Wednesday, March 14, 2012

Top 7 Mistakes Made by Home Buyers

The first thing most people do is start the search either online or in their car on the weekend driving around going to open houses and model homes. It’s fun and gives you a feel for what you might be looking for in a home but is really not a great way to begin.
The problem with this is most of us dream more expensive than we can afford. It’s important to look at your budget BEFORE you get started in the search and know your price range based on a sound budget. 

1. House shopping without knowing how much you can afford.
Get Qualified! Go through the steps of getting qualified with a professional you have been referred to by a friend or someone you know already. If you don’t know anyone ask a friend or relative if they know someone they would recommend. But don’t skip this process.
The lenders require you to be within a certain debt –to-income ratio, both for your personal debt and for your housing debt.  Your interest rate and loan program will also be determined based on your down payment and credit scores. You and your Realtor will know at this point just how much you can afford. Your mortgage broker or loan officer will be able to give you and your Realtor a letter of prequalification or better yet a pre-approval at this point to send along with any offer you make on a home. This will strengthen your offer and make it stand out from the others.  

2.   House shopping without your own Agent!
I get this question so often it really needs to be explained in more detail and more often because so many people just don’t understand the client to Realtor relationship.
The best comparison I can give you is to a client/attorney relationship. Think about that for a minute while we talk about this…

So many people call on signs in front of houses or go to open houses on their own without an agent to represent them. They start talking to the agent on the other end. This is most likely the listing agent, i.e. the seller’s agent.  In many cases this same agent unless you tell him/her you have an agent of your own, could be the beginning of a 
duel agency. If you enter into a contract with one of his/her listings this would be a duel agency. This is legal but must be disclosed to all parties.  Many real estate companies and broker don’t allow it for liability reasons and in my own personal opinion I think it’s really difficult to represent both seller and buyer and stay mutual. Duel agency can also be formed when two agents from the same office represent buyer and seller. This scenario doesn't have the risks of liabilities as the other and is more common. I don’t advise getting into the one agent dual situation if it can be avoided. I know I am getting cursed by Realtors who love the double ended deals but experience has taught me that it's a tough road to go down and not one I recommend. 

I do advise having a Realtor working for you and only you. Getting back to the attorney comparison you wouldn't hire an attorney if he also represented the person you were suing, right? OR you wouldn't share an attorney with your spouse during a divorce. Finding a Realtor you like, trust and one who works hard for you is ideal. If you are lucky enough to have this relationship, respect it and don’t solicit another Realtor even by accident. This happens more often then I’d like to see because people just don’t understand once you are working with a Realtor and they spend time with you, you should be loyal to them. Unless you decide you need to move on because they are not working out. Then have the decency to tell them you are moving on and why. They need to know this and why so if it’s something they did they can correct it and improve if not with you with their next client. But if they are doing a good job for you, don’t go jumping from one Realtor to another; be loyal to one good Realtor.

Now another issue about Realtors I’d like to cover for all my Realtor friends. Because I know how hard they work and I’d like you to understand something about their income contrary to what you may have heard.  I often hear from clients that Realtors make so much money. Buyers often think they have to pay the Realtors. That is not true…. the seller’s pays a fee to sell their home and this is how the Realtors get paid. This commission is usually 5% to 6% of the sell price and is split between the agent that sells the property and the agent that listed the property. THEN those two agents have a split with their brokers who employ them. That split is contracted and can be anything, but average is 50% to 100%, the broker will make a set fee per deal if 100% commission is granted.  The average income for a Realtor in the US for female is 15,260 – 40,337 and for male 30,968 – 110,000. Stats taken from  
3.   Lack of Home Fixing Vision
With most of the inventory on the marketing today being Foreclosures and REO’s a lot of these homes are in need of repair. In fact we have special loan programs to address the added cost associated with repair and remodeling of these types of homes. Many people have a hard time getting past loud paint color and wallpaper let alone missing appliances, cabinet, sinks, toilets and flooring. Getting passed all that and having some imagination will be rewarding when you think of taking one of these home and making it your own. Think of it like taking a brand new home where you get to pick out the colors, carpets and flooring. Don’t shy away from these homes. Use your imagination and a licensed contractor and dig in. Most of these house are at BIG discounts so stop being so picky.

4.   Procrastination Waiting for something better!
Are you one of these people who can never make up your mind or put things off until you either miss out on the deal or something comes up and you’re off in another direction, I think it’s probably safe to say most of us from time to time have wore this hat. As a home buyer and going through many homes and trying to find just the right one, most of us know when we walk in the door of our next home. We have a feeling in our gut! You have to listen to your gut! You need to act on your instinct. Timing is everything don’t let someone else get your home by waiting and sitting on your hands or the fence.  Make your offer and don’t hesitate when you find the right home.

5.   Not Getting A Home Inspection!
All I am going to say here is NEVER waive your right to have one. Always get a home inspection and YOU or your Realtor need to be the one choosing who does the inspection. Never except one already done by the seller. 

6.   Make a large purchase while also shopping for a home
Sounds crazy I know but it happens more than you would think. I’ve had clients after I’ve prequalified them to purchase a home go out and shop for a car. OMG does this throw a wrench in the process… messes up the debt-to-income ratios and you have to start over and hopefully they haven’t disqualified themselves by going over the allowed limits. This could also reduce the amount they could afford to spend on a home. So be careful and do not make any large purchases while looking for a home. Also don’t allow anyone to pull your credit. As your credit score could be reduced.

7.   Buying with Emotion
This is a difficult one especially with first time home buyers. It’s hard to keep our emotions out of a transaction. It is however wise for many reasons.  In the negotiating process you never want to show how much you love a home and can’t live without it to a seller. Being able to walk away will always give you the upper hand. Be strong and patient and let your agent do his/her job. 

Thank you for stopping by my blog, please follow my blog for future post. Your comments and questions are encouraged and welcome.

Roxy Redenbaugh
ACMC, Loan Consultant
Branch Manager
808-637-0011 Office

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