Buying your first home can be one of the most exciting experiences of your adult life. But if you aren’t careful, it can also turn out to be one of the worst experiences in your life. Here are some of the most common mistakes inexperienced homebuyers make and ways to avoid them.
Mistake #1: Thinking that buying a foreclosure is always going to be a great deal.
Buying a foreclosed home at a great bargain is often more difficult than it seems. Usually, buyers experienced with foreclosures are the ones able to get the best deals. A first-time homebuyer stands at a real disadvantage. Typically, a foreclosed home has been vacant for several months before it is put on the market. During that time, vandals can steal the pipes and wires, drag off the cabinets and appliances, or squat in the home. Animals can burrow into the house, eating holes in walls, chewing on wires and spreading their feces. Wind, rain, and snow can cause structural problems. Leaving a house empty for an extended period of time is a recipe for disrepair. Experienced buyers know this and know what to look for. They also know how much to estimate repairs will cost. First time homebuyers have none of this knowledge.
Unlike a normal house purchase, the foreclosure process does not generally allow for an inspection. As a result, buyers have to guess at repair costs based on the outside appearance, the age, and the time left vacant. If you want to avoid making a major financial mistake and still purchase a foreclosure, speak to someone knowledgeable with foreclosures and get an idea of common problems. Then estimate the cost to make these repairs and decide if it’s still a good financial move.
Mistake #2: Not knowing what to look for in a qualified buyer’s agent.
Qualified buyer’s agents can help a homeowner buy a home in two ways. First, they can help you identify a suitable property that is well priced for the market. Second, they can help you quality for a mortgage by organizing and presenting your finances in a way that appeals to lenders. As a result, finding a good buyer’s agent is an important step. A good agent will listen to your needs, spend time with you, and won’t get pushy. They will have experience and be knowledgeable about the market. A buyer’s agent, unlike the seller’s, works in your best interest and should represent you, not the seller. Be sure your buyer’s agent does not have any special relationship with the seller’s agent. This is a conflict of interest that could undermine their advice.
To find a good buyer’s agent, ask friends and relatives who have purchased a home recently if they could recommend someone they used. If not, interview some buyer’s agents to find out if they have experience working with first time buyers and with buyers in your market. This will help you find one that is qualified to take you on as a client.
Mistake #3: Not understanding the actual costs of owning a home.
As a first time home buyer, you might think that as long as you can afford the mortgage payments, you can afford that home. But this is simply not true. A mortgage payment is just one of many home ownership costs. Property taxes and homeowner’s insurance should factor into your cost equation. Maintenance and repairs are also something to consider because your home will definitely need repairs and upkeep regardless of how new it is.
Several of these costs can sometimes be rolled into your mortgage payment. But it is important to consider all of these costs in addition to the mortgage payment so you can decide how much home you can actually afford to buy.
Mistake #4: Failing to get a professional inspection.
Getting a home inspection is an component of buying a new home, but many inexperienced home buyers simply take the seller’s word that there is nothing wrong with the house. A seller often isn’t under any obligation to tell you about the mold in the basement, or the leak in the roof, or anything else that may affect the sale of the home. In most cases, the seller’s agent will hire a home inspector to go over the property before the sale. But this can be a conflict of interest since they are being paid by the seller.
To avoid this mistake and to save yourself from huge problems in the near future, hire an independent home inspector. These inspections often only cost a few hundred dollars but they can save a buyer thousands of dollars – or even in rare cases hundreds of thousands of dollars - if they find something major that needs to be repaired. Most home sales are based on a contingency of the results of the home inspection so you can either opt out of the purchase or ask the seller to make the repairs if you aren’t comfortable with the results of the inspection. Often, home inspections pay for themselves. Sellers will often reduce the purchase price as compensation for problems discovered during an inspection.
These are some of the more common and financially costly mistakes that first time home buyers and even some experienced home buyers make. By educating yourself on the common mistakes, you can avoid sleepless nights and put more money in your pocket when buying a home.