Debt Free

Even if your goal is to become debt free that probably won’t extend to your mortgage. For most of us anyway, the mortgage will still be a fact of life, especially if we adhere to the American tradition of trading up every 5 – 10 years or so. If you’re going to be purchasing a home every half decade or thereabouts, that’s still only about 6 residential real estate transactions over your lifetime. For most, that’s too few to really become an expert on the subject. Especially on your first few transactions, the entire process can be a bit overwhelming, and there are plenty of opportunities to make a mistake or two. 

Here are 5 of the most common mistakes buyers make when purchasing a home and how you can avoid them.

1 – Buyers often aren’t aware who’s responsible for what. The mortgage companies, their agents, seller’s agents and appraisers work for themselves or the seller. They aren’t there to represent the buyer. You need to know this, and be aware of it when negotiating. Have a clear idea of who works for whom in the transaction process. Be advised, statements you make to any of the above individuals may contain juicy information that may be actually used against you in the negotiation process. Know who works for you, and don’t volunteer information to anyone else.

2 - Buyers often fail to personally inspect the property. Sure, you walk through it with your real estate agent, but too many people then rely on the home inspector to catch anything that may be wrong with the property. Fine, they’re professionals, and that’s what they’re paid for. However, you should go back through the property and really look at everything after you have done the Sunday open house tour that got you so worked up in the first place. In some cases you may benefit from taking along a friend or objective third party to help you see everything a bit more clearly.

3 – Buyers don’t have their own agent. Remember the seller’s, or listing, agent works for the seller to help them negotiate the most advantageous deal for them, not you. You should be represented as well. This is especially important for the first few real estate transactions. These are not like buying a loaf of bread at 7-11. Real estate transactions are very complicated and one small mistake could either cost you thousands or fail to generate the maximum benefit for you. Real Estate for Dummies may be interesting, informative reading, but do you want to trust a little, yellow book with your hard earned dollars? Remember, there are a myriad of state and local laws and statutes that any guide book may inadequately cover.

4 – Using the bank or mortgage company’s estimate of what they can afford. All too often they substantially overstate the amount of home you can actually afford. There are legions of homeowners out there who are house poor due to following this advice. Remember, you’ve got to have money put away for any of the little things that may crop up for maintenance and improvements, and you’re going to have to make the mortgage payments every month for quite some time. You should look in homes that will require you to finance only about 3 times your annual income. In some areas, you may be hard pressed to find a livable property for such a figure, but otherwise you may have to resort to dome pretty creative financing to swing the deal. If you’re trading up, you can obviously use the equity in your existing home to contribute to your new home. This will allow you to afford more house.

5 – Failing to take other factors besides the home itself into account. Remember, there are plenty of other things that contribute to your homes long term value and the quality of life you’ll enjoy when you’re living there. Look at the rest of the neighborhood too. Proximity to freeways are important for resale and your convenience if you’ll be commuting to work everyday. Many times you’ll be shown the home on a weekend, when there’s no traffic. Sure it’s only 15 minutes to work, ON SATURDAY! You should come back on Tuesday morning about 7:30am for a more representative picture of the commute. You may be surprised to find out that 15 minutes grows to an hour during morning rush hour.

Drive through the neighborhood and talk to potential new neighbors. Check up on the schools. They are a huge impact not only on your children, but also on resale values. Go online and check your city or county’s planned projects that may impact the area. In many cases, you’ll be able to find about projects many years in advance by looking at appropriations for environmental and traffic studies. Remember that a new road, an expansion of an existing road, or a rezoning amy substantially affect your lifestyle and future property values.