Common Home Buying Mistakes

What are the most Common Mistakes Made by Home Buyers? As a San Antonio REALTOR®, I have had the privilege of working with some great people in every aspect of the real estate industry. Unfortunately, I have also witnessed some of the mistakes made by eager and first time home buyers. Below is a list of what I call the BIG 12.

1. Buying the Wrong House.

The very first thing home buyers should do is write a list of the "absolute needs" they are looking for in a home. If you do not prioritize your needs and wants by listing out your desires and nice-to-haves, you can easily get swept up in the excitement of buying a home that was a bit less, or more than what was actually needed. Buying too little or too much of a home can place both emotional and financial burdens on you and your family for years to come.

2. The wrong community.

Some places are just flat-out expensive, and you'll probably have to search for a location that's affordable. That doesn't mean you should choose the cheapest locale either.

If you don't like the location you'll be unhappy. What's more, you'll probably have a hard time selling your property if the community isn't good. Ask around and read the local papers plus speak to people who live in the neighborhood to know how the community is faring economically, what the major issues are, and what the community involvement is like.

Don't neglect the schools. Gather such data as test scores, statistics on the percentage of kids who graduate and go to college, the student/teacher ratio and so on. Take time to visit the local schools and talk to parents.

3. Right home, right community, but wrong part of the sub-division.

Even if you find the right home in the right community, is it located in the best part of the sub-division? Where is this going you ask? The following comments come from showing many buyers, and trying to sell homes in various subdivisions during my career in San Antonio. It’s all about location, and yes, even the home’s location within the sub-division matters. Here are a few home locations I have found to have some difficulty reselling:

• Homes that are on long straight streets within a sub-division

• Homes that have adjoining drainage ditches or easements which connect to the property

• Homes that back up to drainage easements or retention ponds

• Homes that have busy main city street behind or next to them

• Homes that are in a curve of a main entry street into the sub-division

• Homes that lie next to a utility easement such as over-head power lines

• Homes that have utility access panels, electrical transformers or boxes in their front lawns

• Homes that back up to commercial property

4. Falling in love with a home.

If you think a house is ideal, don't let the seller or any of the sellers agents know. If the seller finds out you are in love with the house, the seller could hold out for a higher price.

A wise home buyer knows there are lots of houses -- and there's one out there that's the right house at the right price. If you can't afford it, move on and keep looking. Falling in love always leads to the number 1 mistake “Buying the wrong house.” What if something is really wrong with the home and you know deep down that you should not proceed, but you really love the home. Love will blind you to your actual feelings about the property and will cause you to accept things that you normally would have run away from. Falling in love with a particular home, home builder or model of home can cause you to fail in one or all of the other eleven areas listed in this article.

5. Over-buying the first time.

Being "house poor" is a very uncomfortable living experience. A large and beautiful home with little or no furniture tends to be empty and cold. A life where almost every dime of your earnings goes to the support of your house gets old very quickly, and can cause frequent stress within the family. Pushing yourself right up to--or beyond--your limits leaves you highly exposed when an inevitable life event changes personal finances. Leave yourself some breathing room! Buying a home that's way out of your price range could derail your ability to fund other important items such as retirement savings, children's education -- not to mention the entertainment budget.

6. You picked the wrong mortgage.

These days, many home buyers are rushing to secure a mortgage as fast as possible without fully exploring their options. That's because sellers often only consider bids from individuals who have been pre-approved for a loan. A word of advice…pick your financing package with care.

Gone are the days when you had to save up for a 20% deposit to own your dream home. Now you can take out 90% (or even 100%, if you are a Veteran) of the value of the property which means you don't have to spend years saving for a deposit before getting into the property market.

7. Don't sugar coat reality and a bad credit rating.

It's best to be honest here (as always!) and accurately report your credit rating, card debts and personal debts. If you try to fudge the truth, this sort of stunt can haunt you for a long time. The reality is the lender will be able to verify your credit score.

8. Buying a house that is tough to resell.

Many home buyers stay focused on finding a home where their families will be happy and safe. You should also remember this is also a big financial investment. Take a moment to look ahead to the day you'll sell the house. Knowing the neighborhood and paying attention to marketable details of the house will go a long way toward preventing a buying mistake. I like to tell my home buying clients that they should always look at a house as if they will be planning on selling it in three years.

It's easy when you're house hunting to forget what it's going to be like to sell your home down the road. But as you tour homes, put yourself in the perspective of the sellers. You may be drawn to a home that has quirky features or no closets or just one, tiny bathroom (Your thinking may be that you can use armoires, and share showers). But others may not be as enthusiastic. When you buy, think about the day and when it's time to sell.

9. Not using a real estate agent or using the Listing Agent as your REALTOR®.

Finding out too late that you have no representation can be a nasty surprise when you assume that the REALTOR® with whom you have been working with to represent you actually represents, and owes complete fidelity to the seller. How does this happen? By not taking the time to ask if the REALTOR® represents you. Or, by rushing out to look at homes, whether in person or on the Internet, or by contacting the Listing Real Estate Agent who has the house advertised, and represents the seller.

Another pitfall occurs when you try to represent yourself in the purchase of a home, and thinking that you will save money. Remember, working with a buyer’s agent costs you nothing. Additionally, any seller who is not represented by a REALTOR® is looking to keep the commission savings in their pocket rather than pay it to a REALTOR®, so why would they give it to you? The selling or listing real estate agent’s duty is to represent the seller, although they can legally act as a dual agent in Texas, this would mean no advice can be given to either party.

A buyers agent will help you negotiate your contract, process the paperwork, help you find the right home, plus help in scheduling the needed inspections necessary appointments when you do find your dream home.

10. Putting up "Non-Refundable" earnest money.

If your Real Estate Agent recommends it, find another agent because they don't have your best interest at heart. Be sure to work with a good real estate agent to write an option period that will allow you to withdraw your offer and get back your earnest money if the financing, home inspection or appraisal do not pan out.

11. You forgot about or under estimated the closing costs.

Think it's bad to pay tax when you eat out? Wait until you're paying closing costs, which can run up to 6% percent of the home's purchase price.

A mortgage lender should provide you with a Good Faith Estimate of what costs will be. But keep in mind this is an estimate and includes such things as origination (points) on the loan, escrow fees, title and homeowners insurance, legal costs, property taxes, fees to record your deed and notary/courier fees.

12. Didn’t hire a professional home inspector.

Bottom line: you should never buy a home without having it inspected. After all, you don't want to learn that you've bought a house that's filled with termites or has a frazzled electrical system. If you're building a new home, home inspections at various stages of the building process can ensure that all the work has been finished properly, and to current building standards.

Home inspections typically run $250 to $500 and usually include a check of a home's mechanical, heating and air condition systems, plumbing and electrical work, structural, roof, walls, foundation, attic, drainage and attached/detached garages. You can ask the inspector what the scope of their inspection is since there may be some limitations, depending on the company.

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