To the great relief of many people, both inside and outside the real estate industry, it seems like the worst part of the sagging real estate market could be behind us. It’s dangerous business attempting to foretell market movements (see below) but at least in some areas of the country it does look as if buyers are beginning to come out of their lengthy hibernation. If you are thinking about buying property, here are the top ten problems that you should steer clear of before taking the plunge.
1. Not Getting a Mortgage Pre-approval Document Obtaining pre-approval for a mortgage loan is a very important first step for potential buyers. Getting a home loan pre-approval will give you a much better idea of the total home loan amount you can readily borrow. Being pre-approved also shows that you are a serious buyer, not just wasting the seller’s time. Most sellers with worthwhile properties won’t bother to consider an offer unless it is documented by verification of loan pre-approval. In addition, should any problems with your credit worthiness surface it is much better to discover them right from the start, while you still have time to make changes to correct them. Encountering a credit snag after you have already agreed to purchase a property can be very distressing.
2. Not Hiring a Buyer’s Agent Unless other arrangements are made, with nearly all full service real estate companies, the buyer’s agent works for you at no cost to you. His or her commission is paid by the seller’s broker after the sale closes. Hence, it is in your best interest to hire your own representation – a buyer’s agent – instead of working with the seller’s agent. The seller’s agent is obligated by law to act in the seller’s best interest, not yours. By using the services of a buyer’s agent you can level the playing field since a buyer’s agent is required to serve in your best interest.
3. Selecting the Wrong Real Estate Agent Before choosing a buyer’s agent, you should talk to a number of different agents. Request the names of earlier clients so you can check references. Don’t limit yourself to agents with large brand name firms or so called “million-dollar” agents. Also, before hiring a friend or family member who is an agent, remember that if you are disappointed with the level of service provided, it’s considerably easier to dismiss an agent who is a “stranger”.
4. Not Understanding the Length of Time the Process Takes Buyers, and sellers, sometimes believe that the home buying process is shorter than it really is. There are a wide range of unforeseen problems that can result in delays. Sellers can drag their feet on formally accepting an offer, you may have problems selling your present house, the loan processing may be held up, repairs may need to be completed, problems with obtaining a clear title to the property may arise, etc. Murphy’s Law always seems to surface when trying to close a deal promptly. Be sure to allow at least two to three months to complete the transaction.
5. Presuming the Appraisal and/or the Tax Assessment Are the Same as the Actual Value. Appraisals and tax assessments are intended to be objective approximations of value. Yet, different appraisers can arrive at significantly different results. Buyers should request that their agent conduct a comparative market analysis (CMA) to get a better idea of the property’s present market value before submitting an offer to purchase.
6. Attempting to Time the Variations in the Real Estate Market Trying to time a purchase with when the market has hit rock bottom is nearly impossible. I would be an extremely rich man if I had that ability! Both buyers and sellers should realize that a sound real estate investment is always a long-term venture.
7. Ignoring the Facts When Searching for a Dream Home When buying a home, if you only follow your heart and not your head, you will probably be in for some nasty surprises. That fabulous home may look like your dream home, but make sure you consider everything involved. Consider such everyday issues as the effect a large home loan may have on your resources, commuting times, the quality of local schools and shopping facilities, the cost of property taxes and homeowner association as well as other quality-of-life aspects of home ownership. That fabulous home may not be worth the problems it causes you and your family.
8. Failing to Remember That Timing Is Everything As you can probably imagine, paying two mortgage payments can be incredibly hard to manage. When thinking about selling your current home and buying another, understand that the sale of your current home is the more crucial of the two transactions. If you would be unable to make payments on two loans, if at all possible, try to secure the sale of your current home before committing to purchase a new one.
9. Not Understanding the Contract. Remember that a purchase contract is a legally binding document. Not understanding what you’re agreeing to can be a big mistake. Read the agreement carefully prior to signing and get clarification if there is something you are unsure about. Don’t be afraid to have your attorney review it,if you wish. Ensure that it contains everything you it should, including which party is paying for what. Verbal agreements should be included, in writing, in the contract. Make certain that your agent takes an activerole in the developing of and negotiation of the contract. Hurrying through this step can add delays and cause financial and emotional pain.
10. Not Conducting a Criminal Search for the New Neighborhood. Agents in most areas of the country are not required to tell buyers that there is a sex offender or other illegal activity in the neighborhood. Check with the local police department or sheriff’s office to find out how to review local sex offender and related criminal databases. Additionally, the internet has made this research much easier in recent years. There are quite a few online resources for locating this information. Visit the website backgroundcheckpoint.com for information about a number of of these important resources.
Jim Navary has been a freelance writer and researcher for over thirty years covering a broad range of subjects. In addition, he is a licensed real estate salesperson in the Commonwealth of Virginia specializing in real estate in the Tri-Cities area of Virginia and Petersburg, Virginia homes for sale.
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