1. Not understanding multiple offer situations
A multiple offer situation is when you are competing with another buyer for the same property. This occurs when two or more offers come in at the same time and usually, the seller will send a notice for the prospective buyers to bring their highest and best offer. This is extremely common in 2021. Oftentimes home buyers don’t understand how aggressive the bidding can get when this happens. This can lead them to submit less competitive offers and ultimately lose out on the home. I often ask my clients, at what cost (or monthly payment) will you be mad if you do not get it. Right now, it is taking some clients 4 or 5 offers before they are getting an accepted offer.
2. Letting emotions take over
There’s no denying that buying a home is an emotional experience. However, many times home buyers get so caught up in the excitement of a home that they sometimes overlook glaring issues of a property. I want to find you a perfect home, but I also want you in a safe and solid investment. I have been told I am too honest with clients in the past. Inspections are needed, but we should give the home a hard look before making an offer.
3. Not getting pre-qualified before starting your home search
Get Pre-qualified or Pre-Approved before you start looking. Make sure the monthly payment amount includes taxes and home owners insurance. In this hot market where homes are flying off the shelf and are in constant multiple offer situations, you want to be able to act quickly when you find the home of your dreams. If you wait until you’re ready to put a contract on a home, the home will most likely be gone.
4. Failing to consider additional expenses and timelines
If you’ve never purchased a home before then you may not be aware of the costs besides the actual mortgage loan for the property. Be sure to take into account all closing costs, down payment amount, earnest money, moving expenses, and setting up utilities. Also, planning timelines for when you sell and actually move and close is a very important part.
5. Being too picky
Many first-time home buyers think they are purchasing a home that they will live in for 20 years, which may be the case for a few, but the reality is that most first-time home buyers will upgrade to a larger home or move to a different location altogether within a couple of years. It’s perfectly normal to want the perfect home that you can see yourself living in forever, but it is best to write down just a couple of items that you are unwilling to compromise on. This will help make your home selection a little less stressful.
6. Not seeing past cosmetic issues
Being able to overlook minor cosmetic issues could actually save you $1,000’s if the home is priced to condition. We’ve seen homes completely transformed with fresh paint, new carpet, landscaping, and some good old-fashioned elbow grease. Some buyers can handle repairs and some can not.
7. Buying a Car right before closing
You’re finally under contract on the home of your dreams you want a new car for that garage. Well, you might be sleeping in that new car if it changes your debt to income and might kill your home financing. If you need to make major purchases talk to your lender first.
8. Assuming your credit is too low to qualify
Many people are afraid to even apply for a home loan because they think their credit is too low. This is often a mistake because there are programs out there that will often accept credit scores as low as 580. Also, if your credit score is borderline, there might just be a few minor things you need to do to repair it and qualify.
9. Working directly with the listing agent
Sometimes buyers want to work directly with the seller or listing agent without having an agent represent them. This is most common with new construction homes when the buyer walks into a model home and begins working with the agent on site. The problem is that the agent in the model home works for the seller (builder) and has a fiduciary duty to look out for their best interests…….NOT yours. When there are contract disputes or someone is not upholding their end of the deal, you need someone with experience who will fight for you…..not the other way around. Also, the seller’s agent does not often give a discount if there is not a buyer’s agent. The current average cost to a buyer to have me as an agent is less than .02% of the price of a home.
10. Not understanding the type of market
Understandably first-time home buyers are often looking for the best deal they can get. However, first, you must understand the type of real estate market that your local area is in as great deals are not always plentiful. A buyer’s market is exactly what it sounds like……there is usually a surplus of home inventory for the number of active homebuyers. This can result in some fantastic deals for buyers. On the flip-side is a seller’s market, where home inventory is tight and it is common to see multiple offer situations, which can drive up the price of homes even higher. If you’re purchasing a home in a hot seller’s market, you should be mentally prepared for the chance that the homes you are looking at could go over the asking price and that you will have to be more aggressive with your offers.
Jay Goslee will be able to give you a complete analysis of what your real estate market looks like and how you can best compete (and win) against other buyers. If you have read all the way to this point – email us at [email protected], just say Nachos, and I will buy you lunch one day.