5 Of The Most Expensive Mistakes Homebuyers Make

5 Of The Most Expensive Mistakes Homebuyers Make

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Purchasing real estate can end up having you feel like Alice in Wonderland if you are not careful. Even after years of being in the industry, I am still learning new things. That is probably never going to change because there are so many different aspects and uses for real estate, not to mention so many different ways to purchase and sell real estate. Plus, the rules are always changing. Real estate is a never ending learning experience. Add to the fact that real estate is probably the largest purchase you are ever going to make, you can see how easy it is to make mistakes that end up costing thousands, tens of thousands of dollars, or more! That is why it is good to have a real estate broker helping you through the process. Here are a few of the things that a good agent is going to help you figure out and take into account as you work through the home-buying process.

Mistake #1:

Not knowing how much they can afford before they make an offer.

Real estate gets real expensive real fast. Even offering $20,000 over your budget, has a big impact on your monthly payment (usually around $100/mo). Or finding out that you can't qualify for that loan after you've paid for an inspection ($400) and/or the appraisal ($500). Plus, you are probably 3 weeks delayed in your purchase which can mean, another rent/mortgage payment, less availability of homes to purchase, renegotiating another house, feeling defeated from loosing the first house, etc. The easiest way to avoid this mistake is to get pre-approved for a mortgage by a Lender so you know in advance exactly how much you can afford. Most pre-approvals are free and it will give you a basis to make a more informed purchasing decision when you find the house you like. 

Mistake #2:

Not realizing that the wrong mortgage can cost thousands of dollars in needless interest and taxes.

Check with your accountant before you make your final decision on which mortgage you’re going to choose. Your CPA can tell you what the long-term effects will be on your income, your taxes, and the equity you build in your home over time. Most people aren't aware that with a standard 30-year mortgage they’ll be paying two-and-a-half times the amount of the mortgage in payments. With some advance planning and a simple strategy, they can cut the amount of interest they pay dramatically and own their homes sooner. Plus, there are SO many different loan types! Each ones have pros and cons, and it takes some planning to figure out which is best for your plan.

Mistake #3:

Not realizing in advance whom the real estate consultant represents.

Most people think that the agent they’re working with is working for them. But unless they’re working as your buyer representative, they represent the seller.  There are different types of agency relationships you can have with a Realtor, so make sure you’re clear on your options. Walking into an open house and having the agent there write it up can be very costly for a buyer if that agent is representing the seller. That agent is contracted to act in the seller's best interests and sell that home for as much as possible. Plus, buyer's agents are almost always FREE to the buyer. You've got nothing to lose with having your own representation.

Mistake #4:

Not discovering hidden defects before they buy a home.

One of the most expensive mistakes is also one of the easiest to avoid, by having a professional pre-purchase home inspection.  Don't get stuck with a money pit. The cost of a professional home inspection is usually a few hundred dollars, but the peace of mind it can give you and the expense you can avoid are worth thousands of dollars. Do you know what LP siding is and why that is bad (potentially $15,000 fix)? Do you know how many years a roof has left in it (potentially $10,000 fix)? Do you know when a furnace needs to be replaced (potentially a $5000 fix)? A home inspector does. Plus, you can often negotiate with the seller before you close to have some of those repairs taken care of.

Mistake #5: Not knowing how much their credit can affect their ability to buy or refinance a home.

Before you buy a home, many of the clouds on your credit history can be cleared up or even eliminated. Your mortgage professional can help you review and prepare your credit file in advance. Your credit score determines your interest rate and even small changes in your interest rate has huge impacts on how much you pay for the home. Did you know that a change in rate by 1% affects your purchasing power by 10%? That means if you can buy a $300,000 home at 4%, you can only afford a $270,000 home at 5%. Your credit has a huge impact on what you can afford.

As always, every situation is unique and needs special attention from qualified professionals to best fit your needs. You need to make sure that you have a real estate broker who can walk you through these considerations and point you toward lenders, inspectors, lawyers, etc. that will be best for you and your situation. If you have any questions or feel ready to talk with a professional about your potential move, I am happy to help!

Michael Voth
Real Estate Broker
Bellwether Real Estate

Heather Williams Headshot
Phone: 360-599-8946
Dated: August 22nd 2016
Views: 2,055
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