The prospect of buying and owning your own house is very thrilling but can quickly turn into an unnerving experience. It’s exciting but full of complexities.
While it’s likely to be the largest financial transaction you may ever make, it is based on facts that we can tell that many homebuyers have no clue on how to go about making the right decisions when it comes to purchase.
You can hardly blame them because the system is stacked against them, with much of the power being on the side of the seller.
To help guide you, let’s look at the 10 most Common Mistakes made by Home Buyers that you should not make.
- Lack of proper research
The right path to a proper research is knowing your budget’s limitations.
A wise home buyer will analyse assets, decipher debts and get pre-approved for finance before plunging into the house hunt.
Get to know the neighbourhood – remember you’re not just buying a house; you’re also buying a location.
It’s important to find out about the quality of schools, the crime level, transport, and possibly upcoming zoning issues.
Example: Not every part of the mainland is dry land.
2. Choosing mortgage based on assumption
To put you in the best negotiating position, it’s critical to have your loan preapproved (not just pre-qualified) before going house hunting.
Find out how much house you can afford – but you can’t simply go to a bank’s Internet site, use the calculators to see how much you can borrow and assume you’ll get a loan.
There’s a big difference between what the banks indicate they can lend you and what they actually will.
It’s important to pick your finance package carefully.
Don’t just go to one bank; instead use an independent finance broker who has access to a range of lenders and finance products.
3. Being intimidated by “The Market”
Don’t be influenced by “the market” more than by your own needs.
Of course, the property market moves in cycles and there are times when it suits buyers and there are sellers’ markets when prices are booming.
However, waiting for the “right time” or prices to go down is gambling with your family’s future.
At times the mixed messages in the media may confuse you and you’ll be tempted to put off the decision to buy.
If you know your budget, have your finance organised and think about your current and future needs, then you should rarely let short term market conditions influence what will be a long-term lifestyle decision.
4. Going beyond your budget
Every homebuyer knows the feeling – you’re looking for a home that fits your budget, but that much more expensive property just looks that much more appealing.
However, buying a home that’s way out of your price range should never be in your line of thought.
It’s human nature for us to want a little more than we can afford, and there’s always a real estate agent who will try and sweet talk you into it.
But don’t be tempted – the bank has usually offered you a borrowing limit for good reasons based on your ability to repay the loan and the real estate agent is coming from a selfish point of view.
Spending more than you can sensibly afford leaves you exposed to potential financial shocks, including rises in interest rates.
5. Showing excitement for a specific property
If you think a house is ideal, don’t let the seller’s agents know.
Agents are good at reading emotions and negotiating the last cent out of prospective purchasers.
A wise home buyer knows there’s 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.
6. It’s not all about price
We all know you make your money in property when you buy, but that doesn’t mean you must buy cheaply.
You make your money by buying the right property not a cheap property.
Price is what you pay, value is what you get.
This means you should avoid making your buying decision purely on price.
You can always buy cheap properties in secondary locations or on main roads, but you’ll be stuck with a secondary property and that is a bad choice.
However, when you’ve found the right property – it’s important to make a proper offer.
One that secures your home, but that does not overpay.
Don’t base your offer on the seller’s asking price.
Instead, get a comparative market analysis from your buyers’ agent.
This analysis will reveal recent asking and sales prices of similar homes in the neighbourhood.
With this type of knowledge, a wise home buyer can make an offer that is appropriate.
7. Underestimating the full costs of buying a home
Many homebuyers fail to budget for the full costs associated with buying a house.
Firstly, there’s the acquisition costs.
Things like stamp duties,
loan application fees and mortgage insurance.
Apart from budgeting for moving costs, be prepared for the unexpected when you move into your new home. It’s funny how things that have been working for years seem to break down.
Always set aside a budget for those irritating and sometimes costly breakdowns.
Then…don’t underestimate the ongoing costs of owning your property.
Owning can cost much more than renting with expenses like rates, insurance and maintenance.
8. Purchasing a property out of desperation
You’ve been looking for a few months but haven’t found your dream home.
The agents are misleading you; you may have been out bid by someone who had deeper pockets than you.
You’re Fed Up!
One big mistake home buyer makes is to buy a property in desperation.
They buy something reasonable rather than something that really suits their needs because they’re sick of the emotional rollercoaster of home buying.
This is a decision you may live to regret for a long time.
9. Ignoring the importance of a professional building inspection
It’s important to engage a competent and independent (not one recommended by the selling agent) professional to check your potential new home.
Remember… these inspectors are trained to find faults, so don’t freak out when they produce a long list.
Look out for major faults but don’t let minor faults that are easily repaired trouble you too much.
If you’re not sure how to interpret the report, have a chat with the building inspector and ask questions like – would you buy this property?
10. Going Solo
You probably are a very smart person and may even have a good working knowledge of the home buying process.
What you probably may not have, however, is perspective.
If, how and when you buy a home are all decisions that will have major consequences.
That’s why it’s important to have the same protection on your side that the seller has and also why it’s critical to engage a professional buyers’ agent to represent your interests.
The sellers have an agent protecting them, looking after their interests and advising them, but most home buyer’s go solo.
Sure, you’ve read some articles and done your research on the Internet, but this is likely to be your largest purchase ever.
And those emotions will cloud some of your decisions. You wouldn’t go to court without a lawyer by your side – would you?