The Top 10 Buyer Mistakes

And How to Avoid Them

For most people, buying a home is the largest purchase of their lifetime, yet many home buyers make costly mistakes. Learn to identify an eliminate all of these, and you can potentially save yourself a lot of money - and your sanity - in the home purchase process.

1. Not going through with the purchase.

Given the complexity of a real estate transaction and the money involved, cold feet are to be expected. However, the benefits of home ownership are significant – and the process can be dramatically simplified with the right buyer’s agent and lending partners. Take all the time you need to get familiar with the buying process, view homes and make a sound home buying decision – but, don't let nerves keep you from making your home owning dreams a reality.

2. Choosing the wrong agent.

Don't make buying a home more difficult by choosing the wrong agent. You want an agent who works for you, listens to your needs and goals, and is committed to achieving them. It's important to choose an agent with a solid understanding of the market, a track record of negotiating the most optimal terms for their clients, and provides hands on step-by-step guidance throughout the home buying process. An agent with the right experience to anticipate potential issues before they occur and a track record of getting in front of them before they create any complications for their clients. Your agent will be in close contact with you throughout the process so it's important to choose someone who is both highly competent AND enjoyable to work with.

3. Shopping for a home BEFORE getting pre-approved for a mortgage.

Buyers who look at homes before talking with a lender are shopping without a budget. When you meet with a lender and go through the pre-approval process, your lender will establish (1) a maximum price range that you can afford, (2) a maximum loan amount, and (3) a total monthly payment. You will also know the total amount of cash needed to close – so you will have an accurate picture of the total money needed up front for your down payment and closing. Asking your buyer’s agent for referrals to a few prospective mortgage companies can be a good way to find someone you can trust. Interview prospective loan officers and ask questions until you feel confident they are the right lending partner.

You may have a general idea of how much your home could be worth based on comparable sales (or “comps”) - homes with similar sizes and features that have sold near you. However, no two comps are created equal so you need to take that analysis a step further. It’s helpful to run the comps through a valuation model to compare individual features for a broad list of homes – that way you can validate your prospective home price based on extensive market data. You can contact me for a free home valuation at any time; there is no charge, and no commitment. This can give you a good point of reference for how much your home might be worth.

4. Not shopping multiple lenders.

There are two reasons most home buyers don’t shop multiple lenders, (1) it takes more time, and (2) they’re worried about having multiple inquires on their credit report. Ok, yes, going through the pre-approval process with multiple lenders will take more time – but it’s time, and quite possibly a fair amount of money, you could make up in the long run. And no, you do not have to worry about multiple inquiries affecting your credit score. The Consumer Financial Protection Bureau and FICO, the credit scoring company, want you to shop lenders and want to make it easy for you. To make it easier to compare loan terms from multiple lenders, the Consumer Financial Protection Bureau requires lenders to provide you with a standardized 3-page Loan Estimate form and the end of the pre-approval process. FICO allows for multiple inquiries (“rate shopping”) from lenders within a 30 day period in efforts to make sure you get the best rates.

Comparing the interest rates and closing costs can help you ensure you get the best rates on your next mortgage. Not only will shopping lenders help you get the best rate, you will also get more advice from loan officers and get a feel for who you prefer to work with and the best mortgage lender for your situation.

5. Making a large purchase or significant life change before closing.

When a buyer is pre-approved, that is not a guarantee that the loan will be approved. Life can be unpredictable, and if there is something like a loss of employment during the home buying process, you may not be able to proceed with the home purchase – and that is out of your control. However, there are many things in your control. Do not make any large purchases (anything – a car, a mattress – that might require financing or a credit inquiry), open a new credit card, open/close a checking or savings account, take a new job, or make any other BIG changes without talking to your lender first. Remember, to gain final approval the lender will confirm there has been no change in your financial circumstances since pre-approval (or will need to approve your new financial circumstances).

6. Buying the wrong house.

I know this sounds obvious, but surprisingly easy to get emotionally attached to a house and lose some objectivity in the process. You want a home that is the right fit for you now and in the long term, but it’s also important that it will appeal to a large buyer pool in the future. Is the home big enough to grow with you if you think a home based business or kids could be part of your future plans? Are there any incurable defects - a bad floor plan, heavy street traffic and lack of adequate parking- that might not only affect your satisfaction, but also affect resale value? Make sure your buyer’s agent really understands your home buying goals and has a strong grasp on overall and local market conditions so they can help you maintain critical objectivity throughout the home buying process.

7. Searching for a unicorn.

You could pass on a home that is a great fit for your needs AND great value if you are looking for something that just does not exist (or does not exist in your budget). This might sound a tad harsh, but – let’s be real - very few of us actually get to purchase our “dream home”. The home buying process is largely a process of elimination; you’re trying to find a house that’s the best fit for your priorities (wants/needs) and your financial goals. If you love 80% of a house, like another 10%, and want to change the final 10%, it’s probably a great fit for you. While this may not be an expensive mistake in terms of dollars and cents, it can be a big mistake for your sanity and your relationships with your agent and lender. Be realistic, and don’t sabotage your search.

8. Failing to adequately negotiate terms with the seller.

You may want to sit down for this one: Completing a residential real estate contract is not for the faint of heart. These contracts typically require 203 information items – and sales price fills in only one “blank.” The other 202 represent significant opportunities to make the contract safer and more favorable for you. Far too many first-time buyers make the mistake of focusing only on price and not the other contract terms. Possession terms, inclusions, exclusions, inspection contingencies – the right agent will help you to identify the contract terms you can and should negotiate. Ultimately, you will be bound by the contract you sign. Make sure you feel well informed and educated throughout the negotiation process and that you understand the agreement in full before signing.

9. Skipping the home inspection process.

A home inspection is a buyer expense and typically runs in the range $400-$700 (depending on the size and amenities of the home) – but, it is absolutely money well spent. As a buyer, this is your opportunity to find out as much as possible about the property and make sure that there aren’t going to be any big surprises once the home is yours. Once you complete an inspection, you will have the option to (1) accept the house “as is” and request zero repairs, (2) terminate the contract, or (3) submit a list of inspection items you would like to address. Your buyer’s agent can help advise you through the inspection objections and negotiate resolution with the sellers.

9. Not allowing for delays in the transaction.

In a perfect world, all real estate transactions close on time. In the world we live in, transactions are often delayed a week or more. Suppose you asked your landlord to terminate your lease the day your purchase transaction was scheduled to close. A day or two before your scheduled closing date, you discover your transaction is delayed a week. You tell your landlord you need another week, and he/she is now inconvenienced and angry. This type of delay can present many problems, but planning for delays – like terminating your lease one week after closing - can alleviate the stress that these problems have on you and your life.

Final Thoughts . . .

At the end of the day, you want the home purchase process to be as smooth and painless as possible. Thinking about all the things that can go wrong might be overwhelming, but remember that knowledge is power. Now that you’re aware of the most common (and costly) mistakes when buying a home – you can avoid them, and potentially save yourself a large chunk of change.

- Chris Hawksley | Realtor, Broker Associate -