While buying a home can be a significant milestone achievement, it can quickly become your worst nightmare.
The real estate business is not for the faint-hearted. Any mistake or blunder when buying a home will complicate the process, which may lead to enormous financial loss.
Below are some common mistakes every home buyer, whether first-time or seasoned, should avoid when purchasing a home:
Buying a Home when you are not Ready
Owning a home is a dream of many people. The desire to be a homeowner is the primary motivating factor for many home buyers. According to recent research, about 62% of first-time home buyers were motivated to buy a home because of the desire to be homeowners.
However, the desire to be a homeowner should not be the main reason to buy a house. Home buyers must be aware of everything involved in buying and owning a home. Without the full knowledge of what it takes to be a homeowner, you may regret your decision to buy a house.
A new study has reported an upsurge in buyer’s remorse among property buyers. According to the report, about 60% of homeowners experience buyer’s remorse.
Buying a new home is a substantial investment requiring committing a significant chunk of your financial resources.
Apart from the purchase price, there are other associated costs you will need to pay as part of the home-buying agreement.
Some of these associated costs that home buyers should know include:
- Property taxes
- Maintenance costs
- Closing costs
- Homeowners Insurance
- Future upgrades
If, therefore, your current finances cannot take care of the present and future costs of the house, then you are not ready to buy a home.
Going into buying a home when your financial situation is not strong can lead to financial ruin.
There’s a time in your life when renting a house will be a better financial option for you. As a renter, you are not burdened with property market risks like market downturns and financial responsibilities like repairs and maintenance.
You will know you are ready to buy a house when your finances can shoulder the responsibilities of owning a home.
Failure to Set Up and Stay within your Budget
After determining you are ready to buy a house, the next step is to set up and stay within your budget.
Many home buyers fall into the error of buying a house above and beyond their budget.
Going over your budget will affect your ability to finance future expenses and keep your part of the mortgage agreement.
Settle for a house you can afford by considering your savings, credit score, present income, and other financial commitments.
Not Researching the neighborhood
The location of a house determines the value of the property.
Some factors home buyers should look out for and which can affect the value of properties in a neighborhood include:
- Zoning violations
- Violence and crime
- Property decay
- Abandoned homes
- Vacant properties
Many communities in the United States struggle with the menace of abandoned homes. According to current statistics, over 16 million housing units are vacant in the U.S.
Home buyers should avoid buying homes in areas or neighborhoods with any of the above problems. Research has shown that the value of properties in bad neighborhoods plummets once any of the factors mentioned above appear.
Once the property’s value decreases, it becomes hard to sell it in the future. And even when you see a willing buyer, it will be significantly less than what you paid to acquire it.
Avoid buying a home in areas without adequate public transportation, amenities, and future development plans.
Failure to Physically Inspect the House
One of the worst mistakes a home buyer can make is not to physically inspect a house before purchasing it. Unfortunately, many people buy houses without physically seeing or inspecting them. According to a recent report, about 90% of millennial home buyers would consider buying a house without physically seeing it.
If all you see are pictures or the outside structure of a property, then you know very little about it.
Physically inspecting a house before buying it can help you in the following ways:
- Identify defects and safety issues – Houses with structural defects and safety issues are apparent to the cursory looker.
- It takes a trained eye to identify the hidden defects in the foundation, electrical, and roofing of a house.
- Not identifying these defects before buying the property means the home buyer will pay for future expensive repairs.
- Gives you some bargaining power – After physically inspecting a house, you are in a better position to negotiate for a better deal based on the information you have.
- Peace of Mind – Buying a house, like most businesses, is full of risks. Not knowing what you are dealing with can put you under stress, which may affect your health. A thorough physical inspection reduces that risk by increasing your confidence in the investment.
- Better Budgeting – We mentioned earlier how it is crucial for home buyers to stay within their budget. When you inspect a house before purchasing it, you become aware of any defects and plan for future repairs.
- Legal Protection – The legal principle of caveat emptor usually applies when buying a house. According to this common law principle, only the buyer is responsible for reasonably examining property before purchase. The implication is that failure to inspect a property before purchase may foreclose the buyer from raising the issue later.
- Mortgage Financing and Insurance – If you want favorable mortgage financing and insurance on your property, always inspect a property before purchasing. Lenders and insurance companies prefer properties with little or no significant risks.
Failing to Consider the Resale Value
Because purchasing a home is an investment, buyers should consider the potential resale value of the house they want to buy.
A house with a good resale value appreciates over time and does not lose its value even during market downturns.
Investing in a house with a high resale value will ensure that if you decide to sell it in the future, you will make some profit.
A property with a high resale value is viewed more favorably by lenders, making it easier to secure financing.
When you know the resale value of a property you want to purchase, you are in a better position to decide the profitability or otherwise of improving it.
Not Consulting an Experienced Real Estate Agent
Although there are times when you can buy a house without a realtor, it is, however, advisable to also use the services of real estate agents when purchasing a home.
Some buyers attempt to go through the process alone without seeking the guidance of a qualified real estate agent. An experienced agent can provide valuable insights and negotiate on their behalf.
Realtors or real estate agents are professionals with specialized knowledge in the housing market.
Because real estate agents understand the real estate market, home buyers can benefit from their insights to make informed decisions.
Another advantage of using real estate agents when purchasing a house is that they have access to multiple property listings giving you more options to choose from.
Again, experienced real estate agents have great negotiation skills which you need if you want to strike a good bargain.
The home-buying process can be stressful. Engaging the services of a real estate agent will provide you with the professional assistance you need to make the process less stressful.
Buying a Home without a Real Estate Lawyer
It is shocking that some people go through the home-buying process and are willing to part with their hard-earned money without the services of an attorney.
One of the main reasons people cite for refusing to consult a lawyer when buying a home is that lawyers are expensive.
Unfortunately, many people have discovered through the hard way that hiring a lawyer before you buy a house is better than hiring them afterward. Buying a house requires a lot of legal documentation and paperwork necessary to seal the agreement. Some of these documents include:
- Home title
- mortgage agreement
- Loan application
- Purchase receipt
- Certificate of occupancy
- Closing Disclosure
- Affidavit of title
- Deed of trust or mortgage
Any mistake you make in these legal documents will haunt you in the future.
Home buyers should fully understand the terms and conditions of their mortgage, including interest rates, loan duration, and any penalties.
To fully understand the terms of any real estate agreement you endorse, get a lawyer to guide you throughout the home buying process.
Finally, on Mistakes Home Buyers Should Avoid
Do not turn your dream of purchasing a home into a financial nightmare by falling into the mistakes outlined in this article.
Avoiding common mistakes like:
- buying a home when you are not ready,
- going over your budget,
- not researching the neighborhood,
- failure to inspect the property,
- not considering the resale value of the property,
- not consulting a real estate agent, and
- purchasing real property without a lawyer,
can make this process a financially rewarding experience.