If there were pitfalls to avoid when buying a house that could save you thousands of dollars, you’d want to know about them, right?At Shiloh Street, we see too many home buyers focus only on the process of buying a house and not enough attention to the pitfalls that cost home buyers millions per year.
Before you rush into buying a home, get familiar with the 7 pitfalls you need to avoid so you’re well prepared and ready for anything that comes your way….
Pitfall #1 – NOT Getting Your Mortgage Pre-Approval
The most common mistake I see home buyers make is waiting too long to get pre-approved for their home loan. 99% of home sellers want to know that the home buyer making an offer on their home is pre-approved for their mortgage. The seller doesn’t want to risk taking their house off the market for a buyer who can’t afford the house, right?
Here’s a common situation: home buyers will tour a few homes for sale with their real estate agent, find one they fall in love with and then realize they need to get their mortgage pre-approval before they can submit an offer in order for the seller to take their offer seriously.
But by the time they get their mortgage pre-approval, the seller has already accepted another offer. Home buyers miss out on real estate bargains all the time because of this mistake. Don’t be the sucker who loses out on their dream home by not getting pre-approved first!
Pitfall #2 – Picking a Shabby Realtor
In most local real estate markets, there’s no shortage of real estate agents fighting for your business. New Realtors get into the business everyday but don’t make the mistake of trusting them 100% just because they have a real estate license.
My suggestion is to choose a real estate agent or Realtor that has solid experience in the real estate market you’re buying a house in. Buying a house will probably be the biggest purchase of your life and you want an experienced professional handling your real estate transaction.
For example, would you want Johnny, the 26 year old surgeon fresh out of med school to operate on your herniated disc or Dr. Stone with 20 years of experience performing that exact operation? That’s what I thought.
Pitfall #3 – Did You Budget for House Repairs?
First-time home buyers will often jump into buying a house as soon as they get the chance. They figure that as long as their mortgage payment is no higher than their rent payment, things should be fine. Wrong!
When you’re looking at renting vs. buying a house, you can’t just look at the monthly payment. You need to be financially ready to pay for any unexpected repairs and maintenance that will come up (and believe me, it will come up!)
A leading cause of foreclosure in the US is renters buying homes prematurely without being financially prepared. So get ready for the unexpected repairs and you’ll be able to weather most storms that come your way.
Pitfall #4 – Thinking Short Sales are EASY
The buzz word in real estate today is ‘short sale’, right? You’ve probably heard it 63 times this week on CNN and CNBC. Every home buyer thinks it’s the best path to buying a house at a huge discount.
The truth is that on average a short sale transaction takes 6-12 months to close. And many transactions fall apart after months of negotiating with the bank, which forces you to start all over at square one. Don’t be fooled; short sales are long, stressful and super frustrating.
My advice is to avoid them like the plague. Instead, try looking at bank owned homes and read my article ‘4 Reasons to Buy a Bank Owned Home vs. a Short Sale’ for all the nitty gritty details.
Pitfall #5 – NOT Retiring in Your House
No, I’m not saying that you need to retire in the house you’re buying. What I’m saying is on average people move every 7 years, which means you’ll probably be selling that house you’re about to buy at some point in the future, right?
So you need to think about the pros and cons to selling the house before you buy it. I know it sounds backwards but it’s the smart thing to do with real estate.
Think about what issues will turn prospective home buyers off and make it difficult to sell in the future. Can any of them be easily fixed with good home staging tips? Do you have any reason to think the home’s value will go down before you sell?
Buying a house is very emotional but try to think objectively about the difficulties you might have when re-selling the house. If there aren’t any negatives, that’s great! It’ll keep you from buying a house next to the freeway just because you liked the kitchen cabinets.
Pitfall #6 – Getting Into Bidding Wars
What’s a ‘bidding war’? When a home for sale gets offers from multiple home buyers at the same time, it can create a bidding war. Most times, the seller’s listing agent will tell each of the buyer’s real estate agents to make their highest offer because there are multiple offers on the table. It’s a tactic used to get the seller a higher sales price.
Pretty sneaky, huh?
It works because buyers get so emotional and competitive that they feel they have to out bid everyone else and win the house. You may feel like a winner but you can end up overpaying for the house. Instead, make your offer at the price you’re willing to pay and don’t budge unless the house is a killer bargain or it’s your absolute dream house you just can’t live without.
Pitfall #7 – Picking Any Home Inspector with 2 Ears
I’m not telling you to search for a 1 eared home inspector. The point is picking the right home inspector to perform a thorough inspection of the house is just as important as choosing an experienced Realtor. The home inspection process is where you could end up paying thousands of dollars in the future if a repair or construction issue is missed.
Don’t blindly use the home inspector your real estate agent recommends. Interview him/her along with 2-3 others. Ask them how long their home inspection generally takes, how much experience they have, the most common issues they find in homes like the one you’re planning to buy, etc. Grill them like you’re hiring a CEO for your Fortune 500 company!
Don’t choose the cheapest or the fastest home inspector. The home inspection is not a step to buying a house that you want to cut corners on. Generally, the longer a home inspector takes to perform an inspection, the more detailed and thorough they are which is exactly what you want.
If you keep an eye out for these 7 pitfalls when you’re buying a house in your local real estate market, you’ll be miles ahead of every other poor home buyer that doesn’t have a clue and picks a Realtor because they had a picture of their dog, Fluffy, on their business card.