10 Mistakes First Time Home Buyers Should Avoid
1. Not knowing how much house you can afford
Many novice home buyers spend a lot of time researching homes - comparing kitchen layouts and backyard square footage - but very little time researching their financing options. One of the first things buyers should do is talk to a qualified lender and get pre-approved for a mortgage. Without first figuring out how much house you can afford, you risk falling in love with one you can't.
2. Assuming foreclosures are great deals
Just because the previous owner owed $450,000 on a house before the bank took it over doesn't mean it's worth that much now. Values have slipped significantly, so you may not be getting the bargain you think with a foreclosure. Also, most homes owned by lenders or banks have been sitting vacant for months and may have been vandalized. That could require extensive renovation or repair. Weigh the costs of fixing up the property against the savings you'll likely reap by buying a lower-priced foreclosed home.
2. Assuming foreclosures are great deals
Just because the previous owner owed $450,000 on a house before the bank took it over doesn't mean it's worth that much now. Values have slipped significantly, so you may not be getting the bargain you think with a foreclosure. Also, most homes owned by lenders or banks have been sitting vacant for months and may have been vandalized. That could require extensive renovation or repair. Weigh the costs of fixing up the property against the savings you'll likely reap by buying a lower-priced foreclosed home.
3. Letting your true feelings show
No matter how much you've fallen in love with a house, don't let the seller's agent in on it. Otherwise, they will gain the upper hand in negotiations.
4. Failing to find a good buyer's agent
Landing a mortgage is tough these days, so buyers should rely heavily on knowledgeable agents to help them get their finances in order. After all, buyer's agents have a fiduciary responsibility to the buyer exclusively - and should be looking out for their best interests. Mia and I have been working with first-time home buyers here in the East Valley since 2004 and will gladly provide testimonials and personal references. If that is not enough, we suggest that you interview several candidates about their experience, if they've worked with first-time buyers before, and what kind of service you'll get from them. We are confident that you will find our area knowledge, real estate expertise, experience, and service to be second-to-none.
No matter how much you've fallen in love with a house, don't let the seller's agent in on it. Otherwise, they will gain the upper hand in negotiations.
4. Failing to find a good buyer's agent
Landing a mortgage is tough these days, so buyers should rely heavily on knowledgeable agents to help them get their finances in order. After all, buyer's agents have a fiduciary responsibility to the buyer exclusively - and should be looking out for their best interests. Mia and I have been working with first-time home buyers here in the East Valley since 2004 and will gladly provide testimonials and personal references. If that is not enough, we suggest that you interview several candidates about their experience, if they've worked with first-time buyers before, and what kind of service you'll get from them. We are confident that you will find our area knowledge, real estate expertise, experience, and service to be second-to-none.
5. Underestimating the costs of owning a home
Whether it's a rusty pipe or a leaky roof, things go wrong and need to be fixed. Many home buyers don't anticipate the additional costs for repair and maintenance, or for an increase in utility costs. Consider the age of your new home and how well it's been treated by the previous owners in your budget. Be prepared to set aside a small percentage (1% at most) of the home's purchase price annually for repairs and upkeep.
6. Failing to budget for property taxes
Property taxes - and the likelihood that they'll climb over the course of your time in the house - should be factored into any home-buying budget. To get an idea of how much you'll be paying, the easiest way would be to call me, your local East Valley Realtor. You can also contact the local assessor's office or talk to people in the neighborhood.
Whether it's a rusty pipe or a leaky roof, things go wrong and need to be fixed. Many home buyers don't anticipate the additional costs for repair and maintenance, or for an increase in utility costs. Consider the age of your new home and how well it's been treated by the previous owners in your budget. Be prepared to set aside a small percentage (1% at most) of the home's purchase price annually for repairs and upkeep.
6. Failing to budget for property taxes
Property taxes - and the likelihood that they'll climb over the course of your time in the house - should be factored into any home-buying budget. To get an idea of how much you'll be paying, the easiest way would be to call me, your local East Valley Realtor. You can also contact the local assessor's office or talk to people in the neighborhood.
7. Assuming your first offer will get accepted
As home prices increase, competition from home buyers in the market is bound to heat up. You can't assume you'll be able to find the perfect property, walk in there, make an offer, and get the home. Try not to get discouraged if you lose out on the first, or second house you make an offer on.
8. Skipping the inspection
Before signing anything, do not neglect to hire a professional inspector. The seller isn't likely to tell you there's mold in the basement, or the walls are poorly insulated. I will provide you with the names of several home inspectors I have a working relationship with, but you have the option to find and hire your own inspector to ensure there's no conflict of interest.
As home prices increase, competition from home buyers in the market is bound to heat up. You can't assume you'll be able to find the perfect property, walk in there, make an offer, and get the home. Try not to get discouraged if you lose out on the first, or second house you make an offer on.
8. Skipping the inspection
Before signing anything, do not neglect to hire a professional inspector. The seller isn't likely to tell you there's mold in the basement, or the walls are poorly insulated. I will provide you with the names of several home inspectors I have a working relationship with, but you have the option to find and hire your own inspector to ensure there's no conflict of interest.
9. Doing too much too fast
Some buyers will want to make the house their own right away by making home improvements. They end up overextending themselves on credit to do so. Do not assume the home improvement will pay for itself by increasing the home's value, because the real estate market has been very volatile over the last several years. Instead, you should exhibit patience and make changes to your home over time.
10. Failing to include a contingency clause in the contract
A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through, and the appraisal contingency clause protects you in case the appraisal value comes in under the purchase price. Should one of these events occur, the buyer typically gets back the money he/she used to secure the property. Without the clause, the buyer can lose that money and still be obligated to buy the house.
Some buyers will want to make the house their own right away by making home improvements. They end up overextending themselves on credit to do so. Do not assume the home improvement will pay for itself by increasing the home's value, because the real estate market has been very volatile over the last several years. Instead, you should exhibit patience and make changes to your home over time.
10. Failing to include a contingency clause in the contract
A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through, and the appraisal contingency clause protects you in case the appraisal value comes in under the purchase price. Should one of these events occur, the buyer typically gets back the money he/she used to secure the property. Without the clause, the buyer can lose that money and still be obligated to buy the house.
