that can make the process lightning fast or give them access to great homes even before they go onto online listings. A few hours of work with one can save thousands.
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