The Top Ten Biggest Mistakes in Home Buying
As someone searching for a new home, you sometimes have an overwhelming amount of information. Floor plans, communities, interest rates, mortgages – there is so much to look at, sift through and decide. So what are the most important things to keep in mind?
1. Not doing your homework
You’ve probably heard the old maxim: “Knowledge is power.” Nowhere is this truer than in real estate. With a price tag that’s two or three times your annual salary, if ever a purchase demanded preparation it’s home buying.
It can be overwhelming when you think about all the factors that can affect a home’s value: its location, school district, deed restrictions, taxes and amenities. That’s why it’s imperative that you do your homework before you start.
2. Trying to make a shrewd investment
It’s easy to think we are all financial geniuses. No doubt some of you are. So, Mr. Gates and Mr. Buffett, you have my permission to move on to the third biggest mistake in home buying. As for the rest of you, forget everything they told you in that late-night infomercial. While real estate investing can make a great career, it’s no place for amateurs.
As simple as it may sound, when it comes to buying a home, your best bet is to choose one that appeals to you. The chances are very good that if you like it others will, too.
Am I suggesting that you throw caution to the wind? Lead with your heart and not with your head? Absolutely not, but if you choose a neighborhood where you want to live and choose a home that’s attractive and structurally sound, then you probably won’t go wrong. If you want to be known as a shrewd real estate investor, then wait at least three to five years before selling and you can tell everybody that you outguessed the market.
3. Choosing a poor location
OK – you’ve found the right home. It’s in a good school district, it’s got great curb appeal, a terrific floor plan that fits your family and the price is right. The only drawback is the bowling alley that backs up to it. Walk away.
Nothing spoils life and resale value like a poor location. If it bothers you now, don’t think you will learn to live with it. The flood lights from that office building across the way will only get brighter with time. The planes on final approach to the airport will only get louder and more frequent.
The best looking home, the most extravagant landscaping, tall fences, and insulated windows will never overcome a homesite near a pig farm (no offense to pig farmers).
4. Overlooking an inferior floor plan for an attractive exterior
I don’t mean to downplay the importance of curb appeal. A home that turns your head as you drive down the street can be a real asset. Resale will be a lot easier if you don’t have to stand on the curb shouting, “No, wait! I know it looks bad, but this home’s got great personality!” If the romance doesn’t continue when you open the door, then you’ve got a problem that will be difficult to unload.
You want a home that makes your heart beat faster when you first open the door. It’s got to have a layout that makes people feel comfortable, one that responds to the way we live today. Open. Friendly. Functional.
I’ve seen it happen a hundred times. Buyers approach a home with an exterior they’re not crazy about, then they discover a fantastic floor plan, and when they come back out, the exterior seems to have magically improved. If I had to choose between a good-looking exterior or a knockout interior – and I couldn’t have both – I’d choose the great interior any time. After all, that’s where you live every day.
5. Not considering how your family wants to live
We all carry around a mental picture of the perfect home. If you’re a child of the 60s, your ideal home probably looks like the Cleaver’s house. Younger shoppers may be searching for the Brady’s or the Cosby’s home, or maybe even the Taylor’s home from Home Improvement. These images seldom fit the way we really live.
It’s also not about finding a home your parents would like (unless they’re helping with the down payment). It’s not choosing a home your best friends would want.
This home only needs to fit one family – yours. Your comfort and happiness depends on how well you can judge that fit.
Start by thinking of how you live now. Try not to be influenced by those fantasies of how life would be if only you had the right home. If your idea of fun is watching reruns of Jeopardy in your pajamas, then look for a TV room that accommodates your favorite recliner. If you like to have friends and family over for informal get-togethers, then look for a large kitchen that’s open to the Family Room. How many rooms do you need? How should they be arranged? Owner's Retreat up or down? Will you have use for a home office?
Don’t overlook how your family lives outside, as well. Will you use a pool or would a hot tub suffice? Do you like to garden and work in the yard, or would you rather have less maintenance?
If you’re buying a used home, you’ll have to look beyond the current owner’s décor and furnishings. If it’s a builder’s furnished new model home, the toughest part will be facing the fact that the decorator and furniture don’t come with it. If you’re honest with yourself, you can find a home that will fit your family and feel like…well, home.
6. If buying a resale, not having the home property inspected
I can't emphasize this one enough. When you find your dream home, it's love at first sight. As with all love affairs, you begin to lose your objectivity and see only what you want to see. 'OK, so the foundation is cracked. But, isn't this the cutest little window you've ever seen?' Now is a good time to seek professional help.
