Top House-Hunting Mistakes
House hunting is an incredibly stressful time for most people. Buying a house is the single biggest purchase you’ll make in your life. It’s an investment that you’ll have to live with, and in, for several years. So it’s important to make the right decision
The goal: to find a house you love with a price tag you can afford. But that’s easier said than done. Learn from others’ mistakes so you don’t have to make them.
Not Knowing Your Budget
Knowing what you can afford is a key part of house hunting. You’ll need to review that budget you developed a few years back and reassess your finances.
Does it feel like you can comfortably afford more than your current rent/mortgage payment? Or are you struggling to make ends meet with your current expenses. It’s important to be realistic with your money. Don’t get stuck with a mortgage payment that’s beyond your budget.
Skipping Your Mortgage Pre-Approval
Now that you’ve decided you’re going to buy a house, your first step should be to head down to the bank.
The thing to remember here is what you think you can afford, and what the bank says you can afford can vary wildly. Banks are much more careful about who they loan money to. The housing bubble and widespread foreclosures that led to what is now known as Great Recession saw to that.
And just because you can afford the house you’re looking at, doesn’t mean the bank will give you the money. If you don’t have a steady income or have poor credit, don’t count on the mortgage process being easy for you. Yet another lesson we learned from the recession. Lenders providing mortgages to subprime borrowers went extinct as their losses were too high.
Getting pre-approved will help you narrow down your search.
Not Using a Real Estate Agent
You’ve got your pre-approval in hand. The next step is to find a real estate agent or broker.
The housing market is like a shark tank. You’ll get eaten alive if you don’t know what you’re doing. Everyone involved is trying to get a leg up. Sellers are looking to maximize their earnings, and why wouldn’t they? To do that they’ve hired a real estate agent or broker to negotiate on their behalf.
You need to do the same.
Making an offer on a house without an agent could cost you thousands. The agent you hire will work in your best interest to make sure you get the best deal possible. They’ll help you navigate the system.
Not Shopping Around
It’s important to know your options when it comes to house hunting. There are a lot of factors that can determine whether or not you’re getting a good deal.
You know what you can afford, but that can add up to a lot of different things in different houses. It can vary from neighborhood to neighborhood. The difference in kitchen countertops alone can change the price by thousands of dollars.
You don’t want to act too quickly and make an offer on a house that you’ll regret opening.
It can be easy to ignore what’s wrong with a house because it checks all the boxes on your list. It might have a spa-like master bathroom and a chef’s kitchen, but if the foundation is crumbling, it’s probably not a good investment. Make sure you don’t let your wish list take priority over owning a good and sturdy home. It’s a big investment and you don’t want to waste your money.
On the other hand, fixer-uppers are great if you’re handy, but don’t bite off more than you can chew. We’ve all been there. Read some articles, watched some tutorials on YouTube, and thought “I could fix that.” And then found out pretty quickly that the task was beyond our skillset. Unless you already have experience in construction don’t try to go at it alone.
If you don’t need to move in right away and have money in your budget or find a house that’s below your maximum price, hiring a contractor may be the way to go to fix up your fixer-upper. You can pay a lot less by having a contractor add in all those fancy items on your wish list rather than buying a house that already has them, and add equity to your house in the process.
Don’t Let Minor Flaws Scare You
While overlooking flaws can be an issue, there are some things that look bad but are easy to fix.
Some houses might look ugly at first glance. Just because the house isn’t pleasing to the eye right now, doesn’t mean it can’t be. Something as simple as replacing the pulls and the faucet in the kitchen can quickly give the room a new look. Wallpaper can easily be removed and walls can be painted.
You can use this to your advantage. Negotiate with the seller. Convince them these flaws diminish the value of the home and don’t warrant their asking price. After saving some money on the house, use the extra money to make more substantial repairs down the road.
What About the Neighborhood
Once you’ve narrowed down your search to a few homes you like, look beyond the property itself and observe the neighborhood.
For example, in my area, many luxury lofts and condos are popping up. But they aren’t exactly situated in a neighborhood that matches the money you’d have to pay to live there. If you’re investing your life savings into this house, you don’t want to be concerned about your safety in your own home.
In addition to safety, there are plenty of other nuisances you might encounter.
- Is your house on a main road, near a major transportation hub, or close to a highway? Traffic and noise could become a serious problem for you.
- Is there lots of undeveloped land nearby? Your quiet, cozy neighborhood could become overpopulated and your privacy disappear.
- Are home values in the area increasing or decreasing? You don’t want your house to be worth less than what you bought it for.
And what about the school district? If you’re planning to start a family or already have one, will your children get a good education? Will they have access to plenty of extracurricular activities? GreatSchools.org is a great place to check.
Make sure you’re not rushing to put in an offer. While timing is of the essence in some markets, don’t skip steps to beat out other potential buyers. You want this to be the right home for you and it can take a little bit of time to make sure you made the right decision.
Conversely, don’t take too long. Indecision can cost you your dream home. I’m the type of person that has a tough time making decisions. If you’ve truly found the right place for you, don’t wait to find the next best thing. House hunting can be draining and dragging out the process longer than it needs to be can hurt you physically and mentally as well as financially.
Offering Too Much
If you’ve found your dream home, odds are it’s someone else’s dream home too. We all want close to the same thing when it comes to house hunting. Bidding wars can be common on popular houses. And some sellers intentionally price their house below what it’s worth to encourage multiple offers and create a bidding war.
Don’t let the bidding war get out of control. Trust your real estate agent when it comes to making an offer. They understand the market and can tell you if you’re paying a fair price for the house you want.
If you offer too high a price, if the market doesn’t hold up when it’s time to sell, you could end up upside down on your mortgage and be unable to offload your home.
You could also end up in a situation where your bank’s appraisal of the house comes in below your offer. They’re not going to give you more money than the house is worth. If this happens, you’ll get stuck paying the difference in cash.
Forgoing a home inspection can make your offer more attractive to a seller. The fewer conditions that come with your offer, the faster they’ll be able to get paid for the house.
But home inspections are important to the process. Many mortgage lenders require an inspection before they’ll give you the money. This way you can go back to the seller and show them the issues and ask they adjust the price to account for any issues that are found.
Don’t Get Desperate
House hunting can be a long and stressful process. It can be difficult to find the right house, and getting outbid on a house you like can be even more discouraging. But don’t let this force you into making a bad decision.
Buying a house is expensive, and ending up with a house you don’t want to live in can make the process even more expensive. If you have time to decide, then wait for the right opportunity. It’s better to stay put or move into a cheap apartment temporarily than purchase a house you’ll want to move out of in a year.
When it comes to house hunting be realistic, don’t act impusively, and take your time. Make sure you’re making the right choice, both for your feelings and for your wallet. And trust the advice of you real estate agent. They want to help you find the right house.
Scott Marcello is the founder of CleverWithCash. He's gathered experience in several areas of finance having worked in a bank and as a tax preparer. People have been asking him for years how to get their finances in order. So he figured, why not put the advice all in one place? Thus CleverWithCash was born.
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