Purchasing a home is a highly emotional experience. If you let your emotions get the best of you, you could make several common home buyer mistakes. Because homeownership has far-reaching consequences, it’s critical to keep your emotions in check and make the most logical decision possible.
Your plan may be to buy a home you like at a reasonable price, but unfortunately, many people do things that prevent them from realizing their dream. Let’s take a look at some of the most common house-hunting blunders—and how to avoid them.
1. Uncertainty about what you can afford
It’s difficult to leave a place once you’ve fallen in love with it. You begin to fantasize about how wonderful your life would be if you had all of the wonderful amenities it provided, such as the lovely tree-lined streets, the jetted bathtub, and the spacious kitchen with professional-grade appliances. However, imagining yourself in that house will only harm you if you can’t or won’t be able to afford it. To avoid temptation, limit your house hunting to properties in your financial neighborhood.
You’ll end up lusting after something you can’t afford if you look at places outside your price range. This can put you in the dangerous position of trying to spend beyond your means or feeling dissatisfied with what you can actually afford.
2. Failure to obtain mortgage pre-approval
As we should have learned from the subprime mortgage crisis, what the bank says you can afford and what you know you can afford (or are comfortable paying) are not always the same thing. In contrast, what you believe you can afford and what the bank is willing to lend you may not be the same, particularly if you have poor credit or an unstable income.
Before making an offer on a home—or even going house hunting in earnest—get pre-approved for a loan. If you don’t, you’ll be wasting the seller’s, the seller’s agent’s, and your agent’s time if you sign a contract only to find out later that the bank won’t lend you what you need—or that it’ll only lend you on terms you find unacceptable. Pre-approval can also assist you in locating the previously mentioned financial neighborhood for your house-hunting expeditions.
Even if you have been pre-approved for a mortgage, your loan could fall through at the last minute if you do something that will lower your credit score, such as finance a car purchase. If your actions kill the deal, you may have to return any deposit or earnest money you put up when you signed the contract.
3. Failure to shop around
While you should be realistic in your search and willing to make some compromises, don’t give up on essentials. For example, if you know you’re going to have kids and need three bedrooms, don’t buy a two-bedroom house. If one of the main reasons you’re tired of apartment living is that you despise sharing walls with your neighbors, don’t buy a condo just because it’s less expensive than a house. True, you’ll have to make some sacrifices to afford your first home, but don’t make any that will put a significant strain on your finances.
Unless you are a high-end buyer looking for custom homes, chances are that any home you find that you like has several others that are similar to it. Most neighborhoods have similar or identical homes; they may have all been built by the same builder. Even if you can’t find an identical model for sale, you’ll most likely be able to find a house with many of the same features. If you’re thinking about buying a condo or townhouse, the odds are in your favor as well.
Being willing to continue your search will keep you from making rash decisions that you may come to regret later. There are numerous real estate websites and apps that can help you streamline the house-hunting process, allowing you to preview hundreds of homes from the comfort of your couch in a matter of hours.
4. Failure to Employ an Agent
5. A Lack of Vision
Even if you can’t afford to replace the hideous wallpaper in the bathroom right now, it may be worth it to put up with the ugliness for a while in order to get into a house you can afford. Don’t be put off by physical flaws if the house otherwise meets your needs in terms of the big things that are difficult to change, such as location and size.
Simultaneously, don’t be fooled by minor upgrades and cosmetic fixes. These are low-cost tricks used by sellers to play on your emotions and elicit a much higher price. Sellers can spend $2,000 on minor upgrades or several thousand dollars on staging. Furthermore, doing home improvements yourself, even if you must hire a contractor, is frequently less expensive than paying the increased home value to a seller who has already done the work for you. And you can do them according to your preferences, not those of others.
6. Ignoring Significant Flaws
If you’re on a tight budget, look for homes whose full potential has yet to be realized. The increase in equity from your improvements will allow you to move up the property ladder.
That being said, if you’re going to buy a fixer-upper, don’t buy one that’s more than you can handle in terms of time, money, or ability. For example, if you believe you can do the work yourself but discover you can’t once you start, any repairs or upgrades you planned will almost certainly cost twice as much once labor is factored in—and that may not be in your budget.
Furthermore, you would have to consider the costs of completing any projects you may have begun, including the costs of replacing materials you discarded. Before purchasing a property that isn’t move-in ready, consider your abilities, your budget, and how soon you need to move.
7. Ignoring Your Neighbors
Consider the surrounding area as well as the house. Of course, it’s impossible to predict the future of your chosen neighborhood, but inquiring about or researching its prospects now can help you avoid unpleasant surprises later.
You should ask the following questions:
What kind of neighborhood development plans are in the works?
Is the street destined to become a major thoroughfare or a popular rush-hour shortcut?
Is there talk of a bridge or highway being built nearby within the next five years?
What are the local zoning laws?
Is there a lot of undeveloped land in the area? What is likely to be constructed there?
Have home values in the area been declining?
If you’re satisfied with the answers to these questions, the location of your potential home will retain its rose-colored luster.
8. Hurrying to Make an Offer
If you find a home you like in a hot market, you may need to make an offer quickly. However, you must strike a balance between the need to make a quick decision and the need to ensure that the home is right for you.
Make sure the neighborhood feels safe at night and during the day (try to visit at different times) and look into potential noise issues, such as a nearby train.
Ideally, you’ll be able to sleep on the decision for at least one night. How well you sleep that night and how you feel about your house in the morning will tell you a lot about whether you’re making the right decision. Thinking about the decision also allows you to research the property’s value and offer a reasonable price.
9. You're Dragging Your Feet
Assume you are self-employed. Perhaps you value time more than others. The more time and energy you have to devote to searching for a home, the less time and energy you have to devote to work. Not dragging out the home-buying process may be the best thing for your business, and your company’s continued success will be critical to paying the mortgage.
If you don’t act quickly, someone else will, and you’ll have to keep looking. Don’t undervalue how time-consuming and disrupting house hunting can be.
10. Providing Too Much
First, if the house does not appraise at or above the amount of your offer, the bank will not make you a loan unless the seller lowers the price or you pay the difference in cash. If this occurs, you will have to pay the difference between your bid and your mortgage out of pocket. Second, if market conditions are similar to or worse than when you bought the house, you may find yourself upside down on the mortgage and unable to sell.
Examine comparable sales and get your agent’s opinion before making an offer to ensure the purchase price for the home you buy is reasonable for both the house and the location.
11. Failure to Inspect
That is why a thorough inspection of the property is required; in fact, your mortgage lender may require it. Keeping your emotions in check until you have a complete picture of the physical condition of the house and the viability of your potential investment will help you avoid making a costly financial mistake.
12. Become Desperate
When you’ve been looking for a while and haven’t found anything you like—or, worse, have been outbid on the houses you do want—easy it to become desperate to find your new home right away.
However, if you move into a home that you dislike, the transaction costs to get rid of it will be high. You’ll have to pay an agent’s commission (up to 5% to 6% of the sale price), as well as closing costs for your new mortgage.
You’ll also have to deal with the hassle and expense of moving once more.
It’s fine to wait until something suitable comes along if you have the time. You’re bound to find something you can live with if your demands are reasonable for your budget. In some areas, new houses are listed for sale on a daily basis.
In conclusion
In short, when it comes to purchasing a new home, be realistic, take your time, avoid acting on impulse, and, ultimately, make a home-purchase decision that is good for both your emotions and your finances.