They're called structural and mechanical inspectors. Good ones are worth every penny. A good one is licensed by the state (ask to see his or her certificate) and has no personal relationship with you, the seller or the Real Estate Professional. This is someone you pay for a professional, unbiased opinion about the structural integrity and mechanical performance of the home you're planning to buy. They will inspect every major component of the house from the foundation to the rafters, including the central air, furnace, water heaters, plumbing and electrical. You will also want to have the home inspected for termites. As much as it may hurt to hear something negative about the one you love, this is when you want the ugly truth.
Many resale homes were built when energy codes were more lenient or nonexistent. Independent, third-party performance verification inspections that test for energy efficiency can make a big difference in the performance of your home and its effect on your pocketbook.
You and the seller will be given a written report with a list of items that must be repaired before you close the deal. Usually the contract spells out limits on what the seller is obligated to pay for repairs. If the cost of recommended repairs exceeds this amount and the seller is unwilling to pay for them or to adjust the sales price, DO NOT proceed. (You may elect to pay the difference if the overall deal is still a good one.) This could be the toughest decision of your life, but ignore the engineer’s warning and you will live to regret it.
7. If buying new, failing to check out the builder's reputation
If you’re shopping for a new home, you probably know where you want to live, so you’ll be comparing home builders in that area of town. You’ll look for home designs that appeal to you in a price range you can afford. Once you’ve narrowed your search to one or more builders’ homes, your next step should be to take a long hard look at the builders.
Here are the most important questions you should answer about any builder before you let them build your home:
- How long have they been in business?
- How many homes have they sold?
- What do their Homeowners think of them?
- How many of the Homeowners would buy from the builder again?
- What do other builders say about them?
- What industry recognition have they received?
- What does the Real Estate Professional community think of them?
- What kind of warranties do they offer?
- Do they have a department solely dedicated to warranty issues?
- Do they have an energy-efficiency or green building program?
The best way to check out a builder is to ring some doorbells and knock on doors. Visit the communities where they build and ask Homeowners about their experiences. You should talk to at least three to five neighbors and get a consensus before you make one of the largest investments of your life.
If you don’t get satisfactory answers to most of these questions, choose another builder. If none of them pass this test, choose another part of town. Beyond all the fancy advertising and hype, builders have only one thing of real value: their reputation. If the one you’re considering doesn’t have a good one, they shouldn’t get your business.
8. Not getting what you want because you are impatient
To borrow a phrase from the Rolling Stones, time is on your side. Show me someone in a hurry to buy and I’ll show you someone who pays too much. There are a lot of things you can rush into and recover from later, but this does not include marriage or buying a home. Never, ever, ever, rush into buying a home. Have I made my point yet? It is the single largest investment most of us ever make. It requires an enormous amount of energy, effort and research. It takes time to do it right.
You need time to do your homework. You’ve got schools to check, tax rates to compare, mortgage companies to shop, communities to drive, and – if it’s a new home – you need to check the builders’ reputations (See #7 above).
If it’s a used home, you need time to negotiate. Seldom should you pay the “asking price” on a used home. The longer you can take, the better the deal you can usually make. If you find yourself in an unavoidable time bind because of a transfer or the impending sale of your home, try to make arrangements to delay the purchase. You can always store your non-essential things and rent in the interim. Sometimes people who purchase your home are willing to lease it back to you on a pro-rated basis if you need extra time. It doesn’t hurt to ask and it could save a lot. Do the math. If patience can save you $5,000 on the purchase price, wouldn’t that be worth it?
Whatever you do, even if you don’t have time and you must move forward, try not to show it until after the price is set.
9. Buy low. Sell high.
It’s a great plan if you’re a fortuneteller, but for the rest of us mere mortals, here is the best advice for when to buy a home: There is no time like the present. You know what homes cost. You know what interest rates are. You know you have a job (If not and you’re not independently wealthy, maybe you should consider putting it off). Warren Buffett says, “the rear view mirror is always clearer than the windshield.” Looking back, we can all see when the best time to buy a home would have been – it is hard to find a better time than the present. Who can predict the future? The best we can do is learn from the past. History shows that those who purchased homes and kept them for three to five years or more did better than those who didn’t. How can you argue with that?
Will interest rates be lower some day? Maybe – then you can refinance. Will home prices ever be significantly lower? Probably not. Will you be making money in the future? We all hope so. Do you have a crystal ball? Stop your waiting. Just do it.
10. And the biggest home buying mistake...drum roll, please
Not buying at all! No place to call your own. No control. No tax break. No appreciation. No equity. No kidding.